KWS Saat flagged boosts from strong North American demand for spinach seed, and the continued recovery in European rye area spurred by dryness, as it forecast “optimism” over prospects, despite a widened interim loss.
The German-based seeds group - reporting a 41% rose to E86.5m in losses for the July-to-December period, the first half of its financial year – said that the result reflected largely knock-on effects of its takeover of vegetable seeds group Pop Vriend.
These included extra interest expenses related to the acquisition, besides E16.8m in one-off charges related to asset amortisation, and a cut of E5.7m in the value of inventories acquired with the deal.
Its sales for the period rose “sharply”, by 14.0% to E289.1m, reflecting organic growth in the vegetables and cereals divisions, besides the extra trade brought with Dutch-based Pop Vriend.
‘High demand for spinach seed’
The vegetables division was “buoyant, on the back of high demand for spinach seed”, KWS said, flagging demand “in particular in North America”, where domestic seed producers are battling against Fusarium oxysporum, a fungal disease.
And while the US, the world’s top exporter of leaf spinach, saw its exports of fresh of chilled crop rise by 13.6% last year to 95.61m pounds, according to US Department of Agriculture data, it required a growing tally of imports to maintain supplies.
US imports of fresh spinach in 2019 soared by 82% to 38.69m pounds.
In KWS’s key cereals division, sales rose by 13% year on year to E157.1m, a gain “mainly attributable” to the rye market, “which benefited from… higher cultivation area”.
Bouts of dryness noted in many parts of central Europe, while a negative for the group’s winter rapeseed seed sales, have been a boost to rye, which is more resistant to drought than other cereals.
European Union rye area had as of last year rebounded by 16% from a 2016 low of 1.92m hectares which was the smallest in at least 25 years, according to European Commission data, which show particular expansion in Germany, which has been notably prone to dryness.
The EU rye harvest last year, at 8.49m tonnes, stood up 36% year on year, and its highest since 2014, according to the commission.
Analysis group Strategie Grains forecasts a further gain in EU rye area for the 2020 harvest of 4.8% to some 2.2m hectares on its data, which foresee 2020 output of 8.8m tonnes compared with an 8.1m-tonne harvest last year on its assessment.
‘Grounds to be optimistic’
KWS reported a 9.2% drop to E133.4m in revenues in corn, thanks largely to a later start this year to the Brazilian safrinha corn-sowing season, in turn a reflection of a late-running soybean harvest.
For sugarbeet, sales fell by 38% to E27.9m, with KWS saying it had not this time received the extent of early seed orders as received the year before.
Nonetheless, Eva Kienle, the KWZ chief financial officer said that “the first half of the year and the indications for the upcoming spring sowing season give us grounds to be optimistic about the current fiscal year”.
The group stood by expectations of sales for the year to the end of June rising by 8-12%, with the expectation for vegetable seed sales upgraded to E80m-90m, from E80m.
The forecast for the group operating profit margin for the year was kept at 8-12%.
KWS shares stood 2.9% lower at E56.70 in afternoon deals in Frankfurt.