KWS intensifies efforts aimed at future growth (2014-05-27)
Net sales rise after nine months of fiscal 2013/2014 by 4.6% to €921.7 million – Negative exchange rate effects and planned expansion of R&D and sales activities impact income – Profitability remains high
KWS SAAT AG (ISIN: DE0007074007), one of the world’s leading seed companies, increased its net sales by 4.6% to €921.7 (previous year: 880.9) million in the first nine months of fiscal year 2013/2014 (ending June 30). However, operating income (EBIT) fell to €167.8 (185.6) million. Negative exchange rate effects reduced net sales and income. The announced expansion of research and development (R&D) activities and sales resulted in additional costs of around €30 million in the first nine months. This expenditure will help the company create the foundations needed for long-term growth.
A total of just over 13% (11.6%) of the anticipated net sales will be used for research and breeding in 2013/2014 as a whole. Research activities will remain focused at Einbeck. In the coming fiscal year, KWS will also begin work at a second research facility in the U.S. “This will strengthen our position in global plant research while also further expanding our presence in one of the key seed markets,” said Philip von dem Bussche, CEO of KWS SAAT AG. “In China, too, we can now take a further step, following the approval granted by the Chinese Ministry of Agriculture for our joint venture with our long-standing partner Beidahuang Kenfeng Seed Ltd. This joint venture will now establish the structures needed to begin its operations in fiscal 2015/2016.”
Higher volumes for corn in North America despite smaller cultivation area
The Corn Segment remains the Group’s largest contributor to net sales. Revenue rose by 7.1% to €561.3 (524.2) million, thanks largely to strong growth in South America and Southeastern Europe. Sales volumes grew in North America despite a reduction in corn cultivation area due to increased sowing of soybeans. Exchange rates in North and South America and Eastern Europe had a negative impact, and EBIT fell by 1.5% to €103.5 (105.1) million.
The performance of the Sugarbeet Segment was helped by continuing high demand in North America and large parts of Northern Europe. Net sales rose by 4.7% to €259.2 (247.5) million. Higher revenue year on year partly compensated for greater R&D and sales expenditures, with the result that the segment’s EBIT fell only slightly to €75.6 (76.8) million.
Business in the Cereals Segment was impacted by the change in the price of rye relative to that for wheat. While the price of rye was above that for wheat in the previous year, the situation was reversed in the current fiscal year, leading to lower demand for rye seed, in particular in Germany and Poland. Net sales consequently fell to €97.2 (104.8) million. The changes in the sales mix, coupled with higher expenditure on research and sales, resulted in EBIT of €25.4 (31.9) million. In addition, KWS has reached an agreement with the family shareholders of KWS LOCHOW GMBH to acquire the remaining 18.9% stake. A purchase agreement to this effect was certified on May 26, 2014. The transaction is to be concluded in the current fiscal year. The family shareholders intend to maintain an investment in the industry and possibly acquire shares in KWS SAAT AG with some of the proceeds.
Income in the Corporate Segment was € –36.7 (–28.2) million. The KWS Group’s cross-segment function costs and research expenditures are pooled in the Corporate Segment, whose revenue comes from farms. This revenue totaled €4.0 (4.4) million in the first nine months.
In line with our strategy of sustainable growth, total capital expenditure by the KWS Group in the first nine months of fiscal 2013/2014 increased to €48.8 (41.7) million. Of that figure, €43.3 (38.7) million was on property, plant and equipment. As in previous years, capital expenditure was therefore well above depreciation of €29.2 (25.8) million.
Outlook: KWS increasing net sales
The KWS Group expects net sales in 2013/2014 as a whole to grow by up to 3% to about €1.2 (1.1) billion, despite negative exchange rate developments in some important regions. EBIT will be around €134 (150.7) million as a result of higher R&D expenditure, expansion of sales structures and negative exchange rate effects, giving an expected EBIT margin of 11.4% (13.1%). “That’s still a high level in view of the investments we are making in our future,” noted Philip von dem Bussche.
Head of Investor Relations
KWS SAAT AG