KWS SAAT SE & Co. KGaA (KWS) Earnings Call Transcript & Summary

Dear ladies and gentlemen, welcome to the analyst conference call of KWS regarding the financial results of 2021. At our customers' request this conference will be recorded. [Operator Instructions]. May I now hand you over to Eva Kienle, CFO, who will lead you through this conference. Please go ahead.

Thank you very much, and a warm welcome, and good afternoon, ladies and gentlemen. Welcome to our 2021 fiscal year KWS conference call, where we will discuss a little further on our results that were published today and also some outlook on the future perspectives for KWS. Our operating business developed very well last year with an organic sales growth of around 9% without currency effects, we were really able to more than compensate for the significant negative currency effects which amounted roughly to EUR 86 million on the top line. We also recorded a slight increase in EBITDA despite negative foreign exchange bottom line effects that were around EUR 16 million. Our free cash flow increased significantly, partly due to improved working capital management and partly because we pursued a somewhat more cautious investment policy last year under the COVID-19 conditions. Our net income also showed a significant increase, so that we intend to pay a higher dividend of EUR 0.80 per share, which is in line with our dividend policy. But now let's take a closer look at the financial figures from the past year. As I mentioned, sales and operating profit have shown stable or slightly increasing growth despite headwinds from currencies, especially the Brazilian real and the U.S. dollar and in particular, those should be mentioned here. In terms of cost ratios, we saw increases in cost of goods sold and in R&D. While we recorded lower quotas on selling, marketing, administrative expenses, which are also partly due to corona. Financial results, however, improved significantly from last year's EUR 7.8 million to now a plus EUR 5.5 million. This is, on one hand, due to better results of our financing activities and refinancing at lower interest rates and to the other side for higher earnings contributions from our joint venture operations both in North America with AgReliant and in China. Our tax rate then was significantly lower than the previous years. You can see here the tax rate is at 22.2%, which is mainly due to a one-off effect from a revaluation of deferred tax liabilities in the Netherlands. All of this then led to a significant increase in the net income and earnings per share of around 16% both. So overall, I would say a very positive picture, especially when you take into account the strong currency effect that we have digested as well as the still last year of really high amortization charges following the acquisition of the Pop Vriend vegetable business in 2019. As already mentioned, we will propose the shareholders a significant increase in the dividend due to the positive development in net income, and to the high level of cash balance that we still have in our books. We are [ thus ] staying within the scope of the continuous dividend policy corridor that we have, which is between -- distributing between 20% and 25% of our annual net income which is, as you can see, the fourth year in a row, the increase in our dividend, and we are also pleased about this, but all this became possible in a still quite challenging global environment here. Let us now take a look at the development of the individual segments. Sales in the Corn segment were reported at previous year level, that increased by over 8% currency adjusted. Businesses in Europe, mainly Southeastern Europe and Latin America contributed to that growth, especially in Brazil, we continue to benefit from the great success of our newly introduced varieties, but also from very favorable market conditions overall. Also in Europe, as I mentioned, Southern and Eastern Europe in grain corn, we could benefit from our new varieties that performed very well in the market. In North America, at AgReliant, on the other hand, we saw a decline in sales at the joint venture operations, both in corn and in soybean in a very competitive environment on one hand and due to negative currency effects on the other hand, but still, we were able here also in the U.S. to improve slightly in the terms of earnings. This is why you see an EBIT improvement here in the segment in, the overall segment from EUR 67 million to EUR 71 million. Looking ahead to our -- according to our long-term ambitions, the Corn segment will remain our growth driver in the coming years, with expected growth from all regions, but especially continued growth from South America with an overall stable margin compared to the prior years. Now we come to the Sugarbeet segment where we achieved a significant increase in the sales of 13% after currency adjustments and if we would remain on a euro basis as still at 6.6%. With this development, we are again -- once again underlying our leading position worldwide in this market segment. Our global market share again has now risen by 2% compared to prior year, and we're up at 64% now. Part of that is our strong innovation capability into this crop, and we could achieve this also with the CONVISO SMART variety portfolio, which almost doubled its sales in 2021 to EUR 78 million, making such -- thus a significant contribution to the strong growth. Also, we are gaining market share with that portfolio in all regions, and we want to continue growing with CONVISO SMART in the coming years at the same very high double-digit growth rates. In addition, we have also achieved initial sales with the next just newly introduced innovation, which is a Cercospora tolerance variety called CR+. And you might know that Cercospora is one of the most widespread and most damaging diseases in sugarbeet cultivation. It attacks the leaf and it has spread quite significantly in the last years also in Europe, but also in the U.S. So therefore, we saw a very successful market entry in the U.S., and the CR+ sales are around EUR 20 million already in the first year of introduction. In terms of profit, we achieved an increase in EBIT to EUR 175 million despite charges from currencies and also despite significantly higher costs for seed multiplication and seed processing all over Europe. With the profit margin now still well over 30%, sugarbeet remains, of course, an important and really stable source of earnings for all our group even in challenging times. For the coming year, we expect sales and EBIT margin at this year's -- past year's level, although I think that we do see some upside potential here. Now we come to the Cereals segment, which generates the majority of the business in the first half of the financial year. And overall, we saw a flat solid performance here. at local currency, that would be a slight increase by 3.3%. This is mainly the U.K. British pound that is showing currency effects here. Thanks to favorable commodity prices still at that point last year on rye, compared to wheat, we were able to achieve a very strong growth, but also rapeseed crops could increase their market share and their footprint. Hybrid rye on the other hand, was more than flat before currency effects. And for this current year, we expect a further growth again in rye, but this will be a challenging undertaking. At around EUR 21 million, the segment result was below previous year's figure, but not far away from our expected plans for this year. which is due to higher planned R&D expenses and also higher cost of sales for new growth initiatives and selling and marketing initiatives that start into new markets where we're entering, for example, the Canadian market with our hybrid rye assortment. So we're optimistic about the current year, and we expect a slight increase in both sales and margins for this segment. Now we come to the new kid on the block, Vegetable segment, which was disappointing in 2021. As you can see here in the numbers, although we were able to gain some ground in the fourth quarter, the headline is a significant reduction in sales that dropped from EUR 84 million in '19/'20 to EUR 58 million in 2021. This is basically and mostly related to the U.S. market where there is the majority of our spinach seed sales and as they -- the whole service segment and gastronomy and catering has been in full lockdown, still during first half, and sort of end of '20, first half of '21. We suffered significant losses due to those restrictions during the COVID-19 pandemic. We were able to grow sales with bean seeds, but this is definitely, of course, by 13%, but this is nowhere near enough to compensate for this heavy decline that we saw in the spinach side here. Good news, we still can earn good money here. If you look at the EBIT adjusted before PPA effects, it would still be at an EUR 8 million, which is a profit contribution or at least a cash contribution that allows to finance also this part of the vegetable development that we call greenfield approach. Purchase price allocations and you can do the math here on your own is -- the last year, at a high level, EUR 26 million. Next year, we'll see a lower charge as a consequence, which is below EUR 20 million. So it then is decreasing further which will then last this year, again, as I mentioned, around this level and then will just become after '21, '22 a high single-digit million amount. Based on the recovery of the gastronomic sector and the increased opening and frequency or frequentation also of restaurants. Also in the U.S., we also expect the recovery here in the spinach business in the current financial year, but still a full recovery is not expected before the next 2 to 3 years here. Last but not least, the Corporate segment where we essentially manage our overarching research and administration costs. The EBIT here has improved significantly due to a number of one-off effects. One is positive here, in this case, it's positive to our favor, effect on a U.S. dollar loan that returned with a EUR 6 million extraordinary profit on the valuation here for this financing instrument, but also some corona-related savings of all central group and selling departments due to reduced activities and traveling, training, marketing activities, field days and so on and so on. For the current financial year, we expect a number of around or cost of around EUR 100 million. So an increase again or an increase back to a more normal from EUR 92 million to EUR 100 million. As I mentioned in the beginning, against the backdrop of the corona pandemic, we started the year 2021 very cautiously, and were also pursued a somewhat more conservative investment policy. We had asked our businesses not to go full speed ahead with the budgets that were released, and really to revisit or to reevaluate all investment undertakings in order to maintain a solid cash -- cash base here for the business and not to overdo it in investments. In the end, we came up at EUR 81 million, so clearly much less than the previous years. Focus still here is the establishment and expansion of many production facilities in corn, but also research and development capacities, especially also in -- starting off in the vegetables business. In corn, for example, here, we expanded the processing capacities in Romania, also in Brazil and the U.S. The sugarbeet large-scale expansion in Einbeck is completed, and there is up and coming a new plant in Russia to serve the Eastern European markets from there where we still can apply neonicotinoids as according to our seed codes. In the coming years, we will increase the investment volume again and again, like in the prior years, exceed EUR 100 million mark, so don't expect it to remain at this EUR 81 million, which is at a very low level. Finally, let's focus on the expectations and the outlook for the current financial year 2021, '22. Based on the clear innovations we have in our variety portfolio, we expect very strong sales growth of 5% to 7%. We expect the EBIT margin, excluding now the purchase price allocations to be again in the range between 11% and 12%. And this is somewhat lower to the guidance we have had so far, which was 11% to 13%. But this reflects our very cautious look into the cost increases, inflationary issues we might be facing in some areas of our activities, some of them might be really substantial looking into the seed multiplication effects that we cannot one-on-one immediately roll over into price increases to our customers. R&D ratio is expected to remain in the range of 18% to 20%. And also, we will continue to invest into innovation at higher level. That means R&D, basic research, digitalization efforts, but also into new and sustainable business initiatives that have a very sort of large lead time. So that we're embarking on this route now. If we look somewhat in the more distant future, and this is what I was triggering with the sustainability topic, we believe that the goals of the Green Deal, which is formulated by the European Union in the Farm to Fork Strategy, they will have a major impact on how we are really doing agriculture here in Europe, and that's also to our customers' operations and ourselves. Here, you see the targets and those targeted reductions in the use of pesticides of 50% and fertilizers of 20% and the expansion of organic farming by 2030 poses a really immense challenge for agriculture. And that's basically because the food supply for the population needs to be maintained also under these conditions, which clearly put the yields for the output, the food output under pressure. So we believe plant breeding has played and will continue playing a very key role in overcoming these challenges in a very sustainable manner. Working against those constraints is at the heart of our business model. And with our new and adaptive varieties year-on-year, we help to reduce the use of pesticides, fertilizers, other agricultural inputs in the field, while we continue maintaining and even improving the yield output with high and stable yields at the same time. Some examples I just mentioned, which has improved the plant breeding are like CONVISO plus, like CR+ or CONVISO SMART, CR+, but also other achievements of innovation, which is herbicide and fungus resistant crops and portfolio that we offer. With our own sustainability ambition initiative 2030, we have targeted and now clearly put our focus on those areas where we want to accelerate contributions to sustainable agriculture in the coming years. And this is also clearly to be measured and reported upon. Health area relates to safeguarding the food supply. So here, we're aiming to an average annual yield increase of 1.5% for breeding progress. In addition, we strive to expand the area for which digital farming solutions are used at over 6 million hectares. And this should help our farmers to achieve better results on their field due to a better understanding of how to manage the crop during the cultivation time. Second, we aim to invest more than 30% of our R&D budget in the reduction of inputs and by 2030, more than 25% of all varieties should be suitable for lower inputs. Third, we'll increase the number of crops for which we have our own breeding programs from 24 to 27 to enhance crop diversity. So we are one of the few seed suppliers that have such a large product portfolio. And fourth, by 2030, over 40% of varieties be suitable for direct use in human nutrition. So here, clearly, we aim at supporting sustainable diets directly for food. In the area of corporate responsibility, like all others do, we have set ourselves goals to reduce our own footprint on scope 1 and 2 emissions in absolute numbers by 50% by 2030 and to achieve the net-zero by 2050. We also want to expand our social commitment on various levels, such as social projects, employee satisfaction and health and safety. With this set of goals, I think, in my opinion, we have clearly embarked on a very demanding program but also made it clear, made it transparent. And we will implement the coming years, and measure, and report on how we have significantly sharpened and moved our company forward in this area of sustainability that should be near and dear to all of us. If you look at the contributions that KWS has made to biodiversity, and I mentioned there was 24 different crops that we've breed already and the portfolio expansion in the past. This overview of the variety approvals that you can see here clearly shows how we have developed over the past 20 years and is very informative. The number of approvals for KWS has almost doubled in the last 10 years. And in the last financial year, we achieved a new record high with almost 500 approvals. Great success of our R&D organization and clearly a confirmation also of our approach to consistently expand into innovative and strong and clearly outlooking portfolios and investing R&D at a constant high level between 18% to 20%. In the future, we will focus our breeding activities even more on sustainability criteria and expand our breeding programs so that we can continue to be a reliable partner for farmers in the supply of innovative seeds and at the same time, address the challenges ahead for our agriculture in Europe and in the rest of the world. Last but not least, we are also shaping the future leadership structure of KWS with the essential foresight that is part of our company's DNA. You have all read that after a handover period in 2022, starting January 2023, the KWS Executive Board will consist of 4 members again as you can see on this slide. Next slide. Felix Büchting as the seventh-generation representative of the founder family will become speaker of the Executive Board. The Executive Board change frames -- the payroll transformation of our Supervisory Board as the Chairman, Andreas Büchting, will not present himself for vote for the December 2022 Supervisory Board elections as per the company statutes, due to age. Following his retirement end of 2022, our former speaker of the Executive Board, Philip von dem Bussche will be proposed to lead the Supervisory Board for the 2 years until end of 2024. After that interim period of 2 years, my current colleague, Hagen Duenbostel, who has by then undergone the requested cooling-off period of 2 years according to good corporate governance will be presented for election to the Supervisory Board. With this, I would like to close my presentation. Thank you for your attention so far. I'm very much looking forward to your questions.

[Operator Instructions] And the first question is from Christian Faitz, Kepler Cheuvreux.

Yes. I have 3 questions, if I may. First of all, can you please give us an idea how much higher your production costs are and which price improvements you need to achieve for your products to pass on these higher production costs. And maybe in that context also, I mean, some of your competitors claim they are hedged against higher production costs. Is that possible? Is that also possible for you? Or do you just have to essentially pay the farmers to market prices they would otherwise achieve just cropping their own crops. Then on veggies, Ms. Kienle, you mentioned it yourself, you are largely dependent on spinach for the time being. How dependent is that vegetable portfolio on spinach. Can you please give us a short reminder, is it 60%, 80%? And how much of that spinach market for you of that relevant spinach market is in the U.S., versus other regions? And then third, I typically don't ask management questions, but why is your current colleague and CEO planning to do such a move at such a relatively young age. Thank you very much.

Thank you very much for the questions. Maybe I'll start with the last question. And I'm smiling a little bit here. So clearly, for his motivations, I think you have to ask him clearly, when or why he decided to change and focus on the Supervisory Board task at that age. I would not falsely relate a Supervisory Board position to age. I think it's a good sign, if you also see younger people entering supervisory boards and also especially people that have not been too long out of business. So this is to my understanding, personal understanding, it's not a disadvantage. To me, and that's my personal view on this. He has spent an enormous amount of time serving KWS on the Executive Board. And I think it's quite natural if you have the seventh-generation family member also in the Executive Board that you say also it's time here to make place for a clear family leadership again. And you all saw that Felix Büchting will become speaker of the board. So we have, again, the spokesmanship of the company within the family. And I think this is also a logic that made Hagen decide or to say then, he would take a step further and managing and advising the company as a Supervisory Board Chairman, which is to me quite logic, irrespective of the age. Now first question on the production costs passing on price increases. I think this depends clearly on which crop you look into, and you know about our overall sales split. So there is not forcefully a split for -- sorry, increase in sugarbeet seeds, commodity price increases relates mainly to wheat, to corn, to soybean. And here, clearly, we see increasing production costs because we have, of course, every time the choice of our multipliers to either multiply for us or grow corn normally and sell it at the commodity markets for the then existing very attractive prices. So there is very little way out that you can negotiate those expectations or commodity market offers away, where possible you can hedge it. It depends again on how the contract with your grower is regulated. I don't know about the way the competitors do it. We do have usually fixed prices. So there is not forcefully always a need to hedge. This would be the case if you have -- want to contract, and the contracting is roughly in October, November, the year before, if you have fully volatile prices in your multiplying contract, then of course, it would be really good advice to hedge it. We do it for some only, in those cases where we clearly say that price is adjusting a little bit upwards or downwards according to the commodity price development, but it's not fully flexible and fully volatile here. So we are trying to put this sometimes over or somehow over into our sales prices, which is not always possible, especially it's not possible if you look into our growth markets, which are the ones with a little more weaker economics, Russia, Eastern Europe, Southeastern Europe, Brazil. And also in the U.S., our market position is not that we are amongst the biggest ones. So of course, also we have to face the competitive situation, and we cannot overdo with our price increase wishes as we have to observe closely how the competitors are doing. And sometimes this is then on the sales price side, where the competition takes place. So very reduced -- very reduced efforts here, although we did very well in 2021 in the U.S. to increase prices. But again, for 2021, we can definitely not fully pass on everything. We also saw on the cereal side, the commodity price development here will put again a little plateau, so ceiling to the rye development. As you know, if the spread between wheat prices and rye prices become too big or interesting, the wheat price becomes more interesting, then the farmers clearly go for wheat price -- for wheat sawing, this is what we see right now. So the clear demand for rye is platooning respectively, slowing down in '21, '22 due to the strong wheat price development. So this is not only a grower and sort of incoming price premium discussion, but also about the farmers' decision on which crop to farm for, and this is what is also driving our expectation here. Overall, roughly, seeds is about 25%, 30% of our -- all our purchase volumes. So that's the -- by far the largest and a significant portion here. And we would expect roughly -- if we say there -- might be up to 10% cost increase here expected, you would see a -- our -- in all our procurement costs, a 2% cost increase here all over the places. Last question was on the vegetables. So how dependent are we on spinach at Pop Vriend and what's the rest of the portfolio. So there is roughly 2/3 of the portfolio of the Pop Vriend Seeds is vegetable. And so this is clearly a significant dependency, as you say, 40% goes to the U.S., mainly North America, a little bit to South America, 30% is in Europe and 30% is other regions with a lot of countries especially Far East, Middle East Asia. So 40% is depending on the U.S. market and also another 30% on Europe. So 70% is in markets where clearly lockdowns were affecting gastronomy and food service sales.

The next question is from [indiscernible].

I would like to come back on to the corn segment. So the first question goes to your Lat Am business, primarily on Brazil. If my math is not wrong, basically, you posted something like a 30% organic sales growth last year in Brazil. So maybe can you help us understand basically the breakdown in terms of volume and pricing. And also what you see basically in the upcoming of vacation seasons there in the end. The second one also belongs to corn on -- it goes to the U.S. market, so AgReliant. So we've heard from Vilmorin basically they are at least optimistic on the net income contribution from the AgReliant JV. So do you have a different view on this market? Or are you sharing basically the same, because it looks to me basically that they did take a rather cautious view when it comes to U.S. operation in corn in the year ahead. And then the third one lastly goes to sugarbeet. I'd like to understand how your view is when it comes to acreage competition, basically, I think you're assuming something like flat acreage going forward in sugarbeet in the new application season. So how do you see basically the strong competition from grain basically weighing -- potentially weighing on this kind of flat acreage outlook?

Okay. Now let's start with corn, Brazil. So Brazil, and you're right, we have gained significant market share here. It's both. There is a volume and a price growth that we could clearly achieve. The price increase is much higher than the volumes, which really helped a lot, improving the profitability here in Brazil, also very -- again, as you mentioned, double-digit growth rates, that's clearly something that we saw here. So confirmed and again, has been awarded also best corn seed company of the year second time in a row. So regarding the market's acceptance and the market outlook, there's very clear full steam ahead in Brazil. market share is now up by 1%, up to 9%. So this is very clear here ahead of more than 1% point from last year. Corn U.S., AgReliant. So the sales came in quite sort of flat, so to say, in 2021, which is more related to the price that we could manage to increase to the levels that we wanted, but also a little bit to the volumes that was then counteracted by a cautious managing of production cost of selling, administrative costs and also of hedging, as you mentioned. So we do commodity hedging in the U.S., for example. So that offset part of the clear reduction in sales margin in 2021. And looking ahead, we also expect this to become clearly better in '21, '22 on a margin perspective. As we do think that the second year in a row, we will become better with the price achievements that we are targeting for. And also, of course, the currency effect is not seem to be -- or not expected to be so negative as it was in 2021 on the U.S. side. So yes, we see it as [ Limagrain ], of course, that 2020 -- '21-'22 has a better outlook here. Sugarbeet acreage competition, and I understood your question compared -- crop competition, so to say, the sugarbeet against grain, that could be the case, yes. The point being that we have already looked or expected for a slightly but really slightly reduced acreage into '21, '22. And we do not see a too large competition with grain. As again, as I mentioned, it would be weak in those cases. And on the other side, we have seen quite some diseases and problems with the weather that would trigger then into wheat. And this is why the input that is required -- would be required for wheat farming, certainly then offsetting the clear discrepancy or the difference in price you have compared if you look at the selling price, so at the commodities spot prices. Sugar, you have -- sugarbeet, you always have a safe haven where you can land your harvest for safe prices. Wheat is the question on how your yield output and your yield will be at harvest time. So this is why we are not fully seeing it just being a price decision.

The next question is from Andreas Heine of Stifel.

A couple of questions, if I may. I'd like to start with the rising production costs, which are obvious in a time when the crop prices go up. But it sounds like that high crop prices are something negative for a seed company, which I don't get. Usually, I would assume that if the farmers earn more and the crop prices are higher, that is -- that this benefit is kind of shared across the value chain. So fertilizer prices were up, and crop protection has higher volume at least. And then seed that is usually not higher acreage, but then also higher prices. Maybe you can elaborate why it looks like that, not only you, but other seed companies who cannot benefit from this favorable environment. Second, on the CONVISO SMART and CR+ trade. Is it fair to assume that the pure tax fee, so what you get at the premium for the trade itself, is roughly 25% of what you mentioned, as generated sales with CONVISO EUR, 78 million and EUR 20 million of the CR+ in the U.S. And maybe you can give also an update where you are now in the penetration of CONVISO, it is listed in -- it's approved in 25 countries. Where are you in penetrating the European markets with CONVISO and how fast was the penetration of CR+ trade in the U.S. in the very first year. That's basically what I wanted to know.

Okay. I'm starting with the second part here. the question on CONVISO SMART and Cercospora plus trades. And actually, if you talk about trades here, it's a natural trade. So it's a natural mutation that allows the plant to develop an own resistance or tolerance against those herbicides or diseases. So this is clearly a lucky shot, if you would say, in breeding, becoming -- being able to generate such products. And this does not mean that we can explicitly price this trade in. We are simply looking about what is the increased potential then in yield output. We can calculate them, of course, what this might bring to the farmer and then we put a part of this on top of our prices. Just to give you an example, if you would say, the normal sugarbeet costs, I would just say something 50, we would say, okay, with a CONVISO SMART, he would need to apply for 10 less herbicides. So 8 of all those hours, and we say you -- CONVISO plus is now 58. So of course, we cannot fully roll over the advantage the farmer has on him, but we are sharing a portion of what he saves and inputs if he can still achieve the same output. So the price is very different depending on what the trade in this case allows the farmer to stay for, and we are always taking part of his share of wallet that he's gaining due to this. So it's not really priced. There is no tech fee in the sense you mentioned it like we had, for example, or we have in the U.S. with Monsanto. It's a normal price of the crop, of the product itself, but of course, it's higher prices than the normal base variety, you would see. The market penetration is different country by country. So we have countries with over 50% penetration already, for example, Hungary, Czech Republic, Slovakia, then we have countries with a less market penetration, which are between 20% and 30%, like Italy, Croatia, Serbia, Romania, Turkey and then we have some smaller countries, which less than 10% yet that have started off. We have overall roughly 2.5 million hectares that won't be accessible with CONVISO SMART, for example, the U.S. And we are still open with the pending registration of CONVISO as a herbicide in Germany and France. So those are not yet included. For the rest of Europe, it looks quite favorable. And we are -- as I mentioned, we are most of the large countries, we are between 20% and over 50% of market penetration already with regards to CONVISO SMART. And in the -- for Cercospora plus, the large portion -- larger portion so far is in the U.S., Europe, 27%, so Europe without Eastern Europe will catch up quickly in the next years to come. And the Eastern Europe and Southeast Europe portion will remain a quite small one here. Rising production, crop prices -- rising production costs. Yes, how -- where to start here. Now the fertilizers are up -- prices up. Crop protection is very, very cautious here. And again, we cannot roll over the increase in -- one is the increase in seed purchases, this we cannot roll over one-on-one to our customers. So we are trying our best here, but it is not possible. Clearly, it's not, because the multipliers have a different market power than the customer has or both have the same market power towards KWS, for example. So you can -- even with the argument of saying commodity prices are up by 20%, you know this. So just pay us 20% on top list will not work because it depends on local competition and competitive situation. And the other thing is, of course, that it's always looked upon from a farmer economy perspective. So every supplier, fertilizer supplier, herbicide supplier, us and others, we are looking at how is the farmers' economy is going to develop in this time. Now if the commodity prices are up, he has a chance of increasing, of course, his profitability. And by this, we can also roll over a little bit of the production cost that rise. On the other side, we also have rising production costs that are sort of our own, if you say, fault, maybe it's not a fault or the consequence of a European politics that, for example, bans neonics, and we have to start shifting production or processing capabilities around and transporting sugarbeet seed over different places into Europe. This increases production logistics cost significantly, but it's not to the farmer that you can roll those increased production costs over. So there is a portion to -- it's a pricing element where you could say, okay, this -- we would expect you to put on the prices. But on the other hand, there is part of operations where we ourselves increased the production costs, and this is hard to roll over to the customer.

Yes, understood. But quite some frustration on my side, I have to say, if I look at fertilizers, it's not really an innovative product and here prices treated, if I think on [indiscernible] more than doubled for nitrogen and seed, which puts quite some effort in R&D and really comes up this innovation is not able to transfer even the production costs. And that basically, what you said is due to the competition because there is bill, is up for the farmers incredibly strongly, and that's well accepted and the competition among the seed companies, while only 5, does not make this possible.

Yes.

As there are no further questions, I would like to hand back to you, Mrs. Kienle.

Thank you very much, and thank you for those who had some questions for us. We do hope that we could give you a good outlook not only into what has happened into last year, but also for the year ahead, it will remain very challenging. But also very interesting to work in an increasing awareness for sustainability environment and being in the seed business is exactly the right place to be. So we do hope that we convince you -- we can convince you more to understand the power of a seed breeding company. Thank you for your attention, and I wish you all a good rest of the day. Thank you very much.

Ladies and gentlemen, thank you for your attendance. This conference has been concluded. You may disconnect.