Annual Report • Oct 25, 2016
Annual Report
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| The KWS Group (in € millions) | 2015/2016 | 2014/2015 | 2013/2014 |
|---|---|---|---|
| Net sales and income | |||
| Net sales | 1,036.8 | 986.0 | 923.5 |
| R&D intensity in % | 17.6 | 17.7 | 16.2 |
| EBIT | 112.8 | 113.4 | 118.3 |
| as a % of net sales (EBIT margin) | 10.9 | 11.5 | 12.8 |
| Net financial income/expenses | 14.8 | 16.7 | 7.5 |
| Net income for the year | 85.3 | 84.0 | 80.3 |
| Key figures on the financial position and assets | |||
| Capital expenditure | 99.6 | 132.5 | 69.4 |
| Depreciation and amortization | 48.2 | 45.9 | 41.2 |
| Equity | 767.9 | 738.7 | 637.8 |
| Equity ratio in % | 53.5 | 55.2 | 54.7 |
| Return on equity in % | 11.9 | 13.6 | 12.8 |
| Return on assets in % | 7.0 | 7.8 | 7.8 |
| Net debt1 | 87.9 | 105.9 | 31.6 |
| Total assets | 1,436.6 | 1,337.1 | 1,165.0 |
| Capital employed (avg.)2 | 906.9 | 851.0 | 737.5 |
| ROCE (avg.) in %3 | 12.4 | 13.3 | 16.0 |
| Cash flow from operating activities | 125.9 | 48.1 | 76.0 |
| Employees | |||
| Number of employees (avg.)4 | 4,843 | 4,691 | 4,150 |
| Personnel expenses | 232.2 | 216.9 | 189.9 |
| Key figures for the share | |||
| Earnings per share | 12.92 | 12.53 | 11.69 |
| Dividend per share | 3.00 | 3.00 | 3.00 |
| Reconciliation (in € millions) | Segments | Reconciliation | KWS Group |
|---|---|---|---|
| Net sales | 1,356.8 | –320.0 | 1,036.8 |
| EBIT | 141.1 | –28.3 | 112.8 |
1 Short-term + long-term borrowings – cash and cash equivalents – securities
2 Total capital employed at the end of the quarters (intangible assets + property, plant and equipment + inventories + trade receivables – trade payables) / 4
3 EBIT / capital employed (avg.)
4 Average number of employees in the year under review
Hagen Duenbostel (CEO) Corn, Corporate Development & Communications, Compliance Peter Hofmann Sugarbeet, Cereals, Marketing Eva Kienle Finance, Controlling, Global Services, IT, Legal, Human Resources Léon Broers Research & Breeding
Seed is a matter of trust, and we continue to strengthen our customers' trust in the performance of our products – year after year. Systematic enhancement of our varieties' yields, the quality of the seed itself and expert support in cultivation through close personal contacts are what make KWS unique and successful over the long term. These qualities are all the more important in times when the agricultural industry faces major and lasting challenges. Low consumer prices, declining cultivation areas for important crops and negative exchange rate influences again shaped KWS' economic environment in international markets. Exceptional efforts were needed for us to achieve our mission of ensuring that KWS still grew profitably under these circumstances.
Thanks to our well-diversified product portfolio and our independence as a family-owned company, we have been able to continue to implement our long-term strategy. That included expanding our research and breeding programs in particular. We obtained around 400 new marketing approvals in fiscal 2015/2016 and again reaped the fruit of our many years of work.
The global seed market's potential fell in 2015 by around 8% to approximately €37 billion US dollars. Total cultivation area hardly declined at all. However, intensive competition, greater use of farm-saved seed for growing cereals and a switch to crops with lower seed prices, such as soybean or rapeseed, had a negative impact.
The pesticide and seed sector overall is still undergoing a process of consolidation and integration. Several large takeovers or mergers of agrochemical companies are currently on the agenda. With a business model that specializes in plant breeding, KWS is largely unaffected by these developments. We have more than doubled net sales and profits in the past ten years by our own efforts and remain one of the world's leading companies in the field of variety development.
Seed is at the start of the food supply chain. In more developed economic regions, food has become a question of individual lifestyle. People define themselves more and more by what they eat: flexitarian, vegetarian, vegan, food combining or low-carb – the range of diets is diverse. Some abstain from eating meat, while others avoid cereals or dairy products. Yet whatever diet is preferred, modern agriculture produces crops to meet that demand. With their knowledge, good ideas and cutting-edge technologies, farmers ensure that we consumers will continue to be offered high-quality food now and in the future. As part of that, they always work with an eye to using resources efficiently – out of economic and ecological considerations.
As a plant breeding company, KWS is part of this modern agriculture. Our focal objective is always to help farmers to be successful. The two-page photo spreads and Spotlight Topic in this Annual Report reflect what counts: closeness and trust.
We are optimistic about the future. We still expect to achieve net sales growth of more than 5% and at least a double-digit EBIT return in the medium to long term. In the short term, we do not anticipate any easing in the economic environment. In all likelihood, we will not quite achieve our medium-term target of at least 5% growth in net sales in fiscal 2016/2017. However, we expect to improve our profitability (EBIT margin). You can find more information on that on pages 56 to 57.
Research and development and closeness to our customers remain vital to KWS, even in its 160th year. That is why we will keep focusing our efforts on these fields in the future. Finally, I would like to thank our employees, shareholders, partners and customers for the business success we achieved last year. We look forward to a successful future together.
With best regards from Einbeck on behalf of the entire Executive Board.
Dr. Hagen Duenbostel Chief Executive Officer
In what was, all in all, a turbulent economic climate in the agricultural sector, numerous intended acquisitions in the pesticide and seed industry were the subject of public debate in fiscal 2015/2016. They are expected to result in changes in KWS' competitive environment. In this connection, KWS was neither a takeover target, nor do we currently aim to make any acquisitions of our own. Preserving our company's independence remains a key concern of the family shareholders. In particular, the long-term product development cycles in plant breeding require a stable base and strategic planning security. In this spirit, the Supervisory Board and Executive Board once again cooperated successfully in the past fiscal year.
The Supervisory Board discharged the duties incumbent on it in accordance with the law, the company's Articles of Association and the bylaws, regularly advised and monitored the Executive Board in its activities and satisfied itself that the company was run properly and in compliance with the law and that it was organized efficiently and cost-effectively. The Supervisory Board decided on all significant business transactions requiring its consent and carefully accompanied the Executive Board in all fundamental decisions of importance to the company. The Supervisory Board discussed the information and assessments that influenced its decisions together with the Executive Board. Both boards continued their constructive and trusted cooperation as in the past. Among other things, this was demonstrated by the fact that, as is customary, the Supervisory Board was involved in all decisions of vital importance to the company at an early stage. The Supervisory Board was provided with the necessary information in written and oral form regularly, promptly and comprehensively. This included all key information on relevant questions of strategy, planning, the business performance and the situation of the company and the KWS Group, including the risk situation, risk management and compliance. Business transactions requiring consent were submitted to, and discussed and approved by, the Supervisory Board in compliance with the bylaws for the Executive Board. The company's business policy, corporate and financial planning, profitability and situation, the general development of the various businesses, market trends and the competitive environment, research and breeding and, along with important individual projects, risk management at the KWS Group were the subject of detailed discussions. The Chairman of the Supervisory Board continued the bilateral discussions with the Chief Executive Officer and individual members of the Executive Board in regular talks outside the meetings of the Supervisory Board. In addition, there were monthly meetings between the Chairman of the Supervisory Board and the Executive Board as a whole, where the company's current business development and, in particular, its strategy, occurrences of special importance and individual aspects were dealt with. The Chairman of the Supervisory Board informed the Supervisory Board of the results of these meetings. The Supervisory Board did not make use of its right to conduct an examination granted by Section 111 (2) AktG (German Stock Corporation Act) since the reporting by the Executive Board meant there was no reason to do so.
The full Supervisory Board held six meetings in fiscal 2015/2016. All members participated in all of the meetings, with the exception of the meeting on June 22, 2016, where one member was excused and not in attendance. In a special meeting on September 22, 2015, the Supervisory Board dealt with the subject of licensing in genetically improved traits for corn. In order to strengthen the technology platforms of KWS and Vilmorin & Cie (a listed company of Limagrain), long-term agreements with a leading trait and seed producer were then concluded. KWS and Vilmorin have since been authorized to make worldwide commercial use of all current and future corn traits from its portfolio. Along with the existing trait agreements, this one enabled KWS to successfully complement and expand its trait portfolio in the future.
The meeting of the Supervisory Board to discuss the financial statements on October 14, 2015, was devoted to examining and approving the financial statements of KWS SAAT SE and the consolidated financial statements of the KWS Group as of June 30, 2015. The Supervisory Board also
discussed any impacts of the intended acquisitions in the industry on KWS.
The meetings on December 16 and 17, 2015, focused on strategic planning covering a ten-year time frame, as well as the regulatory framework in Europe, in particular for new plant breeding technologies. The Supervisory Board also approved acquisition of the remaining stake in the Brazilian corn company RIBER KWS. The meeting additionally adopted a resolution to sell the seed potato operations to the Dutch company Stet Holland B.V. In its meeting on March 16, 2016, the Supervisory Board heard detailed reports on the progress of product development. In addition, a resolution was adopted to conduct a public tendering process as part of appointment of an independent auditor.
On June 22, 2016, the agenda as usual included adoption of the corporate planning for fiscal 2016/2017, including medium-term planning up to 2019/2020. At the meeting, the Supervisory Board also discussed the results of its efficiency review and conducted the survey of the Supervisory Board with the aim of avoiding and identifying fraud. The Supervisory Board is not aware of any relevant acts.
Deloitte GmbH Wirtschaftsprüfungsgesellschaft, Hanover, the independent auditor chosen at the Annual Shareholders' Meeting on December 17, 2015, and commissioned by the Audit Committee, has audited the financial statements of KWS SAAT SE that were presented by the Executive Board and prepared in accordance with the provisions of the German Commercial Code (HGB) for fiscal 2015/2016 and the financial statements of the KWS Group (IFRS consolidated financial statements), as well as the Combined Management Report of KWS SAAT SE and the KWS Group Management Report, including the accounting reports, and awarded them its unqualified audit certificate. In addition, the auditor concluded that the audit of the financial statements did not reveal any facts that might indicate a misstatement in the declaration of compliance issued
by the Executive Board and the Supervisory Board in accordance with Section 161 AktG (German Stock Corporation Act) with respect to the "German Commission for the Corporate Governance Code" (cf. Clause 7.2.3 (2) of the German Corporate Governance Code).
The Supervisory Board received and discussed the financial statements of KWS SAAT SE and the consolidated financial statements and Combined Management Report of KWS SAAT SE and the KWS Group, along with the report by the independent auditor of KWS SAAT SE and the KWS Group and the proposal on utilization of the net profit for the year made by KWS SAAT SE, in due time. Comprehensive documents and drafts were submitted to the members of the Supervisory Board as preparation. For example, all of them were provided with the annual financial statements, Combined Management Report, audit reports by the independent auditors, corporate governance report, compensation report and the proposal by the Executive Board on the appropriation of the profits. The Supervisory Board also held detailed discussions of questions on the agenda at its meeting to discuss the financial statements on October 24, 2016. The auditor took part in the meeting. It reported on the main results of the audit and was also available to answer additional questions and provide further information for the Supervisory Board. According to the report of the independent auditor, there were no material weaknesses in the internal control and risk management system in relation to the accounting process. There were also no circumstances that might indicate a lack of impartiality on the part of the independent auditor. The small extent of services additionally provided by the independent auditor can be seen from the Notes.
In accordance with the final results of its own examination, the Supervisory Board endorsed the results of the audit, among other things as a result of the preliminary examination by the Audit Committee, and did not raise any objections. The Supervisory Board gave its consent to the annual financial statements of KWS SAAT SE, which were prepared by the Executive Board, and to the consolidated financial statements of the KWS Group, along with the Combined Management Report of KWS SAAT SE and the KWS Group. The financial statements are thereby approved. The Supervisory Board also endorses the proposal by the Executive Board to the Annual Shareholders' Meeting on the appropriation of the net retained profit of KWS SAAT SE after having examined it.
The Supervisory Board conducted its efficiency review in accordance with Clause 5.6 of the German Corporate Governance Code for fiscal 2014/2015 and 2015/2016, accompanied and supported by Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft. According to the final report by Ernst & Young, the results of the evaluation of the Supervisory Board of KWS SAAT SE meet the benchmark; no fundamental weaknesses were identified by the persons questioned.
The Supervisory Board discussed compliance with the recommendations of the "German Commission for the Corporate Governance Code." As regards setting a limit on the length of time members can serve on the Supervisory Board of KWS SAAT SE in accordance with Clause 5.4.1 of the German Corporate Governance Code, the Supervisory Board stuck by its decision to continue not to comply with these recommendations by the German Corporate Governance Code, since they would significantly restrict the rights of a business with a tradition of family ownership like KWS, whose family shareholders hold a majority stake.
The Supervisory Board regularly addressed the question of any conflicts of interest on the part of its members and those of the Executive Board. In the year under review, there were no such conflicts of interests that had to be disclosed immediately to the Supervisory Board and reported to the Annual Shareholders' Meeting.
The Audit Committee convened for three joint meetings in fiscal 2015/2016. It also held three telephone conferences – on all occasions with all its members in attendance, with the exception of the telephone conference on November 19, 2015, where one member was excused and not in attendance. In its meeting on September 28, 2015, the Audit Committee discussed the annual financial statements and accounting of KWS SAAT SE and consolidated financial statements of the KWS Group for the fiscal year 2014/2015. The annual compliance report, risk management and the results of the auditing projects were on the agenda at its meeting on March 16, 2016. The audit plan for fiscal 2016/2017 was also discussed and adopted. The subjects discussed at the meeting on June 22, 2016, included the new quarterly reporting standards and the results of the Supervisory Board's efficiency review. The quarterly reports and the semiannual report for fiscal 2015/2016 were discussed in detail in three telephone conferences and their publication was approved.
| Committee | Chairman | Members | |||
|---|---|---|---|---|---|
| Audit Committee | Hubertus von Baumbach | Andreas J. Büchting Jürgen Bolduan |
|||
| Committee for Executive Board Affairs |
Andreas J. Büchting | Arend Oetker Cathrina Claas-Mühlhäuser |
|||
| Nominating Committee | Andreas J. Büchting | Arend Oetker Cathrina Claas-Mühlhäuser |
The Audit Committee convened on September 22, 2016, to discuss the current annual financial statements of KWS SAAT SE and KWS' consolidated financial statements and accounting. The independent auditor explained the results of its audit of the 2015/2016 financial statements and pointed out that – in its opinion – there were no circumstances that could have led to a lack of impartiality on its part. The Audit Committee also dealt with the proposal by the Executive Board on the appropriation of the net retained profit of KWS SAAT SE and recommended that the Supervisory Board approve it. It additionally dealt with the results of the examination of the 2014/2015 financial statements by the German Financial Reporting Enforcement Panel (FREP), which was based on spot checks and produced no objections.
In addition, the Audit Committee obtained the statement of independence from the auditor in accordance with Clause 7.2.1 of the German Corporate Governance Code, ascertained and monitored the auditor's independence, examined its qualifications and defined the focal areas of the audit. The Audit Committee also satisfied itself that the regulations on internal rotation were observed by the independent auditor and dealt with the services rendered additionally by the independent auditor.
In addition, the Audit Committee dealt in its meetings with preparing the resolution on the appointment of the independent auditor for fiscal year 2016/2017 to be proposed to the Annual Shareholders' Meeting on December 15, 2016. In order to select the independent auditor to be proposed to the Annual Shareholders' Meeting, the Audit Committee conducted a tendering process in the period from March 31, 2016, to September 22, 2016, in accordance with the provisions of the new EU Regulation on independent auditors that has been in force since June 17, 2016. After the documents submitted by a total of nine auditing firms were intensively discussed and assessed, the Audit Committee recommended to the Supervisory Board that Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, Hanover, be proposed to the Annual Shareholders' Meeting for appointment as the independent auditor. At its meeting of October 24, 2016, this recommendation – following consideration of an alternative
candidate also named by the Audit Committee – was confirmed and resolved by the Supervisory Board.
The Committee for Executive Board Affairs reviewed the compensation paid to members of the Executive Board in the year under review. As part of that, it proposed increasing the fixed compensation of Dr. Peter Hofmann to the level of the other Executive Board members. Peter Hofmann has served on the Executive Board of KWS SAAT SE since October 1, 2014, but has been responsible since 2005 for the Sugarbeet Segment, which has recently held its own very well in a tough market environment. In view of that and his many years of successful work for the company, the committee proposed converting the contract of Peter Hofmann – before the end of its existing term and with effect January 1, 2016 – into a five-year contract with the same terms and conditions for variable compensation as for the other ordinary members of the Executive Board. The Supervisory Board endorsed the committee's proposals.
In October 2015, Dr. Arend Oetker informed KWS that he had transferred his shares in KWS to the next generation of his family as part of an anticipated inheritance. At the same time, he transferred entrepreneurial responsibility for the stake in KWS held by the Oetker family to his daughter Dr. Marie Theres Schnell, Munich. In addition, the Deputy Chairman of the Supervisory Board considered resigning his seat on the Supervisory Board of KWS SAAT SE at the end of 2016. The Nominating Committee convened on May 28, 2016, and discussed filling the post that was likely to become vacant. The shareholder families Büchting/Oetker had proposed Marie Theres Schnell as the representative of the family of Arend Oetker.
After completing secondary school, Marie Theres Schnell (born in 1976) studied communications in Salzburg and Gothenburg and completed her university education by gaining a doctorate in Zurich in 2007. She gained professional experience as assistant to the board of management at a large digital publishing house and as part of a trainee program in the food industry in Spain. She then worked as a freelance media consultant. In addition to this inter-
Andreas J. Büchting, Chairman of the Supervisory Board
national activity, she was able to gain diverse experience at the companies of the Arend Oetker Group, not only in the fields of agriculture, retailing and food, but also in her work on various shareholder bodies. Coming from a family with a long tradition of entrepreneurship, she contributes experience, a sense of responsibility, vision and sound judgment.
The Nominating Committee examined her candidacy, taking into account the relevant regulations of the German Corporate Governance Code. Accordingly, the committee satisfied itself that Ms. Schnell also had the time expected for her to discharge her duties on the board. In addition, the Supervisory Board aims to ensure that half of its shareholder representatives are independent within the meaning of the German Corporate Governance Code. The departure of Arend Oetker and election of Marie Theres Schnell in his place would mean that the situation on the board would remain the same in this respect. The Board would thus still meet the target it has set itself. The aspect of diversity should be taken into account in filling posts on the Supervisory Board. In this context, the Supervisory Board decided in accordance with Section 111 (5) AktG (German Stock Corporation Act) that the ratio of female members on the Supervisory Board of KWS SAAT SE should not be less than 16.6% by June 20, 2017. That figure would increase to 33.3% overall and 50% in terms of shareholder representatives with the appointment of Marie Theres Schnell. The Nominating Committee arrived at the conclusion that Marie Theres Schnell was qualified to hold a position on the Supervisory Board and would be an excellent enrichment for it. On September 20, 2016, Dr. Arend Oetker informed the Chairman of the Supervisory Board that he would resign as a member of the Supervisory Board of KWS SAAT SE effective the end of the Annual Shareholders' Meeting on December 15, 2016. The Nominating Committee then recommended in accordance with Clause 5.3.3 of the German Corporate Governance Code that Dr. Marie Theres Schnell be proposed as a candidate for election of his successor to the Annual Shareholders' Meeting on December 15, 2016.
The Supervisory Board expresses its thanks to the Executive Board and all employees of KWS SAAT SE and its subsidiaries for their great commitment and efforts yet again in helping KWS continue its gratifying development.
Einbeck, October 24, 2016
Dr. Drs. h.c. Andreas J. Büchting Chairman of the Supervisory Board
Seed is a matter of trust. That is why personal consulting and close contact between our seed experts and farmers in their region is very near to our heart. Choosing the variety adapted to the location in question lays the foundation for successful cultivation. However, our consultants' work is by no means done once a variety is selected – on the contrary. Throughout the entire vegetation period, they are a reliable partner, maintaining close contact with their farmers and discussing agricultural matters with them: from tilling methods, the right time for sowing, the use of pesticides and fertilizers to the ideal time to harvest crops and suitable storage conditions. As a result, we live up to our responsibility at the beginning of the value chain even after selling our seed.
While KWS was able to expand its business activity in the year under review, the agricultural sector is again confronted by a surplus supply of agricultural raw materials, low commodity prices and regional adjustments in the cultivation area, as well as political and economic uncertainties. The nervousness of capital market players is reflected in the volatility of KWS' share price. It rose sharply year on year, although the average daily fluctuation between the highest and lowest price (on a small trading volume) was €5.62 (4.33)1 – despite KWS' solid business performance. The share reached an all-time high at €313.55 in July 2015. The general stock market slump in January 2016 meant its price fell to a low of €235.10 for the year. KWS' share recovered strongly after that to close at almost the same level of the previous year at the end of the fiscal year (€297.80; –0.6%). That is a very good performance for the industry. Almost all listed competitors fared worse in the same period – despite major consolidation projects with prices well above the stock market values for the affected companies. The DAX fell by around 14% and the EURO STOXX 50 index by even approximately 18% in this period, although there were slight gains for the MDAX (around 2%) and SDAX (around 1%). Looking at the share's performance over the past five years (July 1, 2011, to June 30, 2016), the KWS share price increased by 93%. The SDAX rose by 61% and the DAX by around 31% in the same period.
The share still occupies a mid-range position in the SDAX, Germany's index for small caps. Measured in terms of free float market capitalization at the relevant key date of June 30, 2016, the KWS share ranked 18th (18th) in the index, which comprises 50 companies, and 39th (35th) in terms of trading volume over the period under review. KWS SAAT SE's market capitalization was €1,964 (1,970) million or, solely on the basis of the proportion of free float, €565 (569) million.
For more than 40 years KWS has offered its employees the chance to become a shareholder in the company and thus share in its success and identify more strongly with it. The content of our Employee Share Program remained unchanged in the year under review. Our employees were able to buy up to 500 KWS shares at a price of €217.60 (214.40), including a 20% discount, which the individual employees must pay tax on. A total of 395 (401) employees in ten
1 If not otherwise specified, the figures in parentheses give the previous year's figure.
Free oat 32.1% 52.5% Families Büchting, Arend Oetker Tessner Beteiligungs GmbH 15.4%
(nine) European countries took up this offer and purchased a total of 7,541 (9,878) shares, corresponding to an average stake per employee of 19 (25) shares. The acquired shares are subject to a lock-up period of four years. They cannot be sold, transferred or pledged during this period. As in previous years, the shares used for the Employee Share Program were acquired in accordance with Section 71 (1) No. 2 of the German Stock Corporation Act (AktG). A total of €1.9 (2.7) million was used to buy back the company's own shares, giving an average purchase price per share of €258.85 (271.73).
The KWS Group increased its net sales last fiscal year by 5.2% to €1,036.8 (986.0) million. In what was, all in all, a turbulent economic environment in the agricultural sector, among other things with declining cultivation areas and higher costs of sales as well as non-recurring costs, EBIT was €112.8 (113.4) million, almost at the level of the previous year, although it was impacted by positive exchange rate effects. Net financial income/expenses fell; that and a lower tax rate meant that net income for the year was €85.3 (84.0) million. The return on sales after tax fell to 8.2% (8.5%), although it would have been lower had it not been for the positive exchange rate effects.
The Executive Board and Supervisory Board will therefore propose payment of an unchanged dividend of €3.00 (3.00) for fiscal year 2015/2016 to the Annual Shareholders' Meeting on December 15, 2016. Some €19.8 (19.8) million would thus again be distributed to
KWS SAAT SE's shareholders. With a dividend payout ratio of 23.2% (23.6%) of the KWS Group's net income for the year, the company would stick to its earnings-oriented dividend policy of a payout in the long-term target range of 20% to 25%.
| Key figures for the KWS share | |
|---|---|
| ISIN | DE0007074007 |
| Number of shares | 6,600,000 |
| Closing price | in € |
| June 30, 2016 | 297.80 |
| June 30, 2015 | 298.50 |
| Trading volume (avg.) | in shares/day |
| 2015/2016 | 2,068 |
| 2014/2015 | 2,211 |
| Market capitalization | in € millions |
| June 30, 2016 | 1,965 |
| June 30, 2015 | 1,970 |
Generations trust in a brand – that is the result of continuous breeding progress and personal customer care and support.
Corporate sustainability means orientation to the future in what we do, i.e., striving to create lasting value and economic success – true to our 160-year tradition as a family business.
The prime goal of our corporate strategy is to ensure KWS' independence, which is why it is geared toward profitable growth. Proactive planning and action is vital to achieve that strategy and is thus a core principle of our corporate governance. Plant breeding is a costly and time-consuming business: It takes up to ten years for each new variety to be developed. That means we have to carefully address the economic, ecological and social challenges of today and tomorrow so as to identify and anticipate the resultant opportunities and risks. We align our company strategically and operationally on that basis.
We intend to keep on systematizing the process for determining the key issues relating to our long-term corporate development. To enable that, we plan to expand our dialogue with stakeholders, which has been conducted to date at our headquarters in Einbeck, and make it more international in the coming years. In this way, we obtain feedback from the various markets and can also discuss critical issues with the relevant local stakeholders and gain knowledge to enable our company's further development.
The latest sustainability report for fiscal year 2015/2016 is based on the international reporting specifications of the Global Reporting Initiative (GRI G4) and is available on the company's Internet site at www.kws.com/ir. We are currently working to internationalize our sustainability reporting, with the objective of expanding it so that it covers the main aspects of sustainability for the entire KWS Group and integrating it fully in the Annual Report in the medium term.
Our company's success is founded on the achievements of all our employees. We make intensive efforts to recruit good employees and have introduced a process to identify and further develop our junior staffers.
We strive to surpass statutory requirements relating to work safety and environmental protection, as well as to the efficient use of resources, such as water, energy and pesticides, as far as our influence allows.
We are particularly committed to strengthening the regional and local attractiveness of our locations on the cultural and social planes. We support both young academicians (through Deutschlandstipendien and interships) and top-flight researchers. We encourage our people to get involved in their own social areas. Many KWS employees have become actively involved in aid for refugees, for example.
The 2016 Field Days held by the German Agricultural Society (DLG) in the town of Hassfurt, in Lower Franconia, attracted 21,632 visitors over its three days. After ten months of preparation for this event, KWS showcased its entire portfolio there. Sugarbeet, corn, cereals, rapeseed, catch crops, organic seed – almost 60 varieties were exhibited on the demonstration plots, offering farmers, consultants and other interested persons a good opportunity to learn more about KWS' broad range of services and varieties directly at the plants' location. Many took this chance to discuss the latest trends and developments in plant breeding and modern agriculture with KWS' experts on the spot. In the evening, we welcomed more than 1,000 guests to our CultiVent party.
Leonard Dempfle has a problem. The farmer from the German Allgäu region planted corn as feed for his 70 cows on an area of about 20 hectares, and now it is fully mature – in mid-September, almost two weeks before the normal time for harvesting. The long dry spell this summer sped up the maturing process. Should he harvest it now or wait a while? To help him decide, Dempfle picks a few corn plants by hand from different spots and takes these samples to his regional KWS consultant in the village of Burtenbach, 25 kilometers away. He wants to have the consultant determine the current dry matter content of his corn plants. Ernst-Arthur Bommer, head of KWS' consulting office for Bavaria and Württemberg, has his hands full. In his area of responsibility alone, he and his team analyze some 1,000 corn samples a week before the harvest between mid-August and the beginning of October. "Dry matter monitoring enables us to determine the corn's maturity precisely and recommend an ideal time to harvest it," explains Bommer. If the dry matter content is between 32% and 35%, it is time to bring in the corn.
Bommer relies on close dry matter monitoring at many locations for his region, which has very different soil and climatic conditions and thus large differences in ripening times. KWS not only offers this service in southern Germany, but also at more than 250 locations nationwide for the most important corn varieties. All farmers who are registered with CultiVent, KWS' digital consulting platform, regularly receive the results of dry matter monitoring and harvesting recommendations tailored precisely to their cultivation area by e-mail.
In the case of silage corn for dairy cattle, which Dempfle grows, it is especially important to harvest it at the ideal time. "Tastiness and starch content are vital. If the corn is too old, lower fresh weight yield from the field means that the basic feed intake of the cattle is reduced and farmers have to use more of the expensive concentrate feed. That can mean losses
of up to €500 a hectare," says Bommer in describing the economic consequences of late harvesting, which may even threaten a farmer's livelihood. Just a few minutes later, Leonard Dempfle has the results for his samples in his hands and now knows that he will begin chopping his corn the next day.
Dry matter monitoring is just one example of the wide range of consulting and services KWS offers. Personal contact with the farmer and customized advice are also of great importance in consulting on varieties and cultivation of all other crops from KWS' product portfolio, such as sugarbeet, cereals or rapeseed. Trust
A mature performance – the KWS consultant and farmer together determine the best time to pick corn so that all the farmer's efforts are rewarded with a good yield.
is a vital component of the relationship between the seed producer, dealers and farmers.
The foundations for creating extensive value added are laid by consulting with farmers on choosing the right variety for different regional and climatic demands. With its above-average expenditure on continuously developing new varieties, KWS strives to live up to its special responsibility of providing farmers with the best-possible seed for the crops in its portfolio. Breeding progress in practice is enabled by delivering varieties that produce higher and higher yields and are adapted to very different climatic and soil conditions.
The vitality of a particular era does not so much depend on the harvest, but more on the seed it sows.
Ludwig Börne (1786–1837), journalist and literary critic
As the example of dry matter monitoring shows, KWS does much more than advise farmers on choosing the right varieties for their individual needs. Just over a quarter of our approximately 4,800 employees worldwide take care of the needs and worries of our customers in their sales work. A closely knit regional network of KWS consultants also provides farmers with support in agricultural matters – from tilling, sowing, pesticide and harvesting, through to storage. Only in that way can the yield potential inherent in the seed's genetic makeup be leveraged as much as possible. That means we work hand in hand with farmers to reliably ensure increases in yield and quality.
In addition to personal one-on-one contact, we continuously gather the latest pioneering findings on key questions of modern agriculture for our customers. We share our knowledge at diverse information and educational events, some of which are seen on the two-page photo spreads in this report. They include Agricultural Forums that KWS regularly holds nationwide and the biennial Field Days held by the German Agricultural Society (DLG).
The sharing of diverse knowledge and experience in a spirit of trust between KWS' consultants and farmers not only creates the basis for reliable yields that safeguard the farmer's livelihood. This initial interface in the value chain of modern agriculture and nutrition is also the foundation for the high quality of the food we love to eat at the end of that chain.
Cooking and eating are no longer just about nourishment, but have long since become an expression of our personal lifestyle. Modern agriculture, with its diverse products, ensures that everyone can eat to suit their taste. But how exactly does it do that? A new website www.moderne-landwirtschaft.de provides a vivid and entertaining look at this subject – and at who does what (German only).
Compared with the previous year, there have not been any significant changes in the fundamentals of the KWS Group as presented in the following.
Since it was founded in 1856, KWS has specialized in developing, producing and distributing high-quality seed for agriculture. From our beginnings in sugarbeet breeding, we have evolved into an innovative and international supplier with an extensive portfolio of crops. We cover the complete value chain of a modern seed producer – from breeding of new varieties, multiplication and processing, to marketing of the seed and consulting for farmers. KWS' core competence lies in breeding new, high-performance varieties that are adapted to regional needs, such as climatic and soil conditions. Every new variety delivers added value for the farmer. Our business model is based on this added value – which is ultimately attributable to breeding progress, optimization of seed quality and consulting founded on a spirit of trust.
KWS SAAT SE is the parent company and holding company of the KWS Group. It is responsible for strategic management and, among other things, multiplies and distributes sugarbeet and corn seed. It finances basic research and breeding of the main range of varieties at the KWS Group and provides its subsidiaries with new varieties every year for the purpose of multiplication and distribution. An overview of the subsidiaries and associated companies included in the consolidated financial statements of the KWS Group is provided in the Notes on pages 86 to 87.
The KWS Group's operational business is conducted in the three product segments corn, sugarbeet and cereals:
The Corn Segment is the KWS Group's largest division in terms of net sales. It covers production and distribution of corn seed, as well as rapeseed, soybean, sunflower and sorghum. Its operating performance depends significantly on the spring sowing season in the northern hemisphere. That means most of the segment's net sales are generated in the second half of the fiscal year (January to June). The segment generates a lower share of its revenue in the first two quarters, mainly from winter rapeseed in Europe and corn varieties in South America.
The Sugarbeet Segment comprises sugarbeet seed production and distribution. Our high-quality sugarbeet varieties are some of the highest-yielding in the industry, which is why we are the leader in the field of sugarbeet seed with a global market share of 55%. Our main sales markets are North America, a region where genetically improved, herbicide-tolerant sugarbeet varieties are used almost exclusively, and the EU, where KWS likewise has a very good market position with conventionally bred, multiple-resistant varieties. Sugarbeet is sown in the spring, which means that net sales in this segment are largely generated in the second half of our fiscal year (January to June).
The Cereals Segment includes production and distribution of seed for rye, wheat, barley and rapeseed. Hybrid rye accounts for the largest share of revenue from cereals (more than 40%), followed by wheat and barley (each around 20%). We generate the remainder from other crops such as rapeseed or triticales. In our core markets for cereal seed (Germany, Poland, the UK and France), farmers predominantly sow their crops in the fall. Consequently, we generate most of our revenue in this segment in the first half of our fiscal year (July to December).
The Corporate Segment supports the operating segments with research and development activities and provides central functions for controlling the group. Its relatively low net sales come from the
revenue from our own farms. Since all cross-segment function costs and research expenditure is charged to this segment, its income at the end of the fiscal year is usually negative to a significant extent.
Information on the net sales and income contributed by the segments, including our joint ventures, can be found in our segment reports starting on page 41.
KWS SAAT SE's headquarters are located in Einbeck, Lower Saxony. We have 62 subsidiaries and associated companies at present, operating in more than 70 countries, largely in the moderate climatic zone. You can find a detailed breakdown of net sales by region on page 37.
We offer our customers – farmers – a broad range of agricultural crops that have been adapted by breeding to the conditions of their specific location. These crops include corn, sugarbeet, the cereals rye, wheat and barley, oil plants such as sunflower, soybean and rapeseed as well as catch crops. The varieties are mainly adapted to the moderate climatic zones. Since we entered the Brazilian market in 2012, varieties for subtropical regions have also been part of our portfolio. In addition to selling seed, our field staff is also on hand to offer farmers free consulting on choosing and cultivating varieties.
KWS' breeding processes are geared toward exploiting plants' potential as much as possible and leveraging it to handle the challenges of modern, sustainable agriculture. Whether it is plants for producing food, fodder or energy, conventional, organic or genetically improved, we offer farmers the ideal variety for their purposes. It takes up to ten years to breed a
KWS employees are not stuck indoors all the time. They get to know our products personally.
new variety. Thanks to our large network of breeding and trial stations in all the world's key markets, we can test the individual candidates under a wide range of climatic and local conditions to determine whether the varieties are suitable for cultivation. In many markets, variety development ends in an official approval process in which candidates have to meet high quality standards, usually for at least three years. Only then can we distribute the varieties to our customers via the various channels.
Our breeding and seed multiplication activities are subject to weather influences that cannot always be quickly compensated for with countermeasures. Economic policy decisions in the agricultural industry, which is strongly regulated worldwide, may also impact our business. You can find more details on these external factors in our opportunity and risk report on pages 49 to 55.
We sold our conventional seed potato business to Stet Holland B.V. in the year under review. An agreement to this effect was signed on April 11, 2016. The business generated net sales of around €28 million and was run in the Sugarbeet Segment.
In line with the planned expansion of our business activities, we took over all the remaining shares in our Brazilian subsidiary RIBER KWS SEMENTES at the end of the calendar year 2015. It had already been fully consolidated in the Corn Segment before the purchase option was exercised.
As announced in the last Annual Report, KWS MAIS GMBH was merged with KWS SAAT SE effective July 1, 2015. The company's reintegration marked one of several planned steps in simplifying the Group's structure. The merger will also enable us to make internal processes more efficient and reduce our administrative overhead. The structure and controlling of our segments will not be affected by this measure.
Our strategic planning is the foundation of the KWS Group's further development. It defines strategic objectives, initiatives and core measures for existing activities and for potential new fields of business. The planning is based on a long-term horizon (ten years) and includes an analysis and assessment of market trends, competitors and the KWS Group's position. Strategic planning is carried out every three years on a rolling basis. We believe that strategic success factors are, in particular, our intensive research, breeding of new, high-yielding varieties and continuous expansion of our global footprint so that we are on the ground in regional markets with their special climatic conditions.
Due to the fact that the equity method (IFRS 11) was applied to our joint ventures for the first time last year, we have adjusted our key indicator "R&D intensity," which is measured relative to net sales. This change was necessary because the earnings contributed by the equity-accounted joint ventures are now only allowed to be included in net financial income/expenses at the Group level. We have retained the other objectives without any changes.
| Objectives | ||||
|---|---|---|---|---|
| Profitable growth | ■ Increase in consolidated net sales by an average of 5% to 10% p.a. ■ EBIT margin ≥10% |
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| Research and development | ■ R&D intensity of around 17% of consolidated net sales ■ 1% to 2% progress in yields p.a. for our customers and development of tolerances and resistances |
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| Internationalization | ■ Expansion of the portfolios of varieties for subtropical markets | |||
| Sustainability | ■ Integration of international subsidiaries in KWS' sustainability reporting |
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| Dividend | ■ A dividend payout ratio of 20% to 25% of the KWS Group's net income for the year |
Our investments and expenditure for research and development are the foundation for profitable growth. We aim to increase the KWS Group's net sales by an average of 5% to 10% p.a. and achieve an EBIT margin of at least 10%. In line with the principles of our long-term corporate strategy, we use our earnings strength to expand research and development in particular, as well as for our distribution operations. As a result, we bolster the KWS Group's potential and lay the foundation for future growth.
The objective of our research and development is to obtain new varieties that are tailored to different needs and changing agricultural requirements. Our most important objectives across all crops are to increase yield, breed resistance to plant diseases and pests and improve plants' quality of processing. Conservation of plant genetic resources is also a key concern of ours. Expressed in hard and fast figures, the new varieties we supply to our customers deliver an average yield progress of 1% to 2% a year.
We will push further ahead with internationalization of our company. Our commitment in the subtropical market of Brazil as well as the joint venture with our partner Kenfeng in China are part of that. Markets such as Brazil, with multiple harvests a year, not only offer attractive sales potential – especially for our corn business – but also enable us to cushion the highly seasonal nature of our business in the medium to long term.
KWS' business model is geared toward sustainable success. We are currently working to internationalize our sustainability reporting, with the objective of expanding it so that it covers the entire KWS Group by fiscal 2017/2018. You can find more information on the current reporting on pages 14 to 15.
The KWS Group's profitable growth is the basis of our dividend policy. Thanks to our successful performance over the past years, we have been able to pay our shareholders an annual dividend of 20% to 25% of the KWS Group's net income for the year. This policy is to be retained in the future.
In the past fiscal year, our business performance was in line with the above-mentioned medium- to long-term objectives. Our net sales growth was in the desired range, as was the EBIT margin and R&D intensity. We continued to increase our foreign sales, including in our subtropical market Brazil. We plan to expand our sustainability reporting to all significant international subsidiaries and associated companies by fiscal 2017/2018. Preparations for that were commenced in the year under review. The dividend ratio of the payout in December 2015 was 23.6% and thus within our target range.
Detailed annual and medium-term operational plans, which also include our joint ventures proportionately, are used to control the Group and the three segments corn, sugarbeet and cereals. The medium-term plan covers the time frame of the annual plan plus the three subsequent fiscal years. In turn, the medium-term plan is derived from our strategic corporate planning, which covers a timescale of ten years.
The targets set in the annual and medium-term planning are arrived at on the basis of the strategic planning, regional economic and legal situation, anticipated market trends and assessments of the company's position in the market and the potential product performance. In a subsequent bottom-up process, which also includes the development of our joint ventures, we use these premises to define figures for sales volumes and net sales, production capacities and quantities, the allocation of resources (including capital spending and personnel), the level
Just how does that work? Around 100 participants in the "KWS Showcase on Modern Sugarbeet Breeding" learned more about successful breeding methods directly in the field.
of material costs and internal charge allocation and the resultant balance sheet data, along with the financial budget. In principle, part of the planning documentation is also an opportunity/risk assessment that every manager must conduct for his or her unit.
The planning is compared every quarter with the company's actual business performance and the updated estimates of the underlying general conditions. If necessary, we initiate suitable countermeasures and make adjustments. We update the forecast for the current fiscal year at the end of each quarter. At the end of each fiscal year, all the units conduct a detailed variance analysis of the budgeted and actual results. That serves to optimize our internal planning processes.
Controlling is responsible for coordinating and documenting all planning processes and our current expectations. It monitors compliance with adopted budgets and analyzes the efficiency and cost-effectiveness of business processes and measures. The Controlling team also advises decision-makers on economic optimization measures. In particular the heads of the three product segments, the regional directors and the heads of research and development activities and the central functions are responsible for the content of the planning and current forecasts.
The Executive Board uses various indicators for planning, controlling and monitoring the business performance of the KWS Group and its operating units. The main indicators for the KWS Group are net sales, operating profitability (EBIT margin) and R&D intensity. KWS' product segments, which are divided into Business Units, are in turn geared toward the main indicators of net sales and EBIT margin.
KWS SAAT SE has a system of dual management and supervision, consisting of the Executive Board and the Supervisory Board. Both bodies have strictly separated responsibilities and different members. While the Executive Board manages the company, the Supervisory Board supervises and advises the Executive Board. These responsibilities have also been retained following the company's conversion into a European Stock Corporation (Societas Europaea/SE). The declaration on corporate governance in accordance with Section 289a of the German Commercial Code (HGB) contains detailed information on the extensive and close cooperation between the Executive Board and the Supervisory Board and has been published at www.kws.com/ir.
Guidelines for the companies' day-to-day work Our guiding principles define the framework for our goal of creating sustainable and profitable growth for our customers, employees and investors. Our strategic decisions and day-to-day actions in operational business are guided by the following company principles:
The KWS Group owes its innovativeness and success to a growing workforce worldwide. With our central policy framework – Rules, Guidelines and Procedures ( RGPs) – we create a common understanding of the freedoms and decision-making processes within KWS. The RGPs are continuously improved by means of constant monitoring and feedback. They complement our existing guiding principles, with the objective of preserving KWS' unmistakable profile, also against the backdrop of the Group's increasing internationalization.
The objective of our research and development work is to create high-performance varieties that meet various environmental and application requirements and ensure a continuous increase in yield. To enable that, we continue to invest in expanding our research and breeding capacities. In fiscal 2015/2016 alone, our R&D expenditure totaled €182.4 million. The result was that new KWS varieties were awarded around 400 marketing approvals.
Plant breeding is a very research-intensive and long-term business. Promising parent lines have to be crossed for each new variety and their progeny examined and selected with regard to the desired traits over a period of several years. At the end of the development process come variety tests in which the traits of new varieties are determined and compared with standard varieties. An average of ten years elapse between the first crossing and the actual marketing of a variety.
To develop new varieties, we maintain our own longterm breeding programs organized in a crop-specific structure. Our breeders are assisted in that by a global network of various breeding and trial stations. That means candidate varieties can be tested under the location-specific conditions in their target markets.
Breeding and distribution activities in over 70 countries
As part of our own research activities, scientists at KWS continuously work on new molecular biology, IT or technical approaches that enable us to develop new, improved product traits and further optimize our breeding methods. So that the latest scientific findings and methods can be integrated faster in our breeding work, we also complement our research activities with partnerships with public research institutes and private enterprises.
The new statutory regulations under the Nagoya Protocol came into effect last fall. KWS supports the Nagoya Protocol, whose goals are the sustainable use and fair sharing of the benefits from plant genetic resources. We have undertaken great efforts to implement the complex provisions of the Nagoya Protocol. To enable that, we have implemented a system that provides us with efficient access to plant genetic resources in compliance with guidelines and enables our scientists worldwide to document the origin of all genetic material for their product development work. However, we are also committed to expanding and strengthening the proven "International Treaty on Plant Genetic Resources for Food and Agriculture". It is an efficient and pragmatic instrument governing the use of plant genetic resources.
KWS carries out breeding work in countries where genetically modified traits are vital to the successful market launch of commercial varieties. A long-term licensing agreement now ensures that KWS has worldwide access to the portfolio of such traits from a leading provider for its corn breeding work.
By integrating these traits in our own breeding material, we hope to obtain new, competitive varieties for the North and South American markets in the medium term. We have made very good progress in Argentina, where we already have commercial varieties under an earlier agreement.
The herbicide-tolerant CONVISO® SMART sugarbeet we developed for conventional cultivation in cooperation with Bayer CropScience has achieved an important milestone on the path to market launch. Various varieties were registered for the official performance tests in the markets of relevance to us, such as the European Union, Eastern Europe or Turkey, in 2016. The chosen varieties are adapted to the specific conditions of the countries and bring together not only the new technology for herbicide tolerance, but also various resistances to plant diseases and pests, such as rhizomania, rhizoctonia, cercospora and nematodes. As a result, we are ideally prepared to enter the market when the first CONVISO® SMART varieties obtain approval.
In the U.S. sugarbeet market, there is increasing demand for genetically modified varieties that have multiple tolerance to herbicides. To address this trend and maintain our excellent market position, we are developing a successor product to the successful ROUNDUP READY® sugarbeet. The second generation of herbicide-tolerant sugarbeets will have threefold tolerance to the active substances glyphosate, glufosinate and dicamba, and will be ready for the market in the middle of the next decade.
KWS always strives to apply innovative approaches and technologies in order to improve breeding methods and the quality of its varieties. The past years have seen the development of several precise, molecular biology methods that open up new prospects for plant breeding and are growing in importance for us. Some of these methods can be used to develop plant varieties with desired traits very precisely and in a far shorter time. The results are nature-identical and the plants do not differ from conventionally bred ones in terms of their genetic makeup or traits.
We have therefore identified "new breeding technologies" and, in particular, genome editing methods as a field of research that is important to us and are investing in their application and further development.
In order to drive development of technology and secure access to important technology components, we also launched a cooperation in the year under review with a research group that is a world leader in the field of genome editing at the Chinese Academy of Sciences in Beijing.
Rye breeding program established for Russia Rye is grown on 5 million hectares throughout the world. Some 1.5 million hectares of that figure are in Russia. Hybrid varieties adapted specifically to the region's severe winters and short vegetation periods are required in most of the country.
So as to develop hybrid varieties for this challenging region, we began establishing a breeding program at KWS' station in Doktorovo near Lipetsk in 2008. In the meantime, the testing network has been expanded to include several more locations and the selection capacities have thus been significantly improved. The test infrastructure is also supplemented by a selection system for tolerance to frost and snow mold under controlled conditions at our German breeding station in Petkus.
While establishing the infrastructure, we were able to set up a product development program that enables faster development of varieties. The first winter-hardy KWS candidates are already undergoing assessment and in the first year exhibited a higher yield compared to local standards varieties. We expect to market initial varieties with superior winter hardiness in fiscal year 2019/2020.
| 2015/2016 | 2014/2015 | +/– | ||
|---|---|---|---|---|
| R&D employees1 | 1,830 | 1,777 | +3.0% | |
| Ratio of R&D employees | in% | 38.0 | 38.0 | |
| R&D expenditure | in € millions | 182.4 | 174.6 | +4.5% |
| R&D intensity2 | in % | 17.6 | 17.7 | |
| Marketing approvals for new varieties | 397 | 429 | –7.5% | |
1 Average number of employees
Advice on varieties tailored to the farmer's individual needs is effective only if our consultants know what varieties produce the best performance under what local conditions. For the past 25 years, our AgroService has worked to find the answer to that and pass along its knowledge. It is the link between sales, science and breeding, and creates on the basis of scientific findings and its own trials the foundation for professionally sound advising. The AgroService Corn visits the trial locations throughout Germany several times a year, for example. That means our employees travel in pairs to more than 35,000 plots a year. All the information they obtain helps further increase value added for farmers.
For 160 years, KWS' employees have been renowned for their innovative thinking and pioneering ideas. They keep on setting higher standards in all our markets and developing sustainable solutions to the challenges of today and tomorrow.
KWS' work culture of respect is key to that achievement. The strong roots of our family business provide secure support. They also give every employee the opportunity and latitude to unfold their individual potential and enjoy entrepreneurial freedom. At the same time, we demand a high degree of personal initiative from every employee. Flat hierarchies, open doors and quick, direct communication ensure that we achieve our goal together: Seeding the Future.
Global growth and regional markets mean that a high degree of adaptivity is always required. In order to help employees purposefully tackle the diverse requirements in this market environment, KWS has established an integrated development environment. Challenging tasks enable our employees to develop the personal and professional skills they need and to unfold their individual potential to the full.
Throughout the group, we offer our employees the chance to take part in an extensive range of further training at the local level, above all to help them enhance their professional expertise. Consistent parameters for the performance and career development review ensure continuous dialogue between employee and manager throughout the company.
The "Sparring Circles" and "KWS on Board" are proven development programs for all executives at the KWS Group. Sparring Circles enable a profitable sharing of ideas, while KWS on Board provides an extensive insight into our corporate strategy, culture and values, and shows what we expect from an executive at KWS.
The current focus of our activities is on successor and talent management at KWS. The Group-wide process has been expanded significantly on the basis of our strategic alignment and shared values. Thanks to the intensive commitment of executives from all areas of the company, potential experts and managers can now be identified early on across all locations, segments and functions and pinpointed development measures can be initiated for them.
Our Orientation Center is a development program that enables us to verify individual potential and offer effective development plans. For its part, the International Development Program offers experts and executives an additional opportunity to enhance their
Our employees are the key to our success. Creative and committed people keep coming up with innovations to generate new growth.
| 2015/2016 | 2014/2015 | +/– | |
|---|---|---|---|
| Germany | 1,908 | 1,868 | 2.1% |
| Europe (excluding Germany) | 1,449 | 1,401 | 3.4% |
| Americas | 1,280 | 1,234 | 3.7% |
| Rest of world | 206 | 188 | 9.6% |
| Total | 4,843 | 4,691 | 3.2% |
1 Average number of employees.
personal and professional strengths in the international environment.
Good training for our employees is a basic necessity so that KWS can remain successful in the future. In fiscal 2015/2016, KWS employed 97 young people in six business administration, agricultural technological science and industrial vocations in Germany. Nine instructors and around 120 training officers ensure a high quality of training. We offer university graduates two introductory programs: There is very great demand for our tried-and-tested internal Trainee Program and for the "Breeders Academy," which is tailored specifically to plant breeding.
We give all career starters at KWS extensive insight into our globalized, highly networked business processes. We also attach particular importance to developing professional qualifications as well as personal skills.
We have an international presence on the labor market with our employer brand. Our clear positioning and the authentic way we address our target groups make us
an attractive employer in the eyes of potential employees. We nurture intensive contacts with professional groups of importance to us and have an extensive network.
We continue to pursue a rigorous policy of developing junior staffers at an early stage. School pupils and students can learn more about the various task areas and the company KWS in internships or on excursions, for example. We have intensified our commitment in the area of scholarships. Apart from various Deutschlandstipendien and the KWS UK scholarship, we started awarding the Ferdinand von Lochow scholarship at the agricultural departments of three German universities this fiscal year.
As an employer, KWS stands for qualities such as close and trusted cooperation, team spirit and personal responsibility, dependability and vision. Our employees can rely on these cornerstones of how we interact. Flextime models are family-friendly and a firm part of our working world. As part of our Employee Share Program, we help employees acquire shares in their own company.
Our employees know that we care about their well-being. We promote their health extensively with our "KWS Healthy Working World" initiative. There are activities tailored to the needs of the various locations,
Employees by function Number of employees 4,843
Administration 14% Production 26%
38% Research & Development 22% Distribution
Teamwork and creativity are needed – in the NEWCOMER project, KWS trainees have taken over joint responsibility for the KWS Art Lounge that was opened in 2015.
such as medical checkups, dietary advice, sports courses and support in stress management. In September 2015, KWS SAAT SE was presented with the Corporate Health Award, which is under the patronage of the German Ministry of Health, in the category "Excellence": Our company was cited as "exemplary in how it is committed to promoting the health, fitness and capabilities of its employees and in the proactive, sustainable HR policy it pursues."
We also support our employees in their involvement in non-profit organizations or work for social causes. Among other things, the projects aim to help refugees in Germany, the homeless or socially disadvantaged families in the U.S. and seriously ill children in Russia. We attach importance to our aid being geared to local needs.
KWS operates in more than 70 countries. This international range means more than that a variety of different languages are spoken at KWS. Different cultures, disciplines and personal backgrounds join to enrich our working climate. We value this individuality and give it our appreciation, support and respect. KWS also implements the statutory requirements on equal participation of women and men in management positions.
KWS has had a new employee representative body since this fiscal year: the European Employee Committee. It always becomes actively involved if matters affecting the relevant rights and obligations of employees from at least two EU counties are discussed. That reflects the greater internationalization of KWS and the legal form of our company.
| Key figures for employees (in Germany) | |||||
|---|---|---|---|---|---|
| 2015/2016 | 2014/2015 | +/– | |||
| Number of employees in Germany1 | 1,908 | 1,868 | 2.1% | ||
| of which part-time employees | 392 | 367 | 6.8% | ||
| Ratio of men | in % | 50.9 | 50.9 | ||
| Ratio of women | in % | 49.1 | 49.1 | ||
| Number of trainees | 97 | 100 | –3% | ||
| Trainee ratio | in % | 5.1 | 5.3 | ||
| Average age (in years) | 40.5 | 40.4 | |||
| Length of service (in years) | 13.2 | 13.0 | 1.5% |
1 Average number of employees.
In some cases, sharp declines in cultivation area in the regions, volatile exchange rates and prices for agricultural raw materials that remained at a low level defined the economic climate in fiscal 2015/2016. Nevertheless, KWS increased its net sales within the forecast range by 5.2% to €1,036.8 (986.0) million, mainly thanks to the success of the Sugarbeet Segment. All in all, the performance of the Brazilian real and the Russia ruble had a particularly negative impact on net sales. Research and development expenditure rose slightly and was thus in line with our forecast, with R&D intensity coming in as expected at 17.6% (17.7%). The KWS Group's earnings strength remained virtually constant with EBIT at the level of the previous year. We had assumed a much lower EBIT in the third quarterly report. The
final result was mainly attributable to the very good performance of the Sugarbeet Segment, as well as positive effects from measurement of balance sheet items denominated in foreign currency on the reporting date, a factor that is difficult to anticipate. The EBIT margin was 10.9%. As a result, the KWS Group turned in a successful business performance for the year as a whole – and bucked the in part lower trend for net sales in the industry in the same period.
KWS regularly generates around 20% of its annual net sales in the first and second quarters (July to December). The fall sowing season for cereals mainly determines its business performance in this period. Demand for high-quality cereal varieties remained low throughout the industry in the year under review, which had a negative impact on the Cereal
Growth rates per quarter (compared with previous-year's level, effective)
Segment's net sales and income. However, we had largely taken that into account in our guidance, so we did not have to make any significant changes to it during the year. We generate most of our annual net sales in the third and fourth quarters (January to June), mainly from our hybrid corn and sugarbeet crops. The net sales predominantly come from regions in the moderate climatic zone, such as North America, Europe and China. The biggest increases in net sales at the Corn Segment in the year under review were in North and South America. However, our performance in Europe was weaker than anticipated. Gains in market share only partially compensated for declining cultivation areas and low demand for corn. In addition, special effects that are difficult to foresee, such as negative exchange rate effects – including the devaluation of the Brazilian real – reduced the segment's growth in net sales. These developments during the course of the year were the main reasons why we reduced our guidance for the Corn Segment during the year. However, demand in the Sugarbeet Segment was higher than anticipated – and so our business performance in all regions significantly surpassed our expectations, leading us to raise our guidance for this segment during the year. We were helped by the positive performance of the US dollar and unexpected increases in cultivation area in the EU. We expanded our already high market shares in
We invest over 17% of our net sales in research and development. That's where the foundations for our company's future are laid.
many countries. In the Corporate Segment, there were positive exchange rate effects on the reporting date and lower expenditures for individual central functions. EBIT was thus more positive than anticipated in May 2016.
| Results for 2014/2015 |
Guidance for 2015/2016 |
Adjustments to the guidance during the year |
Results for 2015/2016 |
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|---|---|---|---|---|---|---|
| Annual Report (10/15/2015) |
1st Quarterly Report (11/24/2015) |
2nd Quarterly Report (02/25/2016) |
3rd Quarterly Report (05/26/2016) |
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| Net sales | €986.0 million |
+5 to 10% | – | – | – | €1,036.8 million; +5.2% |
| R&D intensity | 17.7% | Around 17% | – | – | – | 17.6% |
| EBIT margin | 11.5% | ≥10.5% | ≥10.0% | – | – | 10.9% |
The KWS Group successfully expanded its business activity in the year under review. Although the market environment remained volatile and challenging and was characterized by exchange rate fluctuations and low prices for agricultural raw materials, net sales rose by €50.8 million to €1,036.8 (986.0) million, an increase of 5.2%. After adjustment for exchange rate effects, net sales would have been €1,070.7 million. All product segments, but mainly sugarbeet and corn seed business, contributed to
this increase. The higher net sales from sugarbeet seed were mainly from our business activity in North America, Northern and Eastern Europe and the Middle East (Turkey). Significant factors in that were increased market share, expanded cultivation areas and the advantageous performance of the US dollar. The increase in net sales from corn seed was achieved in particular in Brazil. As expected, however, our revenue from cereals grew only slightly due to low cereal prices and the generally low demand for high-quality cereal seed. The fall in demand for hybrid rye seed also had a negative impact.
Net sales by region 2015/2016 Total net sales €1,036.8 million
North and South America 27% Rest of world 8%
22% Germany
43% Europe (excluding Germany)
The cost of sales rose by 6.0% to €480.9 (453.5) million in the year under review. This figure includes higher material costs due to poor weather conditions for seed multiplication, as well as costs from amortization of the genetically modified traits we acquired. The gross margin in the year under review was thus 53.6% (54.0%). We increased our distribution activities in order to further expand and strengthen our business activity, in particular in growth regions. Consequently, our selling expenses in the past fiscal year increased by 4.1% to €196.8 million, giving a selling expense ratio of 19.0% (19.2%). Research and development expenditure rose by 4.5% to €182.4
(174.6) million. General and administrative expenses increased less than proportionately relative to net sales by 2.1% to €76.4 million. The balance of other operating income and other operating expenses was €12.5 (19.3) million. It thus fell 35.2% year on year as a result of low reversals of allowances on receivables and lower other operating income. The related individual items are explained in detail in the Notes on pages 114 to 115. All in all, the KWS Group posted EBIT of €112.8 (113.4) million, almost at the same level as the previous year. The EBIT margin was 10.9% (11.5%).
Income from equity-accounted financial assets is part of the net income from equity investments. It increased to €26.5 (23.7) million in the year under review – due to the fact that our joint ventures in North America expanded their business activity and initial income was generated by our Chinese joint venture KEN-FENG – KWS SEEDS CO., LTD. – and was thus 11.5% above the level of the previous year. Other net income from equity investments fell, since SOCIETE DE MARTINVAL was acquired in full in September 2014
and thus a one time gain from revaluation of the existing shares was included in the previous fiscal year. A further component of net financial income/expenses is the interest result, which fell to €–11.7 (–10.8) million, among other things because a new borrower's note loan of €70 million was raised. Net financial income/ expenses was thus €14.8 (16.7) million. Earnings before taxes were €127.6 (130.1) million and income taxes totaled €42.3 (46.1) million, meaning that the tax rate fell to 33.1% (35.4%). The KWS Group's net income for the year was €85.3 (84.0) million. Earnings per share consequently rose to €12.92 (12.53).
| 2015/2016 | 2014/2015 | +/– | ||
|---|---|---|---|---|
| Net sales | in € millions | 1,036.8 | 986.0 | 5.2% |
| Operating income | in € millions | 112.8 | 113.4 | –0.5% |
| Net financial income/expenses | in € millions | 14.8 | 16.7 | –11.4% |
| Result of ordinary activities | in € millions | 127.6 | 130.1 | –1.9% |
| Income taxes | in € millions | 42.3 | 46.1 | –8.2% |
| Net income for the year | in € millions | 85.3 | 84.0 | 1.5% |
| Earnings per share | in € | 12.92 | 12.53 | 3.1% |
| EBIT margin | in % | 10.9 | 11.5 | |
The task of financial management at the KWS Group is to secure the company's financial assets long-term and ensure adequate earnings strength. Only then is KWS Group always able to operate with financial independence as well as flexibly shape its growth activities. Financial management at the
KWS Group is run from headquarters in Einbeck. This central controlling increases transparency and helps minimize risks. The KWS Group uses financing, investment and hedging instruments as part of financial management. Derivatives are used primarily to hedge the risk of interest rate changes and currency risks.
North and South America 15.6% 49.2% Germany
32.4% Europe (excluding Germany)
Cash earnings were €107.3 (92.1) million and thus higher than in the previous year, due to the higher net income for the year before depreciation and amortization and lower other non-cash income. The far lower capital tie-up year on year as a result of a reduction in trade receivables was a major factor in the fact that net cash from operating activities rose to €125.9 (48.1) million. The net cash from investing activities totaled €–92.2 (–123.8) million. In September 2014, the acquisition of SOCIETE DE MARTINVAL resulted in higher payments. The figure for the previous year was consequently higher. We successfully issued a borrower's note loan of €70 million in December 2015. Due to lower borrowings overall, the net cash from financing activities fell slightly to €21.4 (48.4) million. The KWS Group's cash funds at June 30, 2016, rose sharply to €163.9 (108.2) million.
Rest of world 2.8%
A syndicated loan with a total volume of €200 million and running until October 2020 still exists with KWS SAAT SE's principal bankers to finance operating resources during the year.
The KWS family is growing and becoming more and more international. Around 60% of our employees now work outside Germany.
Total capital spending fell by 24.9% year on year and was €99.6 (132.5) million in fiscal 2015/2016. The biggest single investments related to the already mentioned licensing agreement for corn trait technology and expansion of our production and breeding capacities. Our investments in Germany included a new breeding station and a new greenhouse complex. Depreciation and amortization were €48.2 (45.9) million.
| 2015/2016 | 2014/2015 | +/– | ||
|---|---|---|---|---|
| Cash and cash equivalents | in € millions | 163.9 | 108.2 | 51.5% |
| Net cash from operating activities | in € millions | 125.9 | 48.1 | >100.0% |
| Net cash from investing activities | in € millions | –92.2 | –123.8 | 25.5% |
| Net cash from financing activities | in € millions | 21.4 | 48.4 | –55.8% |
100% attention to their "plant children" by our employees is a mainstay of our commercial success.
The KWS Group's total assets increased by 7.4% in fiscal 2015/2016 to €1,436.6 (1,337.1) million. Noncurrent assets rose to €667.9 (633.0) million, mainly due to planned investments in new production plants and research and development capacities. Current assets at the balance sheet date were €768.7 (704.1) million. This increase was attributable, in particular, to much higher cash and cash equivalents, which were impacted by the reversal of securities positions and earlier receipts of payments. The earlier receipts of payment were also the reason for the decline in trade receivables. The increase in inventories was not as sharp as in the previous year thanks to intensive stock management. As a result, net borrowings at the end of the fiscal year fell to €87.9 (105.9) million, despite the additional borrower's note loan of €70 million.
On the other side of the balance sheet, equity rose by 4.0% to €767.9 (738.7) million, mainly due to the increase in retained earnings. As a result, noncurrent assets were fully covered by equity. Raising of the borrower's note loan in December 2015 meant that noncurrent liabilities rose to €393.6 (316.7) million. As a result, the KWS Group's equity ratio is 53.5% (55.2%). The balance sheet thus reflects a solid financing structure. We also do not plan to make any significant changes to our financial policy in the future.
| 06/30/2016 | 06/30/2015 | +/– | ||
|---|---|---|---|---|
| Assets | ||||
| Noncurrent assets | in € millions | 667.9 | 633.0 | 5.5% |
| Current assets | in € millions | 768.7 | 704.1 | 9.2% |
| Equity and liabilities | ||||
| Equity | in € millions | 767.9 | 738.7 | 4.0% |
| Noncurrent liabilities | in € millions | 393.6 | 316.7 | 24.3% |
| Current liabilities | in € millions | 275.1 | 281.7 | –2.3% |
| Total assets | in € millions | 1,436.6 | 1,337.1 | 7.4% |
The KWS Group's consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS). The segments are presented in the Management Report in line with our internal corporate controlling structure in accordance with GAS 20. The main difference is that we can no longer carry the revenues and costs of our joint ventures in the statement of comprehensive income (in accordance with IFRS 11), so the KWS Group's net sales and EBIT are lower than the total for the segments. The earnings contributed by the joint ventures are instead included under net financial income/expenses. In addition, their assets are included in the KWS Group's balance sheet as equity-accounted financial assets. So as to retain transparency on our operational development, the joint ventures are included in the segment reports. The difference from the KWS Group's statement of comprehensive income is summarized for a number of key indicators in the reconciliation table:
| Reconciliation table | ||||
|---|---|---|---|---|
| Disclosures | Segments | Reconciliation | KWS Group | |
| Net sales | in € millions | 1,356.8 | –320.0 | 1,036.8 |
| EBIT | in € millions | 141.1 | –28.3 | 112.8 |
| Number of employees | avg. | 5,472 | –629 | 4,843 |
| Capital expenditure | in € millions | 159.7 | –60.1 | 99.6 |
| Total assets | in € millions | 1,563.2 | –126.6 | 1,436.6 |
The reconciliation between the KWS Group's statement of comprehensive income and the reporting by segments in fiscal 2015/2016 is impacted by our joint ventures in the North American and Chinese corn markets. That applies to all key figures in the above table, with the main influences coming from North America. Net sales and EBIT increased in North
America, which also affected the reconciliation. The Chinese joint venture KENFENG – KWS SEEDS CO., LTD. was awarded its business license in the year under review, so it was able to generate net sales for the first time and was carried at equity in the KWS Group's annual financial statements.
Key figures
| 2015/2016 | 2014/2015 | +/– | ||
|---|---|---|---|---|
| Net sales | in € millions | 795.2 | 754.4 | 5.4% |
| EBIT | in € millions | 63.6 | 84.2 | –24.5% |
| EBIT margin | in % | 8.0 | 11.2 | |
| Capital expenditure | in € millions | 119.1 | 44.5 | >100.0% |
| Capital employed (avg.) | in € millions | 654.4 | 585.4 | 11.8% |
| ROCE (avg.) | in % | 9.7 | 14.4 | |
The segment's performance: Net sales grown – earnings impacted by the eco nomic climate
We grew the Corn Segment's operational business and increased its net sales by 5.4% to €795.2 (754.4) million. The growth in net sales in North and South America offset the slight decline in Europe. With the exception of the US dollar, most foreign currencies, such as the Russian ruble, Ukrainian hryvnia, Brazilian real and Argentinean peso, fell in value against the euro, which had a negative impact overall in view of the contributions these countries make to net sales. After adjustment for exchange rate effects, the segment's net sales would have risen by around 7.4% to €810.0 million.
We accomplished our main research and development projects as planned in the year under review. We also expanded our distribution activities further. The additional expenses for that totaled €9.5 million. The negative impact of the weather on seed production resulted in quality and volume-related problems and thus ultimately in higher cost of sales. In addition, amortization of the acquired trait technology reduced the segment's earnings. All in all, the segment's EBIT fell sharply by 24.5% to €63.6 (84.2) million. The EBIT margin was thus 8.0% (11.2%).
The economic climate did not change compared to the previous year and was still characterized by intense competition. Global stocks of agricultural raw materials were still at the high levels of the previous year. Consumer prices for corn therefore remained low and volatile. There were differing trends regarding corn cultivation areas: The area increased in North and South America, but declined in Europe and Asia, in some cases in important cultivation regions.
The corn cultivation area in the U.S. was roughly 38.1 million hectares, one of the highest-ever figures. Our 50:50 joint ventures there with the French company Vilmorin & Cie (a listed company of Limagrain) expanded their business activity in the year under review. As a result, pro-rata net sales from North America increased by 14.7% to €312.1 (272.1) million. The performance of the US dollar also had a positive impact on net sales.
In Brazil, we pressed ahead with changing the portfolio over to our own varieties. Revenue from corn seed rose despite the devaluation of the Brazilian real, and KWS' market share increased by almost 2%. We also increased our market share in Argentina by around 3%, despite the fact that cultivation area there fell.
Low commodity prices not only put pressure on the cultivation area for grain corn in Europe, but also resulted in restrictions to the area used for growing silage corn in some regions. These effects could not be offset everywhere by gains in market share and so there were slight declines in net sales.
The pace of growth in China was a little lower than last year, also due to a decline in cultivation area, especially in the northeast of the country. We expanded our local business structures. For the first
time, our joint venture KENFENG – KWS SEEDS CO., LTD. prepared complete annual financial statements, which were included proportionately in the segment's results.
The oil and field seed business in the Corn Segment includes soybeans, winter rapeseed, sunflowers and sorghum. Revenue from this business rose by a total of 6.3% to €94.2 (88.6) million. Our European winter rapeseed business went very well, increasing by 18.2%. Other oil seed business – primarily North and South American soybean revenue – grew by 5%.
The segment's capital expenditure amounted to €119.1 (44.5) million. The biggest single investment related to the licensing agreement for new corn technology concluded in October 2015. Capital expenditure on property, plant and equipment mainly related to construction or expansion of production plants, such as in Ukraine and China. In North America, we also acquired the corn and sorghum business of Golden Acres together with Vilmorin & Cie.
Mighty corn – one hectare of silage corn supplies the basic feed needed for three to four cows per year and in its growth phase "recycles" the CO2 emitted by a car driving 60,000 km.
Key figures
| 2015/2016 | 2014/2015 | +/– | ||
|---|---|---|---|---|
| Net sales | in € millions | 439.5 | 390.5 | 12.5% |
| EBIT | in € millions | 118.6 | 93.0 | 27.5% |
| EBIT margin | in % | 27.0 | 23.8 | |
| Capital expenditure | in € millions | 17.2 | 24.0 | –28.3% |
| Capital employed (avg.) | in € millions | 242.9 | 236.1 | 2.9% |
| ROCE (avg.) | in % | 48.8 | 39.4 | |
KWS specializes in breeding regionally adapted sugarbeet varieties and for years has provided its customers with varieties that turn in first-class performance. New high-performance varieties and strengthening of our sales teams in the segment's growth regions were again the foundation for our successes in the year under review. We grew our net sales from sugarbeet seed in just about all regions, mainly on the back of gains in market share. The growth was particularly significant in North America, Northern and Eastern Europe and the Middle East (Turkey). As a result, we were able to increase the segment's net sales by 12.5% to €439.5 (390.5) million. Our good performance was underpinned by positive exchange rate effects, all in all, and greater cultivation areas in Europe and Asia. The negative exchange rate effects from Eastern Europe were more than compensated for, in particular by the performance of the US dollar. After adjustment for exchange rate effects, the segment's net sales were €437.6 million. Overall, the segment achieved a global share of 55% (53%) in the sugarbeet seed market in the year under review. That means KWS remains the world's clear market leader by far.
The segment's earnings rose, mainly as a result of expanded business and higher market share. We reduced our selling expense ratio by means of targeted cost management. Research and development activities increased in line with our medium-term planning, while administrative expenses again remained stable. Thanks to improved stock management, the expenses from writing down and destroying
inventories were lower than in previous years. The segment ultimately posted a sharp increase in EBIT of 27.5% to €118.6 (93.0) million.
Due to constantly growing demand, the global sugar price climbed to more than 550 US dollars per ton of white sugar in June 2016 – its highest level since 2012. Cultivation areas in Europe and Asia increased slightly, following declines in the previous year. The exchange rate of currencies against the US dollar had a positive impact for the segments. The economic climate in Russia and Ukraine remained tough, in particular because of their volatile currencies. The Turkish lira also fell slightly in value. The sugar market regime in the EU will no longer apply as of October 2017. The sugar production from the 2016 sugarbeet harvest, which will be marketed in the 2016/2017 sugar year, will thus be the last to be produced under the existing market regime. Our expectations for the segment can be found in the forecast report on pages 56 to 57.
Outside the EU 28, revenue from sugarbeet seed increased sharply again, in particular in North America, Eastern Europe and the Middle East. We improved our very good market position further thanks to good variety performance and expansion of distribution activities. On the back of stable market share, net sales in North America benefited especially from the performance of the US dollar. Cultivation area in the EU 28 rose by approximately 8%, which had a
positive impact on our business. We increased our net sales in the UK, the Netherlands, Sweden and Germany. There were also increases in cultivation area in Eastern Europe, a region with great growth potential for the segment. Here too, additional distribution activities and good variety performance helped us improve our market position.
The segment's capital expenditure totaled €17.2 (24.0) million. It mainly went to renovating seed production plants. In North America, we completed modernization of our sugarbeet seed production plant in Tangent, Oregon, a project that took several years and in which we invested a total of more than €35 million. Apart from higher seed quality, we will also boost efficiency in the future. At the same time, the entire software landscape in North America was pooled and simplified. Other capital spending related to modernization of cold stores for breeding activities, construction of a greenhouse complex in the U.S. and development of a new technology for harvesting beet in trials. We will increase the capacity of the seed production and processing plants in Einbeck in the coming years, and also prepare them for being able to handle CONVISO® SMART sugarbeet.
In the potato business segment, we will focus in the future on developing hybrid potatoes. We sold our conventional seed potato business to Stet Holland B.V. during the fiscal year. Seed potato business contributed net sales of €27.9 (26.1) million and negative income to the segment in the year under review.
Sweet as sugar – one sugarbeet delivers an average of around 40 sugar cubes.
Key figures
| 2015/2016 | 2014/2015 | +/– | ||
|---|---|---|---|---|
| Net sales | in € millions | 118.0 | 111.3 | 6.0% |
| EBIT | in € millions | 9.0 | 12.0 | –25.0% |
| EBIT margin | in % | 7.6 | 10.8 | |
| Capital expenditure | in € millions | 9.2 | 44.4 | –79.3% |
| Capital employed (avg.) | in € millions | 120.7 | 109.0 | 10.7% |
| ROCE (avg.) | in % | 7.5 | 11.0 | |
The segment's net sales increased year on year by 6.0% to €118.0 (111.3) million. This rise is attributable to the acquisition of the remaining shares in SOCIETE DE MARTINVAL (MOMONT) in France in September 2014. MOMONT's entire earnings were recognized in the segment for the first time in the year under review. Hybrid rye business, which is important for the Cereals Segment, declined as expected, in particular because the differences in selling prices between rye and wheat were higher than in previous years. Moreover, weather-related factors kept the advantages of hybrid rye from being fully realized. Royalties from licensing of winter wheat also declined. However, our net sales from barley varieties rose, among other things for malting barley. The segment's income was impacted in particular by pinpointed expenditure on research and development and distribution, which was increased by around €10.1 million. The decline in hybrid rye business entailed higher expenditure on inventories and far lower contributions to earnings overall. The segment's EBIT thus fell to €9.0 (12.0) million. The EBIT margin was 7.6% (10.8%).
Multiple factors had a negative impact on our cereal operations in the year under review. The consistently good weather and cultivation conditions ensured that there was still a strong supply of agricultural raw materials. In conjunction with influences that restrained demand, such as barriers to trade in
Eastern Europe, this resulted in low consumer prices for milk, meat and cereals. Farmers therefore suffered perceptible reductions in their liquidity. Against this backdrop, demand for high-quality cereal seed also fell in the segment's core regions. Farmers tended to use farm-saved seed from the harvests of previous years. Low meat prices also led to a reduction in livestock, which had a negative impact on demand for cereals for fodder. In seed production, the good weather conditions and other factors resulted in high inventories on a scale not planned.
Germany is the most important single market for our Cereals Segment. We generate around 40% of net cereal sales there, mainly from hybrid rye, wheat and barley. Domestic net sales declined slightly in the year under review, in particular due to the difficult hybrid rye business. Nevertheless, KWS remained the clear market leader there, with a share of some 60%. In addition, our product pipeline contains high-performance hybrid rye varieties that we expect to be awarded market approval soon.
We were able to grow net sales in our Northern Europe region, in particular in the Benelux countries, Scandinavia and the UK. It accounted for around 30% of the segment's net sales. The declines in wheat licensing business were more than compensated for by very good barley business.
In France, we successfully completed integration of the MOMONT Group. The acquisition had a positive impact on net sales in the region. However,
the increase was lower than expected. The main reasons for that were lower demand industry-wide for high-quality cereal seed and greater use of farm-saved seed by farmers. In this climate, we were able to maintain our market position in the crops that are important in France, namely wheat, barley and rapeseed. Net sales in the region were almost 10% of the segment's net sales.
The segment's capital expenditure totaled €9.2 (44.4) million. We invested primarily in expanding and modernizing breeding stations and production plants in the year under review. These activities are in line with our long-term corporate planning and are intended to maintain or further improve the quality of our seed and varieties. Capital expenditure was higher in the previous year due to the acquisition of the remaining shares in MOMONT.
Apart from the development of new varieties, our breeding activities include long-term research and development projects, such as establishment of hybrid breeding for barley and wheat. Another objective is to develop hybrid rye varieties that are adapted to growth conditions in Eastern Europe and North America. We are also working on alternative uses of rye for fodder, for example. These activities are intended to help us tap additional market potential in the medium term. In the short term, we expect to improve our competitive position with new high-performance varieties, in particular in the field of hybrid rye.
Ear, ear – roughly 10,000 loaves of bread can be baked from the harvest of one hectare of wheat.
| Key figures | ||||
|---|---|---|---|---|
| 2015/2016 | 2014/2015 | +/– | ||
| Net sales | in € millions | 4.1 | 4.2 | –2.4% |
| EBIT | in € millions | –50.1 | –51.2 | 2.1% |
| Capital expenditure | in € millions | 14.3 | 20.1 | –28.9% |
The Corporate Segment's net sales are generated from our farms in Germany. In the past fiscal year they were €4.1 (4.2) million. All cross-segment costs are also allocated to the segment. They include expenses for all central functions of the KWS Group and for long-term research projects. The segment's
net sales cannot cover these expenses. As a result, the segment's income (EBIT) is always clearly negative. It was positively impacted by exchange rate effects on the reporting date and was € –50.1 (–51.2) million in the year under review.
There were no events after June 30, 2016, that can be expected to have a significant impact on the KWS Group's earnings, assets and financial position.
As an international seed company, the KWS Group operates in a dynamically changing environment. That results in risks as well as opportunities, which we have to weigh as the foundation for our entrepreneurial decisions.
We define an opportunity as a development that could have a positive impact on our earnings, financial position and assets. At the KWS Group, opportunity management is an integral component of the established controlling system between the subsidiaries/associated companies and company management. Strategic opportunities of major importance, such as joint ventures and acquisitions, are handled by the KWS Group's Executive Board. Even though the strategic orientation is based on organic growth, acquisitions also offer KWS opportunities.
Operational opportunities are identified and exploited in the Business Units of the segments, since they have the most comprehensive knowledge of their markets and products. Targeted measures are formulated together with the Executive Board so that strengths can be leveraged and strategic growth potentials tapped. Extensive strategic planning covering a ten-year time frame is the basis for opportunity management. In keeping with our growth strategy, we exploit industry-specific and strategic opportunities by means of pinpointed investments in production capacities, research and development activities, and expansion of distribution.
We see diverse opportunities for the KWS Group to develop the company further in line with our strategy. So that we succeed in achieving sustainable, profitable growth in the future as well, our prime goal must be to retain and increase our innovativeness. The latter is expressed in seed business by continuous increases in the yields of new varieties. The plants' yield potential can either be increased or their resistance to detrimental influences, of whatever type, can be improved. Our target is to offer our customers an increase in yield of 1% to 2% per annum with our new varieties. That is why we constantly expand our research and development activities. A measure of our innovativeness is the number of newly approved varieties. In the approval processes, our varieties are compared directly with rival products in official performance tests.
Market opportunities also result from our intensified activities in subtropical regions. Our corn activities in Brazil and China will enable us to tap additional sales potential for the KWS Group in the medium to long term, including in other subtropical markets, by developing varieties tailored precisely to their climatic conditions. In particular in China, there is a good opportunity to participate in the government's declared increase in performance in the corn market.
Investing in the expansion of our production capacities and modernization of our seed processing offers additional opportunities to grow further. Further development of our variety portfolio and expansion of capacities are accompanied by expansion of our international distribution structures to enable even more tailored and intensive information and advice for our customers on the possible uses of our seed, and thus allow us to leverage further sales potential. In addition, continuous optimization of processes offers the KWS Group the opportunity to increase productivity and optimize cost structures.
We define a risk as a potential future event that might have a negative impact on our business.
A vital aspect of risk management at KWS is to include all employees, who assess and are responsible for risks on the ground. This enables risks to be identified, assessed, controlled and reported on promptly. The risk management system supports and monitors this process. With proactive strategies, we reduce or avoid negative impacts on our business so that we can survive and thrive on the world market.
The Executive Board is responsible for risk management. The Group functions Corporate Finance, Corporate Compliance Office, Corporate Development & Communications and Corporate Controlling share the tasks (see the table). In addition, the Corporate Management Circle (first and second management levels) form the Risk Committee of KWS.
Our risk management system is based on the internationally recognized COSO II model (Committee of Sponsoring Organizations of the Treadway Commission). The principles of risk management are enshrined in our group-wide "Rules, Guidelines & Procedures." Core contents of it define the scope of application, responsibilities and reporting lines.
| Tasks | |
|---|---|
| Corporate Finance | ■ Early detection of risks ■ Risk management ■ Interest and currency management ■ Insurance ■ Loan management ■ Damage prevention ■ Auditing |
| Corporate Controlling | ■ Planning/budget ■ Current expectation |
| Corporate Development & Communications | ■ Integrated Management System ■ Rules, Guidelines & Procedures (RGPs) ■ Internal audits ■ Excellence Through Stewardship (ETS) |
| Corporate Compliance Office | ■ Compliance Management System ■ Compliance Risk Assessment ■ Compliance training ■ External audits ■ Examinations |
Structure of risk management at the KWS Group
As part of its audit of the annual financial statements for fiscal year 2015/2016, Deloitte GmbH Wirtschaftsprüfungsgesellschaft confirmed that our system for early detection of risks complies with the requirements under the German Stock Corporation Act. It also enables early identification of risks that jeopardize the company's existence. Identified weaknesses are reported to the Executive Board and the Supervisory Board and rectified in the continuous improvement process.
The risk management process at KWS consists of the phases of identification, assessment, control and monitoring of risks and risk reporting. By risk identification, we mean that the persons responsible for a risk process and area record the potential risks in an electronic platform for sharing information. The identified risks are plausibilized and summarized in a risk control matrix. Our risk inventory currently contains around 100 risks and almost as many control activities.
As part of risk assessment, the risks are first analyzed. They are measured after the countermeasures have been concluded. The risks are classified by their likelihood of occurrence and extent of damage and prioritized according to a traffic light system. The "expected damage rating" resulting from the likelihood of occurrence and extent of damage is relevant for assessing a risk's materiality.
Risk controlling comprises instruments with which we aim to reduce risks. It comprises measures to reduce risks, constant monitoring of risks and risk transfer. Systematic reviews are conducted to determine whether controlling is effective; they are documented with the internal control system (ICS). The persons in charge of the processes examine the controls at least once a year to determine that they are effective. In addition, experienced independent auditors examine compliance with the controls using a risk-based approach. A report on the ICS' effectiveness is given to the Audit Committee of the Supervisory Board every year.
Corporate Finance reports to the Risk Committee on the current risk situation at the KWS Group and the business segments every quarter. The Risk Committee then uses this report as the basis for discussing how risks will develop in the future.
The risk management and internal control system comprises structures and processes designed to make sure that business transactions are included in accounting promptly, consistently and correctly. The following are examined regularly: the completeness of financial reporting, the Group's uniform accounting, measurement and account allocation stipulations, and the authorization and access regulations for IT systems used in accounting. Intra-Group transactions are consolidated appropriately and in full.
The Group functions Corporate Finance, Group Accounting and Corporate Controlling are responsible for consolidated accounting at KWS. The Group's own service centers help the subsidiaries in preparing their annual financial statements. A uniform system tool subject to the Group's regulations on accounting makes it easier to ensure that the consolidated financial statements comply with the rules.
We talk to each other – open communication is vital to identifying risks at an early stage.
We divide our risks into nine categories, which have been expanded compared with the previous year. For example, we have created a new category: "Product risks." The overview and subsequent explanation give a more detailed description of the categories whose expected damage rating is at least "significant."
1 Rarely: 1–5%; unlikely: 5–15%; possible: 15–30%; likely: 30–60%; almost certainly: 60–99%
2 Immaterial: <€250,000; low: €250,000 to €500,000; moderate: €0.5 to €4.5 million; substantial: €4.5 to €15 million; critical: ≥€15 million
3 Moderate: <€1 million; significant: €1 to €4.5 million; existential: ≥€4.5 million
Drawing from natural resources to the fullest – but always responsibly.
KWS faces political risks in the strongly regulated international agricultural industry. For example, uncertainty continues in Ukraine and the sanctions against Russia are still in place. Both of these factors have the potential to negatively impact our business activities there. We generated net sales totaling €59.9 (59.5) million in the two countries in fiscal 2015/2016. Other growth countries of importance for us, such as Brazil and China, are currently grappling with economic and political difficulties. The economic impact of the United Kingdom's decision to leave the EU (Brexit) in the recent referendum is not significant for our business as far as can be seen at present.
Our business success depends, among other things, on the type of market access, our own variety performance and the competitive environment. However, the global economy has an indirect influence
on our net sales and income. We address these challenges with systematic analyses of the market and the competition and by developing high-quality seed all over the world.
Currency risks arise from fluctuations in exchange rates, in particular for receivables and liabilities denominated in foreign currency. There are interest rate risks as a result of potential changes to market interest rates. The interest payable on financial obligations with a variable rate of interest may increase. We address currency risks and the risk of interest rate changes to a reasonable extent through the usual hedging instruments, such as derivatives and forward exchange deals, to reduce the influence on the KWS Group's earnings and assets situation. In fiscal 2015/2016, we hedged our research and development expenditure and inter-company loans almost completely in order to avoid exchange rate risks.
Experts in dialog – quality is a hallmark of our seed, but also of our consulting.
The outcome of the current process of consolidation in the agricultural industry is still open at present. We do not expect any negative impact on our business in the short term. There are opportunities and risks from market consolidation in the medium to long term. For example, market opportunities may arise for KWS as a result of carve-outs and divestments by the new groups for antitrust reasons.
Seed production is dependent on the weather. We reduce the effects of crop failures by multiplying seed in separate locations and regions in Europe, North and South America and Asia. We can carry out contra-seasonal multiplication in the winter half-year in the southern hemisphere if there are bottlenecks in the volume of seed produced.
We counter the outage of seed processing plants by means of regular maintenance, risk inspections and organizational and technical damage prevention programs. To cover economic loss, we have Group-wide property and business interruption insurance.
We have established checks and tests to determine the performance and quality of our seed. Quality controls, such as germination and sprouting strength tests, are conducted at all stages of production. The aim of that is to avoid claims for damages due to product liability.
Our quality controls include an examination of conventional seed, among other things to determine that it is free of GMOs. Strict requirements must be met regarding handling of genetically modified products, in particular, to prevent GMOs becoming mixed with conventional seed. In the absence of a standardized legal threshold value, a number of European countries practice a policy of zero tolerance. KWS is a member of the "Excellence Through Stewardship" (ETS) initiative. This is an internationally standardized quality management program relating to the use of genetically modified plant material throughout the product life cycle. By becoming a member, we signal our clear commitment to the responsible use of transgenic plant material.
The acquisition or licensing of technologies is customary and necessary in the industry. We reduce the related risks by developing our own innovations, which may also be attractive to competitors.
KWS faces risks from official proceedings and legal disputes. Legal disputes are possible, in particular, with suppliers, customers, employees, lenders and investors, and may result in payments or other obligations. There were no significant legal proceedings in fiscal 2015/2016.
Under our compliance policy and the Code of Business Ethics, we obligate our employees to undertake to act in accordance with laws, contracts, internal guidelines and our corporate values. In addition, we regularly hold international compliance training courses.
The KWS Group's business and production processes, as well as its internal and external communications, are run on globally networked IT systems. Any outages in them can result in a significant interruption to business operations here and there. In addition, theft of sensitive data can entail a loss of reputation for us.
On the basis of our IT security policies, our IT security organization monitors and controls access to sensitive company data. Firewall and antivirus and software programs are kept up to date and are designed to avoid losses and damage as a result of hacking and malware. There is also an extensive authorization concept. External IT service providers
constantly examine our IT security and system authorizations in order to perform an objective risk assessment and provide recommendations for optimization measures.
Our risk situation increased slightly in fiscal 2015/2016. The most important risks are still related to products and the market. The increasing share of our business in emerging countries and in foreign currency harbors additional political and currency risks. However, they do not jeopardize the existence of the KWS Group, neither individually nor in their entirety.
We feel sure that, thanks to our global footprint, innovative strength and the quality of our products, we can seize opportunities and successfully counter risks as they arise. However, we cannot rule out the possibility that further factors that are currently unknown or which are not assessed as significant may jeopardize the continued existence of the KWS Group in the future.
Contraception by paper bag prevents uncontrolled pollination. Breeding progress requires maximum care in every work step.
Research and development is a must, since the future belongs to innovative varieties that are resistant to pests and offer high yields.
The expectations of management outlined here are based on our corporate planning and the information it takes into account, including market expectations, strategic decisions, regulatory measures or exchange rate trends. They are subject to the same premises as the consolidated financial statements and forecast our business performance up to June 30, 2017. In our forecast for the KWS Group's statement of comprehensive income, we specify the anticipated net sales, EBIT and R&D intensity excluding the contribution our joint ventures make to net sales and income (in accordance with IFRS 11). You can find the net sales and EBIT expectations in the forecast for the segments. In line with our internal corporate controlling structure, the contributions made by our joint ventures are included proportionately in the segment reports.
The high stocks of agricultural raw materials worldwide suggest that no recovery in the agricultural industry's economic situation can be expected in the coming fiscal year. Moreover, it looks like there will be a record corn harvest in North America, which will put even more pressure on prices for agricultural raw materials. We therefore anticipate that the economic environment will remain difficult. There is only limited potential for shifts in cultivation area in favor of KWS' important crops, such as corn or sugarbeet, and competition remains very intense. We specifically expect lower net sales in our sugarbeet seed business in North America. Despite the fact that there will no longer be any net sales in Europe from our operational potato business as a result of
its sale, we expect net sales in Europe to remain stable or increase slightly. All in all, we expect the KWS Group's net sales to be below our medium- to long-term growth target of at least 5%. At the same time, we expect the EBIT margin to increase slightly compared to the previous year (10.9%), despite the fact that profit contributions from the sugarbeet seed business in North America will probably be lower. We will increase expenditure on ensuring our future growth, maintaining an R&D intensity of around 17%. Our capital spending on property, plant and equipment in the coming fiscal year will relate mainly to the construction of new or expansion of existing production plants, such as increasing the capacity of sugarbeet seed production in Einbeck.
The Corn Segment is expected to grow its net sales by between 5% and 10% in the coming year. As far as can be seen at present, all regions will contribute to that. We will successfully expand our business in Europe, assuming that there are no further declines in the corn cultivation area. Net sales in North America will only increase slightly and the high yields from the 2016 harvest mean that expansion of the cultivation area is unlikely. In Argentina, we expect a sharp increase in the corn cultivation area under the new agricultural policy, and we expect to benefit from that. In Brazil, we will further increase the share of our own corn varieties and grow net sales as a whole – albeit not as strongly as in previous years. Despite further expansion of research and distribution, the segment's income will improve as far as can be seen at present. We expect the segment to generate an EBIT margin of around 10%.
We will probably not be able to repeat the exceptional success of the Sugarbeet Segment in 2015/2016 in the coming fiscal year. The sale of our operational potato business means that KWS will focus on developing hybrid potatoes in the future. As a result, there will no longer be any revenue from the sale of seed potatoes. We generated net sales of around €28 million in this field in the year under review. In view of our already very large share of the market, we do not see any possibility for further growth in North America. We anticipate a slight decline in net sales there. The EU's Sugar Market Regime will expire in September 2017, which means a new situation for the 2017 spring sowing season. Due to declining sugar stocks, we currently expect cultivation area in the EU to increase slightly. All in all, the segment's net sales are expected to fall by 5% to 10%. The segment's income will probably be lower and the EBIT margin slightly below that of the previous year.
For the fall sowing season in the second half of 2016, the current level of consumer prices for cereals continues to mean low earnings prospects for farmers. In such an environment, demand for high-quality cereal seed will also tend to be lower than in times of high cereal prices. The Cereals Segment is therefore expected to post net sales on a par with the previous year. The segment's income will improve, among other things due to lower expenditure on inventory management. We currently anticipate an EBIT margin of just over 10%.
Revenue from our farms in Germany is grouped in the Corporate Segment. It should again be around €4 million. All cross-segment costs of the KWS Group are allocated to this segment, which regularly means that its EBIT is negative. It will likely be between €–55 and €–60 million.
| Net sales growth | EBIT margin | R&D intensity | |
|---|---|---|---|
| Statement of comprehensive income of the KWS Group |
<5% | ≥11% | Around 17% |
Smartphones and tablets are now mobile accessories and constant companions for many farmers. That's why, in addition to personal contact, KWS' online platform CultiVent offers digital consulting on topics related to growing crops. Up-to-date information for the particular season and digital services support farmers – from cultivation to harvesting and beyond. Farmers can use the "KWS mobile" app to control the population density or calculate the current level of nutrient removal – quickly and easily, right in the field. The "damage pattern finder" gives farmers tips on suitable strategies to combat diseases and pests. Backed by this knowledge, farmers can not only increase their yield and thus their income, but also use resources in a more efficient and eco-friendly way.
Responsible corporate governance has always been of great importance at KWS SAAT SE. Since it was founded 160 years ago, our company's successful development has been based on thinking in the long term and acting in terms of sustainability. The Executive Board and the Supervisory Board run and accompany KWS with the goal of ensuring that it creates sustainable value added. They once again examined in the year under review whether the company complies with the stipulations of the German Corporate Governance Code. As a result, the following declaration of compliance was issued to the effect that the company complies almost fully with the code's recommendations.
You can find detailed information on corporate governance, also with the contents in accordance with Clause 3.10 of the German Corporate Governance Code, in our corporate governance report (which is also the declaration on corporate governance in accordance with Section 289a of the German Commercial Code (HGB)), which is available in full on our website at www.kws.com/ir. You can find the compensation report on the next page.
The Executive Board and the Supervisory Board of KWS SAAT SE declare, in compliance with Section 161 AktG (German Stock Corporation Act), that the company has complied with the recommendations of the German Corporate Governance Code in the version dated May 5, 2015, since the last compliance declaration in October 2015, and does now comply, and will comply with them in the future, with the following exceptions:
In accordance with Clause 4.2.2 (2) Sentence 3 of the German Corporate Governance Code, the Supervisory Board shall consider the relationship between the compensation of the Executive Board and that of senior management and the workforce overall, particularly in terms of its development over time, whereby the Supervisory Board shall determine how senior managers and the relevant staff are to be differentiated. This recommendation is not complied with, since the compensation of the Executive Board, senior management and staff is based on variable criteria that defy rigid definition. These criteria include not only generally applicable yardsticks such as degree of responsibility, tasks, personal performance, expertise and the like for the Executive Board, but also the company's economic situation, success and future prospects.
In accordance with Clause 5.4.1 (2) Sentence 1 of the German Corporate Governance Code, the Supervisory Board is to set a limit on the length of time members can serve on the Supervisory Board. This recommendation is not complied with, since in a business with a tradition of family ownership like KWS it would significantly restrict the rights of the family shareholders, who hold a majority stake in the company.
Clause 7.1.2 Sentence 4 of the German Corporate Governance Code states that the consolidated financial statements shall be publicly accessible within 90 days of the end of the fiscal year and interim reports within 45 days of the end of the reporting period. KWS SAAT SE publishes its consolidated financial statements and interim reports within the period of time defined in the regulations for the Prime Standard of the German Stock Exchange. The company's seasonal course of business means that it cannot ensure compliance with the recommended periods in the German Corporate Governance Code.
The Supervisory Board The Executive Board
1 Not part of the audited Combined Management Report
The compensation report contains explanations on the salient features, structure and level of the compensation paid to members of the Executive Board and the Supervisory Board of KWS SAAT SE. It is based on the relevant statutory provisions and oriented toward the pertinent recommendations of the German Corporate Governance Code.
The compensation of members of the Executive Board was set by the Supervisory Board and approved by the Annual Shareholders' Meeting. It is based on the size and activity of the company, its economic and financial situation and the level and structure of compensation for managing board members at comparable companies.
The total compensation of the Executive Board comprises the following components:
The performance-related bonus (including fringe benefits), the LTI payment and the total compensation of every member of the Executive Board is limited individually to a maximum overall amount.
The basic annual salary in the year under review for all Executive Board members was €300 thousand. The Chief Executive Officer receives an extra "CEO bonus" of 25% on top of the basic annual salary. The basic compensation is paid as a monthly salary. The basic fixed annual salary of Dr. Peter Hofmann was adjusted to the level of the basic salary of the other Executive Board members (€300 thousand per fiscal year) effective July 1, 2015; the other components of Dr. Hofmann's compensation remain unchanged. Pursuant to the resolution adopted by the Supervisory Board on December 17, 2015, Dr. Peter Hofmann was reappointed for a term of five years effective January 1, 2016, before the end of his existing term. The other components of his compensation were adjusted to fully match that of the other Executive Board members at that time.
The all-important pellet. Every single seed embodies our knowledge and mission to deliver maximum performance and quality.
Apart from these fixed salaries, there is also non-monetary compensation in the form of fringe benefits (such as a company car and a mobile phone), contributions to health and nursing care insurance, and accident insurance in favor of members of the Executive Board.
The variable payment for Executive Board members (performance-related bonus) depends on the company's performance over three years – the sustainable net income. It is calculated on the basis of a fixed percentage of the average net income of the KWS Group for the past three fiscal years. The object of that is for the compensation to reflect the company's performance, positive or negative. Additional payments for any duties performed in subsidiaries and associated companies are offset against the variable payment (performance-related bonus). This – including the fringe benefits – is limited to an amount of €500 thousand for each Executive Board member (€300 thousand for Dr. Peter Hofmann until December 31, 2015) per fiscal year. If sustainable net incomes of more than €100 million in each year are generated in two successive years, the upper limit for the bonus is increased to €600 thousand for each Executive Board member as of the following fiscal year.
Since fiscal year 2010/2011, there has also been a stock-based bonus system (the first reference point for which was in January 2012). It is intended to act as a long-term incentive and thus support the company's sustainable development. Every member of the Executive Board is obligated to invest a freely selectable amount ranging between at least 20% and at most 50% of the gross performance-related bonus payment in shares of KWS SAAT SE. The long-term incentive (LTI) is paid in the form of cash compensation after a holding period of five years. It will be paid for the first time at the beginning of 2017. This payment is calculated on the basis of the share's performance over the holding period and on the average return on sales (ROS, based on segment reporting), measured as the ratio of operating income to net sales. The LTI payment is limited to a maximum of one-and-a-half times (two times for Dr. Hagen Duenbostel) of the capital used to acquire the shares.
Additional special payments were not granted to the members of the Executive Board in the year under review.
Pension obligations are granted in the form of a direct obligation to provide benefits, with the annual anticipated pensions ranging between €13 thousand and €130 thousand, and a defined contribution plan. In fiscal 2015/2016, €306 (279) thousand was paid to a provident fund backed by a guarantee for pension commitments to members of the Executive Board. A further €423 (143) thousand was allocated to the pension provisions in accordance with IAS 19 (of which €24 thousand was interest expenses and €399 thousand from revaluation effects). Pension provisions totaling €1,384 (960) thousand were thus formed for the members of the Executive Board of KWS SAAT SE.
| Pension commitments | ||||
|---|---|---|---|---|
| in € | 06/30/2016 | 06/30/2015 | Interest expenses |
Revaluation effects |
| Dr. Hagen Duenbostel | 1,015,005.00 | 682,379.00 | 17,059.00 | 315,567.00 |
| Dr. Peter Hofmann | 368,618.00 | 278,114.00 | 6,953.00 | 83,551.00 |
| Total | 1,383,623.00 | 960,493.00 | 24,012.00 | 399,118.00 |
The total compensation to be reported for the Executive Board in accordance with Section 314 (1) No. 6a of the German Commercial Code (HGB) in conjunction with German Accounting Standard No. 17 (GAS 17) was €3,531 (3,803) thousand in fiscal 2015/2016. 38.8% (35.6%) was accounted for by the basic annual salary, including fringe benefits, 45.4% (46.8%) by annual variable components and 15.8% (17.6%) by multi-year variable components. The tables below provide an overview of the total compensation granted in the fiscal year on an individualized basis (excluding pension costs).
| in € | Cash compensation | LTI FV1 | Total | LTI | |||
|---|---|---|---|---|---|---|---|
| Basic compensation |
Fringe benefits |
Performance related bonus |
Total | Grant | Cost | ||
| Dr. Hagen Duenbostel | 375,000.00 | 21,522.58 | 421,671.27 | 818,193.85 | 205,561.20 | 1,023,755.05 | 252,034.89 |
| Dr. Léon Broers | 300,000.00 | 23,126.34 | 421,671.27 | 744,797.61 | 205,561.20 | 950,358.81 | 202,245.34 |
| Dr. Peter Hofmann | 300,000.00 | 22,835.78 | 337,337.02 | 660,172.80 | 64,567.30 | 724,740.10 | 6,470.38 |
| Eva Kienle | 300,000.00 | 27,966.54 | 421,671.27 | 749,637.81 | 82,224.48 | 831,862.29 | 20,096.09 |
| Total | 1,275,000.00 | 95,451.24 | 1,602,350.83 | 2,972,802.07 | 557,914.18 | 3,530,716.25 | 480,846.70 |
| in € | Cash compensation | Total | LTI | ||||
|---|---|---|---|---|---|---|---|
| Basic compensation |
Fringe benefits |
Performance related bonus |
Total | Grant | Cost | ||
| Dr. Hagen Duenbostel | 337,500.00 | 20,350.50 | 433,588.53 | 791,439.03 | 240,839.40 | 1,032,278.43 | 229,067.52 |
| Dr. Léon Broers | 300,000.00 | 21,902.68 | 433,588.53 | 755,491.21 | 216,196.55 | 971,687.76 | 174,081.27 |
| Dr. Peter Hofmann | 187,499.97 | 15,905.68 | 195,114.84 | 398,520.49 | 0.00 | 398,520.49 | 0.00 |
| Eva Kienle | 300,000.00 | 26,995.92 | 433,588.53 | 760,584.45 | 54,366.70 | 814,951.15 | 5,449.04 |
| Phillip von dem Bussche |
135,000.00 | 9,131.94 | 282,868.06 | 427,000.00 | 159,035.30 | 586,035.30 | 232,368.96 |
| Total | 1,259,999.97 | 94,286.72 | 1,778,748.49 | 3,133,035.18 | 670,437.95 | 3,803,473.13 | 640,966.79 |
1 Long term incentive fair value
Compensation of former members of the Executive Board and their surviving dependents amounted to €1,334 (1,693) thousand, of which €97 (97) thousand was payment under a consultancy agreement. Pension commitments in accordance with IAS 19 (2011) recognized for this group of persons amounted to €8,027 (7,131) thousand as of June 30, 2016. The pension commitments for three former members of the Executive Board are backed by a guarantee. No loans were granted to members of the Executive Board and the Supervisory Board in the year under review.
In the tables below, we present the individual awards and receipts separately for each member of the
Executive Board, as incurred in the year under review and in the previous year in accordance with the recommendations in Clause 4.2.5 (3) of the German Corporate Governance Code (DCGK) in the version dated May 5, 2015.
The target compensation, including the agreed lower and upper limits, is shown under "Award." The LTI awards are assessed at the present value at the time of acquisition of the last tranche of shares. The details on the receipts show the payments actually made to a member of the Executive Board in fiscal years 2014/2015 and 2015/2016.
Executive Board compensation in keeping with Clause 4.2.5 (3) of the German Corporate Governance Code (DCGK)
| in € | Grant | Receipt | ||||
|---|---|---|---|---|---|---|
| 2015/2016 | 2014/2015 | 2015/2016 | 2014/2015 | |||
| min. | max. | |||||
| Dr. Hagen Duenbostel (Chief Executive Office) | ||||||
| Fixed payment | 375,000.00 | 375,000.00 | 375,000.00 | 337,500.00 | 375,000.00 | 337,500.00 |
| Fringe benefits | 21,522.58 | 21,522.58 | 21,522.58 | 20,350.50 | 21,522.58 | 20,350.50 |
| Subtotal | 396,522.58 | 396,522.58 | 396,522.58 | 357,850.50 | 396,522.58 | 357,850.50 |
| Annual variable payment (performance-related bonus) |
419,876.27 | 0.00 | 478,477.42 | 421,424.46 | 421,671.27 | 433,588.53 |
| Total cash compensation | 816,398.85 | 396,522.58 | 875,000.00 | 779,274.96 | 818,193.85 | 791,439.03 |
| Multi-year variable payment | ||||||
| LTI 2013/2014 | 240,839.40 | |||||
| LTI 2014/2015 | 205,561.20 | 0.00 | 433,215.59 | |||
| Subtotal | 1,021,960.05 | 396,522.58 | 1,308,215.59 | 1,020,114.36 | 818,193.85 | 791,439.03 |
| Pension costs1 | 107,059.00 | 107,059.00 | 107,059.00 | 98,048.00 | 107,059.00 | 98,048.00 |
| Total compensation | 1,129,019.05 | 503,581.58 | 1,415,274.59 | 1,118,162.36 | 925,252.85 | 889,487.03 |
| Maximum compensation2 | 1,765,000.00 | 1,765,000.00 | ||||
| Dr. Léon Broers | ||||||
| Fixed payment | 300,000.00 | 300,000.00 | 300,000.00 | 300,000.00 | 300,000.00 | 300,000.00 |
| Fringe benefits | 23,126.34 | 23,126.34 | 23,126.34 | 21,902.68 | 23,126.34 | 21,902.68 |
| Subtotal | 323,126.34 | 323,126.34 | 323,126.34 | 321,902.68 | 323,126.34 | 321,902.68 |
| Annual variable payment | ||||||
| (performance-related bonus) | 419,876.27 | 0.00 | 476,873.66 | 421,424.46 | 421,671.27 | 433,588.53 |
| Total cash compensation | 743,002.61 | 323,126.34 | 800,000.00 | 743,327.14 | 744,797.61 | 755,491.21 |
| Multi-year variable payment | ||||||
| LTI 2013/2014 | 216,196.55 | |||||
| LTI 2014/2015 | 205,561.20 | 0.00 | 324,911.69 | |||
| Subtotal | 948,563.81 | 323,126.34 | 1,124,911.69 | 959,523.69 | 744,797.61 | 755,491.21 |
| Pension costs1 | 72,000.00 | 72,000.00 | 72,000.00 | 72,000.00 | 72,000.00 | 72,000.00 |
| Total compensation | 1,020,563.81 | 395,126.34 | 1,196,911.69 | 1,031,523.69 | 816,797.61 | 827,491.21 |
| Maximum compensation2 | 1,547,000.00 | 1,547,000.00 | ||||
| Dr. Peter Hofmann | ||||||
| Fixed payment | 300,000.00 | 300,000.00 | 300,000.00 | 187,499.97 | 300,000.00 | 187,499.97 |
| Fringe benefits | 22,835.78 | 22,835.78 | 22,835.78 | 15,905.68 | 22,835.78 | 15,905.68 |
| Subtotal | 322,835.78 | 322,835.78 | 322,835.78 | 203,405.65 | 322,835.78 | 203,405.65 |
| Annual variable payment | ||||||
| (performance-related bonus) | 335,901.02 | 0.00 | 377,164.22 | 189,641.01 | 337,337.02 | 195,114.84 |
| Total cash compensation | 658,736.80 | 322,835.78 | 700,000.00 | 393,046.66 | 660,172.80 | 398,520.49 |
| Multi-year variable payment | ||||||
| LTI 2013/2014 | 0.00 | |||||
| LTI 2014/2015 | 64,567.30 | 0.00 | 102,055.60 | |||
| Subtotal | 723,304.10 | 322,835.78 | 802,055.60 | 393,046.66 | 660,172.80 | 398,520.49 |
| Pension costs1 | 78,953.00 | 78,953.00 | 78,953.00 | 60,663.00 | 78,953.00 | 60,663.00 |
| Total compensation | 802,257.10 | 401,788.78 | 881,008.60 | 453,709.66 | 739,125.80 | 459,183.49 |
| Maximum compensation2 | 1,047,000.00 | 635,250.00 |
1 In accordance with IAS 19R from commitments for pensions and other pension benefits; this relates to costs for the company, not the actual entitlement or payment
2 The total compensation is limited individually to a maximum overall amount per fiscal year
Executive Board compensation in keeping with Clause 4.2.5 (3) of the German Corporate Governance Code (DCGK)
| in € | Grant | Receipt | ||||
|---|---|---|---|---|---|---|
| 2015/2016 | 2014/2015 | 2015/2016 | 2014/2015 | |||
| min. | max. | |||||
| Eva Kienle | ||||||
| Fixed payment | 300,000.00 | 300,000.00 | 300,000.00 | 300,000.00 | 300,000.00 | 300,000.00 |
| Fringe benefits | 27,966.54 | 27,966.54 | 27,966.54 | 26,995.92 | 27,966.54 | 26,995.92 |
| Subtotal | 327,966.54 | 327,966.54 | 327,966.54 | 326,995.92 | 327,966.54 | 326,995.92 |
| Annual variable payment (performance-related bonus) |
419,876.27 | 0.00 | 472,033.46 | 421,424.46 | 421,671.27 | 433,588.53 |
| Total cash compensation | 747,842.81 | 327,966.54 | 800,000.00 | 748,420.38 | 749,637.81 | 760,584.45 |
| Multi-year variable payment | ||||||
| LTI 2013/2014 | 54,366.70 | |||||
| LTI 2014/2015 | 82,224.48 | 0.00 | 129,964.68 | |||
| Subtotal | 830,067.29 | 327,966.54 | 929,964.68 | 802,787.08 | 749,637.81 | 760,584.45 |
| Pension costs1 | 72,000.00 | 72,000.00 | 72,000.00 | 72,000.00 | 72,000.00 | 72,000.00 |
| Total compensation | 902,067.29 | 399,966.54 | 1,001,964.68 | 874,787.08 | 821,637.81 | 832,584.45 |
| Maximum compensation2 | 1,247,000.00 | 1,247,000.00 | ||||
| Philip von dem Bussche (Chief Executive Officer until December 31, 2014) | ||||||
| Fixed payment | - | 135,000.00 | - | 135,000.00 | ||
| Fringe benefits | - | 9,131.94 | - | 9,131.94 | ||
| Subtotal | - | 144,131.94 | - | 144,131.94 | ||
| Annual variable payment (performance-related bonus) |
- | 282,868.06 | - | 282,868.06 | ||
| Total cash compensation | - | 427,000.00 | - | 427,000.00 | ||
| Multi-year variable payment | ||||||
| LTI 2013/2014 | 159,035.30 | |||||
| LTI 2014/2015 | ||||||
| Subtotal | - | 586,035.30 | - | 427,000.00 | ||
| Pension costs1 | ||||||
| Total compensation | - | 586,035.30 | - | 427,000.00 | ||
| Maximum compensation2 |
1 In accordance with IAS 19R from commitments for pensions and other pension benefits; this relates to costs for the company, not the actual entitlement or payment 2 The total compensation is limited individually to a maximum overall amount per fiscal year
The Supervisory Board's compensation was set by the Annual Shareholders' Meeting on December 17, 2009, and has remained unchanged since then. It is based on the size of the company, the duties and responsibilities of the members of the Supervisory Board and the company's economic situation. The remuneration includes not only a fixed payment of €28 thousand p.a. and a fixed payment for work on committees, but also a performance-related component. This component is geared toward the
company's long-term development. In keeping with that, members of the Supervisory Board receive €400 for each full €0.10 by which the average consolidated annual earnings per share before minority interests for the past three fiscal years, starting with the fiscal year for which the compensation is granted, exceeds the amount of €4.00. The performance-related payment is limited to the amount of the fixed payment.
The Chairman of the Supervisory Board receives three times and his or her deputy one-and-a-half times the fixed compensation of an ordinary member. There is no extra compensation for them for work on committees. The Chairman of the Audit Committee receives €25 thousand p.a. Ordinary members of the Supervisory Board receive €5 thousand p.a. for their work on the Committee for Executive Board Affairs and €10 thousand p.a. for their work on the Audit Committee. The members of the Supervisory Board are reimbursed for all expenses
– including value-added tax – that they incur while carrying out the duties of their position.
The compensation for the Supervisory Board in the year under review was unchanged over the previous year. Total compensation was €516 thousand exclusive of value added tax. In all, 46% (46%) or €238 (238) thousand of the total compensation is performance-related.
| in € | Fixed | Work on committees |
Performance related |
Total 2015/2016 |
Total 2014/2015 |
|---|---|---|---|---|---|
| Dr. Andreas J. Büchting1 | 84,000.00 | 0.00 | 84,000.00 | 168,000.00 | 168,000.00 |
| Dr. Arend Oetker2 | 42,000.00 | 0.00 | 42,000.00 | 84,000.00 | 84,000.00 |
| Hubertus von Baumbach3 | 28,000.00 | 25,000.00 | 28,000.00 | 81,000.00 | 81,000.00 |
| Jürgen Bolduan | 28,000.00 | 10,000.00 | 28,000.00 | 66,000.00 | 66,000.00 |
| Cathrina Claas-Mühlhäuser | 28,000.00 | 5,000.00 | 28,000.00 | 61,000.00 | 61,000.00 |
| Dr. Berthold Niehoff | 28,000.00 | 0.00 | 28,000.00 | 56,000.00 | 56,000.00 |
| 238,000.00 | 40,000.00 | 238,000.00 | 516,000.00 | 516,000.00 |
1 Chairman
2 Deputy Chairman 3 Chairman of the Audit Committee
Disclosures in Accordance with Sections 289 (4) and 315 (4) of the German Commercial Code (HGB) and the Explanatory Report of the Executive Board
The subscribed capital of KWS SAAT SE is €19.8 million. It is divided into 6.6 million bearer shares. Each share grants the holder the right to cast one vote at the Annual Shareholders' Meeting.
There may be restrictions relating to voting rights or the transfer of shares as a result of statutory or contractual provisions. For example, shareholders are barred from voting under certain conditions pursuant to Section 136 of the German Stock Corporation Act (AktG) or Section 28 of the German Securities Trading Act (WpHG). In addition, no voting rights accrue to the company on the basis of the shares it holds (Section 71b AktG). The Executive Board is not aware of any contractual restrictions relating to voting rights or transfer of shares. If there are no restrictions to voting rights, all shareholders who register for the Annual Shareholders' Meeting in time and have submitted proof of their authorization to participate in the Annual Shareholders' Meeting and exercise their voting rights are authorized to exercise the voting rights conferred by all the shares they hold and have registered. If members of the Executive Board or executive employees have acquired shares as part of the long-term incentive programs, these shares are subject to a lockup period until the end of the fifth year after the end of the quarter in which they were acquired. The lock-up period for shares that employees have acquired as part of the Employee Stock Programs runs until the end of the fourth year as of when they are posted to the employee's securities account.
The company has been informed by shareholders of the following direct or indirect participating interests in the capital of KWS SAAT SE in excess of 10% of the voting rights in accordance with Section 21 and Section 22 of the German Securities Trading Act (WpHG) or elsewhere:
The voting shares, including mutual allocations, of the members and companies of the families Büchting und Arend Oetker listed below each exceed 10% and total approximately 52.5%:
The voting shares, including mutual allocations, of the members and companies of the families Büchting and Arend Oetker listed above each exceed 10% and total approximately 53.1% for
■ Dr. Arend Oetker, Germany
The voting shares, including mutual allocations, of the shareholders stated below each exceed 10% and total 15.4%.
Shares with special rights that grant powers of control have not been issued by the company. There is no special type of voting control for the participating interests of employees. Employees who have an interest in the company's capital exercise their control rights in the same way as other shareholders.
Members of the Executive Board of KWS SAAT SE are appointed and removed in accordance with Article 9 (1) and Article 39 (2) of the Council Regulation on the Statute for a European Company (SE Regulation), Article 46 of the Council Regulation on the Statute for a European Company (SE Regulation) and Sections 84 and 85 AktG (German Stock Corporation Act). Section 6 of KWS SAAT SE's Articles of Association also contains provisions that relate to the appointment of members of the Executive Board by the Supervisory Board and that correspond to the statutory regulations.
The company's Articles of Association can be amended by a resolution adopted by the Shareholders' Meeting in accordance with Article 59 of the Council Regulation on the Statute for a European Company (SE Regulation) and Section 179 (1) AktG (German Stock Corporation Act). In accordance with Article 51 of the SE Implementation Act (SEAG), Section 179 (2) AktG (German Stock Corporation Act) and Section 18 of the Articles of Association of KWS SAAT SE, amendments to the Articles of Association require that at least half the capital stock be represented and that a resolution be adopted by the Shareholders' Meeting by a simple majority of the capital stock represented in adoption of the resolution, unless obligatory statutory regulations specify otherwise. If at least half the capital stock is not represented in adoption of the resolution to amend the Articles of Association, the resolution must be passed with a majority of at least two-thirds of the votes cast. The power to make amendments to the Articles of Association that only affect the wording (Section 179 (1) Sentence 2 AktG) has been conferred on the Supervisory Board in accordance with Section 22 of the Articles of Association of KWS SAAT SE.
The Executive Board is not currently authorized to issue or buy back shares.
Significant agreements subject to the condition of a change in control pursuant to a takeover bid have not been concluded. The compensation agreements between the company and members of the Executive Board governing the case of a change in control stipulate that any such compensation will be limited to the applicable maximum amounts specified by the German Corporate Governance Code.
Crowds of people normally only seen at the Annual Shareholders' Meeting gathered at the Biotechnology Center on January 29, 2016. Over 500 customers of KWS flocked to the Agricultural Forum in Einbeck. As at 30 other Agricultural Forums held throughout Germany, farmers were able to get firsthand information on the latest topics in breeding, agricultural policy, markets and agricultural trials. In the course of the year, KWS offers many other opportunities for people to learn more about plant breeding and about our company – at conferences, Field Days or trade shows, for example. There is also great demand for tours of our headquarters in Einbeck. In fiscal 2015/2016, more than 7,400 visitors took the opportunity to get a close-up insight into seed production, the greenhouses and research labs.
The Management Reports of KWS SAAT SE and the KWS Group are combined. The declaration on corporate governance in accordance with Section 289a of the German Commercial Code (HGB), which also contains the compliance declaration in accordance with Section 161 AktG (German Stock Corporation Act), has been published in the Internet at www.kws.com/ir. The following disclosures are identical to those of the KWS Group and are printed in this Annual Report:
| Disclosures | Page(s) |
|---|---|
| On the Compensation Report, in accordance with Section 289 (4) of the German Commercial Code (HGB) and explanatory report of the Executive Board |
61 to 67 |
| On business activity, corporate strategy, corporate controlling and management, as well as explanations on business performance |
22 to 48 |
| On the dividend | 13 |
| On research and development | 27 to 29 |
| On the sustainability report | 49 |
KWS SAAT SE is the parent company and holding company of the KWS Group. It is responsible for strategic management and, among other things,
Breeding new varieties and developing new technologies takes a long time – and calls for focus and perseverance.
multiplies and distributes sugarbeet and corn seed. It finances basic research and breeding of the main range of varieties at the KWS Group and provides its subsidiaries with new varieties every year for the purpose of multiplication and distribution. KWS SAAT SE and KWS LOCHOW GMBH concluded a profit and loss transfer agreement on October 15, 2015, which will apply retroactively as of July 1, 2015. The Shareholders' Meeting of KWS LOCHOW on October 15, 2015, and the Annual Shareholders' Meeting of KWS SAAT SE on December 17, 2015, approved conclusion of the profit and loss transfer agreement; as a result, KWS LOCHOW paid a profit of €10.6 million to the company for the first time for fiscal year 2015/2016 on the basis of the agreement. As announced in the last annual report, KWS MAIS GMBH was merged with KWS SAAT SE effective July 1, 2015. The profit from the merger was €67.7 million and is recognized as extraordinary income. The reintegration of KWS MAIS GMBH marked one of several planned steps in simplifying the Group's structure in order to make internal processes more efficient and reduce our administrative overhead. The structure of our segments
was not affected by this measure. In order to permit better comparability, the figures from the previous year include the relevant contributions by KWS MAIS GMBH. More information is published in the annual financial statements of KWS SAAT SE at www.kws.de/ir (German only).
KWS SAAT SE's net sales increased in fiscal 2015/2016 by 1.4% to €458.0 (451.8) million. This rise is mainly attributable to the increase in revenue from sugarbeet seed and the positive performance of winter rapeseed business. Research and development expenditure, which is pooled at KWS SAAT SE, was increased to €158.0 (155.1) million. Selling expenses fell slightly to €59.2 (61.3) million. Most of the administrative functions for the KWS Group are located in KWS SAAT SE. Administrative expenses were €57.0 (55.9) million. The balance of other operating income and other operating expenses rose by €0.9 million to €33.2 million. Overall, KWS SAAT SE's operating income was thus €18.1 (8.4) million. Net financial income/expenses is made up of the net income from equity investments from eight (seven) companies and the interest result. It fell to €18.0 (36.7) million, in particular due to expenses from operational potato business and a rise in interest expense. Taking into account tax expenditures, net income for the year was €100.7 (32.5) million.
KWS SAAT SE's total assets increased in the year under review by 21.8% to €885.2 (727.0) million. Fixed assets at the balance sheet date were €485.4 (420.8) million or 54.8% (57.9%) of total assets. The increase in fixed assets is mainly due to a rise in intangible assets and financial assets. At the same time, current assets rose by 30.6% to €398.4 (305.1) million, mainly due to the increase in cash and cash equivalents to €105.1 (12.8) million. Inventories rose by 13.5% to €67.0 (59.0) million, while receivables and other assets fell to €206.4 (226.2) million. KWS SAAT SE's equity increased to €266.4 (253.0) million, giving an equity ratio of 30.1% (34.8%). There was an increase in the liabilities to banks to €225.1 (150.0) million, mainly due to the issue of a further borrower's note loan of €70.0 million. In addition, liabilities to affiliated companies rose to €237.3 (161.7) million, mainly due to financing activities. KWS SAAT SE's total liabilities were €493.0 (345.6) million.
An average of 1,424 (1,326) people were employed at KWS SAAT SE in the year under review, of whom 116 (124) were trainees and interns.
The risks and opportunities at KWS SAAT SE are essentially the same as at the KWS Group. It shares the risks of its subsidiaries and associated companies in accordance with its respective stake in them. You can find a detailed description of the opportunities and risks and an explanation of the internal control and risk management system (Section 289 (5) of the German Commercial Code (HGB)) on pages 49 to 55.
KWS SAAT SE generates the main part of its net sales from sugarbeet and corn seed business and royalties from basic corn seed. The further development of sugarbeet seed business depends, to a major extent, on developments in our growth markets in Eastern Europe and cultivation areas in our key markets. We currently anticipate a slight increase in net sales from this business. Corn business will probably increase slightly as well, with the result that, all in all, we expect KWS SAAT SE to grow its net sales slightly year on year. KWS SAAT SE's operating income is mainly impacted by income from European sugarbeet and corn business, the costs of central Group functions and the KWS Group's cross-segment research and development activities. In view of the anticipated challenging market environment in the EU, we assume at present that income from corn and sugarbeet business will decline slightly. That, along with a slight increase in costs for the central Group functions, means that KWS SAAT SE's EBIT is expected to fall slightly.
| July 1 to June 30 | |||
|---|---|---|---|
| in € thousand | Note no. | 2015/2016 | 2014/2015 |
| I. Income statement | |||
| Net sales | (19) | 1,036,774 | 986,015 |
| Cost of sales | 480,864 | 453,498 | |
| Gross profit on sales | 555,910 | 532,517 | |
| Selling expenses | 196,818 | 188,991 | |
| Research & development expenses | 182,360 | 174,627 | |
| General and administrative expenses | 76,402 | 74,756 | |
| Other operating income | (20) | 70,372 | 87,960 |
| Other operating expenses | (21) | 57,938 | 68,686 |
| Operating income | 112,764 | 113,417 | |
| Interest and similar income | 2,662 | 1,621 | |
| Interest and similar expenses | 14,347 | 12,401 | |
| Income from equity-accounted financial assets | 26,466 | 23,747 | |
| Other net income from equity investments | 3 | 3,722 | |
| Net financial income/expenses | (22) | 14,784 | 16,689 |
| Results of ordinary activities | 127,548 | 130,106 | |
| Taxes | (23) | 42,271 | 46,058 |
| Net income for the year | (26) | 85,277 | 84,048 |
| II. Other comprehensive income | (11) | ||
| Revaluation of available-for-sale financial assets | 354 | –172 | |
| Currency translation difference for economically independent foreign units |
–18,743 | 24,606 | |
| Currency translation difference from equity-accounted financial assets | –469 | 21,223 | |
| Items that may have to be subsequently reclassified as profit or loss | –18,858 | 45,657 | |
| Revaluation of net liabilities/assets from defined benefit plans | –17,049 | –8,956 | |
| Items not reclassified as profit or loss | –17,049 | –8,956 | |
| Other comprehensive income after tax | –35,907 | 36,701 | |
| III. Comprehensive income (total of I. and II.) | 49,370 | 120,749 | |
| Net income after shares of minority interests | 85,261 | 82,712 | |
| Share of minority interests | 16 | 1,336 | |
| Net income for the year | 85,277 | 84,048 | |
| Comprehensive income after shares of minority interests | 50,681 | 120,282 | |
| Share of minority interests | –1,311 | 467 | |
| Comprehensive income | 49,370 | 120,749 | |
| Earnings per share (in €) | 12.92 | 12.53 | |
| in € thousand | Note no. | 06/30/2016 | 06/30/2015 |
|---|---|---|---|
| Intangible assets | (2) | 95,098 | 85,661 |
| Property, plant and equipment | (3) | 378,639 | 351,856 |
| Equity-accounted financial assets | (4) | 147,511 | 153,018 |
| Financial assets | (5) | 2,192 | 2,465 |
| Noncurrent tax assets | (6) | 3,382 | 3,976 |
| Other noncurrent financial assets | 96 | 26 | |
| Deferred tax assets | (23) | 41,039 | 35,910 |
| Noncurrent assets | 667,957 | 632,912 | |
| Inventories | (7) | 185,783 | 177,990 |
| Biological assets | (7) | 12,496 | 12,344 |
| Trade receivables | (8) | 293,881 | 309,665 |
| Securities | (9) | 30,679 | 66,973 |
| Cash and cash equivalents | (10) | 133,224 | 41,211 |
| Current tax assets | (8) | 55,451 | 57,549 |
| Other current financial assets | (8) | 45,070 | 26,732 |
| Other current assets | (8) | 12,090 | 11,756 |
| Current assets | 768,674 | 704,220 | |
| Total assets | 1,436,631 | 1,337,132 |
| in € thousand | Note no. | 06/30/2016 | 06/30/2015 |
|---|---|---|---|
| Subscribed capital | 19,800 | 19,800 | |
| Capital reserve | 5,530 | 5,530 | |
| Retained earnings | 740,197 | 705,720 | |
| Minority interest | (12) | 2,432 | 7,668 |
| Equity | (11) | 767,959 | 738,718 |
| Long-term provisions | 136,515 | 110,641 | |
| Long-term borrowings | 228,712 | 181,783 | |
| Trade payables | 1,413 | 1,600 | |
| Deferred tax liabilities | (23) | 9,447 | 9,686 |
| Other noncurrent financial liabilities | 681 | 539 | |
| Other noncurrent liabilities | 16,885 | 12,482 | |
| Noncurrent liabilities | (13) | 393,653 | 316,731 |
| Short-term provisions | 80,914 | 87,355 | |
| Short-term borrowings | 23,078 | 32,283 | |
| Trade payables | 75,014 | 59,658 | |
| Current tax liabilities | 21,062 | 30,111 | |
| Other current financial liabilities | 13,990 | 15,687 | |
| Other current liabilities | 60,961 | 56,589 | |
| Current liabilities | (14) | 275,019 | 281,683 |
| Liabilities | 668,672 | 598,414 | |
| Total equity and liabilities | 1,436,631 | 1,337,132 |
| July 1 to June 30 | |||||||
|---|---|---|---|---|---|---|---|
| in € thousand | Parent company | ||||||
| Subscribed capital |
Capital reserve |
Accumulat ed Group equity from Earnings |
Comprehensive other Group income |
||||
| Adjustments from currency translation |
Adjustments from currency translation of equity accounted financial assets |
Reserve for available for-sale financial assets |
|||||
| 07/01/2014 | 19,800 | 5,530 | 662,031 | –22,230 | –11,293 | 69 | |
| Dividends paid | –19,800 | ||||||
| Net income for the year | 82,712 | ||||||
| Other comprehensive income after tax |
0 | 25,463 | 21,223 | –160 | |||
| Total consolidated gains (losses) |
82,712 | 25,463 | 21,223 | –160 | |||
| Change in shares of minority interests |
0 | ||||||
| 06/30/2015 | 19,800 | 5,530 | 724,943 | 3,233 | 9,930 | –91 | |
| Dividends paid | –19,800 | ||||||
| Net income for the year | 85,261 | ||||||
| Other comprehensive income after tax |
0 | –17,395 | –469 | 333 | |||
| Total consolidated gains (losses) |
85,261 | –17,395 | –469 | 333 | |||
| Change in shares of minority interests |
3,596 | ||||||
| 06/30/2016 | 19,800 | 5,530 | 794,000 | –14,162 | 9,461 | 242 |
in € thousand Parent company Parent company Minority interest Group equity
| Comprehensive other Group income |
Comprehensive other Group income |
Total | Minority interest |
Comprehensive other Group income |
Total | ||||
|---|---|---|---|---|---|---|---|---|---|
| Adjustments from currency translation Reserve for of equity available Adjustments accounted for-sale from currency financial financial translation assets assets |
Revaluation of defined benefit plans |
Other trans actions |
Adjustments fromcurrency translation |
Revaluation of defined benefit plans |
Other trans actions |
||||
| –22,230 –11,293 69 |
–24,795 | 594 | 629,706 | 9,088 | –1,021 | 0 | –4 | 8,063 | 637,769 |
| –19,800 | 0 | 0 | –19,800 | ||||||
| 82,712 | 1,336 | 1,336 | 84,048 | ||||||
| –160 | –8,956 | 0 | 37,570 | –857 | –12 | –869 | 36,701 | ||
| –160 | –8,956 | 0 | 120,282 | 1,336 | –857 | 0 | –12 | 467 | 120,749 |
| 862 | 862 | –862 | –862 | 0 | |||||
| –91 | –33,751 | 1,456 | 731,050 | 10,424 | –1,878 | 0 | –878 | 7,668 | 738,718 |
| –19,800 | –329 | –329 | –20,129 | ||||||
| 85,261 | 16 | 16 | 85,277 | ||||||
| 333 | –17,049 | 0 | –34,580 | –1,348 | 21 | –1,327 | –35,907 | ||
| 333 | –17,049 | 0 | 50,681 | 16 | –1,348 | 0 | 21 | –1,311 | 49,370 |
| 0 | 3,596 | –6,728 | 3,132 | 0 | –3,596 | ||||
| 242 | –50,800 | 1,456 | 765,527 | 3,383 | –94 | 0 | –857 | 2,432 | 767,959 |
| July 1 to June 30 | |||
|---|---|---|---|
| ------------------- | -- | -- | -- |
| in € thousand | Note no. | 2015/2016 | 2014/2015 |
|---|---|---|---|
| Net income for the year | 85,277 | 84,048 | |
| Depreciation/reversal of impairment losses (–) on property, plant and equipment |
48,187 | 45,911 | |
| Increase/decrease (–) in long-term provisions | 1,184 | –1,192 | |
| Other noncash expenses/income (–) | –27,351 | –36,704 | |
| Cash earnings | 107,297 | 92,063 | |
| Increase/decrease (–) in short-term provisions | –551 | 14,027 | |
| Net gain (–)/loss from the disposal of assets | 849 | –160 | |
| Increase (–)/decrease in inventories, trade receivables and other assets not attributable to investing or financing activities |
–26,973 | –72,809 | |
| Increase/decrease (–) in trade payables and other liabilities not attributable to investing or financing activities |
19,560 | 2,841 | |
| Proceeds and payments (+) from/for equity-accounted companies | 25,682 | 12,157 | |
| Net cash from operating activities | (1) | 125,864 | 48,119 |
| Proceeds from disposals of property, plant and equipment | 1,101 | 1,741 | |
| Payments (–) for capital expenditure on property, plant and equipment | –67,745 | –82,108 | |
| Proceeds from disposals of intangible assets | 87 | 107 | |
| Payments (–) for capital expenditure on intangible assets | –29,699 | –4,468 | |
| Proceeds from disposals of financial assets | 348 | 229 | |
| Payments (–) for capital expenditure on financial assets | –266 | –7,535 | |
| Receipts from the disposal of consolidated subsidiaries and other business units |
4,000 | 0 | |
| Payments (–) for purchase of shares in consolidated subsidiaries and other business units |
0 | –31,727 | |
| Net cash from investing activities | (2) | –92,174 | –123,761 |
| Dividend payments (–) to owners and minority shareholders | –47,215 | –19,800 | |
| Cash proceeds from long-term borrowings | 144,758 | 103,678 | |
| Cash repayments of long-term borrowings | –71,066 | –30,907 | |
| Changes from proceeds (+)/repayments (–) of short-term borrowings | –5,092 | –4,573 | |
| Net cash from financing activities | (3) | 21,385 | 48,398 |
| Net cash changes in cash and cash equivalents | 55,075 | –27,244 | |
| Changes in cash and cash equivalents due to exchange rate, consolidated group and measurement changes |
644 | 13,164 | |
| Cash and cash equivalents at beginning of year | 108,184 | 122,264 | |
| Cash and cash equivalents at end of year | (4) | 163,903 | 108,184 |
The KWS Group is a consolidated group as defined by the relevant accounting regulations. The consolidated financial statements of the KWS Group as of June 30, 2016, have been prepared by KWS SAAT SE in accordance with the International Financial Reporting Standards (IFRS) published by the International Accounting Standards Board (IASB), London, taking into account the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) and in addition the commercial law regulations to be applied pursuant to Section 315 a (1) HGB (German Commercial Code).
KWS SAAT SE is an international company based in Germany and has its headquarters at Grimsehlstrasse 31, 37574 Einbeck, Germany.
The statements were prepared under the assumption that the operations of the company will be continued. The accounting and measurement methods have generally been retained without change, except for the recognition of deferred tax assets and deferred tax liabilities, which – as is customary internationally – are shown after being netted
To be applied in the future
off against each other, provided the requirements defined in IAS 12 have been met. The previous year's figures have been adjusted to enable better comparison.
Unless otherwise stated, all the figures in the Notes are in thousands of euros (€ thousand) and have been rounded in accordance with standard commercial practice.
In addition, the following standards had to be applied for the first time in fiscal year 2015/2016: Amendments to IAS 19 (2011) – Employee Benefits: Employee Contributions; Annual Improvements to the International Financial Reporting Standards (2010–2012 cycle); Annual Improvements to the International Financial Reporting Standards (2011–2013 cycle). The new standards and interpretations to be applied did not result in any significant impact.
The following standards and interpretations, or revisions of standards or interpretations, were not applied in the year under review, as they have not yet been adopted by the EU or application of them for fiscal 2015/2016 was not yet mandatory:
| Amendments to IFRS 11 – Joint Arrangements: Accounting for Acquisitions Fiscal 2016/2017 of Interests in Joint Operations Amendments to IAS 16 and IAS 38 – Property, Plant and Equipment and Intangible Fiscal 2016/2017 Assets: Clarification of Acceptable Methods of Depreciation and Amortization Amendments to IAS 16 and IAS 41 – Property, Plant and Fiscal 2016/2017 Equipment and Agriculture: Bearer Plants Amendments to IAS 27 – Separate Financial Statements: Fiscal 2016/2017 Equity Method in Separate Financial Statements Annual Improvements to the International Financial Reporting Standards Fiscal 2016/2017 (2012–2014 cycle) Amendments to IAS 1 – Presentation of Financial Statements: Disclosure Initiative Fiscal 2016/2017 |
|---|
| Amendments to IFRS 10, IFRS 12 and IAS 28 – Investment Entities: At the earliest in fiscal year 2016/2017 Applying the Consolidation Exception |
| Amendments to IAS 12 – Recognition of Deferred Tax Assets for Unrealized Losses At the earliest in fiscal year 2017/2018 |
| Amendments to IAS 7 – Statement of Cash Flows: Disclosure Initiative At the earliest in fiscal year 2017/2018 |
| Amendments to IFRS 2 – Classification and Measurement of Share-based At the earliest in fiscal year 2018/2019 Payment Transactions |
| IFRS 15 – Revenue from Contracts with Customers At the earliest in fiscal year 2018/2019 |
| IFRS 9 – Financial Instruments At the earliest in fiscal year 2018/2019 |
| IFRS 16 – Leases At the earliest in fiscal year 2019/2020 |
The impact of the standards and interpretations on the consolidated financial statements of the KWS Group are currently being examined and determined. On the basis of the results of this examination to date, KWS does not expect any significant effects on the consolidated financial statements from application of new or amended standards, with the exception of application of IFRS 16 – Leases.
The consolidated financial statements of the KWS Group include the single-entity financial statements of KWS SAAT SE and its subsidiaries in Germany and other countries, as well as joint ventures and associated companies, which are carried using the equity method, and a joint operation. A company is a subsidiary if KWS SAAT SE has existing rights that give it the current ability to control its relevant activities. Relevant activities are the activities that significantly affect the company's returns. Control therefore only exists if KWS SAAT SE has the ability to use its power to affect the amount of the variable returns. Control can usually be derived from holding a majority of the voting rights directly or indirectly. Subsidiaries and joint ventures that are considered immaterial for the presentation and evaluation of the financial position and performance of the Group are not included. Details on the changes in the consolidated group are provided in Section 2. "Disclosures on the annual financial statements – Consolidated group and changes in the consolidated group."
The single-entity financial statements of the individual subsidiaries included in the consolidated financial statements and the single-entity financial statements of the joint ventures and associated companies included using the equity method and of the joint operation were uniformly prepared on the basis of the accounting and measurement methods applied at KWS SAAT SE; they were audited by independent auditors. For fully or proportionately consolidated units acquired before July 1, 2003, the Group exercised the option allowed by IFRS 1 to maintain the consolidation procedures chosen to date. The goodwill reported in the HGB financial statements as of June 30, 2003, was therefore transferred unchanged at its carrying amount to the opening IFRS balance sheet. For acquisitions made after June 30, 2003, capital consolidation follows the purchase method by allocating the cost of acquisition to the Group's interest in the subsidiary's remeasured equity at the time of acquisition. Any excess of interest in equity over cost is recognized as an asset, up to the amount by which fair value exceeds the carrying amount. Any goodwill remaining after first-time consolidation is recognized under intangible assets.
According to IAS 36, goodwill is not amortized, but tested for impairment at least once a year (impairment-only approach). Investments in unconsolidated companies are carried at cost.
Joint ventures are consolidated using the equity method in application of IFRS 11 and IAS 28. The basis for a joint venture is a contractual agreement with a third party to manage a joint venture together. In the case of joint ventures, the parties who exercise joint management have rights to the net assets of the agreement.
In the case of joint ventures measured in accordance with the equity method, the carrying amount is increased or reduced annually by the equity capital changes corresponding to the KWS Group's share. In the case of first-time consolidation of equity investments using the equity method, differences from first-time consolidation are treated in accordance with the principles of full consolidation. The changes in the proportionate equity that are recognized in profit or loss are included, along with impairment of goodwill, under the item "Income from equity-accounted financial assets" in the net financial income/expenses.
Associated companies in which a stake between 20% and 50% is held are likewise measured using the equity method.
Subsidiaries are always consolidated if such recognition is considered material for the fair presentation of the financial position and results of operations of the KWS Group. As part of the elimination of intra-Group balances, borrowings, receivables, liabilities and provisions are netted between the consolidated companies. Intercompany profits not realized at Group level are eliminated from intra-Group transactions. Sales, income and expenses are netted between consolidated companies, and intra-Group distributions of profit are eliminated.
Deferred taxes on consolidation transactions recognized in income are calculated at the tax rate applicable to the company concerned. These deferred taxes are aggregated with the deferred taxes recognized in the separate financial statements.
Minority interests are recognized in the amount of the imputed percentage of equity in the consolidated companies.
Under IAS 21, the financial statements of the consolidated foreign group companies that conduct their business as financially, economically and organizationally independent entities are translated into euros using the functional
currency method and rounded in accordance with standard commercial practice as follows:
The following exchange rates were applied in the consolidated financial statements for the main foreign currencies relative to the euro:
| Rate on balance sheet date | Average rate | ||||
|---|---|---|---|---|---|
| 1 EUR/ | 06/30/2016 | 06/30/2015 | 2015/2016 | 2014/2015 | |
| ARS | Argentina | 16.67190 | 10.16290 | 13.58600 | 10.27994 |
| BRL | Brazil | 3.61730 | 3.49470 | 4.11588 | 3.20855 |
| GBP | UK | 0.82615 | 0.71153 | 0.75290 | 0.75716 |
| RUB | Russia | 71.21020 | 61.52060 | 74.54532 | 59.64182 |
| UAH | Ukraine | 27.56354 | 23.54140 | 26.60710 | 20.80004 |
| USD | USA | 1.11430 | 1.11840 | 1.10631 | 1.19175 |
The difference resulting from the application of annual average rates to the net profit for the period in the income statement is taken directly to equity. According to IAS 21, exchange differences resulting from loans to foreign subsidiaries are reported in Other comprehensive income and are not recognized in profit or loss.
The costs for the functions include all directly attributable costs, including other taxes. Research and development expenses are reported separately for reasons of transparency. Performance-based government grants are not deducted from the costs to which they relate, but reported gross under other operating income.
The accounting policies are unchanged from the previous year.
All estimates and assessments as part of accounting and measurement are continually reviewed; they are based on historical patterns and expectations about the future regarded as reasonable in the particular circumstances.
Net sales include sales of products and services, less revenue reductions. Net sales from the sale of products are realized at the time at which the opportunities and risks pass to the buyer. Net sales from service transactions are recognized at the time at which the outcome of the transaction can be reliably estimated in accordance with the percentage of completion. Other income, such as interest, royalties and dividends, is recognized in the period it accrues as soon as there is a contractual or legal entitlement to it.
Performance-based public grants are carried under the other operating income as part of profit/loss.
Operating expenses are recognized in the income statement upon the service in question being used or as of the date on which they occur.
Purchased intangible assets are carried at cost less straight-line amortization and impairment losses. It is necessary to examine whether the useful life of intangible assets is finite or indefinite. Goodwill has an indefinite useful life. Goodwill and intangible assets with an indefinite useful life are not amortized, but tested for impairment at least once a year. The procedure for the impairment test is explained in the notes to the balance sheet. Intangible assets acquired as part of business combinations are carried separately from goodwill if they are separable according to the definition in IAS 38 or result from a contractual or legal right.
The service life of intangible assets is as follows:
| Useful life of intangible assets | ||||||
|---|---|---|---|---|---|---|
| Useful life | ||||||
| Breeding material, proprietary rights to varieties and trademarks |
10 years | |||||
| Other rights | 5–10 years |
Property, plant and equipment is measured at cost less straight-line depreciation and impairment losses. In addition to directly attributable costs, the cost of self-produced plant or equipment also includes a proportion of the overheads and depreciation/amortization.
Software 3–8 years Distribution rights 5–20 years Trait licensing agreements 15 years
| Useful life | |
|---|---|
| Buildings | 10–50 years |
| Operating equipment and other facilities |
5–25 years |
| Technical equipment and machinery | 5–15 years |
| Laboratory and research facilities | 5–13 years |
| Other equipment, operating and office equipment |
3–15 years |
Low-value assets are fully expensed in the year of purchase; they are reported as additions and disposals in the year of purchase in the statement of changes in fixed assets. Impairment losses on property, plant and equipment are recognized according to IAS 36 whenever the recoverable amount of the asset is less than its carrying amount. The recoverable amount is the higher of the fair value less costs to sell or the value in use. If the reason for an earlier
impairment loss on property, plant and equipment no longer applies, its value is increased to up to the amount that would have resulted if the impairment loss had not occurred, taking depreciation into account. In accordance with IAS 20, government grants are deducted from the costs of the asset. Any deferred income is not recognized.
Financial instruments are, in particular, financial assets and financial liabilities. The financial assets consist primarily of bank balances and cash on hand, trade receivables, other receivables, other financial assets and securities. The credit risk mainly comprises trade receivables. The amount recognized in the balance sheet is net of allowances for receivables expected to be uncollectible, estimated on the basis of historical patterns and the current economic environment. The credit risk on cash and derivative financial instruments is limited because they are kept with banks that have been given a good credit rating by international rating agencies. There is no significant concentration of credit risks, because the risks are spread over a large number of contract partners and customers. The entire credit risk is limited to the respective carrying amount. Comments on the risk management system can be found in the Management Report.
Available-for-sale financial assets are carried at fair value if that can be reliably measured. Unrealized gains and losses, including deferred taxes, are recognized directly in the reserve for available-for-sale financial assets under equity. Allowances are recognized immediately through the income statement. Financial assets belonging to this category of financial instruments are measured at cost, since there is no active market. The financial assets include shares in unconsolidated subsidiaries and securities classified as noncurrent assets. They are subsequently measured at amortized cost. Borrowings are carried at amortized cost.
The carrying amount of receivables, fixed-income securities and cash is assumed as the fair value due to their short term and the fixed-interest structure of the investments.
The financial liabilities comprise, in particular, trade payables, borrowings and other liabilities.
The fair value of financial liabilities with a long-term fixed interest rate is determined as present values of the payments related to the liabilities, using a yield curve applicable on the balance sheet date.
Derivative instruments are measured at fair value in accordance with IAS 39; they can be assets or liabilities. Common derivative financial instruments are essentially used to hedge interest rate and foreign currency risks. The fair value of the derivative financial instruments is measured on the basis of the market information available on the balance sheet date and using recognized mathematical models, such as present value or Black-Scholes, to calculate option values, taking their volatility, remaining maturity and capital market interest rates into account. The instruments must also be classified in a level of the fair value hierarchy.
Financial instruments in level 1 are measured using quoted prices in active markets for identical assets or liabilities. In level 2, they are measured by directly observable market inputs or derived indirectly on the basis of prices for similar instruments. Finally, input factors not based on observable market data are used to calculate the value of level 3 financial instruments.
Subsequent measurement of the financial instruments depends on their classification in one of the following categories defined in IAS 39:
This category mainly comprises trade receivables, other receivables, loans and cash, including fixed-income shortterm securities. Loans are measured at cost. Loans that carry no interest or only low interest are measured at their present value. Discernible risks are taken into account by recognition of an impairment loss. After their initial recognition, the other financial assets in this category are measured at amortized cost using the effective interest method, minus impairments. Receivables that carry no interest or only low interest and with a term of more than twelve months are discounted. Necessary value impairments are based on the expected credit risk and are carried in separate impairment accounts. Receivables are derecognized if they are settled or uncollectible. Other financial assets are derecognized at the time they are disposed of or if they have no value.
Held-for-trading securities acquired with the intention of being sold in the short term are assigned to this category. Derivate financial instruments with a positive market value are also categorized as held for trading, unless they are
designated hedging instruments in accordance with IAS 39. They are measured at fair value. Changes in value are recognized in income. Securities are derecognized after being sold on the settlement date.
This category covers all financial assets that have not been assigned to one of the above categories. In principle, securities are classed as available for sale, unless a different classification is required due to the fact that they have an explicit purpose. Equity instruments, such as shares in (unconsolidated) affiliated companies, which are measured at amortized cost, and shares held in listed companies, are also included in this category. In principle, financial instruments in this category are measured at their fair value in subsequent recognition. The changes to their fair value in subsequent recognition are recognized as unrealized gains and losses directly in equity in the reserve for available-forsale financial assets. The realized gains or losses are not recognized as profit or loss until they are disposed of. If there is objective evidence of permanent impairment on the balance sheet date, the instruments are written down to the lower value. Any subsequent decreases in the impairment loss are recognized directly in equity.
■ Financial liabilities measured at amortized cost All financial liabilities, with the exception of derivative financial instruments, are measured at amortized cost using the effective interest method. The liabilities are derecognized at the time they are settled or when the reason why they were formed no longer exists.
■ Financial liabilities at fair value
This category covers derivative financial instruments that have a negative market value and are categorized in principle as held for trading. They are measured at fair value. Changes in value are recognized in income. Derivatives that are designated hedging instruments in accordance with IAS 39 are excluded from this provision.
Securities are generally classified as available for sale, which is why changes in their fair values that require reporting are taken directly to equity. If securities are carried at their fair value and have to be recognized in income, changes to the fair values are directly included in the net income for the period.
The derivatives do not meet the requirements of IAS 39 to be designated as a hedging instrument. They are measured at their fair value. The changes in their market value are recognized in the income statement. Derivatives are derecognized on their day of settlement.
Inventories are measured at the lower of cost or net realizable value less an allowance for obsolescent or slow-moving items. In addition to directly attributable costs, the cost of sales also includes indirect labor and materials including depreciation under IAS 2. Under IAS 41, biological assets are measured at fair value less the estimated costs to sell. Immature biological assets are carried as inventories as of the time they are harvested. The measurement procedure used is based on standard industry value tables.
Deferred taxes are calculated in accordance with IAS 12. Deferred taxes are calculated on differences between the carrying amounts of assets and liabilities in the consolidated balance sheet and their tax base, and on carried-forward tax losses. Deferred tax assets are netted off against deferred tax liabilities, provided they relate to the same tax creditor and have the same due date. Deferred tax assets are recognized if it can be assumed that they will be used in future. Deferred tax liabilities must be set up for all taxable temporary differences. All deferred taxes must be assessed individually at each balance sheet date. Under IAS 12, deferred taxes are calculated on the basis of the applicable local income tax anticipated at the time of reversal. No discounting is carried out.
The provisions for income taxes comprise obligations from current income taxes. They are measured on the basis of a best-possible assessment of the future amount to be paid. Deferred taxes are carried in a separate balance sheet item.
The provisions for pensions and other employee benefits are calculated using actuarial principles in accordance with the projected unit credit method. Actuarial gains and losses resulting from revaluation of the net liability must be recognized directly in equity in Other comprehensive income. If there are planned assets, they are netted off against the associated obligations.
The provisions for semi-retirement include obligations from concluded semi-retirement agreements. Payment arrears and top-up amounts for semi-retirement pay and for the contributions to the statutory pension insurance program are recognized in measuring them.
Provisions are set up if current obligations have accrued from past events and it is likely that they will be utilized. In addition, it must be possible to estimate the amount of the anticipated obligation reliably.
Provisions are measured at their expected amount or most likely amount, depending on whether they comprise a large number of items or constitute a single obligation. Provisions are reviewed regularly and adjusted to reflect new findings or changes in circumstances. Long-term provisions are discounted taking into account future cost increases and using capital market interest rates for matching maturities, insofar as the interest effect is material.
The contingent liabilities result from debt obligations where outflow of the resource is not probable or the level of the obligation cannot be estimated with sufficient reliability, or from obligations for loan amounts drawn down by third parties as of the balance sheet date.
In accordance with IAS 23, borrowing costs are capitalized if they can be classified as qualifying assets.
The measurement approaches and amounts to be carried in these IFRS financial statements are partly based on estimates and specifically defined specifications. This relates in particular to:
Selection of parameters for the model-based measurement of derivatives
Determination whether tax losses carried forward can be used
Despite careful estimates, the actual development may deviate from the assumptions.
The Executive Board of KWS SAAT SE prepared the consolidated financial statements on September 27, 2016, and released them for distribution to the Supervisory Board. The Supervisory Board has the task of examining the consolidated financial statements and declaring whether it approves them.
| 06/30/2015 | ||||||
|---|---|---|---|---|---|---|
| Domestic | Foreign | Total | Domestic | Foreign | Total | |
| Fully consolidated | 13 | 46 | 59 | 13 | 49 | 62 |
| Equity method | 0 | 3 | 3 | 0 | 4 | 4 |
| Joint operation | 0 | 1 | 1 | 0 | 0 | 0 |
| Total | 13 | 50 | 63 | 13 | 53 | 66 |
KWS MAIS GMBH was merged with KWS SAAT SE effective July 1, 2015. In addition, KWS SERVICOS E PARTICI-PACOES SOUTH AMERICA LTDA. acquired the remaining shares in RIBER KWS SEMENTES S.A. in December 2015.
On January 25, 2016, SOCIETE DE MARTINVAL S.A.S., LABOGERM S.A.R.L. and MOMONT HENNETTE S.A. merged and the resultant company was renamed KWS MOMONT S.A.S. S.A.R.L. ADRIEN MOMONT ET FILS was also renamed KWS MOMONT RECHERCHE S.A.R.L. on the same date.
KANT-HARTWIG & VOGEL GMBH was included in the consolidated companies for the first time effective April 1, 2016. Our second sugarbeet company in the U.S. was merged with BETASEED INC. effective April 21, 2016.
Assets of KWS POTATO B.V. – mainly varieties, rights and the customer base – with a total carrying amount of €3,881 thousand were sold as part of an asset deal in June 2016. The breeding station and its land are still owned by the company, whose purpose is to provide breeding services. Its distribution activities have been discontinued.
A total of 59 (62) companies were fully consolidated in the consolidated financial statements at June 30, 2016. Three (four) joint ventures and associated companies were measured using the equity method. One (zero) joint operation has been included proportionately. This is GENECTIVE S.A.
| Sugarbeet | Corn | Cereals | Corporate | ||||
|---|---|---|---|---|---|---|---|
| 100% | BETASEED INC.2 Bloomington, MN, U.S. |
100% | KWS BENELUX B.V. Amsterdam, Netherlands |
100% | KWS LOCHOW GMBH Bergen, Germany |
100% | KWS LANDWIRTSCHAFT GMBH* |
| 100% | KWS FRANCE S.A.R.L. | 100% | KWS SEMENA S.R.O. | 100% | KWS UK LTD.6 | Einbeck, Germany | |
| 100% | Roye, France DELITZSCH |
100% | Bratislava, Slovakia KWS MAIS FRANCE S.A.R.L. |
100% | Thriplow, UK KWS LOCHOW |
100% | KWS INTERSAAT GMBH Einbeck, Germany |
| PFLANZENZUCHT GMBH9 | Champol, France | POLSKA SP.Z O.O.6 | 100% | KWS SEEDS INC.8 | |||
| 100% | Einbeck, Germany O.O.O. KWS RUS11 |
100% | KWS AUSTRIA SAAT GMBH Vienna, Austria |
100% | Kondratowice, Poland KWS MOMONT S.A.S.6 |
100% | Bloomington, MN, U.S. GLH SEEDS INC.2 |
| Lipetsk, Russia | 100% | KWS SJEME D.O.O. | Mons-en-Pévèle, France | Bloomington, MN, U.S. | |||
| 100% | O.O.O. KWS R&D RUS10 Lipetsk, Russia |
100% | Pozega, Croatia KWS OSIVA S.R.O. |
100% KWS MOMONT RECHER CHE S.A.R.L.13 |
100% | KWS SAATFINANZ GMBH Einbeck, Germany |
|
| 100% | KWS ITALIA S.P.A. | Velke Mezirici, Czech Republic | Mons-en-Pévèle, France | 100% | RAGIS KARTOFFELZUCHT | ||
| 100% | Forli, Italy KWS POLSKA SP.Z O.O. |
100% | KWS BULGARIA E.O.O.D. Sofia, Bulgaria |
UND HANDELS GESELLSCHAFT MBH |
|||
| Poznan, Poland | Formerly: KWS Semena | Einbeck, Germany | |||||
| 100% | KWS SCANDINAVIA A/S9 Guldborgsund, Denmark |
100% | Bulgaria E.O.O.D. AGROMAIS GMBH |
100% | KWS KLOSTERGUT WIEBRECHTSHAUSEN |
||
| 100% | KWS SEMILLAS IBERICA S.L.9 | Everswinkel, Germany | GMBH | ||||
| 100% | Zaratán, Spain SEMILLAS KWS CHILE LTDA. |
100% | KWS MAGYARORSZÁG KFT. Györ, Hungary |
Northeim-Wiebrechtshausen, Germany |
|||
| Rancagua, Chile | 100% | KWS SEMINTE S.R.L.12 | 100% | EURO-HYBRID | |||
| 100% | KWS SRBIJA D.O.O. New Belgrade, Serbia |
99% | Bucharest, Romania KWS ARGENTINA S.A. |
GESELLSCHAFT FÜR GETREIDEZÜCHTUNG MBH |
|||
| 100% | KWS SUISSE SA | Balcarce, Argentina | Einbeck, Germany | ||||
| 100% | Basle, Switzerland BETASEED FRANCE S.A.R.L.17 |
51% | RAZES HYBRIDES S.A.R.L.3 Alzonne, France |
100% | KWS SERVICOS E PARTICIPACOES |
||
| Bethune, France | 100% | KWS MELHORAMENTO E | SOUTH AMERICA LTDA.18 | ||||
| 100% | KWS UKRAINE T.O.V.11 Kiev, Ukraine |
SEMENTES LTDA.19 Curitiba, Brazil |
100% | São Paulo, Brazil KWS GATEWAY RESEARCH |
|||
| 100% | KWS TÜRK TARIM TICARET | 100% | RIBER KWS SEMENTES S.A.20 | CENTER LLC.2 St. Louis, MO, U.S. |
|||
| A.S.8 Eskisehir, Turkey |
100% | Patos de Minas, Brazil KWS PERU S.A.C.7 |
100% | KWS SERVICES | |||
| 100% | BETASEED GMBH Frankfurt, Germany |
100% | Lima, Peru KWS R&D China LTD.14 |
DEUTSCHLAND GMBH Einbeck, Germany |
|||
| 100% | KWS POTATO B.V.16 | Hefei, China | 100% | KWS SERVICES EAST | |||
| 93% | Emmeloord, Netherlands DYNAGRI S.A.R.L.15 |
GMBH Vienna, Austria |
|||||
| Casablanca, Morocco | 100% | KWS SERVICES WEST S.L.U. | |||||
| 100% | KWS Podillya T.O.V. 21 Kiev, Ukraine |
100% | Barcelona, Spain KWS SERVICES NORTH |
||||
| AMERICA LLC. | |||||||
| 100% | Bloomington, MN, U.S. BEIJING KWS AGRICULTURE |
||||||
| TECHNOLOGY CO., LTD.14 | |||||||
| 100% | Beijing, China KWS CEREALS USA LLC.2 |
||||||
| Champagne, IL, U.S. | |||||||
| 100% | KWS SERVICES NORTH B.V. Rotterdam, Netherlands |
||||||
| 100% | KANT-HARTWIG & VOGEL | ||||||
| GMBH Einbeck, Germany |
|||||||
| Equity-accounted joint ventures1 | Equity-accounted associated companies1 |
Joint operation (proportionately consolidated)1 |
||||||
|---|---|---|---|---|---|---|---|---|
| Corn | Corn | Corn | ||||||
| 50% 50% |
AGRELIANT GENETICS LLC. 5 Westfield, IN, U.S. AGRELIANT GENETICS INC. Chatham, Ontario, Canada |
49% | KENFENG – KWS SEEDS CO., LTD. Beijing, China |
50% | GENECTIVE S.A. Chappes, France |
| Sugarbeet | Corn | Cereals | |||
|---|---|---|---|---|---|
| 67% | VAN RIJN BALCAN S.R.L.15 Vulcan, Romania |
100% | KWS SEEDS THAILAND CO., LTD.14 Chiang Mai, Thailand |
74% | LOCHOW-PETKUS BELGIUM N.V.6 Linter, Belgium |
| 100% | KWS R&D PRIVATE LIMITED11 Hyderabad, India |
||||
| 100% | KWS PARAGUAY S.R.L.22 Asuncion, Paraguay |
||||
| 50% | GENECTIVE CANADA INC.4 Montreal, Canada |
||||
| 50% | GENECTIVE TAIWAN LTD.4 Taipei City, Taiwan |
||||
| 50% | GENECTIVE USA CORP.4 Weldon, U.S. |
||||
| 50% | GENECTIVE JAPAN K.K.4 Chiba, Japan |
||||
| 50% | GENECTIVE KOREA4 Sangdaewon-dong, Korea |
||||
* Profit and loss transfer agreement
Status: June 30, 2016
In accordance with its internal reporting system, the KWS Group is primarily organized according to the following business segments:
Considered a core competency for the KWS Group's entire product range, plant breeding, including the related biotechnology research, is essentially concentrated at the parent company KWS SAAT SE in Einbeck. The breeding material, including the relevant information and expertise about how to use it, is owned by KWS SAAT SE with respect to sugarbeet and corn and by KWS LOCHOW GMBH with respect to cereals. Product-related R&D costs are carried directly in the product segments Corn, Sugarbeet and Cereals. Centrally controlled corporate functions are grouped in the Corporate Segment. The distribution and production of oil and field seed are reported in the Cereals and Corn Segments, in keeping with the legal entities currently involved.
Following the merger with KWS MAIS GMBH, the production and distribution activities of this segment are managed by KWS SAAT SE. The activities relate to corn for grain and silage corn, and to oil and field seed, and are conducted by one (one) German company, 15 (15) foreign subsidiaries, two (three) joint ventures, one (one) associated company and one (zero) joint operation of the KWS Group.
The results of the multiplication, processing and distribution activities for sugarbeet seed, as well as our seed potato business, are reported under the Sugarbeet Segment. Under the leadership of KWS SAAT SE, 17 (18) foreign subsidiaries and two (two) subsidiaries in Germany are active in this segment.
The lead company of this segment, which essentially concerns the production and distribution of hybrid rye, wheat and barley, as well as oil and field seed, is KWS LOCHOW GMBH with its four (six) foreign subsidiaries in France, the UK and Poland.
Apart from revenue from our farms and services for third parties, net sales from strategic projects are reported in this segment. The segment also assumes the costs of all central holding functions and expenses for long-term research projects that have not yet reached market maturity.
It also includes all management services of KWS SAAT SE, such as the holding company and administrative functions, which are not directly charged to the product segments or indirectly allocated to them by means of an appropriate cost formula.
The Executive Board as the main decision-making body is responsible for allocating resources and assessing the earnings strength of the business segments. The segments and regions are defined in compliance with the internal controlling and reporting systems (management approach). The accounting policies used to determine the information for the segments are basically the same as used for the KWS Group. The only exception relates to consolidation of the equity-accounted joint ventures that are assigned to the Corn Segment, namely AGRELIANT GENETICS LLC., AGRELIANT GENETICS INC. and KENFENG – KWS SEEDS CO., LTD. In accordance with internal controlling practices, they are included proportionately as part of segment reporting.
The segment net sales, segment income, depreciation and amortization, other noncash items, operating assets, operating liabilities and capital expenditure on noncurrent assets by segment have been determined in accordance with the internal operational controlling structure, with the joint ventures and associated company consolidated proportionately (management approach). In order to permit better comparability, they have been reconciled with the figures in the IFRS consolidated financial statements.
Segment sales contains both net sales from third parties (external sales) and net sales between the segments (intersegment sales). The prices for intersegment sales are determined on an arm's-length basis. Uniform royalty rates per segment for breeding genetics are used as the basis.
Technology revenues from genetically modified properties ("tech fees") are paid as a per-unit royalty on the basis of the number of units sold, due to their growing competitive importance.
| in € thousand | Segment sales | Internal sales | External sales | |||
|---|---|---|---|---|---|---|
| 2015/2016 | 2014/2015 | 2015/2016 | 2014/2015 | 2015/2016 | 2014/2015 | |
| Corn | 795,320 | 754,458 | 162 | 16 | 795,158 | 754,442 |
| Sugarbeet | 439,635 | 390,646 | 88 | 99 | 439,547 | 390,547 |
| Cereals | 119,046 | 113,207 | 1,095 | 1,939 | 117,951 | 111,268 |
| Corporate | 17,921 | 18,133 | 13,811 | 13,981 | 4,110 | 4,152 |
| Segments acc. to management approach |
1,371,922 | 1,276,444 | 15,156 | 16,035 | 1,356,766 | 1,260,409 |
| Elimination of equity-accounted financial assets |
–319,992 | –274,394 | ||||
| Segments acc. to consolidated financial statements |
1,036,774 | 986,015 |
The Corporate Segment generates 77.1% (77.1%) of its sales from the other segments. As in the previous year, the sales of this segment represent 0.3% of the Group's external sales.
The Corn Segment is the largest contributor of external sales, accounting for 58.6% (59.9%) of external sales, followed by Sugarbeet with 32.4% (31.0%) and Cereals with 8.7% (8.8%).
| Earnings, depreciation and amortization and other noncash items per segment | |||
|---|---|---|---|
| ----------------------------------------------------------------------------- | -- | -- | -- |
| Depreciation and | |||||||
|---|---|---|---|---|---|---|---|
| in € thousand | Segment earnings | amortization | Other noncash items | ||||
| 2015/2016 | 2014/2015 | 2015/2016 | 2014/2015 | 2015/2016 | 2014/2015 | ||
| Corn | 63,570 | 84,184 | 23,199 | 19,525 | 16,080 | –4,517 | |
| Sugarbeet | 118,571 | 92,998 | 14,193 | 14,974 | 11,002 | 15,199 | |
| Cereals | 9,028 | 12,019 | 8,192 | 7,284 | 5,862 | 4,143 | |
| Corporate | –50,102 | –51,186 | 10,343 | 9,840 | 1,555 | 22,150 | |
| Segments acc. to management approach |
141,067 | 138,015 | 55,927 | 51,623 | 34,499 | 36,975 | |
| Elimination of equity-accounted financial assets |
–28,303 | –24,598 | –7,740 | –5,712 | –21,328 | 8,680 | |
| Segments acc. to consolidated financial statements |
112,764 | 113,417 | 48,187 | 45,911 | 13,171 | 45,655 | |
| Net financial income/expenses | 14,784 | 16,689 | 0 | 0 | 0 | 0 | |
| Earnings before taxes | 127,548 | 130,106 | 0 | 0 | 0 | 0 |
The income statements of the consolidated companies are assigned to the segments by means of profit center allocation. Operating income, the most important internal parameter and an indicator of the earnings strength in the KWS Group, is used as the segment result. The operating income of each segment is reported as the segment result. The segment results are presented on a consolidated basis and include all directly attributable income and expenses. Items that are not directly attributable are allocated to the segments on the basis of an appropriate formula.
Depreciation and amortization charges of €55,927 (51,623) thousand allocated to the segments relate exclusively to intangible assets and property, plant and equipment.
The other noncash items recognized in the income statement relate to noncash changes in the allowances on inventories and receivables, and in provisions.
| in € thousand | Operating assets | Operating liabilities | ||||
|---|---|---|---|---|---|---|
| 2015/2016 | 2014/2015 | 2015/2016 | 2014/2015 | |||
| Corn | 717,419 | 644,909 | 163,694 | 136,624 | ||
| Sugarbeet | 262,555 | 274,238 | 91,227 | 70,233 | ||
| Cereals | 118,283 | 120,291 | 25,772 | 23,490 | ||
| Corporate | 108,600 | 102,719 | 90,508 | 91,213 | ||
| Segments acc. to management approach | 1,206,857 | 1,142,157 | 371,201 | 321,560 | ||
| Elimination of equity-accounted financial assets | –240,961 | –204,640 | –78,981 | –63,698 | ||
| Segments acc. to consolidated financial statements | 965,897 | 937,517 | 292,220 | 257,862 | ||
| Others | 470,735 | 399,615 | 376,452 | 340,552 | ||
| KWS Group acc. to consolidated financial statements | 1,436,631 | 1,337,132 | 668,672 | 598,414 |
The operating assets of the segments are composed of intangible assets, property, plant and equipment, inventories, biological assets and trade receivables that can be charged directly to the segments or indirectly allocated to them by means of an appropriate formula.
The operating liabilities attributable to the segments include the borrowings reported on the balance sheet, less provisions for taxes and the portion of other liabilities that cannot be charged directly to the segments or indirectly allocated to them by means of an appropriate formula.
Capital expenditure on assets was increased year on year by 20.0% to €159,711 (133,073) thousand. Capital expenditure in the Corn Segment (€119,072 thousand; previous year: €44,528 thousand) related mainly to the trait licensing agreement and the production plant in Ukraine. The capital expenditure in the Sugarbeet Segment totaled €17,199 thousand following €24,026 thousand in the previous year, that of the Cereals Segment €9,174 thousand following €44,399 thousand in the previous year, and that of the Corporate Segment €14,266 thousand following €20,120 thousand in the previous year.
Investments in long-term assets by segment
| in € thousand | 2015/2016 | 2014/2015 |
|---|---|---|
| Corn | 119,072 | 44,528 |
| Sugarbeet | 17,199 | 24,026 |
| Cereals | 9,174 | 44,399 |
| Corporate | 14,266 | 20,120 |
| Segments acc. to management approach | 159,711 | 133,073 |
| Elimination of equity-accounted financial assets | –60,426 | –8,061 |
| Segments acc. to consolidated financial statements | 99,285 | 125,012 |
The disclosures on the regional composition of net sales, capital expenditure and operating assets have been made in accordance with the accounting policies to be applied to the consolidated financial statements of the KWS Group, and thus, without proportionate consolidation of the equityaccounted financial investments.
The external net sales by sales region are broken down on the basis of the country where the customer is based. No individual customer accounted for more than 10% of total net sales in the current or past fiscal year.
| in € thousand | 2015/2016 | 2014/2015 |
|---|---|---|
| Germany | 223,971 | 223,885 |
| Europe (excluding Germany) | 450,817 | 441,526 |
| Thereof in France | (107,067) | (107,263) |
| North and South America | 282,999 | 254,709 |
| Thereof in Brazil | (78,557) | (66,316) |
| Thereof in the U.S. | (180,288) | (164,571) |
| Rest of world | 78,986 | 65,895 |
| KWS Group | 1,036,774 | 986,015 |
A total of 65.1% (67.5%) of total sales are recorded in Europe (including Germany).
| in € thousand | 2015/2016 | 2014/2015 |
|---|---|---|
| Germany | 48,945 | 33,859 |
| Europe (excluding Germany) | 32,220 | 64,630 |
| Thereof in France | (10,681) | (44,305) |
| North and South America | 15,531 | 22,834 |
| Thereof in Brazil | (2,441) | (2,871) |
| Thereof in the U.S. | (9,745) | (17,067) |
| Rest of world | 2,589 | 3,689 |
| KWS Group | 99,285 | 125,012 |
A total of 49.3% (27.1%) of the capital spending was made in Germany. Of the further capital spending, 15.6% (18.2%) was made in North and South America, 32.5% (51.7%) in Europe (excluding Germany) and 2.6% (3.0%) in the rest of the world.
Long-term assets by region in € thousand 2015/2016 2014/2015 Germany 214,217 185,651 Europe (excluding Germany) 163,994 156,084 Thereof in France (71,889) (67,629) North and South America 234,253 240,965 Thereof in Brazil (37,603) (48,073) Thereof in the U.S. (184,839) (181,296) Rest of world 10,976 10,300 KWS Group 623,440 593,000
| in € thousand | Gross book values | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Currency trans lation |
Change in conso lidated compa nies |
Addi tions |
Additions of equity account ed assets |
Dis posals |
Disposals of equity ac counted assets |
Trans fers |
||||
| 07/01/2015 | 06/30/2016 | |||||||||
| Patents, industrial property rights and software |
110,543 | –829 | 0 | 29,538 | 0 | 23,625 | 0 | 1,359 | 116,986 | |
| Goodwill | 36,975 | –7,712 | 0 | 0 | 0 | 5,451 | 0 | 4,888 | 28,700 | |
| Intangible assets | 147,518 | –8,541 | 0 | 29,538 | 0 | 29,076 | 0 | 6,247 | 145,686 | |
| Land and buildings |
284,248 | –5,331 | 0 | 11,507 | 0 | 1,896 | 0 | 6,495 | 295,023 | |
| Technical equipment and machinery |
211,210 | –3,319 | 0 | 16,558 | 0 | 6,631 | 0 | 12,277 | 230,095 | |
| Operating and office equipment |
90,489 | 679 | 0 | 10,037 | 0 | 6,268 | 0 | –792 | 94,145 | |
| Payments on account |
24,483 | –307 | 0 | 31,645 | 0 | 228 | 0 | –17,295 | 38,298 | |
| Property, plant and equipment |
610,430 | –8,278 | 0 | 69,747 | 0 | 15,023 | 0 | 685 | 657,561 | |
| Equity-accounted financial assets |
161,411 | –470 | 0 | 44 | 26,466 | 0 | 25,682 | –5,865 | 155,904 | |
| Financial assets | 2,835 | –32 | 0 | 247 | 0 | 378 | 0 | 156 | 2,827 | |
| Assets | 922,194 07/01/2014 |
–17,321 | 0 | 99,576 | 26,466 | 44,477 | 25,682 | 1,223 | 961,979 06/30/2015 |
|
| Patents, industrial property rights and software |
88,375 | –2,819 | 21,511 | 4,460 | 0 | 585 | 0 | –399 | 110,543 | |
| Goodwill | 34,365 | 0 | 2,610 | 0 | 0 | 0 | 0 | 0 | 36,975 | |
| Intangible assets | 122,740 | –2,819 | 24,121 | 4,460 | 0 | 585 | 0 | –399 | 147,518 | |
| Land and buildings |
235,426 | 3,584 | 6,118 | 26,163 | 0 | 1,744 | 0 | 14,701 | 284,248 | |
| Technical equipment and machinery |
173,546 | 1,193 | 6,017 | 23,741 | 0 | 2,582 | 0 | 9,295 | 211,210 | |
| Operating and office equipment |
81,818 | 1,441 | 106 | 14,002 | 0 | 7,454 | 0 | 576 | 90,489 | |
| Payments on account |
28,185 | 589 | 0 | 20,283 | 0 | 403 | 0 | –24,171 | 24,483 | |
| Property, plant and equipment |
518,975 | 6,807 | 12,241 | 84,189 | 0 | 12,183 | 0 | 401 | 610,430 | |
| Equity-accounted financial assets |
134,523 | 21,223 | –13,278 | 7,353 | 23,747 | 0 | 12,157 | 0 | 161,411 | |
| Financial assets | 3,048 | –116 | 52 | 182 | 0 | 331 | 0 | 0 | 2,835 | |
| Assets | 779,286 | 25,095 | 23,136 | 96,184 | 23,747 | 13,099 | 12,157 | 2 | 922,194 | |
| Net book values | Amortization/depreciation | |||||||
|---|---|---|---|---|---|---|---|---|
| Value | Currency | |||||||
| Trans | Dis | impair | Planned | trans | ||||
| fers | posals | ments | additions | lation | ||||
| 06/30/2015 | 06/30/2016 | 06/30/2016 | 07/01/2015 | |||||
| 66,398 54,138 |
50,588 | 129 | 19,538 | 2,181 | 11,434 | –23 | 56,405 | |
| 28,700 31,523 |
0 | 0 | 5,452 | 0 | 0 | 0 | 5,452 | |
| 95,098 85,661 |
50,588 | 129 | 24,990 | 2,181 | 11,434 | –23 | 61,857 | |
| 205,901 203,841 |
89,122 | 1,484 | 1,598 | 0 | 9,365 | –535 | 80,407 | |
| 99,522 91,049 |
130,573 | 742 | 5,921 | 0 | 16,097 | –506 | 120,161 | |
| 34,920 32,485 |
59,225 | –1,714 | 5,552 | 0 | 9,110 | –623 | 58,004 | |
| 38,296 24,481 |
2 | 0 | 0 | 0 | 0 | 0 | 2 | |
| 378,639 351,856 |
278,922 | 512 | 13,071 | 0 | 34,572 | –1,664 | 258,574 | |
| 147,511 153,018 |
8,393 | 0 | 0 | 0 | 0 | 0 | 8,393 | |
| 2,192 2,465 |
635 | 0 | 31 | 0 | 0 | 296 | 370 | |
| 623,440 593,000 |
338,539 | 641 | 38,092 | 2,181 | 46,006 | –1,391 | 329,194 | |
| 06/30/2014 | 06/30/2015 | 06/30/2015 | 07/01/2014 | |||||
| 54,138 44,964 |
56,405 | –21 | 478 | 3,905 | 10,561 | –973 | 43,411 | |
| 31,523 28,913 |
5,452 | 0 | 0 | 0 | 0 | 0 | 5,452 | |
| 85,661 73,877 |
61,857 | –21 | 478 | 3,905 | 10,561 | –973 | 48,863 | |
| 203,841 163,182 |
80,407 | –56 | 1,640 | 0 | 8,729 | 1,130 | 72,244 | |
| 91,049 65,368 |
120,161 | 84 | 1,962 | 0 | 13,563 | 298 | 108,178 | |
| 32,485 27,160 |
58,004 | –7 | 7,000 | 0 | 9,153 | 1,200 | 54,658 | |
| 24,481 28,183 |
2 | 0 | 0 | 0 | 0 | 0 | 2 | |
| 351,856 283,893 |
258,574 | 21 | 10,602 | 0 | 31,445 | 2,628 | 235,082 | |
| 153,018 126,130 |
8,393 | 0 | 0 | 0 | 0 | 0 | 8,393 | |
| 2,465 2,700 |
370 | 0 | 101 | 0 | 0 | 123 | 348 | |
| 593,000 486,600 |
329,194 | 0 | 11,181 | 3,905 | 42,006 | 1,778 | 292,686 | |
The statement of changes in fixed assets contains a breakdown of assets summarized in the balance sheet and shows how they changed in 2015/2016. Capital expenditure on property, plant and equipment and intangible assets was €99,285 (125,011) thousand. The Combined Management Report describes the significant additions to assets. Depreciation and amortization and value impairments amounted to €48,187 (45,911) thousand.
This item includes purchased varieties, rights to varieties and distribution rights, software licenses for electronic data processing and goodwill. The current additions of €29,538 (4,460) thousand related to software licenses and patents as well as trait licensing agreements (€25,338 thousand). Amortization of intangible assets amounted to €13,615 (14,466) thousand, of which €2,181 (3,905) thousand were value impairments. Depending on the operational use of the intangible assets, these charges are included in the selling expenses to an amount of €1,737 thousand and in the research and development costs to an amount of €444 thousand.
One major intangible asset is the trait licensing agreement. Its carrying amount at the balance sheet date was €24,050 thousand. Its remaining useful life is 14 years.
The goodwill recognized as an asset relates mainly to the Brazilian companies RIBER KWS SEMENTES S.A. – €15,660 (21,686) thousand; KWS MELHORAMENTO E SE-MENTES LTDA. – €2,722 (4,115) thousand; and the French breeding company GENECTIVE S.A. – €4,888 (4,888) thousand. In the Cereals Segment, the goodwill of KWS MOMONT S.A.S. is recognized to an amount of €2,600 (2,600) thousand and that of KWS UK LTD. to an amount of €1,399 (1,693) thousand.
In order to meet the requirements of IFRS 3 in combination with IAS 36 and to determine any impairment of goodwill, cash-generating units have been defined in line with internal reporting guidelines. At the KWS Group, these are generally the legal entities, with the exception of our potato unit, which as a whole represents the cash-generating unit. To test for impairment, the carrying amount of each entity is determined by allocating the assets and liabilities, including attributable goodwill and intangible assets. An impairment
loss is recognized if the recoverable amount of an entity is less than its carrying amount. The recoverable amount is the higher of the fair value less costs to sell and the value in use of a cash-generating unit. The impairment tests to be carried out for fiscal 2015/2016 determine the recoverable amount on the basis of the value in use of the respective cash-generating unit.
The impairment test uses the expected future cash flows on which the medium-term plans of the companies are based; these plans, which cover a period of four years, have been approved by the Executive Board. They are based on historical patterns and expectations about future market development.
For the European and American markets, the key assumptions on which corporate planning is based include assumptions about price trends for seed, in addition to the development of market shares and the regulatory framework. Company-internal projections take the assumptions of industry-specific market analyses and company-related growth perspectives into account.
The discount rate at the KWS Group has been derived as the weighted average cost of capital (WACC) and for the cash-generating units is 4.48% (5.46%) after tax. A growth rate of 1.5% (1.5%) has been assumed here beyond the detailed planning horizon in order to allow for extrapolation in line with the expected inflation rate.
The impairment tests conducted at the end of fiscal year 2015/2016 confirmed that the existing goodwill is not impaired. Sensitivity analyses were also carried out for all cash-generating units to which goodwill is allocated. In our opinion, realistic changes in the basic assumptions would not result in the need to recognize an impairment loss at any cash-generating unit whose goodwill is significant relative to the total carrying amount of goodwill.
The impairment test for KWS POTATO B.V. in the previous year revealed the need for a write-down, which was reflected in a reduction in the value of the intangible assets by €3,905 thousand. A total of €2,237 thousand has been allocated to the research and development costs and €1,668 thousand to the selling expenses, since a number of varieties, customer relationships and industrial property rights were relinquished. This value impairment has been charged to the Sugarbeet Segment.
Capital expenditure amounted to €69,747 (96,430) thousand and depreciation amounted to €34,572 (31,445) thousand. The Combined Management Report describes the significant capital expenditure. Property, plant and equipment – mainly assets under construction – to an amount of €3,111 thousand are held as security for liabilities.
The joint ventures AGRELIANT GENETICS LLC. and AGRE-LIANT GENETICS INC., which KWS operates together with its joint venture partner Vilmorin, are recognized at equity. In the year under review, AGRELIANT GENETICS LLC. was
classified as a significant joint venture. From the Group perspective, AGRELIANT GENETICS INC. was classified as an insignificant joint venture.
The two joint ventures are operating units. The main business activity of the two joint ventures is the production and sale of corn and soybean seed in North America.
The following disclosures on the joint ventures in accordance with IFRS 12.21 (a) and (b) in conjunction with IFRS 12.B12-B13 are only slightly influenced by the insignificant joint ventures. If individual items of the information presented are materially influenced by the insignificant joint ventures, this information is presented separately.
| 06/30/2016 | 06/30/2015 |
|---|---|
| 50% | 50% |
| 310,658 | 318,792 |
| (23,428) | (48,494) |
| 206,013 | 122,992 |
| 253,654 | 174,974 |
| (74,624) | (17,158) |
| 3,674 | 2,352 |
| 259,343 | 264,458 |
| 129,672 | 132,229 |
| 8,802 | 13,668 |
| 138,474 | 145,897 |
| 637,976 | 570,236 |
| 15,478 | 10,820 |
| 48,004 | 44,292 |
| 0 | 0 |
| 48,004 | 44,292 |
| 24,002 | 22,146 |
| 24,002 | 22,146 |
| 51,364 | 23,408 |
1 Thereof AGRELIANT GENETICS LLC.: €5,878 (23,594) thousand
The disclosures on insignificant associated companies in
accordance with IFRS 12.21 (c) in conjunction with IFRS 12.B16 are as follows:
| in € thousand | 06/30/2016 | 06/30/2015 |
|---|---|---|
| Carrying amount for the stake in insignificant associated companies (aggregated) | 9,059 | 7,120 |
| Net income for the year | 5,029 | 20 |
| Other comprehensive income | 0 | 0 |
| Comprehensive income (100%) | 5,029 | 20 |
In the year under review, this relates to our Chinese joint venture KENFENG – KWS SEEDS CO., LTD., which is included in the KWS Group's consolidated financial statements as an associated company in accordance with the equity method.
Joint operations are based on joint arrangements that always exist when the KWS Group jointly conducts operations managed together with a third party pursuant to a contractual agreement. The operation is jointly managed only if decisions on significant activities require the unanimous consent of the parties involved. The assets and liabilities and revenue and expenses from the joint operations are included proportionately (at 50%) in the consolidated financial statements. The main activity of the proportionately consolidated GENECTIVE S.A. is development of its own traits for genetically improving crops.
Investments in unconsolidated subsidiaries totaling €439 (39) thousand and shares in cooperatives, GmbHs and other securities classified as noncurrent assets that are of minor significance are reported, in principle, at their amortized cost totaling €692 (1,871) thousand since the fair value cannot be reliably determined. Listed shares are carried at their fair value of €452 (89) thousand. This
account also includes other interest-bearing loans totaling €230 (466) thousand. The other financial assets totaling €379 thousand are reported at their amortized cost, since the fair value cannot be reliably determined.
This mainly relates to the present value of the corporate income tax credit balance of the German Group companies, which was last determined at December 31, 2006, and has been paid in ten equal annual amounts since September 30, 2008.
Inventories and biological assets increased by €7,945 thousand, or 4.2%, a figure that includes cumulative impairment losses on the net realizable value totaling €49,947 (51,244) thousand. Inventories to an amount of €5,225 thousand are held as security for liabilities. Immature biological assets relate to living plants in the process of growing (before harvest). The field inventories of the previous year have been harvested in full and the fields have been newly tilled in the year under review. Public subsidies of €1,368 (1,443) thousand, for which all the requirements were met at the balance sheet date, were granted for the total area under cultivation of 4,240 (4,246) ha and were recognized in income. Future public subsidies depend on the further development of European agricultural policy.
| in € thousand | 06/30/2016 | 06/30/2015 |
|---|---|---|
| Raw materials and consumables | 18,041 | 18,263 |
| Work in progress | 52,206 | 48,921 |
| Immature biological assets | 12,496 | 12,344 |
| Finished goods | 115,536 | 110,806 |
| 198,279 | 190,334 | |
| in € thousand | 06/30/2016 | 06/30/2015 |
|---|---|---|
| Trade receivables | 293,881 | 309,665 |
| Current tax assets | 55,451 | 57,549 |
| Other current financial assets | 45,070 | 26,732 |
| Other current assets | 12,090 | 11,756 |
| 406,492 | 405,702 |
Trade receivables were €293,881 thousand following €309,665 thousand in the previous year. This amount includes €1,386 (3,022) thousand in receivables from joint ventures and joint operations.
| in € thousand | |||||||
|---|---|---|---|---|---|---|---|
| Carrying amount |
Of which: neither written down nor overdue on the balance sheet date |
Of which: not written down on the balance sheet date and overdue in the following time frames |
Of which: written down and not overdue on the balance sheet date |
||||
| 1–90 days |
91–180 days |
181–360 days |
>360 days |
||||
| 06/30/2016 | |||||||
| Trade receivables | 293,881 | 268,656 | 15,656 | 2,748 | 1,257 | 0 | 4,521 |
| Other current financial assets |
45,070 | 34,559 | 0 | 0 | 0 | 0 | 0 |
| 338,951 | 303,215 | 15,656 | 2,748 | 1,257 | 0 | 4,521 | |
| 06/30/2015 | |||||||
| Trade receivables | 309,665 | 254,682 | 45,630 | 3,442 | 2,285 | 0 | 1,402 |
| Other current financial assets |
26,732 | 21,996 | 5 | 1,108 | 1 | 134 | 0 |
| 336,397 | 276,678 | 45,635 | 4,550 | 2,286 | 134 | 1,402 |
The already overdue trade receivables that have been partly written down amount to €1,043 (2,224) thousand. There are no indications on the balance sheet date that customers who owe trade receivables that have not been written down and are not overdue will not meet their payment obligations.
Receivables to an amount of €4,147 thousand are held as security for liabilities.
The following allowances have mainly been made for possible risks of nonpayment of trade receivables:
| Change in allowances on receivables | ||
|---|---|---|
| in € thousand | 07/01 | Addition | Disposal | Reversal | 06/30 |
|---|---|---|---|---|---|
| 2015/2016 | 22,627 | 9,466 | 1,317 | 4,040 | 26,736 |
| 2014/2015 | 27,393 | 7,305 | 1,219 | 10,852 | 22,627 |
The receivables include an amount of €450 (361) thousand due after more than one year.
Securities amounting to €30,679 (66,973) thousand relate primarily to debt securities and fund shares.
Cash and cash equivalents of €133,224 (41,211) thousand consists of balances with banks and cash on hand. The cash flow statement explains the change in this item compared with the previous year, together with the change in securities.
The fully paid-up subscribed capital of KWS SAAT SE is still €19,800 thousand. The no-par bearer shares are certificated by a global certificate for 6,600,000 shares. The company does not hold any shares of its own.
The capital reserves essentially comprise the premium obtained as part of share issues.
The revenue reserves essentially comprise the net income generated in the past by the companies included in the
consolidated financial statements, minus dividends paid to shareholders. The differences from currency translation, the reserve for available-for-sale financial assets and the reserve for revaluation of net liabilities/assets from defined benefit plans, as well as the reserve for currency translation for equity-accounted financial assets, are also carried here.
Differences from translation of the functional currency of foreign business operations into the currency used by the Group in reporting (euro) are essentially carried in the item Adjustments from currency translation. The item Revaluation of net liabilities/assets from defined benefit plans includes the actuarial gains and losses from pensions and other employee benefits. Differences from translation of the functional currency of equity-accounted foreign business units into the currency used by the Group in reporting (euro) are essentially carried in the reserve for currency translation for equity-accounted financial assets.
The tax effects on other comprehensive income are as follows:
| Other comprehensive income | |||||||
|---|---|---|---|---|---|---|---|
| in € thousand | 2015/2016 | 2014/2015 | |||||
| Before taxes |
Tax effect | After taxes | Before taxes |
Tax effect | After taxes | ||
| Items that may have to be subsequently reclassified as profit or loss |
–18,752 | –106 | –18,858 | 45,606 | 51 | 45,657 | |
| Revaluation of available-for-sale financial assets |
460 | –106 | 354 | –223 | 51 | –172 | |
| Currency translation difference for economically independent foreign units |
–18,743 | 0 | –18,743 | 24,606 | 0 | 24,606 | |
| Currency translation difference from equity-accounted financial assets |
–469 | 0 | –469 | 21,223 | 0 | 21,223 | |
| Items not reclassified as profit or loss | –24,652 | 7,603 | –17,049 | –12,945 | 3,989 | –8,956 | |
| Revaluation of net liabilities/assets from defined benefit plans |
–24,652 | 7,603 | –17,049 | –12,945 | 3,989 | –8,956 | |
| Other comprehensive income | –43,404 | 7,497 | –35,907 | 32,661 | 4,040 | 36,701 |
The objective of KWS' capital management activities is to pursue the interests of shareholders and employees in accordance with the corporate strategy and earn a reasonable return on investment. One main goal is to retain the trust of investors, lenders and the market, so as to strengthen the company's future business development. KWS' capital management activities intend to optimize the average cost of capital. Another goal is a balanced mix of equity and debt capital. Consolidated income (after taxes and
minority interests) is €85,261 (82,712) thousand. However, there was a total dividend payout of €19,800 (19,800) thousand in December 2015. This ensures the adequate internal financing of further operating business expansion in the long term. Equity increased by €29,241 thousand to €767,959 (738,718) thousand. This figure includes a reduction of €19,212 thousand (previous year: increase of €45,829 thousand) in the reserve for currency translation for foreign subsidiaries and equity-accounted joint ventures and associated companies. Please refer to the statement of changes in equity for further effects not recognized in the income statement.
An important indicator in capital management is the equity ratio. It was 53.5% (55.2%) at June 30, 2016, and thus at a good and solid level. The capital structure is as follows:
The focus in selecting financial instruments is on financing with matching maturities, which is achieved by controlling the maturities. Long-term financial borrowings increased by €46,929 (68,029) thousand. This is mainly due to the increase in long-term financial loans from banks.
The accumulated interests in RIBER KWS SEMENTES S.A. in the previous year were €5,576 thousand and have been carried under minority interests. The voting rights on June 30, 2015, corresponded to 49.99%. The share of minority interests in this company's net income for the year was €1,263 thousand.
The acquisition of the remaining shares in RIBER KWS SEMENTES S.A. means that the KWS Group does not have any minority interests that are assessed as being significant. The disclosures on significant minority interests in accordance with IFRS 12.12 in conjunction with IFRS 12.B10 are as follows for the previous year:
| in € thousand | RIBER KWS SEMENTES S.A., Patos de Minas, Brazil |
|---|---|
| 06/30/2015 | |
| Equity | 11,152 |
| Current assets | 69,164 |
| Noncurrent assets | 16,259 |
| Current liabilities | 44,300 |
| Noncurrent liabilities | 29,971 |
| Net sales | 65,804 |
| Profit/loss | 2,525 |
| Other income | –2,465 |
| Comprehensive income | 60 |
| Net cash from operating activities | 1,446 |
| Net cash from investing activities | –2,237 |
| Net cash from financing activities | 2,868 |
In addition, DYNAGRI S.A.R.L., KWS ARGENTINA S.A. and RAZES HYBRIDES S.A.R.L. have minority interests, although these are assessed as being insignificant.
Noncurrent liabilities increased by €76,922 thousand. That is mainly attributable to the increase in long-term financial borrowings from banks totaling €76,178 thousand. At the same time, other noncurrent financial liabilities decreased by €29,249 thousand.
| Noncurrent liabilities | ||
|---|---|---|
| in € thousand | 06/30/2016 | 06/30/2015 |
| Long-term provisions | 136,515 | 110,641 |
| Long-term borrowings | 228,712 | 181,783 |
| Trade payables | 1,413 | 1,600 |
| Deferred tax liabilities | 9,447 | 9,686 |
| Other noncurrent financial liabilities | 681 | 539 |
| Other noncurrent liabilities | 16,885 | 12,482 |
| 393,653 | 316,731 |
| Long-term provisions | ||||||||
|---|---|---|---|---|---|---|---|---|
| in € thousand | 06/30/2015 | 06/30/2016 | ||||||
| Changes in the consoli dated group, currency |
Interest expenses from com pounding |
Addition | Consump tion |
Reversal | ||||
| Pension provisions | 102,201 | –186 | 2,538 | 26,356 | 4,478 | 0 | 126,431 | |
| Tax provisions | 1,392 | 3 | 0 | 1,582 | 1,341 | 0 | 1,636 | |
| Other provisions | 7,048 | 33 | 114 | 1,762 | 501 | 8 | 8,448 | |
| 110,641 | –150 | 2,652 | 29,700 | 6,320 | 8 | 136,515 |
The other provisions mainly comprise provisions by the German companies for semi-retirement and loyalty bonuses.
The pension provisions are based on defined benefit obligations, determined by years of service and pensionable compensation. They are measured using the projected unit credit method under IAS 19 (2011), on the basis of assumptions about future developments. The assumptions in detail are that wages and salaries in Germany will increase by 3.00% (3.00%) annually, in the U.S. by 3.75% (3.75%) annually and in the rest of the world by 2.00% (2.00%) annually. An annual increase in pensions of 2.00% (2.00%)
is assumed in Germany. The discount rate in Germany was 1.30% compared with 2.50% the year before, 3.60% in the U.S. compared with 4.60% the year before, and between 1.05% and 3.00% in the rest of the world.
The following mortality tables were used at June 30, 2016:
A retirement age of 63 years is imputed for Germany, whereas a retirement age of 65 years is imputed for the U.S.
The pension plans are mainly subject to the following risks:
The following benefits are provided under a company agreement relating to the company retirement pension program:
For benefit obligations backed by a guarantee by an insurance company toward three former members of the Executive Board, the planned assets of €10,217 (9,446) thousand correspond to the present value of the obligation. In accordance with IAS 19 (2011), the pension commitments are netted off against the corresponding assets (planned assets).
The defined benefit obligations abroad mainly relate to pension commitments in the U.S. Share funds and bonds were mainly invested in to cover them. All employees who have reached the age of 21 are entitled to benefits. In addition, each employee must have worked at least one year and at least 1,000 working hours to earn an entitlement.
The following benefits are granted from the pension plan:
The present value of the defined benefit obligation from the pension plan is calculated using a discount rate defined on the basis of the returns on high-quality fixed-income corporate bonds. If the income from the planned assets is below this rate of interest, the result is a shortfall in the plan. The corporate bonds and share funds are chosen to ensure risk diversification and managed by an external fund manager.
The fall in the returns on corporate bonds and thus the discount rate will result in an increase in the obligations, which is only partly compensated for by a change in the value of the planned assets.
The present value of the defined benefit obligation from the plan is calculated on the basis of the best-possible estimate using mortality tables. An increase in the life expectancy of the entitled employees results in an increase in the plan liabilities.
The present value of the defined benefit obligation from the plan is calculated on the basis of future salaries/pensions. Consequently, increases in the salary and pension of the entitled employees results in an increase in the plan liabilities.
In previous years, KWS countered the usual risks of direct obligations by converting the pension obligations from defined benefit to defined contribution plans. As a result, subsequent benefits will be provided by a provident fund backed by a guarantee. The existing obligations, which are partly covered by planned assets, are funded from the operating cash flow and are subject to the familiar measurement risks.
| in € thousand | 2015/2016 | 2014/2015 | ||||
|---|---|---|---|---|---|---|
| Germany | Abroad | Total | Germany | Abroad | Total | |
| Accrued benefit entitlements from retirement obligations on July 1 |
106,837 | 18,408 | 125,245 | 95,942 | 13,865 | 109,807 |
| Service cost | 787 | 917 | 1,704 | 691 | 698 | 1,389 |
| Interest expense | 2,608 | 761 | 3,369 | 2,713 | 671 | 3,384 |
| Actuarial gains (–)/losses (+) | 21,388 | 3,792 | 25,180 | 12,402 | 986 | 13,388 |
| of which due to a change in financial assumptions used for calculation |
21,229 | 3,389 | 24,618 | 12,010 | 747 | 12,757 |
| of which due to experience adjustments |
159 | 403 | 562 | 392 | 239 | 631 |
| Pension payments made | –5,013 | –541 | –5,554 | –4,911 | –678 | –5,589 |
| Exchange rate changes | 49 | 49 | 2,365 | 2,365 | ||
| Other changes in value | –124 | –124 | 501 | 501 | ||
| Accrued benefit entitlements from retirement obligations on June 30 |
126,607 | 23,262 | 149,869 | 106,837 | 18,408 | 125,245 |
| in € thousand | 2015/2016 | 2014/2015 | ||||
|---|---|---|---|---|---|---|
| Germany | Abroad | Total | Germany | Abroad | Total | |
| Fair value of the planned assets | ||||||
| on July 1 | 9,446 | 13,598 | 23,044 | 9,275 | 10,698 | 19,973 |
| Interest income | 229 | 601 | 830 | 260 | 603 | 863 |
| Income from planned assets excluding amounts already recognized as interest |
||||||
| income | 1,133 | –605 | 528 | 491 | –47 | 444 |
| Pension payments made | –591 | –485 | –1,076 | –580 | –485 | –1,065 |
| Exchange rate changes | 48 | 48 | 2,309 | 2,309 | ||
| Other changes in value | 64 | 64 | 520 | 520 | ||
| Fair value of the planned assets on June 30 |
10,217 | 13,221 | 23,438 | 9,446 | 13,598 | 23,044 |
In order to allow reconciliation with the figures in the bal-
ance sheet, the accrued benefit must be netted off with the planned assets.
| in € thousand | 2015/2016 | 2014/2015 | ||||
|---|---|---|---|---|---|---|
| Germany | Abroad | Total | Germany | Abroad | Total | |
| Accrued benefit entitlements from retirement obligations on June 30 |
126,607 | 23,262 | 149,869 | 106,837 | 18,408 | 125,245 |
| Fair value of the planned assets on June 30 |
10,217 | 13,221 | 23,438 | 9,446 | 13,598 | 23,044 |
| Balance sheet values on June 30 | 116,390 | 10,041 | 126,431 | 97,391 | 4,810 | 102,201 |
| in € thousand | 2015/2016 | 2014/2015 | ||||
|---|---|---|---|---|---|---|
| Germany | Abroad | Total | Germany | Abroad | Total | |
| Service cost | 787 | 917 | 1,704 | 691 | 698 | 1,389 |
| Net interest expense (+)/income (–) | 2,379 | 159 | 2,538 | 2,452 | 68 | 2,520 |
| Amounts recognized in the income statement |
3,166 | 1,076 | 4,242 | 3,143 | 766 | 3,909 |
| Gains (–)/losses (+) from revaluation of the planned assets (excluding amounts already recognized as interest income) |
–1,133 | 605 | –528 | –491 | 47 | –444 |
| Actuarial gains (–)/losses (+) due to a change in financial assumptions used for calculation |
21,229 | 3,390 | 24,618 | 12,011 | 747 | 12,758 |
| Actuarial gains (–)/losses (+) due to experience adjustments |
159 | 403 | 562 | 392 | 239 | 631 |
| Amounts recognized in other comprehensive income |
20,255 | 4,397 | 24,652 | 11,912 | 1,033 | 12,945 |
| Total (amounts recognized in the statement of comprehensive income) |
23,421 | 5,473 | 28,894 | 15,055 | 1,799 | 16,854 |
The service cost is recognized in operating income in the respective functional areas by means of an appropriate formula. Net interest expenses and income are carried in the interest result.
The fair value of the planned assets was split over the following investment categories:
Breakdown of the planned assets by investment category
| in € thousand | 2015/2016 | 2014/2015 | ||||
|---|---|---|---|---|---|---|
| Germany | Abroad | Total | Germany | Abroad | Total | |
| Corporate bonds | 3,510 | 3,510 | 3,646 | 3,646 | ||
| Equity funds | 8,842 | 8,842 | 9,071 | 9,071 | ||
| Consumer industry | 1,935 | 2,010 | ||||
| Finance | 956 | 1,068 | ||||
| Industry | 656 | 698 | ||||
| Technology | 1,514 | 1,396 | ||||
| Health care | 986 | 1,337 | ||||
| Other | 2,795 | 2,562 | ||||
| Cash and cash equivalents | 869 | 869 | 881 | 881 | ||
| Reinsurance policies | 10,217 | 10,217 | 9,446 | 9,446 | ||
| Planned assets on June 30 | 10,217 | 13,221 | 23,438 | 9,446 | 13,598 | 23,044 |
The planned assets abroad relate mainly to the U.S. There is no active market for the reinsurance policies in Germany. There is an active market for the other planned assets: the fair value can be derived from their stock market prices. A total of 82.3% (79.2%) of the corporate bonds have an AAA rating.
The following sensitivity analysis at June 30, 2016, shows how the present value of the obligation would change given a change in the actuarial assumptions. No correlations between the individual assumptions were taken into account in this, i.e., if an assumption varies, the other assumptions were kept constant. The projected unit credit method used to calculate the balance sheet values was also used in the sensitivity analysis.
| Sensitivity analysis | |||||||
|---|---|---|---|---|---|---|---|
| in € thousand | Effect on obligation in 2015/2016 | Effect on obligation in 2014/2015 | |||||
| Change in assumption |
Decrease | Increase | Change in assumption |
Decrease | Increase | ||
| Discount rate | +/– 100 basis points |
28,975 | –22,459 | +/– 100 basis points |
21,889 | –17,286 | |
| Anticipated annual pay increases | +/– 50 basis points |
–1,325 | 1,437 | +/– 50 basis points |
–915 | 991 | |
| Anticipated annual pension increase | +/– 25 basis points |
–4,654 | 4,846 | +/– 25 basis points |
–3,848 | 3,991 | |
| Life expectancy | +/– 1 year | –5,471 | 5,592 | +/– 1 year | –4,489 | 4,563 |
The following undiscounted payments for pensions (with their due dates) are expected in the following years:
| Anticipated payments for pensions | |||||||
|---|---|---|---|---|---|---|---|
| in € thousand | 2015/2016 | ||||||
| Germany | Abroad | Total | |||||
| 2016/2017 | 5,042 | 600 | 5,642 | ||||
| 2017/2018 | 4,979 | 686 | 5,665 | ||||
| 2018/2019 | 4,921 | 789 | 5,710 | ||||
| 2019/2020 | 5,027 | 834 | 5,861 | ||||
| 2020/2021 | 4,941 | 1,083 | 6,024 | ||||
| 2021/2022–2025/2026 | 24,333 | 5,465 | 29,798 |
The weighted average time at which the pension obligations are due is 16.6 (15.2) years in Germany and 17.3 (16.0) years abroad.
Apart from the above-described pension obligations, there are other old-age pension systems. However, no provisions Anticipated payments for pensions
| in € thousand | 2014/2015 | |||||
|---|---|---|---|---|---|---|
| Germany | Abroad | Total | ||||
| 2015/2016 | 5,050 | 535 | 5,585 | |||
| 2016/2017 | 4,948 | 594 | 5,542 | |||
| 2017/2018 | 4,909 | 623 | 5,532 | |||
| 2018/2019 | 4,864 | 751 | 5,615 | |||
| 2019/2020 | 4,986 | 756 | 5,742 | |||
| 2020/2021–2024/2025 | 24,425 | 4,713 | 29,138 |
have to be set up for them, since there are no further obligations above and beyond payment of the contributions (defined contribution plans). These comprise benefits that are funded solely by the employer and allowances for conversion of earnings by employees.
The total pension costs for fiscal 2015/2016 were as follows:
| Pension costs | ||||||
|---|---|---|---|---|---|---|
| in € thousand | 2015/2016 | 2014/2015 | ||||
| Germany | Abroad | Total | Germany | Abroad | Total | |
| Cost for defined contribution plans | 2,266 | 1,302 | 3,568 | 2,070 | 1,095 | 3,165 |
| Service cost for the defined benefit obligations |
787 | 917 | 1,704 | 691 | 698 | 1,389 |
| Pension costs | 3,053 | 2,219 | 5,272 | 2,761 | 1,793 | 4,554 |
In addition, contributions of €13,724 (12,947) thousand were paid to statutory pension insurance institutions.
The costs for defined contribution plans in Germany mainly related to the provident fund backed by a guarantee. The contributions to this pension plan were €2,016 (1,649) thousand. The return and income from the planned assets depend on the reinsurance policy, which yields guaranteed interest of between 1.25% and 2.25%. In addition, the benefit obligation from salary conversion was backed by a guarantee that exactly matches the present value of the obligation of €3,581 (4,048) thousand (defined contribution plan).
The long-term financial borrowings include loans from banks amounting to €228,712 (152,534) thousand. They have remaining maturities through 2025.
| Current liabilities | ||
|---|---|---|
| in € thousand | 06/30/2016 | 06/30/2015 |
| Short-term provisions | 80,914 | 87,355 |
| Current liabilities to banks | 22,684 | 31,857 |
| Current financial liabilities to affiliates | 65 | 308 |
| Other current financial liabilities | 329 | 118 |
| Short-term borrowings | 23,078 | 32,283 |
| Trade payables to affiliates | 0 | 1,108 |
| Trade payables to joint ventures | 45 | 0 |
| Other trade payables | 74,969 | 58,550 |
| Trade payables | 75,014 | 59,658 |
| Tax liabilities | 21,062 | 30,111 |
| Other current financial liabilities | 13,990 | 15,687 |
| Other current liabilities | 60,961 | 56,589 |
| 275,019 | 281,683 | |
| in € thousand | 06/30/2015 | 06/30/2016 | ||||
|---|---|---|---|---|---|---|
| Changes in the consoli dated group, currency |
Addition | Consump tion |
Reversal | |||
| Obligations from sales transactions | 73,152 | –1,249 | 61,121 | 67,463 | 2,677 | 62,884 |
| Obligations from purchase transactions |
5,395 | –1,773 | 1,792 | 788 | 742 | 3,884 |
| Other obligations | 8,808 | 4,242 | 7,869 | 3,452 | 3,321 | 14,146 |
| 87,355 | 1,220 | 70,782 | 71,703 | 6,740 | 80,914 |
The obligations from sales transactions essentially relate to provisions for licenses and returns. The obligations from purchase transactions include provisions for procurement transactions, such as compensation for breeding areas. The other obligations relate to litigation risks and other provisions that cannot be assigned to the group of sales transactions or the group of purchase transactions.
The tax liabilities of €21,062 (30,111) thousand include amounts for the year under review and the period not yet concluded by the external tax audit.
| in € thousand | 06/30/2016 | ||||||
|---|---|---|---|---|---|---|---|
| Nominal volume |
Carrying amounts |
Fair value | Nominal volume |
Carrying amounts |
Fair value | ||
| Currency hedges | 143,735 | 2,027 | 2,027 | 95,003 | 1,182 | 1,182 | |
| Interest-rate hedges | 34,000 | –485 | –485 | 34,000 | –130 | –130 | |
| Commodity hedges | 162 | 9 | 9 | 148 | 0 | 0 | |
| 177,897 | 1,551 | 1,551 | 129,151 | 1,052 | 1,052 |
Of the currency hedges, hedges with a nominal volume of €140,625 (89,248) thousand have a remaining maturity of less than one year, and hedges with a nominal volume of €3,110 (5,755) thousand have a remaining maturity of between one and five years. In the previous year, hedges for interest-rate derivatives with a nominal volume of €19,000 thousand had a remaining maturity of less than one year. Of the interest-rate derivatives, hedges with a nominal volume of €29,000 (0) thousand will mature within one to five years, and hedges with a nominal value of €5,000 (15,000) thousand will mature in more than five years. The commodity hedges have remaining maturities of less than one (one) year.
In general, the fair values of financial assets and liabilities are calculated on the basis of the market data available on the balance sheet date and are assigned to one of the three hierarchy levels in accordance with IFRS 13. The principal market, i.e., the market with the largest volume of trading
and the greatest business activity, is used to calculate the fair value. If this market does not exist for the asset or liabilities in question, the market that maximizes the amount that would be received to sell the asset or minimizes the amount that would be paid to transfer the liability, after taking into account transaction costs, is used. These are active and accessible markets for identical assets and liabilities, where the fair value results from quoted prices that are observable (level 1 input factors). At the KWS Group, this relates to securities in the category "Available-for-sale financial assets", as well as fund shares at banks and other financial assets whose price is likewise quoted in active markets.
The level 2 input factors relate to derivative financial instruments that have been concluded between KWS companies and banks. The prices can thus be derived indirectly from active market prices for similar assets and liabilities. The level 3 input factors cannot be derived from observable market information.
The carrying amounts and fair values of the financial assets (financial instruments), split into the measurement categories in accordance with IAS 39, are as follows:
| in € thousand | Financial instruments | |||||||
|---|---|---|---|---|---|---|---|---|
| Fair values | Carrying amounts | |||||||
| Loans and receivables |
Financial assets held for trading |
Available-for-sale financial assets |
Total carrying amount |
|||||
| Financial assets | ||||||||
| Financial assets | 2,192 | 0 | 0 | 2,192 | 2,192 | |||
| Other noncurrent financial assets |
96 | 0 | 96 | 0 | 96 | |||
| of which derivative financial instruments |
(96) | (0) | (96) | (0) | (96) | |||
| Trade receivables | 293,881 | 293,881 | 0 | 0 | 293,881 | |||
| Securities | 30,679 | 0 | 0 | 30,679 | 30,679 | |||
| Cash and cash equivalents | 133,224 | 133,224 | 0 | 0 | 133,224 | |||
| Other current financial assets | 45,070 | 42,120 | 2,950 | 0 | 45,070 | |||
| of which derivative financial instruments |
(2,950) | (0) | (2,950) | (0) | (2,950) | |||
| Total | 505,142 | 469,225 | 3,046 | 32,871 | 505,142 |
| in € thousand | Financial instruments | ||||
|---|---|---|---|---|---|
| Fair values | Carrying amounts | ||||
| Loans and receivables |
Financial assets held for trading |
Available-for-sale financial assets |
Total carrying amount |
||
| Financial assets | |||||
| Financial assets | 2,465 | 0 | 0 | 2,465 | 2,465 |
| Other noncurrent financial assets |
26 | 0 | 26 | 0 | 26 |
| of which derivative financial instruments |
(26) | (0) | (26) | (0) | (26) |
| Trade receivables | 309,665 | 309,665 | 0 | 0 | 309,665 |
| Securities | 66,973 | 0 | 0 | 66,973 | 66,973 |
| Cash and cash equivalents | 41,211 | 41,211 | 0 | 0 | 41,211 |
| Other current financial assets | 26,732 | 23,756 | 2,976 | 0 | 26,732 |
| of which derivative financial instruments |
(2,976) | (0) | (2,976) | (0) | (2,976) |
| Total | 447,072 | 374,632 | 3,002 | 69,438 | 447,072 |
The fair value of financial assets (equity instruments) measured at amortized costs cannot be reliably determined because there are no active markets. These assets relate to shares in unconsolidated subsidiaries and associated companies. It is assumed that the carrying amounts are the same as the fair values. In addition, the financial assets include securities classified as noncurrent assets, whose fair value is measured by their prices on the stock market (level 1).
The fair value of trade receivables, other current financial assets, and cash and cash equivalents is the same as the carrying amounts as a result of the short time in which these instruments are due.
The fair values of securities classified as current assets are based on the price for them quoted on active markets (level 1).
The fair value of derivative financial instruments is the present values of the payments related to these balance sheet items. These instruments are mainly forward exchange deals. They are measured on the basis of quoted exchange rates and yield curves available from the market data and allowing for counterparty risks (level 2).
The carrying amounts and fair values of the financial liabilities (financial instruments), split into the measurement categories in accordance with IAS 39, are as follows:
| 06/30/2016 | |||||
|---|---|---|---|---|---|
| in € thousand | Financial instruments | ||||
| Fair values | Carrying amounts | ||||
| Financial liabilities measured at amortized cost |
Financial liabilities held for trading |
Disclo sure in acc. with IFRS 7 |
Total carrying amount |
||
| Financial liabilities | |||||
| Long-term borrowings | 233,558 | 228,712 | 0 | 0 | 228,712 |
| of which outstanding purchase price obligations for consolidated subsidiaries |
(0) | (0) | (0) | (0) | (0) |
| Long-term trade payables | 1,413 | 1,413 | 0 | 0 | 1,413 |
| Other noncurrent financial liabilities | 681 | 148 | 533 | 0 | 681 |
| of which derivative financial instruments | (533) | (0) | (533) | (0) | (533) |
| Short-term borrowings | 23,078 | 23,078 | 0 | 0 | 23,078 |
| Short-term trade payables | 75,014 | 75,014 | 0 | 0 | 75,014 |
| Other current financial liabilities | 13,990 | 13,026 | 964 | 0 | 13,990 |
| of which derivative financial instruments | (964) | (0) | (964) | (0) | (964) |
| Total | 347,734 | 341,391 | 1,497 | 0 | 342,888 |
| in € thousand | Financial instruments | ||||||
|---|---|---|---|---|---|---|---|
| Fair values | Carrying amounts | ||||||
| Financial liabilities measured at amortized cost |
Financial liabilities held for trading |
Disclo sure in acc. with IFRS 7 |
Total carrying amount |
||||
| Financial liabilities | |||||||
| Long-term borrowings | 183,428 | 152,534 | 0 | 29,249 | 181,783 | ||
| of which outstanding purchase price obligations for consolidated subsidiaries |
(29,249) | (0) | (0) | (29,249) | (29,249) | ||
| Long-term trade payables | 1,600 | 1,600 | 0 | 0 | 1,600 | ||
| Other noncurrent financial liabilities | 539 | 274 | 265 | 0 | 539 | ||
| of which derivative financial instruments | (265) | (0) | (215) | (0) | (215) | ||
| Short-term borrowings | 32,283 | 32,283 | 0 | 0 | 32,283 | ||
| Short-term trade payables | 59,658 | 59,658 | 0 | 0 | 59,658 | ||
| Other current financial liabilities | 15,687 | 14,003 | 1,684 | 0 | 15,687 | ||
| of which derivative financial instruments | (1,684) | (0) | (1,684) | (0) | (1,684) | ||
| Total | 293,195 | 260,352 | 1,949 | 29,249 | 291,550 |
The fair value of long-term borrowings was calculated on the basis of discounted cash flows. To enable that, interest rates for comparable transactions and yield curves were used (level 2).
The outstanding purchase price obligation for consolidated subsidiaries that was recognized in the previous year must be carried at the present value of the anticipated future purchase price payments for minority interests. This was derived from the anticipated operating income of the subsidiary and a risk-adjusted discount rate (level 3).
Due to the generally short times by which trade payables and other financial liabilities (excluding derivatives) are due, it is assumed that their carrying amounts are equal to the fair value.
None of the reported financial instruments will be held to maturity.
| in € thousand | 06/30/2016 | 06/30/2015 | ||||||
|---|---|---|---|---|---|---|---|---|
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |
| Derivative financial instruments not part of a hedge under IAS 39 |
0 | 3,046 | 0 | 3,046 | 0 | 3,002 | 0 | 3,002 |
| Available-for-sale financial assets | 32,421 | 0 | 0 | 32,421 | 69,104 | 0 | 0 | 69,104 |
| Financial assets | 32,421 | 3,046 | 0 | 35,467 | 69,104 | 3,002 | 0 | 72,106 |
| Derivative financial instruments not part of a hedge under IAS 39 |
0 | 1,497 | 0 | 1,497 | 0 | 1,949 | 0 | 1,949 |
| Financial liabilities | 0 | 1,497 | 0 | 1,497 | 0 | 1,949 | 0 | 1,949 |
The table below presents the net gains/losses carried in the income statement for financial instruments in each measurement category:
| Net gain/losses of financial instruments | ||
|---|---|---|
| in € thousand | 06/30/2016 | 06/30/2015 |
| Available-for-sale financial assets | 47 | 141 |
| Financial assets held for trading | –262 | 2,141 |
| Loans and receivables | –1,349 | 3,854 |
| Financial liabilities measured at amortized cost | –12,228 | –10,644 |
| Financial liabilities held for trading | 1,158 | –1,471 |
The net income from available-for-sale financial assets includes income from equity investments in cooperatives and income from securities.
The net gains from financial assets held for trading and financial liabilities held for trading solely comprise changes in the market value of derivative financial instruments.
The net gain/loss from loans and receivables mainly includes effects from changes in the allowances for impairment.
The net losses from financial liabilities measured at amortized cost result mainly from interest expense.
Interest income from financial assets that are not measured at fair value and recognized in the income statement was €2,278 (1,480) thousand. Interest expenses for financial borrowings were €12,228 (10,644) thousand.
In order to control the credit risk resulting from receivables from customers, a regular creditworthiness analysis is conducted by the responsible credit manager in accordance with the credit volume. Security is available for some of these receivables and is used depending on the local circumstances. This includes, in particular, credit insurance, down payments and guarantees. In general, reservation of ownership of goods is agreed with our customers. Credit limits are defined for all customers. Credit risks from financial transactions are controlled centrally by Corporate Finance/Treasury. In order to minimize risks, financial transactions are exclusively conducted within defined limits with banks and partners who always have an investment grade. Compliance with the risk limits is constantly monitored. The limits are adjusted depending on the credit volume only subject to the approval of the regional or divisional management and the Executive Board.
Liquidity is managed in the eurozone by the central Treasury unit using a cash-pooling system. Liquidity requirements are generally determined by means of cash planning and are covered by cash and promised credit lines.
KWS SAAT SE raised a borrower's note loan for an amount of €70 million for financing purposes in December 2015. The tranches have a maturity of five and seven years; part of the loan has a variable interest rate, but most of it (€43 million) has a fixed interest rate.
There are unutilized credit lines totaling €271 million. The syndicated loan of €200 million runs until October 2019, with the option of extending it up to October 2021. This loan only contains one financial covenant. In the case of financial covenants, the dynamic gearing ratio is used as a financial indicator. Compliance with the covenants is regularly reviewed by KWS SAAT SE's Treasury unit and reported to the banks every quarter in connection with the quarterly and annual financial statements.
The table below shows the KWS Group's liquidity analysis for nonderivative and derivative financial liabilities. The table is based on contractually agreed, undiscounted payment flows:
| in € thousand | Book value | Cash flows | |||
|---|---|---|---|---|---|
| Liquidity analysis of financial liabilities | 06/30/2016 | 06/30/2016 Total |
Due in <1 year |
Due in >1 year and <5 years |
Due in >5 years |
| Financial liabilities | 251,790 | 257,621 | 27,496 | 124,519 | 105,606 |
| Trade payables | 76,427 | 76,427 | 75,014 | 1,202 | 210 |
| Other financial liabilities | 13,174 | 13,174 | 13,026 | 148 | |
| Nonderivative financial liabilities | 341,391 | 347,221 | 115,536 | 125,869 | 105,816 |
| Payment claim | 21,052 | 20,237 | 815 | ||
| Payment obligation | 23,225 | 21,961 | 1,264 | ||
| Derivative financial liabilities | 1,497 | 2,173 | 1,724 | 449 |
| in € thousand | Book value | Cash flows | |||
|---|---|---|---|---|---|
| Liquidity analysis of financial liabilities | 06/30/2015 | 06/30/2015 Total |
Due in <1 year |
Due in >1 year and <5 years |
Due in >5 years |
| Financial liabilities | 214,066 | 237,027 | 42,285 | 138,416 | 56,326 |
| Trade payables | 61,258 | 61,258 | 59,658 | 1,189 | 411 |
| Other financial liabilities | 14,542 | 14,542 | 14,268 | 274 | |
| Nonderivative financial liabilities | 289,866 | 312,827 | 116,211 | 139,879 | 56,737 |
| Payment claim | 40,134 | 39,868 | 266 | ||
| Payment obligation | 43,812 | 43,168 | 644 | ||
| Derivative financial liabilities | 1,949 | 3,678 | 3,300 | 378 |
The cash flows of the derivative financial liabilities mainly relate to forward exchange deals and include both interest payments and redemption payments. These derivative financial instruments are settled in gross.
The following sensitivity analyses show the impact on income and equity. The calculated figures relate to the portfolio at the balance sheet date and show the hypothetical effect for one year.
In order to assess the risk of exchange rate changes, the sensitivity of a currency to fluctuations was determined. After the euro, the US dollar is the most important currency in the KWS Group. All other currencies are of minor importance. The average exchange rate in the fiscal year was 1.11 (1.19) USD/EUR. If the US dollar depreciated by 10%, the financial instruments would be worth €199 (233) thousand. If the US dollar appreciated by 10%, the financial instruments would have a value of €244 (285) thousand. The net income for the year and equity would change accordingly.
Due to seasonally related fluctuations in borrowing requirements, the impact of changes in market interest rates is calculated across the board on the basis of the current interest result.
In order to assess the risk of interest rate changes, the sensitivity of interest rates to fluctuations was determined. The average rate of interest in the fiscal year was negative. An increase in the rate of interest of one percentage point would result in additional interest expense and higher interest income canceling each other out (previous year: additional income of €0.1 million); equity would therefore not be impacted (previous year: an improvement of €0.1 million). A reduction in the rate of interest to zero percentage points would add a further €0.6 (1.1) million in income to the interest result. Equity would increase by €0.4 (0.7) million in the event of such a change in the rate of interest.
The Management Report addresses possible risks resulting from agreements regarding financial dependencies.
As in the previous year, there are no contingent liabilities to report at the balance sheet date.
There was a €13,211 (11,875) thousand obligation from uncompleted capital expenditure projects, mainly relating to property, plant and equipment. The largest item is the obligations from investments of €2.0 million in expanding the greenhouse complex and of €1.9 million in expanding the Forum at Einbeck.
| in € thousand | 06/30/2016 | 06/30/2015 |
|---|---|---|
| Due within one year | 16,520 | 15,063 |
| Due between 1 and 5 years | 21,353 | 20,788 |
| Due after 5 years | 6,002 | 7,530 |
| 43,875 | 43,381 |
The leases relate primarily to full-service agreements for IT equipment and fleet vehicles, which also include services for which a total of €5,556 (4,544) thousand was paid in the year under review. The main leasehold obligations relate to land under cultivation.
| 2015/2016 | 2014/2015 | |||
|---|---|---|---|---|
| in € millions | % of sales | in € millions | % of sales | |
| Net sales | 1,036.8 | 100.0 | 986.0 | 100.0 |
| Cost of sales | 480.9 | 46.4 | 453.5 | 46.0 |
| Gross profit on sales | 555.9 | 53.6 | 532.5 | 54.0 |
| Selling expenses | 196.8 | 19.0 | 189.0 | 19.2 |
| Research & development expenses | 182.4 | 17.6 | 174.6 | 17.7 |
| General and administrative expenses | 76.4 | 7.4 | 74.8 | 7.6 |
| Other operating income | 70.4 | 6.8 | 88.0 | 8.9 |
| Other operating expenses | 57.9 | 5.6 | 68.7 | 7.0 |
| Operating income | 112.8 | 10.9 | 113.4 | 11.5 |
| Net financial income/expenses | 14.8 | 1.4 | 16.7 | 1.7 |
| Result of ordinary activities | 127.6 | 12.3 | 130.1 | 13.2 |
| Taxes | 42.3 | 4.1 | 46.1 | 4.7 |
| Net income for the year | 85.3 | 8.2 | 84.0 | 8.5 |
| Share of minority interest | 0.0 | 0.0 | 1.3 | 0.1 |
| Net income after minority interest | 85.3 | 8.2 | 82.7 | 8.4 |
| By product category | ||||||
|---|---|---|---|---|---|---|
| in € thousand | 2015/2016 | 2014/2015 | ||||
| Certified seed sales | 918,471 | 877,494 | ||||
| Royalties income | 73,006 | 72,626 | ||||
| Basic seed sales | 19,411 | 14,318 | ||||
| Services fee income | 3,513 | 780 | ||||
| Other sales | 22,373 | 20,797 | ||||
| 1,036,774 | 986,015 |
| in € thousand | 2015/2016 | 2014/2015 |
|---|---|---|
| Germany | 223,972 | 223,885 |
| Europe (excluding Germany) | 450,817 | 441,526 |
| North and South America | 282,999 | 254,709 |
| Rest of world | 78,986 | 65,895 |
| 1,036,774 | 986,015 |
For further details of sales, see segment reporting. Sales are recognized when the agreed goods or services have been supplied and the risk and title pass to the buyer. Any rebates or discounts are taken into account.
The cost of sales increased by 6.0% to €480,864 (453,498) thousand, or 46.4% (46.0%) of sales. The total cost of goods sold was €290,480 (272,836) thousand.
The impairment losses on inventories and the decreases in the impairment loss, which are carried as a reduction in the cost of materials in the period, are as follows for each segment:
| July 1 to June 30 | |||
|---|---|---|---|
| in € thousand | Total | ||
| Impairment losses | 9,350 | ||
| Decreases in impairment loss | 6,777 |
The €7,827 thousand increase in selling expenses to €196,818 (188,991) thousand is attributable to the creation and expansion of distribution structures. This is 19.0% of net sales, down from 19.2% the year before.
costs for new varieties are not recognized as an asset because evidence of future economic benefit can only be provided after the variety has been officially certified.
amounted to €182,360 (174.627) thousand. Development
Research and development is recognized as an expense in the year it is incurred; in the year under review, this
General and administrative expenses increased by €1,646 thousand to €76,402 thousand, representing 7.4% of sales, after 7.6% the year before.
| July 1 to June 30 | ||
|---|---|---|
| in € thousand | 2015/2016 | 2014/2015 |
| Income from sales of fixed assets | 445 | 877 |
| Income from the reversal of provisions | 6,748 | 6,427 |
| Exchange rate gains and gains from currency and interest rate hedges | 28,050 | 36,640 |
| Income from reversal of allowances on receivables | 4,636 | 10,852 |
| Performance-based public grants | 5,924 | 4,845 |
| Income relating to previous periods | 8,925 | 8,227 |
| Income from loss compensation received | 132 | 862 |
| Miscellaneous other operating income | 15,512 | 19,230 |
| 70,372 | 87,960 |
The other operating income mainly comprises foreign exchange gains and income from interest rate hedges, as well as income from the reversal of provisions and miscellaneous other operating income. The performance-based government grants mainly relate to breeding allowances and farm payments.
| in € thousand | 2015/2016 | 2014/2015 |
|---|---|---|
| Legal form expenses | 944 | 1,712 |
| Allowances on receivables | 8,263 | 8,478 |
| Counterparty default | 3,293 | 8 |
| Exchange rate losses and losses on currency and interest rate hedges | 28,986 | 44,304 |
| Losses from sales of fixed assets | 1,294 | 717 |
| Expenses relating to previous periods | 1,741 | 1,199 |
| Expense from remeasurement of intangible assets | 239 | 238 |
| Other expenses | 13,178 | 12,030 |
| 57,938 | 68,686 |
In the year under review, allowances for receivables and counterparty defaults of €4,132 (5,644) thousand were recognized as an expense at the Corn Segment, €7,244 (2,591) thousand at the Sugarbeet Segment and €180 (251) thousand at the Cereals Segment.
| July 1 to June 30 | ||
|---|---|---|
| in € thousand | 2015/2016 | 2014/2015 |
| Interest income | 2,618 | 1,480 |
| Interest expenses | 11,679 | 9,709 |
| Income from other financial assets | 44 | 141 |
| Write-down on securities | 0 | 9 |
| Interest effects from pension provisions | 2,547 | 2,518 |
| Interest expense for other long-term provisions | 114 | 158 |
| Financial lease interest expense | 7 | 7 |
| Interest result | –11,685 | –10,780 |
| Result from equity-accounted financial assets | 26,466 | 23,747 |
| Income from equity investments | 3 | 0 |
| Gain from revaluation of the existing shares in SOCIETE DE MARTINVAL S.A. | 0 | 3,722 |
| Net income from equity investments | 26,469 | 27,469 |
| Net financial income/expenses | 14,784 | 16,689 |
Net income from equity investments fell year on year by €1,000 thousand. Income from equity-accounted financial assets rose from €23,747 thousand to €26,466 thousand, but was not able to fully compensate for the non-recurring effect from remeasurement of the existing shares in SOCIETE DE MARTINVAL S.A. Together with an interest
result of €–11,685 (–10,780) thousand, net financial income/expenses fell by €1,905 thousand to €14,784 (16,689) thousand. The interest effects from pension provisions comprise interest expenses (compounding) and the planned income.
Income tax expense is computed as follows:
| Income tax expenses | ||||||
|---|---|---|---|---|---|---|
| in € thousand | 2015/2016 | 2014/2015 | ||||
| Actual income taxes | 40,803 | 51,954 | ||||
| In Germany | 4,666 | 15,723 | ||||
| Abroad | 36,137 | 36,231 | ||||
| Thereof from previous years | –267 | 294 | ||||
| Deferred taxes | 1,468 | –5,896 | ||||
| In Germany | 2,831 | –634 | ||||
| Abroad | –1,363 | –5,262 | ||||
| Income taxes | 42,271 | 46,058 | ||||
KWS pays tax in Germany at a rate of 29.1%. Corporate income tax of 15.0% (15.0%) and solidarity tax of 5.5% (5.5%) are applied uniformly to distributed and retained profits. In addition, trade tax is payable on profits generated in Germany. Trade income tax is applied at a weighted average rate of 13.3% (13.3%), resulting in a total tax rate of 29.1% (29.1%).
The "Law on Tax Measures Accompanying Introduction of the Societas Europaea and Amending Further Tax Regulations" (SEStEG), which was passed at the end of 2006, means that the corporate income tax credit balance at December 31, 2006, can be realized. It will be paid out in ten equal annual amounts from 2008 to 2017. The
German Group companies carried these claims as assets at their present value totaling €2,470 (3,706) thousand at June 30, 2016. A total of €1,236 (1,235) thousand was recovered in the year under review and recognized directly in equity.
The profits generated by Group companies outside Germany are taxed at the rates applicable in the country in which they are based. The tax rates in foreign countries vary between 10.0% (10.0%) and 39.0% (39.0%).
The deferred taxes that are recognized relate to the following balance sheet items and tax loss carryforwards:
| Deferred taxes | |||||
|---|---|---|---|---|---|
| in € thousand | Deferred tax assets | Deferred tax liabilities | |||
| 2015/2016 | 2014/2015 | 2015/2016 | 2014/2015 | ||
| Intangible assets | 786 | 273 | 5,957 | 8,118 | |
| Property, plant and equipment | 612 | 515 | 17,703 | 15,375 | |
| Financial assets | 1,738 | 1,655 | 0 | 1 | |
| Inventories | 8,122 | 9,645 | 1,013 | 187 | |
| Current assets | 1,618 | 4,760 | 4,026 | 3,363 | |
| Noncurrent liabilities | 27,549 | 18,145 | 1,420 | 954 | |
| of which pension provisions | (22,734) | (15,754) | (11) | (92) | |
| Current liabilities | 14,463 | 11,547 | 3 | 87 | |
| Deferred taxes recognized (gross) | 54,888 | 46,540 | 30,122 | 28,085 | |
| Tax loss carryforward | 5,588 | 6,660 | 0 | 0 | |
| Consolidations | 1,249 | 1,119 | 11 | 10 | |
| Setting off | –20,686 | –18,409 | –20,686 | –18,409 | |
| Deferred taxes recognized (net) | 41,039 | 35,910 | 9,447 | 9,686 |
There is a deferred tax expense of €1,616 (1,308) thousand from the allowance for deferred taxes on tax loss carryforwards and temporary differences in the year under review. The write-up of deferred taxes results in deferred tax income of €95 (0) thousand.
No deferred taxes were formed for tax loss carryforwards totaling €24,987 (13,595) thousand that have not yet been utilized. Of these, €4,627 (5,266) thousand must be utilized within a period of 5 years and €5,715 (0) thousand within a
period of nine years. Low carryforwards totaling €14,645 (8,330) thousand can be utilized without any time limit.
No deferred taxes were formed for deductible temporary differences totaling €543 (1,540) thousand.
Temporary differences of €120,336 thousand are connected to shares in subsidiaries for which no deferred tax liabilities are formed pursuant to IAS 12.39.
In the year under review, there were surpluses of deferred tax assets from temporary differences and loss carryforwards totaling €30,677 (13,864) thousand at Group companies that made losses in the past period or the previous period. These were considered recoverable, since it is
assumed that the companies in question will post taxable profits in the future. The fact is taken into account here that the KWS Group may realize income with a delay due to the long-term nature of research and development spending.
The reconciliation of the expected income tax expense to the reported income tax expense is derived on the basis of the consolidated income before taxes and the nominal tax rate for the Group of 29.1% (29.1%), taking into account the following effects. In order to improve clarity, the presentation in the tax reconciliation has been changed and the previous year's figures have been adjusted accordingly.
Other taxes, primarily real estate tax, are allocated to the relevant functions.
| Reconciliation of income taxes | ||
|---|---|---|
| in € thousand | 2015/2016 | 2014/2015 |
| Earnings before income taxes | 127,548 | 130,106 |
| Expected income tax expense1 | 37,148 | 37,861 |
| Reconciliation with the reported income tax expense | ||
| Differences from the Group`s tax rate | 11,709 | 4,228 |
| Effects of changes in the tax rate | –393 | 0 |
| Tax effects from: | ||
| Expenses not deductible for tax purposes and other additions | 4,255 | 6,654 |
| tax-free income | –13,155 | –5,573 |
| other permanent deviations | –330 | –778 |
| Reassessment of the recognition and measurement of deferred tax assets | 3,567 | 3,646 |
| Tax credits | –245 | –313 |
| Taxes relating to previous years | –2,385 | –79 |
| Other effects | 2,100 | 412 |
| Reported income tax expense | 42,271 | 46,058 |
| Effective tax rate | 33.1% | 35.4% |
1 Tax rate in Germany: 29.1%
July 1 to June 30
| in € thousand | 2015/2016 | 2014/2015 |
|---|---|---|
| Wages and salaries | 188,170 | 176,088 |
| Social security contributions, expenses for pension plans and benefits |
44,013 | 40,785 |
| 232,183 | 216,873 |
Personnel costs went up by €15,310 thousand to €232,183 thousand, an increase of 7.1%. The number of employees increased by 152 to 4,843, or by 3.2%.
Compensation increased by 6.9% from €176,088 thousand in the previous year to €188,170 thousand. Social security contributions, expenses for pension plans and benefits were €3,228 thousand higher than in the previous year.
| 2015/2016 | 2014/2015 | |
|---|---|---|
| Germany | 1,908 | 1,868 |
| Europe (excluding Germany) | 1,449 | 1,401 |
| North and South America | 1,280 | 1,234 |
| Rest of world | 206 | 188 |
| Total | 4,843 | 4,691 |
1 Annual average
With our joint ventures, associated company and joint operation consolidated proportionately, the number of employees was 5,472 (5,322). The reported number of employees is greatly influenced by seasonal labor.
KWS has established a share program for employees. All employees who have been with the company for at least one year without interruption and have a permanent employment relationship that has not been terminated at a KWS Group company that participates in the program are eligible to take part. That also includes employees who are on maternity leave or parental leave or who are in semi-retirement.
Each employee can acquire up to 500 shares. A bonus of 20% is deducted from the purchase price, which depends on the price applicable on the key date. The shares are subject to a lock-up period of four years beginning when they are posted to the employee's securities account. The right to a dividend, if KWS SAAT SE pays one out, exists during the lock-up period. Holders can also exercise their right to participate in the Annual Shareholders' Meeting during the lock-up period. They can dispose freely of the shares after the lock-up period.
A total of 7,541 (9,878) shares were repurchased for the Employee Share Program at a total price of €1,952 (2,684) thousand in the year under review. The total cost for issuing shares at a reduced price was €311 thousand in the past fiscal year (previous year: €566 thousand).
The stock-based compensation plans awarded at the KWS Group are recognized in accordance with IFRS 2 "Share-based Payment." The incentive program, which was launched in fiscal 2009/2010, involves stock-based payment transactions with cash compensation, which are measured at fair value at every balance sheet date. Members of the Executive Board are obligated to acquire shares in KWS SAAT SE every year in a freely selectable amount ranging between 20% and 50% of the gross performance-related bonus. Along with that, all members of the second management level can likewise take part in an LTI program. As part of this program, they are obligated to invest in shares in KWS SAAT SE every year in a freely selectable amount ranging between 10% and 40% of the gross performance-related bonus. The members of the Executive Board and the second management level may sell these shares at the earliest after a regular holding period of five years beginning at the time they are acquired (end of the quarter in which the shares were acquired). The entitled persons are paid a long-term incentive (LTI) in the form of cash compensation after the holding period for the tranche in question. Its level is calculated on the basis of KWS SAAT SE's share performance and on the KWS Group's return on sales (ROS), measured as the ratio of operating income to net sales, over the holding period. For persons with contracts as of July 1, 2014, the cash compensation for members of the Executive Board is a maximum of one-and-half times (for the Chief Executive Officer two times), and for members of the second management level a maximum of two times their own investment (LTI cap). The costs of this compensation are recognized in the income statement over the period and were €510 (1,044) thousand in the period under review. The provision for it at June 30, 2016, was €2,680 (2,170) thousand. The LTI fair values are calculated by an external expert.
The KWS Group's net income for the year was €85,277 (84,048) thousand on operating income of €112,764 (113,417) thousand and net financial income/expenses of €14,784 (16,689) thousand. The return on sales fell slightly to 8.2% (8.5%). Net income for the year after minority interest was €85,261 (82,712) thousand. Earnings per share in the year under review were €12.92 (12.53).
The cash flow statement, which has been prepared according to IAS 7, shows the changes in cash and cash equivalents of the KWS Group in the three categories of operating activities, investing activities and financing activities. The effects of exchange rate changes and changes in the consolidated group have been eliminated from the respective balance sheet items, except those affecting cash and cash equivalents.
The cash proceeds from operating activities are substantially determined by cash earnings. In the year under review they were €107,297 (92,063) thousand. The proportion of cash earnings included in sales was 10.3% (9.3%). Lower working capital tie-up and higher liabilities meant that there were net cash proceeds of €26,973 thousand. The cash proceeds from operating activities also include interest income of €2,609 (1,479) thousand and interest expense of €7,871 (6,843) thousand. Income tax payments amounted to €46,916 (69,967) thousand. The dividends received from the joint ventures are also carried here and total €25,682 (12,157) thousand.
A net total of €92,174 (123,761) thousand was required to finance investing activities. An amount of €97,444 (86,576) thousand was paid for intangible and tangible assets and an amount of €266 (7,535) thousand for financial assets. Some €25,262 thousand was paid out to obtain the trait licensing agreements. There were total cash receipts of €1,536 (2,077) thousand for disposals of assets. There were cash receipts of €4,000 thousand from the disposal of business units. A total of €31,727 thousand was paid to acquire shares in consolidated companies and other business units in the previous year.
Financing activities resulted in cash proceeds of €21,385 thousand (previous year: cash proceeds of €48,398 thousand). The dividend payments to parent shareholders and other shareholders comprise the dividends of €19,800 (19,800) thousand paid to the shareholders of KWS SAAT SE, as well as acquisition of the minority interest in Brazil of €27,086 thousand. In addition, net borrowings totaling €68,600 (68,198) thousand were raised.
Of the changes in cash and cash equivalents caused by exchange rate, consolidated group and measurement changes, a total of €–1,161 (6,879) thousand results from exchange rate-related adjustments.
As in previous years, cash and cash equivalents are composed of cash (on hand and balances with banks) and current available-for-sale securities.
KWS SAAT SE posted operating income of €18,149 thousand compared with €–23,242 thousand for the previous year. Allowing for net financial income/expenses of €17,991 (45,017) thousand and an extraordinary income of €67,617 (0) thousand resulting from the merger with KWS MAIS GMBH as well as income taxes totaling €3,032 (2,108) thousand, net income in accordance with the German commercial law regulations was €100,725 (19,667) thousand. Adding the net profit of €66 (199) thousand brought forward from the previous year, a net retained profit of €100,791 thousand is available for distribution.
A proposal will be made to the Annual Shareholders' Meeting that, of KWS SAAT SE's net retained profit, an amount of €80,950 thousand should be allocated to the revenue reserves and €19,800 thousand should be distributed as a dividend of €3.00 (3.00) for each of the 6,600,000 shares.
The balance of €41 (66) thousand is to be carried forward to the new account.
The compensation of the members of the Supervisory Board consists of a fixed and a variable component, with the variable component being limited to the level of the fixed compensation. As in the previous year, the total compensation for members of Supervisory Board amounts to €516 (516) thousand, excluding value-added tax. Some €238 (238) thousand of the total compensation is performance-related.
In fiscal year 2015/2016, total Executive Board compensation amounted to €3,531 (3,803) thousand. The variable compensation, which is calculated on the basis of the net profit for the period of the KWS Group, is made up of a bonus and a long-term incentive. The bonus totals €1,602 (1,779) thousand; there are contributions from the long-term incentive tranche for 2014/2015 totaling €558 thousand (tranche for 2013/2014: €670 thousand).
Compensation of former members of the Executive Board and their surviving dependents amounted to €1,334 (1,693) thousand. Pension provisions recognized for this group of persons amounted to €8,027 (7,131) thousand as of June 30, 2016, before being netted off with the relevant planned assets.
Dr. Arend Oetker indirectly holds a total of 1,694,587 (1,650,010) shares and Dr. Andreas J. Büchting 108,030 (108,030) shares in KWS SAAT SE. The members of the Supervisory Board hold a total of 1,803,317 (1,758,735) shares in KWS SAAT SE.
All together, the members of the Executive Board hold 16,107 (14,445) shares in KWS SAAT SE.
Transactions with related parties in accordance with IAS 24 are all business dealings that are conducted with the reporting entity by entities or natural persons or their close family members, if the party or person in question controls the reporting entity or is a member of its key management personnel, for example. There were no business transactions or legal transactions that required reporting for this group of persons in fiscal 2015/2016. As part of its operations, KWS procures goods and services worldwide from a large number of business partners. They also include companies in which KWS has an interest and on which representatives of KWS' Supervisory Board exert a significant influence. Business dealings with these companies are always conducted on an arm's-length basis and are not material in terms of volume. As part of Group financing, short- and medium-term term loans are taken out from, and granted to, subsidiaries at market interest rates. The compensation that has to be disclosed in accordance with IAS 24 for management in key positions at the Group comprises remuneration for the active Executive Board and the Supervisory Board. It is presented in the Group Management Report. No other related parties have been identified for whom there is a special reporting requirement under IAS 24.
The following subsidiaries with the legal form of a corporation within the meaning of Section 264 (3) of the German Commercial Code (HGB) have utilized the exemption provided in Section 264 (3) of the German Commercial Code (HGB) as regards preparation of financial statements and publication:
| Related parties | ||||||||
|---|---|---|---|---|---|---|---|---|
| in € thousand | Deliveries and services provided |
Received deliveries and services |
Receivables | Payables | ||||
| 2015/2016 | 2014/2015 | 2015/2016 | 2014/2015 | 06/30/2016 | 06/30/2015 | 06/30/2016 | 06/30/2015 | |
| Unconsolidated subsidiaries |
0 | 0 | 0 | 0 | 330 | 0 | 0 | 0 |
| Equity-accounted joint ventures |
4,891 | 6,196 | 16,319 | 15,205 | 17,323 | 6,394 | 0 | 22 |
| Joint operation | 1,862 | 1,691 | 6,925 | 6,812 | 439 | 0 | 0 | 1,086 |
| Other related parties | 0 | 0 | 132 | 132 | 0 | 0 | 0 | 0 |
On December 17, 2015, the Annual Shareholders' Meeting of KWS SAAT SE elected the accounting firm Deloitte GmbH, Hanover, to be the Group's auditors for fiscal year 2015/2016.
| in € thousand | 2015/2016 | 2014/2015 |
|---|---|---|
| a) Audit of the consolidated financial statements |
674 | 741 |
| b) Other certification services | 0 | 2 |
| c) Tax consulting | 0 | 0 |
| d) Other services | 109 | 52 |
| Total fee paid | 783 | 795 |
For fiscal year 2016/2017, fees for consulting services (excluding auditing) of up to €75 thousand are expected.
KWS SAAT SE has issued the declaration of compliance with the German Corporate Governance Code required by Section 161 Aktiengesetz (AktG – German Stock Corporation Act) and made it accessible to its shareholders on the company's home page at www.kws.com/ir.
| Supervisory Board | |
|---|---|
| Members | Mandates |
| Dr. Drs. h.c. Andreas J. Büchting Einbeck Agricultural Biologist Chairman of the Supervisory Board of KWS SAAT SE |
Membership of comparable German and foreign oversight boards: ■ Member of the Board of Directors of Ball Horticultural Company, West Chicago, Illinois (U.S.) |
| Dr. Arend Oetker Berlin Businessman Managing Partner of Kommanditgesellschaft Dr. Arend Oetker Vermögensverwaltungsgesellschaft mbH & Co., Berlin Deputy Chairman of the Supervisory Board of KWS SAAT SE |
Membership of other legally mandated Supervisory Boards: ■ Schwartauer Werke GmbH & Co. KGaA, Bad Schwartau (Chairman) ■ Cognos AG, Hamburg (Chairman) Membership of comparable German and foreign oversight boards: ■ Leipziger Messe GmbH, Leipzig |
| Hubertus von Baumbach Ingelheim am Rhein Businessman Chairman of the Board of Managing Directors of C. H. Boehringer Sohn AG & Co. KG, Ingelheim am Rhein Jürgen Bolduan Einbeck Seed Breeding Employee Chairman of the Central Works Council of KWS SAAT SE |
|
| Cathrina Claas-Mühlhäuser Frankfurt am Main Businesswoman Chairwoman of the Supervisory Board of CLAAS KGaA mbH, Harsewinkel |
Membership of other legally mandated Supervisory Boards: ■ CLAAS KGaA mbH, Harsewinkel (Chairwoman) Membership of comparable German and foreign oversight boards: ■ CLAAS KGaA mbH, Harsewinkel (Deputy Chairwoman of the Shareholders' Committee) |
| Dr. Berthold Niehoff Einbeck Agricultural Scientist Employee Representative |
| Supervisory Board Committees | |||
|---|---|---|---|
| Committee | Chairman | Members | |
| Audit Committee | Hubertus von Baumbach | Andreas J. Büchting Jürgen Bolduan |
|
| Committee for Executive Board Affairs |
Andreas J. Büchting | Arend Oetker Cathrina Claas-Mühlhäuser |
|
| Nominating Committee | Andreas J. Büchting | Arend Oetker Cathrina Claas-Mühlhäuser |
| Members | Mandates |
|---|---|
| Dr. Hagen Duenbostel Einbeck Chief Executive Officer Corn, Corporate Development and Communication, Corporate Compliance |
Membership of comparable German and foreign oversight boards: ■ Hero AG, Lenzburg, CH (Member of the Board of Administration) |
| Dr. Léon Broers Einbeck Research and Breeding |
|
| Dr. Peter Hofmann Einbeck Sugarbeet, Cereals, Marketing |
|
| Eva Kienle Göttingen Finance, Controlling, Global Services, IT, Legal, Human Resources |
We declare to the best of our knowledge that the consolidated financial statements give a true and fair view of the assets, financial position and earnings of the Group in compliance with the generally accepted standards of consolidated accounting, and that an accurate picture of the course of business, including business results, and the Group's situation is conveyed by the Group Management Report, which is combined with the Management Report of KWS SAAT SE, and that it describes the main opportunities and risks of the Group's anticipated development.
Einbeck, September 27, 2016 KWS SAAT SE THE EXECUTIVE BOARD
H. Duenbostel L. Broers
E. Kienle P. Hofmann
We have audited the annual financial statements of the KWS Group – consisting of the balance sheet, the statement of comprehensive income, the notes, the cash flow statement, segment reporting and the statement of changes in equity – and the Combined Group Management Report for the fiscal year from July 1, 2015, to June 30, 2016, all of which were prepared by KWS SAAT SE, Einbeck. The preparation of the consolidated financial statements and the Group Management Report according to the International Financial Reporting Standards (IFRS) as applicable in the EU, and in addition according to the commercial law regulations to be applied pursuant to Section 315a (1) HGB (German Commercial Code), is the responsibility of the Executive Board of the company. Our task is to give, on the basis of the audit we have conducted, an opinion on the consolidated financial statements and the Group Management Report.
We conducted our audit of the annual financial statements in accordance with Section 317 HGB and the generally accepted standards for the audit of financial statements promulgated by Institut der Wirtschaftsprüfer (the German Institute of Certified Public Accountants). According to these standards, the audit must be planned and executed in such a way that misstatements and violations materially affecting the presentation of the view of the assets, financial position and earnings conveyed by the consolidated financial statements, taking into account the applicable regulations on orderly accounting, and by the Group Management Report are detected with reasonable certainty. Knowledge of the business activities and the economic and legal operating environment of the Group and evaluations of possible errors are taken into account. The effectiveness of the internal accounting control system and the evidence supporting the disclosures in the consolidated financial statements and the Group Management Report are evaluated mainly on
the basis of test samples within the framework of the audit. The audit includes the assessment of the annual financial statements of the companies included in the consolidated financial statements, the definition of the companies consolidated, the accounting and consolidation principles used and any significant estimates made by the Executive Board, as well as the evaluation of the overall presentation of the consolidated financial statements and the Group Management Report. We believe that our audit provides a reasonable basis for our opinion.
On the basis of our audit, we have no reservations to note.
In our opinion, pursuant to the findings gained during the audit, the consolidated financial statements of KWS SAAT SE, Einbeck, comply with the IFRS as applicable in the EU, and in addition with the commercial law regulations to be applied pursuant to Section 315a (1) HGB, and give a true and fair view of the assets, financial position and earnings of the Group, taking into account these regulations. The Group Management Report accords with the consolidated financial statements, conveys overall an accurate view of the Group's position and accurately presents the opportunities and risks of future development.
Hanover, September 27, 2016
Deloitte GmbH Wirtschaftsprüfungsgesellschaft
Auditor Auditor
(Kompenhans) (Römgens)
| Date | |
|---|---|
| November 24, 2016 | Report on the 1st quarter of 2016/2017 |
| December 15, 2016 | Annual Shareholders' Meeting in Einbeck |
| March 7, 2017 | Report on the 2nd quarter of 2016/2017 |
| May 23, 2017 | Report on the 3rd quarter of 2016/2017 |
| October 26, 2017 | Publication of 2016/2017 financial statements, annual press and analyst conference in Frankfurt |
| November 23, 2017 | Report on the 1st quarter of 2017/2018 |
| December 14, 2017 | Annual Shareholders' Meeting |
| Key data of 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 |
Grimsehlstrasse 31 P.O. Box 1463 37555 Einbeck Germany
Phone +49 (0)5561 311 0 Fax +49 (0)5561 311 322 [email protected] www.kws.com
This translation of the original German version of the Annual Report has been prepared for the convenience of our English-speaking shareholders. The German version is legally binding.
Photos/illustrations:
Uwe Aufderheide ■ Hollis Bennett ■ Dirk-Andre Betz ■ Eberhard Franke ■ Frank Stefan Kimmel ■ Landpixel ■ Julia Lormis ■ Dominik Obertreis ■ Spieker Fotografie ■ KWS Group archive
KWS SAAT SE Grimsehlstrasse 31 P.O. Box 1463 37555 Einbeck/Germany www.kws.com
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