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German regulator summons Baywa to court
The German financial supervisor BaFin has concrete evidence that BayWa AG (active in the agriculture, energy and construction materials markets) has violated accounting rules. Therefore, on October 29, 2024, it ordered an audit of the consolidated annual accounts as of December 31, 2023 and the associated management report of the group.
The step was deemed necessary because the presentation of the financial position and the risks arising from the financing of the group, as well as the presentation of the objectives and methods of risk management in the consolidated financial statements and the group management report, may be incorrect, according to BaFin (in full the Bundesanstalt für
Finanzdienstleistungsaufsicht).
In the 2023 annual accounts, audited by accountant PwC, the group's liquidity risk was still indicated as 'low'. Just a few months later, however, the company had to turn to financiers for support. That raises questions.
Liquidity risk
Companies must present the financial position and risks arising from the financing of the group in both their consolidated financial statements and the group management report. They must also state and explain their risk management objectives and methods. This includes the obligation to describe liquidity risk, i.e. the risk that the company will not be able to meet its payment obligations on time. This includes refinancing risk.
Companies must also identify and assess the risk that market prices or factors affecting them will change. This includes risks from changes in interest rates.
If BaFin has specific indications of incorrect bookkeeping, it must order an event-related audit of the company in question. The legal basis for this is the German Securities Trading Act. The audits mentioned are usually carried out by BaFin's own auditors. BaFin can also make its audit assignments known.
BayWa had a turnover of €24 billion last year and suffered a loss of over €93 million. These figures were announced in May of this year. In the months that followed, it became clear that there was much more to say about the financial situation of the group and that there were all kinds of financial holes in the annual accounts. In total, around a billion in additional financing was needed since then to keep the company afloat.
Klaas van der Horst
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