KWS kicks off fiscal 2014/2015 with growth in net sales (Nov. 26, 2014)
Net sales in the first quarter rise by 7.8% year on year – Function costs increased as planned to strengthen long-term growth – Expectations for the year as a whole confirmed
KWS SAAT AG (ISIN: DE0007074007), one of the world’s leading seed companies, has begun the new fiscal year 2014/2015 by growing net sales 7.8% to €105.3 (previous year: 97.7) million. Function costs, in particular spending on distribution and research and development, increased as planned in the first quarter of 2014/2015 in line with the corporate strategy of long-term growth. “Our goal is to continue working rigorously to tap our newer sales markets. At the same time, we intend to expand our leading position in established markets with high-yielding new varieties,” said Philip von dem Bussche, CEO of KWS SAAT AG, in outlining the foundation of the company’s further growth.
The first quarter is traditionally impacted by cereals business and, to an increasing extent, corn activities in South America. Corn and Sugarbeet, the two segments with the highest net sales, generate the lion’s share of their revenue only when the spring sowing season starts. That means operating income (EBIT) is always negative in the first two quarters. EBIT fell to € –35.1 (–26.8) million in the period under review. This figure includes additional expenditure on research and development, distribution and administration of €12.1 million compared with the same quarter of the previous year. In order to prepare for its planned growth in the coming years, KWS is also increasing its capital spending, mainly in expanding seed processing capacities. Capital expenditure in the first quarter of 2014/2015 rose by €24.2 million to €37.2 million, of which €20.2 million was on property, plant and equipment.
Net sales in the Corn Segment benefited from strong growth in South America and a positive performance in winter rapeseed business, which improved by just over 15%. Net sales rose by 32.0% to a total of €47.8 (36.2) million. Including the planned rise in function costs, the segment’s income (EBIT) was € –34.6
Net sales at the Sugarbeet Segment rose overall by 10.3% to €7.5 (6.8) million. Given large harvests and sugar stocks, as well as an anticipated decline in cultivation area in the 2015 growing season, however, this cannot be regarded as a trend for the fiscal year as a whole. The segment’s income (EBIT) was € –15.3 (–18.0) million.
Low consumer prices dampened trends in the Cereals Segment in the first quarter of fiscal 2014/2015. Net sales fell by 4.3% to €56.2 (58.7) million. Higher expenditure on product development and distribution, coupled with lower contribution margins from hybrid rye business, led to a drop in the segment’s income (EBIT) by 5.3% to €19.6 (20.7) million.
Cross-segment function costs and basic research expenditure are charged to the Corporate Segment, whose income is therefore always negative. The segment’s income in the first quarter of 2014/2015 was € –17.6 (–13.5) million.
French cereals activities acquired in full
KWS acquired the remaining 51% stake in the French seed company Société de Martinval S.A. from the Momont family effective September 30, 2014. With the established brand name MOMONT, which will be retained, KWS will strengthen its wheat breeding activities in France and is planning in particular to intensify research into as well as production and marketing of cereal seed and rapeseed in this important market.
Outlook: Guidance confirmed despite difficult market environment
Large harvests in the 2014 growing season are currently resulting in low consumer prices for corn, soybean and wheat in the agricultural sector. The world market price for sugar has also fallen sharply. Despite this rather difficult market environment, the company is confirming its guidance at the segment level. Consequently, growth in net sales of just over 5% to around €1.25 billion and a double-digit EBIT margin are still anticipated for fiscal 2014/2015. “We’ve decided to issue our guidance and segment information on the basis of our internal corporate controlling structure so that we can continue to report transparently on our operational development even after the changes to IFRS 11 and the adjustment to the consolidated methods that entails,” explained Eva Kienle, CFO of KWS SAAT AG. “As a result, the guidance and presentation of the segments’ results still include our 50:50 joint ventures proportionately. However, the contribution margins of these companies are reported in the net financial income/expenses in the income statement.”
The full report on our business performance in the first quarter of 2014/2015 can be downloaded in the Internet at www.kws.com/ir.
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