KWS SAAT AG continues its growth in the first half of 2008/2009

(Einbeck, February 26, 2009/No.5/gf) – KWS SAAT AG (ISIN: DE 0007074007), one of the leading international seed companies, increased its consolidated net sales in the first half of fiscal 2008/2009 (which ends on June 30) by almost 30 percent to €141.8 (110.3)* million. The sales of cereals seed developed particularly well. “The hybrid rye business of KWS LOCHOW again drove growth,” said Hagen Duenbostel, CFO of KWS SAAT AG, about the Group’s performance. “Our winter rapeseed varieties also showed increases in net sales.” Sales revenue from the new potato joint venture Van Rijn–KWS B.V. is included in the KWS Group for the first time.

KWS’ seed business is characterized by seasonal fluctuations. While costs are spread relatively evenly over the year, most sales are generated in the third quarter. The crops that account for by far the largest net sales – corn and sugarbeet – are not sown until the spring season. Seen as an average over many years, KWS generates just under 20 percent of its annual revenue in the months July to December. As a result, income for the first half of the year is typically negative, and KWS does not pass the break-even point until the third quarter. In the first six months of 2008/2009, KWS improved its operating income (EBIT) by €5.7 million to € –39.9 (–45.6) million. Finance income/expenses fell to € –2.1 (+4.8) million, since the figure for the same period of the previous year was boosted by the profit from the sale of its former potato activities. Net income for the period was € –30.2 (–25.1) million.

High-yielding hybrid varieties post gratifying increase in sales and profits

Net sales in the cereals segment grew by 35% to €74.2 (54.8) million in the first half of the year, in which demand is mainly for winter cereals and rapeseed. The corn segment (including oil seed) recorded just above a 20% increase in net sales to €37.7 (30.5) million. Since the main sales season for corn begins in the third quarter, 40 percent of net sales in this segment were generated by winter rapeseed. “The slight decline in cultivation area was more than compensated for by additional revenue from high-yielding hybrid varieties, which now account for more than half of rapeseed sales,” said Duenbostel. Net sales of €20.2 (21.4) million were achieved in sugarbeet seed business. Net sales at the breeding & services segment increased in the first six months to €9.7 (3.6) million. The figure includes not only farm revenues, but also net sales from the seed potato joint venture for the first time. However, the main business for the new potato activities does not begin until spring.

Capital expenditure well above depreciation

In order to strengthen its leading market position, the KWS Group has significantly increased its workforce to 3,147 (2,760). Research and development activities at the Einbeck location also benefited from this increase. In the first six months, KWS invested €14.3 (14.8) million in property, plant and equipment, mainly in the corn segment, where new drying, processing and storage capacities were created in Romania, Ukraine, Turkey and the U.S. As a result, capital expenditure was again well above depreciation of €7.7 (7.2) million.

Forecast for the year as a whole confirmed

KWS’ Executive Board confirms its net sales and earnings forecasts for the whole of fiscal 2008/2009 on the basis of current planning. Net sales are expected to grow by 10%, and the Group will likely be able to maintain the previous year’s income, despite higher costs.

Now that the radical changes brought about by reform of the European Sugar Market Regime are largely complete, we expect business at the sugarbeet segment to increase slightly. However, its income will be strained by negative currency effects and possible allowances for receivables. Given the 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 develop positively as a result of royalties. Overall, we expect to surpass the previous year’s net sales (€599.1 million) by approximately 10%. We are confident that operating income will be on a par with the excellent mark of the previous year (€70.1 million).

The individual product segments:

In million € (at December 31)	H1 2008/2009	H1 previous year
Consolidated net sales	141.8	110.3
Sugarbeet	20.2	21.4
Corn	37.7	30.5
Cereals	74.2	54.8
Breeding & services	9.7	3.6
Operating income	–39.9	–45.6
Net income for the period	–30.2	–25.1

Contact:
Georg Folttmann
Phone: +49 (0) 55 61 / 311-640
g.folttmann@kws.com

* The figures in parentheses are those for the previous year