KWS continues its growth (2015-02-25)
Net sales in the first half of 2014/2015 increase slightly by 8.5% over the same period of the previous year – Higher expenditure on expanding distribution and production structures – Research center opened in St. Louis – Stable results expected for the year as a whole: EBIT margin of at least 10%
KWS SAAT AG (ISIN: DE0007074007), one of the world’s leading seed companies, is sticking rigorously to its growth path and implementing its capital spending program as planned. Net sales in the first half of fiscal 2014/2015 rose by 8.5% to €194.0 (178.8) million. “Our higher spending on expansion of our distribution and production structures and on research into and breeding of new, high-yielding varieties will enable us to create the lasting foundation for our long-term success,” is how Hagen Duenbostel, CEO of KWS SAAT AG, outlines the company’s strategy, which is based on sustainability.
There were additional function costs totaling around €22.8 million in the first half of 2014/2015, with the result that operating income (EBIT) was € –96.8
(–79.3) million. Negative earnings are always reported in the first half of every fiscal year. Expenditures are spread almost linearly over the year as a whole, whereas the two segments that make the largest contribution to net sales – Corn and Sugarbeet – do not generate the main part of their revenue until the sowing season that starts in the spring. Exchange rate movements in the individual regions – positive effects from appreciation of the US dollar, negative effects from the devaluation of Eastern European currencies – roughly canceled each other out.
Extensive capital spending program
Capital expenditure on fixed and intangible assets increased to a total of €77.1 (23.2) million in the first half of 2014/2015. This is mainly due to the acquisition of the remaining 51% stake in the French seed company SOCIETE DE MARTINVAL S.A. In addition, further expansions in seed processing capacities are envisaged by the end of fiscal 2014/2015, as a result of which the capital spending budget is expected to grow to €138 (82.6) million. Spending to expand distribution structures and on research into and breeding of new varieties is expected to be 14% above the level of the previous year.
Research center opened in St. Louis, Missouri (U.S.)
The KWS Gateway Research Center, which was completed at the end of 2014, gives the KWS Group a second location for its research activities alongside its key site in Einbeck. The company plans to expand the research center in the U.S. step-by-step. KWS intends to employ around 25 people in this innovative region for global plant research and breeding by the end of fiscal 2014/2015.
Growth in a tough market environment
In North and South America, there are signs that corn cultivation area will decline in favor of soybeans. Nevertheless, net sales at the Corn Segment, which essentially comprise revenue from operations in South America, winter rapeseed business in Europe and initial net sales in North America in the first half of 2014/2015, increased by 4.2% to €99.6 (95.6) million. The segment’s income (EBIT) was impacted by additional expenditure on expanding production and distribution structures and on variety development and totaled € –63.2 (–56.1) million.
Net sales at the Sugarbeet Segment grew in the first half of 2014/2015 by 11.6% to €28.9 (25.9) million. The dynamism of the first quarter thus remained unbroken, but will weaken in the further course of the year due to lower cultivation area in Europe, although we intend to compensate for that by strong sugarbeet business in America. The segment’s income, including higher function costs and negative currency effects due to the performance of the ruble, was € –42.2 (–35.3) million.
Despite low producer prices, the Cereals Segment turned in an extremely gratifying performance in the first half of 2014/2015. Net sales were €83.7 (85.3) million and operating income (EBIT) was €23.7 (25.2) million, in both cases just below the figures for the previous year.
The Corporate Segment reports cross-segment function costs and research expenditures, while its only revenue comes from our farms. The segment’s income developed as planned and was € –32.6 (–27.6) million in the first half of 2014/2015.
Stable results expected for the year as a whole: Increase of 6% in net sales, EBIT margin of at least 10%
“Given that our environment remains challenging, we expect a stable performance for 2014/2015 as a whole,” says a confident Eva Kienle, CFO of KWS SAAT AG. The anticipated lower net sales at the Corn Segment due to a reduction in cultivation area are to be at least partly offset by a further improvement in sugarbeet seed business. All in all, the Executive Board expects the KWS Group to grow its net sales by just over 6% to around €1.25 billion (previous year: €1,178 million) and post an EBIT margin of at least 10%. The R&D intensity will be around 13% and the selling expense ratio just over 18% at the end of the year.
The full report on our business performance in the first half of 2014/2015 can be downloaded in the Internet at www.kws.com/ir.
Head of Investor Relations
KWS SAAT AG