KWS SAAT SE & Co. KGaA

Interim / Quarterly Report • Feb 26, 2009

Semiannual Report of the KWS Group Fiscal Year 2008/2009

July 1 to December 31, 2008

Interim management report

Dear shareholders and friends of KWS,

Seed business in the months of October to December is characterized by low net sales, since our main products – corn and sugarbeet – are not sown until the spring season. Costs, on the other hand, are spread evenly over the fiscal year. This means that operating income for the first half of the year is typically negative. It nevertheless improved over the previous year thanks to successful business with cereals and rapeseed. We expect good sales opportunities for the spring sowing season above all in the corn segment.

Business development in the first six months

Net sales at the KWS Group rose in the first half of fiscal 2008/2009 by almost 30% year-on-year to €141.8 (110.3)* million. This was largely due to successful expansion of our sales in the cereals segment, with the hybrid rye business of KWS LOCHOW again driving growth. We achieved further increases in net sales with our winter rapeseed varieties. Seed sales in our main segments of corn and sugarbeet are comparatively low in the first two quarters due to the times at which these crops are sown. Most of our sales activities do not begin until the spring season. Sales revenue from our potato joint venture van Rijn – KWS B.V. is included in the consolidated semiannual report for the first time and is reported under the breeding & services segment.

Net sales at the KWS Group in the first six months usually account for just under 1/5 of the annual total. In light of this, the figures in the semiannual report as of December 31 are of limited value in drawing conclusions about the overall trend for fiscal 2008/2009.

Operating income (EBIT) in the first half of the year improved by €5.7 million to € –39.9 (–45.6) million as a result of the increase in net sales. This improvement was primarily attributable to the profitable cereals business. Research and development expenditure in the first six months was €43.1 (38.9) million.

* The figures in parentheses are those for the previous year

Finance income/expenses includes interest income from the net cash balance at June 30, 2008, and interest expense from financing the company's operations. The applicable discount rate of 6.4% (5.0%) for measuring pension provisions reduced net interest expense by around €0.5 million more than in the same period of the previous year. In the previous year, financial income/expenses also included the profit from the sale of our previous potato activities. The figure for income taxes was obtained by applying the effective tax rate planned for the fiscal year as a whole to the pre-tax profits for the half year.

Income statement

	2nd quarter		1st half year
€ millions	2008/2009	Prev. year	2008/2009	Prev. year
Net sales	59.0	48.4	141.8	110.3
Operating income Net financial income/expenses	–28.7 –2.2	–30.3 –0.9	–39.9 –2.1	–45.6 4.8
Result of ordinary activities	–30.9	–31.2	–42.0	–40.8
Income taxes	–7.0	–9.8	–11.8	–15.7
Net income for the period	–23.9	–21.4	–30.2	–25.1
Minority interest	–0.1	0.4	2.7	1.7
Net income after minority interest	–23.8	–21.8	–32.9	–26.8
Earnings per share (€)	–3.61	–3.30	–4.98	–4.06

The individual segments

The area used for sowing cereals in Europe remained largely stable in 2008, despite lower prices for cereals for consumption compared with the 2007 calendar year. In this environment, net sales in the cereals segment rose by 35% in the first six months to €74.2 (54.8) million. This is almost completely attributable to successful hybrid rye sales. While there was a slight decline in winter wheat sales in Germany and France, sales volumes for barley developed positively. Earnings in the first half year in the cereals segment were €18.8 (10.7) million. However, since the costs are spread evenly over the fiscal year and the segment has already generated the main portion of its net sales, income will weaken considerably over the year as a whole.

The corn segment posted a year-on-year increase in net sales of just over 20% to €37.7 (30.5) million, around 40% of which came from winter rapeseed. Despite a slight reduction in cultivation area for rapeseed in the EU 27, we were able to grow net sales as a result of higher prices for hybrid varieties. For the first time, more than 50% of rapeseed sales came from high-yielding hybrid varieties. The slight net sales of corn in the first half of the year were made in Latin America and were also due to early orders from Europe and North America. The sales season in the main markets of this segment begins in the third quarter. The already announced increase in the cost of sales for seed production is reflected in the corn segment's income in the first half of the year. Consequently, it was € –23.5 million at December 31, down slightly from the previous year's € –22.9 million, despite the increase in net sales.

The sugarbeet segment posted net sales of €20.2 (21.4) million in the first six months. Slight declines were recorded only in the first quarter. Income at the segment fell to € –13.9 (–10,7) million. There were higher expenses compared with the previous year as a result of negative currency influences and allowances on receivables.

For the first time, the breeding & services segment included net sales of the seed potato business of our Dutch joint venture van Rijn – KWS as well as farm revenues, resulting in an increase to €9.7 (3.6) million. The main business season for potatoes starts in the spring of 2009. Despite higher expenditures in research and development, the segment's income of €-21.3 (-22.7) million was also aided by a rise in royalties from the successful cereals business.

Capital expenditure

In the first six months, KWS invested €14.3 (14.8) million in property, plant and equipment. It is therefore showing capital expenditure well above depreciation of €7.7 (7.2) million. Most of the investments in property, plant and equipment in the first half of the year were made in the corn segment. New drying, processing and storage capacities were created in Romania, Ukraine, Turkey and the U.S. Our new joint venture van Rijn – KWS B.V., which is proportionately consolidated in the breeding & services segment, resulted in additions to fixed assets of €17.7 million.

Out of total capital expenditure of €32.8 (15.6) million within the KWS Group, 68% was in the breeding & services segment, 23% in the corn segment, 5% in the sugarbeet segment and 4% in the corn segment.

	2nd quarter		1st half year
€ millions	2008/2009	Prev. year	2008/2009	Prev. year
Net sales	59.0	48.4	141.8	110.3
Segments: Sugarbeet Corn Cereals Breeding & services	15.4 17.3 18.1 8.2	15.0 13.2 18.5 1.7	20.2 37.7 74.2 9.7	21.4 30.5 54.8 3.6
Operating income	–28.7	–30.3	–39.9	–45.6
Segments: Sugarbeet Corn Cereals Breeding & services	–8.8 –15.0 4.1 –9.0	–9.1 –13.5 4.3 –12.0	–13.9 –23.5 18.8 –21.3	–10.7 –22.9 10.7 –22.7
Capital expenditure	6.1	7.4	32.8	15.6
Segments: Sugarbeet Corn Cereals Breeding & services	1.2 2.2 0.6 2.1	1.5 0.9 1.0 4.0	1.8 7.4 1.3 22.3	3.4 3.8 2.3 6.1

Segment report

Basis of accounting and reporting

The KWS Group is a consolidated group as defined in the International Financial Reporting Standards (IFRSs) published by the International Accounting Standards Board (IASB), London, taking into account the interpretations of the International Financial Reporting Interpretations Committee (IFRIC). The semiannual financial statements of the KWS Group were prepared in accordance with IAS 34, and have not been examined by an auditor or undergone a complete statutory audit. Exactly the same accounting methods applied in the preparation of the consolidated financial statements as of June 30, 2008, were used. The Notes appended to the annual financial statements as of June 30, 2008, therefore apply accordingly. The income taxes were calculated on the basis of the individual country-specific income tax rates, taking account of the planning for the fiscal year as a whole.

Companies consolidated in the KWS Group

The consolidated semiannual financial statements of the KWS Group include the separate financial statements of KWS SAAT AG and its subsidiaries in Germany and other countries in which it directly or indirectly controls more than 50% of the voting rights. In addition, joint ventures are proportionately consolidated, according to the percentage of equity held in those companies. 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.

The companies consolidated in the KWS Group at July 1, 2008, grew with the inclusion of our joint venture van Rijn – KWS B.V., Poeldijk, Netherlands, and its four subsidiaries. As a result, a total of 42 companies will be fully consolidated and eight proportionately consolidated in 2008/2009.

€ millions	December 31, 2008	June 30, 2008
Assets
Intangible assets	52.4	34.5
Property, plant and equipment	163.2	157.1
Other financial assets	5.5	5.5
Noncurrent tax assets	6.3	7.1
Deferred tax assets	19.6	16.9
Noncurrent assets	247.0	221.1
Inventories and biological assets	191.9	85.8
Trade receivables	87.2	224.2
Marketable securities	12.9	18.0
Cash and cash equivalents	74.3	95.0
Current tax assets	30.8	7.1
Other current assets	44.8	19.9
Current assets	441.9	450.0
Total assets	688.9	671.1
Capital reserve Retained earnings Minority interests	5.5 312.1 22.2	5.5 351.8 20.9
Equity	359.6	398.0
Long-term provisions	60.0	60.9
Long-term borrowings	2.5	2.6
Trade payables	2.0	2.0
Deferred tax liabilities	17.3	13.8
Other long-term liabilities	10.8	11.3
Noncurrent liabilities	92.6	90.6
Short-term provisions	75.4	88.2
Short-term borrowings	38.1	3.9
Trade payables	68.2	36.9
Current tax payables	21.7	22.6
Other liabilities	33.3	30.9
Current liabilities	236.7	182.5
Liabilities	329.3	273.1
Total equity and liabilities	688.9	671.1

The increase in inventories is due to the inclusion of the new harvest of 2008 and its processing to produce certified seed for sale. Thanks to the good quality, the adjustments required were €0.7 million, better than the previous year's figure of € –1.4 million.

Our accounts receivable management proved successful, despite the financial crisis and growth in net sales. Trade receivables at December 31 were €87.2 (70.1) million compared with €224.2 (204.2) million at June 30, on sales that increased by €31.5 million to €141.8 million. Cash and cash equivalents fell in the first 6 months by €25.7 million to €87.2 million and, together with the raising of additional short-term loans of €34.2 million, resulted in a net balance of €46.6 million at December 31, 2008.

The current tax assets are €23.7 (18.8) million higher than at June 30, 2008, due to entitlements to a tax refund as a result of the negative earnings for the half year. The increase in other current assets of €19.9 (16.0) million to €44.8 (31.0) million is mainly due to payments on account.

		1st half year
€ millions	2008/2009	Previous year
Net income for the period	–30.2	–25.1
Cash earnings Funds tied up in net current assets	–25.2 8.9	–19.4 37.9
Net cash from operating activities	–16.3	18.5
Net cash from investing activities	–31.3	–4.0
Net cash from financing activities	21.8	13.5
Change in cash and cash equivalents	–25.8	28.0
Cash and cash equiv.s at beginning of period	112.9	68.1
Changes in cash and cash equivalents due to exchanging rate, consolidated group and
measurement changes	0.1	–4.2
Cash and cash equivalents at end of period	87.2	91.9

Cash Flow Statement

Net cash from operating activities fell to € –16.3 (18.5), primarily due to additional seed inventories.

The net cash from investing activities was greatly impacted by acquisition of the potato activities in van Rijn – KWS B.V. In contrast, there was only a slightly negative cash flow in the previous year as a result of the sale of our previous potato activities.

€ millions	Group interests	Minority interests	Group equity
Balance as at June 30, 2007	346.1	20.0	366.1
Dividends paid	–9.2	–0.4	–9.6
Changes in consolidation scope	0.0	0.0	0.0
Other changes	0.0	0.0	0.0
Consolidated net profit	–26.8	1.7	–25.1
Other gains (losses)	–6.7	–0.1	–6.8
Total consolidated gains (losses)	–33.5	1.6	–31.9
Balance as at December 31, 2007	303.4	21.2	324.6
Balance as at June 30, 2008	377.1	20.9	398.0
Dividends paid	–11.2	–0.7	–11.9
Changes in consolidation scope	0.0	0.0	0.0
Other changes	0.0	0.0	0.0
Consolidated net profit	–32.9	2.7	–30.2
Other gains (losses)	4.4	–0.7	3.7
Total consolidated gains (losses)	–28.5	2.0	–26.5
Balance as at December 31, 2008	337.4	22.2	359.6

Statements of Changes in Equity of the KWS Group

The changes in equity reflect the negative profit for the half year. Minority interests rose due to the good earnings from cereals. Pursuant to the resolution adopted by the Annual Shareholders' Meeting on December 16, 2008, KWS SAAT AG paid a dividend of €1.70 per share to its shareholders, i.e. a total of €11.2 million. The other gains include €3.7 million of equity capital increases with no effect on profits, while there had been a reduction of €6.8 million in the same period of the previous year. This is attributable in particular to the stronger US dollar in the second quarter.

Employees
	1st half year
	2008/2009	Previous year
Germany	1,262	1,173
Europe (excluding Germany)	649	537
Americas	1,132	993
Other countries	104	57
Total	3,147	2,760

The workforce was expanded significantly in the first half of the year. At the end of the second quarter on December 31, the KWS Group employed 3,147 (2,760) people worldwide. This level is to be retained over the further course of the fiscal year. The larger workforce benefits our research and development activities, among other areas.

Outlook for fiscal 2008/2009

We expect the corn segment to increase its net sales by around 10% over the previous year (€328.9 million), in particular as a result of the continuing positive trends in our growth markets of North America and Southeastern Europe. Given this, we will probably be able to maintain the previous year's income of €23.2 million, despite the higher cost of sales and any allowances for receivables in sales regions where liquidity is weak.

The reform of the Sugar Market Regime has almost been completed and so we expect to see seed business in the EU 27 stabilize at the sugarbeet segment. We assume that we will be able to grow our business again slightly in Germany, while there will be a negative impact in France as a result of greater competitive pressure. Apart from that, our Roundup Ready varieties will be able to significantly increase their market share again in North America. However, the additional contribution margins from this innovative technology flow mainly to the breeding & services segment as royalties.

Particularly in Eastern Europe, our sales opportunities are suffering under the effects of the financial crisis. As far as can be seen at present, net sales in the sugarbeet segment will improve slightly over the previous year (€194.8 million), but segment income will fall significantly as a result of negative currency effects and the need to make allowances for receivables.

Due to the already mentioned positive course of business, we expect the cereals segment to increase its net sales by around 20% and improve its income by some 35%.

Despite greater expenditure for research and breeding, income at the breeding & services segment will improve significantly as a result of increasing internal royalties, in particular for the marketing of the Roundup Ready trait in the U.S.

We still assume that the KWS Group will grow its net sales by 10% over the previous year (€599.1 million) and post operating income (EBIT) on a par with the previous year (€70.1 million).

Forecast report

Above and beyond the opportunities and risks described in the 2007/2008 Annual Report, we currently see the following factors that may potentially have an impact on our business:

Risks

In the second half of the calendar year 2008, the global credit sector was hit hard by the crisis in the intermeshed financial markets. As a consequence, there was a sharp reduction in the availability of bank loans. The upshot was general liquidity problems that also caused prices to fall rapidly on the commodity markets. KWS is feeling this particularly in Southeastern and Eastern Europe. Apart from higher losses of receivables, there are exchange rate risks at the reporting date because of local currencies trending weaker.

In the course of the past year, the German Federal Office of Consumer Protection and Food Safety (BVL) suspended approval for a number of common pesticides for treating seed. On February 9, 2009, the BVL reinstated the approval of Mesurol. Nevertheless, the directive to suspend approval for other agents remains in force. That poses the risk for KWS of a loss of value created from the way we treat our products.

Opportunities

The Renewable Energy Sources Act 2009 came into effect on January 1, 2009. It stipulates an entitlement to payment for a period of 20 years for anyone generating power from renewable energies. It creates an incentive to further expand the feeding of biogas into existing natural gas networks. This brings with it the chance that there will be stronger long-term demand for energy plants.

Declaration by legal representatives (Responsibility Statement)

We declare to the best of our knowledge that these interim consolidated financial statements give a true and fair view of the assets, financial position and earnings of the KWS Group in compliance with the accounting principles applicable to interim reporting, and that an accurate picture of the course of business, including business results, and the Group's situation is conveyed by the interim group management report, and that it describes the main opportunities and risks of the KWS Group's anticipated development.

Einbeck, February 26, 2009

KWS SAAT AG

The Executive Board

Philip von dem Bussche Christoph Amberger

Hagen Duenbostel Léon Broers

Financial calendar

May 28, 2009	Report on the 3rd quarter 2008/2009
October 29, 2009	Annual press conference in Hanover; Analyst conference in Frankfurt
December 17, 2009	Annual Shareholders' Meeting in Einbeck

KWS SAAT AG

Grimsehlstrasse 31 37555 Einbeck P.O. Box 14 63 Phone: +49 5561/311-0 Fax: +49 5561/311-322 www.kws.com e-mail: info@kws.com