KWS strengthens its foundation for further growth – Dividend to remain unchanged at €3.00 a share
Net sales in 2013/2014 increase by 2.7% to €1,178.0 million despite negative exchange rate effects – Significant expansion in R&D and distribution activities influence earnings – EBIT margin of 11.8% – Net sales expected to grow by 5% to 10% in 2014/15
KWS SAAT AG (ISIN: DE0007074007), one of the world’s leading seed companies, stayed with its long-term corporate strategy in fiscal 2013/2014 and sharply increased its spending on research and breeding while expanding its distribution structures. Net sales rose by 2.7% to €1,178.0 (previous year: 1,147.2)†million. After adjustment for negative exchange rate effects, net sales would have been 7.1% higher year on year. Expenditure on product development and distribution increased by €22†million while exchange rate effects reduced earnings by about €4†million, and the company generated operating income (EBIT) of €138.4†(152.1)†million. Net income for the year fell above-proportionately to €80.3†(92.3)†million due to special tax effects. Nevertheless, the Executive Board and the Supervisory Board will propose an unchanged dividend payout of €3.00 per share in view of the company’s good operating performance.
“Following two exceptionally strong years, the 2013/2014 annual financial statements are also very gratifying. The KWS Group continues to show high earnings strength, as reflected in the EBIT margin of 11.8%,” said Philip von dem Bussche, CEO of KWS SAAT AG. “By continuously expanding our research and development activities, we are strengthening the foundation for our company’s long-term success.” KWS obtained 336 (276) marketing approvals for new varieties across all its crops in fiscal 2013/2014. R&D expenditure increased by 6.0% to €148.8†(140.4)†million or 12.6% (12.2%) of net sales. An average of 1,836†(1,768) of the 4,847†(4,443) employees of the KWS Group worldwide worked in research and development in the fiscal year. Selling expenses rose by 7.1% to €204.0†(190.5)†million as a result of the expansion of international distribution structures.†
In fiscal 2013/2014, the company invested a total of €82.6†(65.2)†million in property, plant and equipment, an increase of 26.7%. One focus of capital spending is on expanding corn production capacities, which includes construction of a new seed processing plant in Serbia. In addition, there were measures to modernize sugarbeet seed production in North America and many investments to replace plant and equipment. Depreciation and amortization totaled €45.8†(38.4)†million.
The Corn Segment increased its net sales slightly by 1.9% to €714.9†(701.7)†million. Unfavorable exchange rate influences, in particular from the US dollar zone but also from South America and Eastern Europe, weighed on the unit’s continuing good operating performance. After adjustment for negative exchange rate effects totaling €28†million, the segment’s net sales would have been €742.9†million (+5.9%). Sales markets in South America developed very dynamically, and a slight increase in net sales was also achieved in Europe. The segment’s income (EBIT) rose by 9.4% to €100.9†(92.2)†million, despite higher expenditure on product development and distribution. That resulted in a return on sales (EBIT margin) of 14.1%†(13.1%).
The Sugarbeet Segment, which also includes KWS’ seed potato business, grew net sales by 6.8% to €351.1†(328.6)†million. Of this, €318.5†(297.8)†million was generated from sugarbeet and €32.6†(30.8)†million from seed potatoes. The company again increased net sales in the core markets of North America and the EU†28 thanks to a portfolio of high-yield varieties and thus consolidated its leading position in the sugarbeet market. The segment’s income (EBIT) fell by 5.1% to €70.1†(73.9)†million due to the costs of restructuring the seed potato business. The return on sales was 20.0% (22.5%).
Net sales in the Cereals Segment fell by 3.9% to €107.3†(111.7)†million due to the drop in prices of cereals for consumption. Farmers increasingly resorted to farm saved seed in the 2013/2014 winter sowing season. Demand for KWS’ rye varieties, which make a strong contribution to profits, was significantly lower as a result of reductions in cultivation area, which particularly impacted the segment’s income (EBIT). EBIT was €17.1†(26.9)†million, giving a return on sales of 15.9% (24.1%).
The company charges its cross-segment costs for long-term research projects and central administrative functions to the Corporate Segment, whose income is therefore always negative. The increase in expenditure in the year under review meant that the segment’s income (EBIT) was € –49.7†(€ –40.9)†million.
Comfortable balance sheet ratios underpin growth
Cash earnings in fiscal 2013/2014 were €110.4†(109.5)†million, while net cash from operating activities (operating cash flow) was €61.0†(84.6)†million. The decline in operating cash flow is due to the increase in working capital. Inventories were increased by €48.5†million to €193.0†million to ensure the ability to deliver seed. Total assets increased only slightly by 3.6% to €1,262.8†(1,218.7)†million. Exchange rate effects of €19.2†million which are not recognized in the income statement and effects from the acquisition of the minority interests in the company’s cereals business reduced equity by 1.8% to €637.8†(649.6)†million. As a result of the fact that adjustments were still required pursuant to new accounting regulations (IAS 19 R), the equity ratio is now a comfortable 50.5% (53.3%).
Fiscal year 2014/2015: Net sales to be grown by 5% to 10%
The company plans to significantly increase its spending on distribution activities and research and development again in the current fiscal year and to press ahead with tapping young sales markets and breeding high-yielding new varieties. That will be accompanied by extensive investments in property, plant and equipment. “To be ready for the growth we plan in coming years, we have to expand our seed processing capacities in North America and Eastern Europe,” explained Eva Kienle, CFO of KWS SAAT AG. “In addition, we’ll expand our research facilities at Einbeck and continue to set up our new research center in St. Louis, Missouri (U.S.) Our expansion will mean the creation of about 300 new jobs worldwide, so we will have approximately 5,200 employees by the end of the fiscal year.” Overall, the Executive Board expects an increase in the KWS Group’s net sales of 5% to 10% and an EBIT margin of at least 10% in fiscal 2014/2015. The Executive Board also announced that KWS†SAAT†AG would be converted into a European Stock Corporation, KWS†SAAT†SE. A proposed resolution to this effect will be submitted to the Annual Shareholders’ Meeting on December†18,†2014, the Executive Board said.
The 2013/2014 Annual Report can be downloaded from the Internet at www.kws.com/ir
Head of Investor Relations
Phone +49 (0)5561 311 640
Mobile +49 (0)173 29 10 520
KWS SAAT AG