KWS SAAT AG (ISIN: DE0007074007), one of the leading international seed companies, clearly exceeded its growth and earnings targets and continued its long tradition of profitable business performance in fiscal 2010/2011 (ending June 30). The KWS Group's net sales rose by 13.4% to €855.4 million, with all product segments contributing to this success. Expansion of operational business and lower allowances on receivables and inventories helped EBIT grow strongly by 41.5% to €116.6 million. Research & development expenditure rose by €16.4 million to €113.5 million. Nevertheless, the already double-digit EBIT return was increased to 13.6% (previous year: 10.9%). Net income for the year was €72.9 million, up €21.4 million over the previous year. At the Annual Shareholders' Meeting, the Executive and Supervisory Boards will propose increasing the dividend by €0.20 to €2.10 per share and distributing a bonus payment of €0.20 to let the shareholders of KWS SAAT AG participate in the company's strong performance in 2010/2011.
Corn: The segment with highest net sales and income - Positive market environment
All product segments developed very well in fiscal 2010/2011. The highest net sales and income at the KWS Group was generated by business with corn seed. Net sales rose by 14% to €471.1 million, while operating income almost doubled to €62.0 million. "Excellent variety performance let us grow our market share in our key European regions," said Philip von dem Bussche, Chief Executive Officer of KWS SAAT AG.
Sugarbeet: High world market prices and growing market share in the EU 27
The Sugarbeet Segment benefited from the fact that world market prices for sugar remained high and from a bigger market share in the EU 27. Despite the fact that approval for the cultivation of Roundup Ready® sugarbeet in the U.S. was given late, and then only subject to conditions, sales of these genetically improved varieties were almost constant. Including potato business, which was integrated in the Sugarbeet Segment effective April 1, net sales at the segment increased by a total of 12.6% to €293.5 million, of which potato activities accounted for approximately 10%. The segment's income rose by 24.2% to €42.1 million.
The cereals business also developed well again, but did not reach the high level of 2008. Net sales in this segment improved by almost 11% to €77.4 million and income by 36.2% to €14.3 million. Adjusted to account for the move of potato activities to the Sugarbeet Segment, net sales at the Breeding & Services Segment were €13.4 million. "We increased our R&D budget significantly again and, for the first time, invested more than €100 million in enhancing our innovative strength," said Chief Financial Officer Dr. Hagen Duenbostel. R&D expenditure of €113.5 million (previous year: €97.5 million) was not fully compensated for by additional internal royalties, meaning the segment's income fell to € -1.8 million (previous year: €6.3 million).
Net cash from operating activities rises sharply - Net liquidity above €100 million mark
Duenbostel regards the KWS Group as having an extremely stable foundation. "The significant increase in net income for the year resulted in a rise in net cash from operating activities from €27.4 million to €101.2 million. Extensive investments totaling €52.4 million were made in seed production. The overall result is a strong free cash flow of €48.8 million compared with € -28.0 million in the previous year." On the balance sheet date, cash and cash equivalents, including securities, amounted to €146.9 (113.7) million. Minus financial borrowings, which hardly increased year-on-year, net liquidity was thus €113.3 (81.4) million. Despite currency losses on the balance sheet date, equity improved by €37.3 million. The equity ratio rose again to 59% (previous year: 58%).
Forward-looking investments in research & development create jobs
Constant expenditure on research & development secures KWS' long-term growth. Capital spending in the year under review was €113.5 million, and a further 10% increase in the R&D budget is planned for 2011/2012. "The success of our R&D activities is ultimately reflected in the approval of new varieties. We were awarded 296 new distribution approvals worldwide in 2010/2011," noted Philip von dem Bussche.
These investments also secure new jobs long term. The number of employees now working for the KWS Group in 70 countries has risen by almost 30% in the past five years, for example. The workforce increased to an average of 3,560 in the year under review (previous year: 3,492). "After stepping up our research & development efforts considerably in Einbeck in the past years, we also plan to keep the focus of our research activities in Germany and continuously expand our research and breeding work," said von dem Bussche. "However, internationalization at KWS has made it necessary for us to reorganize our administration. We have reduced the burden on our operating companies by establishing four Service Centers that pool administrative tasks," he added.
Outlook: Continuation of profitable growth with a double-digit EBIT margin
For fiscal 2011/2012, KWS sees good business opportunities in the Corn Segment and expects its net sales to increase by up to 10%, above all on the back of growth from the regions North America, France and Southeastern Europe. In the Sugarbeet Segment, a reduction in area due to good harvests cannot be ruled out. Including seed potato business, which will probably contribute a volume of about €40 million, KWS expects net sales of around €300 million in this segment. The 2011 cereal sowing season has gone well thus far and will likely result in a slight rise in net sales.
In summary, Philip von dem Bussche said, "Demand for seed remains high at present, but we do not anticipate the same level of dynamic growth as in fiscal year 2010/2011. We expect net sales at the KWS Group to rise by 5% overall in fiscal 2011/2012. We will increase our R&D budget by approximately 10%. This also includes additional expenses for developing genetically improved traits for corn as part of our new research joint venture with the French plant breeder Vilmorin. Sales and marketing expenditure will also rise proportionately. Overall, we therefore anticipate operating income (EBIT) of just over €100 million and a double-digit EBIT margin."
Corn: The segment with highest net sales and income - Positive market environment
All product segments developed very well in fiscal 2010/2011. The highest net sales and income at the KWS Group was generated by business with corn seed. Net sales rose by 14% to €471.1 million, while operating income almost doubled to €62.0 million. "Excellent variety performance let us grow our market share in our key European regions," said Philip von dem Bussche, Chief Executive Officer of KWS SAAT AG.
Sugarbeet: High world market prices and growing market share in the EU 27
The Sugarbeet Segment benefited from the fact that world market prices for sugar remained high and from a bigger market share in the EU 27. Despite the fact that approval for the cultivation of Roundup Ready® sugarbeet in the U.S. was given late, and then only subject to conditions, sales of these genetically improved varieties were almost constant. Including potato business, which was integrated in the Sugarbeet Segment effective April 1, net sales at the segment increased by a total of 12.6% to €293.5 million, of which potato activities accounted for approximately 10%. The segment's income rose by 24.2% to €42.1 million.
The cereals business also developed well again, but did not reach the high level of 2008. Net sales in this segment improved by almost 11% to €77.4 million and income by 36.2% to €14.3 million. Adjusted to account for the move of potato activities to the Sugarbeet Segment, net sales at the Breeding & Services Segment were €13.4 million. "We increased our R&D budget significantly again and, for the first time, invested more than €100 million in enhancing our innovative strength," said Chief Financial Officer Dr. Hagen Duenbostel. R&D expenditure of €113.5 million (previous year: €97.5 million) was not fully compensated for by additional internal royalties, meaning the segment's income fell to € -1.8 million (previous year: €6.3 million).
Net cash from operating activities rises sharply - Net liquidity above €100 million mark
Duenbostel regards the KWS Group as having an extremely stable foundation. "The significant increase in net income for the year resulted in a rise in net cash from operating activities from €27.4 million to €101.2 million. Extensive investments totaling €52.4 million were made in seed production. The overall result is a strong free cash flow of €48.8 million compared with € -28.0 million in the previous year." On the balance sheet date, cash and cash equivalents, including securities, amounted to €146.9 (113.7) million. Minus financial borrowings, which hardly increased year-on-year, net liquidity was thus €113.3 (81.4) million. Despite currency losses on the balance sheet date, equity improved by €37.3 million. The equity ratio rose again to 59% (previous year: 58%).
Forward-looking investments in research & development create jobs
Constant expenditure on research & development secures KWS' long-term growth. Capital spending in the year under review was €113.5 million, and a further 10% increase in the R&D budget is planned for 2011/2012. "The success of our R&D activities is ultimately reflected in the approval of new varieties. We were awarded 296 new distribution approvals worldwide in 2010/2011," noted Philip von dem Bussche.
These investments also secure new jobs long term. The number of employees now working for the KWS Group in 70 countries has risen by almost 30% in the past five years, for example. The workforce increased to an average of 3,560 in the year under review (previous year: 3,492). "After stepping up our research & development efforts considerably in Einbeck in the past years, we also plan to keep the focus of our research activities in Germany and continuously expand our research and breeding work," said von dem Bussche. "However, internationalization at KWS has made it necessary for us to reorganize our administration. We have reduced the burden on our operating companies by establishing four Service Centers that pool administrative tasks," he added.
Outlook: Continuation of profitable growth with a double-digit EBIT margin
For fiscal 2011/2012, KWS sees good business opportunities in the Corn Segment and expects its net sales to increase by up to 10%, above all on the back of growth from the regions North America, France and Southeastern Europe. In the Sugarbeet Segment, a reduction in area due to good harvests cannot be ruled out. Including seed potato business, which will probably contribute a volume of about €40 million, KWS expects net sales of around €300 million in this segment. The 2011 cereal sowing season has gone well thus far and will likely result in a slight rise in net sales.
In summary, Philip von dem Bussche said, "Demand for seed remains high at present, but we do not anticipate the same level of dynamic growth as in fiscal year 2010/2011. We expect net sales at the KWS Group to rise by 5% overall in fiscal 2011/2012. We will increase our R&D budget by approximately 10%. This also includes additional expenses for developing genetically improved traits for corn as part of our new research joint venture with the French plant breeder Vilmorin. Sales and marketing expenditure will also rise proportionately. Overall, we therefore anticipate operating income (EBIT) of just over €100 million and a double-digit EBIT margin."
