KWS Group confirms net sales and EBIT targets
Revenue increased in the first half of the year – First-half income (EBIT) impacted by planned increase in spending on research and distribution – Expected EBIT margin of at least 10% at the end of the fiscal year confirmed
KWS SAAT SE (ISIN: DE0007074007), one of the world’s leading seed breeding companies, reports a rise in net sales for the KWS Group after the first six months of fiscal 2015/2016. Revenue increased sharply year on year by 13.1% to €219.5 million. Income (EBIT) is typically negative in the first half of the year and was impacted in particular by the planned increase in spending on research and development and on distribution. It was €–106.3 (–96.8) million. An EBIT margin for the KWS Group of at least 10% is still expected at the end of the fiscal year.
“We are very pleased to be able to confirm our expectations for net sales and earnings at this point, because it wasn’t necessarily a given in view of the currently challenging market climate in the agricultural sector,” said Eva Kienle, Chief Financial Officer of KWS SAAT SE. “We’re also managing that without jeopardizing our future growth, since expenditure on research & development and on distribution is being increased as planned.” After the first half of the year, spending on research & development was €87.3 (78.7) million and selling expenses were €83.5 (74.9) million. Administrative expenses were €37.6 million, i.e. at about the same level of the previous year (€37.0 million), despite a sharp expansion in the volume of business. Operating income, which is usually negative at this time of the year, was
€–106.3 (–96.8) million. Apart from spending on growth, the net effect from negative currency influences and higher cost of sales due to extreme weather in seed production were responsible for the year-on-year decline.
Total capital expenditure in the first six months was €54.2 (78.7) million. It was sharply higher in the previous year due to the acquisition of the remaining shares in the French cereal breeder SOCIETÉ DE MARTINVAL S.A. (MOMONT).
Segment reporting: All product segments grow net sales year on year
Net sales in the Corn Segment were €115.7 (99.6) million, a year-on-year increase of 16.2%. Early sales of corn seed in North America and positive business performance in Argentina contributed to that. In Brazil, organic growth was offset by the significant devaluation in the real. In Europe, the performance of winter rapeseed business was particularly gratifying, with a sharp increase in revenue. The segment’s income was mainly affected by higher expenditure on research & development and on distribution, as well as by negative exchange rate effects. In addition, extreme weather in South America and Europe resulted in bottlenecks in seed production in some regions. That increased the costs of sales. The segment’s income at the end of the period under review was €–87.3 (–63.2) million.
Net sales at the Sugarbeet Segment increased markedly in the first six months. Revenue rose to €46.9 (28.9) million, mainly due to higher early orders. The markets of the UK, the Netherlands and Turkey contributed to that in particular. Due to higher net sales and lower adverse exchange rate factors in Eastern Europe, the segment’s income increased to
€–28.6 (–42.2) million or by 32.2%.
In view of low producer prices, net sales in the Cereal Segment were, as expected, restrained in the first half of 2015/2016. Although net sales rose slightly to €86.0 (83.7) million, this was mainly due to the previous year’s acquisition in the French cereal market. Hybrid rye and wheat sales declined. However, winter barley business performed positively. The segment’s income fell clearly to €19.0 (23.7) million, primarily due to the decline in the hybrid rye business.
The Corporate Segment carries cross-segment function costs and research expenditures, and its only revenue comes from our farms. The segment’s income developed as planned and was €–33.0 (–32.6) million in the first half of 2015/2016.
Forecast: EBIT margin of at least 10% confirmed for 2015/2016
Although the general conditions in the market are challenging, KWS expects to grow net sales by 5% to 10% in the current fiscal year 2015/2016. The basis for this continued positive performance is the large number of marketing approvals for new high-performance varieties, which increased by almost 30% to 429 in the last fiscal year. We expect to gain market share in particular in the regions Southeastern and Eastern Europe, but also once again in South America. A crucial factor here will be how the currently strained market situation develops.
Expenditure on future growth will be expanded moderately as planned. The research & development intensity is expected to be 17% to 18% of net sales at the end of the fiscal year. We confirm our earnings expectations from the last quarter and anticipate an EBIT margin of at least 10% for the KWS Group at the end of the fiscal year. Capital expenditure will again exceed €100 million, in particular due to expansion of our research and production structures and acquisition of access to new trait-technology.
Wolf-Gebhard von der Wense
Head of Investor Relations
Phone +49 (0) 5561 311 968
Mobile +49 (0) 151 18 85 56 73
KWS SAAT SE