KWS with stable business performance in a challenging environment – Guidance for the year confirmed

Einbeck, February 18, 2021

Total net sales of the KWS Group (ISIN: DE0007074007) decreased slightly by 1.1% in the first six months of 2020/2021 due to negative currency effects (currency-adjusted operating growth: + 9.0%). The key figures EBITDA, EBIT and net income were at the previous year's level despite the pandemic and remained negative as is customary for the first six months. KWS generates significant sales and earnings contributions with the spring sowing in the third fiscal quarter (January to March).

“We continue to see robust business development in a challenging environment. With our innovative cereals and corn varieties, we were able to score points in important growth markets such as Eastern Europe and Brazil in the first half of the year,” commented Eva Kienle, CFO of KWS. “At the same time, the devaluation of some currencies, especially in South America, had a negative impact on our key financial figures. We are optimistic about the rest of the financial year and the upcoming spring sowing season and are confirming our guidance for the KWS Group.“

Net sales for the first six month were at € 326.0 (329.6) million. EBITDA was € –48.2 (–50.8) million, while EBIT was € –93.2 (–92.0) million. The Group recorded a lower gross profit, as well as higher function costs for research and development and administration, while selling expenses fell year over year. Exchange rates had a negative impact on the KWS Group's earnings position, despite positive valuation effects from financial instruments.

Net financial income/expenses was € –24.9 (–27.4) million. Since the earnings contributed by the equity-accounted joint ventures do not materialize until the third quarter, net income from equity investments in the first six months is well in the red. It totaled € –17.2 (–19.7) million. The interest result was unchanged at € –7.7 (–7.7) million.

Income taxes totaled € –31.8 (–32.8) million. The result was net income for the period of € –86.2 (–86.5) million or € –2.61 (–2.62) per share.

Free cash flow improved to € –64.3 (–126.3) million (excluding the acquisition of Pop Vriend Seeds) in the reporting period. The improvement resulted mainly from a significant reduction in working capital.

Overview of the key figures

in € millions H1 2020/2021 H1 2019/2020 +/-
Net sales 326.0 329.6 -1.1%
EBITDA -48.2 -50.8 5.1%
EBIT -93.2 -92.0 -1.3%
Net financial income/expenses -24.9 -27.4 9.1%
Result of ordinary activities -118.1 -119.4 1.1%
Income taxes -31.8 -32.8 3.0%
Net income -86.2 -86.5 0.3%
Earnings per share (in €) -2.61 -2.62 0.4%

Business performance of the segments

Net sales at the Corn Segment declined slightly to €131.8 (133.4) million. Business expanded buoyantly (in terms of local currency) in Brazil and Argentina, our main markets in South America. On the other hand, there were significant negative exchange rate influences from the Brazilian real and Argentinian peso. The business in North America declined in the face of a challenging competitive environment. The segment’s income was € –69.1 million, on a par with the previous year’s figure of € –68.2 million. The Corn Segment does not generate significant net sales and contributions to earnings until the spring sowing season in the third quarter (January to March).

Net sales at the Sugarbeet Segment rose in the first half of the year to €43.1 (27.9) million. The sharp increase is mainly attributable to a higher proportion of early sales in Germany and Eastern Europe. In the previous fiscal year, such deliveries were not recorded until after the New Year. The segment’s income in the first six months was € –45.6 million and so at the level of the previous year (€ –46.3 million). Although net sales rose, there were in particular higher negative exchange rate effects and higher research and development expenditure. As is customary, revenue from sugarbeet seed is low in the first half of the year; significant net sales are not generated until the spring sowing season in the third quarter (January to March).

Net sales at the Cereals Segment in the first six months were €156.1 million, on a par with the previous year (€157.1 million). Whereas exchange rate effects likewise negatively impacted the figure, there was a noticeable increase in sales volumes for wheat, barley and rapeseed seed. Business operations with hybrid rye seed were stable, although net sales fell 4% year over year due to exchange rate effects. The medium-term growth prospects for hybrid rye remain positive. The segment’s income was €52.3 million and so at the level of the previous year (€53.8 million).

Net sales at the Vegetables Segment fell sharply to €26.0 (44.3) million due to lower demand for spinach seed in the wake of the Covid-19 pandemic, which hit the food service market segment particularly hard. This drop in business also meant that EBITDA declined to €2.8 (19.1) million and EBIT (including effects from the purchase price allocation) to € –8.7 (2.3) million.

Net sales in the Corporate Segment rose to €3.6 (2.5) million. They are mainly generated from KWS 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 segment’s income improved to € –39.1 (–54.4) million, mainly due to positive exchange rate-related valuation effects from financial instruments and lower costs as a result of the pandemic.

The difference from the KWS Group’s statement of comprehensive income and segment reporting is due to the requirements of the International Financial Reporting Standards (IFRSs) and is summarized for the key indicators of net sales and EBIT in the reconciliation table below:

Reconciliation table

in € millions Segments Reconciliation KWS Group
Net sales 360.7 -34.7 326.0
EBIT -109.9 16.7 -93.2

Guidance for the 2020/2021 fiscal year confirmed

For the KWS Group, the Executive Board continues to expect net sales at the previous year's level (€1,282.6 million). Assuming that net sales are stable, the EBIT margin is expected to be in the range between 11% and 13% (after adjustment for the non-cash effects as part of the purchase price allocation for the acquisition of Pop Vriend Seeds).

Due to the change in its short-term business prospects, the Executive Board assumes that the Vegetables Segment will generate net sales in a range between €60 and €65 million (previously: a slight decline from the previous year’s figure of €83.5 million). The EBIT margin – after adjustment for effects as part of the purchase price allocation for the acquisition of Pop Vriend Seeds – is now expected at around 20% (previously: 20% to 25%).

About KWS*
KWS is one of the world’s leading plant breeding companies. More than 5,700 employees in 70 countries generated net sales of around €1.3 billion in fiscal 2019/2020. 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, vegetables, rapeseed and sunflowers. KWS uses leading-edge plant breeding methods to continuously improve yield for farmers and plants’ resistance to diseases, pests and abiotic stress. To that end, the company invested more than €200 million last fiscal year in research and development.

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

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