German agricultural group BayWa, which is struggling with a debt burden of more than five billion euros, faces a near-impossible task to regain financial stability. Despite a net loss of 641 million euros (in the first three quarters of 2023), experts see possibilities for salvation, provided the company takes cost-cutting measures.
A second report on the chances of success of such an operation says that BayWa can only survive by “shrinking healthily.”
The rescue plan provides for the sale of various international subsidiaries, including stakes in the New Zealand fruit trader T&G Global and the Dutch grain and soy trader Cefetra. In addition, BayWa will have to adjust its functional structure lines and reduce operational costs and energy costs. The core activities in agriculture, building materials, energy and technology will be retained, 'but must operate functionally'. What this means in concrete terms is not made clear.
A capital increase is planned, in which existing shareholders will have to inject new money. This money will be used to wind down loss-making investments. In September, German credit banks already made 500 million euros available as a bridging loan, so that the company could wind down the harvest season.
Despite the challenges, the restructuring report gives hope for a feasible rescue. Experts point out that the proposed measures can restore liquidity. It is still uncertain what the outcome of the investigation by the financial regulator Bafin will be. These investigations focus on possible irregularities in financial reporting, and a negative outcome could further damage confidence.
German politicians, such as Florian von Brunn (SPD), have repeatedly stressed that a recovery plan can only succeed if there is full transparency about BayWa's financial situation. If it turns out that the figures have been tampered with, this could lead to stricter regulations and have major consequences for the company.
The largest shareholders, including Bayerische Raiffeisen-Beteiligungs AG and Raiffeisen Agrar Invest, are crucial to the recovery process. They are called upon to finance the largest part of the capital increase. The question is to what extent the German government is prepared to step in.
Caretaker Chancellor Olaf Scholz (SPD) and Minister of Economy Robert Habeck (Greens) recently presented a comprehensive recovery plan for the ailing German economy. Due to the collapse of their coalition with the FDP, the economic malaise is now entering the election campaigns. The problems in the automotive industry also require attention and possibly additional government support.
Although the road to recovery is still long and uncertain for BayWa, the current plan offers a clear structure and concrete measures to make the group financially healthy again by the end of 2027. But this is only possible if the shareholders, banks and the government step in. Only then can BayWa remain a major player in German agriculture.