EBIT margin expectations unchanged for the fiscal year as a whole

Einbeck, February 27, 2018

Net sales lower in the first half of the year – Increase in expenditure aimed at securing future growth – Net sales and EBIT to be in the anticipated range at the end of the fiscal year

The KWS Group (ISIN: DE0007074007) recorded a 12.8% fall in net sales to €244.1 million in the first half of 2017/2018. That was due to a decline in corn and sugarbeet seed business in the regions South America and Turkey. However, net sales in the cereal seed business increased sharply, due in part to the transfer of the rapeseed business from the Corn Segment. EBIT is typically negative after the first half of the year. It fell to € –89.6 (previous year: –70.3) million due to the rise in costs (largely in keeping with planning) and the fact that there were no positive special effects as in the previous year. 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). Expectations for net sales and earnings for the fiscal year as a whole remain unchanged. KWS is sticking to its recently published guidance for the KWS Group; the company has also issued a more precise forecast for its performance in the year as a whole.

“We intend to continue to grow and to invest in the future, regardless of the economic situation. As a result, expenditure to secure future growth impacted EBIT in the first six months, largely as planned. We currently expect a solid double-digit EBIT margin at the end of the fiscal year,” stated Eva Kienle, Chief Financial Officer of KWS SAAT SE. The decline in net sales was accompanied by a planned increase in expenditure, particularly on research and development, IT projects and optimization of administration. Earnings in the previous year were also impacted by a positive special effect from sugarbeet seed production. EBIT totaled € –89.6 (–70.3) million. Net income after taxes for the period declined by 25.3% to € –80.6 (–64.3) million.

Segment reports: Winter cereals business grows

Net sales at the Corn Segment in the first half of fiscal 2017/2018 fell by 38.9% to €110.5 (180.8) million. One contributing factor was that rapeseed activities, which accounted for €25 million of the Corn Segment’s net sales in the same period of the previous year, were transferred to the Cereals Segment. Net sales from corn seed in South America – particularly in Brazil – were below the strong level of the previous year. The decline was due not only to strong negative exchange rate effects, but also to a temporary inadequate supply of seed resulting from our planned portfolio switchover. In Europe and North America, there is usually only little revenue generated from early sales of corn seed in the first half of the year. The segment’s EBIT was € –76.2 (–59.1) million. The drop was largely attributable to transfer of the rapeseed activities.

Net sales in the Sugarbeet Segment in the first six months were down year on year at €33.8 (45.2) million due to the fact that (as expected) seed sales in Turkey were lower. The devaluation of the Turkish lira also had a negative impact. Revenue from sugarbeet seed in the EU rose slightly, but – as is customary at this time of the year – remained low. No significant net sales are generated in the other regions at this stage, either. The segment’s income in the first half of the year was € –27.3 (–19.2) million. A special effect related to seed production had a positive influence on earnings in the previous year.

In the winter season just ended, KWS’ winter cereal and winter rapeseed business performed positively and increased markedly. Net sales in the Cereals Segment in the first half of the year rose by 47.8% to €123.3 (83.4) million and so were well up over the same period of the previous year. The main reasons for that were the transfer of all rapeseed activities to the segment at the beginning of fiscal 2017/2018 as well as an 11% rise in seed sales in Europe. Hybrid rye seed business in Germany and Poland also went well, with net sales of rye seed growing there by double-digit rates. Net sales from barley and wheat likewise rose slightly. The segment’s income was €34.3 (21.4) million.

Net sales in the Corporate Segment totaled €2.4 (3.2) million. They are mainly generated from the company’s 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 regularly negative. In addition to the increase in selling expenses as a result of the planned launch of marketing measures in Europe, general administrative expenses also rose – among other things, due to costs for optimizing our organizational structure and strengthening our IT infrastructure. The segment’s income was € –45.3 (–35.2) million.

Reconciliation table

In € million Segments Reconciliation KWS Group1
Net sales 270.0 -25.9 244.1
EBIT -114.5 24.9 -89.6

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

Forecast: Expectations for the year as a whole confirmed
The KWS Group expects to increase its net sales slightly and achieve an EBIT margin of between 11.0% and 12.0%. All in all, the underlying expectations for the KWS Group’s net sales and EBIT published most recently have not changed substantially, despite the – in some cases – significant negative exchange rate effects and lower net sales in South America. As far as can be seen at present, research and development projects will result in an increase in R&D intensity, which will be in excess of 18%. Capital spending will also be increased and is expected to be above €100 million.

Semiannual Report 2017 | 2018

About KWS*

KWS is one of the world’s leading plant breeding companies. In fiscal 2016/2017, 4,950 employees in 70 countries generated net sales of €1,080 million and earnings before interest and taxes (EBIT) of €132 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 €190 million last fiscal year in research and development, 17 percent of its net sales. For more information: www.kws.de. Follow us on Twitter® at https://twitter.com/KWS_Group.

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


Wolf-Gebhard von der Wense
Wolf-Gebhard von der Wense
Send e-mail