KWS reports successful spring business and raises guidance

The KWS Group has increased its net sales at the end of the third quarter of 2016/2017 by 8.6% to €904.7 million. Net sales in Brazil rose to more than €100 million. Sugarbeet seed business benefited from strong variety portfolio and increasing cultivation area. Oil seed business also went well. However, cereals business in Europe declined slightly. The KWS Group’s operating income (EBIT) was €170.1 million and so improved sharply – also because of higher expenses due to exchange rate effects and the potato business in the same period of the previous year. The net sales and earnings expectations for the fiscal year as a whole have been raised slightly.

“As in previous years, we made advances operationally in the first nine months of this fiscal year, as confirmed by the figures for the period,” stated Eva Kienle, Chief Financial Officer of KWS SAAT SE. “I’m particularly pleased about our earnings performance.”

At March 31, 2017, there was a sharp rise in the contribution margin due to higher net sales and a slight improvement in the cost of sales compared to the same period of the previous year. Expenditure on distribution was increased by 2.8% and that on research and development by 5.4%. Administrative expenses, on the other hand, fell by 2.7%. Sale of the operational potato business last year had a positive impact on other operating expenses. Negative exchange rate effects were also lower. The KWS Group’s EBIT at March 31, 2017, was thus €170.1 (128.7) million, well above the figure for the previous year.

Segment reports: Net sales and EBIT increased in the Corn and Sugarbeet Segments

In the first three quarters, the Corn Segment grew its net sales by 6.6% year on year to €691.4 (648.5) million. Corn seed as well as oil seed business went well. Growth continued in Brazil, where KWS posted net sales of more than €100 million for the first time since entering the market in 2012. The appreciation in the Brazilian real and an increase in cultivation area had a positive impact on that. Corn business in Europe was stable for the most part up to the end of the period under review, but the prospects for the fourth quarter will be impacted by a market environment that remains strained. Net sales fell slightly in North America, where there are currently signs that corn cultivation area will decline. The segment’s income rose, despite an above-proportionate increase in expenditure on distribution and on research and development. It was €87.2 (71.4) million and was impacted by lower negative exchange rate effects.

Despite last year’s disposal of the seed potato operations (net sales from potatoes at the segment were €17.8 million after nine months last year), net sales in the Sugarbeet Segment rose to €358.6 (331.4) million, a year-on-year increase of 8.2%. Apart from good variety performance, the change in the Sugar Market Regime due this year and the price of sugar on the world market are having a better than expected positive influence on cultivation area for sugarbeet. KWS generated higher revenue from sugarbeet seed in just about all regions. The segment’s income improved to €137.1 (108.3) million, mainly as a result of the higher revenue from sugarbeet seed, an improvement in the cost of sales, and the previously mentioned sale of our loss-making seed potato business.

At the end of the third quarter, net sales at the Cereals Segment were €96.9 (104.3) million. While barley business remained stable in a market climate that was still tough for cereals, revenue from rye, rapeseed and wheat fell. The devaluation of pound sterling also had a negative impact on the segment’s net sales. Despite lower net sales, the segment’s EBIT rose slightly year on year to €17.0 (16.7) million as a result of lower cost of sales and function costs.

All cross-segment costs, such as expenditure for all central functions at the KWS Group and long-term research projects, are carried in the Corporate Segment. Its income is therefore always negative. While general and administrative expenses fell sharply, research expenditure increased slightly. EBIT was € –48.1 (–43.4) million. Exchange rate effects had a significant positive impact on earnings in the previous year.

Reconciliation table

In € million	Segments	Reconciliation	KWS Group1
Net sales	1,151.2	-246.5	904.7
EBIT	193.2	-23.1	170.1

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


Guidance raised: Net sales growth of just over 5% – EBIT margin at least 11%

There were further concrete indications of a continuing expansion in sugarbeet seed business in the course of fiscal 2016/2017 due to rising cultivation area. The KWS Group therefore now expects to increase its net sales by just over 5%. The EBIT margin is expected to be at least 11% for the fiscal year as a whole. Capital spending will not exceed the €100 million mark this fiscal year and the R&D intensity will be around 17%.