Stable growth despite tough market environment (2015-05-28)
Net sales in the first nine months increase by 6.9% year on year to €777.8 million – Function costs increase as planned to strengthen long-term growth – EBIT margin about 10.0%
KWS SAAT SE (ISIN: DE0007074007) increased its net sales in the first nine months of fiscal 2014/2015 by 6.9% year on year to €777.8 million (previous year: €727.4 million). The Corn and Sugarbeet Segments gained market share in a tough economic environment thanks to strong variety performance. In line with our long-term corporate strategy, the planned expansion of our research and development (R&D) and distribution activities in the first nine months resulted in higher function costs. Operating income (EBIT) was therefore down from the previous year at €140.1 (145.8) million.
At the same time we continued our extensive capital spending program aimed at ensuring our future growth. Capital spending on property, plant and equipment and intangible assets increased sharply year on year and was €95.3 (37.2) million after nine months. Apart from expansion of R&D and office capacities at Einbeck, a new corn processing plant in Serbia was completed. “This is a logical step in the implementation of our long-term business strategy and strengthens our position in the key growth markets of Southeastern and Eastern Europe,” said Hagen Duenbostel, CEO of KWS SAAT SE. KWS acquired the remaining 51% stake in the French joint venture SOCIETE DE MARTINVAL S.A. (MOMONT) last fall.
Renaming of the company completed
The conversion of KWS SAAT AG into a European Stock Corporation (“Societas Europaea”) as adopted by the Shareholders’ Meeting in December 2014 was entered in the commercial register in April 2015 and thus became legally effective. The company now operates under the name KWS SAAT SE. The shareholders of KWS SAAT AG are now shareholders of KWS SAAT SE. The name under which the shares are listed was changed, but this will have no effect on trading of the shares on the stock market. The change in legal form and the related establishment of a European Employee Committee reflect our comprehensive business activities in Europe.
All product segments grow their net sales
In an environment that is still characterized by low selling prices for the farmer and slight declines in cultivation area in Europe, we were able to grow net sales at the Corn Segment by 6.3% to €596.9 (561.3) million. In North America, net sales of our joint venture AGRELIANT increased, although cultivation area is expected to remain stable. This was aided by the appreciation in the US dollar during the year, which more than compensated for the negative effects from depreciation of the Ukrainian hryvnia and the Russian ruble. We again recorded an increase in net sales in South America. However, the segment’s income was clearly lower compared with the same period of the previous year, mainly as a result of the planned increase in function costs for research and development and distribution. It was €87.8 (103.4) million after the first nine months of the current fiscal year.
KWS sugarbeet varieties currently occupy leading positions in terms of performance in all major markets, enabling us to gain share in just about all markets in the Sugarbeet Segment, despite difficult conditions. We again increased our seed sales in North America and Turkey. However, sales in our seed potato business were below the previous year. Net sales for the Sugarbeet Segment were higher year on year at €288.6 (259.2) million. Its income was €88.6 (75.6) million.
Net sales at the Cereals Segment after the third quarter were slightly up year on year at €98.2 (97.2) million. The course of business was impacted by the at times sharp differences in producer prices for wheat and rye. Cultivation area for hybrid rye declined slightly, which had a negative effect on the segment’s income. In addition, expenditure on distribution and research and development increased, meaning the segment’s income was below the level of the previous year at €20.9 (25.4) million.
The Corporate Segment posts cross-segment costs and research expenditures with long planning timescales. On the other hand, it obtains net sales in the single-digit million range from our farming activities. Its income is therefore negative by virtue of its structure. Income has developed as planned in the current fiscal year and was € –40.5 (–36.7) million in the first three quarters of 2014/2015.
Growth targets confirmed
“We are confident about achieving our annual targets for the KWS Group despite new challenges in the market environment,” summed up Eva Kienle, CFO of KWS SAAT SE. Expectations for the Corn Segment have been lowered slightly, but that will be offset by the gratifying business performance at the Sugarbeet Segment. The KWS Group expects to grow its net sales by just over 7% to about €1.27 billion (previous year: €1,178 million) and post an EBIT margin of about 10% in fiscal 2014/2015. The R&D intensity is expected to be 13% and the selling expense ratio just over 18%.