KWS SAAT SE & Co. KGaA ($KWS)

Ladies and gentlemen, welcome to the KWS SAAT Quarterly Reports 9 Months 2025-2026. [Operator Instructions] Let me now turn the floor over to your host, Jorn Andreas, Chief Financial Officer of KWS SAAT.

Thank you, and a warm welcome, everyone. This is Jorn Andreas, CFO of KWS. Thank you, everyone, for joining us today for our 9 months '25/'26 update. Before I take you through our financial results, let me start with the big picture. As you -- agriculture remains a challenging environment, ongoing political tensions, fluctuating commodity prices and pressure on acreage and palm economics have reduced the visibility not only for our farmers, but also by extension for our industry. And yes, this is exactly where we, as KWS prove our strength in a challenging environment, we delivered a resilient top line solid earnings and a strong operational discipline. And this is not a coincidence. It reflects 3 things: our diversified portfolio, our consistent execution and our innovation-driven business model. Even in areas under pressure, such as the Sugarbeet acreage, we navigated the environment effectively. And importantly, our strong financial position and our leverage gives us the flexibility to invest organically and also where it fits via M&A. And with that perspective, let's move into the numbers. And as always, at this point, a quick reminder, some of the statements we'll be making today are forward-looking and subject to risks and uncertainties. And always, please refer to Slide 2 for the full disclaimer. Let me now walk you through the key figures. So net sales reached EUR 1.35 billion, slightly above prior year. On an organic basis, this translates into a 2.6% growth, and this was partly offset by currency headwinds of minus 1.8% and the portfolio effect of minus 0.5%. EBITDA increased to EUR 386.8 million from EUR 360.8 million. And I'll come back to the drivers, including the special items in a moment. Net income from continuing operations rose to EUR 220 million from EUR 202.8 million, mainly driven by the improved EBITDA and a better financial result. CapEx decreased to EUR 56 million from EUR 73.6 million last year, reflecting a normalization of our elevated prior year level across segments. Free cash flow was at minus EUR 52.4 million compared to minus EUR 3.9 million last year. The main drivers were lower operating cash flow due to higher receivables backlog, partially offset by a payment related to the divestment of our North American corn business in Q1. The debt remained essentially stable at EUR 179 million, and our trailing 12-month leverage improved 2.4x EBITDA, down from 0.5x. Overall, we are pleased with the result. In a nutshell, we see a resilient demand, a strong EBITDA development and an expected seasonality in our free cash flow. Now turning to sales in more detail. organic growth of 2.6% reflects a solid underlying demand across segments. However, our quarterly performance was also influenced by pull-forward effects from Q4 into Q3 in certain regions, most notably in corn and to some extent also in sugar beet. Currency effects mainly by the Turkish lira and the U.S. dollar amounted to a minus 1.8% translation impact. And the portfolio effect of minus 0.5% primarily relates to the absence of R&D services invoiced to our former joint venture client. Now on profitability. EBITDA improved to EUR 386.8 million and includes several special effects. So let me strip that out for you. First, EBITDA includes a EUR 29 million positive contribution from the sale of license rights in the North American corn business. Second, an EUR 8 million effect relates to the reversal of the VAT provision at the Sugarbeet segment and the prior year comparison in context. And finally, a currency effect of approximately EUR 50 million, again mainly driven by the Turkish lira and U.S. dollar, mostly of it was translation. Importantly, when adjusting for these special items, EBITDA increased from EUR 353 million to EUR 357 million, supported by active cost mitigation measures. So while special items supported the reported figures, the underlying profitability improved slightly. And this reflects the continued discipline on the cost and execution, which has been a key priority for us this year. Let's now turn to the segment review, starting with Sugarbeet. Sales increased to EUR 73.8 million, including negative currency effects of 2.7%. Organic sales growth was plus 4.2%, reflecting both go-forward effects and a higher share of innovation-led offerings. Specifically, our leading innovations such as CONVISO SMART accounted for 62% of sales, up from 57% last year. So the mix shift towards differentiated premium price products is continuing. And this success speaks again to the strength of our portfolio as the global acreage in 2026 is estimated to shrink about 6% to roughly 4.3 million hectares for Sugarbeet worldwide. So we continue to generate more value per hectare. And going forward, we expect an estimate of this negative trend in the global acreage has somewhat bottomed out with stable or slightly growing acres expected in the next season. Considering the prior year positive one-off related to the reversal of ABT provision and also some negative currency effects in the current period, we were able to defend our strong profitability in the segment despite the challenges I already described in the Sugarbeet market. Moving to Corn. Sales were EUR 349.4 million below the prior year, but a 1.3% organic growth. We saw clear pull-forward dynamics that shifted part of the volume into Q3. Our sunflower business, which is also consolidated in the BU corn for which we expect substantial growth in the years to come, delivered encouraging double-digit growth supported by our renewed variety portfolio. Our EBITDA performance in Corn improved significantly and includes the EUR 29 million one-off effect from the disposal of the license rights in North America. In addition, we incurred also lower R&D expenses due to the absence of charges by our former JV AgReliant. Next, Cereals. Sales were stable at EUR 243.4 million. Organic growth was 0.7%. And Oilseed rape performed strongly, with sales up 21%, driven by a high performance portfolio. This was partially offset by hybrid rye which declined 14% and impacted by comparatively low rye market prices. Wheat remained broadly at the prior year level. EBITDA was clearly below prior year, mainly due to increased R&D efforts as well as a provision for a legal risk in the mid-single-digit million euro range. And finally, Vegetables, sales increased to EUR 46.5 million. Organic growth was 2% and supported by higher beam seed sales and a stable demand in Spinach. EBITDA was more negative year-on-year, which is in line with our plans as we are investing in the expansion of our vegetable breeding capacity. Let me now turn to cash flow. Operating cash flow was lower primarily because net working capital increased, driven mainly by higher trade receivables and this is a typical seasonal pattern and also reflects the sales phasing I discussed earlier. Investing cash flow includes the partial payment of the purchase price related to the North American corn business. And as mentioned at the beginning, CapEx decreased to EUR 56 million below the prior year across segments. Free cash flow came in at around EUR 52.7 million, down from minus EUR 3.9 million last year. For the full year, however, we are confident to exceed the free cash flow figure of EUR 123 million for last year, driven by both better operating and investing cash flow. On net debt leverage, net debt stands at EUR 179 million and the bridge reflects a strong EBITDA contribution offset by working capital seasonality, CapEx as a dividend payment, which was at EUR 41.3 million this year compared with EUR 33 million last year. Our trailing 12-month net debt-to-EBITDA ratio improved 2.4x, down from 0.5x. And we continue to expect net debt to be significantly lower at year-end driven by the usual seasonal unwind in working capital. Coming to our forecast for full year 256, which we are confirming today based on the 9 months performance and our current visibility. While currency volatility and regional order patterns remain factors to watch our underlying business performance and cost discipline support the outlook. And looking further out, while uncertainties remain, the underlying trend gives us confidence. Before we move to Q&A, I'd like to share a quick save the date with all of you. We are planning to host AK, as vegetable investor analyst seminar, at the end of September on 29 September '26 in Andijk, Netherlands. And we will be very pleased if you could join us. We know that our Vegetables business continues to attract a lot of questions and rightly so. And this now provides a fantastic opportunity to take a closer look at how far we have already come and where we are heading. So being on the site, you will be able to experience our breeding activities with the teams, of course, that drive the progress and engage in discussions around strategy execution in Vegetables. So I have no doubt that this direct look behind the scenes will give you a much clearer sense of the progress and also the momentum that we have built in this business. So we very much hope to see many of us there. And with that, I would like to close my prepared remarks. Thank you again for your attention and for joining us. And I now look forward to your questions together with my colleague, Peter Vogt, Head of IR.

[Operator Instructions] So the first question is from Mr. Christian Faitz from Kepler Cheuvreux.

So a couple of questions, please. First of all, you had pull-forward effects apparently in both Corn as well as in Sugarbeet, as you mentioned. Can you give us an idea of the magnitude, i.e., what would then be missing in your Q4? Second, in your corn segment, sunflower seeds grew quite nicely, I believe, double digit. Can you give us an idea how prominent sunflower seats are within your Corn segment in the meantime? And my third question pertains to the sale of the license rights, i.e., the EUR 29 million proceeds. Is this stemming from the 2015 agreement with[indiscernible] i.e, the Acro Vitera trade. Can you confirm that? Thanks very much. .

Thank you very much, Christian. So first on your question on the forward effect. Yes. So we have seen that orders Q3 from Q4 and that, as you know, has always something to do with all the weather conditions and the different regions where we operate. So roughly, you can say that the pull forward effect on organic growth was roughly EUR 30 million. So which means that if you say cancel, let's say these forward effects, the growth was more or less flat, which is also in line with our full year guidance. And what you can also say is that 2/3 of the pull forward effects were roughly in the Corn business unit and 1/3 in the Sugarbeet business unit. I think that gives you a good indication. Sunflower, yes, so we are really thrilled with how the Sunflower business develops. I mean, we discussed this also in our Capital Markets Day that we are now launching our own varieties. We have really some advantage on the R&D side with some gauge capabilities that we have to accelerate our capabilities or pipeline. So we've been able to increase our Sunflower sales double digit. And we are now having a revenue of around about EUR 15 million in our Sunflower business at 9 months. So I think that's really nice growth from where we have been, and there's also more to come in the years of course. And we indicated that we want to achieve EUR 100 million revenue with sunflower by the end of the decade. And last question on the license. So this is really related to the license that we provide for our germplasm to a AgReliant in the past. So this has been part of the overall deal of AgReliant in last year. Meaning that we've not only, of course, sold our assets or subsidiaries or shareholding in our AgReliant business, but we also gave the buyer TDM also the rights the varieties, which were held, let's say, by our operations in Europe. And for this license rights, we recognized a gain of EUR 29 million in the first quarter, '25-'26.

Okay. Great. Just a quick follow-up. Did you say EUR 15 million year-to-date for the sunflower or was it EUR 50 million?

EUR 15 million.

Next question is from Mr. Michael Schaefer from ODDO BHF.

I have two on the Sugarbeet to start with. Well, the first one is, if I'm looking at your profitability and you reported a EUR 325 million EBITDA is roughly 46% margin. If you compare this with last year and strip out the EUR 8 million one-off gain. So I come to the which will be slightly higher, 46.6% EBITDA margin. The question is, despite the 4.2% organic sales growth and despite the very strong at least from my perspective, very strong mix effect you have reported. So why have we seen on an operating basis margin working backwards? This would be my first question. And the second one is, you indicated that probably on the Sugarbeet acreage side, we have seen the bottom in terms of, let's say, total acreage. Can you elaborate what do you expect into the next season across the different regions in your production planning for next year? And then 1 final question on the cereal segment, this kind of legal risk provision which you have put in place there, mid-single digit. So what is this all about? Perfect. Good questions.

So first of all, on the margins of all, we are actually quite pleased also that we are able to keep the operating margins at in Sugarbeet continuously high level. So with a contribution margin of around 66%. That's actually a level of last year. And as you can imagine, that we are operating in an environment, we have pressure on acreage. being able to keep, let's say, that profitability on that pretty high level is I think also really a testament of the pricing power that we have in our markets. So in terms of the changes, this really primarily relates to the regional sales mix that we have. So we have also communicated that we had a significant translation negative translation effect about EUR 15 million. in our EBITDA and a big part comes from the U.S. dollar and from our regional mix perspective, our U.S. business is, say, margin accretive with this let's say Sugarbeet, and this has then a mix effect on our overall profitability in the EU. So meaning on the country level, a region level, there's no actual change. It's really more mix effect than anything else. And as you rightly said, so with the mix shift, as it or more innovative varieties, CONVISO and [indiscernible] will effectively counterbalance other, let's say, challenges that we face, of course, in this macro environment. The second question was, I think, on acreage, acreage development. So yes, we have seen, of course, in this season, a pretty strong reduction in acreage to 4.3 million hectares, that's a minus 6%. And what we see, I mean, it's early days to be called ones were [indiscernible] customers how they often for next year. It's early days, but we feel, as I already said earlier that things have bottomed out in our scenario right now is that we are either stable on current levels or see a slight increase but that's something we will probably give you more, let's say, visibility further down in the year. And I think last question was on the legal risk and series business. Yes. So in series, we recognized the provision for an ongoing antitrust investigation in France for which we have made a provision in a mid-single-digit million euro amount. And yes, for your understanding that, of course, given the ongoing proceedings, we -- or I cannot comment really any further on the details, but what we can say is that we are defending here our position, we're not going for settlement. So that's why it's an ongoing case.

And the next question is from Mr. Leon Muhlenbruch from MWB research.

I have a question to the EBIT margin. Your target is 19% to 21%. Do you see potential for even in the next years for even more than 21%? Or is it can we imagine the limit.

Well, I mean, of course, we are ambitious and we are always strive to increase our profitability, but we actually feel quite good with the 19% to 21% range at this time. So I mentioned at the beginning, we are in, I would say, volatile times also in agriculture with farmers having had quite significant pressure also on the margins, I would say, the last 12 to 18 months. And of course, with the increase in input cost for the farmer that has had much of it will still has as we all know, things like fertilizer, et cetera, have been already contracted most of it last year. So that's still a way for us and also cost inflation for the farmers. I think there's pressure and we also have to see how much, let's say, leeway we have in our pricing activities. And at the same time, what we really want to do, of course, is to continue to reinvest our profits also in R&D. So that's really a priority for us. So I mean, if we would have the opportunity to gain additional, let's say, profitability, we'll probably reinvest this R&D and sales in the corridor that we have communicated.

Okay. And under the challenging environment, do you believe that the vegetable demand will already be a meaningful contributor over the -- for the growth in the near term? Or is it more in the long term?

So what is really exciting. That's why we have decided to have this investor seminar next September or coming September in -- and is that we have really a pivotal milestone for us next year, next fiscal year '26-'27, we will be launching all foody what you call the foody crops. So for all our sites is that we have invested quite a lot of , as you all know, over the last years, tomato, pepper, cucumber, melon, watermelon all of these varieties, we will see market launches next year. Of course, for some of it will be a couple of varieties on the portfolio. So we start small and the contribution will be, I would say, mid-single digit million euro revenue next year start with. But it's really the first time that we are really out in the market actually setting, let's say, our varieties. And the goal is to grow obviousness to EUR 100 million by the end of the decade from roughly EUR 70 million where we are today. So that's why it's growth definitely bid into our plan, and that's why we are also excited to really invite you to unsee the team see also the pipeline that is ahead of us, and that gives you all the confidence that we really have a nice growth engine that we have did over last year.

There at the moment, there seem to be no further questions.

All right. So I'm pretty sure that we will have a plenty of opportunity today and in the next phase to follow up on a few things. We will be also on the road. So thank you again for your interest and joining us this morning. And already, we look forward to seeing you of course, if not on the road, then latest at our Vegetables Investor Day in Andijk. And with that, thank you, and have a good day.