Vilmorin & Cie sales down 8.5% in first half 2018

• Reduction in sales for the first semester, resulting in a decrease in the operating income
   
• Slight improvement of the net income for the 1st semester 2017-2018
   
• Outlook for 2017-2018:
  
  

• Objective for business growth readjusted at 4%*
• Objective for the current operating margin rate maintained

On average, sales for the first semester globally represent around only one third of the annual sales for Vilmorin & Cie (The Limagrain seed business). Because of this highly seasonal pattern, the consolidated financial statements for the first semester traditionally show very negative income.


Sales for the first semester lower (by 3.5% on a like-for-like basis), in spite of the rebound triggered in vegetable seeds

Vilmorin & Cie’s consolidated sales for the first semester 2017-2018, closed on December 31, 2017, came to 460.1 million euros, a decrease of 8.5% with current data, and 3.5% on a like-for-like basis, including the change in the scope of activity related to the withdrawal by the Vegetable Seeds Business Unit VILMORIN-MIKADO from the distribution of agricultural supplies in Japan.

Vegetable Seeds division: a regain in activity over the 2nd quarter

Sales for the Vegetable Seeds division for the first semester came to 248.7 million euros, a drop of 13.3% with current data compared with the first semester for 2016-2017. It should be emphasized that during the course of the second quarter, the withdrawal by the Business Unit VILMORIN-MIKADO from the distribution of agricultural supplies in Japan once again accelerated and has proven to be faster than planned. On a like-for-like basis, the decrease was 6%.

During the second quarter, business began to grow again (+2.9% on a like-for-like basis), after a first quarter recording a marked drop in sales. The upswing in the sales of seeds concerns the three Business Units: HM.CLAUSE, Hazera and VILMORINMIKADO, with particularly fine performances in Asia, and a number of countries in the Mediterranean basin, especially Turkey. Nevertheless business was affected by distributor inventory levels that have been globally high, particularly in North America, and also by problems importing seeds into certain countries.

When looking at this semester overall, the growth trend for the business of selling seeds, Vilmorin & Cie’s core business, has not been called into question, in particular when considering the very promising order portfolio for the coming months. Consequently, besides the acceleration of the withdrawal from the distribution of agricultural supplies in Japan, for fiscal year 2017-2018, Vilmorin & Cie is aiming for 4% growth in sales of Vegetable Seeds on a like-for-like comparison with 2016-2017.

Field Seeds division: contrasting business over the semester, in a market context that remains tense

Sales for the Field Seeds division for the first semester came to 197.9 million euros, down by 1.8% compared with the first semester for 2016-2017. Restated on a like-for-like basis, activity was stable. During the course of the second quarter, the Field Seeds division recorded sales down by 5.2% on a like-forlike basis.

• In Europe, the commercial campaign for rapeseed once again this year achieved excellent growth, particularly in France, in the United Kingdom and in Central and Eastern Europe. This excellent performance reflects market share gains, allowing Vilmorin & Cie to reinforce its position as a top-ranking European player.
  The first part of the straw cereal seed campaign (wheat, barley) posted a drop in sales, in a market context where the use of commercial seeds has fallen, particularly in France.
  In a market environment still heavily influenced by the low level of prices for agricultural production, orders for corn are looking satisfactory, whereas the cultivated acreage for this crop should be reduced. Finally, orders for the sunflower seeds campaign, for which a number of deliveries have been delayed until the third quarter, are fully in line with objectives, particularly in Eastern Europe.
   
• In South America, sales were down at the end of December, after a fiscal year for 2016-2017 that was marked by very strong growth in business. Sales for the first corn campaign in Brazil (safra) were stable compared to the previous year, in spite of a significant drop in cultivated acreage, whereas the second corn campaign (safrinha) has started later than last year. Moreover orders for safrinha were lower than at the end of December 2016, as a result of the probable reduction in acreage devoted to this crop and the drop in the market for commercial seeds, in a context of pressure on pricing policies. Sales of soybean seeds continued to grow steadily, reflecting Vilmorin & Cie’s drive to strengthen its positions in this major crop in South America.
   
• In the other new development zones (Asia and Africa), the level of business achieved overall during the first semester corresponds to expectations.

On these bases, and taking into account a level of business less dynamic than expected in South America, resulting from a lackluster market environment this year in this region, Vilmorin & Cie has decided to readjust its objective for the increase of its sales in Field Seeds for fiscal year 2017-2018 to 4% on a like-for-like basis compared to the previous fiscal year, as opposed to more than 5% as previously targeted.

Finally, on the North American market, the beginning of the commercial campaign for corn and soybean is running well, in the context of virtual stability predicted for corn acreage.

Decrease in the operating income, directly linked to the reduction in business, and slight improvement of the net income for the semester

After taking into account the cost of destruction and impairment of inventory, margin on the cost of sales came to 236.8 million euros, representing 51.5% of total sales, up 2.6 percentage points compared to the first semester for the previous fiscal year; it mainly benefitted from the withdrawal from the distribution of agricultural supplies in Japan, and also from the improvement of the Vegetable Seeds product mix.

Net operating charges came to 279.2 million euros, an increase of 14.7 million euros compared with the first semester for fiscal year 2016-2017, including an additional investment of 3.5 million euros in research and development.

Consequently, the operating income for the first semester shows a loss of 42.4 million euros on December 31, 2017, an increase of 23.9 million euros compared to the first semester for 2016-2017; the operating margin, traditionally negative at the end of the first semester, came to -9.2%, as opposed to -3.7% on December 31, 2016.

The income contribution from associated companies, in particular AgReliant (North America. Field Seeds) and Seed Co (Africa. Field Seeds), stood at -26.6 million euros at the end of the first semester for 2017-2018, as opposed to -24.9 million euros for the first semester of the previous fiscal year.

The financial income shows a net charge of 16.7 million euros as opposed to 6.8 million euros on December 31, 2016. In particular, this year net foreign exchange losses of 4.6 million euros were recorded, as opposed to net foreign exchange gains of 4.1 million euros the previous fiscal year.

On December 31, 2017 a net tax income of 47.6 million euros was recorded, an increase of 37.1 million euros compared to the previous year, notably owing to the adoption of lower tax rates in France and the United States.

As a result of these factors, the net result for the semester shows a loss of 38.1 million euros, including a group share loss of 37.3 million euros, a reduction of 1.6 million euros compared with the first semester for fiscal year 2016-2017.

At the end of December 2017, the balance sheet structure is naturally influenced to a large extent by the seasonal nature of the annual business cycle. Net of cash and cash equivalents (226.3 million euros), financial indebtedness came to 986.2 million euros, including a non-current share of 891.3 million euros.

The group share of equity stood at 1,085.2 million euros and minority interests at 107.9 million euros.

Outlook for 2017-2018: the objective for business growth has been readjusted and the objective for the current operating margin rate is maintained

In view of the results for the first semester, as presented above, and on the basis of information currently available, for fiscal year 2017-2018 Vilmorin & Cie is now aiming for an increase in consolidated sales of 4% on a like-for-like basis compared with fiscal year 2016-2017, as opposed to an increase of 5% as previously targeted. This objective now takes into account the full impact of the withdrawal from the distribution of agricultural supplies in Japan. Moreover, Vilmorin & Cie is maintaining its objective of achieving a current operating margin rate at the same level as in 2016-2017, including research investment estimated at around 255 million euros.

Finally, Vilmorin & Cie is aiming for a contribution from its associated companies – mainly AgReliant (North America. Field Seeds), Seed Co (Africa. Field Seeds) and AGT (Australia. Field Seeds) at least equivalent to that of 2016-2017.

Over the second semester, reaching these objectives will nevertheless partly depend on the definitive evolution of cultivated acreage per crop and on prices for agricultural production, particularly in South America, in a context of pressure on pricing policies for the Field Seeds activity, and also, for the Vegetable Seeds activity, on the confirmation of dynamic business for the most important period of the fiscal year.

“Over the course of fiscal year 2017-2018, Vilmorin & Cie should be able to confirm the solid growth course of its activities, even though certain market trends, particularly the persistent pressure on agricultural prices, should result in a pace of growth that is not as strong as for the previous fiscal year. Strengthened by the wealth of its product portfolio and its organization model in close proximity to markets, Vilmorin & Cie enjoys full confidence in its capacity to achieve another quality fiscal year, both in terms of business and its profit level. Operating in a competitive market characterized by major consolidation operations, Vilmorin & Cie can confirm its strategy combining organic growth and a policy of targeted acquisitions. True to its long-term vision, Vilmorin & Cie will pursue the deployment of this development and innovation strategy, with the ambition of business and margin growth higher than market trends, both in Vegetable Seeds and Field Seeds”, Vilmorin & Cie’s CEO, Daniel JACQUEMOND commented.

* On a like-for-like basis