KWS SAAT SE & Co KGaA (Xetra:KWS) Q4 2026 Earnings Call

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4:26 You will hear music until the chairperson will open the conference. You will hear music until the chairperson will open the conference.

6:15 KGaA, Peter Vogt, Nicolas Wielandt, Felix Büchting, Jorn Andreas, Sebastian Talg Good morning, ladies and gentlemen, and welcome to KWS SAAT SE publication of full-year results 2025-2026. The conference will be recorded. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation.

7:01 Let me now turn the floor over to your host, Dr. Jorn Andreas. Good morning, everyone. Thank you for joining us today for our full-year 2536 results call. Before we dive into the numbers, let me start with a brief perspective on the year. So 2025-2026 was certainly a challenging year for the agricultural sector. We've seen lower acreage in several crops, cautious farmer sentiment, and also adverse currency developments that created quite some headwinds across many of our markets. Against this backdrop, we delivered actually a very resilient performance. While sales were affected by market conditions, we maintained a strong probability, we generated excellent cash flow and further strengthened our balance sheet.

7:51 And at the same time, we continued investing in innovation and in executing our civic priorities. We are very happy about that. So in short, the year once again demonstrated the resilience of the KGaA's business model and the strength of our diversified portfolio. Before we dive into more details, as always, please note that some statements made today... Euro's organic sales declined by only 1%, despite significant acreage reductions in sugar beet and corn. In addition, each reduced reported sales by roughly one percentage point.

8:43 EBITDA came in at 343 million and remained at a strong level despite the softer market environment. Net income increased by more than 13% to 158 million, supported by a significantly improved financial result. FEC cash flow remained strong at approximately 123 million, and was virtually unchanged from last year. As a consequence, net debt dropped, declined further to less than 9 million, leaving us with an exceptionally strong balance sheet. So while market positions affected growth, profitability, cash generation and financial strength remained very solid.

9:29 Let me now put this into perspective against the targets that we set at the beginning of the year. Looking at our guidance, SAIT's development was clearly more challenging than anticipated at the beginning of the year. We initially expected around 3% organic growth and later adjusted our outlook to roughly flat development. The result of minus 1 reflects weaker than expected acreage development throughout the year that we, to a large extent, mitigated by our control of the strength. At the same time, we continue to focus on what is in our control So we implemented efficiency measures that contributed roughly 25 million in savings in fiscal year 2025-2026. In addition, we also actively managed account development, generating efficiency gains that could also continue to support plausibility going forward.

10:23 As a result, despite an expected English development and also adverse currency effects, but also significantly impacting our PDA, we successfully delivered an adjusted FDA margin within our guide range of 19 to 21%. In addition, the disposal of our North American corn license rights, with that we've successfully completed the strategic alignment of our corn segment that contributed another 29 million to our PDA, also in line with our expectations. And finally, we intend to increase the dividend to €1.30 per share, reflecting our ambition to deliver stable or rising dividends every year. So, taken together, we delivered three out of four targets in a challenging environment.

11:15 During the sales, looking at the bridge, three factors explain the reported sales decline. First, lower acreage. reduced organic sales by 1% second currencies. They created another percentage point of headwind, mainly the U.S. dollar, the Turkish Lira, and the Ukrainian Rivne. And third, portfolio effects accounted for the remaining time and were largely related to the absence of R&D service revenues from our former AgriLiant joint venture. So, the key message is here that the decline in report sales was not driven by our portfolio. Rather, it reflects a combination of acreage reductions, currency effects, and portfolio-related changes.

12:06 Turning to profitability. So, as in the last years, we recorded a few one-time items as shown on this slide. Currently, it benefited from a 29 million gain related to the disposal of our North American Horn License Rights, while the prior year included the reversal of a VAT provision. The largest year-on-year improvement came from the financial results, mainly supported by positive effects from the sale of our participation agro-reliant against the corresponding negative effect in the previous year. Including those effects, net income and earnings per share, as previously mentioned, increased by 13%. Let's now dive into the segments and start with sugar beet, our largest product segment.

12:56 25-26 was another year in which our innovation driven strategy clearly paid off. Global sugar beet acreage declined by roughly 10% as high sugar inventories prompted producers to contract lower beet volumes, especially in Europe. And this reduction was higher than we anticipated at the beginning of the season last year. and reduce our ability to achieve growth in the last financial year. Nevertheless, against this backdrop and against this market contraction, the organic sales decline of just 0.6% for the sugar beet segment provides compelling evidence of the resilience of our world leading sugar beet business. And here innovation remains the key driver.

13:43 So Conviso Smart and CI Plus continue to gain traction and now account for 63% of segment sales. and this ongoing shift towards more differentiated, higher-value solutions remains one of the most important drivers of long-term value creation in the segment. Profitability also remains exceptional, so even after this reduction in acreage, sugar beet delivered an EBITDA margin of almost 42%. And looking ahead, high sugar prices and expected lower sugar yields Most of our sugar beet regions this year should support a stable or even growing acreage in the upcoming season, which would allow us to generate top and bottom line growth in the sugar beet segment again, and that makes us confident for the current fiscal year.

14:36 Turning to our corn segment, the headline sales declined primarily reflects lower equity across markets, as well as portfolio tax stemming from the equity line transaction. However, looking beneath the surface, the development was actually encouraging. So, excluding Russia, comparable sales growth reached 2%. And more importantly, we continue to gain market share both in grain and silage across Europe, which confirms the competitiveness of our portfolio. Another highlight of KGaA is sunflower, where sales increased 35%. While still a relatively small business today, this development confirms our conviction that sunflower can become an increasingly important growth for the years ahead. And remember, our ambition is to deliver 100 million revenues by the end of the decade.

15:26 Profitability approved also significantly in corn. reported EVDA benefited from the disposal of license rights. But even if you take this out, even excluding this one-time effect, the segment delivered meaningful improvement in operating profitability. And that is important because it demonstrates the quality of the remaining portfolio and also the decision behind the recent portfolio changes.

15:54 Turning to serious, sales remained broadly were stable despite continued pressure in several COP markets. Rape Seat was once again the clear standout performer, so sales increased 24% in our oilseed rate. Our market share continued to rise and further strengthened our position as one of the leading players in Europe. And I would say this coming season, we will be the leading player in Europe. By contrast, rye, wheat and barley continue to face weaker market conditions, largely affected lower commodity prices last year ahead of the pandemic. Probability was additionally impacted by a provision that we already flagged after the nine months, related to an antitrust investigation in France. And excluding this effect, the underlying earnings development remained broadly in line with past levels. So overall, CEWS once again demonstrated the value of its diversified crop portfolio.

16:56 Lastly, vegetables. The sales were below prior year's level, mainly affecting development in village and timing effects in certain markets. Our focus remains unchanged. It remains firmly on long-term value creation and we continued investing heavily in breeding capabilities, infrastructure and new crops while further expanding our innovation pipeline. So this rationale remains fully intact and we are all looking forward to providing more insights and a few next week's Vegetable Investor and Analyst Seminar

17:31 in Andijk, in the Netherlands. Let me now turn to cash flow. Despite lower sales volumes and a more challenging market environment, we once again generated free cash flow of approximately 123 million. The composition of the cash flow differs, however, from last year. Operating cash flow was lower, reflecting both decline in the EBITDA and higher working capital requirements. and at the same time, investing cash flow improved by the same amount, which is due to two reasons. First, the payment of the first tranche in the context of the equity line divestiture. And second, somewhat lower capital expenditures mainly due to project cravings. So even in the year characterized by lower acreage and cryptocurrency developments, KUS continued to convert earnings in cash very effectively.

18:25 And that has, of course, positive implications. Our balance sheet improved further during the financial year and remains one of the key strengths of KDRS. The debt declined significantly to less than 9 million at the year end. And I think few companies in our industry operate with a balance sheet as strong as ours today. And as a result, we entered the financial year with exceptional financial flexibility and this gives us considerable scope to continue investing in R&D to support the growth of our existing businesses and pursue attractive opportunities if they create long-term value for our shareholders. So, our band sheet is stronger than ever and it provides a very solid foundation for the growth of KWS.

19:14 and we remain committed to predictable and sustainable dividend growth. Based on the results achieved, we propose to increase the dividend to €1.30 per share. And this represents another year of dividend growth and results in a payout ratio of approximately 29%, which is fully in line with our dividend policy. So since the financial year 2020, our dividend has actually increased from We expect organic sales growth of around 3% in the assumption of Peter Vogt, Nicolas Wielandt, Felix Büchting, Jorn Andreas, Sebastian Talg KGaA, Peter Vogt, Nicolas Wielandt, Felix Büchting, Jorn Andreas, Sebastian Talg For profitability, we expect an EBITDA margin between 19% to 20%, and this also remains fully licensed or mid-term addition and continues to include also

20:49 substantial investments in R&D. So overall, we enter the financial year with good confidence in profitable growth. So before moving to Q&A, let me briefly remind you on our Vegetables and Investor Analyst Seminar in ANDAIC next week. We have fantastic participation and we really look forward to discussing the development and long-term potential of this business in much greater detail. And you will see this on site. You will get to taste and feel our products. And that will be, I think, a very great event. So looking forward to this. For now, let me close with three takeaways. First, we delivered a resilient profitability despite significant market headwinds.

21:36 Second, we generated strong cash flow. and further strengthen our already very healthy bank sheet. And third, we continue to invest. We continue to invest in innovation in future growth while maintaining financial discipline. So taken together, I think these achievements leave us well positioned for the year ahead. And that makes us really confident. So thank you very much for your attention. And Peter and I are happy to answer all your questions. Thank you very much. Ladies and gentlemen, if you would like to ask a question, please press star 9 and pound key on your telephone keypad. If you would like to revoke your question, press star 3 and pound key.

22:19 You can also use the dial-in function in the webcast and raise your hand if you would like to ask a question by phone. So, the first question is from Michael Schäfer from OdorBHF. Please go ahead, the floor is yours. Yeah, good morning gentlemen. Thanks for taking my questions. The first one would be on your sugar beet segment outlook. Jorn, you mentioned the 10% decline in global acreage in the past season and obviously we have seen sugar prices in a rather strong recovery in recent months. So I wonder what you have baked into your slight organic sales

23:04 growth outlook on the On the top line, shall we think about some more price pressure? For me, it looks like a rather conservative statement on that one. This would be my first question. The second one is on cereals, on rapeseed. Well, you said that you gain market share and you may overtake the number one position in the next season. Can you just give us a bit of color? What's the delta in terms of market share to the number one in the segment? And last not least on Russia, obviously there were some setbacks in corn.

23:49 On a more, let's say, general or more broader terms, how should we think about your Russian business in general? Is there also a risk to to the sugar beet segment or so what's your view on on the region and how is affecting the respective segments this would be my three questions for the beginning thanks questions so first of all yes sugar beet outlook um So that's our best estimate on the acreage reduction last year that we mentioned. And exactly because of this, we were a bit more cautious, to be honest. You might label the conservative, we say more cautious, let's say, when we put together the outlook, let's say. So our current data that we have, we'll say, is more positive. That's what you also said.

24:40 That's true. So we saw a strong increase in sugar Price is also reflecting on the effects in India and Thailand. So we have here not a great harvest, which is putting more bullish factors on the prices. We see also not good or not great yields in Europe. Talking about the heat waves in certain parts of southern Europe or the southern part of Germany. So that leaves also clearly a mark on the supply. and so that bodes well for us. So a big driver of the acreage reduction last year was the supply and demand balance of the 10.2 years of very good harvest. So we believe that actually this year Europe will be completely balanced out its inventory, will also be a net importer because they do not have enough of their own produced sugar supply.

25:39 That means we have rebalanced Let's say a supply and demand situation after this season. And then, you know, provides us with a good starting point for the upcoming growing season. So we've been a bit more conservative and said, okay, in our outlook, we work with a stable acreage. That means we have not put in very optimistic assumptions in our outlook in order to be here on the more safe side. and if that trend continues and if we see in October really as a result of the harvest that we see already today in the trial, trial harvests that are already of course happening, then I think that this gives us

26:21 also some opportunities because we will also continue to further increase the penetration of Conviso and ACR+, which anyway will also then help us on the gold side. Eulti Grave, that's a fantastic situation for us.

26:37 And you know that this is basically the first quarter of our fiscal year. It's the most important quarter for Eulti Grave. That's when all the planting happens, let's say for the current season. We had a fantastic start to the new fiscal year. Strong growth in OECD RAPE. When we say we want to become the leader in Europe now in the upcoming growth season, I have to say it actually happened. We are now number one. We have gained market share from all key markets and that is for us really a situation where start at nine because OECD prices are of course very high, commodity prices are high so there's literally incentive for the farmer to move into OECD if let's say the crop rotation allows and let's say a market or a portfolio where we have the best product in the market so that helps us really good and get a good start.

27:38 Russia is of course still a moving target, if you want, in that situation. It is largely unchanged, I would say, compared to all the previous calls when we were discussing the situation. So it remains for us still a revenue contributor with less than 10%,

28:01 let's say, to the overall KGaS portfolio. So that has not changed, let's say. for our sugar beet business. I told you already that for cereals and corn, there's anyway any more opportunistic business. Let's say also that anyway very low in terms of revenue contribution at all. So sugar beet is the remaining key business that we have. and we do not see, let's say, that any local production would be able to match the performance requirements necessary in order to supply the demand, let's say, in the domestic demand. So we don't see that. Currently it's operating, so it's pretty stable, but of course no one

28:45 can predict the future, but so far so good. Thank you very much. Thank you very much. The next question is from Christian Feitz from Kepler Chevro. The floor is yours. Yes, thanks. Good morning, Jorn, Peter and team. A couple of questions remaining, please. I'll ask my questions next week. First of all, you talked about obviously the oilseed rape business, which seems to be going well into the new season. Can you talk a bit about your serious business, such as, for example, winter wheat, how that is going, also given higher wheat prices into the seeding season? And second, just a minor question, but can you please elucidate a bit the antitrust investigation you seem to be facing in France?

29:42 Thanks very much. Yeah, very good. I look forward to your pitching questions next week. So now for cereals in general, I would say that we have a very diversified portfolio in cereals and in all crops that we operate in cereals, we are the leader in a year or so. We've now gained number one position in hybrid rice anyway, by far number one, and same for wheat and for barley as well. So it's a really good position to be in. So for the other product crops, last year was a bit, I would say, more challenging because of the low commodity prices last year. Farmers were more to farm-saved seed, so our revenue was more or less stable. We were not able to increase the revenue in this situation.

30:32 So for the coming year, we are more confident because at some point in time, the farmer needs also to purchase fresh, new seeds, not to catch up also with the years. So on that side, we are also confident, but I would say overall, if you look at the crop rotation, the winter is of course a residual loser if you look at the overall agricultural crop rotation. Of course, sugar prices are going up, and anyway, if the farmer would be completely unconstrained, would plant as much sugar as possible, All these rates are very good, so that would be also a very strong drive to plant more oilseed rape. Corn prices have increased, so that might also help to move some acreage to corn. I would say overall, the other winter fields are the residual loser, but within this market, which we would deem to be Stable, maybe slightly increasing.

31:34 We hope that we can gain more share by our business coming from this more stronger farm safety situation last year. That's how I would describe the situation. That's also how we see the start of the year. It's pretty stable after the decline last year.

31:51 It's really stabilized and also slightly growing. And that's what we see for the other as well. So overall, I think it's a good start. So that is basically unchanged to what we also discussed after nine months. So there is a situation that for the serious business in France, you know, there's a certain mechanism that's also transparent and public. Everyone can see it on the website where prices for royalties and their basic fees are set. You know, that's also done in conjunction also with French

32:28 authorities. There is a question whether this mechanism is compliant and future-oriented or not. In order to be prudent, we took a provision of 5 million euros, but we, as well as all other bargaining participants, rejected this claim because it's in practice for 30 years. It's been looked at many times. It's public. Well, it is what it is. It's not on our balance sheet as a provision and then we'll see how it develops, but we're depending on our position and reject this plan. Okay, great. Thanks very much, Jorn. If I may, one last question. You talked about Russia, but how is the business going for you in Ukraine at this point in time?

33:18 Luke, Ukraine is actually going well, I have to say, and I say this with some fidelity, let's say, because we are very in close contact with our people in Ukraine. Last week, a problem was also in Ukraine, visiting the teams and the site, which of course was an important one for us, I can tell you. Pressure on the teams locally is significant and we are just very grateful and a lot of respect for all people that were in the conditions. We again increased our revenue in Ukraine in a significant, I would say, single digit amount. Thank you very much. See you next week.

34:24 Before we move on to the next question, I would like to repeat, if you would like to

34:28 ask a question, please press star, nine and pound key on your telephone keypad or use the dial-in function in the webcast and raise your hand. Next question is from Leon Mullenbruch from MWB Research. Please go ahead. Hello, everyone. Thank you for taking my question. So you already answered my question on the market environment and the drivers of your expected recovery. My follow up on this would be, as you mentioned, the potential impact of El Niño and potential improvements in sugar. Could a strong El Niño event also negatively affect your business overall, especially the other segments? And my second question would be to the margins. So your current margin target is 19% to 20%. What could be a driver to move above the 20% in the long term?

35:27 Very good question. In India, of course, we all read the news. We had a very pronounced annual this year that affected some of the important growing regions in Asia, in particular India and Thailand. And those are also the key regions for us that influence their global sugar prices. And that is already a mark on the commodity prices. because the harvest is not going as expected, because you have a lot of liquid drought, you miss the rainfall, and that has an impact on the harvest. You have the counter-effect, basically, in Latin America, where you have the heavy rainfall in parts of Brazil, you have heavy rainfall in Argentina, and for some of the areas, it could be beneficial, let's say. So, usually, Argentina is the winner. From Nino and Brazil, it can be both directions, also very different growing regions in Brazil.

36:20 So I would say for sugar, it's a positive driver, and that's all materializing. For the other crops, you cannot really say that there could be one or the other direction, because losses on one side of the globe could be compensated theoretically on other sides, which is dependent really on conditions. If you have super heavy rainfall, then you can also not harvest better yields, for example. So I would say, on the other part, it's really more balanced, I would say, the effect. We don't expect any big, let's say, movement. And that's also an experience that we have looking at the past, because we have an immune effect, of course, every few years. And that's also the experience that we've made in previous situations. So on the other ones, we are more, let's say, neutral, I would say. There was a margin. Yes. So we continue to invest in our business. So we said, OK, we want to, you know, Peter Vogt, Jorn Andreas, Sebastian Talg Thank you. See you next week.

38:08 Thank you very much. At the moment, there seems to be no further questions. I repeat again, if you would like to ask a question, please press star nine and pound key on your telephone keypad, or just use the dial-in function and raise your hand. We have Michael Sheffer from BHF on the line. Please go ahead. Yeah, so thanks for taking my follow up. Well, coming back to vegetables, and I don't want to preempt here on your next week's CMD, however, on the numbers. So looking into, obviously, you reported minus 6.8% decline organically on the sales side. But looking into the details, I realized that you cut back significantly on the marketing spend, even on the relative basis compared to, let's say, historical levels. So I wonder whether you can give a bit more color, let's say, how the How challenging 2025-2026 was for the segment and maybe on those kind of metrics how we should think about going into 2026-2027?

39:12 Absolutely. We had a decline last year, but this is also again very high compared with the previous year, we've gone to 16%, so about two years of high single-digit growth. We were having, I would say, two or three wins. First was that we had a lower demand in North America. The food service segment was a bit lower in terms of demand. We had an oil phasing, which was simply oil phasing, an oil slip from June into July. That also made an impact because the business size was not as big as It's not fully, I would say, unaffected by water phasing effects. And then we also had these high comparables that I mentioned in the previous year. So in that context, it's an okayish result, and we definitely plan to come back to growth this year also.

40:15 That's very clear. Only question, selling expenses, it's a bit of an artifact, Michael, because we actually increased some of the selling expenses. However, last year, we had this one-off write-off of the PopPrint brand. And this basically was at $10 million. Thank you very much. Thanks. Thank you very much. There seems to be no further questions.

41:04 I thank everyone for your participation. And with that, I would like to hand over to your host, Mr. Andreas, for the closing remarks. Right, thanks again. Yeah, no, just thank you again for your interest and time for joining us this morning. And as already mentioned several times, we're looking forward to seeing you next week at our Investor Day in Andes, forward to spending some time with you. And with that, thank you and have a good day.