KWS is growing in a difficult market environment

November 24, 2015

First quarter revenues increased – Quarterly result (EBIT) mainly influenced by currency effects – Expected EBIT margin of at least 10% at year end

KWS SAAT SE (ISIN: DE0007074007) and its international subsidiaries started the 2015/2016 fiscal year with sales growth of 11.3% to €117.2 million. In some of the key agricultural regions of KWS in the first quarter, domestic currencies depreciated or fluctuated strongly against the euro, which had a negative impact on the operating result (EBIT) of the first quarter. Nevertheless, KWS expects to achieve the long-term target of an EBIT margin of at least 10% by the end of the fiscal year.

“Despite the continued challenging market environment, we will continue to pursue our long-term corporate strategy, in particular the continuous development of new high-yielding varietal products,” said Hagen Duenbostel, Spokesman for the Executive Board of KWS SAAT SE. “Therefore we will continue to invest in new production facilities and research & development as planned.” According to plan, expenditures for research and development increased by 8.7% to €45.8 (42.1) million after the first quarter. At the same time, the sales structures were strengthened and selling expenses increased by 13.6% to €36.7 (32.3) million. Administrative expenses increased slightly to €18.0 (17.2) million. The EBIT, which is usually negative in the first quarter, reached –€47.0 (–35.1) million at the end of the first quarter. Negative currency effects and the planned increase in expenses for sales and for research and development were the main reasons for the decline compared to the same period of the previous year.

Total investments amounted to €15.7 (56.2) million after the first quarter. In the previous year, they were significantly increased by the takeover of the outstanding shares of the French cereal grower SOCIETE DE MARTINVAL S.A (MOMONT).

Segment reporting: Positive sales development for corn and sugarbeet

Sales revenues in the corn segment rose after the first quarter by 5.2% to €50.3 (47.8) million. In the first quarter, revenues were driven in particular by corn and soybeans sales in South America and the winter rapeseed business in Europe. In South America, sales revenues from corn seed remained equivalent to the previous year, despite lower acreage and negative currency developments. In contrast, the winter rapeseed business in Europe increased. Taking into account negative currency effects, the segment result (EBIT) after the first quarter was
–€45.2 (–34.6) million. At this point in time it is typically negative, as the seed business of the segment only accounts for a small part of annual sales in the first quarter due to seasonal factors.

Sales in sugarbeet segment sales revenues grew by 70.7% to €12.8 (7.5) million. However, the first quarter is still not a reliable indicator for the course of the year as a whole, and part of the increase in sales was attributable to the sale of a production plant to Japan. Sales were also offset by expenses spread evenly throughout the year so that the segment result fell to –€16.4 (–15.3) million.

Sales revenues in the the cereals segment remained at the previous year’s level with €56.4 (56.2) million. The situation on the grain exchanges remained difficult for sowing. The price of rye remained significantly weaker than the already low wheat price. There was a decline in the sales of hybrid rye, which was offset by the acquisition of MOMONT last year. The scheduled expansion of expenditures for research & development as well as for sales was the main reason for the decline in segment earnings (EBIT) to €15.7 (19.6) million in the first quarter.

Sales in the corporate segment, all comprehensive costs, such as expenditures for all the central functions of the KWS Group and long-term research projects, have been recorded. The earnings statement is thus always negative. After the first quarter, the EBIT was
–€16.8 (–17.6) million.

Forecast: Continued sustainable earnings expected for 2015/2016

“Our strategy remains unchanged. In addition to expanding our business activities in growth markets, we will not lose sight of strengthening KWS’s market position in our core markets,” explained Eva Kienle, CFO of KWS SAAT SE. “We are keeping our long-term target of an EBIT margin of at least 10%.” The expansion of business activities requires further investment. In particular, the focus is on the expansion and modernization of production facilities in the growth markets of Eastern and Southeastern Europe and the USA and the expansion of research and development facilities at several sites. Overall, the Executive Board currently expects revenue growth of 5–10% for the end of the 2015/2016 fiscal year, with an EBIT margin of at least 10%. The proportion of expenditures for research and development is expected to be around 17%.

Expectation for 2015/2016 fiscal year

Forecast in € million Sales for 2015/2016 € EBIT margin
for 2015/2016 €
According to the IFRS statement of comprehensive income 1,035–1,085 At least 10%