KWS SAAT AG (ISIN: DE0007074007), one of the leading international seed companies, started the new 2013/2014 fiscal year (as of June 30) with more restraint after the outstanding results in previous years. The revenue of the KWS Group decreased by 9% to €103.1 (113.1) million in the first quarter. The main reason for this trend was lower sales in the cereal segment due to the significant reduction in the prices for cereals for consumption. Corn and sugarbeet, the revenue mainstays for the entire year, will not be sown until the spring. Due to this distinct seasonality, the operating result of KWS in the first two quarters is usually negative. In addition, the expenses for research and development as well as for distribution securing long-term growth, have also been significantly increased. Consequently, the operating result (EBIT) decreased to –€38.9 (–22.2) million.
Cereal sales decrease - corn benefits from trade in South America
Sales in In the cereal segment, decreased consumer prices affected development. This resulted in significantly reduced acreage in Germany and Poland - especially for rye. The revenue in the segment decreased by 15.5% to €58.7 (69.5) million. In this respect, however, it should be noted that the rye business experienced a special situation in the previous year, since rye prices were higher than wheat prices for a change. The tighter profit margins from the rye business combined with the simultaneous additional expenses for product development and distribution led to an overproportional drop in earnings in all cereals by 25% to €20.7 (27.6) million.
On the contrary, the revenue in the Corn segment increased by nearly 11% to €36.2 (32.7) million, mainly through growth in South America. Winter rapeseed trade remained at the previous year’s level. The segment result decreased against the background of planned higher function costs by 15% to
–€28.1 (–24.4) million. The corn business, which constitutes only about 5% of the annual revenue in the first quarter due to seasonal effects, again represents the highest growth potential of the KWS Group. Here, the crucial aspect will be the price for consumer corn in spring 2014, on which the North American farmers orient themselves.
Sales revenues in the sugarbeet segment decreased by 24% to €6.8 (9.0) million due to shifts between quarters. Here too, the decreased revenue was countered by expenses evenly distributed throughout the year, so that the segment result dropped to –€18.0 (–14.3) million.
Expansion of activities in all central functions
Due to the planned expansion of activities in all central functions, the result in the Corporate segment amounts to –€13.5 (–11.1) million. Here, the cross-segment functional costs and research expenses are bundled.
In addition, investments in tangible fixed assets throughout the group were increased to €18.1 (17.2) million. These clearly exceed the depreciation of €9.1 (8.7) million. The main individual investments were the capacity expansions of corn production in North America and France.
Outlook: KWS plans an increase in sales with a double-digit return
KWS expects that the weaker cereal business and the slightly decreased revenues from sugarbeet will be more than compensated for through growth in the corn segment. From the present point of view, the company anticipates a sales growth of 5% to approximately €1.2 billion (1.147 billion) and an EBIT margin of 11.5% (13.1%). Eva Kienle, CFO of KWS SAAT AG, added: “The preliminary costs for the development of new products and markets lead to a decreased margin. We will spend approximately €159 (140.8) million in the 2013/2014 fiscal year on product development alone. On top of this, there will be large investments of approximately €100 million as the basis of our future growth.”
