KWS seed more in demand than ever in the 2011/2012 fiscal year

October 18, 2012

Sales increase by more than 15% to €986 million - Operating income (EBIT) increases by 21% to €141 million, despite significantly increased R&D expenses - Growth in all product segments - Dividend to be raised by 22% to €2.80

KWS SAAT AG (ISIN: DE0007074007), one of the world’s leading seed companies, achieved peak sales and earnings in the 2011/2012 fiscal year (as of June 30). The business forecasts, which rose twice in the course of the year, were once again exceeded. Benefiting from high prices for agricultural commodities worldwide, sales in the KWS Group increased by 15.3% to €986.3 million. EBIT improved disproportionately by 20.8% to €140.9 million, driven by the expansion of the operating business, the release of value adjustments on receivables, and positive currency effects. The EBIT margin reached 14.3%, once again exceeding the high figure of 13.6% achieved in the previous year. In order to further improve the competitiveness of the KWS Group, research and development expenses were increased as planned by 11.5% to €126.6 million. The year-on-year increase of 29.5% to €94.4 million benefited from a reduced tax rate of 30% (previous year: 34%) in the Group. Against the backdrop of these pleasing Annual financial accounts, the Executive Board and Supervisory Board will propose an increase in dividends at the annual shareholder meeting, of just under 22% to €2.80 per share (previous year: €2.30).

Unbroken momentum for corn growth continues

Business in the high-revenue corn segment profited from sustained high market momentum in North America and Europe, which the KWS Group was able to use with a high-performance variety portfolio and high seed availability. Revenue in this segment rose by 19.7% to €571.5 million. The operating result improved even more strongly by 22.3% to €77.8 million, helped by the release of value adjustments. Due to the high prices of agricultural commodities worldwide, farmers have mainly used high-quality seed and expanded acreage for grain corn. In the United States, as well as in Europe, the market could be expanded with regionally differentiated distribution systems.

Sugarbeet segment revenues more than €300 million for the first time

Driven by strong North American business, sugarbeet segment sales also increased by 6.7% to €313.4 million. Almost 90% of revenues are attributable to the sugarbeet product area, 10% by the seed potato business, which has been fully consolidated in the sugarbeet segment for the first time since the 2011/2012 fiscal year. While sugarbeet sales rose in North America, they did not quite reach the previous year’s level in the EU-27. Overall, earnings rose by 21.2% to €79.9 million. The reversal of value adjustments and exchange rate effects had a positive effect on the segment result. Philip von dem Bussche, CEO of KWS: “Our genetically improved sugarbeet varieties still form the basis of our success in North America.”

Cereal business volume has increased significantly

In the cereals segment, revenue increased by 19.9% to €93.3 million. The result was better than expected and amounted to €18.9 million, an increase of 30.3%. In addition to the positive price trend for consumer cereals, the result was inspired above all by the QualityPlus brand,®which has established a new standard of quality in Germany.

Segment Breeding & Services dissolved

The revenues of the corporate area (previously: Breeding & Services) reached €8.1 million in the year under review (previous year: €6.5 million). This consists of income from farms, services for third parties and revenue from strategic projects. The segment result was –€35.7 (–27.4) million and includes all cross-segment expenses. This includes administrative costs of all KWS Group central functions, as well as costs for long-term research projects that have still no market maturity. By contrast, product-related expenses for breeding activities have been directly reflected in the product segments since the beginning of the 2011/2012 fiscal year. The segment result therefore reflects the high research activities of KWS.

Operating cash flow further increased - company growth solidly financed

During the 2011/2012 period, Cash Earnings in the KWS Group rose to €117.8 (104.1) million. Balanced with the accumulation of receivables and inventories, as well as the increase in current provisions, the cash flow from operating activities amounts to €104.2 (101.2) million. Hagen Duenbostel, KWS Chief Financial Officer: “The operating cash flow was again above the high level of €100 million. Investments totaled €56.6 (52.4) million, including €9.0 million for acquisitions made in Brazil. This leaves a strong free cash flow of €47.6 (48.8) million.” Cash and cash equivalents, including securities, amounted to €183.0 (146.9) million at the balance sheet date of June 30, 2012. Minus financial liabilities, net liquidity therefore reached €107.9 (113.3) million. Equity increased by €72.8 million to €603.1 million and, as in the previous year, fully covers non-current assets and inventories. With a simultaneous increase in the balance sheet total, the equity ratio fell slightly to 55.2% (58.8%).

Research budget increased according to plan and new jobs created

Expenses for research and development in the 2011/2012 fiscal year were increased according to plan for the future development of high-performance varieties. “Modern plant breeding is cutting-edge technology that allows us to steadily improve our seeds,” said Philip von dem Bussche. “Every year we spend 12% to 15% of revenue on R&D. In the reporting period, we invested €126.6 (113.5) million to further strengthen our competitiveness. This secured existing jobs and created additional jobs at KWS.” In the reporting year, the number of employees who now work for the KWS Group in more than 70 countries increased by more than 8% to an average of 3,851 (3,560).

Outlook: Continued operational growth

For the 2012/2013 fiscal year, KWS anticipates continued growth in the corn segment. In addition to growth in North America and China, Brazil will contribute sales revenues for the first time. In the sugarbeet seed business, the sales level of the previous year is barely sustainable, while on the other hand, the seed potato business is to be further expanded following the market-related difficulties in the previous year. Sales opportunities for grain are again seen as positive.

“In the 2012/2013 fiscal year, the operational growth of the KWS Group is expected to continue. However, from today’s perspective, special factors that had a positive effect on the previous year are not to be expected,” concluded Philip von dem Bussche. “We expect an increase in revenues in the KWS Group of around 10%. Following the particularly high EBIT margin of 14.3% in the past year, we are aiming for a margin of a good 11% in the current fiscal year, despite cost increases for product development and expansion of our sales and production activities.”