KWS Group reports successful rye and winter rapeseed business at the start of fiscal 2017/2018

• Net sales increased
• EBIT impacted by operating costs as customary in the first quarter
• Good earnings still anticipated as the guidance remains unchanged

The KWS Group has increased its net sales by 2.0% to €136.0 million in the opening quarter of fiscal 2017/2018. Rye seed and winter rapeseed business in Europe contributed to that. However, net sales in South America declined slightly. EBIT is typically negative after the first quarter and was € –38.8 (previous year: –28.8) million. KWS is sticking to its guidance for the end of the fiscal year and still anticipates a double-digit EBIT margin below the figure for last year (12.2%).

“We’re satisfied with how the first quarter of fiscal 2017/2018 went. Our expectations for the year as a whole remain positive. We’ll also advance our innovativeness in the fiscal year and significantly raise capital spending and expenditure on research and development,” said Eva Kienle, Chief Financial Officer of KWS SAAT SE, about the published quarterly results. The rise in net sales was accompanied by a planned increase in expenditure on research and development, additional distribution projects and optimization of administration. EBIT totaled € –38.8 (–28.8) million. That was due in particular to the fact that there were no positive special effects as in the previous year, as well as to negative exchange rate effects. Net income after taxes for the period declined by 10.6% to € –38.5 (–34.8) million. It is not possible to deduce a trend for its performance for the year as a whole from these quarterly results, since KWS does not generate the main part of its business until the third quarter (January to March).

Segment reports: Net sales grow in Europe

Net sales in the Corn Segment in the first quarter were €39.3 (71.4) million, a drop of 45.0%. The main reason for that was the transfer of our winter rapeseed activities, which were assigned to the Cereals Segment for the first time in the year under review effective July 1, 2017. In addition, corn and soybean seed business in South America declined slightly – in Argentina due to exchange rate effects. For seasonal reasons, no significant net sales are generated in the other regions at this early stage. The segment’s income is therefore outweighed by operating costs at this time of the year and was € –40.4 (–24.5) million.

Net sales in the Sugarbeet Segment were slightly below the good level of the previous year and totaled €10.3 (12.8) million. Revenues in the first quarter come mainly from the sale of sugarbeet seed in Chile, East Asia and the U.S. The segment’s earnings fell, in particular due to lower other operating income, which in the previous year was positively impacted by a special effect. They were € –17.4 (–13.1) million.

KWS increased its net sales in the Cereals Segment by 76.2% to €88.1 (50.0) million. The largest factor influencing that was the transfer of rapeseed activities from the Corn Segment. Positive winter rapeseed and rye seed business also had a positive impact overall. Net sales from rye rose in particular in Germany and Poland. Wheat and barley business remained stable. The segment’s EBIT at the end of the quarter was €27.9 (11.9) million.

The Corporate Segment’s net sales are generated from our farms in Germany and totaled €0.9 (1.4) million. All cross-segment costs are also allocated to the segment. They include expenses for all central functions of the KWS Group and for long-term research projects. As a result, the segment’s income (EBIT) is always well in the red and in the first quarter was € –25.1 (–20.2) million.

Reconciliation table

In € million	Segments	Reconciliation	KWS Group1
Net sales	138.6	-2.6	136.0
EBIT	-55.0	+16.2	-38.8

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

Forecast: Net sales and earnings expectations unchanged

The Executive Board is sticking to the guidance published in the Annual Report (October 26, 2017). Accordingly, the KWS Group expects to grow its net sales slightly and achieve a double-digit EBIT margin below last year’s 12.2%. As far as can be seen at present, research and development projects will result in an increase in the R&D intensity, which will be in excess of 17.7%. Capital spending will also be increased and is expected to be above €100 million.

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Quartely Statement Q1 2017/2018 of the KWS Group