Feb. 10, 2023
The KWS Group’s net sales rose sharply by around 31% in the first half of 2022/2023 – Operating income improved significantly
Strong growth in all product segments
Net sales forecast raised to 13% to 15% (previously: 10% to 12%)
″The product innovations and high-performance varieties in our cereals and sugarbeet portfolio, our positive momentum in Brazil and the good general conditions in the agricultural markets are accelerating our growth this fiscal year,″ said Eva Kienle, Chief Financial Officer of KWS. ″We are therefore optimistic about the upcoming spring sowing season in our key markets of Europe and North America and are again raising our net sales forecast.″
Business performance in the first half of 2022/2023
The KWS Group’s net sales in the first half of fiscal 2022/2023 rose by around 31% to €563.7 (431.6) million. Exchange rate effects only had a slight impact on net sales all in all. The KWS Group’s key indicators for operating income are typically negative in the first six months, but they improved sharply year over year. EBITDA was € –24.5 (–45.2) million and EBIT was € –71.9 (–89.5) million. Although we posted a much higher gross profit, there were, as planned, higher costs for research and development, sales and administration. Net financial income/expenses fell to € –36.3 (–27.3) million, in particular due to higher interest expenses in the growth market of Brazil. Earnings after taxes were € –79.5 (–85.3) million or € –2.41 (–2.58) per share. The free cash flow fell to € –173.6 (–128.5) million as a result of the growth-driven increase in working capital.
Overview of the key figures
Business performance of the segments
The Corn Segment grew its net sales sharply to €290.9 (200.7) million in the first half of the year. In Brazil, in particular, the increase in sales prices and the high performance of KWS’ variety portfolio led to a significant expansion in corn seed business. Since the segment does not generate the major part of its annual net sales until the third quarter (January to March) in the Europe and North America regions, the segment’s earnings were negative, as customary for the period under review, and totaled € –70.1 (–66.4) million. The decline in the segment’s earnings was mainly due to cost increases and negative exchange rate effects (Argentina).
Net sales at the Sugarbeet Segment rose sharply in the first half of the year to €93.8 (60.9) million. The increase is mainly attributable to earlier seed deliveries in several European markets. Due to seasonal reasons, revenue from sugarbeet seed is low in the first half of the year; the main net sales for the segment are not generated until the spring sowing season in the third quarter (January to March). The segment’s income is negative as customary in the first half of the year, but improved significantly to € –36.1 (–45.2) million year over year. The segment’s income takes into account negative effects in the mid-single-digit million range from the destruction of inventories as a result of changes in the regulatory framework (see the explanations on this subject in the section ″Report on Events after the Balance Sheet Date″ of the Semiannual Report on page 18).
Net sales in the Cereals Segment, which generates the predominant share of its annual net sales in the first half of the year, rose sharply by 19% to €207.8 (€174.9) million, mainly due to strong growth in oilseed rape, rye and wheat seed. The Cereals Segment also achieved high growth rates with its catch crops and organic seed, areas with a highly promising future. Given the strong growth in net sales and an improved product mix, the segment posted an above-proportionate increase in income to €77.5 (62.3) million.
The Vegetables Segment grew its net sales sharply to €28.7 (21.9) million in the first half of the year, mainly on the back of stronger demand for spinach seed in the U.S. and China. The segment’s income improved to € –3.8 (–10.6) million as a result of the course of business and lower effects from the purchase price allocation as part of company acquisitions. The segment’s income takes into account the planned increase in R&D expenditure of €6.8 (4.3) million, which is mainly earmarked for the establishment of breeding programs for new types of vegetables.
Net sales in the Corporate Segment fell to €4.3 (5.1) million. They are mainly generated from KWS’ farms. Since all cross-segment costs for the KWS Group’s central functions and research expenditure are charged to the Corporate Segment, its income is usually negative. The decline in the segment’s income to € –59.3 (–52.9) million is mainly attributable to the expansion of central R&D activities and general cost increases.
Outlook for the 2022/2023 financial year
In view of the positive business performance in the first six months, the Executive Board now expects that the KWS Group will grow its net sales for fiscal 2022/2023 (on a comparable basis, excluding exchange rate and portfolio effects) by 13% to 15% (previously: 10% to 12%). An EBIT margin of between 10% and 11% is still anticipated. The R&D intensity is expected to be in the range of 18% to 20%.
The previous forecasts for the product segments remain unchanged, namely sharp growth in net sales (on a comparable basis) and EBIT margins at the levels of the previous year.