Economic exchange between parties - Difficulties at Baywa: Incurred losses and significant debts
In a bid to recover from debt totalling over five billion euros, Baywa plans to cut expenses and sell off unprofitable businesses. Speaking at the annual shareholders meeting on Tuesday, CEO Marcus Pöllinger vowed that a "transformation process" and improved results would be delivered this year, with each business unit expected to be profitable. However, shareholders were critical of the company's performance, with both shareholder associations and individual investors expressing their concerns.
The Munich-based conglomerate, which originated from the cooperative movement, suffered a loss in 2023, and its first-quarter earnings plummeted to a net loss of 108 million euros. Revenue also took a hit, dropping 17% to just under 5.2 billion euros compared to the same quarter in 2023. The first quarter has typically been a weak period for Baywa, but the company has never posted losses at the beginning of the year before. Baywa will not be paying a dividend for 2023, and the decision was approved by shareholders.
Naturally, the company's debt has grown significantly in recent years. By the end of the first quarter, loans - both short- and long-term - amounted to 5.6 billion euros. Moreover, personnel disagreements emerged in the first quarter, leading to the resignation of Supervisory Board Chairman Klaus Josef Lutz.
Baywa is an international agricultural trader, a project developer for renewable energy plants, and a player in the construction industry, acting both as a trader and service provider. Pöllinger suggested that there would be no major improvements until mid-year: "The first half of the year cannot be a reflection of the anticipated uptrend."
The company's debt issue has worsened over time. Debt, combining short- and long-term loans, reached 5.6 billion euros by the end of the first quarter. Additionally, there were disagreements among employees, leading to Lutz's departure.
Baywa's solar trade is slated for sale, a move initially planned for 2023 but, at the time, without a buyer able to pay the desired price. The business dealing in digital technology for farmers was already sold. Pöllinger also seeks to reduce the workforce, referencing a "socially acceptable" reduction in staff. The company's construction division may be considering short-time work arrangements.
Criticism was directed not only towards Pöllinger but also towards former CEO Lutz, who led the company between 2008 and 2023 before becoming chairman of the supervisory board. The Shareholders' Protection Association (SdK) described a "serious corporate crisis" characterized by "financial debt mountain" and "management disaster." SdK board member Paul Petzelberger demanded that the Baywa supervisory board should return Lutz's separation payment worth 6.7 million euros. The board claims that this is legally unfeasible, explained new chairman of the control committee Gregor Scheller.
The shareholder association DSW lamented the company's "catastrophic course of development," highlighting how Baywa shares have halved their value over the past year. Shareholder anger primarily targeted the outgoing CEO Lutz rather than Pöllinger.
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Despite the challenges, Baywa, headquartered in Munich, with roots in Bavaria's cooperative movement, continues its operations in agriculture, renewable energy projects, and construction. At the annual general meeting, CEO Marcus Pöllinger outlined a plan to reduce expenses, sell unprofitable businesses, and ensure each business unit's profitability.
Klaus Josef Lutz, formerly the Supervisory Board Chairman, resigned amid personnel disagreements, marking a significant change within the company. The subsequent crisis, characterized by significant debts and losses, has drawn criticism from shareholder associations and individual investors, leading to calls for accountability, such as the demand to reclaim Lutz's separation payment.
Baywa's energy division is facing turbulence, with plans to sell its solar trade and potentially implement short-time work arrangements in the construction division. Shareholders expressed disappointment in the company's performance, citing the depreciation of Baywa's shares and the catastrophic course of development.
As Germany grapples with the agricultural crisis and the pressing need for sustainable energy solutions, Baywa's financial struggles serve as an example of the challenges faced in navigating this complex landscape. The company's transformation process and efforts to improve profitability are closely monitored by stakeholders, including its home province of Bavaria.
In the face of criticism and the need to recover financially, Baywa must rebuild trust and deliver on its commitments to shareholders, employees, and the broader German agricultural and energy sectors, ultimately demonstrating its resilience and long-term potential.
