Quarterly Report • Nov 23, 2017
Quarterly Report
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July 1, 2017, to September 30, 2017
¢ Negative exchange rate effects, especially in South America
¢ Net sales grow by 2% despite negative exchange rate effects
¢ Guidance unchanged from that published in the 2016/2017 Annual Report (October 26, 2017)
| 1st quarter of | 1st quarter of | 1st quarter of | 1st quarter of |
|---|---|---|---|
| 2014/2015 | |||
| 136.0 | 133.3 | 117.2 | 105.3 |
| –38.8 | –28.8 | –47.0 | –35.1 |
| –18.2 | –19.5 | –19.2 | –17.0 |
| –38.5 | –34.8 | –44.5 | –35.4 |
| 11.8 | 18.5 | 15.7 | 56.2 |
| 11.9 | 11.7 | 10.8 | 8.9 |
| 781.3 | 729.3 | 686.5 | 624.0 |
| 53.1 | 51.6 | 53.2 | 49.8 |
| 134.8 | 190.1 | 163.9 | 131.3 |
| 1,472.2 | 1,414.2 | 1,290.8 | 1,253.2 |
| –74.9 | –77.2 | –41.3 | –54.2 |
| 4,909 | 5,037 | 4,808 | 4,691 |
| –5.78 | –5.22 | –6.66 | –5.30 |
| 2017/2018 | 2016/2017 | 2015/2016 |
1 = Short-term and long-term borrowings – cash and cash equivalents – securities 2 Number of employees on September 30, 2017
| in € millions | Segments | Reconciliation | KWS Group |
|---|---|---|---|
| Net sales | 138.6 | –2.6 | 136.0 |
| EBIT | –55.0 | 16.2 | –38.8 |
Our main markets are in the northern hemisphere, where our sales drivers corn and sugarbeet are sown in the spring. Due to the strongly seasonal nature of our business, the first quarter (July 1 to September 30) contributes between 10% and 15% of our total net sales for the fiscal year. Only our winter cereals and winter rapeseed business is largely over by the end of the quarter. In addition, net sales of corn, soybean and sugarbeet seed from our activities in the southern hemisphere are included in the quarterly financial statements.
| September 30, 2017 | September 30, 2016 | |
|---|---|---|
| Germany | 1,986 | 1,999 |
| Europe (excluding Germany) | 1,625 | 1,695 |
| North and South America | 991 | 1,069 |
| Rest of world | 307 | 274 |
| Total | 4,909 | 5,037 |
At September 30, 2017, we had 4,909 employees1 worldwide.
The KWS Group grew its net sales slightly in the first quarter of fiscal 2017/2018. The main factors in that were positive winter cereals business – especially for rye – and good winter rapeseed business in Europe. Net sales (of soybean and corn) in South America did not quite reach the very good level of the previous year and declined slightly. The average exchange rate for the Argentinean peso was well below that of the same period in the previous year. The devaluation of pound sterling also had a slightly negative impact on the KWS Group's net sales.
1 Number of employees on September 30, 2017, not including our equity-accounted companies. Please refer to the reconciliation table on page 7.
| in € millions | 1st quarter of 2017/2018 |
1st quarter of 2016/2017 |
+/– |
|---|---|---|---|
| Net sales | 136.0 | 133.3 | 2.0% |
| Operating income | –38.8 | –28.8 | –34.7% |
| Net financial income/expenses | –18.2 | –19.5 | 6.7% |
| Result of ordinary activities | –57.0 | –48.3 | –18.0% |
| Income taxes | –18.5 | –13.5 | –37.0% |
| Net income for the period | –38.5 | –34.8 | –10.6% |
| Earnings per share (in €) | –5.78 | –5.22 | –11.5% |
The KWS Group's net sales in the first quarter of fiscal 2017/2018 totaled €136.0 (133.3)1 million, a rise of 2.0%. That was achieved primarily on the strength of revenue from our rye and winter rapeseed business. Corn and sugarbeet seed business declined slightly; however, no conclusions for the year as a whole can be drawn from that at the present time. After adjustment for exchange rate effects, the KWS Group's net sales would have been €141.1 million, an increase of 5.8%.
1 The figures in parentheses are those for the previous year.
As planned, additional marketing activities were launched in the period under review, as were new projects aimed at strengthening our IT infrastructure. We also continued increasing our expenditure on research & development and further optimized our organizational structure. The balance of other operating income and other operating expenses fell, in particular due to the fact that there were lower positive special effects than those that had an impact in the previous year. The KWS Group's EBIT fell by 34.7% to €–38.8 (–28.8) million in the first quarter of fiscal 2017/2018.
Net financial income/expenses at September 30, 2017, was €–18.2 (–19.5) million and thus slightly up from the previous year. Since the main revenue from our joint ventures does not materialize until the third quarter, net income from equity investments in the first quarter was € –16.3 million and thus well in the red, but it was 6.2% above the level of the previous year (€–17.4 million). The interest result is made up of interest income and, predominantly, interest expenses. The balance improved slightly to €–1.9 (–2.1) million due to higher interest income.
Income taxes were €–18.5 (–13.5) million on earnings before taxes (EBT) of €–57.0 (–48.3) million. The result was a 10.6% fall in net income for the period to €–38.5 million (€–34.8 million) or €–5.78 (€–5.22) per share.
| in € millions | 1st quarter of 2017/2018 |
1st quarter of 2016/2017 |
+/– |
|---|---|---|---|
| Cash and cash equivalents | 110.8 | 68.7 | 61.3% |
| Net cash from operating activities | –74.9 | –77.2 | 3.0% |
| Net cash from investing activities | –12.6 | –26.0 | 51.5% |
| Net cash from financing activities | 5.8 | 8.0 | –27.5% |
Net cash from operating activities in the first quarter of the fiscal year was €–74.9 (€–77.2) million. The increase in inventories is a key factor influencing the net cash outflow customary at this time of the year. Cash earnings were €–31.8 (€–22.9) million. Net cash from investing activities fell by €13.4 million to €–12.6 (–26.0) million due to lower capital expenditure on property, plant and equipment. Cash and cash equivalents totaled €110.8 (68.7) million.
The KWS Group invested a total of €11.8 (€18.5) million in the first quarter of fiscal 2017/2018. The main focus of that is on erecting and expanding production and research & development capacities. We plan to increase our capital spending to more than €100 million for the year as a whole.
1 Without capital expenditures of our at equity consolidated companies.
| in € millions | September 30, 2017 | June 30, 2017 | +/– |
|---|---|---|---|
| Assets | |||
| Noncurrent assets | 675.4 | 680.1 | –0.7% |
| Current assets | 796.8 | 815.1 | –2.2% |
| Equity and liabilities | |||
| Equity | 781.3 | 836.9 | –6.6% |
| Noncurrent liabilities | 356.8 | 358.8 | –0.6% |
| Current liabilities | 334.1 | 299.5 | 11.6% |
| Total assets | 1,472.2 | 1,495.2 | –1.5% |
The KWS Group's balance sheet during the year is impacted sharply by the seasonal course of its business. There are thus usually significant changes in balance sheet items, in particular for working capital, in the course of the year. Inventories rose by €75.2 million to €270.1 (194.9)1 million. Cash and cash equivalents fell by €76.8 million due to financing of our general business operations. Trade receivables were €286.5 (302.6) million. Negative operating income resulted in the decline in equity customary at this time of the year and the equity ratio fell to 53.1% (56.0%). Net debt was €134.8 (48.5) million. Finally, total assets at September 30, 2017, were €1,472.2 (1,495.2) million.
The KWS Group's interim consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS). The segments are presented in the economic report in line with our internal corporate controlling structure in accordance with GAS 20. The main difference is that we no longer carry the revenues and costs of our equityaccounted joint ventures and associated companies in the statement of comprehensive income. The KWS Group's reported net sales and EBIT will therefore be lower than the total for the segments. The earnings contributed by the equity-accounted companies are instead included under net financial income/expenses. In addition, their assets are included separately in the KWS Group's balance sheet. Our equity-accounted companies are included proportionately in the segment reports in line with our internal corporate controlling structure.
The difference from the KWS Group's statement of comprehensive income is summarized for a number of key indicators in the reconciliation table:
| in € millions | Segments | Reconciliation | KWS Group |
|---|---|---|---|
| Net sales | 138.6 | –2.6 | 136.0 |
| EBIT | –55.0 | 16.2 | –38.8 |
| Number of employees as of September 30, 2017 | 5,483 | –574 | 4,909 |
| Capital expenditure | 45.7 | –33.9 | 11.8 |
| Total assets | 1,611.9 | –139.7 | 1,472.2 |
In the first quarter of fiscal 2017/2018, the Corn Segment's net sales were €39.3 (71.4) million, a year-on-year fall of 45.0%. That was mainly attributable to the transfer of our rapeseed activities from the Corn Segment to the Cereals Segment. Winter rapeseed business generated around 35% of the segment's net sales in the same quarter of the previous year. In South America, net sales were slightly below the figure for the strong previous year, and the Argentinean peso depreciated further. In the core regions of Europe and North America, the first quarter sees no significant revenue from early sales of corn seed, and net sales remained constant there. As a result of the transfer of rapeseed operations and the associated earnings, segment income fell to €–40.4 (–24.5) million.
Net sales in the Sugarbeet Segment in the first quarter were slightly down year on year at €10.3 (12.8) million. The revenue mainly comes from the sale of sugarbeet seed in Chile, East Asia and the U.S. No significant net sales are generated in the other regions at this early stage. The segment's income in the first quarter was €–17.4 (–13.1) million. In the previous year, a special effect related to seed production had a positive impact on earnings.
Net sales at the Cereals Segment at the end of the first quarter were 76.2% higher year on year at €88.1 (50.0) million and thus significantly higher than at the same point in the previous year. For the first time, all rapeseed activities were assigned to the Cereals Segment – the main reason for its rise in net sales. Successful seed business also contributed to the rise in net sales: European winter rapeseed business rose by about 15%. In addition, hybrid rye seed business went well in Germany and Poland. Net sales of rye were expanded at double-digit growth rates in both countries. Our net sales of barley and wheat remained stable overall. The segment's income was €27.9 (11.9) million.
Net sales in the Corporate Segment totaled €0.9 (1.4) million. They are mainly generated from our 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. In addition to an increase in expenditure for distribution due to European marketing measures, which launched as planned, general administrative expenses also rose as we strengthened our IT infrastructure and optimized our organizational structure. The segment's income was €–25.1 (–20.2) million.
| 1st quarter of | 1st quarter of | ||
|---|---|---|---|
| in € millions | 2017/2018 | 2016/2017 | +/– |
| Net sales | |||
| Corn | 39.3 | 71.4 | –45.0% |
| Sugarbeet | 10.3 | 12.8 | –19.5% |
| Cereals | 88.1 | 50.0 | 76.2% |
| Corporate | 0.9 | 1.4 | –35.7% |
| Total | 138.6 | 135.6 | 2.2% |
| EBIT | |||
| Corn | –40.4 | –24.5 | –64.9% |
| Sugarbeet | –17.4 | –13.1 | –32.8% |
| Cereals | 27.9 | 11.9 | 134.5% |
| Corporate | –25.1 | –20.2 | –24.3% |
| Total | –55.0 | –45.9 | –19.8% |
There has been no significant change in the situation as to opportunities and risks compared with at June 30, 2017. Risks that jeopardize the company's existence are not currently discernible. You can find detailed information on the risk management system and the risk situation at the KWS Group in the Combined Management Report starting on page 53 of the 2016/2017 Annual Report.
We are sticking by our guidance for the KWS Group for the end of the fiscal year (June 30, 2018), despite the fact that the US dollar will probably fall sharply in value. We still expect a slight increase in net sales for the current fiscal year 2017/2018. As far as can be seen at present, the KWS Group will post a double-digit EBIT margin below the figure for the previous year (12.2%). Due to expansion of our research & development projects, we anticipate an increase in the R&D intensity in excess of the previous year's 17.7%. Capital spending is expected to be at least €100 million.
The expectations for our segments are likewise unchanged from the guidance in the 2016/2017 Annual Report:
EBIT margin slightly above
| Sugarbeet | ||||
|---|---|---|---|---|
| 2017/2018 | 2016/2017 | |||
| Net sales | below previous year | €455 million | ||
| EBIT margin | slightly below previous year |
33.2% | ||
| Corn | ||||
| 2017/2018 | 2016/2017 | |||
| Net sales | above previous year | €825 million |
| 2017/2018 | 2016/2017 | |
|---|---|---|
| Net sales | ≥20% | €109 million |
| EBIT margin | at the previous year´s level |
9.4% |
previous year
7.1%
| 2017/2018 | 2016/2017 | |
|---|---|---|
| Net sales | at the previous year´s level |
€4.8 million |
| EBIT | €–65 million to €–75 million |
€–60.6 million |
1 The segment reporting proportionately includes the net sales and contributions to earnings from our equity-accounted companies in accordance with our internal corporate controlling structure.
| 1st quarter of 2016/2017 |
|
|---|---|
| 136.0 | 133.3 |
| –38.8 | –28.8 |
| –18.2 | –19.5 |
| –57.0 | –48.3 |
| –18.5 | –13.5 |
| –38.5 | –34.8 |
| –17.1 | –3.8 |
| –0.1 | 0.0 |
| –12.5 | –3.4 |
| –4.5 | –0.4 |
| 0.0 | 0.0 |
| 0.0 | 0.0 |
| –17.1 | –3.8 |
| –38.2 | –34.5 |
| –0.3 | –0.3 |
| –38.5 | –34.8 |
| –55.3 | –38.3 |
| –0.3 | –0.3 |
| –55.6 | –38.6 |
| –5.78 | –5.22 |
| 1st quarter of 2017/2018 |
| Assets |
|---|
| in € millions | September 30, 2017 | June 30, 2017 | September 30, 2016 |
|---|---|---|---|
| Intangible assets | 85.1 | 87.4 | 92.4 |
| Property, plant and equipment | 387.6 | 389.3 | 386.2 |
| Equity-accounted financial assets | 131.0 | 151.8 | 129.7 |
| Financial assets | 3.2 | 3.1 | 2.2 |
| Noncurrent tax assets | 1.4 | 2.0 | 3.0 |
| Other noncurrent financial assets | 0.0 | 0.0 | 0.1 |
| Deferred tax assets | 67.1 | 46.5 | 56.5 |
| Noncurrent assets | 675.4 | 680.1 | 670.1 |
| Inventories | 270.1 | 194.9 | 251.7 |
| Biological assets | 4.4 | 13.6 | 4.8 |
| Trade receivables | 286.5 | 302.6 | 285.3 |
| Marketable securities | 5.7 | 9.5 | 24.3 |
| Cash and cash equivalents | 105.1 | 181.9 | 44.4 |
| Current tax assets | 70.4 | 60.0 | 62.8 |
| Other current financial assets | 30.7 | 40.6 | 48.5 |
| Other current assets | 23.9 | 12.0 | 22.3 |
| Current assets | 796.8 | 815.1 | 744.1 |
| Total assets | 1,472.2 | 1,495.2 | 1,414.2 |
| September 30, 2017 | June 30, 2017 | September 30, 2016 |
|---|---|---|
| 19.8 | 19.8 | 19.8 |
| 5.5 | 5.5 | 5.5 |
| 753.8 | 809.1 | 701.9 |
| 2.2 | 2.5 | 2.1 |
| 781.3 | 836.9 | 729.3 |
| 124.5 | 125.4 | 134.9 |
| 199.7 | 200.8 | 226.9 |
| 1.0 | 1.2 | 1.2 |
| 12.5 | 12.7 | 9.8 |
| 0.0 | 1.3 | 0.3 |
| 19.1 | 17.4 | 17.0 |
| 356.8 | 358.8 | 390.1 |
| 78.6 | 72.8 | 83.2 |
| 45.9 | 39.1 | 31.9 |
| 95.7 | 75.4 | 89.6 |
| 35.7 | 25.6 | 24.9 |
| 5.6 | 16.3 | 2.7 |
| 72.6 | 70.3 | 62.5 |
| 334.1 | 299.5 | 294.8 |
| 690.9 | 658.3 | 684.9 |
| 1,472.2 | 1,495.2 | 1,414.2 |
| Changes in equity | |||
|---|---|---|---|
| in € millions | Group interests | Minority interests | Group equity |
| 07/01/2016 | 765.5 | 2.4 | 767.9 |
| Dividends paid | 0.0 | 0.0 | 0.0 |
| Net income for the year | –34.5 | –0.3 | –34.8 |
| Other income after taxes | –3.8 | 0.0 | –3.8 |
| Total comprehensive income | –38.3 | –0.3 | –38.6 |
| Changes in minority interests | 0.0 | 0.0 | 0.0 |
| Other changes | 0.0 | 0.0 | 0.0 |
| 09/30/2016 | 727.2 | 2.1 | 729.3 |
| 07/01/2017 | 834.5 | 2.5 | 836.9 |
| Dividends paid | 0.0 | 0.0 | 0.0 |
| Net income for the year | –38.2 | –0.3 | –38.5 |
| Other comprehensive income after taxes | –17.1 | 0.0 | –17.1 |
| Total comprehensive income | –55.3 | –0.3 | –55.6 |
| Changes in minority interests | 0.0 | 0.0 | 0.0 |
| Other changes | 0.0 | 0.0 | 0.0 |
| 09/30/2017 | 779.1 | 2.2 | 781.3 |
| in € millions | 1st quarter of 2017/2018 |
1st quarter of 2016/2017 |
|---|---|---|
| Net income for the period | –38.5 | –34.8 |
| Cash earnings | –31.8 | –22.9 |
| Funds tied up in net current assets | –43.1 | –54.3 |
| Net cash from operating activities | –74.9 | –77.2 |
| Net cash from investing activities | –12.6 | –26.0 |
| Net cash from financing activities | 5.8 | 8.0 |
| Change in cash and cash equivalents | –81.7 | –95.2 |
| Changes in cash and cash equivalents due to exchange rate, consolidated group and measurement changes |
1.1 | 0.0 |
| Cash and cash equivalents at beginning of period (July 1) | 191.4 | 163.9 |
| Cash and cash equivalents at end of period | 110.8 | 68.7 |
The KWS Group is a consolidated group as defined in the International Financial Reporting Standards (IFRSs) published by the International Accounting Standards Board (IASB), London, taking into account the interpretations of the International Financial Reporting Interpretations Committee (IFRIC). All disclosures on KWS are therefore disclosures on the Group within the meaning of these regulations. Income taxes were calculated on the basis of the individual country-specific income tax rates, taking account of the planning for the fiscal year as a whole. Exactly the same accounting methods applied in the preparation of the consolidated financial statements as of June 30, 2017, were used. The explanations in the Notes to the annual financial statements as of June 30, 2017, on pages 85 to 91 of the Annual Report therefore apply accordingly. The 2016/2017 Annual Report of the KWS Group can be read and downloaded at www.kws.com/ir.
The abridged interim financial statements of the KWS Group for the first three months of fiscal 2017/2018 include the singleentity financial statements of KWS SAAT SE and its subsidiaries and joint ventures in Germany and other countries, the associated company and the joint operation, which are carried in accordance with IFRS 11 and IAS 28. Subsidiaries that are considered immaterial for the presentation and evaluation of the financial position and performance of the Group are not included.
There were no changes in the consolidated group in the first quarter. The number of companies consolidated in the KWS Group is thus still the same as that at June 30, 2017.
The related party disclosures in the 2016/2017 Annual Report and under "Other notes" in the section "Notes for the KWS Group" are essentially the same.
There were no events after September 30, 2017, that can be expected to have a significant impact on the KWS Group's earnings, financial position and assets.
Einbeck, November 2017 KWS SAAT SE The Executive Board
Tessner Beteiligungs GmbH 15.4% Free oat 30.1%
54.5% Families Büchting, Arend Oetker
| KWS SAAT SE | |
|---|---|
| Securities identification number | 707400 |
| ISIN | DE0007074007 |
| Stock exchange identifier | KWS |
| Transparency level | Prime Standard |
| Index | SDAX |
| Share class | Individual share certificates |
| Number of shares | 6,600,000 |
| Date | |
|---|---|
| December 14, 2017 | Annual Shareholders' Meeting in Einbeck |
| February 27, 2018 | Semiannual Report 2017/2018 |
| May 17, 2018 | Quarterly Report 9M 2017/2018 |
| October 24, 2018 | Publication of the 2017/2018 financial statements, Annual Press Conference and Analysts' Conference in Frankfurt |
| November 27, 2018 | Quarterly Report Q1 2018/2019 |
| December 12, 2018 | Annual Shareholders' Meeting in Einbeck |
The Quarterly Report can be downloaded on our Internet sites at www.kws.de and www.kws.com. The KWS Group´s fiscal year begins on July 1 and ends on June 30. Unless otherwise specified, figures in parentheses relate to the same period or date in the previous year. There may be rounding differences for percentages and numbers.
Investor Relations and Financial Press Wolf-Gebhard von der Wense [email protected] Phone: +49 5561 311 968
Press Mandy Schnell [email protected] Phone: +49 5561 311 334 Sustainability Andrea Lukas [email protected] Phone: +49 5561 311 1393 Editor KWS SAAT SE Grimsehlstrasse 31 P.O. Box 1463 37555 Einbeck Germany
This document contains forward-looking statements about future developments based on the current assessments of management. These forward-looking statements may be identified by words such as "forecast," "assume," "believe," "assess," "expect," "intend," "can/may/might," "plan," "should" or similar expressions. These statements are subject to certain elements of uncertainty, risks and other factors that may result in significant deviations between expectations and actual circumstances. Examples of such risks and factors are market risks (such as changes in the competitive environment or risks of changes in interest or exchange rates), product-related risks (such as production losses as a result of bad weather, failure of production plants or quality-related risks), political risks (such as changes in the regulatory environment, including those with regard to the general regulatory framework for the cultivation of energy plants, or violations of existing laws and regulations, for example those regarding genetically modified organisms in corn seed) and general economic risks. Forward-looking statements must therefore not be regarded as a guarantee or pledge that the developments or events they describe will actually occur. We do not intend, nor do we assume any obligation, to update or revise these forward-looking statements, since they are based solely on circumstances on the day they were published.
Photo credits Eberhard Franke
Date of publication: November 23, 2017
This translation of the original German version of the Quarterly Report Q1 2017/2018 has been prepared for the convenience of our English-speaking shareholders. The German version is legally binding.
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