KWS confirms guidance for the year after a strong first six months

Net sales increase sharply in the first half of 2018/2019 – Growth in all product segments – Guidance for net sales and EBIT margin confirmed

Einbeck, February 26, 2019. The KWS Group (ISIN: DE0007074007) recorded an 18.4% increase in net sales to €289.1 million in the first half of 2018/2019. The strong growth is attributable in part to earlier deliveries of seed in some markets. All the product segments (Corn, Sugarbeet and Cereals) contributed to this positive business trend. EBIT is typically negative after the first half of the year and improved to € –76.6 (previous year: –89.6) million. Most recently, KWS has posted around 25% of its annual net sales in the first six months and does not generate the main part of its business until the spring sowing season in the third quarter (January to March). KWS is sticking to its guidance for net sales and the EBIT margin for the 2018/2019 fiscal year.

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“The successful first half of the year and the indications for the upcoming spring sowing season give us grounds to be optimistic about the current fiscal year,” said Eva Kienle, Chief Financial Officer of KWS SAAT SE. “Our good growth – despite significant strains from exchange rate effects – is due to our innovative variety portfolio, which we intend to expand through intensified investment in research and development.” Net sales in the first half of 2018/2019 rose sharply by 18.4% to €289.1 (previous year: 244.1) million. The strong decline in value of a number of local currencies in countries where the KWS Group operates had a negative impact on net sales, which are consolidated in euros. Adjusted for exchange rate effects, the KWS Group’s net sales would have been €329.3 million, a rise of 34.9%. The KWS Group’s operating income (EBIT) improved in the first half of 2018/2019 by 14.5% to € –76.6 (–89.6) million. The strong increase in gross profit was partly offset by higher function costs for sales and administration. Income generated by receivables management activities contributed positively to EBIT. Net financial income/expenses improved to € –21.1 (–29.0) million, mainly due to the rise in income from equity-accounted companies. Income taxes totaled € –36.5 (–38.0) million. The result was net income for the period of € –61.2 (–80.6) million or € –9.20 (–12.23) per share.

Growth in all product segments

Net sales at the Corn Segment rose year over year to €145.3 (110.5) million. An improved supply of seed resulting from the switchover in our portfolio meant that net sales in South America – and in particular in Brazil – were well up over the previous year. Net sales in North America likewise rose sharply as a result of early sales, in some cases for weather-related reasons. Only low revenue is usually generated in Europe in the first half of the year. The segment’s EBIT improved to € –64.0 (–76.3) million. The segment generates the lion’s share of its revenue and EBIT in the third quarter.

Net sales at the Sugarbeet Segment rose in the first half of the year to €45.3 (33.8) million. That is attributable in part to earlier deliveries in some markets, as well as to higher sales, for example in Eastern Europe. The segment’s income in the first half of the year was € –22.7 (–27.3) million. As is customary, revenue from sugarbeet seed is still low in the first half of the year; significant net sales are not expected until the spring sowing season in the third quarter. KWS’ winter cereal seed business, which is now over for the fiscal year, performed quite positively.

Net sales at the Cereals Segment rose in the first half of the year by 12.7% to €139.0 (123.3) million. That increase is mainly attributable to successful rye seed business, which benefited from the relatively stable yields hybrid rye delivers in the dry summer conditions in our core markets, as well as from good commodity prices. Rye is relatively drought-tolerant compared to other cereal crops. Apart from rye, rapeseed and barley seed business also contributed to the growth in net sales. The segment’s income improved to €47.0 (34.3) million due to higher contribution margins from rye business. The segment generates the lion’s share of its revenue and EBIT in the first half of the year.

Net sales in the Corporate Segment totaled €2.7 (2.4) million. They are mainly generated from our farms. Since all cross-segment costs for the KWS Group’s central functions and basic research expenditure are charged to the Corporate Segment, its income is usually negative. The costs consolidated in this segment rose slightly in the first half of the year, among other things due to additional work as part of the reorganization project ONEGLOBE. The segment’s income was € –51.6 (–45.3) million.

Reconciliation table

In € million Segments Reconciliation KWS Group1
Net sales 332.3 -43.2 289.1
EBIT -91.3 14.7 -76.6

1 Excluding the shares of the equity-accounted companies AGRELIANT GENETICS LLC., AGRELIANT GENETICS INC. and KENFENG – KWS SEEDS CO., LTD.

Annual guidance confirmed

KWS is sticking by its forecast from the 2017/2018 Annual Report. As far as can be seen at present, the EBIT margin is expected to be in a range from 10.0% to 12.0% on the back of a slight increase in net sales.

The Executive Board still assumes there will be a significant expansion of research and development and distribution activities, a slight decline in sugarbeet seed business, and higher administrative expenses. Expansion of research and development activities will result in an increase in the R&D intensity to around 19%. As far as can be seen at present, capital spending will amount to more than €100 million.

Due to the strongly seasonal nature of KWS’ business as a result of the great importance of the spring sowing season and external factors that are difficult to anticipate, such as the weather and fluctuations in cultivation area, more detailed statements on the Group’s net sales and earnings performance cannot be made with sufficient reliability at this juncture.

Semiannual Report 2018/2019 KWS Group

About KWS *

KWS is one of the world’s leading plant breeding companies. In fiscal 2017/2018, 5,147 employees in 70 countries generated net sales of €1,068 million and earnings before interest and taxes (EBIT) of around €133 million. A company with a tradition of family ownership, KWS has operated independently for more than 160 years. It focuses on plant breeding and the production and sale of seed for corn, sugarbeet, cereals, rapeseed and sunflowers. KWS uses leading-edge plant breeding methods to continuously improve yield and resistance to diseases, pests and abiotic stress. To that end, the company invested €198 million last fiscal year in research and development, 18.5 percent of its net sales.

* Excluding the shares of the equity-accounted companies AGRELIANT GENETICS LLC., AGRELIANT GENETICS INC. and KENFENG – KWS SEEDS CO., LTD.

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Peter Vogt
Peter Vogt
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