KWS aims for further growth after successful fiscal 2018/2019

Einbeck, October 23, 2019

Growth in all product segments – Net sales rise despite exchange rate effects – Increase in EBIT and net income for the year – Dividend increase to €0.67 (0.64) proposed – Strong growth in net sales planned in fiscal 2019/2020.

The KWS Group (ISIN: DE0007074007) achieved a 4.2% increase in net sales to €1.11 billion in fiscal 2018/2019. Operating income (EBIT) rose by around 13% to €150.0 million, while earnings per share improved by approximately 4% to €3.15.

“Our business performed well in a challenging environment for agriculture,” said Eva Kienle, Chief Financial Officer of KWS. “We have shown growth in all product segments and operating income rose significantly. We expect further growth in the current fiscal year on the back of a diversified product portfolio, promising variety approvals and our entry into the vegetable seed business.”

Net sales rose by 4.2% to €1,113.3 (1,068.0) million in fiscal 2018/2019. All product segments contributed to that growth. The decline in value of a number of local currencies in countries where the KWS Group operates had a negative impact on net sales, which are consolidated in euros.

The KWS Group’s operating income (EBIT) improved by 13.1% to €150.0 (132.6) million. The increase in gross profit was partly offset by higher function costs for research and development, sales and administration. A positive non-recurring effect of around €11 million from the sale of a company participation contributed to the increase in EBIT. The EBIT margin was 13.5% (12.4%).

Net financial result was € –5.5 million, down from the previous year’s figure of €5.4 million. The interest result fell to € –15.0 (–8.0) million due to higher borrowing, while net income from equity-accounted companies declined to €9.4 (13.4) million. Income taxes totaled
€ –40.4 (–38.3) million.

The result was an improvement in net income for the year to €104.0 (99.7) million and earnings per share of €3.15 (3.02).

Overview of the key figures

in € million	2018/2019	2017/2018	Change in %
Net sales	1,113.3	1,068.0	4.2
Operating income (EBIT)	150.0	132.6	13.1
Net financial result	–5.5	5.4	-
Result of ordinary activities	144.5	138.0	4.7
Income taxes	–40.4	–38.3	5.5
Net income for the year	104.0	99.7	4.3
Earnings per share (€)^*	3.15	3.02	4.3
EBIT margin (%)	13.5	12.4	-

^{* Earnings per share for the previous period have been adjusted to reflect the share split (1:5)}

Business performance of the segments

The Corn Segment grew its net sales by 0.7% to €739.0 (734.2) million in the year under review. That increase is mainly attributable to a positive business performance in South America. In North America – and in particular in the Midwest of the U.S. – wet weather conditions during the sowing season meant that corn cultivation area fell sharply and resulted in significant decline in net sales at the joint venture AgReliant. On the other hand, there were positive exchange rate effects from the increase in the US dollar’s value against the euro. In Europe and China, KWS’ business was overall stable in the course of the year. The segment’s income rose by 22% to €57.9 (47.4) million. The EBIT margin rose from 6.5% to 7.8%.

Net sales at the Sugarbeet Segment rose slightly to €461.2 (455.1) million. While net sales in the EU declined due to difficult cultivation conditions, the fall in sugar prices and the removal of surplus capacities in the sugar industry, net sales grew sharply in Eastern Europe thanks to the introduction of CONVISO^® SMART. In North America, net sales benefited from a slight increase in cultivation area and a stronger US dollar. The segment’s EBIT – including a positive non-recurring effect of €11.0 million from the sale of shares in KWS Potato B.V. – increased to €179.6 (160.5) million.

Net sales at the Cereals Segment rose sharply by 13.0% to €170.8 (151.1) million. Net sales from rye seed grew by 24% thanks to the rise in cultivation area and higher market share. Revenue from wheat seed and rapeseed remained stable in the year under review, while barley business increased sharply. Rye seed is still the main sales driver in the Cereals Segment, contributing around 39%. EBIT increased by 25% to €23.0 (18.4) million, giving an EBIT margin of 13.5% (12.2%).

Net sales at the Corporate Segment were €3.9 (4.2) million. They are mainly generated from KWS’ farms. Since all cross-segment costs for the KWS Group’s central functions and basic research expenditure are charged to the Corporate Segment, its income is usually negative. The costs consolidated in this segment rose in the year under review, among other things due to the reorganization project ONEGLOBE, costs for the change in legal form, M&A activities, and higher IT expenditure. The segment’s income was € –97.1 (–77.3) million.

The difference from the KWS Group’s statement of comprehensive income and segment reporting is due to the requirements of the International Financial Reporting Standards (IFRSs) and is summarized for the key indicators of net sales and EBIT in the reconciliation table below:

Reconciliation table

in € million	Segments	Reconciliation	KWS Group¹
Net sales	1,375.0	–261.7	1,113.3
EBIT	163.4	–13.4	150.0

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

Capital spending

KWS’ capital spending in fiscal 2018/2019 was consistent with its long-term growth plans and focused on erecting and expanding production, research and development capacities. Among other things, the company continued to expand sugarbeet seed production in Einbeck, a multi-year project with a total volume of around €40 million. KWS expanded its corn seed drying and production capacities in Brazil and Argentina. Total capital spending in fiscal 2018/2019 was €96.6 (71.7) million.

Proposed dividend to increase to €0.67

Continuing to grow profitably is one of KWS’ core corporate goals. The KWS Group’s net income was €104.0 million following €97.7 million the year before, or an increase of 4.3%. The Executive and Supervisory Boards will therefore propose a dividend of €0.67 (0.64) for fiscal year 2018/2019 to the Annual Shareholders’ Meeting on December 17, 2019, which is in line with the development in earnings. €22.1 (21.1) million would thus be distributed to KWS SAAT SE & Co. KGaA’s shareholders. That would correspond to a dividend payout ratio of 21.3% (21.2%), in line with the KWS Group’s earnings-oriented policy of paying a dividend of 20% to 25% of its net income.

Forecast for the 2019/2020 fiscal year: Strong increase in net sales planned

The Executive Board expects the KWS Group to grow net sales significantly by 8% to 12%. The acquisition of the vegetable seed business of Pop Vriend Seeds and growing corn seed business should make major contributions to that. As far as can be seen at present, the EBIT margin will be between 11% and 13%, while the R&D intensity is expected to be in the range of 17% to 19%. Capital spending in fiscal 2019/2020 will again focus on expanding processing, production and research capacities and is budgeted to be around €100 million.

The Annual Report can be downloaded at www.kws.com

About KWS^*
KWS is one of the world’s leading plant breeding companies. In the fiscal year 2017/18 more than 5,000 employees in 70 countries generated net sales of EUR 1,068 million and earnings before interest and taxes (EBIT) of EUR 133 million. A company with a tradition of family ownership, KWS has operated independently for more than 160 years. It focuses on plant breeding and the production and sale of seed for corn, sugarbeet, cereals, rapeseed, sunflowers and vegetables. KWS uses leading-edge plant breeding methods to increase farmers’ yields and to improve resistance to diseases, pests and abiotic stress. To that end, the company invested approximately EUR 200 million last fiscal year in research and development.

^{* All indications excluding the results from the companies accounted for using the equity method AGRELIANT GENETICS LLC., AGRELIANT GENETICS INC. and KENFENG – KWS SEEDS CO., LTD.}

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