KWS SAAT AG (ISIN: DE0007074007), one of the world’s leading seed-breeding companies, consistently pursued its long-term corporate strategy in the 2013/2014 fiscal year and significantly increased its expenditure on research and breeding as well as on the further expansion of its sales structures. Revenues increased by 2.7% to €1.178 billion (previous year: €1.147 billion). Adjusted for negative currency effects, sales would have been 7.1% above the previous year’s level. Against the background of increased expenditure on product development and sales of €22 million and earnings-reducing currency effects of around €4 million, the company generated an operating result (EBIT) of €138.4 (152.1) million. Due to one-off tax effects, net income for the year fell disproportionately to €80.3 (92.3) million. Nevertheless, the Executive Board and the Supervisory Board are proposing an unchanged dividend of €3.00 per share due to the good operating performance.
“After two exceptionally strong years, the 2013/2014 Annual financial accounts are also very pleasing. With an EBIT margin of 11.8%, the KWS Group continues to demonstrate a high earning power,” said Philip von dem Bussche, CEO of KWS SAAT AG. “By continuously expanding our research and development activities, we are strengthening the basis for successful corporate development in the long term.” In the 2013/2014 fiscal year, KWS received 336 (276) marketing approvals for new varieties across all crops. R&D expenditure increased by 6.0% to €148.8 (140.4) million, corresponding to an R&D ratio of 12.6% (12.2%). Overall, a yearly average of 1,836 (1,768) of the 4,847 (4,443) employees worldwide working for the KWS Group were involved in research and development. Sales expenditure increased by 7.1% to €204.0 (190.5) million due to the expansion of international sales structures.
In the 2013/2014 fiscal year, the company invested a total of €82.6 (65.2) million in tangible assets—an increase of 26.7%. One focus of investment activity is capacity expansion in corn production, including the construction of a new seed processing plant in Serbia. There were also modernization measures in sugarbeet seed production in North America, as well as numerous replacement investments. Depreciation amounted to €45.8 (38.4) million.
Sales revenues in the Corn segment increased slightly by 1.9% to €714.9 (701.7) million. Unfavorable currency effects—particularly from the US dollar zone, but also from South America and Eastern Europe—had a negative impact on the continued good operating performance of the business. Overall, negative currency effects totaled €28 million, so that segment sales on an adjusted basis would be €742.9 million (+5.9%). The South American sales markets developed particularly dynamically, but a slight increase in sales was also achieved in Europe. The segment result (EBIT) increased by 9.4% to €100.9 (92.2) million despite higher expenditure on product development and sales. This corresponds to a return on sales (EBIT margin) of 14.1% (13.1%).
The sugarbeet segment, which also includes KWS’s seed-potato business, achieved an increase in sales of 6.8% to €351.1 (328.6) million. Of this amount, €318.5 (297.8) million was accounted for by sugarbeets and €32.6 (30.8) million by seed potatoes. Sales in the core markets of North America and the EU-28 increased again due to the high-performance variety portfolio and thus expanded the market-leading position for sugarbeet. The segment result (EBIT) fell by 5.1% to €70.1 (73.9) million due to expenses for the realignment of the seed potato business. The return on sales was 20.0% (22.5%).
Sales revenues in the the cereals segment declined by 3.9% to €107.3 (111.7) million due to reduced prices for cereals for consumption. Farmers increasingly resorted to self-grown seed for winter sowing in 2013/2014. The demand for KWS’s high-profit contribution rye varieties dropped significantly due to reductions in acreages, which had a particular impact on the segment result (EBIT). This amounted to €17.1 (26.9) million—a return on sales (EBIT margin) of 15.9% (24.1%).
The corporate segment covers the company’s cross-segment costs for long-term research projects as well as centralized administrative functions, so its earnings are always negative. As a result of higher expenditure in the year under review, the segment result (EBIT) was
–€49.7 (–40.9) million.
Comfortable balance sheet ratios support growth
Cash earnings amounted to €110.4 (109.5) million in the 2013/2014 fiscal year, while cash flow from operating activities (operating cash flow) amounted to €61.0 (84.6) million. The decline in the operating cash flow is due to the increased working capital: Inventories were increased by €48.5 million to €193.0 million to safeguard supply capacity. The balance sheet total increased only slightly by 3.6% to €1.262 (1.218) billion. Results-neutral currency effects of €19.2 million and effects from the acquisition of minority interests in the cereals business led to a decline in equity of 1.8% to €637.8 (649.6) million. Due to further adjustments required by new accounting standards (IAS 19 R), the equity ratio is now comfortable at 50.5% (53.3%).
2014/2015 fiscal year: Sales growth of 5–10% planned
In the current fiscal year, the company plans to once again significantly increase expenditure on sales activities as well as research and development, thereby further promoting the development of new sales markets and the breeding of high-yielding new varieties. This will be accompanied by substantial investments in tangible assets. “In order to be prepared for the planned growth of the coming years, we need to expand our seed-processing capacities in North America and Eastern Europe,” said Eva Kienle, CFO of KWS SAAT AG, explaining the background. “In addition, we will expand our research facilities at the Einbeck site and continue the construction of the new research center in St. Louis, USA. Our expansion program will also mean that we will create around 300 new jobs worldwide by the end of the fiscal year, and then around 5,200 employees will be working for us.” Overall, the Executive Board expects an increase in sales of 5–10% and an EBIT margin of at least 10% for the KWS Group in the 2014/2015 fiscal year. Furthermore, the Executive Board announced the conversion of KWS SAAT AG into a European stock corporation: KWS SAAT SE. A proposal for the corresponding resolution will be submitted to the annual shareholder meeting on December 18, 2014.
The full report on the 2013/2014 fiscal year is available for download online at www.kws.de/ir.
