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Select Harvests LimitedAnnual Report 2014 | 2015 Key figures of the KWS Group in € millions 2014/2015 2013/2014 2012/2013 2011/2012 2010/2011 Key figures of the KWS Group in accordance with the corporate controlling structure1 Key figures of the KWS Group in accordance with IFRS 112 Net sales Operating income (= EBIT) as a % of net sales (= ROS) Net financial income/expenses Net Income as a % of net sales Operative cash flow Net cash from investing activities Equity Balance sheet total Equity ratio in % Return on equity in % Return on assets in % Capital expenditure Depreciation Average number of employees Personnel costs Net sales Operating income (= EBIT) as a % of net sales (= ROS) Net financial income/expenses Net Income as a % of net sales Operative cash flow Net cash from investing activities Equity Balance sheet total Equity ratio in % Return on equity in % Return on assets in % Capital expenditure Depreciation Average number of employees Personnel costs Performance of KWS shares in € Dividend per share Earnings per share Equity per share 855.4 116.6 13.6 –7.0 72.9 8.5 101.2 –52.4 530.3 902.0 58.8 15.2 8.9 49.3 27.6 3,560 165.0 1,260.4 138.0 10.9 –7.1 84.0 6.7 57.7 –136.3 738.7 1,440.2 1,178.0 1,147.2 138.4 11.8 –12.6 80.3 6.8 61.0 –75.4 637.8 152.1 13.3 –10.3 92.3 8.0 84.6 –88.9 649.7 986.3 140.9 14.3 –5.1 94.4 9.6 97.9 –56.6 603.1 1,262.8 1,218.7 1,092.3 51.3 13.6 7.2 140.6 51.6 5,322 256.4 986.0 113.4 11.5 16.7 84.0 8.5 48.1 –123.8 738.7 1,355.5 54.5 13.6 7.8 132.5 45.9 4,691 216.9 3.00 12.53 111.92 53.3 15.8 9.0 65.2 38.4 4,443 209.9 55.2 18.3 10.7 111.5 28.4 3,851 182.5 50.5 12.8 7.3 82.6 45.8 4,847 225.8 923.5 118.3 12.8 7.5 80.3 8.7 76.0 – 63.1 637.8 1,165.0 54.7 12.8 7.8 69.4 41.2 4,150 189.9 3.00 11.69 96.64 1 Our 50:50 joint ventures are included proportionately in accordance with their shares. 2 In accordance with IFRS 11, the net sales and expenses of our joint ventures are no longer included in KWS’ statement of comprehensive income. Instead, the shares they contribute to earnings are carried under net financial income/expenses. In addition, the assets of our joint ventures will be included in the future in the KWS Group’s balance sheet as an equity-accounted financial asset in ac- cordance with the new accounting regulations. l s r e d o h e r a h s r u o o T Content 2 To our shareholders 3 Foreword of the Executive Board 5 Report of the Supervisory Board 10 The KWS share 12 Spotlight topic 16 Corporate Sustainability 20 Corporate Governance 23 Combined Management Report 24 Fundamentals 33 Business performance 36 Earnings, financial position and assets 52 Employees 55 Report on events after the balance sheet date 55 Opportunity and risk report 62 Forecast report 64 KWS SAAT SE (explanations based on the German Commercial Code (HGB)) 68 Other disclosures 75 Annual Financial Statements Hagen Duenbostel (CEO) Corn, Coporate Development & Communications, Compliance Léon Broers Research & Breeding Eva Kienle Finance, Controlling, Global Services, IT, Legal, Human Resources Peter Hofmann Sugarbeet, Cereals, Marketing To our share holders Foreword of the Executive Board KWS can look back on almost 160 years of plant industry’s high rate of innovation is driven by intense breeding experience. In this time, the company has competition – accompanied by shorter and shorter evolved from its beginnings as a domestic sugar- development cycles for new technologies. As a re- beet seed vendor into a leading international plant sult, research & development expenditure in plant breeder. As an independent family business, KWS breeding has risen steadily for years, and KWS again now offers high-yielding varieties in some 70 coun- increased its R&D spending by around 16% to €174 tries and generates more than 80% of its net sales million last fiscal year. outside Germany. In view of the tough climate in the international agricultural markets, however, keeping Despite this challenging environment, KWS was able up earnings-driven expansion of KWS’ business is a to hold its own well in fiscal 2014/2015. We grew our particular challenge. net sales by around 7% to almost €1.3 billion. We posted an EBIT of €138 million and exceeded our After years of steadily increasing demand for food own profit expectations. That is attributable to the and feed and a parallel trend in supply, agricultural close collaboration of our currently 5,322 KWS em- markets now face record cereal inventories. World ployees worldwide. They are the crucial foundation market prices for consumer goods have accordingly of our innovative strength and the key to our future fallen sharply and are still not yet trending upward. growth. What is particularly important for us is to Increasing globalization of trade is also causing practice our corporate values with passion, preserve greater volatility in commodity prices. However, in- our family company’s independence and maintain comes in the farming sector largely correlate with the trust farmers have in us as a powerful partner by these trends in commodity prices. Decisions on what supplying seed of the very best quality. to grow are made on the basis of crop rotation, but also in particular on the farmer’s revenue situation In order to achieve that goal and grow in the future, and costs. Consumer prices for sugar, corn, potatoes we are focusing our resources on research & deve- and oils have dropped to lows that in some cases lopment, expanding distribution and creating the have not been seen for decades. necessary production capacities. The main emphasis of our capital spending program last fiscal year was Depending on the market situation, influences from therefore on expanding and modernizing our seed exchange rate fluctuations and increases in the cost processing and production plants worldwide. We of capital may exert additional pressure on cultiva- were also able to successfully increase our footprint tion area for the individual crops. These challenges in France, one of the world’s most important cereals were especially clear in our international growth markets, by acquiring the remaining 51% stake in the markets, such as Eastern Europe and South Amer- French seed company SOCIETE DE MARTINVAL S.A ica. There were greater economic pressures on (MOMONT) effective September 30, 2014. We invest- cultivation of grain corn there, for example. As a con- ed a total of €141 million last fiscal year. sequence, cultivation area was reduced, as was the size of KWS’ potential market. KWS has grown and spread its roots over all the Plant breeding can offer sustainable solutions to the European player early in its history, namely at the long-term growth in demand for food worldwide. The beginning of the 20th century. Changing its legal years. KWS operated outside Germany and was a Foreword of the Executive Board | To our shareholders 3 KWS Group | Annual Report 2014/2015 form into a European Stock Corporation (Societas The main theme of this report is seed of the very best Europaea/SE) was therefore a logical consequence quality. We therefore present the individual steps of of KWS’ development in Europe and its strong inter- how we produce it. In the spotlight topic and on the national growth, especially in recent years. In addi- two-page photo spreads you can find detailed and tion, the interests of European employees are repre- informative explanations and impressions. I wish you sented by a European body now that the company a very enjoyable read! has the legal form of an SE. In conclusion, I would like to adress our employees. We intend to continue implementing our corporate Without their commitment and innovative expertise, strategy stringently in the coming year. As part of our company’s success would not be possible. On that, we will continue to focus strongly on research & behalf of the whole Executive Board, I would like to development and product quality to keep on offering thank them for their outstanding work. I also thank seed of the highest quality. By doing that, we believe our customers, investors and partners for their sup- we can grow net sales by 5% to 10% and post an port and trust. We will continue on our path together. EBIT margin of at least 10.5%. In this regard I wish to note that next fiscal year we will see a fundamental With best regards from Einbeck on behalf of the change in our financial communications and that the entire Executive Board, KWS Group’s net sales and profit (EBIT) will be lower since they will not include the revenue and expenses from our joint ventures. You can find more informa- tion on page 24. Hagen Duenbostel Chief Executive Officer 4 To our shareholders | Foreword of the Executive Board Annual Report 2014/2015 | KWS Group Report of the Supervisory Board In its meeting on October 15, 2014, the Supervisory the various businesses, market trends and the com- Board decided – following careful examination – to petitive environment, research and product devel- give its consent to the proposal by the Executive opment and, along with important individual projects, Board to convert KWS SAAT AG into KWS SAAT SE, risk management at the KWS Group were also the which also entailed a change in the company’s name. subject of detailed discussions. The Chairman of the Changes in the company’s name have always marked Supervisory Board continued the bilateral discussions the dawning of a new era in KWS’ history. The exten- with the Chief Executive Officer and individual mem- sive efforts being made to develop new products and bers of the Executive Board in regular talks outside penetrate new markets are testimony to the excep- the meetings of the Supervisory Board. In addition, tional dynamism of this dedication to the future. Close there were monthly meetings between the Chairman and trusted interaction between the Supervisory of the Supervisory Board and the Executive Board Board and the Executive Board is vital in this regard. as a whole, where the company’s current business development and, in particular, its strategy, occur- The Supervisory Board discharged the duties incum- rences of special importance and individual aspects bent on it in accordance with the law, the company’s of the company were dealt with. The Chairman of the Articles of Association and the bylaws, regularly Supervisory Board informed the Supervisory Board advised and monitored the Executive Board in its of the results of these meetings. The Supervisory activities and satisfied itself that the company was Board did not make use of its right to conduct an run properly and in compliance with the law and that examination granted by Section 111 (2) AktG (German it was organized efficiently and cost-effectively. The Stock Corporation Act) since the reporting by the Supervisory Board decided on all significant busi- Executive Board meant there was no reason to do so. ness transactions requiring its consent and carefully accompanied the Executive Board in all fundamental Focal areas of deliberations decisions of importance to the company. The Super- The full Supervisory Board held five regular visory Board discussed the information and assess- meetings in fiscal 2014/2015. The meetings were ments that influenced its decisions together with the always attended by all the members, with the ex- Executive Board. Both boards continued their con- ception of one where a member was connected structive cooperation based on mutual trust in every by phone. The meeting of the Supervisory Board of respect. Among other things, this was demonstrated KWS SAAT AG to discuss the financial statements by the fact that, as is customary, the Supervisory on October 15, 2014, was devoted to examining and Board was involved in all decisions of vital importance approving the financial statements of KWS SAAT AG to the company at an early stage. The Supervisory and the consolidated financial statements of the Board was provided with the necessary information KWS Group as of June 30, 2014. In addition, conver- in written and oral form regularly, promptly and com- sion of KWS SAAT AG into a European Stock Corpo- prehensively. This included all key information on ration (Societas Europaea/SE) was discussed. The relevant questions of strategy, planning, the business change in legal form is intended to reflect our com- performance and the situation of the company and the pany’s strong international growth and to emphasize KWS Group, including the risk situation, risk manage- its large footprint in Europe. In addition, the interests ment and compliance. Business transactions requiring of European employees are represented by an addi- consent were submitted to and discussed and ap- tional European body now that the company has the proved by the Supervisory Board in compliance with legal form of an SE. The Supervisory Board decided, the bylaws for the Executive Board. The company’s together with the Executive Board, to propose to the business policy, corporate and financial planning, Annual Shareholders’ Meeting on December 18, 2014, profitability and situation, the general development of that KWS SAAT AG be converted into KWS SAAT SE. Report of the Supervisory Board | To our shareholders 5 KWS Group | Annual Report 2014/2015 The Annual Shareholders’ Meeting agreed to the members and adopted bylaws for the Audit Commit- conversion. The resolution on conversion of the tee. The members and chairpersons of these com- company adopted by the Annual Shareholders’ mittees were the same persons who had served in Meeting also included a resolution on the Articles of this capacity on the respective committees of the Association of KWS SAAT SE, Sections 8 (1) and (2) Supervisory Board of KWS SAAT AG. Further items of which specify that the Supervisory Board consists on the agenda were the appointment of the members of six members: four shareholder representatives of the Executive Board of KWS SAAT SE, namely and two employee representatives. Section 8 (7) of the same persons who had served on the Executive the Articles of Association contains provisions on Board of KWS SAAT AG, approval of the supplemen- appointing the shareholder representatives on the tal agreements to the existing contracts with the Ex- first Supervisory Board of KWS SAAT SE; the same ecutive Board members and adoption of the bylaws persons were appointed as shareholder represen- for the Executive Board of KWS SAAT SE. The mem- tatives as were serving on the Supervisory Board of bers of the Supervisory Board of KWS SAAT SE also KWS SAAT AG. The change in the company’s legal approved the appointment of the members of the form took effect upon its entry in the commercial reg- Executive Board and conclusion of the supplemental ister on April 15, 2015. agreements, including in their capacity as members of the Supervisory Board of KWS SAAT AG. The joint The meetings of the Supervisory Board of formation audit report of the first Supervisory Board KWS SAAT AG on December 17 and 18, 2014, and first Executive Board of KWS SAAT SE was focused on KWS’ HR strategy, establishment of its likewise signed on March 18, 2015. The Supervisory research center in St. Louis and expansion of corn Board of KWS SAAT AG continued to exist alongside production capacities in Eastern Europe. In its last the Super visory Board of KWS SAAT SE until its term meeting on March 18, 2015, the Supervisory Board of office expired when the conversion took effect on of KWS SAAT AG heard detailed reports on the April 15, 2015. All the above-mentioned bylaws and status of product development and the research details on the members of the Supervisory Board’s projects. The company’s organizational development committees can be obtained on the company’s was also discussed. Following this meeting, the homepage. first Supervisory Board of KWS SAAT SE convened for its constitutive meeting on March 18, 2015. The On June 24, 2015, the agenda as usual included adop- meeting was not only attended by the shareholder tion of the corporate planning for fiscal 2015/2016, representatives appointed by the Annual Sharehold- including medium-term planning up to 2018/2019. ers’ Meeting on December 18, 2014, but also by the The Supervisory Board also approved the merger of employee representatives who had been appointed KWS MAIS GMBH with KWS SAAT SE. The survey on March 15, 2015, pursuant to the agreement be- of the Supervisory Board with the aim of avoiding and tween the Executive Board and the Special Negotiat- identifying fraud was also conducted. The Supervisory ing Body of the European employees. The employee Board is not aware of any such acts. A further item on representatives were likewise the same persons who the agenda were the resolutions on the ratio of women had served in this capacity on the Supervisory Board on the Supervisory Board and the Executive Board. of KWS SAAT AG. The first Supervisory Board of The ratio of women among the shareholder represen- KWS SAAT SE then initially elected Dr. Andreas J. tatives on the Supervisory Board is currently 25%; Büchting as its Chairman and Dr. Arend Oetker as the two seats for the employee representatives are its Deputy Chairman. The Super visory Board also currently held by men. In accordance with Section adopted the bylaws for the Super visory Board of 111 (5) AktG (German Stock Corporation Act), the KWS SAAT SE. It then formed a Committee for Exec- Super visory Board decided that the ratio of women utive Board Affairs, a Nominating Committee and an on the Super visory Board of KWS SAAT SE is still Audit Committee, appointed their chairpersons and to be 16.6% within the statutory period for defining 6 To our shareholders | Report of the Supervisory Board Annual Report 2014/2015 | KWS Group target figures for the ratio of women, namely by Combined Management Report of KWS SAAT SE and June 30, 2017. No election to the Supervisory Board the KWS Group Management Report, including the is envisaged within this statutory period. The ratio of accounting reports, and awarded them its unqualified women on the Executive Board of KWS SAAT SE is audit certificate. In addition, the auditor concluded that still to be 25% within the above period of time. No the audit of the financial statements did not reveal any new appointments to posts on the Executive Board facts that might indicate a misstatement in the decla- are planned within the statutory period of time. In ration of compliance issued by the Executive Board accordance with Clause 5.4.1 of the German Cor- and the Super visory Board in accordance with section porate Governance Code, the Supervisory Board of 161 AktG with respect to the “German Commission for KWS SAAT SE also discussed setting a limit on the the Corporate Governance Code” (cf. Clause 7.2.3 (2) length of time members can serve on the Super- of the German Corporate Governance Code). visory Board of KWS SAAT SE and decided not to comply with these recommendations by the German The Supervisory Board received and discussed the fi- Corporate Governance Code, since they would sig- nancial statements of KWS SAAT SE, the consolidated nificantly restrict the rights of a business with a tradi- financial statements of the KWS Group and Com- tion of family ownership like KWS, whose family share- bined Management Report of KWS SAAT SE and the holders hold a majority stake. The Supervisory Board, KWS Group, along with the report by the independent in agreement with the Executive Board, then adopted auditor of KWS SAAT SE and the KWS Group and the declaration of compliance with the German Cor- the proposal on utilization of the net profit for the porate Governance Code in accordance with section year made by KWS SAAT SE, in due time. Compre- 161 AktG. The company’s declaration of compliance hensive documents and drafts were submitted to the for fiscal year 2014/2015 has been published on the members of the Supervisory Board as preparation; company’s homepage. for example, all of them were provi ded with the annual financial statements, Combined Management Report, Annual and consolidated financial statements audit reports by the independent auditors, Corporate and auditing Governance Report, Compensation Report and the Deloitte & Touche GmbH Wirtschaftsprüfungs- proposal by the Executive Board on the appropriation gesellschaft, Hanover, the independent auditor chosen of the profits. The Supervisory Board also held at the Shareholders’ Meeting on December 18, 2014, detailed discussions of questions on the agenda at and commissioned by the Audit Committee, has its meeting to discuss the financial statements on audited the financial statements of KWS SAAT SE that October 14, 2015. The auditor took part in the meeting. were presented by the Executive Board and prepared It reported on the main results of the audit and was in accordance with the provisions of the German also available to answer additional questions and Commercial Code (HGB) for fiscal 2014/2015 and provide further information for the Supervisory Board. the financial statements of the KWS Group (IFRS According to the report of the independent auditor, consolidated financial statements), as well as the there were no material weaknesses in the internal Supervisory Board Committees Committee Audit Committee Chairman Hubertus von Baumbach Committee for Executive Board Affairs Andreas J. Büchting Nominating Committee Andreas J. Büchting Members Andreas J. Büchting Jürgen Bolduan Arend Oetker Cathrina Claas-Mühlhäuser Arend Oetker Cathrina Claas-Mühlhäuser Report of the Supervisory Board | To our shareholders 7 KWS Group | Annual Report 2014/2015 control and risk management system in relation to Supervisory Board Committees the accounting process. There were also no circum- The Audit Committee convened for two joint meet- stances that might indicate a lack of impartiality on ings in fiscal 2014/2015 and also held three telephone the part of the independent auditor. The small extent conferences, on all occasions with all its members of services additionally provided by the independent in attendance. In its meeting on September 29, 2014, auditor can be seen from the Notes. the Audit Committee discussed the 2013/2014 annual financial statements and accounting of In accordance with the final results of its own exam- KWS SAAT AG and consolidated financial statements ination, the Supervisory Board endorsed the results of the KWS Group. In addition, the required audit of the audit, among other things as a result of the relating to the conversion of KWS SAAT AG into a vote by the Audit Committee, and did not raise any European Company (SE) was discussed. The Annual objections. The Supervisory Board gave its consent Compliance Report and the results of the auditing to the annual financial statements of KWS SAAT SE, projects were on the agenda at its second meeting on which were prepared by the Executive Board, and March 18, 2015. The audit plan for fiscal 2015/2016 to the consolidated financial statements of the was also discussed and adopted. The quarterly re- KWS Group, along with the Combined Management ports and the semiannual report for fiscal 2014/2015 Report of KWS SAAT SE and the KWS Group. The were discussed in detail in three telephone confer- financial statements are thereby approved. The ences and their publication was approved. Super visory Board also endorses the proposal by the Executive Board to the Annual Shareholders’ In addition, the Audit Committee obtained the state- Meeting on the appropriation of the net retained profit ment of independence from the auditor in accordance of KWS SAAT SE after having examined it. with Clause 7.2.1 of the German Corporate Gover- Corporate Governance nance Code, monitored the auditor’s independence and examined its qualifications and defined the focal The Supervisory Board conducted its efficiency areas of the audit. The Audit Committee also satisfied review in accordance with Clause 5.6 of the German itself that the regulations on internal rotation pursuant Corporate Governance Code for fiscal 2013/2014 to Section 319a (1) No. 4 HGB were observed by the accompanied and supported by Ernst & Young GmbH independent auditor. The Audit Committee convened Wirtschaftsprüfungsgesellschaft. Recommendations on September 28, 2015, to discuss the current annual and measures derived from it were implemented with- financial statements of KWS SAAT SE and KWS’ con- out exception in fiscal year 2014/2015. solidated financial statements and accounting. The independent auditor explained the results of its audit The Supervisory Board regularly addressed the of the 2014/2015 financial statements and pointed question of any conflicts of interest on the part of out that there were no grounds for assuming a lack its members and those of the Executive Board. In of impartiality on the part of the independent auditor the year under review, there were no such conflicts in its audit. The Audit Committee also dealt with the of interests that had to be disclosed immediately to proposal by the Executive Board on the appropriation the Supervisory Board and reported to the Annual of the net retained profit of KWS SAAT SE and recom- Shareholders’ Meeting. mended that the Supervisory Board approve it. 8 To our shareholders | Report of the Supervisory Board Annual Report 2014/2015 | KWS Group Andreas J. Büchting, Chairman of the Supervisory Board The Committee for Executive Board Affairs dealt worldwide. At the same time, he was someone who in the year under review with the examination of the KWS employees worldwide were able to identify with contracts of the Executive Board members. in our phase of rapid growth. With his boundless At the 2014 Annual Shareholders’ Meeting, the Super- made a major contribution to the company’s success visory Board said farewell to Philip Freiherr von dem over the past decade. The Supervisory Board thanks Bussche, who retired from the Executive Board of him for his extraordinarily successful achievements. energy and great charisma, Philip von dem Bussche KWS SAAT AG. After working on the Supervisory Board for five years from 2000 on, Philip von dem The Supervisory Board also expresses its thanks Bussche was appointed as a member of the Execu- to the Executive Board and all employees of tive Board in 2005 and then, from January 2008, KWS SAAT SE and its subsidiaries for their exemplary as Chief Executive Officer. He was responsible for commitment and the outstanding work they again the product segments Sugarbeet (including potatoes) performed in fiscal 2014/2015. and Cereals up to October 2014. In particular, the Sugar beet Segment performed magnificently during Einbeck, October 14, 2015 his era – despite far-reaching changes in market policies. He also helped shape the establishment of our corn activities in Brazil, our research joint ven- ture GENECTIVE and our second research center in St. Louis. As a farmer and businessman with an optimistic and entrepreneurial spirit, Philip von dem Dr. Drs. h.c. Andreas J. Büchting Bussche enjoyed the special trust of our customers Chairman of the Supervisory Board Report of the Supervisory Board | To our shareholders 9 KWS Group | Annual Report 2014/2015 The KWS share Key figures for the KWS share1 Number of shares (June 30) Closing price (June 30) Low High Market capitalization (June 30) 1 Xetra trading system in millions in € in € in € in € millions 2014/2015 2013/2014 6.6 298.50 257.00 298.50 1,970 6.6 257.50 243.20 280.60 1,700 Low interest rate policy of central banks on only one day of trading in the next twelve months. unchanged On June 30, the share stood at €298.50, thus reach- On the capital markets, there was again no change ing its highest level precisely at the end of our fiscal this year in the interest rate policy of central banks. year. Shortly after the end of our fiscal year, the The United States Federal Reserve (the Fed) and consolidation plans of two large companies in our the European Central Bank stuck to their policy of industry became public, producing the sharp daily low interest rates in order to keep capital cheap swings in KWS’ share price (July 2, 2015: € +6.60, and stimulate economic growth. There were also July 3, 2015: € +7.25, July 6, 2015: €–13.55). On the economic and political uncertainties: There was other hand, the share barely responded to the sharp turbulence in the stock market in China, the political increase in our EBIT forecast on September 1. situation in Eastern Europe remained difficult and the negotiations between Greece and its mostly Eu- KWS share is a firm part of the SDAX ropean lenders are still ongoing. In the environment KWS SAAT SE’s market capitalization was higher of low-interest rates, the stock markets as a whole than in the year before: In the year under review it trended upward, although the prevailing uncertain- was €1,970 million on the basis of the closing price ties were obvious from the strong fluctuations in the on June 30, 2015 (previous year: €1,700 million); major indices. The DAX, for example, exhibited sharp solely on the basis of the proportion of free float swings that continued after the end of our fiscal year: of 28.9% (29.7%) it was €569.4 (504.9) million. The August 24, 2015, saw the biggest daily loss in many share still occupies a mid-range position in the years (–4.7%), while the next day the DAX climbed SDAX, Germany’s most important index for small almost 5% again. caps. Measured in terms of free float market capi- talization at the relevant key date of June 30, 2015, KWS share price increases the KWS share ranked 18th (17th) in the index, which In KWS’ fiscal year (July 1 to June 30), the German comprises 50 companies, and 35th (26th) in terms of stock indices DAX, MDAX and SDAX performed trading volume over the period under review. positively overall. The KWS share increased in price by almost 16% in the period from July 1, 2014, to Shareholder structure remains largely unchanged June 30, 2015, surpassing the rise in the SDAX (ap- There were only slight changes in KWS SAAT SE’s proximately 15%) and DAX (just over 10%). The share shareholder structure in fiscal 2014/2015. Most es- price was very stable. It was listed at €257.50 at the sential change was Tessner Beteiligungs GmbH which beginning of the fiscal year and fell below that mark increased its stake by 0.9 percentage points to 15.1%. 10 To our shareholders | The KWS share Annual Report 2014/2015 | KWS Group Employee Share Program enjoys great popularity Proposal on the appropriation of the profits for For more than 35 years KWS has offered its em- fiscal 2014/2015 ployees the chance to become a shareholder in the Surplus supply due to high global stocks of agricul- company and thus share in its success and identify tural raw materials, low prices for agricultural raw more strongly with it. The content of our Employee materials, a reduction in cultivation area, political and Share Participation Program remained unchanged economic tension in growth markets, and volatile ex- in the year under review. Our employees were able change rates created a challenging climate for KWS to buy up to 500 KWS shares at a price of €214.40, in the past fiscal year. Nevertheless, the KWS Group including a 20% bonus, which the individual employ- was able to increase its net sales year on year in all ees must pay tax on. 401 (401) employees in nine product segments, also after adjustment for exchange European countries took up this offer and purchased rate effects. This operational earnings strength under- a total of 9,878 (11,028) shares, corresponding to pinned our rising expenditure on research & develop- an average stake per employee of 25 (28) shares. ment and expansion of our international distribution The acquired shares are subject to a lock-up period structures. Despite these planned increases, the KWS of four years. They cannot be sold, transferred or Group’s net income for the year was €84.0 million, pledged during this period. As in previous years, the above that of the previous year (€80.3 million). How- shares used for the Employee Share Program were ever, the return on sales remained virtually constant at acquired in accordance with the stipulations in Sec- 6.7% (6.8%). tion 71 (1) No. 2 of the German Stock Corporation Act (AktG). A total of €2.7 (2.8) million was used to The Executive and Supervisory Boards will therefore buy back the company’s own shares, giving an aver- propose payment of a dividend of €3.00 for the fiscal age purchase price per share of €271.73 (257.00). year 2014/2015, i. e. at the same level as the previous year, to the Annual Shareholders’ Meeting. €19.8 million Dividend stable at €3.00 a share would thus be distributed to KWS SAAT SE’s share- At the Annual Shareholders’ Meeting on Decem- holders in December 2015. That means we are able ber 18, 2014, the shareholders decided to set the divi- to stick to our proven dividend policy, which is geared dend per share at €3.00. The number of shares re- toward the company’s earnings strength and envis- mained unchanged, giving a total amount distributed ages a payout of 20% to 25% of the KWS Group’s net of €19.8 million as in the previous year. The dividend income for the year. payout ratio relative to the KWS Group’s net income for the year of €80.3 million in fiscal 2013/2014 was thus 24.7%. Shareholder structure at October 13, 2015 (in %) 6,600,000 shares Free float 28.9 Tessner Beteiligungs GmbH 15.1 56.0 Families Büchting, Arend Oetker, Giesecke The KWS share | To our shareholders 11 KWS Group | Annual Report 2014/2015 Spotlight topic Our seed: the essence of life! Quality is produced in the field To successfully raise crops for food and other all, plants need time to grow. In order to save time and purposes, farmers need high-quality seed. Along be able to respond more flexibly to the market, we with fertilizer and crop protection, seed is the also carry out multiplication in South America, for ex- farmer’s most important production resource. ample in Chile and Argentina. Since it is summer and Therefore, high and high quality is crucial. winter at different times in the northern and southern hemispheres, two generations of seed can be pro- It takes many years to develop a variety. High-quality duced in one year. That saves time, creates flexibility seed is vital so that varieties can unfold their genetic and reduces our production risks. It also means that potential to the full. Seed quality is a very complex lower yields due to the weather in seed multiplication property and may be influenced by many internal and in Europe can be compensated for, ensuring we can external factors, but especially by the steps involved supply farmers in the spring. in multiplication and processing. Special breeding and production know-how, such as that of special- Where does the seed come from? ized companies, is needed to ensure high and con- Multiplication planning is followed by field production. stantly improved seed quality. It is necessary here to comply with the high – and in some cases crop-specific – requirements demanded Why does seed production take so long? of the production conditions in order to ensure out- The production process begins with sales and multi- standing seed quality. That includes, for example, plication planning. As part of that, the volumes of each regulations on the distance between the multiplication variety that might potentially be cultivated in the indi- areas for different varieties of a crop. The objective of vidual markets are assessed in order to calculate pro- such minimum distances is to prevent the presence duction requirements. This planning is continuously of undesirable traits from other populations through adjusted throughout the production process to make pollination. sure that enough seed of high quality is produced without high surpluses. Planning commences up to However, field production also entails other challenges, three years before the seed is sold to farmers – after such as in the production of hybrid seed. Hybrid 12 To our shareholders | Spotlight topic Annual Report 2014/2015 | KWS Group breeding is a breeding method that is more than instance. However, sugarbeet seed – which is angular 100 years old. In this method, systematic crossing of by nature – has to be polished and pelleted to obtain two parents explicitly chosen for their properties cre- the round “pellet” that enables precision sowing of ates progeny that exhibits better growth and a higher individual seeds. The individual seed lots are dressed yield than its parent generation. To produce hybrid as desired by the farmer with crop protection at the seed successfully, it is therefore necessary to ensure end of processing. that the pollen of the plant chosen as the “father” actually pollinates the “mother” plant. Yet how can Structure of a sugarbeet pellet that be guaranteed? The answer to that also depends to a very great extent on the crop in question. There is a relatively “simple” mechanical possibility for pro- ducing corn hybrids. The tassels and thus the male flowers are simply removed (page 14/15). The process is sometimes far more complicated for other crops. In the case of sugarbeet, for example, the female and male flower parts are to be found together in a flower. So special mother lines that are male-sterile due to a biological mechanism and do not produce any pollen are used to obtain hybrid seed. The procedure is similar for rapeseed and rye. The populations are monitored by experts throughout their entire time in the field. It is important to multiply 1 2 3 4 Seed Embryo A pellet has four layers added in very specific, high-tech procedures: 1 Active substance – protects the seed from sources of fungal damage 2 Coating with substances to promote germination and emergence 3 Active substances – as protection from animals and sources seed in regions with a favorable climate where the of fungal damage in the earth disease pressure on, and occurrence of pests that attack, the crops are particularly low and the con- ditions for pollination and maturation (page 18/19) are 4 Color layer – prevents direct contact with the coating, protects against friction and gives the pellet its typical orange color as ideal as possible. Such regions for sugarbeet are How does life stay in the seed? Northern Italy and Southern France. All the processes are designed to make sure that Just looking at the seed, you’d never know how much high-tech it contains. Dr. Ralf Tilcher, Head of Seed Technology the seed is handled carefully so that the seedlings are kept protected and ideal germination capacity can be ensured. Each lot is repeatedly examined throughout the process – whether the seed actual- ly has the quality features and traits that make the variety what it is. That includes specific resistance against diseases or constituents that define its quali- ty, for instance. The seed’s germination capacity and How seed becomes a high-tech product spouting strength are also determined (page 34/35). In order to ensure the high quality of seed produced We set high standards: For instance, the germination on the field, it must be processed after being har- capacity of our sugarbeet seed is at least 96% – vested. The seed is cleaned, dried gently and sorted usually even higher! by size (page 50/51). The precise technical processes for processing the raw goods depends on the nature Only when the seed has been thoroughly examined and size of the seed of the various crops, among and has passed all the checks is it approved for sale, other factors. Corn is harvested on the cob and only packaged and shipped (page 66/67). As a result, the separated from the cob after it has been dried, for farmer ends up with seed of best quality. Spotlight topic | To our shareholders 13 KWS Group | Annual Report 2014/2015 A great combination Hybrid production To produce hybrid seed successfully, it is necessary to ensure that the pollen of the pollinating plant (“father”) actually pollinates the “mother” plant. That is relatively easy to do with corn due to its special architecture: The male flower (the tassel) is located at the tip of the plant, while the female flower is in the middle section of the stalk. The mother plants, on which the seed to be harvested grows, are detasseled, i. e. the male flower is completely removed. Depending on the conditions in the field and the prevailing weath- er, detasseling is carried out in repeated mechanical operations or completely by hand. Our employees check that every plant has ac- tually been completely detasseled to ensure the purity of the seed batch. Coordinating this process requires efficient logistics and a lot of experience, since the time window for this activity is very limited. It is precision work that guarantees the quality of the hybrid seed. Corporate Sustainability KWS seeds the future ■■ Economics: KWS is one of the leading seed KWS is a forward-looking company whose missions companies. Key factors in our success include is to be commercially successful in the long term specializing in our core business, i. e. breeding and create values. Proactive planning and action is high-yielding new varieties. We also pursue a therefore the core principal of our corporate gover- policy of rigorous customer orientation, orienta- nance. That means we have to carefully address the tion toward growth and profitability, as well as economic, ecological and social challenges facing independence and financial strength. our company in the future so as to anticipate the ■■ Product innovations: KWS’ product portfolio resultant opportunities and risks at an early stage. is geared to our customers’ needs and require- Core issues of our long-term corporate development ments. Global trends such as climate change and the limited availability of natural resources, such as soil and water, as well as the occurrence of plant KWS’ long-term economic success is mainly shaped diseases and pests, are major factors that influ- by the following core sustainability issues: ence breeding objectives in product development. ■■ Modern breeding methods: We use modern ■■ Employees: Our company’s success is founded breeding methods to develop varieties that keep on on the achievements of our employees. We make delivering higher yields and enable resource-sparing intensive efforts to recruit new employees and agriculture under changing conditions. That also have introduced a process to identify and further includes new biotechnology methods, which are develop junior staffers. indispensable to enable goal-oriented, efficient plant breeding. The more resistant and undemanding a variety is, the fewer resources are needed to care for it in the vegetation period – a perfect symbiosis of ecology and economics. ■■ Seed quality: Our prime concern is for our cus- Social commitment tomers to be satisfied. We develop genetic poten- KWS is part of society and is committed to helping tial and produce top-quality seed so that plants’ society. The focus of that is on promoting science genetic potential can be fully leveraged after and research in the field of plant breeding and sowing in the field. Our mission is to provide our biotechnology and strengthen ing the regional and customers with the best-possible consulting, and local attractiveness of our locations by fostering we are backed in that by a closely-knit regional cultural and social life there. network of consultants. ■■ Safe seed: We ensure that our seed is safe for Dialogue with stakeholders people and the environment by means of technical We intend to keep on systematizing the process and organizational measures and furnish proof of for determining the key issues relating to our long- that in extensive tests and analyses in compliance term corporate development. To enable that, we with official requirements – whether it is ecological, aim to expand our dialogue with stakeholders, which conventional or genetically modified seed. has been conducted to date at our headquarters in ■■ Protection of intellectual property: Adequate Einbeck, and make it more international in the coming protection of intellectual property is necessary years. In this way, we obtain feedback from the various to refinance our high expenditure on research markets and can also discuss critical issues with the & development. We therefore advocate variety relevant local stakeholders and derive measures for our protection and patenting, since both systems company’s further development. are of major importance for KWS’ breeding and research activities. Sustainability Reporting ■■ Social and ecological standards: As an inter- The latest Sustainability Report for fiscal year national company, we define and apply social and 2014/2015 is based on the international reporting ecological standards for our group-wide process- specifications of the Global Reporting Initiative es. That also includes imposing appropriate stipu- (GRI G4) and is available online on the company’s lations on our suppliers and service providers. homepage at www.kws.com/sr2015. ■■ Compliance: We support observance of the law and company requirements by means of effective We are currently working to internationalize our sus- compliance management. tainability reporting, with the objective of expanding ■■ Work safety and protection of the environment: it so that it covers the main aspects of sustainability Work safety and protection of the environment are for the entire KWS Group and integrating it fully in the firmly integrated in our production and processing Annual Report in the medium term. operations in order to avoid detrimental impacts on people and the environment. Wherever possible, we also aim to optimize our use of resources and apply the principle of recycling. Corporate Sustainability | To our shareholders 17 KWS Group | Annual Report 2014/2015 Development worker Pollination The flower is the heart of breeding, since crossing processes begin there: It has to be pollinated to produce seed or fruit. That sounds banal, but it is vital in seed production. Without pollination there would be no fertilization and thus no seed. Even though the pol- len of some plants is transported by wind, most of our crops are pollinated by insects. That means that beneficial insects, such as honey-bees, are of great importance to us as a seed producer. The success of our seed production depends directly on them. We therefore have specially trained auditors conduct voluntary and in- dependent checks of our seed processing operations and have the latter certified in accordance with the German SeedGuard quality standard. The entire process – from trial dressing and technical pro- cessing to packaging and storage of the treated seed – is examined. That enables us to ensure that our processes and products provide the greatest possible protection of the environment and health. Corporate Governance KWS SAAT SE’s successful development since 1856 KWS SAAT SE (Section 8.7), which was adopted by is founded on thinking long term and acting in terms the Annual Shareholders’ Meeting on December 18, of sustainability. Corporate governance is entrenched 2014. In the future, the shareholder representatives at the company and enables us to ensure responsible, will be elected by the Annual Shareholders’ Meeting value-creating management and control of the com- in accordance with Section 8.2 of the company’s pany. We create trust by heeding the interests of our Articles of Association. The employee representatives customers and employees, the capital markets and will be elected by direct vote by the European employ- our national and international business partners – and ees of the KWS Group in accordance with the provi- that makes a key contribution to our lasting success. sions of the SNB Agreement. For more information, please refer to the excerpt from the SNB Agreement We live up to our responsibility and take into account posted on www.kws.de > Unternehmen > Investor the relevant legal requirements regarding manage- Relations > Hauptversammlungen > 2015 (German ment and supervision of German stock corporations only). in our decisions. We also intensively address the acknowledged standards of good and responsible As a listed company based in Germany, KWS SAAT SE corporate governance, in particular the German is still subject to the provisions of the German Corpo- Corporate Governance Code. rate Governance Code (DCGK). KWS was converted from a German stock corporation You can find detailed information on corporate govern- to a European Stock Corporation (Societas Europaea/ ance from our Corporate Governance Report (which SE) on April 15, 2015. This step reflects our compa- is also the declaration on corporate governance in ny’s strong international growth and emphasizes its accordance with Section 289a of the German Com- large footprint in Europe. As a European Stock Cor- mercial Code (HGB)), which is available on our website poration headquartered in Germany, KWS SAAT SE at www.kws.com > Company > Investor Relations > is governed by European legal norms and – unless Corporate Governance. The Compensation Report, special provisions stipulate otherwise – by German which is presented on pages 69 to 74 of this Annual SE and corporation law. Report, contains details on the compensation system and the individual remuneration of the members of the KWS has retained the main features of its successful Executive Board and the Supervisory Board. corporate constitution. That applies in particular to the dual system of management with the Supervisory Compliance declaration in accordance with Board and Executive Board and participation of section 161 AktG (German Stock Corporation Act) employees on the Supervisory Board. As in its 2014/2015 former legal form as a German stock corporation, The Executive Board and the Supervisory Board of one-third of KWS SAAT SE’s Supervisory Board KWS SAAT SE declare in compliance with Sec- is made up of employee representatives. The first tion 161 AktG that the company has complied with employee representatives were appointed pursu- the recommendations of the German Corporate ant to Section 14.1. of the “Agreement on Employ- Governance Code in the version dated June 24, ee Involvement at KWS SAAT SE” (“SNB Agree- 2014, since the last compliance declaration in ment”) dated March 16, 2015. October 2014, and with the recommendations of the The first shareholder representatives were appointed dated May 5, 2015, since its publication in the official in accordance with Article 40 (2) Sentence 2 of the section of the Federal Official Gazette, and does Council Regulation on the Statute for a European now comply and will comply with them in the future, Company pursuant to the Articles of Association of with the following exceptions: German Corporate Governance Code in the version 20 To our shareholders | Corporate Governance Annual Report 2014/2015 | KWS Group In accordance with Clause 5.4.1 (2) Sentence 1 they held their seats at the former KWS SAAT AG. of the German Corporate Governance Code, the The recommendation in Clause 5.4.3 Sentence 1 of Supervisory Board is to set a limit on the length of the German Corporate Governance Code is to be fully time members can serve on the Supervisory Board. complied with again in the future. This recommendation is not complied with, since in a business with a tradition of family ownership like Clause 7.1.2 Sentence 4 of the German Corporate KWS SAAT SE it would significantly restrict the rights Governance Code states that the consolidated finan- of the family shareholders, who hold a majority stake cial statements shall be publicly accessible within 90 in the company. days of the end of the fiscal year and interim reports within 45 days of the end of the reporting period. In accordance with Clause 5.4.3 Sentence 1 of the KWS SAAT SE publishes its consolidated financial German Corporate Governance Code, elections to statements and interim reports within the period of the Supervisory Board are to be made on an individ- time defined in the regulations for the Prime Standard ual basis. The shareholder representatives of the first of the German Stock Exchange. The company’s sea- Supervisory Board of KWS SAAT SE were appointed sonal course of business means that it cannot ensure in accordance with Article 40 (2) Sentence 2 of compliance with the recommended periods in the the Council Regulation on the Statute for a European German Corporate Governance Code. Company pursuant to the Articles of Association. This did not entail any change in the persons rep- resenting the shareholders; their term of office as Einbeck, October 2015 members of the Supervisory Board of KWS SAAT SE will also not exceed their remaining term for which The Supervisory Board The Executive Board Corporate Governance | To our shareholders 21 KWS Group | Annual Report 2014/2015 24 Fundamentals 24 Group structure and business activity 26 Objectives and strategies 28 Control system 30 Research & development 33 Business performance 36 Earnings, financial position and assets 36 In accordance with the corporate controlling structure 36 Earnings 38 Corn Segment 40 Sugarbeet Segment 42 Cereals Segment 44 Corporate Segment 45 Financial situation 46 Assets 47 In accordance with IFRS 11 47 Earnings 48 Financial situation 49 Assets 52 Employees 55 Report on events after the balance sheet date 55 Opportunity and risk report 62 Forecast report 64 KWS SAAT SE (explanations based on the German Commercial Code (HGB)) 68 Other disclosures 69 Declaration regarding Corporate Governance 69 Compensation Report t r o p e R t n e m e g a n a M d e n b m o C i Combined Management Report Combined Management Report We changed the presentation of the KWS Group’s consolidated financial statements at the beginning of fiscal 2014/2015 due to an amendment to the International Financial Reporting Standards (IFRS 11). The main change is that we can no longer carry the net sales and costs of our 50:50 joint ventures, which are operated in the Corn Segment, in the statement of comprehensive income (see page 76) in the KWS Group, so the KWS Group’s reported net sales and EBIT are signif- icantly lower. The earnings contributed by these companies are instead included under net financial income/expenses. In addition, their assets will be included in the KWS Group’s balance sheet as equity-accounted financial assets in accordance with the new accounting regulations. So as to ensure there is no impairment to the transparency of our operational development compared with the previous year, this year we still report our joint ventures proportionately in the Combined Management Report in accordance with our internal corporate controlling structure and present the earnings, financial position and assets both in accordance with our internal corporate controlling structure and the KWS Group’s consolidated financial statements. We also indicate the main differences between the two forms of presentation in the Combined Management Report. After the year of transition 2014/2015, we will only report in accordance with the new accounting regulations – with the exception of the segment reporting. Fundamentals Group structure and business activity breeding new, high-yielding plant varieties. From our Since it was founded in 1856, KWS has specialized beginnings in sugarbeet breeding, we have evolved in developing, producing and distributing high-quality into an innovative international supplier with an exten- seed for agriculture. KWS’ core competence is sive portfolio of crops. We cover the complete value Breeding activities of the KWS Group Breeding stations Test locations for trial cultivation 24 Combined Management Report | Fundamentals Annual Report 2014/2015 | KWS Group chain of a modern seed company – from breeding of purposes. Genetically improved varieties, which are new varieties, multiplication and processing, to mar- distributed in particular in North and South America, keting of the seed and consulting for farmers. now contribute 37%2 (34%) of our net sales. Diversified product portfolio Our company’s long-term success is founded on We offer our customers – farmers – a broad range of research and breeding new varieties. Our highly qual- agricultural crops that have been adapted by breed- ified employees and close collaboration with other ing to the conditions of their specific location. These companies and research institutions are key factors crops include corn, sugarbeet, the cereals rye, wheat that drive continuous innovation and constant opti- and barley, oil plants such as rapeseed, sunflower mization of our varieties. Thanks to our large network and soybean, and potatoes. The varieties are mainly of breeding and trial stations in all the world’s key adapted to the moderate climatic zones. Since we markets, we can test the individual candidates under entered the Brazilian market in 2012, varieties for sub- a wide range of climatic and local conditions to deter- tropical regions have also been part of our portfolio. mine whether the varieties are suitable for cultivation. Global footprint The section “Research & Development” on page 30 contains an overview of the main focus of our activities The KWS Group has around 5,3001 employees, has in this field last fiscal year. 65 subsidiaries and associated companies at present and operates in more than 70 countries. We generate Organization of the KWS Group 18% of our net sales in Germany and 36% in other KWS SAAT SE is the parent company of the KWS European countries. Another 41% of our revenue is Group. It multiplies and distributes sugarbeet seed, from North and South America, with the remaining breeds a broad range of crops and provides its sub- 5% coming from other foreign countries. sidiaries with new varieties every year for the purpose of multiplication and distribution. It also conducts Growth through research and breeding important basic research for the entire KWS Group, All of KWS’ activities are geared toward exploiting assumes the function of a holding company and man- plants’ potential as well as possible and leveraging ages the Group with its 65 subsidiaries and associated it to tackle the challenges of modern, sustainable companies operationally and strategically. An overview agriculture. Whether it’s plants for producing food, of the subsidiaries and associated companies included fodder or energy, conventional, organic or genetically in the consolidated financial statements of the KWS improved: We offer farmers the ideal variety for their Group is provided in the Notes on page 96/97. 1 Main differences from the consolidated financial statements: Excluding the joint ventures, KWS employs around 4,700 people and generates 77.3% of its net sales abroad (44.8% in Europe, 25.8% in North and South America and 6.7% in the rest of the world). 2 Main differences from the consolidated financial statements: Net sales from genetically improved varieties account for around 23%, excluding the proportionately consolidated companies. Distribution of value added (around 30% of the total output) Lenders 3% Shareholders 5% Public sector 13% Company 16% €404.7 million 63% Employees Fundamentals | Combined Management Report 25 KWS Group | Annual Report 2014/2015 The KWS Group’s operational business is conducted The Cereals Segment includes production and dis- in the three segments Corn, Sugarbeet and Cereals tribution of rye, wheat, barley and rapeseed. It con- and, including our 50:50 joint ventures in the Corn Seg- tributes 9% of the KWS Group’s net sales. Hybrid rye ment, can be described as follows: accounts for 44% of the segment’s revenue, wheat 21%, barley 20% and other crops around 15%. In The Corn Segment is the KWS Group’s largest divi- our core markets for cereal seed (Germany, Poland, sion in terms of net sales, accounting for around 60% England and France), farmers predominantly sow of the total figure. It covers production and distribution the crops in the fall. Consequently, we generate most of corn seed and the product areas of oil and field of our revenue in this segment in the first half of our seed, which includes rapeseed, sunflower and sor- fiscal year (July to December). ghum. We still generate the lion’s share of net sales in this segment from corn seed, in particular in the U.S. The Corporate Segment supports the operating and Europe. We are one of the top three largest corn segments with research & development activities seed vendors, in terms of cultivation area, in these and by providing central functions for controlling the markets. The largest share of net sales comes from group. Its relatively low net sales mainly come from regions where sowing is carried out in the spring, with the revenue from our farms. Since all cross-segment the result that the segment’s operating performance function costs and research expenditure is charged is impacted by seasonal fluctuations. The segment to this segment, its income is usually negative. generates just around 10% to 15% of its revenue in the first half of our fiscal year (July to December), Objectives and strategies mainly from winter rapeseed in Europe and corn vari- The objective of our corporate strategy, which is eties in South America. based on long-term, proactive thinking, is to make sure our diverse range of products meets the chang- The Sugarbeet Segment generates 31% of the KWS ing and often very specific requirements of our Group’s net sales. Most of that comes from sugar- customers. Our corporate values define the core beet seed production and distribution. Around one- framework for our goal of creating sustainable, tenth of the segment’s net sales is generated from profitable growth for our customers, employees and seed potato business. Our high-quality sugarbeet investors. Particular cornerstones of our business varieties are some of the highest-yielding in the in- model are intensive research work, development of dustry, which is why we are the leader in the field of new, high-yielding varieties and continuous expansion sugarbeet seed with a global market share of 53%. of our global footprint so that we are on the ground in Our main sales markets are still North America, a regional markets with their special climatic conditions. region where genetically improved, herbicide-tolerant sugarbeet varieties are almost exclusively used, and the EU, where KWS is likewise extremely successful with conventionally bred, multiple-resistant varieties. Sugarbeet is sown in the spring, which means that net sales in this segment are likewise largely generated in the second half of our fiscal year (January to June). 26 Combined Management Report | Fundamentals Annual Report 2014/2015 | KWS Group The KWS Group’s medium- and long-term objectives 1 Objectives Profitable growth Research & development Internationalization Sustainability Dividend ■■ An average increase in consolidated net sales of 5% to 10% p. a. ■■ EBIT margin > 10% ■■ R&D intensity of 12% to 15% of consolidated sales ■■ 1% to 2% progress in yields p. a. for our customers and development of tolerances and resistances ■■ Foreign sales > 80% ■■ Expansion of the portfolio of varieties for subtropical markets ■■ Integration of international subsidiaries ■■ A dividend payout ratio of 20% to 25% of the KWS Group’s net income for the year 1 Including our joint ventures. We will revise these medium- and long-term objectives in the coming fiscal year as a consequence of the new accounting regulations from IFRS 11. This change will affect in particular our objectives for the EBIT margin and R&D intensity, which can already be seen from the forecast for fiscal 2015/2016 on page 62/63. We were able to achieve our objectives successfully The framework for our strategic decisions and every- in the past fiscal year. Our net sales growth was in day work as part of operational business is formed the desired range, as was the EBIT margin, the R&D by our guiding principles, which are based on four intensity and our foreign sales. Our young subsidiaries core activities: in Brazil can look back on a very successful year, with ■■ We increase genetic potential through outstanding sharp increases in net sales and gains in market share. research and breeding programs. The dividend ratio of the payout in December 2014 was ■■ We deliver best-quality seeds to our farmers 24.7% and thus also in line with our objectives. ■■ We act as trusted performance partners for our farmers throughout their value chain Guiding principles with a clear focus ■■ We create entrepreneurial freedom and help One of the major challenges of the 21st century is people unfold their talents. to supply a growing world population with sufficient food and regenerative raw materials despite the fact Development of new varieties that the necessary resources are growing scarcer. Plant breeding is our core competence. It stands at While more than seven billion people now have to be the beginning of the value chain for food and feed provided with food and raw materials, the arable land production and all forms of regenerative raw materi- available worldwide cannot be increased at will. Con- als. Modern variety breeding is a resource-intensive sequently, it is falling in terms of area per capita. That process that extends over a period of about ten makes it necessary to keep on increasing production years. This time span is needed to develop a plant on the area available. with new properties into a variety that can be award- ed approval and is ready for marketing. As a global breeding company, KWS has been working with foresight for generations on the issue The objective of our research and breeding is to ob- of sustainable agricultural production. The develop- tain new crop varieties that are tailored to different ment of new varieties makes it possible to increase needs and changing agricultural requirements. Our yields and thus steadily boost yields per unit area. We most important objectives across all crops are to supply seed that meets the very highest quality and increase yield, breed resistances to plant diseases performance requirements to farmers in many regions and pests and to improve plants’ quality of process- of the world. ing. Conservation of plant genetic resources is also a key concern of ours. Fundamentals | Combined Management Report 27 KWS Group | Annual Report 2014/2015 Expressed in hard and fast figures, the new varieties employee extensive entrepreneurial freedom and we supply to our customers deliver an average yield prospects for their individual development, as well as progress of 1% to 2% a year. So that we continue that to encourage them to act on their own responsibility success, we will continue to focus strongly on research and sustainably. & development as part of our corporate planning. Sustainable and profitable growth Expansion of our global footprint Our investments and expenditure for research & de- With business activities in more than 70 countries velopment are the foundation for sustainable growth. around the world, KWS has become a leading inter- We aim to increase the KWS Group’s net sales by national plant breeder. We now generate over 80% an average of 5% to 10% p. a. and achieve a return of our sales abroad. Nevertheless, our strategic ob- (EBIT margin) of at least 10%1. The development of jective is still to press ahead with further internation- the key performance indicators is described in the alizing our company. Our extensive commitment in sections “Earnings, financial position and assets” in Brazil, as well as the joint venture with our longstand- accordance with our corporate controlling structure ing partner Kenfeng in China, are part of that. starting on page 36 and in accordance with IFRS 11 as of page 47. In line with the principles of our long- Markets such as Brazil, with a subtropical climate and term corporate strategy, we use our earnings strength several harvests a year, not only offer attractive sales to expand research and breeding in particular, as well potential – especially for our corn business – but are as our distribution operations. As a result, we bolster also very attractive for another reason: In our core the KWS Group’s potential and lay the foundation for markets, our main contributors to net sales – corn and future growth. sugarbeet – are only sown in the spring, whereas there are different sowing and harvesting cycles in other re- Control system gions. As a result, we can cushion the highly seasonal The objective of the KWS Group’s corporate strat- nature of our business in the medium term. egy is to ensure the company’s long-term growth. Detailed annual and medium-term operational plans High seed quality for our customers that include our joint ventures proportionately are used What counts most for us is that farmers trust in KWS. to control the Group and the three segments Corn, That is why we demand the very highest standards Sugarbeet and Cereals. The medium-term plan covers as regards the quality of our seed and our consulting. the time frame of the annual plan plus three further Our goal as a trusted partner, specialist and consul- fiscal years. In turn, the medium-term plan is derived tant to agriculture is at all times to supply high-quality, from our strategic corporate planning, which covers a innovative seed for producing food and feed, as well timescale of ten years. as regenerative raw materials. The KWS Group is a power ful partner at all stages in the value chain: in re- The targets set in planning are derived from the basis search into, breeding of and approval for new vari eties, of the regional economic and legal situation, antici- in multiplying and processing seed, in distribution, and pated market trends and assessments of the compa- when it comes to providing consulting on the ground. ny’s position in the market and the potential product performance. In a subsequent bottom-up process, Entrepreneurial freedom for employees which also includes the development of our joint ven- Qualified and motivated employees are the key to tures, these premises are used to define targets for our commercial success. We therefore offer our em- sales volumes and net sales, production capacities ployees the opportunity to shape their place of work and quantities, the allocation of resources (including and working environment. All employees at the KWS capital spending and personnel), the level of material Group can develop their strengths and press ahead costs and internal charge allocation and the resultant with pursuing their own ideas. Open dialogue is balance sheet data, along with the financial budget. the foundation for that. It is a firm part of the culture A firm part of the planning documentation is an of our evolved and innovative family business and opportunity/risk assessment which every manager enables maximum flexibility. Our goal is to give every must conduct for his unit. 1 See also medium and long-term objectives of the KWS Group on page 27. 28 Combined Management Report | Fundamentals Annual Report 2014/2015 | KWS Group We subject our seed to a stringent selection process during production – just around onefifth of the original quantity is finally packaged and sold. That means only top quality is put on the market. The planning is compared every quarter with the The Executive Board uses various indicators for plan- company’s actual business performance and the ning, controlling and monitoring the business per- updated estimates on the underlying general con- formance of the KWS Group and operating units. The ditions. If necessary, suitable countermeasures are main indicators are net sales, operating profitability initiated and adjustments made. A detailed forecast (EBIT margin) and R&D intensity (research expenditure for the current fiscal year is made at the end of each as a ratio of net sales). The development of these key quarter. At the end of each fiscal year, all units con- figures in fiscal 2014/2015 can be found in the report duct a detailed variance analysis of the budgeted on the earnings situation on page 36. and actual results. That serves to optimize our in- ternal planning processes and further enhance the Management and control already high quality of our forecasts. KWS SAAT SE has a system of dual management, consisting of the Executive Board and the Super- Corporate Controlling is responsible for coordinat- visory Board. Both bodies have strictly separated ing and documenting all planning processes and responsibilities and different members. While the Ex- our current expectations. It monitors compliance ecutive Board manages the company, the Supervisory with adopted budgets and analyzes the efficiency Board supervises and advises the Executive Board. and cost-effectiveness of business processes and These responsibilities have also been retained follow- measures. The Controlling team also advises deci- ing the company’s conversion into a European Stock sion-makers on economic optimization measures. Corporation (Societas Europaea/SE). The declaration The respective heads of the individual areas are on corporate governance in accordance with Section responsible for the contents of the planning and cur- 289a of the German Commercial Code (HGB) con- rent forecasts. They include in particular the heads of tains detailed information on the extensive and close the three product segments, the research & develop- cooperation between the Executive Board and the ment activities and the central functions, as well as Supervisory Board and has been published at the regional heads of sales. www.kws.com > Company > Investor Relations > Corporate Governance. Fundamentals | Combined Management Report 29 KWS Group | Annual Report 2014/2015 Our sugarbeet varieties belong to the species “Beta vulgaris”. They are always given female names. Due to their excellent properties, some of the names are ingrained in our customers’ minds like those of pop stars, e. g. Lisanna, Danicia, Rashida. Research & development Opening of the KWS Gateway Research Center Breeding progress means sustainable, enhanced crop The pace of change in plant research, develop- performance and higher yields for farmers. According- ment of methods and product innovation keeps on ly, we continued to invest last fiscal year in expanding growing. As a result, cutting-edge technologies and our research and breeding capacities in order to be research approaches for plant breeding are gaining able to develop products that offer high long-term importance. KWS has therefore invested in estab- performance for our international markets. Research lishing a new research center in the U.S. in order to & development expenditure in fiscal 2014/2015 was better tap the country’s international excellence in €173.8 (150.0) million. As a result, 13.8%1 of KWS’ total innovation and strengthen its own presence in plant net sales were invested in research & development research. Also, access to innovative technologies activities. 37% of our employees, around 2,0002 peo- and top-class research is to be ensured by means of ple, worked in research & development. The success cooperation ventures and networks. of our breeding activities is reflected, among other things, in the number of variety approvals worldwide: The establishment of the research center began in We obtained 429 (336) marketing approvals for new the spring of 2014 in the Bio-Research & Develop- KWS varieties across all our crops in fiscal 2014/2015, ment Growth Park (BRDG Park) in St. Louis, Missouri 28% more than in the previous year. That means we (U.S.). The center is surrounded by universities, still have a competitive product pipeline. 1 The research & development intensity is going to be restated due to the fact that the requirements under IFRS 11 are mandatory for the first time and will increase sharply as a result. While research & development expenditure is hardly impacted by this change, the KWS Group’s net sales will be lower by the share contributed by the joint ventures. The R&D intensity will therefore be around 17%. 2 The average number of R&D employees excluding joint ventures is around 1,800. See pages 52 to 54 for more information on employees. 30 Combined Management Report | Fundamentals Annual Report 2014/2015 | KWS Group institutions and various companies from our industry. Importance of winter breeding nurseries for corn It was officially opened in January 2015. breeding at KWS Winter breeding nurseries have been a core com- Research in molecular biology will be conducted at ponent of corn breeding at KWS for many years. If it the KWS Gateway Research Center, and the results were not for the large and flexible breeding stations in will be used specifically to develop new and im- the southern hemisphere, no breeding program would proved product traits. 15 highly qualified employees now be competitive, since winter breeding nurseries were hired to carry out research in the period under speed up variety development significantly and create review and have already initiated their first scientific a cost advantage. Thanks to the favorable climatic projects. The team is to be expanded to around 25 conditions, two to three generations of corn a year by the end of 2015; an increase to up to 75 research- can be established (depending on the location) and ers is planned in the medium-term. selected for the desired traits. Expansion of corn activities in China As corn breeding at KWS grows sharply, the winter The Chinese market is developing steadily and is breeding nurseries also have to be expanded steadi- one of KWS’ key markets of the future. China now ly. Over the past six years, KWS has succeeded in has the world’s largest corn cultivation area – almost doubling its capacities at the winter breeding nurs- 38 million hectares in 2015 and more than the U.S. eries. To enable that, extensive investments were for the first time. KWS was quick to respond to made in new stations, the related infrastructure and this trend and, within the space of five years, has machinery. KWS currently has winter breeding nurs- put together an expert breeding team that is able eries in four different countries in South America and to develop high-yielding corn varieties for all major their capacities are being increased steadily. cultivation areas in China, with the exception of tropical regions. Last fiscal year, we were able to Acquisition of MOMONT and initial submit competitive hybrids for approval in KWS’ breeding activities important regions in China, for the first time also in After 15 years of excellent cooperation between KWS the country’s summer cultivation areas, which total and the French company SOCIETE DE MARTINVAL more than ten million hectares. After the joint venture S.A. (MOMONT), KWS acquired the remaining KENFENG-KWS was awarded its business license 51% stake in the company in September 2014. In do- at the end of 2014, we began activities to commence ing so, we aim to leverage the opportunity to further commercial operations and establish a joint breeding expand our cereal breeding activities and strengthen program. The first breeding nursery was set up in our market position in France long-term. Gongzhuling in Jilin Province in the spring of 2015. MOMONT’s existing structures are an ideal comple- ment to our organization and allow us to pool joint activities. To benefit from state-of-the-art breeding technologies as soon as possible, we established cutting-edge sowing techniques and an advanced trial design in the current season. We intend to use further modern breeding tech nologies soon. Fundamentals | Combined Management Report 31 KWS Group | Annual Report 2014/2015 Increasing importance of nematode-tolerant The requirements demanded of new varieties have varieties and increased leaf health in sugarbeet increased constantly: Apart from high yield potential, Many sugarbeet cultivation areas have experienced the importance of leaf health has also increased, a sharp increase in infestation by cyst nematodes coupled with reduced use of fungicides. The further in the past years. We recognized this development strategic alignment of our breeding programs and at an early date and have responded by develop- intensified use of new breeding methods have result- ing new high-performance varieties by means of ed in a significant increase in the competitiveness intensive breeding. The first variety with triple toler- of KWS’ sugarbeet varieties. ance – combining resistance to the Rhizomania virus, Rhizoctonia and beet cyst nematodes – has been approved in France. Key figures for research & development1 R&D employees Ratio of R&D employees R&D expenditure R&D intensity Marketing approvals for new varieties in % in € millions in % 2014/2015 2013/2014 1,985 37 173.8 13.8 429 1,836 38 150.0 12.7 336 +/– 8.1% 15.9% 27.7% 1 Main differences from the consolidated financial statements: R&D expenditure €174.6 million, R&D intensity 17.7%, number of R&D employees 1,777 In plant breeding, you can choose your parents. However, only by choosing the right crossing partners can we reach our goal: to increase our varieties’ resistance. Business performance Forecast versus actual business performance1 KWS Group Net sales EBIT Corn Net sales EBIT Sugarbeet Net sales EBIT Cereals Net sales EBIT Results 2014/2015 Forecast 2014/2015 2 Q3 05/28/2015 Ad-hoc 09/01/2015 +7.0% +5% to 10% Approx. +7.5% Approx. +7% – 0.3% ≥ –10.6% Approx. – 9% Approx. +/– 0% +5.5% > +10% Approx. +7% Approx. +5% –16.6% – 6% to –14% Approx. –19% Approx. –17% +11.2% +32.5% +3.7% –29.8% +/– 0% +/– 0% +/– 0% +/– 0% Approx. +9% Approx. +11% Approx. +21% Approx. +32% Approx. +5% Approx. +4% Approx. –32% Approx. –30% 1 Including our joint ventures. 2 Forecasts taken from the Annual Report 2013/2014. See also www.kws.com/ir. We successfully implemented our planning and activ- When we published our 2013/2014 Annual Report ities in line with our corporate strategy for 2014/2015 in October 2014, we forecast that the KWS Group in the year under review, despite some turbulence on would grow its net sales by 5% to 10% and post agricultural markets, a fall in cultivation area in many an EBIT margin of at least 10%. This guidance was places and the fact that farmers felt a greater strain on confirmed by our results after the first three quarters; their liquidity in some cases. Expansion of research however, the contribution made by our segments to and breeding to develop new, high-yielding varieties net sales and income was different than had been impacted many projects in the fiscal year and meant assumed at the start of the fiscal year, mainly due our research & development expenditure rose by to the above-described regional turbulences. The €23.8 million. That we are on the right track is shown Sugarbeet Segment significantly surpassed our ex- by our good market position in individual regions (see pectations. Our good sugarbeet variety performance the segment reports on pages 38 to 44) and the sharp resulted in higher net sales than forecast, especially rise in marketing approvals awarded to our new vari- in regions outside Europe. The segment’s anticipated eties. We achieved both thanks to outstanding variety EBIT was far exceeded as a result of non-recurring performance and our strong, likewise significantly currency effects and lower counterparty defaults (as- expanded distribution network in the relevant markets. pects that are difficult to factor into planning), which Our operating performance was accompanied by is why we increased our income guidance on Sep- trade restrictions in Eastern Europe and wild fluctua- tember 1, 2015, to €138 million (corresponding to an tions in exchange rates: Currencies in Eastern Europe EBIT margin of 10.9%). Ultimately, our sales grew by suffered from a sharp depreciation, while the US 7.0% and the EBIT margin was 10.9%. These trends dollar grew in strength. All in all, the KWS Group’s net include the net sales and expenses of our joint ven- sales were positively impacted by currency influences tures and are based on the forecast in the preceding to an amount of around €30 million, compared with Annual Report. They therefore differ from the figures the significant negative effect in the previous year. in the consolidated financial statements. An explana- tion of the earnings situation in accordance with the consolidated financial statements can be found on page 47. Business performance | Combined Management Report 33 KWS Group | Annual Report 2014/2015 Best in class Quality testing Seed is one of the most important resources for a farmer. Its quality – tested several times over to ensure its reliability – is the prerequi- site for good yields and thus the viability of agricultural enterprises. That is why seed has to meet the very highest quality requirements and is checked continuously by various institutions throughout the production process. Our quality tests start as early as the field multiplication phase. We then conduct quality tests when we take delivery of the raw goods. Further tests are performed as part of drying, cleaning and calibration, up to when the seed is treated with pesticides and packaged. The seed’s germination capacity, sprout- ing strength and field emergence are also determined. The minimum qualities of seed for sale are regulated by law. However, we demand much higher standards of quality from our seed. Only if these high requirements are met is the seed accepted, certified and sold. Earnings, financial position and assets in accordance with the corporate controlling structure In this section, we present our business performance The main difference is that we can no longer carry in accordance with our corporate controlling struc- the net sales and costs of our 50:50 joint ventures in ture. That means that, as in previous years, our 50:50 the individual items of the statement of comprehen- joint ventures, which are operated in the Corn Seg- sive income and the net assets of our joint ventures ment, are shown proportionately in terms of earn- are included in the KWS Group’s balance sheet as ings, financial situation and assets in accordance equity-accounted financial assets. As a result, the with the stake in them. KWS Group’s net sales, EBIT and total assets are much lower, whereas net financial income/expenses In the following section we present the earnings, increased by the share of earnings contributed by the financial situation and assets in accordance with KWS’ joint ventures. Net income for the year is practically consolidated financial statements based on IFRS 11. identical under both consolidation methods. Earnings Abridged income statement Net sales Operating income Net financial income/expenses Result of ordinary activities Taxes Net income for the year 2014/2015 2013/2014 in € millions 1,260.4 1,178.0 in € millions in € millions in € millions in € millions in € millions 138.0 –7.1 130.9 46.9 84.0 138.4 –12.6 125.9 45.6 80.3 +/– 7.0% – 0.3% 43.7% 4.0% 2.9% 4.6% Earnings per share in € 12.54 11.69 7.3% EBIT margin 10.9% 11.8% 7.0% increase in net sales – growth in Gross margin improved again all product segments Gross profit in the year under review rose to €610.8 Net sales at the KWS Group rose by 7.0% to (563.5) million. License and material costs were only €1,260.4 (1,178.0) million in fiscal 2014/2015. The in- slightly higher and again resulted in a below-pro- crease in net sales at the Sugarbeet Segment was portionate increase in the cost of sales by 5.7% to 11.2%, well above the forecasts for the fiscal year. €649.6 (614.5) million. That gives an improved gross Net sales rose by 5.5% in the Corn Segment and by margin of 48.5% (47.8%). 3.7% in the Cereal Segment. In particular in North and South America, the Sugarbeet Segment (in Function costs rise due to business expansion North America) and Corn Segment (in North and Continuous expansion of our business activities South America) posted sharp increases in net sales. needs to be flanked by expansion of our global dis- The performance of the US dollar against the euro had tribution structures. Consequently, selling expenses a positive effect in this regard. in the year under review increased as planned by 36 Combined Management Report | Earnings, financial position and assets Annual Report 2014/2015 | KWS Group One unit of sugarbeet seed with 100,000 pellets is enough to cultivate around a hectare of land and yields (100m x 100m = 10,000 sqm) up to 20 tons of sugar. 11.5% to €236.7 (212.3) million. Their ratio of the The EBIT margin declined accordingly to 10.9% KWS Group’s net sales was 18.8% (18.0%). The (11.8%). Net financial income/expenses improved high expenditure on distribution is intended to last- to € –7.1 (–12.6) million due to a fall in interest ex- ingly secure KWS’ position in growth markets. This pense and the con tributions to earnings from the long-term approach is underscored by the planned stake acquired in MOMONT. Earnings before taxes increase in our research & development budget. Re- (EBT) rose from €125.9 million in the previous year search & development costs increased in fiscal year to €130.9 million. Income taxes for the year under 2014/2015 by 15.9% (6.5%) to €173.8 (150.0) million. review were €46.9 (45.6) million, meaning that our tax Administrative expenses in the year under review rose rate improved slightly to 35.8% (36.2%), although it moderately by 5% (10.4%) to €80.5 million. was still above the long-term average. Losses that Operating income at the level of the in net sales in countries where the tax rate is above previous year 30% (North America) were key factors influencing cannot be deducted against tax and the increases Other operating income was €89.8 (60.7) million, that. while other operating expenses totaled €71.6 (46.8) million. The balance of them rose year The KWS Group posted net income of on year by €4.3 million to €18.2 (13.9) million, among €84.0 (80.3) million for fiscal year 2014/2015. things due to positive currency effects. Minority interests were €1.3 (3.2) million, meaning €82.7 (77.1) million are attributable to shareholders Operating income (EBIT) was €138.0 million, of KWS SAAT SE. The number of shares was un- on a par with the previous year (€138.4 million). changed, giving earnings per share of €12.53 (11.69). Earnings, financial position and assets | Combined Management Report 37 KWS Group | Annual Report 2014/2015 Corn Segment Key figures for the Corn Segment Net sales EBIT EBIT margin 2014/2015 2013/2014 in € millions in € millions in % 754.4 84.2 11.2 714.9 100.9 14.1 +/– 5.5% –16.6% Net sales grow by 5.5% The regions: Gains in market share despite fall in The Corn Segment continued its operational growth cultivation area of past years in fiscal 2014/2015 and increased its net Corn cultivation area in North America fell by 2% sales by 5.5% to €754.4 (714.9) million. It was able to to around 36 (37) million hectares. Nevertheless, grow its sales above all in North and South America. AGRELIANT, our 50:50 joint venture with the French That was accompanied by different, in some cases company Vilmorin & Cie., was able to slightly improve significant currency effects. The positive impacts from its market position as the third-largest vendor of corn. exchange rate developments in the U.S. and Argentina AGRELIANT’s net sales in North America rose to were offset by depreciation in the currencies of Brazil, €556 (509) million due to exchange rate effects. De- Ukraine and Russia during the year. After adjustment mand for high-quality varieties with multiple genetic for exchange rate effects, the segment’s net sales resistance to herbicides and insects declined slightly would have risen by 3.0% to around €736 million. due to the pressure on U.S. farmers to cut costs. The planned continuation of our growth strategy In our growth market Brazil, we were again able to included increasing distribution and research expen- increase our net sales of corn and soybean signifi- diture by €31.7 million year on year. Together with cantly: Our net sales in this important corn market negative non-recurring effects, such as currency rose by over 20% in total, despite the negative cur- influences from Eastern Europe and allowances on rency influences due to the depreciation of the Bra- inventories, the segment’s income (EBIT) fell by 16.6% zilian real. As a result, we were able to expand our to €84.2 (100.9) million. It was thus well below the market share sharply. That is a good success for our previous year which had been impacted by positive companies operating in Brazil, given that corn cul- non-recurring effects. tivation area there likewise declined by around 2%. Corn cultivation area also fell sharply in Argentina. As Bumper harvests worldwide – consumer prices one of the few corn seed vendors there, KWS posted for corn continue to drop almost constant net sales and so achieved a gratify- For the second year in a row, record harvests and ing 1% gain in market share. high inventories worldwide defined the economic cli- mate in the corn seed industry. The price for corn for There was also a decline in area totaling 4% in consumption on the exchange in Chicago fell Europe, although this varied greatly from region to in January 2015 to 146.50 USD/ton, a further drop of region. We were able to defend our outstanding mar- 15% from the level in January 2014. The current bear- ket position in Germany and Northern Europe, while ish mood on the agricultural commodity markets, ac- we grew our net sales by double digits in individual companied by the economic crisis in Eastern Europe, markets in Eastern and Southern Europe despite resulted in untypically high declines in cultivation area declines in cultivation area. In contrast, our business in important markets for corn seed. The exceptionally performance was slightly down in France and fell high seed harvests in the fall of 2014 also produced a sharply in Southeastern Europe. All in all, we were global supply surplus, resulting in perceptible pres- not quite able to achieve our net sales targets in sure on prices that varied from region to region. Europe in a challenging economic climate. 38 Combined Management Report | Earnings, financial position and assets Annual Report 2014/2015 | KWS Group Corn Our activities in China are now mainly based on corn seed licensing business. Net sales from that rose slightly in the year under review. Along with that, our corn production and distribution joint venture cleared the first hurdle to start its operations by obtaining its business license in December 2014. Together with our longstanding Chinese partner Kenfeng, we expect the last step in the approval process to be accomplished in fiscal 2015/2016. Oil seed revenue rises by 7.8% Revenues from our oil seed business rose both in Europe and America. While soybean is mainly mar- keted in America, rapeseed and sunflower are more important in Europe. Net sales from oil seed totaled €88.6 (82.2) million. Corn is cultivated on about 180 million hectares worldwide – a figure that is growing, since the crop delivers the highest yields per hectare. KWS Group | Annual Report 2014/2015 Sugarbeet Segment Key figures for the Sugarbeet Segment Net sales EBIT EBIT margin 2014/2015 2013/2014 in € millions in € millions in % 390.5 93.0 23.8 351.1 70.2 20.0 +/– 11.2% 32.5% Significant rise in net sales and profit whereas the strong US dollar had a positive impact outside the EU on our performance in North America. Consumer Net sales at the Sugarbeet Segment, comprising prices for potatoes reached new lows, diminishing sales revenue from our sugarbeet seed and seed the revenue prospects for our seed potato business. potato business, rose by 11.2% in fiscal 2014/2015 to €390.5 (351.1) million. With the exception of France, The regions: North America boosts sugarbeet the increases in net sales were almost exclusively seed business outside the European Union, in particular in North Expansion of sugarbeet breeding and outstanding America, Russia and Turkey. Sugarbeet seed busi- variety performance were the foundation for very ness accounted for €364.4 (318.5) million and seed successful business in the past fiscal year in all re- potato business for €26.1 (32.6) million of total net gions. Net sales in North America increased yet again sales. After adjustment for exchange rate effects, over the already high level of the previous year. We the segment’s net sales would have risen by 8.3% to further expanded our clear leadership in the market. €380.4 million. Following a very successful fourth quarter, net sales in North America were up about 25% year on year. The segment’s income (EBIT) in the period under review was €93.0 (70.2) million, mainly due to the ad- In the EU 28, high inventories and quotas trans- ditional contribution margin from the increase in net ferred from the previous growing season led to a sales, and so was 32.5% up year on year despite the significant reduction in cultivation area of more than planned far higher distribution and research expendi- 10%. However, sales were maintained at a virtually ture. This significant increase was largely due to our constant level thanks to gains in market share and good performance in North America. As previously were €136.1 million (€137.2 million). Business went reported on September 1, 2015, there were also particularly well in France and was accompanied positive exchange rate effects and lower allowances by sharp gains in market share. In Germany, the for receivables in the fourth quarter. Administrative Netherlands and Poland, the reduction in cultivation expenses remained stable. area – despite increasing market share – meant that Low sugar prices worldwide – high inventories, our business performance fell sharply as a result of our net sales declined. In particular in Scandinavia, especially in the EU a large reduction in area. Our business activity in the Sugarbeet Segment was exposed to both positive and negative external influ- Net sales outside the EU 28 increased to €228.3 ences in the year under review. High sugar invento- (180.8) million. Apart from our success in North ries worldwide resulted in a further fall in the price of America, we recorded very positive business in sugar, which had a direct impact on sugarbeet cul- Turkey, where our market share rose to more than tivation area. The political and economic situation in 50%. In addition, net sales rose in Russia and China, Eastern Europe resulted in sharp exchange rate fluc- among other countries. However, we were not able tuations there and insolvencies among local farmers, to compensate for trends in Serbia, Croatia and 40 Combined Management Report | Earnings, financial position and assets Annual Report 2014/2015 | KWS Group Sugarbeet Ukraine, which were affected by sharp declines in area, by winning market share. In some cases, we suffered significant declines in net sales here. We pressed ahead with our cooperation project with Bayer CropScience to develop a conventional her- bicide-tolerant sugarbeet. The new technology was named CONVISO® SMART. The new varieties are resistant to the herbicide Conviso and enable more efficient control of weeds in sugarbeet cultivation. We expect the market launch of the first varieties as of 2018. Seed potato business impacted by all-time lows for consumer prices Last season, consumer prices for potatoes were at a record low. That is due, among other things, to high production volumes and a large supply of potatoes for consumption. Such a climate tends to foster the use of farm-saved seed potatoes, since farmers use their own harvest for the next growing cycle due to the decline in prices. In this difficult market environ- ment, net sales from our seed potato business fell to €26.1 (32.6) million, resulting in a sharply negative contribution to earnings. Sugarbeets do not form their seed pods until the second growing season. Seed production – from requirements planning to packaging – therefore takes up to three years. KWS Group | Annual Report 2014/2015 Cereals Segment Key figures for the Cereals Segment Net sales EBIT EBIT margin 2014/2015 2013/2014 in € millions in € millions in % 111.3 12.0 10.8 107.3 17.1 15.9 +/– 3.7% –29.8% Segment’s net sales rise slightly – research and breeding companies was lower, since farmers increas- distribution expenditure increased ingly opted to use farm-saved seed in response to the Net sales in the Cereals Segment rose slightly year above conditions. That meant in particular that net on year by 3.7% to €111.3 (107.3) million. Against the sales from hybrid rye declined. The greening mea- backdrop of low agricultural commodity prices, our sures under agricultural policy, which aim for greater business with wheat, barley and rapeseed went well: crop diversity and envisage the provision of ecological Net sales for each of the crops increased year on focus areas on arable land, had a stabilizing impact on year – and even by around 50% for barley. However, the area used to grow rapeseed and barley. revenue from our high-quality hybrid rye varieties de- clined, since alternative types of cereal are preferred The regions: Growth in core markets, when consumer prices are low. Nevertheless, hybrid acquisition in France rye remained the largest contributor to net sales in KWS’ cereals varieties turned in a promising perfor- the segment, accounting for 44% of the total figure. mance compared with the competition in the year Along with operational business, the takeover of the under review. We grew our net sales in all important remaining 51% stake in the French seed company regions. While our business went well in key mar- SOCIETE DE MARTINVAL S.A. (MOMONT) had a kets such as the UK, Poland or France, there were positive impact, adding around €6 million to the seg- slight declines in net sales in Germany. That is mainly ment’s net sales. attributable to the difficult conditions in hybrid rye business, where – along with the fall in cultivation The segment’s income (EBIT) was €12.0 (17.1) million. area – we suffered slight losses in market share. The positive effects on income from the increase in net sales and reduction in the cost of sales were France is one of the world’s largest individual mar- cancelled out by higher expenditure aimed at se- kets for cereals, with around 5 million hectares used curing our future growth: Expenditure on research & for wheat and some 1.8 million for barley. KWS has development and on distribution rose as planned and operated in the French cereals market for many years were the main reason for the year-on-year decline in now and has successfully expanded its footprint in EBIT. Due to the time of acquisition, which was after this important market by acquiring the remaining the segment’s key fall sowing season, not all the pos- 51% stake in the French seed company SOCIETE itive contributions to income from the acquisition of DE MARTINVAL S.A. (MOMONT) effective Septem- MOMONT were able to be recognized by the Cereals ber 30, 2014. The already mentioned effects on net Segment. sales and profit are due to the time of the takeover and the seasonal nature of cereals business. Economic environment: Prices for cereals for consumption remain low Sharp increase in the number of marketing The market environment for cereals proved to be approvals for new varieties tough in fiscal 2014/2015: Consumer prices for cere- We increased our expenditure on research & devel- als stagnated at a low level for the second year in a opment in fiscal 2014/2015 in line with our growth row. In general, demand for certified seed from plant strategy. The cost and effort involved in our diverse 42 Combined Management Report | Earnings, financial position and assets Annual Report 2014/2015 | KWS Group Cereals breeding programs is paying off: In the year under review we significantly increased the number of marketing approvals for new varieties. They include new hybrid rye varieties with improved yield perfor- mance and ergot resistance. They will be launched in Germany and Poland in fiscal 2015/2016 as part of our “VorsprungPlus”, a system that gives farmers early access to newly approved varieties. Our breeding activities cover not only traditional breeding of new varieties, but also long-term research & development projects, such as establishment of hybrid breeding for barley and wheat and use of state- of-the-art technologies to optimize breeding processes. A further objective is to develop hybrid rye varieties that are adapted to growing conditions in Eastern Europe or the U.S. and Canada and will help us tap additional market potential in the medium term. KWS Cereals set new standards of seed quality with the QualityPlus system. To ensure that high standards are met, only selected multipliers and processors produce the QualityPlus seed for KWS’ cereals varieties. KWS Group | Annual Report 2014/2015 Corporate Segment Key figures for the Corporate Segment Net sales EBIT 2014/2015 2013/2014 in € millions in € millions 4.2 – 51.2 4.7 – 49.7 +/– –10.6% – 3.0% All cross-segment costs are allocated to our Corpo- and were not sufficient to cover the increase in rate Segment. They include expenses for all central expenditure. For the above reasons, the segment’s functions of the KWS Group and for long-term re- income (EBIT) is usually negative. Due to an increase search projects. The segment’s net sales are mainly in R&D costs, it was € –51.2 (–49.7) million. generated from our farms. They were €4.2 (4.7) million Just 3.5 kilograms of seed are needed to grow one hectare of sugarbeet. This requires the highest seed quality. This can be guaranteed through the centralization of the processing and refining process for our European sugarbeet production operations in Einbeck. Corporate Corporate Segment Financial situation Selected key figures on the financial situation Cash and cash equivalents Net cash from operating activities Net cash from investing activities Net cash from financing activities 2014/2015 2013/2014 in € millions in € millions in € millions in € millions 132.4 57.7 –136.4 41.8 155.0 61.0 –75.4 – 31.5 +/– –14.5% –5.6% – 80.9% > 100% KWS’ financial management is geared in particular A syndicated loan with a volume of €200 million exists to reflect the corporate values of farsightedness and to provide financing during the year. It was renegoti- independence. Consequently, the overriding objec- ated in October 2014 and will run until October 2019, tive of financial management is to secure adequate with an option to extend its term until 2021. earnings strength long term and to safeguard the company’s financial independence. Apart from pro- Sharp increase in capital expenditure viding sufficient liquidity, the objective is to enable it Total capital expenditure in fiscal year 2014/2015 to expand its business activities flexibly and seize was €140.6 (82.6) million. Capital expenditure was opportunities as and when they arise. The financial increased by 70.2% year on year, largely due to the management organization is controlled in the Group takeover of the remaining shares (51%) in MOMONT. centrally from Einbeck. A balanced mix of financ- The Group’s capital expenditure was spread region- ing, investment and hedging instruments is used as ally as follows: 24.7% (35.0%) in North and South the instrument for that. Derivative financial instru- America, 24.1% (28.8%) in Germany and 43.3% ments are used only to hedge the risk of interest rate (33.7%) in Europe (excluding Germany). 7.9% (2.5%) changes and currency risks. of capital spending was in the rest of the world. Operating cash flow of €57.7 million The Corn Segment accounted for 36.9% (51.8%) of Cash earnings in fiscal 2014/2015 were €122.2 total capital expenditure. Expansion of our production (110.4) million. The net cash from operating activities capacities was driven by investments in production (operating cash flow) was €57.7 (61.0) million. The plants in Serbia, North America and France, among increase in working capital resulting from business other countries. We also invested in further breeding expansion in our capital-intensive growth markets capacities in South America and Europe. and higher inventories had a negative impact here. The net cash used in investing activities totaled In the Sugarbeet Segment, we continued the drive €136.3 (75.4) million and includes the payment for we began in previous years to modernize production acquisition of the shares in SOCIETE DE MARTINVAL plants in the U.S. We also invested in production sites S.A. and the planned increase in payments for tan- in Germany and Turkey with the goal of further improv- gible fixed assets. The net cash from financing ac- ing the quality of our seed. The Sugarbeet Segment tivities was €41.8 (–31.5) million and comprised the accounted for 17.1% (22.8%) of the KWS Group’s total dividend for the fiscal year 2013/2014, higher cash capital expenditure. proceeds from long-term borrowings, and slightly reduced installments for repayment of raised loans. In the previous year, it also included the cash paid to acquire the remaining shares in KWS LOCHOW GMBH. The KWS Group’s cash and cash equiva- lents on the balance sheet date at June 30, 2015 totaled €132.4 (155.0) million. Earnings, financial position and assets | Combined Management Report 45 KWS Group | Annual Report 2014/2015 Capital spending in the Cereals Segment was in- Depreciation and amortization in the year under review creased significantly with our strategic objectives in totaled €51.6 (45.8) million. This rise is attributable to mind. The segment’s share of total capital expen- the rapid increase in the KWS Group’s property, plant, diture at the KWS Group thus rose from 8.3% in the and equipment as a result of the high investment ratio. previous year to 31.7%. The investments include the acquisition of the remaining shares in MOMONT and focused on construction and expansion of produc- tion plants, as well as on increasing office capacities. Assets Abridged balanced sheet Assets Noncurrent assets Current assets Equity and liabilities Equity Noncurrent liabilities Current liabilities 06/30/2015 06/30/2014 +/– in € millions in € millions in € millions in € millions in € millions 580.6 859.6 738.7 336.1 365.4 476.8 786.0 637.8 254.2 370.8 21.8% 9.4% 15.8% 32.2% –1.5% Total assets in € millions 1,440.2 1,262.8 14.0% The KWS Group’s total assets rose by 14.0% to On the other side of the balance sheet, the €1,440.2 (1,262.8) million. This was mainly attributable KWS Group’s equity rose by 15.8% to €738.7 to high capital expenditure as part of our business (637.8) million. The equity ratio increased to 51.3% expansion. (50.5%) and thus remained at a solid level. Equity at the balance sheet date far exceeded noncurrent Noncurrent assets increased by 21.8% to €580.6 assets by €158.1 (161.0) million. Noncurrent liabil- (476.8) million, mainly due to investment in property, ities rose by 32.2% to €336.1 (254.2) million as a plant, and equipment. The increase in inventories to consequence of a further borrower’s note loan that €239.7 million and higher trade receivables totaling €377.5 million, both of which grew due to the planned expansion of our business, resulted in an increase in was raised to fund further business expansion in our future markets and the acquisition of MOMONT. Current liabilities on the bal ance sheet date totaled current assets to €859.6 (786.0) million. Cash and cash €365.4 (370.8) million. equivalents, including securities, fell by €22.5 million to €132.5 million. After deduction of financial liabilities, net liquidity was € –88.3 (–12.1) million. 46 Combined Management Report | Earnings, financial position and assets Annual Report 2014/2015 | KWS Group Earnings, financial position and assets in accordance with IFRS 11 The significant differences from the explanations in accordance with the corporate controlling structure” Section “Earnings, financial position and assets in mainly impact the Corn Segment. Earnings Abridged income statement Net sales Operating income Net financial income/expenses Result of ordinary activities Taxes Net income for the year in € millions in € millions in € millions in € millions in € millions in € millions 2014/2015 2013/2014 986.0 113.4 16.7 130.1 46.1 84.0 923.5 118.3 7.5 125.8 45.5 80.3 +/– 6.8% – 4.1% > 100% 3.4% 1.3% 4.6% Earnings per share in € 12.53 11.69 7.2% EBIT margin 11.5% 12.8% –10.2% Surplus supply due to high global stocks of agricultural Gross profit in the year under review rose to raw materials, low prices for agricultural raw materials, €532.5 (494.2) million. License and material costs a reduction in cultivation area, political and economic were only slightly higher and again resulted in a be- tensions in growth markets, and volatile exchange low-proportionate increase in the cost of sales by rates created a challenging climate for KWS in the past 5.6% to €453.5 (429.3) million. That gives a gross fiscal year. Nevertheless, the KWS Group was able to margin of 54.0% (53.5%). increase its net sales year on year in all product seg- ments, also after adjustment for exchange rate effects. Our global growth is secured by expansion of our Net sales rose by 6.8% to €986.0 (923.5) million in distribution activities, among other things in new mar- the year under review. This is mainly attributable to a kets such as Brazil. Consequently, selling expenses significant increase in net sales from our sugarbeet in the year under review increased by €19.0 million to activities in North America and in net sales in our €189.0 (170.0) million . Their ratio to the KWS Group’s growth markets South America, Russia and Turkey. net sales was 19.2% (18.4%). The increase in net sales was underpinned among other things by higher sales volumes in the Sugarbeet Research & development expenditure in- Segment. Good variety performance in all major KWS creased as planned in the year under review to regions made a considerable contribution to this. The €174.6 (149.4) million. The research & development sales volume in the Corn Segment was maintained intensity relative to the Group’s net sales was at the level of the previous year against a backdrop 17.7% (16.2%). General and administrative expens- of sharp falls in cultivation area. Acquisition of the re- es increased below-proportionately relative to net maining shares (51%) in the French cereals company sales by 4% to €74.8 (71.9) million. Other operating MOMONT increased net sales only slightly. 22.7% income was €88.0 (58.2) million, while other operating of total net sales were generated in Germany, 44.8% expenses totaled €68.7 (42.8) million. The balance in Europe (excluding Germany), 25.8% in North and thus rose to €19.3 (15.4) million. The related indi- South America and 6.7% in the other regions. vidual items are presented in detail in the Notes on pages 125 to 127. Earnings, financial position and assets | Combined Management Report 47 KWS Group | Annual Report 2014/2015 The operating income (EBIT) for the KWS Group €125.8 million in the previous year to €130.1 million. was thus €113.4 (118.3) million. The EBIT margin fell Income taxes in the year under review rose to to 11.5% (12.8%). €46.1 (45.5) million, with the result that our tax rate was 35.4% (36.2%). Although the tax rate therefore Net financial income/expenses rose to €16.7 (7.5) fell slightly, losses that cannot be deducted against million. Apart from an improvement of €1.9 million tax and the sharp increases in net sales in high-tax in the interest result, it was mainly impacted by countries are still above the long-term average. The the net income from equity investments. The latter KWS Group posted net income of €84.0 (80.3) million rose by 35.9% to €27.5 (20.2) million as a result for fiscal year 2014/2015. Minority interests were of higher income from equity-accounted financial €1.3 (3.2) million, meaning €82.7 (77.1) million are assets (€ +3.5 million) and income from write-ups attributable to shareholders of KWS SAAT SE. The on subsidiaries, joints ventures and participations number of shares was unchanged, giving earnings (€ +3.7 million). Earnings before taxes (EBT) rose from per share of €12.53 (11.69). Financial situation Selected key figures on the financial situation Cash and cash equivalents Net cash from operating activities Net cash from investing activities Net cash from financing activities 2014/2015 2013/2014 in € millions in € millions in € millions in € millions 108.2 48.1 –123.8 48.4 122.3 76.1 – 63.1 – 43.6 +/– –11.5% – 36.8% 96.2% > 100% KWS’ financial management is geared in particular increase in working capital results from business to reflect the corporate values of farsightedness and expansion in our capital-intensive growth markets independence. Consequently, the overriding objective and higher inventories. of financial management is to secure adequate earn- ings strength long term and to safeguard the com- The net cash used in investing activities totaled pany’s financial independence. Apart from providing €123.8 (63.1) million and includes the payment for the company with sufficient liquidity, the objective is acquisition of the shares in MOMONT and the to enable it to expand its business activities flexibly planned increase in payments for tangible fixed and seize opportunities as and when they arise. The assets. The net cash from financing activities was financial management organization is controlled in the €48.4 (–43.6) million and comprised the dividend Group centrally from Einbeck. A balanced mix of for the fiscal year 2013/2014, which was constant financing, investment and hedging instruments is used compared with the previous year, higher cash pro- as the instrument for that. Derivative financial instru- ceeds from long-term borrowings, and installments ments are used only to hedge the risk of interest rate for repayment of raised loans. Last year they also changes and currency risks. included the cash paid to acquire the remaining shares in KWS LOCHOW GMBH. The KWS Group’s Cash earnings in fiscal year 2014/2015 were cash and cash equivalents on the balance sheet €92.1 (85.0) million on the back of higher deprecia- date at June 30, 2015, totaled €108.2 (122.3) million. tion and amortization of assets and lower other non- cash income. The net cash from operating activities A syndicated loan with a volume of €200 million exists (operating cash flow) was €48.1 (76.1) million. The lower to provide financing during the year. It was renegoti- increase in trade payables and short-term provisions, ated in October 2014 and will run until October 2019, together with the increase in working capital, had with an option to extend its term until 2021. a negative impact on the operating cash flow. The 48 Combined Management Report | Earnings, financial position and assets Annual Report 2014/2015 | KWS Group Total capital expenditure in fiscal year 2014/2015 the Cereals Segment for 37.2% (8.2%). The Group’s was €132.5 (69.4) million. Capital expenditure was capital expenditure was spread regionally as follows: increased by 90.9% year on year, mainly due to the 17.2% (23.0%) in North and South America, 25.5% takeover of the remaining shares (51%) in MOMONT. (34.4%) in Germany and 48.9% (39.6%) in Europe As in the previous year, the main focus of the invest- (excluding Germany). 8.3% (2.5%) of capital spend- ments was on expanding corn processing capacities. ing was in the rest of the world. For instance, a corn processing plant was erected in Serbia. Capital was also invested at the Einbeck Depreciation and amortization in the year under location. Investments were made in construction of a review totaled €45.9 (41.2) million. This rise is attrib- new research and office building. The Corn Segment utable to the rapid increase in the KWS Group’s accounted for 29.5% (44.1%) of total capital expendi- property, plant, and equipment as a result of the high ture, the Sugarbeet Segment for 18.1% (27.3%) and investment ratio. Assets Abridged balanced sheet Assets Noncurrent assets Current assets Equity and liabilities Equity Noncurrent liabilities Current liabilities 06/30/2015 06/30/2014 +/– in € millions in € millions in € millions in € millions in € millions 651.4 704.1 738.7 334.9 281.9 538.7 626.3 20.9% 12.4% 637.8 253.0 274.2 15.8% 32.4% 2.8% Total assets in € millions 1,355.5 1,165.0 16.4% The KWS Group’s total assets rose by 16.4% to financing thus remains solid. Equity at the bal- €1,355.5 (1,165.0) million. This was mainly attribut- ance sheet date far exceeded noncurrent assets by able to high capital expenditure as part of our busi- €87.3 (99.1) million. Noncurrent liabilities rose by ness expansion. 32.4% to €334.9 (253.0) million as a consequence of a further borrower’s note loan that was raised to fund Noncurrent assets at the balance sheet date totaled further business expansion in our future markets and €651.4 (538.7) million as a result of higher investments the acquisition of MOMONT. Current liabilities on in property, plant, and equipment. As a result of the the balance sheet date totaled €281.9 (274.2) million. planned expansion of business, higher inventories totaling €178.0 million and trade receivables totaling €309.7 million resulted in an increase in current assets to €704.1 (626.3) million. Cash and cash equivalents, in- cluding securities, fell by €14.1 million to €108.2 million. Net liquidity was € –105.9 (–31.6) million. The KWS Group’s equity rose by 15.8% to €738.7 (637.8) million. The equity ratio declined slightly to 54.5% (54.7%). The KWS Group’s Earnings, financial position and assets | Combined Management Report 49 KWS Group | Annual Report 2014/2015 Climate protector Processing In order to ensure the high quality of seed produced in the field, it must be processed after being harvested. Seed processing is a very time-consuming and labor-intensive process that depends on the specific crop. The raw goods are always cleaned, gently dried if necessary and calibrated. All the processes are designed to make sure that the seed is handled carefully so that the seedlings are healthy and an ideal quality can be ensured. As part of that, the necessary resources such as energy, water, auxiliary materials and supplies are used as economically as possible in all processing steps. The quantities used may vary from year to year, sometimes considerably, since they depend on the weather-related fluctuations in the quantity and quality of seed harvested. The main focus of environmental protection at the company is therefore on efficient controlling of the use of resources in the processing plants so that seed production is as environmentally friendly and resource-saving as possible. Employees Producing high-quality seed entails a great deal of the employees’ commitment, as well as raising the cost and effort and relies on excellent contributions employer’s contributions to capital-forming payments. from our employees with their high professional This arrangement benefits in particular part-time qualifications. We therefore endeavor to offer our employees and trainees, making it easier for them to employees a working environment that encourages build up their own capital. continuous progress. An attractive and open interna- tional work environment, characterized by fairness, Outstanding attractiveness as an employer – mutual respect and support for each other, enables more important than ever for KWS us to find unconventional and innovative solutions In view of our constant growth and the importance together. We foster a corporate culture that is based of qualified employees to our company, it is increas- on mutual trust and the common goal of keeping KWS ingly vital for KWS to give its employer brand a on its path to success. The values of our family busi- sharper profile and position itself internationally as ness with its rich tradition are the basis for our actions. an attractive place to work. Modern forms of online communication, participation in selected career fairs Europe-wide cooperation strengthened by in Germany and abroad and systematic establish- change in legal form to KWS SAAT SE ment of a significant network are key components KWS has continued to grow strongly in the interna- of our employer branding. We have also maintained tional arena in the past years. The KWS Group gen- intensive contact with relevant professional groups erates around 53% of its total net sales in Europe. and intensified and expanded our cooperation with This trend was reflected by conversion of KWS into a universities and organizations worldwide – for exam- European Stock Corporation (Societas Europaea/SE), ple in Argentina, the U.S. or China. and an additional employee representative body was set up at the European level: the European Employee Seeding the Future: KWS fosters young talents Committee (EEC). After its initial short term of office at an early stage up to 2017, the EEC will be elected for five years and We believe youngsters should gain an initial insight consists of eleven delegates: Three delegates come into working life as early as possible, i. e. when they from Germany and the remaining eight from the other are in school or studying at a university. That is why EU countries in which KWS has subsidiaries. KWS offers students the opportunity to learn more The above-average turnout for the election of the body example in excursions to the company, as interns or at the end of July 2015 showed that our employees at through scholarships. Students can also write their all European companies have a high degree of identi- degree theses in cooperation with KWS or take dual about its various task areas throughout the group: for fication with KWS and make use of the opportunities courses of study. to help shape it. Following the election of the EEC’s Chairperson and two deputies in September 2015, the Excellent career start at KWS body commenced its task of representing employees Good training for our employees is a basic necessity in cross-border matters within the European Union. It so that KWS can remain successful in the future. In will hold at least two meetings a year with the Execu- fiscal 2014/2015, KWS employed 100 youngsters in tive Board to discuss the company’s development and six business administration, agricultural science and planned measures. industrial vocations. Around 120 instructors ensure a high quality of training. KWS offers university gradu- At the national level, too, the focus is on harmonious ates two introductory programs: There is very great rapport: The collective bargaining agreement for demand for our tried-and-tested internal Trainee Germany that was concluded in Einbeck in May 2015 Program and for the “Breeders Academy”, which is specifically paid tribute to the social component and tailored specifically to plant breeding. 52 Combined Management Report | Employees Annual Report 2014/2015 | KWS Group Openness and transparency are not only reflected in our architecture, but above all in our daytoday activities. We give all career starters at KWS extensive insight of KWS’ values, its strategic orientation and its gover- into our globalized, highly networked business pro- nance structures. In the course of our ten-month “Inter- cesses. We also attach particular importance to devel- national Development Program” (IDP), potential junior oping professional qualifications and personal skills. talents are taught the skills that are particularly required Focus on employee development successful completion of the first IDP in February 2015, Personnel development at KWS helps our employees a new intake embarked on the program in June 2015. in KWS’ global business environment. Following the acquire skills that are demanded by our global busi- ness environment with its ever-changing general con- Work-life balance at KWS ditions: constant innovation, customer orientation and We want our employees to be able to reconcile their modern communications. To enable that, a concept for career and private life in every phase of their life. a group-wide successor and talent management sys- KWS supports that goal in Germany with flexitime tem was set up in the year under review. In manage- models and company agreements on child care ment groups consisting of participants from different allowances, as well as by letting employees reduce locations and units, potential candidates are identified their working time so that they can look after depen- in development meetings. The findings obtained help dents who need caring for. boost further development of the identified employees. In addition, the “Orientation Center” (OC) was adapted, The health management initiative launched in Ger- a further training measure whose members include many in 2013/2014 is now firmly in place. Among Executive Board members and external experts and other things, running groups and KWS dragon boot which aims to identify the strengths of selected em- training are offered at the Einbeck location and a fit- ployees and the fields they can develop further. Strate- ness studio accompanies sports programs for entire gic and intercultural aspects are now taken into greater departments. Health management is also becoming account to reflect the company’s environment. established internationally: For example, 86% of all employees in Brazil take part in the “Quality for Life” However, we also continued our proven development program, in which they are given dietary advice and programs: For example, the “KWS On Board” program regular health checks. As part of that, employees gives experts and executives who have newly taken obtain information on possible risk factors and sug- over a management function a better understanding gestions for a healthy lifestyle. Employees | Combined Management Report 53 KWS Group | Annual Report 2014/2015 Employees in numbers1 went to compensation and €49.7 (45.6) million to The number of employees at the KWS Group rose social security contributions, expenses for pension again as planned in fiscal 2014/2015 and averaged plans and benefits. The average length of service 5,322 worldwide, 9.8% up from the previous year. in Germany remains at the constantly high level of 13.0 years. All in all, that underscores the attractive- Personnel costs rose by 13.6% to a total of ness of KWS as a modern and fair employer. €256.4 (225.8) million. Of that, €206.8 (180.3) million 1 Including our joint ventures. Excluding them, the average number of employees is 4,691. Employees by region Germany Europe (excluding Germany) Americas Rest of world Total Employees by function Research & Development Distribution Production Administration Total Key figures for employees (in Germany) Number of employees in Germany of which number of part-time employees Ratio of men Ratio of women Number of Apprentices Apprentice ratio Average age Length of service in % in % in % in years in years +/– 6.0% 14.6% 9.0% 25.3% 9.8% +/– 8.1% 1.5% 23.9% 5.7% 9.8% +/– 6.0% 4.9% 2.0% 2014/2015 2013/2014 1,868 1,401 1,865 188 5,322 1,763 1,223 1,711 150 4,847 2014/2015 2013/2014 1,985 1,259 1,408 670 5,322 1,836 1,241 1,136 634 4,847 2014/2015 2013/2014 1,868 1,763 367 50.9 49.1 100 5.3 40.4 13.0 350 50.2 49.8 98 5.5 40.2 14.0 54 Combined Management Report | Employees Annual Report 2014/2015 | KWS Group Report on events after the balance sheet date We began implementing adaptation of our Euro- our administrative overhead. The structure of our pean Service Center structure at the beginning of segments will not be affected by this measure. August 2015. As part of that, the Service Center North was integrated in the Service Centers Medi- As a further step in optimizing the KWS Group’s terranean and East effective October 1, 2015. The structures, the Executive Board and the Supervisory Rotter dam location was closed; some of its employ- Board will propose conclusion of a profit and loss ees were offered work in the Service Centers that transfer agreement between KWS SAAT SE and took over its activities. KWS LOCHOW GMBH to the Annual Sharehold- ers’ Meeting. KWS SAAT SE holds all the shares As already announced on several occasions, a in KWS LOCHOW GMBH, which bundles the decision was made to merge KWS MAIS GMBH with KWS Group’s cereals activities. Both companies KWS SAAT SE. The merger will become effective have performed successfully in the past years; con- upon being entered in the commercial register and clusion of the agreement is intended to secure their will be carried out in the course of fiscal 2015/2016. successful commercial development, create the KWS MAIS GMBH now generates the highest net conditions for further organic growth and tap further sales in the KWS Group and consistently makes a group-related advantages. large contribution to earnings. The company’s rein- tegration marks a first step in simplifying the Group’s Apart from that, there were no significant events that, structure. Our objective with the merger is also to in the assessment of the Executive Board, might make internal processes more efficient and reduce have an impact on the KWS Group’s earnings, assets and financial position. Opportunity and risk report As an international seed company, the KWS Group and products. Targeted measures are formulated operates in a dynamically changing environment. together with the Executive Board so that strengths That results in risks as well as opportunities, which can be leveraged and strategic growth potentials we have to weigh as the foundation for our entrepre- tapped. Strategic opportunities of major importance neurial decisions. Opportunities are handled by the Executive Board. Extensive strategic planning covering a 10-year time frame is the basis for opportunity management. In keeping We understand an opportunity as a development with our established growth strategy, we exploit that might have a positive impact on our earnings, the industry-specific and strategic opportunities financial position and assets. that arise by means of pinpointed investments in production capacities, research & development and At the KWS Group, opportunity management is an acquisitions. integral component of the established controlling sys- tem between the subsidiaries/associated companies We see diverse opportunities for the KWS Group to and company management. Strategic opportunities, develop the company further in line with our strategy. such as joint ventures and acquisitions, are handled So that we succeed in achieving sustainable, profit- by the Executive Board. Operational opportunities able growth in future as well, our prime goal must be are identified and exploited in our segments, since to retain and further increase our innovativeness. The they have the greatest knowledge of their markets latter is expressed in seed business by continuous Report on events after the balance sheet date | Opportunity and risk report | Combined Management Report 55 KWS Group | Annual Report 2014/2015 Our huge seed processing plant in Serbia was opened this fiscal year after being built in less than a year. increases in the yields of new varieties. The plants’ by developing varieties tailored exactly to their cli- yield potential can either be increased or their resis- matic conditions. In particular in the highly fragment- tance to detrimental influences, of whatever type, ed Chinese corn market, there is a good opportunity can be improved. Our target is to offer our customers to participate in the process of consolidation that is an increase in yield of 1% to 2% per annum with our now beginning. new varieties. That is why we constantly expand our research & development activities. A measure of Investing in expansion of our production capacities our innovativeness is the number of newly approved and modernization of our seed processing offers varieties. In the approval processes, our varieties additional opportunities to grow further. Further are compared directly with rival products in official development of our variety portfolio and expansion performance tests. More details of that and on our of capacities are accompanied by expansion of our research & development activities can be found on distribution structures to enable even more tailored page 30 of this report. and intensive information and advice for our custom- ers on the possible uses of our seed and allow us to There are also market opportunities as a result of our leverage further sales potential. In addition, continu- intensified activities in subtropical regions. Our corn ous optimization of processes offers the KWS Group activities in Brazil and China will enable us to tap the opportunity to increase productivity and optimize additional sales potential for the KWS Group in the cost structures. Short-term opportunities may also medium to long term in these – for us – new markets arise as a result of movements in exchange rates. 56 Combined Management Report | Opportunity and risk report Annual Report 2014/2015 | KWS Group Risks KWS’ risk management system is organized on the We define a risk as a potential future event that might basis of the internationally recognized COSO model have a negative impact on our business. (Committee of Sponsoring Organizations of the Tread- way Commission). Risks are identified and assessed Objectives and strategies in risk management as well as mitigated by suitable control measures. The Our risk management is founded on trust in employ- principles of our risk management are enshrined in our ees and the sense of responsibility of every individual. group-wide “Rules, Guidelines & Procedures”. Core Our employees are to be enabled to assess and mini- contents include principles relating to early detection mize risks on their own. and communication and handling of risks. These standards are implemented by the local subsidiaries. Our risk management system supports a responsible Our group’s own Service Centers help in preparing approach to risks and decision-making processes. It local financial statements and provide a consistent consists of organizational measures so that relevant data model that is subject to the group’s regulations risks can be identified, assessed and controlled at an on accounting and thus ensures that the consolidated early stage. With proactive strategies to counter risks, financial statements comply with the rules. we reduce or avoid negative impacts so that we can operate successfully on the world market. As part of its audit of the annual financial statements for fiscal year 2014/2015, Deloitte & Touche GmbH Structure of the risk management system Wirtschaftsprüfungsgesellschaft confirmed that our The Executive Board is responsible for risk manage- system for early detection of risks complies with the ment. The central functions Corporate Finance, Cor- requirements under the German Stock Corporation porate Controlling, Corporate Compliance Office and Act. It also enables early identification of risks that Corporate Development & Communications share jeopardize the company’s existence. Identified weak- the various tasks among themselves (see the figure). nesses are reported to the Executive Board and the There is also a Risk Committee that reports regularly Supervisory Board and rectified in the continuous on the development of risks. improvement process. Structure of risk management at the KWS Group Corporate Finance Corporate Controlling Corporate Development & Communications Corporate Compliance Office Tasks ■■ Early detection of risks ■■ Risk management ■■ Interest and currency management ■■ Insurance ■■ Loan management ■■ Damage prevention ■■ External audits ■■ Planning/budget ■■ Current expectations ■■ Rules, Guidelines & Procedures ■■ Integrated Management System ■■ Internal audits ■■ Excellence Through Stewardship ■■ Compliance Management System ■■ Compliance Risk Assessment ■■ Compliance training ■■ External audits ■■ Examinations Opportunity and risk report | Combined Management Report 57 KWS Group | Annual Report 2014/2015 Risk management process Risk management and the internal control The risk management process at KWS consists of system in the accounting process the phases of identification, assessment, control and The internal control and risk management system monitoring of risks and risk reporting. comprises measures, structures and processes designed to make sure that business transactions By risk identification, we mean that the persons are included in accounting promptly, consistently responsible for an area of risk identify the potential and correctly. Its objective is to ensure compliance risks. The identified risks are plausibilized and sum- with the law and external and internal accounting marized in a risk control matrix. The risk inventory regulations. The completeness of financial reporting, currently contains around 100 risks and means of the Group’s uniform accounting, measurement and controlling them. account allocation stipulations, and the authoriza- tion and access regulations for IT systems used in This is followed by risk assessment, i. e. qualitative accounting are examined regularly. Intra-group and quantitative analysis of the risks. Risks are trans actions are consolidated appropriately and measured on a net basis, i. e. after risk mitigation in full. Consolidated accounting is carried out at measures have been taken. Their materiality (upper KWS SAAT SE by the corporate units Group Account- risk limit) is evaluated either on the basis of their ing and Group Controlling. potential effect on operating income (EBIT) or spe- cific qualitative indicators. The risks are classified by Main areas of risk their likelihood of occurrence and level of damage We assess risks as being significant if they might and prioritized according to a traffic light system. have a considerable negative impact on our business With risk controlling, we create instruments to actively which the risk categories and individual risks are influence the main risks. Risk controlling comprises listed reflects their importance. Unless otherwise measures to reduce risks, constant monitoring of specified, the risks apply to all segments of the them and risk transfer. Our internal control system KWS Group. activity, financial position or earnings. The order in (ICS) is used to systematically review and document whether this controlling is effective. The adequacy and proper functioning of the controls must be examined once a year by the person responsible for them at the respective business segment or a commissioned third party. External auditing by experienced auditors is conducted to ensure that internal controls work. The objects audited are chosen on a risk-based approach. A report on the ICS’ effectiveness is given to the Audit Committee of the Supervisory Board once a year. The Risk Committee is informed quarterly of the current risk situation for the KWS Group and its fields of business. 58 Combined Management Report | Opportunity and risk report Annual Report 2014/2015 | KWS Group Corporate risks Risk category Market risks ■■ Political instability ■■ Fall in sales volumes and/or prices ■■ Currency depreciation ■■ Change in interest rates Production risks ■■ Influence of the weather on multiplication in the field Likelihood of occurrence1 Potential impact 2 Change from the previous year Possible Significant ■■ Outage of production Possible Significant systems ■■ Product liability ■■ Genetic mixing Procurement risks ■■ Non-delivery by suppliers ■■ Loss of reputation Liquidity risks ■■ Insolvency ■■ Violation of financial obligations ■■ Default by customers Legal risks ■■ Breaches of contract ■■ Anti-trust proceedings ■■ Corruption ■■ Violation of capital market law ■■ Infringement of proprietary rights ■■ Violation of data protection Environmental risks ■■ Pollution of the air, soil and water by dusts, waste water and waste Personnel risks ■■ Demographic change ■■ Shortage of skilled workers IT risks ■■ Non-availability of IT systems ■■ Hacking ■■ Data theft ■■ Conflict in the authorization process Unlikely Moderate Unlikely Significant Possible Significant Possible Significant Unlikely Moderate Possible Significant 1 Unlikely = 1% – 33%. Possible = 34% – 66%. Likely = 67%– 99%. 2 Moderate: Hardly perceptible effects on our business activity, financial position or earnings. Significant: Considerable negative effects on our business activity, financial position or earnings. Existential: Substantial negative effects on our business activity, financial position or earnings that would put the company’s continued existence at jeopardy. Opportunity and risk report | Combined Management Report 59 KWS Group | Annual Report 2014/2015 Market risks KWS has established extensive checks and tests We face political risks in the strongly regulated interna- throughout the production process to safeguard the tional agricultural industry. The continued uncertainty performance and quality of its products. Regular in Ukraine and sanctions against Russia may have quality examinations and controls are conducted a constant negative impact on our business activities at all process levels and also include testing of con- in those countries. We generated net sales totaling ventional seed to determine that it is free of genetic €59.5 million in the two countries in fiscal 2014/2015. technology. In addition, very strict requirements have to be met, in particular in relation to genetically modi- Sale of our products depends on product performance fied products. In the absence of a standardized legal and the competitive situation. In addition, the state threshold value, a number of European countries of the global economy has a major influence on our even practice a policy of zero tolerance. net sales and income. We address this challenge with systematic analyses of the market and the competition KWS joined the “Excellence Through Stewardship” and by developing high-quality seed all over the world. (ETS) initiative in January 2013. This is an internation- Currency risks arise from fluctuations in exchange to the use of biotechnology-derived plant material rates, in particular for outstanding receivables and throughout the product lifecycle. By becoming a mem- liabilities denominated in foreign currency. There are ber, KWS signals its clear and unswerving commitment interest rate risks as a result of potential changes to to the responsible use of transgenic plant material. ally standardized quality management program relating market interest rates. The interest payable on finan- cial obligations with a variable rate of interest may Procurement risks increase. We address the risk of interest rate changes We reduce supply risks that might arise from the and currency risks through the usual hedging instru- procurement of pesticides for the seed we treat by ments, such as derivatives and forward exchange maintaining sufficient stocks. Moreover, the risk of deals, to reduce the influence on the KWS Group’s sources no longer being able to deliver is minimized earnings and assets situation. In fiscal 2014/2015, the by continuous assessment of the quality and ability research & development expenditure and inter-com- to deliver on the part of our suppliers. In addition, pany loans were almost completely hedged our sustainability principles and requirements are laid in order to avoid exchange rate risks. down in our newly introduced Code of Business Eth- Production risks ics for Suppliers. Our suppliers are to respect human rights and work safety and environmental protection Breeding and multiplying seed are dependent on regulations, as well as to avoid any form of child the weather. We reduce the risk of production losses labor. Violation of the code harbors the risk of dam- stemming from bad weather by distributing seed age to our reputation. We conduct audits of suppliers multiplication and processing over several locations to examine whether they comply with the code. in Europe and North and South America. Fluctuations in demand in one region can be compensated for as Liquidity risks part of our global production network. Contra-sea- Liquidity risks arise if the KWS Group is not able sonal multiplication is carried out in the winter half- to fulfill existing or future payment obligations. We year in Chile and Argentina if there are bottlenecks in reduce the liquidity risk by means of central liquidity seed availability in Europe. We counter the outage of planning, cash pooling, long-term borrower’s note production facilities by means of regular maintenance, loans and syndicated credit lines. As in the previous risk inspections and organizational and technical year, full use was not made of the variable credit damage prevention programs. To cover financial loss, lines in fiscal 2014/2015. The financial covenants in we maintain group-wide property and business inter- our loan agreements were complied with. We use ruption insurance. trade credit insurance to reduce the risk of losing 60 Combined Management Report | Opportunity and risk report Annual Report 2014/2015 | KWS Group receivables in risky regions and business segments. IT risks There may be a greater potential for counterparty The KWS Group’s business and production processes, default is some regions at present due to political as well as its internal and external communications, developments (Ukraine) and economic developments are based on globally networked IT systems. Any (exchange rate effects, increase in the price of outages in them can result in a significant interruption goods). Loan management helps us identify drops to business operations. In addition, theft of sensitive in customers’ creditworthiness in good time and to information can entail a loss of reputation for us. Our avoid resultant payment defaults. IT security organization and security policies impede Legal risks unauthorized access to sensitive electronic company data. Firewall and antivirus programs are kept up- The KWS Group faces risks in its operations from of- to-date and are designed to avoid losses as a result ficial proceedings and legal disputes. Legal disputes of hacking and malware. There is also an extensive are possible in particular with suppliers, customers, authorization concept. Constant external examinations employees and investors and may result in payment of our IT security concept and system authorizations or other obligations. There were no significant legal ensure an objective risk assessment of the imple- proceedings in fiscal 2014/2015. Under our compli- mented concepts and measures. ance policies and the Code of Business Ethics, our employees undertake to act in accordance with laws, Overall statement on the risk situation by the contractual provisions, internal regulations and our Executive Board corporate values. Environmental risks The risks presented above do not jeopardize the exis- tence of the KWS Group, either individually or in their entirety. All in all, the risk situation did not change sig- KWS’ international management system regulates the nificantly in fiscal 2014/2015. The main risks for us are proper operation of plant and facilities of relevance to still related to products and the market. The increasing environmental protection so as to minimize negative share of our business in foreign currency, in particular influences on people, the environment and material in emerging countries, means there will be additional assets. Implementation of the instructions is audited currency risks. Nevertheless, and taking into account internally and externally as part of our continuous our countermeasures, we assess the potential financial improvement process. impact of currency risks as being moderate. Personnel risks We feel sure that, thanks to our global footprint, our It is KWS’ conviction that qualified and committed em- innovative strength and the high quality of our prod- ployees are the key to its success. We therefore have ucts, we can seize opportunities and successfully to remain an attractive employer. Our strategies enable counter risks as they arise. However, we cannot rule us to find new talents – career starters and experienced out the possibility that further factors of which we are professionals alike – as well as to further develop the not currently aware or which we do not at present existing workforce. Our employer branding has posi- assess as significant may impact the continued exis- tioned KWS as an attractive place to work in the eyes tence of the KWS Group in the future. of relevant professionals. Extensive vocational training and induction programs help junior staff get their career off to an excellent start. Our integrated personnel development landscape supports our employees in acquiring professional qualifications and personal skills that are demanded by our globally networked business environment with its constantly changing general condi- tions: continuous innovation, customer orientation and modern communications. Opportunity and risk report | Combined Management Report 61 KWS Group | Annual Report 2014/2015 Forecast report Forecast for the KWS Group for fiscal 2015/2016 in € millions According to the IFRS statement of comprehensive income (application of IFRS 11) Sales for 2015/2016 EBIT margin for 2015/2016 R&D intensity for 2015/2016 1,035 – 1,085 ≥ 10.5% ~17% We have changed the KWS Group’s forecast report several locations. For example, a new, cutting-edge due to the previously described amendments to greenhouse is being built in Einbeck and a new the International Financial Reporting Standards breeding station is being set up in Bernburg. We are (IFRS 11). Apart from the forecast for our segment expanding our footprint outside Germany, such as in reporting, which is of relevance to internal corporate the U.S. as a result of the research center in St. Louis. controlling, we will for the first time specify the KWS Group’s anticipated operating income excluding At the Corn Segment, we assume increasing sales our 50:50 joint ventures (see “Forecast for the KWS revenues, in particular in North and South America, Group”). The forecast is based on our corporate but also in Eastern and Southeastern Europe. We planning and the information included in it, such as currently expect net sales to increase by between market expectations or exchange rate developments. 10% and 15% year on year. Despite the sharp in- Forecast for segment reporting and distribution, the segment’s EBIT margin will prob- crease in expenditure on research & development We will continue to implement our successful corpo- ably be around 11%. rate strategy in fiscal 2015/2016. As part of that, we intend to expand our business activities in the sales Following the extremely successful fiscal year markets of Brazil and China we have recently tapped 2014/2015 for the Sugarbeet Segment, it will be and to further increase our already high level of com- difficult to achieve further growth in 2015/2016 in petitiveness in our core markets. As in previous years, view of the fact that cultivation area will likely remain we will further strengthen KWS’ main success factors: stable. In order to repeat the previous year’s suc- our innovative strength and our distribution network. cess, we need to defend the high market shares we Our expenditure on research & development and have captured. It will be crucial to our business to distribution will therefore be increased. expand our position in the growth markets of Eastern Europe and successfully establish our varieties, These measures will be flanked by extensive invest- whose performance is good almost across the ments in property, plant and equipment. The main board, in the other individual markets. If we manage focus of that will be on expanding and modernizing to do that, we expect the segment’s net sales and production plants in the growth markets of Eastern/ income to be at the level of the previous year, despite Southeastern Europe and the U.S. We are also the still difficult situation in the potato market. expanding our research & development facilities at 62 Combined Management Report | Forecast report Annual Report 2014/2015 | KWS Group A very good outlook: the very best seed as the foundation for future growth. At the Cereals Segment, we expect slight growth in Forecast for the KWS Group’s statement net sales from our acquisition in the important cere- of comprehensive income als market of France. The segment’s EBIT margin is The statement of comprehensive income in accor- likely tobe below that of the previous year, however, dance with IFRS 11 no longer includes the net sales due to expected reductions. and costs of our joint ventures. In line with our cor- porate strategy and annual planning, the Executive At the Corporate Segment, we expect stable net Board expects the KWS Group to post operational sales from our farms’ business activities. Due to the sales growth of 5% to 10% and an EBIT margin of at fact that all cross-segment costs at the KWS Group least 10.5% in the coming fiscal year. The R&D inten- are allocated to it, we expect the segment to post a sity is expected to be around 17%. We intend to stick negative EBIT of around € –60 million. to our dividend policy, with a payout ratio between 20% to 25% of our net income for the year. Forecast report | Combined Management Report 63 KWS Group | Annual Report 2014/2015 KWS SAAT SE ( Explanations based on the German Commercial Code (HGB)) The Management Reports of KWS SAAT SE and the Research & development expenditure, which is KWS Group have been combined for the first time for pooled at KWS SAAT SE, increased as planned by fiscal 2014/2015. The annual financial statements of €20.2 million to €158.2 (138.0) million. Expansion of KWS SAAT SE in accordance with the German Com- distribution activities resulted in an increase in selling mercial Code (HGB) and the Combined Management expenses to €30.7 (27.5) million. Most of the admin- Report will be published in the Electronic Federal istrative functions for the KWS Group are located Gazette at the same time. in KWS SAAT SE, with the result that administrative expenses were €53.8 (51.1) million. The balance of Declaration regarding corporate governance other operating income and other operating expens- The declaration on corporate governance in accor- es rose by €12.7 million to €34.7 million and was dance with Section 289a of the German Commercial impacted positively by the balance of currency trans- Code (HGB), which also contains the compliance dec- lation differences and exchange rate hedges totaling laration in accordance with section 161 AktG (German €2.3 (4.7) million and lower allowances for receivables Stock Corporation Act), has been published in the totaling €3.7 (11.4) million. Internet at www.kws.com/ir > Corporate Governance. Compensation Report KWS SAAT SE’s operating income thus fell as expected to € –23.2 million compared with € –14.3 million in the The disclosures in accordance with Section 289 (2) previous year, mainly due to the planned increase in No. 5 of the German Commercial Code (HGB) are con- research & development expenditure. The net finan- tained in the Compensation Report on page 69 to 74. cial income/expenses is made up of the net income from equity investments from eight (seven) companies Disclosures in accordance with Section 289 (4) and the interest result. The net income from equity of the German Commercial Code (HGB) and investments increased by 15.0% to €47.6 (41.4) million. explanatory report of the Executive Board The interest result was € –2.6 (–3.5) million. Taking into The disclosures in accordance with Section 289 (4) account tax expenditures, KWS SAAT SE posted net of the German Commercial Code (HGB) and the income for the year of €19.7 (23.8) million. explanatory report of the Executive Board can be found on page 68/69. Assets and financial situation KWS SAAT SE’s total assets increased in the year un- Business activity, corporate strategy, der review by €61.3 million to €639.8 million. Fixed as- corporate controlling and management, sets at the balance sheet date were €383.1 (357.0) mil- business performance lion or 59.9% (61.7%) of total assets. The increase in You can find disclosures on our business activity, fixed assets is mainly due to capital measures at corporate strategy, corporate controlling and manage- affiliated and associated companies, as well as in- ment, as well as explanations on our business vestments in construction of an office and research performance, on pages 24 to 33. building in Einbeck, licenses, laboratory equipment Earnings and agricultural machinery. At the same time current assets rose to €255.9 (221.3) million, largely as a result KWS SAAT SE’s net sales increased in fiscal of the fact that receivables and other assets increased 2014/2015 by 5.3% to €284.4 (270.1) million. This is by €60.2 million to €210.0 million. Inventories increased mainly due to the positive development of revenue by 11.8% to €26.1 million. The securities held totaled from sugarbeet seed, which – including the sugar- €7.0 (24.3) million and cash and cash equivalents fell to beet technology fee – rose by 7.8%. €12.8 (17.6) million. 64 Combined Management Report | KWS SAAT SE ( Explanations based on the German Commercial Code (HGB)) Annual Report 2014/2015 | KWS Group The company’s equity was €185.3 million, on a par with Report on events after the balance sheet date the previous year. The equity ratio on the balance sheet You can find the report on events after the balance date was therefore 29.0% (32.0%). Provisions increased sheet date for KWS SAAT SE and the KWS Group on by 4.3% to €102.2 million. There was an increase in page 55. the liabilities to banks of €75.9 million to €150.0 million, mainly due to the issue of a further borrower’s note loan Forecast report with a volume of €100 million and simultaneous repay- KWS SAAT SE generates the main part of its net ment of a tranche of the borrower’s note loan that was sales from sugarbeet seed business and royalties issued in 2012. Liabilities to affiliated companies fell by from basic corn seed. Further development of 8.9% to €178.0 million. KWS SAAT SE’s total liabilities sugarbeet seed business depends to a major extent were €347.1 (289.4) million. on developments in our growth markets in Eastern Europe and cultivation areas in our key markets. We At the balance sheet date, fixed assets were covered currently anticipate a slight increase in net sales. by equity to an amount of 48%. A long-term syndicat- The planned integrated of KWS MAIS GMBH’s corn ed loan with a total volume of €200 million exists with activities in fiscal 2015/2016 will also significantly KWS SAAT SE’s principal bankers to finance operat- increase KWS SAAT SE’s net sales. ing resources during the year. Dividend In turn, KWS SAAT SE’s operating income is primarily impacted by the KWS Group’s research & develop- You can find details on the dividend on page 11. ment expenditure, which will again be increased as Employees planned in the coming year so as to secure KWS’ good market position. Together with the administra- An average of 1,195 (1,145) people were employed tive expenses, which are pooled in KWS SAAT SE, at KWS SAAT SE in the year under review, of whom this resulted in negative operating income in the last 115 (118) were trainees and interns. two fiscal years. However, operating income will im- prove sharply and is expected to be positive again as Research & Development a result of the integration of KWS MAIS GMBH. You can find a detailed description of the KWS Group’s research & development activities on The detailed annual financial statements of pages 30 to 32. KWS SAAT SE for fiscal 2014/2015 in accordance with the German Commercial Code (HGB) have also Risks and opportunities been published at www.kws.com > Investor Relations The risks and opportunities at KWS SAAT SE are > Financial Reports. essentially the same as at the KWS Group. It shares the risks of its subsidiaries and associated companies in accordance with its respective stake in them. You can find a detailed description of the opportunities and risks and an explanation of the internal control and risk management system (Section 289 (5) of the German Commercial Code (HGB)) on pages 55 to 61. KWS SAAT SE ( Explanations based on the German Commercial Code (HGB)) | Combined Management Report 65 KWS Group | Annual Report 2014/2015 Packaging artist Packaging and certification Seed production is predominantly organized by the breeder itself, but – depending on the crop – is handled in cooperation with many agricultural partners and processing companies. Our seed’s quality must be guaranteed throughout the production value chain. The complex processes of multiplication and processing are therefore supported organizationally by an Integrated Management System so that, despite a largely decentralized production structure, the processes and subsequent goods movements can be influenced at all times. After undergoing a large number of official tests and quality inspections of our own, the seed is approved for sale. The seed is packaged and certified in Germany under official control, for exam- ple by the Chamber of Agriculture in Hanover. That ensures that only tested seed with a high germination capacity and varietal purity is put on the market. The “blue label” on the seed units indicates that the seed is certified and of top quality. Other disclosures Disclosures in accordance with Sections 289 (4) and The voting shares, including mutual allocations, (5) and 315 (4) of the German Commercial Code (HGB) of the members and companies of the families and the explanatory report of the Executive Board Büchting, Arend Oetker and Giesecke listed below each exceed 10% and total 56.1%: Composition of the subscribed capital The subscribed capital of KWS SAAT SE is ■■ Dr. Drs. h.c. Andreas J. Büchting, Germany €19,800,000.00. It is divided into 6,600,000 bearer ■■ Christiane Stratmann, Germany shares. Each share grants the holder the right to cast ■■ Dorothea Schuppert, Germany one vote at the Annual Shareholders’ Meeting. ■■ Michael C.-E. Büchting, Germany ■■ Annette Büchting, Germany Restrictions relating to voting rights ■■ Stephan O. Büchting, Germany or the transfer of shares ■■ Elke Giesecke, Germany There may be restrictions relating to voting rights ■■ Christa Nagel, Germany or the transfer of shares as a result of statutory or ■■ Bodo Sohnemann, Germany contractual provisions. For example, shareholders are ■■ Matthias Sohnemann, Germany barred from voting under certain conditions pursuant ■■ Malte Sohnemann, Germany to Section 136 of the German Stock Corporation Act ■■ Arne Sohnemann, Germany (AktG) or Section 28 of the German Securities Trading ■■ AKB Stiftung, Hanover Act (WpHG). In addition, no voting rights accrue to the ■■ Büchting Beteiligungsgesellschaft mbH, Hanover company on the basis of the shares it holds (Section ■■ Zukunftsstiftung Jugend, Umwelt und Kultur, 71b AktG). The Executive Board is not aware of any Einbeck contractual restrictions relating to voting rights or ■■ Dr. Arend Oetker, Germany transfer of shares. If there are no restrictions to voting ■■ Kommanditgesellschaft Dr. Arend Oetker rights, all shareholders who register for the Annual Vermögensverwaltungsgesellschaft mbH & Co., Shareholders’ Meeting in time and have submitted Berlin proof of their authorization to participate in the Annual Shareholders’ Meeting and exercise their voting rights The voting shares, including mutual allocations, of are authorized to exercise the voting rights conferred the shareholders stated below each exceed 10% and by all the shares they hold and have registered. If total 15.1%: members of the Executive Board or executive em- ployees have acquired shares as part of the long-term ■■ Hans-Joachim Tessner, Germany incentive programs, these shares are subject to a ■■ Tessner Beteiligungs GmbH, Goslar lock-up period until the end of the fifth year after the ■■ Tessner Holding KG, Goslar end of the quarter in which they were acquired. The lock-up period for shares that employees have ac- Shares with special rights and voting control quired as part of the Employee Share Programs runs Shares with special rights that grant powers of con- until the end of the fourth year as of when they are trol have not been issued by the company. posted to the employee’s securities account. Direct and indirect participating interests in ticipating interests of employees. Employees who excess of 10% of the voting rights have an interest in the company’s capital exercise their The company has been informed by shareholders of control rights in the same way as other shareholders. There is no special type of voting control for the par- the following direct or indirect participating interests in the capital of KWS SAAT SE in excess of 10% of the voting rights in accordance with Section 21 and Section 22 of the German Securities Trading Act (WpHG) or elsewhere: 68 Combined Management Report | Other disclosures Annual Report 2014/2015 | KWS Group Appointment and removal of members Significant agreements in the event of a change of the Executive Board of control, compensation agreements Members of the Executive Board of KWS SAAT SE are Significant agreements subject to the condition of a appointed and removed in accordance with Article 9 (1) change in control pursuant to a takeover bid have not and Article 39 (2) of the Council Regulation on the Stat- been concluded. The compensation agreements ute for a European Company (SE Regulation), Article 46 between the company and members of the Executive of the Council Regulation on the Statute for a Euro- Board and governing the case of a change in control pean Company (SE Regulation) and Sections 84 and stipulate that any such compensation will be limited 85 AktG (German Stock Corporation Act). Section 6 of to the applicable maximum amounts specified by the KWS SAAT SE’s Articles of Association also contains German Corporate Governance Code. provisions that relate to the appointment of members of the Executive Board by the Supervisory Board and Declaration regarding Corporate Governance that correspond to the statutory regulations. The declaration on corporate governance in accor- dance with Section 289a of the German Commercial Amendments to the Articles of Association Code (HGB) (which is also the Corporate Governance The company’s Articles of Association can be amend- Report) is available on our website at www.kws.com ed by a resolution adopted by the Shareholders’ > Company > Investor Relations > Corporate Meeting in accordance with Article 59 of the Council Governance. Among other things, it contains the dec- Regulation on the Statute for a European Company laration in accordance with Section 161 of the German (SE Regulation) and Section 179 (a) AktG (German Stock Corporation Act (AktG) (declaration of compli- Stock Corporation Act). In accordance with Article 59 ance), which is also reproduced on page 20/21 of this of the Council Regulation on the Statute for a Euro- report, relevant disclosures on corporate governance pean Company (SE Regulation), Section 179 (1) AktG practices and a description of the working practices of (German Stock Corporation Act) and Section 18 of the Executive Board and the Supervisory Board. the Articles of Association of KWS SAAT SE, amend- ments to the Articles of Association require that at Compensation Report least half the capital stock be represented and that a The compensation report contains explanations resolution be adopted by the Shareholders’ Meeting on the salient features, structure and level of the by a simple majority of the capital stock represented compensation paid to members of the Executive in adoption of the resolution, unless obligatory stat- Board and the Supervisory Board. It is based on the utory regulations specify otherwise; if at least half relevant statutory provisions and takes into account the capital stock is not represented in adoption of the pertinent recommendations of the German the resolution to amend the Articles of Association, Corporate Governance Code. the resolution must be passed with a majority of at least two-thirds of the votes cast. The power to make Compensation for members of amendments to the Articles of Association that only the Supervisory Board affect the wording (Section 179 (1) Sentence 2 AktG) The Supervisory Board’s compensation was set by the has been conferred on the Supervisory Board in ac- Annual Shareholders’ Meeting on December 17, 2009, cordance with Section 22 of the Articles of Associa- and has remained unchanged since then. It is based tion of KWS SAAT SE. on the size of the company, the duties and responsibil- ities of the members of the Supervisory Board and the Powers of the Executive Board, in particular in company’s economic situation. The remuneration in- relation to issuing or buying back shares cludes not only a fixed payment of €28 thousand p. a. The Executive Board is not currently authorized to and a fixed payment for work on committees, but also issue or buy back shares. a performance-related component. This component is Other disclosures | Combined Management Report 69 KWS Group | Annual Report 2014/2015 geared toward the company’s long-term development. In keeping with that, members of the Supervisory Board receive €400 for each full €0.10 by which the average consolidated annual earnings per share be- fore minority interests for the past three fiscal years, starting with the fiscal year for which the compensa- tion is granted and calculated backward, exceeds the amount of €4.00. The performance-related payment is limited to the amount of the fixed payment. Supervisory Board compensation in € Dr. Andreas J. Büchting 1 Dr. Arend Oetker 2 Fixed 84,000.00 42,000.00 Work on committees Performance- related 2014/2015 Total Previous year Total 0.00 0.00 84,000.00 168,000.00 168,000.00 42,000.00 84,000.00 Hubertus von Baumbach 3 28,000.00 25,000.00 28,000.00 81,000.00 Jürgen Bolduan 28,000.00 10,000.00 28,000.00 66,000.00 Cathrina Claas-Mühlhäuser 28,000.00 5,000.00 28,000.00 61,000.00 Dr. Berthold Niehoff 28,000.00 0.00 28,000.00 56,000.00 84,000.00 81,000.00 66,000.00 61,000.00 56,000.00 238,000.00 40,000.00 238,000.00 516,000.00 516,000.00 1 Chairman 2 Deputy Chairman 3 Chairman of the Audit Committee The Chairman of the Supervisory Board receives three times and his or her deputy one-and-a-half Compensation for members of the times the fixed compensation of an ordinary mem- Executive Board ber. There is currently no extra compensation for The compensation of members of the Executive Board them for work on committees. The Chairman of the was set by the Supervisory Board and approved by the Audit Committee receives €25 thousand p. a. Or- Annual Shareholders’ Meeting. It is based on the size dinary members of the Supervisory Board receive and activity of the company, its economic and financial €5 thousand p. a. for their work on the Committee situation and the level and structure of compensa- for Executive Board Affairs and €10 thousand p. a. tion for managing board members at comparable for their work on the Audit Committee. The mem- companies. bers of the Supervisory Board are reimbursed for all expenses – including value-added tax – that they The “total compensation” of the Executive Board incur while carrying out the duties of their position. comprises five components: The compensation for the Supervisory Board in the 1. A basic fixed annual salary year under review was unchanged over the previ- 2. A variable payment in the form of a ous year. Total compensation was €516 thousand performance-related bonus exclusive of value-added tax. In all, 46% (46%) or 3. A variable payment in the form of a long-term €238 (238) thousand of the total compensation is incentive (LTI) based on the KWS stock price performance-related. 4. Any special payments 5. Other remuneration and pension awards. 70 Combined Management Report | Other disclosures Annual Report 2014/2015 | KWS Group The total compensation of every member of the There has also been a stock-based bonus system in- Executive Board is limited individually to an overall tended to act as a long-term incentive since fiscal year amount that can be achieved. 2010/2011. Every member of the Executive Board is obligated to invest a freely selectable amount ranging Additional payments for any duties performed in between at least 20% and at most 50% of the gross subsidiaries and associated companies are offset performance-related bonus payment in shares of against the variable payment (performance-related KWS SAAT SE. The long-term incentive (LTI) is paid in bonus). This – including the other remuneration – is the form of cash compensation after a holding period limited to an amount of €500 thousand or, in the case of five years. This payment is calculated on the basis of Dr. Peter Hofmann, to €300 thousand per fiscal of the share’s performance over the holding period year. If sustainable average net incomes of more than and on the average return on sales (ROS, based on €100 million in each year are generated in two succes- segment reporting), measured as the ratio of operat- sive years, the upper limit for the bonus is increased to ing income to net sales. For persons with contracts as €600 thousand for each Executive Board member as of July 1, 2014, the LTI payment is limited to a maxi- of the following fiscal year. The increase in the upper mum of 1.5 times (2 times for Dr. Hagen Duenbostel) limit for the bonus does not yet apply to the Executive of the capital used to acquire the shares. Due to his Board member Dr. Peter Hofmann. leaving the Executive Board, Philip von dem Bussche The basic annual salary in the year under review for the last time in January 2015. Philip von dem Bussche until he left at the end of 2014 was still €216 thousand, that for the Executive Additional special payments were not granted to Board members Dr. Hagen Duenbostel, Dr. Leon the members of the Executive Board in the past took part in the LTI program by acquiring shares for Broers and Eva Kienle was €300 thousand, and that fiscal year. for Dr. Peter Hofmann was €250 thousand. New regu- lations on the compensation for Dr. Peter Hofmann Apart from these salaries, there is also non-monetary have been agreed on as of fiscal 2015/2016 and will compensation, such as a company car or a phone, as raise his basic salary to the level of the other Executive fringe benefits. There are also accident insurance pol- Board members. Consequently, the limit on his bonus icies for the members of the Executive Board. Pension and total compensation will be adjusted to €500 thou- obligations are granted both in the form of a direct sand and €1,247 thousand respectively per fiscal year. obligation to provide benefits and a defined contribu- The Chief Executive Officer receives an extra “CEO tion plan, with the annual anticipated pensions ranging bonus” of 25% on top of the basic annual salary. The at present between €13 thousand and €130 thousand. basic compensation is paid as a monthly salary. In fiscal 2014/2015, €279 (108) thousand was paid to a provident fund backed by a guarantee for pension The variable payment for Executive Board members commitments to members of the Executive Board. depends on the Company’s performance over three €143 (115) thousand was allocated to the pension pro- years. It is calculated on the basis of a linear percent- visions in accordance with IAS 19. Pension provisions age of the average net income of the KWS Group for totaling €960 (588) thousand were formed for the the past three fiscal years. members of the Executive Board of KWS SAAT SE. Pension commitments in € 06/30/2015 06/30/2014 Transition from individual commitments to the Executive Board Interest expenses Revaluation effects Dr. Hagen Duenbostel 682,379.00 587,861.00 0.00 17,048.00 77,470.00 Dr. Peter Hofmann 278,114.00 229,766.00 6,663.00 41,685.00 960,493.00 587,861.00 229,766.00 23,711.00 119,155.00 Other disclosures | Combined Management Report 71 KWS Group | Annual Report 2014/2015 The total compensation to be reported for the Execu- salary, including benefits in kind, 44% (54%) by tive Board in accordance with Section 314 (1) No. 6a annual variable components and 22% (18%) by of the German Commercial Code (HGB) in conjunction multi-year variable components. The tables below with German Accounting Standard No. 17 (GAS 17) provide an overview of the total compensation was €4,007 (3,481) thousand in fiscal 2014/2015. granted in the fiscal year on an individualized basis 34% (28%) was accounted for by the basic annual (excluding pension costs). Fiscal year 2014/2015 in € Cash compensation LTI fair value Total LTI Basic com- pensation Other emolu- ments Perfor- mance- related bonus3 Total Grant Cost Philip von dem Bussche1 135,000.00 9,131.94 282,868.06 427,000.00 159,035.30 586,035.30 232,368.96 Dr. Léon Broers 300,000.00 21,902.68 433,588.53 755,491.21 216,196.55 971,687.76 174,081.27 Dr. Hagen Duenbostel 337,500.00 20,350.50 433,588.53 791,439.03 240,839.40 1,032,278.43 229,067.52 Eva Kienle 300,000.00 26,995.92 433,588.53 760,584.45 54,366.70 814,951.15 5,449.04 Dr. Peter Hofmann2 187,499.97 15,905.68 195,114.84 398,520.49 0.00 398,520.49 0.00 1,259,999.97 94,286.72 1,778,748.49 3,133,035.18 670,437.95 3,803,473.13 640,966.79 Fiscal year 2013/2014 in € Cash compensation LTI fair value Total LTI Basic com- pensation Other emolu- ments Perfor- mance- related bonus3 Total Grant Cost Philip von dem Bussche 270,000.00 17,876.82 566,123.18 854,000.00 235,178.36 1,089,178.36 142,335.17 Dr. Léon Broers 216,000.00 21,104.58 512,895.42 750,000.00 186,895.18 936,895.18 98,410.03 Dr. Hagen Duenbostel 216,000.00 19,488.16 514,511.84 750,000.00 187,819.26 937,819.26 137,969.82 Eva Kienle 200,000.00 26,548.49 290,263.21 516,811.70 0.00 516,811.70 0.00 902,000.00 85,018.05 1,883,793.65 2,870,811.70 609,892.80 3,480,704.50 378,715.02 1 Until December 31, 2014 2 Since October 1, 2014 3 Annual variable compensation Compensation of former members of the Executive Board, as incurred in the past fiscal year and in the Board and their surviving dependents amounted to previous year in accordance with the recommen- €1,693 (1,476) thousand, of which €364 (364) thousand dations in Clause 4.2.5 (3) of the German Corporate was non-compete compensation. Pension commit- Governance Code (DCGK) in the version dated ments in accordance with IAS 19 (2011) recognized for June 24, 2014. this group of persons amounted to €7,131 (7,018) thou- sand as of June 30, 2015. The pension commitments The target compensation, including the agreed lower for three former members of the Executive Board are and upper limits, is shown under “Award”. The backed by a guarantee. No loans were granted to LTI awards are assessed at the present value at the members of the Executive Board and the Supervisory time of acquisition of the last tranche of shares. The Board in the year under review. details on the receipts show the payments actually made to a member of the Executive Board in fiscal In the tables below, we present the individual awards years 2013/2014 and 2014/2015. and receipts for each member of the Executive 72 Combined Management Report | Other disclosures Annual Report 2014/2015 | KWS Group Executive Board compensation in € Grant Prevoius year 2014/2015 Receipt Prevoius year 2014/2015 min. max. Philip von dem Bussche (Chief Executive Officer until December 31, 2014) Fixed payment Fringe benefits Subtotal1 Annual variable payment (performance-related bonus)3 135,000.00 135,000.00 135,000.00 270,000.00 135,000.00 270,000.00 9,131.94 9,131.94 9,131.94 17,876.82 9,131.94 17,876.82 144,131.94 135,000.00 144,131.94 287,876.82 144,131.94 287,876.82 282,868.06 0.00 282,868.06 566,123.18 282,868.06 566,123.18 Total cash compensation1 427,000.00 135,000.00 427,000.00 854,000.00 427,000.00 854,000.00 Multi-year variable payment Long term incentive 2012/2013 235,178.36 Long term incentive 2013/2014 159,035.30 0.00 424,334.10 Subtotal1 Pension costs 2 586,035.30 135,000.00 851,334.10 1,089,178.36 427,000.00 854,000.00 0.00 0.00 0.00 0.00 0.00 0.00 Total Compensation1 586,035.30 135,000.00 851,334.10 1,089,178.36 427,000.00 854,000.00 Hagen Duenbostel (Chief Executive Officer as of January 1, 2015) Fixed payment Fringe benefits Subtotal1 Annual variable payment (performance-related bonus)3 337,500.00 337,500.00 337,500.00 216,000.00 337,500.00 216,000.00 20,350.50 20,350.50 20,350.50 19,488.16 20,350.50 19,488.16 357,850.50 135,000.00 357,850.50 235,488.16 357,850.50 235,488.16 421,424.46 0.00 479,649.50 514,511.84 433,588.53 514,511.84 Total cash compensation1 779,274.96 135,000.00 837,500.00 750,000.00 791,439.03 750,000.00 Multi-year variable payment Long term incentive 2012/2013 187,819.26 Long term incentive 2013/2014 240,839.40 0.00 642,601.80 Subtotal1 Pension costs 2 1,020,114.36 135,000.00 1,480,101.80 937,819.26 791,439.03 750,000.00 17,048.00 17,048.00 17,048.00 115,076.00 0.00 0.00 Total Compensation1 1,037,162.36 152,048.00 1,765,000.00 1,052,895.26 791,439.03 750,000.00 Léon Broers Fixed payment Fringe benefits Subtotal1 Annual variable payment (performance-related bonus)3 300,000.00 300,000.00 300,000.00 216,000.00 300,000.00 216,000.00 21,902.68 21,902.68 21,902.68 21,104.58 21,902.68 21,104.58 321,902.68 135,000.00 321,902.68 237,104.58 321,902.68 237,104.58 421,424.46 0.00 478,097.32 512,895.42 433,588.53 512,895.42 Total cash compensation1 743,327.14 135,000.00 800,000.00 750,000.00 755,491.21 750,000.00 Multi-year variable payment Long term incentive 2012/2013 186,895.18 Long term incentive 2013/2014 216,196.55 0.00 346,110.21 Subtotal1 Pension costs 2 959,523.69 135,000.00 1,146,110.21 936,895.18 755,491.21 750,000.00 0.00 0.00 0.00 0.00 0.00 0.00 Total Compensation1 959,523.69 135,000.00 1,547,000.00 936,895.18 755,491.21 750,000.00 1 Taking into account the agreed lower and upper limits. 2 In accordance with IAS 19 from commitments for pensions and other pension benefits; this relates to costs for the company, not the actual entitlement or payment. 3 Annual variable compensation. Other disclosures | Combined Management Report 73 KWS Group | Annual Report 2014/2015 Executive Board compensation in € Eva Kienle Fixed payment Fringe benefits Subtotal1 Annual variable payment (performance-related bonus)3 Grant Prevoius year 2014/2015 Receipt Prevoius year 2014/2015 min. max. 300,000.00 300,000.00 300,000.00 200,000.00 300,000.00 200,000.00 26,995.92 26,995.92 26,995.92 26,548.49 26,995.92 26,548.49 326,995.92 135,000.00 326,995.92 226,548.49 326,995.92 226,548.49 421,424.46 0.00 473,004.08 292,272.54 433,588.53 290,263.21 Total cash compensation1 748,420.38 135,000.00 800,000.00 518,821.03 760,584.45 516,811.70 Multi-year variable payment Long term incentive 2012/2013 0.00 Long term incentive 2013/2014 54,366.70 0.00 87,035.94 Subtotal1 Pension costs 2 802,787.08 135,000.00 887,035.94 518,821.03 760,584.45 516,811.70 0.00 0.00 0.00 0.00 0.00 0.00 Total Compensation1 802,787.08 135,000.00 1,247,000.00 518,821.03 760,584.45 516,811.70 Peter Hofmann (since January 10, 2014) Fixed payment Fringe benefits Subtotal1 187,499.97 187,499.97 187,499.97 15,905.68 15,905.68 15,905.68 203,405.65 135,000.00 203,405.65 Annual variable payment (performance-related bonus)3 189,641.01 0.00 209,094.32 Total cash compensation1 393,046.66 135,000.00 412,499.97 Multi-year variable payment Long term incentive 2012/2013 Long term incentive 2013/2014 0.00 0.00 0.00 Subtotal1 Pension costs 2 393,046.66 135,000.00 412,499.97 6,663.00 6,663.00 6,663.00 Total Compensation1 399,709.66 141,663.00 635,250.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 187,499.97 15,905.68 203,405.65 195,114.84 398,520.49 398,520.49 0.00 398,520.49 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1 Taking into account the agreed lower and upper limits. 2 In accordance with IAS 19 from commitments for pensions and other pension benefits; this relates to costs for the company, not the actual entitlement or payment. 3 Annual variable compensation. 74 Combined Management Report | Other disclosures Annual Report 2014/2015 | KWS Group Annual Financial Statements for the KWS Group 2014/2015 76 Statement of comprehensive income 77 Balance sheet 78 Statement of changes in fixed assets 80 Statement of changes in equity 82 Cash flow statement 83 Notes for the KWS Group 2014/2015 88 1. General disclosures 94 2. Disclosures on the annual financial statements 97 3. Segment reporting for the KWS Group 101 4. Notes to the balance sheet 125 5. Notes to the income statement 132 6. Notes to the cash flow statement 132 7. Other notes 135 8. Declaration by legal representatives 136 Auditors’ Report s t n e m e t a t S l i a c n a n F i l a u n n A Statement of comprehensive income in € thousand I. Income statement Net sales Cost of sales Gross profit on sales Selling expenses Research & development expenses General and administrative expenses Other operating income Other operating expenses Operating income Interest and similar income Interest and similar expenses Income from equity-accounted financial assets Other net income from equity investments Net financial income/expenses Results of ordinary activities Taxes Net income for the year II. Other income Revaluation of available-for-sale financial assets Currency translation difference for economically independent foreign units Currency translation difference from equity-accounted financial assets Items that may have to be subsequently reclassified as profit or loss Revaluation of net liabilities/assets from defined benefit plans Items not reclassified as profit or loss Other income after tax III. Comprehensive income (total of I. and II.) Net income after shares of minority interests Share of minority interests Net income for the year Comprehensive income after shares of minority interests Share of minority interests Comprehensive income Earnings per share (in €) 76 Annual Financial Statements | Statement of comprehensive income Note no. 2014/2015 Previous year (20) (21) (22) (23) (24) (27) (12) 986,015 453,498 532,517 188,991 174,627 74,756 87,960 68,686 113,417 1,621 12,401 23,747 3,722 16,689 130,106 46,058 84,048 923,481 429,272 494,209 170,024 149,382 71,866 58,107 42,777 118,267 1,717 14,428 20,208 0 7,497 125,764 45,488 80,276 –172 –161 24,606 –14,915 21,223 45,657 – 8,956 – 8,956 36,701 120,749 82,712 1,336 84,048 120,282 467 120,749 – 4,283 –19,359 – 5,878 – 5,878 – 25,237 55,039 77,124 3,152 80,276 51,992 3,047 55,039 12.53 11.69 Annual Report 2014/2015 | KWS Group Balance sheet Assets in € thousand Intangible assets Property, plant and equipment Equity-accounted financial assets Financial assets Noncurrent tax assets Deferred tax assets Noncurrent assets Inventories Biological assets Trade receivables Securities Cash and cash equivalents Current tax assets Other current financial assets Other current assets Current assets Total assets Equity and Liabilities in € thousand Subscribed capital Capital reserve Retained earnings Minority interest Equity Long-term provisions Long-term borrowings Trade payables Deferred tax liabilities Other noncurrent liabilities Noncurrent liabilities Short-term provisions Short-term borrowings Trade payables Current tax liabilities Other current financial liabilities Other current liabilities Current liabilities Liabilities Note no. 06/30/2015 06/30/2014 (2) (3) (4) (5) (6) (7) (8) (8) (9) (10) (11) (9) (9) (9) 85,661 351,856 153,018 2,465 3,976 54,319 651,295 177,990 12,344 309,665 66,973 41,211 57,549 26,758 11,756 73,877 283,893 126,130 2,700 4,189 47,935 538,724 120,180 12,568 297,780 69,188 53,076 45,265 14,883 13,305 704,246 626,245 1,355,541 1,164,969 Note no. 06/30/2015 06/30/2014 (12) 19,800 5,530 705,720 7,668 738,718 110,641 181,783 1,600 28,095 12,756 19,800 5,530 604,376 8,063 637,769 98,951 113,754 1,469 26,165 12,676 (14) 334,875 253,015 87,355 32,283 59,658 30,111 15,952 56,589 281,948 616,823 74,825 40,086 56,821 35,426 11,617 55,410 274,185 527,200 (15) Total equity and liabilities 1,355,541 1,164,969 Balance sheet | Annual Financial Statements 77 KWS Group | Annual Report 2014/2015 Statement of changes in fixed assets Fiscal year 2014/2015 in € thousand Gross book values Amortization/depreciation Net book values Change in con solidated companies Currency translation Additions Disposals Transfers Balance 06/30/2015 Balance 07/01/2014 Currency Planned Value im translation additions pairments Disposals Transfers – 2,819 0 – 2,819 3,584 21,511 2,610 24,121 4,460 0 4,460 585 0 585 – 399 110,543 0 36,975 – 399 147,518 6,118 26,163 1,744 14,701 284,248 43,411 5,452 48,863 72,244 – 973 10,561 3,905 0 – 973 1,130 0 10,561 8,729 3,905 Balance 07/01/2014 88,375 34,365 122,740 235,426 Balance Balance Balance 06/30/2015 06/30/2015 06/30/2014 56,405 5,452 61,857 80,407 54,138 31,523 85,661 44,964 28,913 73,877 203,841 163,182 173,546 1,193 6,017 23,741 2,582 9,295 211,210 108,178 298 13,563 120,161 91,049 65,368 81,818 28,185 1,441 589 106 0 14,002 20,283 7,454 576 403 – 24,171 90,489 24,483 54,658 1,200 9,153 2 0 58,004 2 32,485 24,481 27,160 28,183 518,975 6,807 12,241 84,189 12,183 401 610,430 235,082 2,628 31,445 10,602 258,574 351,856 283,893 134,523 3,048 779,286 21,223 –13,278 31,100 12,157 –116 52 182 331 25,095 23,136 119,931 25,256 0 0 2 161,411 2,835 922,194 8,393 348 0 123 292,686 1,778 42,006 3,905 11,181 8,393 153,018 126,130 370 2,465 2,700 329,194 593,000 486,600 – 21 0 – 21 – 56 84 – 7 0 21 0 0 0 Gross book values Amortization/depreciation Net book values Patents, industrial property rights and software Goodwill Intangible assets Land and buildings Technical equipment and machinery Operating and office equipment Payments on account Property, plant and equipment Equityaccounted financial assets Financial assets Assets Fiscal year 2013/2014 in € thousand Change in con solidated companies Currency translation Additions Disposals Transfers Balance 06/30/2014 Balance 07/01/2013 Currency Planned Value im translation additions pairments Disposals Transfers 478 0 478 1,640 1,962 7,000 0 0 101 91 0 91 550 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Balance Balance Balance 06/30/2014 06/30/2014 06/30/2013 0 0 0 5 43,411 5,452 48,863 72,244 44,964 28,913 73,877 51,608 31,088 82,696 163,182 158,373 6,993 – 25 6,968 94 0 94 103 0 88,375 34,365 103 122,740 11,179 602 4,200 235,426 8,606 0 8,606 7,459 4,176 2,150 6,326 12,923 2,300 3,225 173,546 100,646 – 974 11,023 1,821 – 696 108,178 65,368 61,324 8,857 28,056 4,741 151 2,075 – 9,603 81,818 28,185 7,792 4,272 690 0 54,658 2 27,160 28,183 25,904 10,178 61,015 7,794 –103 518,975 217,523 – 2,071 26,274 6,643 –1 235,082 283,893 255,779 21,183 1,423 90,589 11,272 95 19,255 12 –12 0 134,523 3,048 779,286 260,140 –1,925 34,880 6,326 6,734 292,685 486,600 460,536 0 0 –1 8,393 126,130 120,490 348 2,700 1,571 30,755 3,302 34,057 65,613 51,262 2 8,393 167 – 35 0 – 35 – 283 – 814 0 0 181 Patents, industrial property rights and software Goodwill Intangible assets Land and buildings Technical equipment and machinery Operating and office equipment Payments on account Property, plant and equipment Equityaccounted financial assets Financial assets Assets Balance 07/01/2013 82,363 34,390 116,753 223,986 – 990 0 – 990 – 3,337 161,970 – 2,272 77,166 10,180 –1,539 – 297 473,302 – 7,445 128,883 1,738 – 4,283 – 6 720,676 –12,724 0 0 0 0 0 0 0 0 0 0 0 78 Annual Financial Statements | Statement of changes in fixed assets Annual Report 2014/2015 | KWS Group Statement of changes in fixed assets Fiscal year 2014/2015 in € thousand Gross book values Amortization/depreciation Net book values Patents, industrial property rights and software Goodwill Intangible assets Land and buildings Technical equipment and machinery Operating and office equipment Payments on account Property, plant and equipment Equityaccounted financial assets Financial assets Assets Fiscal year 2013/2014 in € thousand Patents, industrial property rights and software Goodwill Intangible assets Land and buildings Technical equipment and machinery Operating and office equipment Payments on account Property, plant and equipment Equityaccounted financial assets Financial assets Assets 134,523 3,048 779,286 21,223 –13,278 31,100 12,157 –116 52 182 331 25,095 23,136 119,931 25,256 0 0 2 161,411 2,835 922,194 Balance 07/01/2013 82,363 34,390 116,753 223,986 – 990 0 – 990 – 3,337 0 0 0 0 0 0 0 0 0 0 0 128,883 1,738 – 4,283 – 6 720,676 –12,724 21,183 1,423 90,589 11,272 95 19,255 12 –12 0 134,523 3,048 779,286 Change in con Currency solidated translation companies Additions Disposals Transfers Balance 07/01/2014 88,375 34,365 122,740 235,426 Balance 06/30/2015 Balance 07/01/2014 – 2,819 0 – 2,819 3,584 21,511 2,610 24,121 4,460 0 4,460 585 0 585 – 399 110,543 0 36,975 – 399 147,518 6,118 26,163 1,744 14,701 284,248 43,411 5,452 48,863 72,244 173,546 1,193 6,017 23,741 2,582 9,295 211,210 108,178 298 13,563 81,818 28,185 1,441 589 106 0 14,002 20,283 7,454 576 403 – 24,171 90,489 24,483 54,658 1,200 9,153 2 0 0 518,975 6,807 12,241 84,189 12,183 401 610,430 235,082 2,628 31,445 8,393 348 0 123 0 0 Currency translation Planned additions Value im pairments Disposals Transfers – 973 10,561 3,905 0 – 973 1,130 0 10,561 8,729 0 3,905 0 0 0 0 0 0 0 478 0 478 1,640 1,962 7,000 0 10,602 0 101 292,686 1,778 42,006 3,905 11,181 Balance 06/30/2015 Balance 06/30/2015 Balance 06/30/2014 – 21 0 – 21 – 56 84 – 7 0 21 0 0 0 56,405 5,452 61,857 80,407 54,138 31,523 85,661 44,964 28,913 73,877 203,841 163,182 120,161 91,049 65,368 58,004 2 32,485 24,481 27,160 28,183 258,574 351,856 283,893 8,393 153,018 126,130 370 2,465 2,700 329,194 593,000 486,600 Change in con Currency solidated translation companies Additions Disposals Transfers Gross book values Amortization/depreciation Net book values Balance 06/30/2014 Balance 07/01/2013 Balance 06/30/2014 Balance 06/30/2014 Balance 06/30/2013 Currency translation Planned additions Value im pairments Disposals Transfers 6,993 – 25 6,968 94 0 94 103 0 88,375 34,365 103 122,740 11,179 602 4,200 235,426 30,755 3,302 34,057 65,613 – 35 0 – 35 – 283 8,606 0 8,606 7,459 161,970 – 2,272 12,923 2,300 3,225 173,546 100,646 – 974 11,023 77,166 10,180 –1,539 – 297 8,857 28,056 4,741 151 2,075 – 9,603 81,818 28,185 51,262 2 – 814 0 7,792 0 473,302 – 7,445 61,015 7,794 –103 518,975 217,523 – 2,071 26,274 8,393 167 0 181 0 0 4,176 2,150 6,326 0 0 0 0 0 0 0 91 0 91 550 0 0 0 5 43,411 5,452 48,863 72,244 44,964 28,913 73,877 51,608 31,088 82,696 163,182 158,373 1,821 – 696 108,178 65,368 61,324 4,272 0 690 0 54,658 2 27,160 28,183 25,904 10,178 6,643 –1 235,082 283,893 255,779 0 0 0 0 –1 8,393 126,130 120,490 348 2,700 1,571 292,685 486,600 460,536 260,140 –1,925 34,880 6,326 6,734 Statement of changes in fixed assets | Annual Financial Statements 79 KWS Group | Annual Report 2014/2015 Statement of changes in equity in € thousand Parent company Parent company Minority interest Group equity Subscribed capital Capital reserve Accumu lated group equity from earnings Comprehensive other group income Comprehensive other group income Total Minority interest Comprehensive other group income Total Adjustments from currency translation of equity- accounted financial assets Reserve for available- for-sale financial assets Adjustments from currency translation Balance as at July 1, 2013 19,800 5,530 Dividends paid Net income for the year Other income after tax Total consolidated gains (losses) Change in shares of minority interests Other changes – 7,300 – 7,010 230 –18,492 594 617,883 624,531 – 19,800 77,124 –14,930 – 4,283 77,124 –14,930 – 4,283 –161 –161 –19,559 –265 Balance as at June 30, 2014 19,800 5,530 662,031 – 22,230 –11,293 69 – 24,795 594 629,706 9,088 –1,021 – 4 8,063 Dividends paid Net income for the year Other income after tax Total consolidated gains (losses) Change in shares of minority interests Other changes –19,800 82,712 0 25,463 21,223 82,712 25,463 21,223 –160 –160 0 0 0 862 862 0 Balance as at June 30, 2015 19,800 5,530 724,943 3,233 9,930 – 91 – 33,751 1,456 731,050 10,424 –1,878 – 878 7,668 738,718 Revaluation of defined benefit Other trans- plans actions Revaluation Adjustments of defined from currency translation –1,036 benefit plans – 425 Other trans- actions – 4 33,227 –1,328 3,152 –19,800 77,124 – 25,132 51,992 3,152 – 20,104 – 25,963 – 265 –19,800 82,712 37,570 0 1,336 120,282 1,336 – 5,758 – 5,758 – 545 – 8,956 – 8,956 15 15 –120 –120 545 3,047 55,039 31,762 –1,328 3,152 –105 – 25,418 0 1,336 –869 649,645 – 21,128 80,276 – 25,237 – 45,522 – 265 637,769 –19,800 84,048 36,701 0 0 – 857 – 857 –12 –12 –862 –862 467 120,749 0 0 0 80 Annual Financial Statements | Statement of changes in equity Annual Report 2014/2015 | KWS Group Statement of changes in equity in € thousand Parent company Parent company Minority interest Group equity Subscribed capital Capital reserve Accumu lated group equity from earnings Comprehensive other group income Total Minority interest Comprehensive other group income Total Balance as at July 1, 2013 19,800 5,530 Revaluation of defined benefit plans Other trans- actions –18,492 594 617,883 Comprehensive other group income Adjustments from currency translation of Reserve for equity- available- Adjustments from currency translation – 7,300 accounted financial assets – 7,010 for-sale financial assets 230 –14,930 – 4,283 77,124 –14,930 – 4,283 25,463 21,223 82,712 25,463 21,223 –161 –161 –160 –160 624,531 – 19,800 77,124 –19,559 –265 –19,800 82,712 0 0 0 Dividends paid Net income for the year Other income after tax Total consolidated gains (losses) Change in shares of minority interests Other changes Dividends paid Net income for the year Other income after tax Total consolidated gains (losses) Change in shares of minority interests Other changes Balance as at June 30, 2014 19,800 5,530 662,031 – 22,230 –11,293 69 – 24,795 594 629,706 9,088 –1,021 Balance as at June 30, 2015 19,800 5,530 724,943 3,233 9,930 – 91 – 33,751 1,456 731,050 10,424 –1,878 – 8,956 – 8,956 –19,800 82,712 37,570 0 1,336 120,282 1,336 – 857 – 857 0 862 862 0 0 0 0 Adjustments from currency translation Revaluation of defined benefit plans –1,036 – 425 Other trans- actions – 4 33,227 –1,328 3,152 –19,800 77,124 – 25,132 51,992 3,152 – 20,104 – 25,963 – 265 15 15 –120 –120 545 – 5,758 – 5,758 – 545 31,762 –1,328 3,152 –105 649,645 – 21,128 80,276 – 25,237 3,047 55,039 – 25,418 – 4 8,063 0 1,336 –869 –12 –12 – 45,522 – 265 637,769 –19,800 84,048 36,701 467 120,749 –862 –862 0 0 – 878 7,668 738,718 Statement of changes in equity | Annual Financial Statements 81 KWS Group | Annual Report 2014/2015 Cash flow statement in € thousand Net income for the year Depreciation/reversal of impairment losses (–) on property, plant and equipment Increase/decrease (–) in long-term provisions Other noncash expenses/income (–) Cash earnings Increase/decrease (–) in short-term provisions Net gain (–)/loss from the disposal of assets Note no. 2014/2015 Previous year 84,048 80,276 45,911 –1,192 – 36,704 92,063 14,027 –160 41,206 1,631 – 38,159 84,954 25,567 – 92 – 72,809 – 62,626 2,841 12,157 48,119 1,741 16,932 11,272 76,007 1,244 Increase (–)/decrease in inventories, trade receivables, and other assets not attributable to investing or financing activities Increase/decrease (–) in trade payables and other liabilities not attributable to investing or financing activities Proceeds and payments (+) from/for equity-accounted companies Net cash from operating activities (1) Proceeds from disposals of property, plant and equipment Payments (–) for capital expenditure on property, plant and equipment – 82,108 – 56,485 Proceeds from disposals of intangible assets Payments (–) for capital expenditure on intangible assets Proceeds from disposals of financial assets Payments (–) for capital expenditure on financial assets Payments (–) for purchase of shares in consolidated subsidiaries and other business units Net cash from investing activities Dividend payments (–) to owners and minority shareholders Cash proceeds from long-term borrowings Cash repayments of long-term borrowings Changes from proceeds (+)/repayments (–) of short-term borrowings Net cash from financing activities Net cash changes in cash and cash equivalents Changes in cash and cash equivalents due to exchange rate, consolidated group, and measurement changes Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 107 – 4,468 229 – 7,535 – 31,727 –123,761 –19,800 103,678 – 30,907 – 4,573 48,398 – 27,244 13,164 122,264 108,184 (2) (3) (4) 2 – 7,071 95 – 874 0 – 63,089 – 66,915 46,265 – 32,902 9,994 – 43,558 – 30,640 – 2,909 155,813 122,264 82 Annual Financial Statements | Cash flow statement Annual Report 2014/2015 | KWS Group Notes for the KWS Group 2014/2015 The KWS Group (KWS Konzern) is a consolidated group as IFRS 11 “Joint Arrangements” supersedes the previous defined in the International Financial Reporting Standards regulations of IAS 31, “Interests in Joint Ventures”, and SIC-13, (IFRS) published by the International Accounting Standards “Jointly Controlled Entities – Non-monetary Contributions by Board (IASB), London, taking into account the interpreta- Venturers”. IFRS 11 governs the financial reporting of joint tions of the International Financial Reporting Interpreta- arrangements and prescribes only the equity method for tions Committee (IFRIC) and in addition the commercial consolidation of joint ventures. Application of IFRS 11 had law regulations to be applied pursuant to Section 315 a (1) significant impacts on the consolidated financial statements of the HGB (German Commercial Code). of the KWS Group. KWS SAAT SE is an international company based in IFRS 12 contains more extensive disclosure requirements Germany and has its headquarters at Grimsehlstrasse 31, in connection with subsidiaries, joint ventures, associated 37574 Einbeck, Germany. companies and unconsolidated structured companies. IAS 27 (2011) and IAS 28 (2011) are subsequent amendments The statements were prepared under the assumption that of the new IFRS 10, IFRS 11 and IFRS 12. the operations of the company will be continued. There are significant changes for the KWS Group in particular The accounting and measurement methods have generally from application of IFRS 11, since for the first time in been retained without change, except for the changes re- fiscal 2014/2015 the consolidated financial statements no sulting from the new accounting standards IAS 27 (2011), longer include the proportionate income, expenses, assets, IAS 28 (2011), IFRS 10, IFRS 11 and IFRS 12. liabilities and cash flows of the joint ventures AGRELIANT Unless otherwise stated, all the figures in the Notes are in INC., Chatham, Canada, and GENECTIVE S.A., Chappes, thousands of euros (€ thousand) and have been rounded in France (as well as SOCIETE DE MARTINVAL S.A. in the accordance with standard commercial practice. previous year). GENETICS LLC., Westfield, U.S., AGRELIANT GENETICS IAS 27 (2011), IAS 28 (2011), IFRS 10, IFRS 11 and These new standards were applied for the first time in com- IFRS 12 – Consolidation pliance with the specific transitional provisions. IFRS 10 “Consolidated Financial Statements” introduces a model where control is the single basis for consolidation of The new standards on consolidation must be applied for the all types of entities. Under the new concept, control exists first time retrospectively. Consequently, the comparative when the following three criteria are cumulatively fulfilled: figures for the previous year have been adjusted accordingly. The potential parent company has power over the potential subsidiary due to voting rights or other rights, it has the right The reconciliation and breakdown of the assets and lia- to variable returns from the subsidiary and it has the ability bilities for all joint ventures (AGRELIANT GENETICS LLC., to use its power to affect the amount of these returns. AGRELIANT GENETICS INC., GENECTIVE S.A. and SOCIE- First-time application of IFRS 10 did not result in any portionate accounting to the equity method in accordance changes to the companies consolidated in the KWS Group. with IAS 8 is as follows for the balance sheets of the pre TE DE MARTINVAL S.A.) as part of the transition from pro- IFRS 10 supersedes the previous regulations of IAS 27 vious years: “Consolidated and Separate Financial Statements” and SIC-12 “Consolidation – Special Purpose Entities”. Notes for the KWS Group 2014/2015 | Annual Financial Statements 83 KWS Group | Annual Report 2014/2015 Changes to IFRS 11 – Balance sheet in € thousand Assets Intangible assets Property, plant and equipment Equity-accounted financial assets Financial assets Noncurrent tax assets Deferred tax assets Noncurrent assets Inventories Biological assets Trade receivables Securities Cash and cash equivalents Current tax assets Other current financial assets Other current assets Current assets Total assets Equity and Liabilities Subscribed capital Capital reserve Retained earnings Minority interest Equity Long-term provisions Long-term borrowings Trade payables Deferred tax liabilities Other noncurrent liabilities Noncurrent liabilities Short-term provisions Short-term borrowings Trade payables Current tax liabilities Other current financial liabilities Other current liabilities Current liabilities Liabilities 06/30/2014 (adjusted) Adjustment (application of IFRS 11) 06/30/2014 (before adjustment) 07/01/2013 (adjusted) Adjustment (application of IFRS 11) 07/01/2013 (before adjustment) 73,877 283,893 – 25,926 – 38,054 99,803 321,947 82,696 255,779 –19,170 – 31,844 126,130 126,130 0 121,475 121,475 2,700 4,189 47,935 538,724 120,180 12,568 297,780 69,188 53,076 45,265 14,883 13,305 – 74 0 –121 61,955 – 60,240 0 – 63,796 – 7,524 – 25,185 – 344 – 998 –1,728 2,774 4,189 48,056 476,769 180,420 12,568 361,576 76,712 78,261 45,609 15,881 15,033 4,014 5,719 37,133 506,816 102,800 11,316 288,507 95,345 60,468 24,385 25,871 11,633 – 3,291 0 – 7,816 59,354 – 30,336 0 – 71,360 – 5,533 – 41,049 0 – 716 –1,902 101,866 287,623 0 7,305 5,719 44,949 447,462 133,136 11,316 359,867 100,878 101,517 24,385 26,587 13,535 626,245 –159,815 786,060 620,325 –150,896 771,221 1,164,969 – 97,860 1,262,829 1,127,141 – 91,542 1,218,683 19,800 5,530 604,376 8,063 637,769 98,951 113,754 1,469 26,165 12,676 253,015 74,825 40,086 56,821 35,426 11,617 55,410 274,185 527,200 0 0 0 –10 –10 – 683 0 –1 –167 – 288 –1,139 – 57,016 –13,271 – 24,290 – 41 – 574 –1,519 – 96,711 – 97,850 19,800 5,530 604,376 8,073 637,779 99,634 113,754 1,470 26,332 12,964 254,154 131,841 53,357 81,111 35,467 12,191 56,929 19,800 5,530 592,553 31,762 649,645 84,262 98,461 1,697 29,530 9,076 223,026 79,252 26,161 63,930 31,930 11,833 41,364 370,896 625,050 254,470 477,496 0 0 0 0 0 – 6,127 1 0 –165 1 – 6,290 – 52,098 – 7,098 –18,816 1 0 – 7,241 – 85,252 – 91,542 19,800 5,530 592,553 31,762 649,645 90,389 98,460 1,697 29,695 9,075 229,316 131,350 33,259 82,746 31,929 11,833 48,605 339,722 569,038 Total equity and liabilities 1,164,969 – 97,860 1,262,829 1,127,141 – 91,542 1,218,683 84 Annual Financial Statements | Notes for the KWS Group 2014/2015 Annual Report 2014/2015 | KWS Group The statement of comprehensive income for fiscal year 2013/2014 and reconciliation of it pursuant to first-time application of IFRS 11 can be seen from the table below: Statement of comprehensive income in € thousand I. Income statement Net sales Cost of sales Gross profit on sales Selling expenses Research & development expenses General and administrative expenses Other operating income Other operating expenses Operating income Interest and similar income Interest and similar expenses Income from equity-accounted financial assets Other net income from equity investments Net financial income/expenses Results of ordinary activities Taxes Net income for the year II. Other comprehensive income Revaluation of available-for-sale financial assets Currency translation difference for economically independent foreign units Currency translation difference from equity-accounted financial assets Items that may have to be subsequently reclassified as profit or loss Revaluation of net liabilities/assets from defined benefit plans Items not reclassified as profit or loss Other comprehensive income after tax III. Comprehensive income (total of I. and II.) Net income for the year Net income after shares of minority interests Share of minority interests Comprehensive income Comprehensive income after shares of minority interests Share of minority interests Earnings per share (in €) 2013/2014 (adjusted) Adjustment (application of IFRS 11) 2013/2014 (before adjustment) 923,481 429,272 494,209 170,024 149,382 71,866 58,107 42,777 118,267 1,717 14,428 20,208 0 7,497 125,764 45,488 80,276 – 254,526 –185,256 – 69,270 – 33,928 561 – 4,875 – 2,565 – 13,428 – 20,165 – 193 – 40 20,208 – 7 20,048 –117 –107 –10 1,178,007 614,528 563,479 203,952 148,821 76,741 60,672 56,205 138,432 1,910 14,468 0 7 – 12,551 125,881 45,595 80,286 –161 0 –161 –14,915 4,283 –19,198 – 4,283 – 4,283 0 –19,359 – 5,878 – 5,878 – 25,237 55,039 80,276 77,124 3,152 55,039 51,992 3,047 0 0 0 0 – 10 – 10 0 –10 –10 0 –10 –19,359 – 5,878 – 5,878 – 25,237 55,049 80,286 77,124 3,162 55,049 51,992 3,057 11.69 0.00 11.69 Notes for the KWS Group 2014/2015 | Annual Financial Statements 85 KWS Group | Annual Report 2014/2015 In addition, the way in which amortization of and impairment thousand and research & development costs increased by losses on intangible assets acquired as part of business €1,136 thousand. The effects of the change in presentation combinations are presented in the income statement has are summarized in the table relating to the adjustments pur- changed. In previous periods they were carried as other suant to first-time application of IFRS 11. This change in pre- operating expenses. In the current fiscal year, they are sentation did not have any impact on balance sheet items. allocated to the relevant function costs. The figures for the previous year have been adjusted accordingly. For the pre- The table below presents reconciliation of the cash flow vious year, that means that other operating expenses fell statement for the previous year pursuant to first-time by €9,442 thousand, selling expenses increased by €8,306 application of IFRS 11: Cash flow statement in € thousand Net income for the year Depreciation/reversal of impairment losses (–) on property, plant and equipment Increase/decrease (–) in long-term provisions Other noncash expenses/income (–) Cash earnings Increase/decrease (–) in short-term provisions Net gain (–)/loss from the disposal of assets Increase (–)/decrease in inventories, trade receivables, and other assets not attributable to investing or financing activities Increase/decrease (–) in trade payables and other liabilities not attributable to investing or financing activities Proceeds and payments (+) from/for equity-accounted companies Net cash from operating activities Proceeds from disposals of property, plant and equipment 2013/2014 (adjusted) 80,276 Adjustment (application of IFRS 11) 2013/2014 (before ad justment) –10 80,286 41,206 1,631 – 38,159 84,954 25,567 –92 – 4,586 208 – 21,059 – 25,446 4,936 54 45,792 1,423 –17,100 110,400 20,631 –146 – 62,626 28,255 – 90,881 16,932 11,272 76,007 1,244 –4,082 11,272 14,989 –117 9,976 0 1,460 –14 1,027 12,332 0 –12,036 1 0 –12,035 15,286 –1,413 – 46,582 – 32,709 21,014 0 61,018 1,361 – 66,461 2 – 8,531 109 –1,901 – 75,421 – 66,915 58,301 – 32,903 9,994 – 31,523 – 45,926 –1,496 202,395 154,973 Payments (–) for capital expenditure on property, plant and equipment – 56,485 Proceeds from disposals of intangible assets Payments (–) for capital expenditure on intangible assets Proceeds from disposals of financial assets Payments (–) for capital expenditure on financial assets Net cash from investing activities Dividend payments (–) to owners and minority shareholders Cash proceeds from long-term borrowings Cash repayments of long-term borrowings Changes from proceeds (+)/repayments (–) of short-term borrowings Net cash from financing activities Net cash changes in cash and cash equivalents Changes in cash and cash equivalents due to exchange rate, consolidated group, and measurement changes Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 2 – 7,071 95 – 874 – 63,089 – 66,915 46,265 – 32,902 9,994 – 43,558 – 30,640 – 2,909 155,813 122,264 86 Annual Financial Statements | Notes for the KWS Group 2014/2015 Annual Report 2014/2015 | KWS Group Use is made of the exemption specified in IFRS 11.C1B in The new standards and interpretations to be applied did not conjunction with IAS 8.28. result in any significant impact. In addition, the following standards had to be applied for the The following standards and interpretations, or revisions of first time in fiscal year 2014/2015: standards or interpretations, were not applied in the year under review, since they have not yet been adopted by the ■■ Amendments to IAS 32 – Financial Instruments: Presenta- EU or application of them for fiscal 2014/2015 was not yet tion: Offsetting Financial Assets and Financial Liabilities mandatory: ■■ Amendments to IAS 36 – Impairment of Assets: Recover- able Amount Disclosures for Non-Financial Assets ■■ Amendments to IAS 39 – Financial Instruments: Recognition and Measurement: Novation of Derivatives and Continuation of Hedge Accounting ■■ IFRIC 21 – Levies Financial reporting standards and interpretations Mandatory firsttime application Amendments to IAS 19 (2011) – Employee Benefits: Employee Contributions In fiscal year 2015/2016 Annual Improvements to the International Financial Reporting Standards (2010 – 2012 cycle) Annual Improvements to the International Financial Reporting Standards (2011 – 2013 cycle) IFRS 14 – Regulatory Deferral Accounts Amendments to IFRS 11 – Joint Arrangements: Accounting for Acquisitions of Interests in Joint Operations In fiscal year 2015/2016 In fiscal year 2015/2016 At the earliest in fiscal year 2016/2017 At the earliest in fiscal year 2016/2017 Amendments to IAS 16 and IAS 38 – Property, Plant and Equipment and Intangible Assets: Clarification of Acceptable Methods of Depreciation and Amortization At the earliest in fiscal year 2016/2017 Amendments to IAS 16 and IAS 41 – Property, Plant and Equipment and Agriculture: Bearer Plants Amendments to IAS 27 – Separate Financial Statements: Equity Method in Separate Financial Statements Amendments to IFRS 10 and IAS 28 – Investments in Associates and Joint Ventures: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture Annual Improvements to the International Financial Reporting Standards (2012 - 2014 cycle) At the earliest in fiscal year 2016/2017 At the earliest in fiscal year 2016/2017 At the earliest in fiscal year 2016/2017 At the earliest in fiscal year 2016/2017 Amendments to IAS 1 – Presentation of Financial Statements: Disclosure Initiative At the earliest in fiscal year 2016/2017 Amendments to IFRS 10, IFRS 12 and IAS 28 – Investment Entities: Applying the Consolidation Exception At the earliest in fiscal year 2016/2017 IFRS 15 – Revenue from Contracts with Customers IFRS 9 – Financial Instruments At the earliest in fiscal year 2017/2018 At the earliest in fiscal year 2018/2019 Notes for the KWS Group 2014/2015 | Annual Financial Statements 87 KWS Group | Annual Report 2014/2015 The impact of the standards and interpretations on the the results of this examination to date, KWS does not expect consolidated financial statements of the KWS Group are any significant effects on the consolidated financial state- currently being examined and determined. On the basis of ments from application of new or amended standards. 1. General disclosures Companies consolidated in the KWS Group According to IAS 36, goodwill is not amortized, but tested for The consolidated financial statements of the KWS Group in- impairment at least once a year (impairment-only approach). clude the single-entity financial statements of KWS SAAT SE Investments in unconsolidated companies are carried at cost. and its subsidiaries in Germany and other countries, as well as joint ventures and associated companies, which are Joint ventures are consolidated using the equity method in carried using the equity method. A company is a subsidiary application of IFRS 11 and IAS 28. The basis for a joint ven- if KWS SAAT SE has existing rights that give it the current ture is a contractual agreement with a third party to manage ability to control its relevant activities. Relevant activities are a joint venture together. In the case of joint ventures, the the activities that significantly affect the company’s returns. parties who exercise joint management have rights to the Control therefore only exists if KWS SAAT SE has the ability net assets of the agreement. to use its power to affect the amount of the variable returns. Control can usually be derived from holding a majority of the In the case of joint ventures measured in accordance voting rights directly or indirectly. Subsidiaries and joint ven- with the equity method, the carrying amount is increased tures that are considered immaterial for the presentation and or reduced annually by the equity capital changes corre- evaluation of the financial position and performance of the sponding to the KWS Group’s share. In the case of first-time Group are not included. Details on the changes in the con- consolidation of equity investments using the equity method, solidated group are provided in Section 2. “Disclosures on differences from first-time consolidation are treated in accor- the annual financial statements – Consolidated group and dance with the principles of full consolidation. The changes in changes in the consolidated group”. the proportionate equity that are recognized in profit or loss Consolidation methods are included, along with impairment of goodwill, under the item “Income from equity-accounted financial assets” in the The single-entity financial statements of the individual net financial income/expenses. subsidiaries included in the consolidated financial state- ments and the single-entity financial statements of the Associated companies in which a stake between 20% and joint ventures and associated companies included using 50% is held are likewise measured using the equity method. the equity method were uniformly prepared on the basis In the year under review, KENFENG – KWS SEEDS CO., of the accounting and measurement methods applied at LTD., Beijing, China, was carried for the first time as an as- KWS SAAT SE; they were audited by independent auditors. sociated company in the consolidated financial statements For fully or proportionately consolidated units acquired be- using the equity method. KWS has a significant influence on fore July 1, 2003, the Group exercised the option allowed by the associated company. IFRS 1 to maintain the consolidation procedures chosen to date. The goodwill reported in the HGB financial statements Subsidiaries are always consolidated if such recognition is as of June 30, 2003, was therefore transferred unchanged at considered material for the fair presentation of the financial its carrying amount to the opening IFRS balance sheet. For position and results of operations of the KWS Group. As acquisitions made after June 30, 2003, capital consolidation part of the elimination of intra-Group balances, borrowings, follows the purchase method by allocating the cost of acqui- receivables, liabilities, and provisions are netted between sition to the Group’s interest in the subsidiary’s remeasured the consolidated companies. Intercompany profits not equity at the time of acquisition. Any excess of interest in realized at Group level are eliminated from intra-Group trans- equity over cost is recognized as an asset, up to the amount actions. Sales, income, and expenses are netted between by which fair value exceeds the carrying amount. Any good- consolidated companies, and intra-Group distributions of will remaining after first-time consolidation is recognized profit are eliminated. under intangible assets. 88 Annual Financial Statements | Notes for the KWS Group 2014/2015 | 1. General disclosures Annual Report 2014/2015 | KWS Group Deferred taxes on consolidation transactions recognized financially, economically, and organizationally independent in income are calculated at the tax rate applicable to the entities are translated into euros using the functional curren- company concerned. These deferred taxes are aggregated cy method and rounded in accordance with standard com- with the deferred taxes recognized in the separate financial mercial practice as follows: statements. Minority interests are recognized in the amount of the year; the imputed percentage of equity in the consolidated ■■ Balance sheet items at the exchange rate on the balance companies. sheet date. ■■ Income statement items at the average exchange rate for Currency translation The following exchange rates were applied in the consoli- Under IAS 21, the financial statements of the consolidated dated financial statements for the main foreign currencies foreign group companies that conduct their business as relative to the euro: 1 EUR/ ARS BRL GBP RUB UAH USD Argentina Brazil UK Russia Ukraine USA Rate on balance sheet date Average rate 06/30/2015 06/30/2014 2014/2015 2013/2014 10.16290 11.10030 10.27994 3.49470 0.71153 2.99440 0.80120 3.20855 0.75716 9.49031 3.11168 0.83282 61.52060 45.82510 59.64182 46.21843 23.54140 16.08685 20.80004 12.69831 1.11840 1.36510 1.19175 1.36030 The difference resulting from the application of annual Accounting policies average rates to the net profit for the period in the income statement is taken directly to equity. According to IAS 21 Consistency of accounting policies exchange differences resulting from loans to foreign The accounting policies are unchanged from the previous subsidiaries are reported in the other comprehensive year, with the exception of the financial reporting standards income and are not recognized in profit or loss. IAS 10 and IFRS 11, which had to be applied for the first time Classification of the statement of comprehensive income All estimates and assessments as part of accounting and The costs for the functions include all directly attributable measurement are continually reviewed; they are based on costs, including other taxes. Research & development historical patterns and expectations about the future regarded expenses are reported separately for reasons of transparency. as reasonable in the particular circumstances. in the year under review. Performance-based government grants are not deducted from the costs to which they relate, but reported gross under other operating income. 1. General disclosures | Notes for the KWS Group 2014/2015 | Annual Financial Statements 89 KWS Group | Annual Report 2014/2015 Recognition of income and expenses Property, plant, and equipment Net sales include sales of products and services, less reve- Property, plant, and equipment is measured at cost less nue reductions. Net sales from the sale of products are re- straight-line depreciation and impairment losses. In addition alized at the time at which the opportunities and risks pass to directly attributable costs, the cost of self-produced plant to the buyer. Net sales from service transactions are recog- or equipment also includes a proportion of the overheads nized at the time at which the outcome of the transaction and depreciation/amortization. can be reliably estimated in accordance with the percentage of completion. Other income, such as interest, royalties and dividends, is recognized in the period it accrues as soon as there is a contractual or legal entitlement to it. Performance-based public grants are carried under the other operating income as part of profit/loss. Buildings Operating equipment and other facilities Technical equipment and machinery Laboratory and research facilities Operating expenses are recognized in the income statement upon the service in question being used or as of the date on Other equipment, operating and office equipment Useful life 10 – 50 years 5 – 25 years 5 – 15 years 5 – 13 years 3 – 15 years which they occur. Intangible assets Low-value assets are fully expensed in the year of purchase; Purchased intangible assets are carried at cost less they are reported as additions and disposals in the year of straight-line amortization and impairment losses. It is neces- purchase in the statement of changes in fixed assets. sary to examine whether the useful life of intangible assets Impairment losses on property, plant, and equipment are is finite or indefinite. Goodwill has an indefinite useful life. recognized according to IAS 36 whenever the recoverable Goodwill and intangible assets with an indefinite useful life amount of the asset is less than its carrying amount. The are not amortized, but tested for impairment at least once a recoverable amount is the higher of the fair value less year. The procedure for the impairment test is explained in costs to sell or the value in use. If the reason for an earlier the notes to the balance sheet. Intangible assets acquired impairment loss on property, plant, and equipment no lon- as part of business combinations are carried separately ger applies, its value is increased to up to the amount that from goodwill if they are separable according to the defini- would have resulted if the impairment loss had not occurred, tion in IAS 38 or result from a contractual or legal right. taking depreciation into account. In accordance with IAS 20, government grants are deducted from the costs of the as- The service life of intangible assets is as follows: set. Any deferred income is not recognized. Breeding material, proprietary rights to varieties and trademarks Other rights Software Distribution rights Financial instruments Useful life Financial instruments are in particular financial assets and financial liabilities. The financial assets consist primarily of 10 years bank balances and cash on hand, trade receivables, other 5 – 10 years receivables and securities. The credit risk mainly comprises 3 – 8 years trade receivables. The amount recognized in the balance 5 – 20 years sheet is net of allowances for receivables expected to be uncollectible, estimated on the basis of historical patterns and the current economic environment. The credit risk on cash and derivative financial instruments is limited because they are kept with banks that have been given a good credit rating by international rating agencies. There is no significant concentration of credit risks, because the risks are spread over a large number of contract partners and customers. The entire credit risk is limited to the respective carrying amount. Comments on the risk management system can be found in the Management Report. 90 Annual Financial Statements | Notes for the KWS Group 2014/2015 | 1. General disclosures Annual Report 2014/2015 | KWS Group Available-for-sale financial assets are carried at fair value if Subsequent measurement of the financial instruments de- that can be reliably measured. Unrealized gains and losses, pends on their classification in one of the following catego- including deferred taxes, are recognized directly in the ries defined in IAS 39: reserve for available-for-sale financial assets under equity. Allowances are recognized immediately through the income ■■ Loans and receivables statement. Financial assets belonging to this category of This category mainly comprises trade receivables, other financial instruments are measured at cost, since there is no receivables, loans and cash, including fixed-income short- active market. The financial assets include shares in uncon- term securities. Loans are measured at cost. Loans that solidated subsidiaries and securities classified as noncur- carry no interest or only low interest are measured at their rent assets. They are subsequently measured at amortized present value. Discernable risks are taken into account by cost. Borrowings are carried at amortized cost. recognition of an impairment loss. After their initial recog- The carrying amount of receivables, fixed-income securities sured at amortized cost using the effective interest meth- and cash is assumed as the fair value due to their short term od, minus impairments. Receivables that carry no interest and the fixed-interest structure of the investments. or only low interest and with a term of more than twelve months are discounted. Necessary value impairments are The financial liabilities comprise in particular trade payables, based on the expected credit risk and are carried in sepa- nition, the other financial assets in this category are mea- borrowings and other liabilities. rate impairment accounts. Receivables are derecognized if they are settled or uncollectible. Other financial assets The fair value of financial liabilities with a long-term fixed in- are derecognized at the time they are disposed of or if terest rate is determined as present values of the payments they have no value. related to the liabilities, using a yield curve applicable on the balance sheet date. ■■ Financial assets at fair value Held-for-trading securities acquired with the intention of Derivative instruments are measured at fair value in accor- being sold in the short term are assigned to this category. dance with IAS 39; they can be assets or liabilities. Com- Derivate financial instruments with a positive market mon derivative financial instruments are essentially used value are also categorized as held for trading, unless they to hedge interest rate and foreign currency risks. The fair are designated hedging instruments in accordance with value of the derivative financial instruments is measured on IAS 39. They are measured at fair value. Changes in value the basis of the market information available on the balance are recognized in income. Securities are derecognized sheet date and using recognized mathematical models, after being sold on the settlement date. such as present value or Black-Scholes, to calculate option values, taking their volatility, remaining maturity and capital ■■ Availableforsale financial assets market interest rates into account. The instruments must This category covers all financial assets that have not also be classified in a level of the fair value hierarchy. been assigned to one of the above categories. In prin- ciple, securities are classed as available for sale, unless Financial instruments in level 1 are measured using quoted a different classification is required due to the fact that prices in active markets for identical assets or liabilities. In they have an explicit purpose. Equity instruments, such level 2, they are measured by directly observable market as shares in (unconsolidated) affiliated companies, which inputs or derived indirectly on the basis of prices for similar are measured at amortized cost, and shares held in listed instruments. Finally, input factors not based on observable companies, are also included in this category. In principle, market data are used to calculate the value of level 3 finan- financial instruments in this category are measured at cial instruments. their fair value in subsequent recognition. The changes to their fair value in subsequent recognition are recognized as unrealized gains and losses directly in equity in the reserve for available-for-sale financial assets. The real- ized gains or losses are not recognized as profit or loss until they are disposed of. If there is objective evidence of permanent impairment on the balance sheet date, the instruments are written down to the lower value. Any sub- sequent decreases in the impairment loss are recognized directly in equity. 1. General disclosures | Notes for the KWS Group 2014/2015 | Annual Financial Statements 91 KWS Group | Annual Report 2014/2015 ■■ Financial liabilities measured at amortized cost Inventories and biological assets All financial liabilities, with the exception of derivative Inventories are measured at the lower of cost or net realizable financial instruments, are measured at amortized cost value less an allowance for obsolescent or slow-moving using the effective interest method. The liabilities are items. In addition to directly attributable costs, the cost of derecognized at the time they are settled or when the rea- sales also includes indirect labor and materials including son why they were formed no longer exists. depreciation under IAS 2. Under IAS 41, biological assets are measured at fair value less the estimated costs to sell. Im- ■■ Financial liabilities at fair value mature biological assets are carried as inventories as of the This category covers derivative financial instruments that time they are harvested. The measurement procedure used is have a negative market value and are categorized in prin- based on standard industry value tables. ciple as held for trading. They are measured at fair value. Changes in value are recognized in income. Derivatives Deferred taxes that are designated hedging instruments in accordance Deferred taxes are calculated on differences between the with IAS 39 are excluded from this provision. IFRS carrying amounts of assets and liabilities and their tax Securities are generally classified as available for sale, which basis. Deferred tax assets are recognized if they result from is why changes in their fair values that require reporting are deductible temporary differences and sufficient taxable profit taken directly to equity. If securities are carried at their fair in future periods is expected. Deferred tax liabilities must be value and have to be recognized in income, changes to the set up for all taxable temporary differences. All deferred taxes fair values are directly included in the net income for the must be assessed individually at each balance sheet date base, and on loss carryforwards; they are reported on a gross period. and must not be discounted. Under IAS 12, deferred taxes are calculated on the basis of the applicable local income tax. The outstanding purchase price obligation for consolidated subsidiaries must be carried at the present value of the Provisions for pensions and other employee benefits anticipated future purchase price payments for minority in- The provisions for pensions and other employee benefits are terests. Changes to the estimates in subsequent years are calculated using actuarial principles in accordance with the recognized in profit or loss. The cost of interest accrued on projected unit credit method. Actuarial gains and losses re- the purchase price obligation is carried in the net financial sulting from revaluation of the net liability must be recognized income/expenses. Derivatives directly in equity in the other income. If there are planned as- sets, they are netted off against the associated obligations. The derivatives do not meet the requirements of IAS 39 to be The provisions for semi-retirement include obligations from designated as a hedging instrument. They are measured at concluded semi-retirement agreements. Payment arrears and their fair value. The changes in their market value are recog- top-up amounts for semi-retirement pay and for the contribu- nized in the income statement. Derivatives are derecognized tions to the statutory pension insurance program are recog- on their day of settlement. nized in measuring them. 92 Annual Financial Statements | Notes for the KWS Group 2014/2015 | 1. General disclosures Annual Report 2014/2015 | KWS Group Other provisions Discretionary decisions and estimates Provisions are set up if current obligations have accrued from The measurement approaches and amounts to be carried past events and it is likely that they will be utilized. In addition, in these IFRS financial statements are partly based on esti- it must be possible to estimate the amount of the anticipated mates and specifically defined specifications. This relates in obligation reliably. particular to: Provisions are measured at their expected amount or most ■■ Determination of the useful life of the depreciable asset likely amount, depending on whether they comprise a large ■■ Definition of measurement assumptions and future number of items or constitute a single obligation. Provisions results in connection with impairment tests, above all for are reviewed regularly and adjusted to reflect new findings capitalized goodwill and in connection with measurement or changes in circumstances. Long-term provisions are dis- of outstanding purchase price obligations for fully consoli- counted taking into account future cost increases and using dated subsidiaries capital market interest rates for matching maturities, insofar ■■ Determination of the net selling price for inventories as the interest effect is material. ■■ Definition of the parameters required for measuring pension provisions Contingent liabilities ■■ Selection of parameters for the model-based measure- The contingent liabilities result from debt obligations where ment of derivatives outflow of the resource is not probable or the level of the ob- ■■ Determination whether tax losses carried forward can be ligation cannot be estimated with sufficient reliability or from used obligations for loan amounts drawn down by third parties as ■■ Determination of the fair value of intangible assets, tan- of the balance sheet date. Borrowing costs gible assets and liabilities acquired as part of a business combination and determination of the service lives of the purchased intangible assets and tangible assets In accordance with IAS 23, borrowing costs are capitalized if ■■ Measurement of other provisions they can be classified as qualifying assets. Despite careful estimates, the actual development may devi- ate from the assumptions. The Executive Board of KWS SAAT SE prepared the consolidated financial statements on October 1, 2015, and released them for distribution to the Supervisory Board. The Super visory Board has the task of examining the consolidated financial statements and declaring whether it approves them. 1. General disclosures | Notes for the KWS Group 2014/2015 | Annual Financial Statements 93 KWS Group | Annual Report 2014/2015 2. Disclosures on the annual financial statements Number of companies including KWS SAAT SE Fully consolidated Equity method Total Domestic Foreign Total Domestic Foreign Total 06/30/2015 06/30/2014 13 0 13 49 4 53 62 4 66 13 0 13 44 8 52 57 8 65 Consolidated group and changes in The remaining shares in the SOCIETE DE MARTINVAL the consolidated group Group were acquired effective September 30, 2014. The The French service company KWS SERVICES MEDITER- French breeding company specializes in breeding and dis- RANEAN S.A.S., Roye, France, was merged with KWS tributing field crops. Apart from cereals, the main revenue FRANCE S.A.R.L., Roye, France, effective July 1, 2014. In driver, its product portfolio also includes sugarbeets, peas, Brazil, the Brazilian company KWS SEMENTES BRASIL oil plants and corn. The main reason for acquiring the 51% PARTICIPACOES LTDA. was renamed KWS SERVICOS stake held by the Momont family is to strengthen competitive E PARTICIPACOES SOUTH AMERICA LTDA. effective cereal breeding programs and expand distribution activities July 1, 2014. In addition, KWS BRASIL PARTICIPACOES in France. Acquisition of the remaining shares in SOCIETE LTDA. was split up and merged with the company RIBER DE MARTINVAL S.A. and the simultaneous sale of the KWS SEMENTES S.A. and KWS MELHORAMENTO LTDA. shares in its subsidiary HAMET S.C.A., Mons-en-Pévèle, The service company KWS SERVICES NORTH AMERICA France, effective September 30, 2014, mean that the re- LLC., Shakopee, U.S., was founded on July 16, 2014. The maining four companies of the SOCIETE DE MARTINVAL company relocated its headquarters from Shakopee to Group must be fully consolidated in the KWS Group’s con- Bloomington in March 2015. KWS PODILLYA T.O.V., Kiev, solidated financial statements as of the time of acquisition. Ukraine, was founded on January 15, 2015. The company’s The 51% stake in the French cereals company and measure- purpose is to acquire and manage land and property. ment of the existing 49% stake at fair value resulted in the BEIJING KWS AGRICULTURE TECHNOLOGY CO. LTD., following fully consolidated assets and liabilities at the time Beijing, China, was founded on March 6, 2015. In addition, of acquisition: our Chinese joint venture KENFENG – KWS SEED CO. LTD., which is carried as an associated company in accordance with the equity method, was awarded its business license by the Chinese authorities on December 15, 2014. 94 Annual Financial Statements | Notes for the KWS Group 2014/2015 | 2. Disclosures on the annual financial statements Annual Report 2014/2015 | KWS Group in € millions Intangible assets Property, plant and equipment Inventories Trade receivables Cash and cash equivalents Other assets Total assets Provisions Liabilities Deferred taxes Total liabilities Net assets 06/30/2014 21.5 12.3 5.2 12.2 6.7 0.1 58.1 0.4 6.5 4.7 11.6 46.4 The acquired property, plant, and equipment was com- As of the time of full consolidation, the SOCIETE DE posed of land and buildings totaling €6.1 million and tech- MARTINVAL Group posted net sales of €11,823 thousand nical equipment and machinery totaling €6.2 million. The and income of € –2,823 thousand before consolidation. If fair value of the equity shares held previously in the joint the SOCIETE DE MARTINVAL Group had been fully consoli- venture was €17,282 thousand. Remeasurement of the shares dated at July 1, 2014, consolidated net sales would have resulted in a gain of €3,722 thousand, which was carried increased by €8,876 thousand and consolidated income under the net financial income/expenses. would have improved by €3,256 thousand. The goodwill of €2.6 million reflects synergy potentials from A total of 62 (57) companies were fully consolidated in the expansion of European wheat business. Trade receivables consolidated financial statements and four (eight) joint ven- totaling €12.2 million were acquired as part of the merger; tures and associated companies were measured using the none has been classified as uncollectible. Deferred taxes equity method at June 30, 2015. have been carried to an amount of €4.7 million. Transaction costs totaling €448 thousand were incurred to acquire the remaining shares and have been recognized under the other operating expenses in the income statement. 2. Disclosures on the annual financial statements | Notes for the KWS Group 2014/2015 | Annual Financial Statements 95 KWS Group | Annual Report 2014/2015 List of shareholdings in accordance with Section 313 HGB (German Commercial Code) Fully consolidated subsidiaries 1 Sugarbeet Corn Cereals Corporate 100% KWS MAIS GMBH 100% KWS LOCHOW GMBH 100% KWS LANDWIRTSCHAFT 100% BETASEED INC. 2 Bloomington, MN, U.S. Einbeck 100% KWS FRANCE S. A.R.L. 100% KWS BENELUX B.V. 5 100% Roye, France DELITZSCH PFLANZENZUCHT GMBH 10 Einbeck 100% O.O.O. KWS RUS 12 Lipezk, Russia Amsterdam, Netherlands 100% KWS SEMENA S.R.O. 5 Bratislava, Slovakia 100% KWS MAIS FRANCE S. A.R.L. 5 Champol, France 100% O.O.O. KWS R&D RUS 11 100% KWS AUSTRIA SAAT GMBH 5 Lipezk, Russia 100% KWS ITALIA S.P.A. Forlì, Italy 100% KWS POLSKA SP.Z O.O. Poznan, Poland Vienna, Austria 100% 100% KWS SJEME D.O.O. 5 Pozega, Croatia KWS OSIVA S.R.O. 5 Velke Mezirici, Czech Republic KWS BULGARIA E.O.O.D. 5 Sofia, Bulgaria 100% KWS SCANDINAVIA A/S 10 100% Guldborgsund, Denmark 100% KWS SEMILLAS IBERICA S.L. 10 Zaratán, Spain 100% SEMILLAS KWS CHILE LTDA. Rancagua, Chile 100% KWS SRBIJA D.O.O. New Belgrade, Serbia 100% KWS SUISSE SA Basle, Switzerland 100% ACH SEEDS INC. 4 100% AGROMAIS GMBH 5 Everswinkel 100% KWS MAGYARORSZÁG KFT. 5 Györ, Hungary 100% KWS SEMINTE S.R.L. 13 Bucharest, Romania 99% KWS ARGENTINA S. A. 5 Balcarce, Argentina 51% RAZES HYBRIDES S. A.R.L. 3 Bloomington, MN, U.S. Alzonne, France 100% KWS MELHORAMENTO E SEMENTES LTDA. 21 Curitiba, Brazil 50% RIBER KWS SEMENTES S. A. 21, 24 Patos de Minas, Brazil 100% KWS PERU S. A.C. 8 Lima, Peru 100% KWS R&D China LTD. 15 Hefei, China 100% BETASEED FRANCE S. A.R.L. 18 Bethune, France 100% KWS UKRAINE T.O.V. 12 Kiev, Ukraine 100% KWS TÜRK TARIM TICARET A.S. 9 Eskisehir, Turkey 100% BETASEED GMBH Frankfurt 100% KWS POTATO B.V. 17 Emmeloord, Netherlands 93% DYNAGRI S. A.R.L. 16 Casablanca, Morocco 100% KWS Podillya T.O.V. 22 Kiev, Ukraine Bergen 100% KWS UK LTD. 7 Thriplow, UK 100% KWS LOCHOW 100% 100% POLSKA SP.Z O.O. 7 Kondratowice, Poland SOCIETE DE MARTINVAL S. A. 7 Mons-en-Pévèle, France MOMONT HENNETTE S. A. 14 Mons-en-Pévèle, France 100% LABOGERM S. A.R.L. 14 Mons-en-Pévèle, France ADRIEN MOMONT S. A.R.L. 14 Mons-en-Pévèle, France 100% GMBH * Einbeck 100% KWS INTERSAAT GMBH Einbeck 100% KWS SEEDS INC. 9 Bloomington, MN, U.S. 100% GLH SEEDS INC. 2 Bloomington, MN, U.S. 100% KWS SAATFINANZ GMBH 100% Einbeck RAGIS KARTOFFELZUCHT- UND HANDELS- GESELLSCHAFT MBH Einbeck 100% KWS KLOSTERGUT WIEBRECHTSHAUSEN GMBH Northeim-Wiebrechtshausen 100% EURO-HYBRID 100% GESELLSCHAFT FÜR GETREIDEZÜCHTUNG MBH Einbeck KWS SERVICOS E PARTICI- PACOES SOUTH AMERICA LTDA. 19 São Paulo, Brazil 100% KWS GATEWAY RESEARCH 100% CENTER LLC. 2 St. Louis, MO, U.S. KWS SERVICES DEUTSCHLAND GMBH Einbeck 100% KWS SERVICES EAST GMBH Vienna, Austria 100% KWS SERVICES NORTH B.V. 100% Rotterdam, Netherlands KWS SERVICES MEDITERRANEAN S.L. Barcelona, Spain 100% KWS SERVICES NORTH AMERICA LLC. Bloomington, MN, U.S. 100% BEIJING KWS AGRICULTURE TECHNOLOGY CO., LTD.15 Beijing, China 100% KWS CEREALS USA LLC. 2 Champagne, IL, U.S. Equity-accounted joint ventures 1 Equity-accounted associated companies 1 Corn 50% AGRELIANT GENETICS LLC. 6 50% GENECTIVE S. A. Chappes, France Corn 49% KENFENG – KWS SEEDS CO., LTD. Beijing, China Westfield, IND, U.S. 50% AGRELIANT GENETICS INC. Chatham, Ontario, Canada Unconsolidated subsidiaries 1 Sugarbeet 65% NOSOMA S.A.R.L. 23 Sahel M'Harza, Morocco 67% VAN RIJN BALCAN S.R.L. 16 Vulcan/Romania Cereals 74% Corporate LOCHOW-PETKUS BELGIUM N.V. 7 Linter, Belgium 100% KANT-HARTWIG & VOGEL GMBH Einbeck 96 Annual Financial Statements | Notes for the KWS Group 2014/2015 | 2. Disclosures on the annual financial statements Annual Report 2014/2015 | KWS Group * Profit and loss transfer agreement 1 The percentages shown for each company relate to the share in that company held within the KWS Group. 2 Subsidiary of KWS SEEDS INC. 3 Subsidiary of KWS FRANCE S.A.R.L. 4 Subsidiary of BETASEED INC. 5 Subsidiary of KWS MAIS GMBH 6 Investee of GLH SEEDS INC. 7 Subsidiary of KWS LOCHOW GMBH 8 Subsidiary of KWS CHILE LTDA. and KWS SERVICOS E PARTICIPACOES SOUTH AMERICA LTDA. 9 Subsidiary of KWS INTERSAAT GMBH and KWS SAAT SE 10 Subsidiary of KWS INTERSAAT GMBH 11 Subsidiary of O.O.O. KWS RUS 12 Subsidiary of EURO-HYBRID GMBH and KWS SAATFINANZ GMBH 13 Subsidiary of KWS MAIS GMBH and KWS SAATFINANZ GMBH 14 Subsidiary of SOCIETE DE MARTINVAL S.A. 15 Subsidiary of EURO-HYBRID GMBH 16 Subsidiary of KWS POTATO B.V. 17 Subsidiary of RAGIS GMBH 18 Subsidiary of BETASEED GMBH 19 Subsidiary of KWS INTERSAAT GMBH and KWS SAATFINANZ GMBH 20 Subsidiary of KWS SERVICOS E PARTICIPACOES SOUTH AMERICA LTDA. and KWS INTERSAAT GMBH 21 Subsidiary of KWS SERVICOS E PARTICIPACOES SOUTH AMERICA LTDA. 22 Subsidiary of KWS UKRAINE T.O.V. 23 Subsidiary of DYNAGRI S.A.R.L. 24 The KWS Group's stake is 50% plus four shares. 3. Segment reporting for the KWS Group In accordance with its internal reporting system, the KWS Group is primarily organized according to the following business segments: Description of segments Corn ■■ Corn ■■ Sugarbeet ■■ Cereals ■■ Corporate KWS MAIS GMBH is the lead company for the Corn Seg- ment. In addition to KWS MAIS GMBH, business activities are conducted by one (one) German company and 15 (15) foreign subsidiaries and three (three) joint ventures of the KWS Group. The production and distribution activities of this segment relate to corn for grain and silage corn, and to Considered a core competency for the KWS Group’s entire oil and field seed. product range, plant breeding, including the related biotech- nology research, is essentially concentrated at the parent Sugarbeet company KWS SAAT SE in Einbeck. The breeding material, The results of the multiplication, processing and distribution including the relevant information and expertise about how activities for sugarbeet seed, as well as our seed potato busi- to use it, is owned by KWS SAAT SE with respect to sugar- ness, are reported under the Sugarbeet Segment. Under the beet and corn and by KWS LOCHOW GMBH with respect leadership of KWS SAAT SE, 18 (17) foreign subsidiaries and to cereals. Product-related R&D costs are carried directly in two (two) subsidiaries in Germany are active in this segment. the product segments Corn, Sugarbeet and Cereals. Cen- trally controlled corporate functions are grouped in the Cor- Cereals porate Segment. The distribution and production of oil and The lead company of this segment, which essentially con- field seed are reported in the Cereals and Corn Segments, cerns the production and distribution of hybrid rye, wheat in keeping with the legal entities currently involved. and barley, as well as oil and field seed, is KWS LOCHOW GMBH with its six (three) foreign subsidiaries and zero (five) joint ventures in France, Great Britain, the U.S. and Poland. 3. Segment reporting for the KWS Group | Notes for the KWS Group 2014/2015 | Annual Financial Statements 97 KWS Group | Annual Report 2014/2015 Corporate The segment net sales, segment income, depreciation Apart from revenue from our farms and services for third and amortization, other noncash items, operating assets, parties, net sales from strategic projects are reported in this operating liabilities and capital expenditure on noncurrent segment. The segment also assumes the costs of all cen- assets by segment have been determined in accordance tral holding functions and expenses for long-term research with the internal operational controlling structure, with the projects that have not yet reached market maturity. joint ventures consolidated proportionately (management It also includes all management services of KWS SAAT SE, been reconciled with the figures in the IFRS consolidated approach). In order to permit better comparability, they have such as holding company and administrative functions, which financial statements. are not directly charged to the product segments or indirectly allocated to them by means of an appropriate cost formula. Segment sales contains both net sales from third parties Segment information (external sales) and net sales between the segments (in- tersegment sales). The prices for intersegment sales are The Executive Board as the main decision-making body determined on an arm’s-length basis. Uniform royalty rates is responsible for allocating resources and assessing the per segment for breeding genetics are used as the basis. earnings strength of the business segments. The segments Technology revenues from genetically modified properties and regions are defined in compliance with the internal (“tech fees”) are paid as a per-unit royalty on the basis of controlling and reporting systems (management approach). the number of units sold, due to their growing competitive The accounting policies used to determine the information importance. for the segments are basically the same as used for the KWS Group. The only exception relates to consolidation The Corporate Segment generates 77.1% (68.7%) of its of the equity-accounted joint ventures that are assigned to sales from the other segments. The sales of this segment the Corn Segment, namely AGRELIANT GENETICS LLC., represent 0.3% (0.4%) of the Group’s external sales. AGRELIANT GENETICS INC. and GENECTIVE S.A (as well as SOCIETE DE MARTINVAL S.A. in the previous year). In The corn segment is the largest contributor of external accordance with the accounting practices we have used sales, accounting for 59.9% (60.7%) of external sales, up to now, they are still included proportionately in internal followed by sugarbeet with 31.0% (29.8%) and cereals with controlling as part of segment reporting. 8.8% (9.1%). in € thousand Segment sales Internal sales External sales Corn Sugarbeet Cereals Corporate Segments acc. to management approach Elimination of equityaccounted joint ventures Segments acc. to consolidated financial statements 2014/2015 754,458 390,646 113,207 18,133 Previous year 714,968 351,488 108,435 15,012 2014/2015 Previous year 2014/2015 16 99 1,939 13,981 46 439 1,095 10,316 754,442 390,547 111,268 4,152 Previous year 714,922 351,049 107,340 4,696 1,276,444 1,189,903 16,035 11,896 1,260,409 1,178,007 – 274,394 – 254,526 986,015 923,481 98 Annual Financial Statements | Notes for the KWS Group 2014/2015 | 3. Segment reporting for the KWS Group Annual Report 2014/2015 | KWS Group in € thousand Corn Sugarbeet Cereals Corporate Segment earnings Previous year 100,859 70,172 17,125 2014/2015 84,184 92,998 12,019 – 51,186 – 49,724 Depreciation and amortization Other noncash items 2014/2015 19,525 14,974 7,284 9,840 Previous year 16,555 16,159 4,351 8,727 2014/2015 – 4,517 15,199 4,143 Previous year 689 7,036 – 3,238 22,150 –16,110 Segments acc. to management approach Elimination of equity-accounted joint ventures Segments acc. to consolidated financial statements 138,015 138,432 51,623 45,792 36,975 –11,623 –24,598 –20,165 –5,712 – 4,586 8,680 362 113,417 118,267 45,911 41,206 45,655 –11,261 Net financial income/expenses 16,689 7,497 Earnings before taxes 130,106 125,764 0 0 0 0 0 0 0 0 The income statements of the consolidated companies are Depreciation and amortization charges of €51,623 (45,792) assigned to the segments by means of profit center alloca- thousand allocated to the segments relate exclusively to tion. Operating income, the most important internal para- intangible assets and property, plant, and equipment. meter and an indicator of the earnings strength in the KWS Group, is used as the segment result. The operating income The other noncash items recognized in the income of each segment is reported as the segment result. The statement relate to noncash changes in the allowances segment results are presented on a consolidated basis and on inventories and receivables, and in provisions. include all directly attributable income and expenses. Items that are not directly attributable are allocated to the segments on the basis of an appropriate formula. in € thousand Operating assets Operating liabilities Corn Sugarbeet Cereals Corporate Segments acc. to management approach Elimination of equity-accounted joint ventures Segments acc. to consolidated financial statements Others 2014/2015 644,909 274,238 120,291 102,719 Previous year 546,753 260,088 74,280 95,193 1,142,157 976,314 321,560 –204,640 –188,016 – 63,698 937,517 418,024 788,298 376,671 2014/2015 Previous year 136,624 151,664 70,233 23,490 91,213 257,862 358,961 616,823 74,992 17,749 67,633 312,038 – 81,990 230,048 297,152 527,200 KWS Group acc. to consolidated financial statements 1,355,541 1,164,969 3. Segment reporting for the KWS Group | Notes for the KWS Group 2014/2015 | Annual Financial Statements 99 KWS Group | Annual Report 2014/2015 The operating assets of the segments are composed of Capital expenditure on assets was increased year on intangible assets, property, plant, and equipment, inven- year by 64.0% to €133,073 (81,165) thousand. Investments tories, biological assets and trade receivables that can be were intensified considerably in the segments Corporate charged directly to the segments or indirectly allocated to (€20,120 thousand; previous year: €13,840 thousand), them by means of an appropriate formula. Cereals (€44,399 thousand; previous year: €6,761 thousand) The operating liabilities attributable to the segments include €18,535 thousand). Investments in the Corn Segment the borrowings reported on the balance sheet, less provi- rose to €44,528 (42,029) thousand. and Sugarbeet (€24,026 thousand; previous year: sions for taxes and the portion of other liabilities that cannot be charged directly to the segments or indirectly allocated to them by means of an appropriate formula. Investments in longterm assets by segment in € thousand Corn Sugarbeet Cereals Corporate Segments acc. to management approach Elimination of equity-accounted joint ventures Segments acc. to consolidated financial statements 2014/2015 Previous year 44,528 24,026 44,399 20,120 133,073 – 8,061 125,012 42,029 18,535 6,761 13,840 81,165 – 13,182 67,983 The capital expenditure in the Cereals Segment includes consolidated financial statements of the KWS Group and thus consolidation-related additions of €28,121 thousand from without proportionate consolidation of the joint ventures. acquisition of the SOCIETE DE MARTINVAL Group. Disclosures by region The external net sales by sales region are broken down on the basis of the country where the customer is based. No The disclosures on the regional composition of net sales, individual customer accounted for more than 10% of total capital expenditure and operating assets have been made in net sales in the current or past fiscal year. accordance with the accounting policies to be applied to the External sales by region in € thousand Germany Europe (excluding Germany) Thereof in France North and South America Thereof in Brazil Thereof in the U.S. Rest of world KWS Group 67.5% (71.5%) of total sales are recorded in Europe (including Germany). 2014/2015 Previous year 223,885 441,526 (107,263) 254,709 (66,316) (164,571) 65,895 986,015 225,149 435,508 (94,921) 205,600 (52,841) (132,889) 57,224 923,481 100 Annual Financial Statements | Notes for the KWS Group 2014/2015 | 3. Segment reporting for the KWS Group Annual Report 2014/2015 | KWS Group Investments in longterm assets by region in € thousand Germany Europe (excluding Germany) Thereof in France North and South America Thereof in Brazil Thereof in the U.S. Rest of world KWS Group 2014/2015 Previous year 33,859 64,630 (44,305) 22,834 (2,871) (17,067) 3,689 125,012 23,396 26,947 (6,515) 15,627 (3,127) (10,126) 2,013 67,983 27.1% (34.4%) of the capital spending was made in Germany. North and South America, 51.7% (39.6%) in Europe (exclud- Of the further capital spending, 18.2% (23.0%) was made in ing Germany) and 3.0% (3.0%) in the rest of the world. Operating assets by region in € thousand Germany Europe (excluding Germany) Thereof in France North and South America Thereof in Brazil Thereof in the U.S. Rest of world KWS Group 06/30/2015 06/30/2014 300,198 343,915 (50,828) 258,872 (96,146) (162,727) 34,532 937,517 248,943 278,784 (42,462) 228,171 (95,492) (107,573) 32,400 788,298 4. Notes to the balance sheet (1) Assets to the variety portfolio of SOCIETE DE MARTINVAL S.A., The statement of changes in fixed assets contains a which totals €15,600 thousand and has a useful life of breakdown of assets summarized in the balance sheet eight years. Amortization of intangible assets amounted to and shows how they changed in 2014/2015. Capital ex- €14,466 (14,932) thousand, of which €3,905 (6,326) thousand penditure on property, plant and equipment and intangible were value impairments. This charge is included in the rele- assets was €125,011 (67,983) thousand. Of that, the acqui- vant function costs, depending on the operational use of the sition of the SOCIETE DE MARTINVAL Group accounts intangible assets. for €36,353 (0) thousand, which have been presented as a change to the consolidated companies. The Combined The goodwill recognized as an asset relates mainly to Management Report describes the significant additions to the Brazilian companies RIBER KWS SEMENTES S.A. – assets. Depreciation and amortization and value impair- €21,686 (21,686) thousand – and KWS MELHORAMENTO E ments amounted to €45,911 (41,206) thousand. SEMENTES LTDA. – €4,115 (4,115) thousand. In the Cereals (2) Intangible assets Segment, the goodwill of SOCIETE DE MARTINVAL is recog- nized to an amount of €2,600 (0) thousand and that of KWS This item includes purchased varieties, rights to varieties UK LTD. to an amount of €1,693 (1,693) thousand. and distribution rights, software licenses for electronic data processing, and goodwill. The current additions of In order to meet the requirements of IFRS 3 in combination €4,460 (6,993) thousand related to software licenses and with IAS 36 and to determine any impairment of goodwill, patents. The consolidated-related additions mainly relate cash-generating units have been defined in line with internal 4. Notes to the balance sheet | Notes for the KWS Group 2014/2015 | Annual Financial Statements 101 KWS Group | Annual Report 2014/2015 reporting guidelines. At the KWS Group, these are generally The impairment tests conducted at the end of fiscal year the legal entities, with the exception of our potato unit, 2014/2015 confirmed that the existing goodwill is not which as a whole represents the cash-generating unit. To impaired. Sensitivity analyses were also carried out for all test for impairment, the carrying amount of each entity is cash-generating units to which goodwill is allocated. In our determined by allocating the assets and liabilities, including opinion, realistic changes in the basic assumptions would attributable goodwill and intangible assets. An impairment not result in the need to recognize an impairment loss at any loss is recognized if the recoverable amount of an entity is cash-generating unit whose goodwill is significant relative to less than its carrying amount. The recoverable amount is the total carrying amount of goodwill. the higher of the fair value less costs to sell and the value in use of a cash-generating unit. The impairment tests to be At KWS POTATO B.V., the impairment test revealed the carried out for fiscal 2014/2015 determine the recoverable need for a write-down, which was reflected in a reduction amount on the basis of the value in use of the respective in the value of its intangible assets by €3,905 thousand; cash-generating unit. €2,237 thousand have been allocated to the research & development costs and €1,668 thousand to the selling ex- The impairment test uses the expected future cash flows on penses, since a number of varieties, customer relationships which the medium-term plans of the companies are based; and industrial property rights were relinquished. This value these plans, which cover a period of four years, have been ap- impairment has to be charged to the Sugarbeet Segment. proved by the Executive Board. They are based on historical Tests provided evidence that all the other goodwill recognized patterns and expectations about future market development. in the consolidated balance sheet and determined for the cash-generating units is not impaired. Possible changes in For the European and American markets, the key the figures reported in the balance sheet result from currency assumptions on which corporate planning is based include translation at the balance sheet date. assumptions about price trends for seed, in addition to the development of market shares and the regulatory framework. The impairment test for KWS POTATO B.V. in the previous Company-internal projections take the assumptions of indus- year revealed the need for a write-down, which was reflected try-specific market analyses and company-related growth by the capitalized goodwill and intangible assets being perspectives into account. reduced by €6,326 thousand. Due to the change in the KWS Group’s debt situation, the (3) Property, plant, and equipment discount rate was derived as the weighted average cost of Capital expenditure amounted to €96,430 (61,015) thousand capital (WACC) in fiscal 2014/2015. The discount rate for the and depreciation amounted to €31,445 (26,274) thousand. cash-generating units is 5.46% after tax. A growth rate of That includes consolidation-related additions of 1.5% (1.5%) has been assumed here beyond the detailed €12,241 thousand from acquisition of the SOCIETE DE planning horizon in order to allow for extrapolation in line with MARTINVAL Group. The Combined Management Report the expected inflation rate. In the previous year, a standard describes the significant capital expenditure. discount rate of 5.1% (after tax) was assumed to calculate present values. 102 Annual Financial Statements | Notes for the KWS Group 2014/2015 | 4. Notes to the balance sheet Annual Report 2014/2015 | KWS Group (4) Equityaccounted financial assets The three joint ventures AGRELIANT GENETICS LLC., AGRELIANT GENETICS INC. and GENECTIVE S.A. are Equityaccounted joint ventures operating units. The main business activity of the two joint The joint ventures AGRELIANT GENETICS LLC., AGRELIANT ventures AGRELIANT GENETICS LLC. and AGRELIANT GENETICS INC. and GENECTIVE S.A., which KWS operates GENETICS INC. is the production and sale of corn and soy- together with its joint venture partner Vilmorin, are recognized bean seed in North America. The main activity of the joint at equity. In the year under review, AGRELIANT GENETICS venture GENECTIVE S.A. is development of its own traits for LLC. was classified as a significant joint venture. From genetically improving crops. the group perspective, AGRELIANT GENETICS INC. and GENECTIVE S.A. were classified as insignificant joint ven- The following disclosures on the joint ventures in accor- tures. This also applied to the 49% stake in the SOCIETE DE dance with IFRS 12.21 (a) and (b) in conjunction with IFRS MARTINVAL Group in the previous year. 12.B12-B13 are only slightly influenced by the insignificant joint ventures. If individual items of the information pre- sented are materially influenced by the insignificant joint ventures, this information is presented separately. Disclosures on equityaccounted joint ventures (with the partner Vilmorin) in € thousand Stake in the joint venture Current assets Thereof cash and cash equivalents Noncurrent assets Current liabilities Thereof current financial liabilities (excluding trade payables and other liabilities and provisions) Noncurrent liabilities Net assets (100%) Group share of net assets (50%) Goodwill Carrying amount for the stake in the joint ventures Net sales Depreciation and amortization Net income for the year Other income Comprehensive income (100%) Comprehensive income (50%) Group share of comprehensive income Dividend payment 06/30/2015 06/30/2014 50% 318,792 (48,494) 122,992 174,974 (17,158) 2,352 264,458 132,229 13,668 145,897 570,236 10,820 44,292 42,932 87,224 43,612 43,612 23,408 50% 305,270 (49,874) 89,899 192,648 (21,886) 1,870 200,651 100,326 13,668 113,994 519,944 7,179 38,262 – 8,552 29,710 14,855 14,855 22,536 4. Notes to the balance sheet | Notes for the KWS Group 2014/2015 | Annual Financial Statements 103 KWS Group | Annual Report 2014/2015 This also applied to the SOCIETE DE MARTINVAL Group in the previous year. Disclosures on insignificant equityaccounted joint ventures (Société de Martinval S.A.) in € thousand Stake in the joint venture Current assets Thereof cash and cash equivalents Noncurrent assets Current liabilities Thereof current financial liabilities (excluding trade payables and other liabilities and provisions) Noncurrent liabilities Net assets (100%) Group share of net assets (49%) Carrying amount for the stake in the joint ventures Net sales Depreciation and amortization Interest income Interest expense Taxes Net income for the year Comprehensive income (100%) Comprehensive income (49%) Group share of comprehensive income Dividend payment 06/30/2014 49% 24,712 (15,859) 11,362 10,944 (4,835) 232 24,898 12,136 12,136 21,520 1,169 143 16 220 2,200 2,200 1,078 1,078 10 104 Annual Financial Statements | Notes for the KWS Group 2014/2015 | 4. Notes to the balance sheet Annual Report 2014/2015 | KWS Group Equityaccounted associated companies The disclosures on insignificant associated companies in In the year under review, this relates to our Chinese joint accordance with IFRS 12.21 (c) in conjunction with IFRS venture KENFENG – KWS SEED CO. LTD., which is included 12.B16 are as follows: in the KWS Group’s consolidated financial statements as an associated company in accordance with the equity method. Disclosures on insignificant equityaccounted associated companies in € thousand 06/30/2015 06/30/2014 Carrying amount for the stake in insignificant associated companies (aggregated) Net income for the year Other comprehensive income Comprehensive income (100%) 7,120 20 – 495 – 475 0 0 0 0 (5) Financial assets (7) Deferred tax assets Investments in unconsolidated subsidiaries totaling €39 Under IAS 12, deferred tax assets are calculated as the (39) thousand and shares in cooperatives and GmbHs that difference between the IFRS balance sheet amount and are of minor significance are reported in principle at their the tax base and on the basis of loss carryforwards. They amortized cost totaling €1,871 (1,936) thousand since the are reported on a gross basis and total €54,319 (47,935) fair value cannot be reliably determined. Listed shares are thousand, of which €6,660 (5,115) thousand will be carried carried at their fair value of €89 (88) thousand. This account forward for the future use of tax losses. also includes other interest-bearing loans totaling €466 (637) thousand. (6) Noncurrent tax assets (8) Inventories and biological assets Inventories increased by €57,586 thousand, or 43.4%, a figure that includes write-downs of the net realizable value This mainly relates to the present value of the corporate totaling €51,244 (48,230) thousand. Immature biological income tax credit balance of the German group compa- assets relate to living plants in the process of growing nies, which was last determined at December 31, 2006, (before harvest). The field inventories of the previous year and has been paid in ten equal annual amounts since have been harvested in full and the fields have been newly September 30, 2008. in € thousand Raw materials and consumables Work in progress Immature biological assets Finished goods tilled in the year under review. Public subsidies of €1,443 (1,455) thousand, for which all the requirements were met at the balance sheet date, were granted for the total area under cultivation of 4,246 (4,326) ha and were recognized in income. Future public subsidies depend on the further de- velopment of European agricultural policy. 06/30/2015 Previous year 18,263 48,921 12,344 110,806 190,334 15,995 38,282 12,568 65,903 132,748 4. Notes to the balance sheet | Notes for the KWS Group 2014/2015 | Annual Financial Statements 105 KWS Group | Annual Report 2014/2015 (9) Current receivables in € thousand Trade receivables Current tax assets Other current financial assets Other current assets Trade receivables were €309,665 thousand following €297,780 thousand in the previous year. This amount in- cludes €3,022 (5,695) thousand in receivables from joint ventures. 06/30/2015 06/30/2014 309,665 297,780 57,549 26,758 11,756 45,265 14,883 13,305 405,728 371,233 in € thousand Balance on 06/30/2015 Of which: neither written down nor overdue on the balance sheet date Carrying amount Of which: not written down on the balance sheet date and overdue in the following time frames 1–90 days 91–180 days 181–360 days > 360 days Of which: written down and not overdue on the balance sheet date Trade receivables 309,665 254,682 45,630 3,442 2,285 0 Other current financial assets Balance on 06/30/2014 26,758 336,423 21,996 5 276,678 45,635 1,108 4,550 1 2,286 134 134 Trade receivables 297,780 264,771 17,642 1,525 3,364 1,257 Other current finan- cial assets 14,883 312,663 14,282 0 0 1 215 279,053 17,642 1,525 3,365 1,472 1,402 0 1,402 3,317 289 3,606 106 Annual Financial Statements | Notes for the KWS Group 2014/2015 | 4. Notes to the balance sheet Annual Report 2014/2015 | KWS Group The already overdue trade receivables that have been partly down and are not overdue will not meet their payment obli- written down amount to €2,224 (5,904) thousand. gations. There are no indications on the balance sheet date that cus- The following allowances have mainly been made for possible tomers who owe trade receivables that have not been written risks of non-payment of trade receivables: in € thousand 2014/2015 2013/2014 07/01 Addition Disposal Reversal 27,393 26,999 7,305 5,999 1,219 747 10,852 4,858 06/30 22,627 27,393 The receivables include an amount of €361 (346) thousand The revenue reserves essentially comprise the net income due after more than one year. generated in the past by the companies included in the (10) Securities consolidated financial statements, minus dividends paid to shareholders. The differences from currency translation, Securities amounting to €66,973 (69,188) thousand relate the reserve for available-for-sale financial assets and the primarily to short-term liabilities securities and fund shares. reserve for revaluation of net liabilities/assets from defined benefit plans are also carried here. (11) Cash and cash equivalents Cash of €41,211 (53,076) thousand consists of balances with Differences from translation of the functional currency of banks and cash on hand. The cash flow statement explains foreign business operations into the currency used by the the change in this item compared with the previous year, group in reporting (euro) are essentially carried in the item together with the change in securities. Adjustments from currency translation. The item Revalu ation (12) Equity of net liabilities/assets from defined benefit plans includes the actuarial gains and losses from pensions and other The fully paid-up subscribed capital of KWS SAAT SE is still employee benefits. €19,800 thousand. The no-par bearer shares are certificated by a global certificate for 6,600,000 shares. The company does not hold any shares of its own. The capital reserves essentially comprise the premium obtained as part of share issues. 4. Notes to the balance sheet | Notes for the KWS Group 2014/2015 | Annual Financial Statements 107 KWS Group | Annual Report 2014/2015 The tax effects on other comprehensive income are as follows: Other comprehensive income in € thousand Items that may have to be subsequently reclassified as profit or loss Revaluation of available-for-sale financial assets Currency translation difference for economically independent foreign units Currency translation difference from equity-accounted financial assets Items not reclassified as profit or loss Revaluation of net liabilities/assets from defined benefit plans Other comprehensive income Before taxes 45,606 – 223 24,606 21,223 –12,945 –12,945 32,661 2014/2015 Previous year Tax effect After taxes Before taxes Tax effect After taxes 51 51 0 0 3,989 3,989 4,040 45,657 –19,407 –172 - 209 24,606 –14,915 21,223 – 8,956 – 8,956 36,701 – 4,283 – 8,232 – 8,232 – 27,639 48 48 0 0 2,354 2,354 2,402 –19,359 –161 –14,915 – 4,283 – 5,878 – 5,878 – 25,237 The objective of KWS’ capital management activities is is ensured by that. Equity increased by €100,949 thousand to pursue the interests of shareholders and employees in to €738,718 (637,769) thousand. This figure includes an accordance with the corporate strategy and earn a rea- increase of €45,829 thousand (previous year: decrease of sonable return on investment. One main goal is to retain €19,198 thousand) in the reserve for currency translation for the trust of investors, lenders and the market so as to foreign subsidiaries and equity-accounted joint ventures strengthen the company’s future business development. and associated companies. Please refer to the statement of KWS’ capital management activities intend to optimize the changes in equity for further effects not recognized in the average cost of capital. Another goal is a balanced mix of income statement. equity and debt capital. Consolidated income (after taxes and minority interests) is €82,712 (77,124) thousand. How- An important indicator in capital management is the equity ever, there was a total dividend payout of €19,800 (19,800) ratio. It was 54.5% (54.7%) at June 30, 2015, and thus at a thousand in December 2014. Adequate internal financing of good and solid level. The capital structure is as follows: further operating business expansion in the long term-term 108 Annual Financial Statements | Notes for the KWS Group 2014/2015 | 4. Notes to the balance sheet Annual Report 2014/2015 | KWS Group Capital structure in € thousand Equity Long-term financial borrowings Other noncurrent liabilties Short-term borrowings Other current liabilties Total capital Share of total capital 54.5% 06/30/2015 738,718 181,783 153,092 32,283 249,665 1,355,541 Share of total capital 54.7% 06/30/2014 637,769 113,754 139,261 40,086 234,099 1,164,969 The focus in selecting financial instruments is on financing (13) Minority interest with matching maturities, which is achieved by controlling The accumulated minority interests in RIBER KWS the maturities. Long-term financial borrowings increased SEMENTES S.A. at the balance sheet date were €5,576 by €68,029 (15,293) thousand. This is mainly due to the (6,078) thousand and are carried under minority interests. increase in long-term financial loans from banks. The disclosures on significant minority interests in accor- dance with IFRS 12.12 in conjunction with IFRS 12.B10 are as follows: Disclosures on subsidiaries with significant minority interests in € thousand Equity Current assets Noncurrent assets Current liabilities Noncurrent liabilities Net sales Profit/loss Other income Comprehensive income Net cash from operating activities Net cash from investing activities Net cash from financing activities RIBER KWS SEMENTES S.A. 06/30/2015 06/30/2014 11,152 69,164 16,259 44,300 29,971 65,804 2,525 – 2,465 60 1,446 – 2,237 2,868 12,155 57,857 20,754 49,883 16,573 51,894 1,085 – 483 602 – 6,405 – 2,866 7,690 4. Notes to the balance sheet | Notes for the KWS Group 2014/2015 | Annual Financial Statements 109 KWS Group | Annual Report 2014/2015 The voting rights of minority interests in RIBER KWS SE- (14) Noncurrent liabilities MENTES S.A. total 49.99% (49.99%). Consequently, the Noncurrent liabilities increased by €81,860 thousand. That share of minority interests in this company’s net income for is mainly attributable to the increase in long-term financial the year is €1,263 (543) thousand. borrowings from banks totaling €68,029 thousand. In addition, KWS ARGENTINA S.A., DYNAGRI S.A.R.L. and RAZES HYBRIDES S.A.R.L. have minority interests, although these are assessed as being insignificant. in € thousand Long-term provisions Long-term borrowings Trade payables Deferred tax liabilities Other noncurrent liabilities 06/30/2015 06/30/2014 110,641 181,783 1,600 28,095 12,756 98,951 113,754 1,469 26,165 12,676 334,875 253,015 The trade payables and other long-term liabilities are due for payment in between one and five (one and five) years. Longterm provisions Pension provisions Tax provisions Other provisions 06/30/2014 89,834 2,018 7,099 98,951 Changes in the consolidated group, currency Addition Consumption Reversal 06/30/2015 – 56 97 –379 –338 16,437 706 871 18,014 4,014 1,429 530 5,973 0 0 13 13 102,201 1,392 7,048 110,641 The pension provisions are based on defined benefit ob- 3.00% (3.00%) annually and abroad by 3.75% (3.75%) annu- ligations, determined by years of service and pensionable ally. An annual increase in pensions of 2.00% (2.00%) is as- compensation. They are measured using the projected unit sumed. The discount rate in Germany was 2.50% compared credit method under IAS 19 (2011), on the basis of assump- with 2.90% the year before and averaged 4.60% abroad fol- tions about future developments. The assumptions in detail lowing 4.40% the previous year. are that wages and salaries in Germany will increase by 110 Annual Financial Statements | Notes for the KWS Group 2014/2015 | 4. Notes to the balance sheet Annual Report 2014/2015 | KWS Group The following mortality tables were used at June 30, 2015: The following benefits are granted from the pension plan: ■■ In Germany: The 2005G mortality table of Klaus Heubeck ■■ An old-age pension at the age of 65 ■■ Abroad: RP-2000 Mortality Table Scale AA ■■ An early retirement pension before the age of 65 – to be eligible, the employee must be at least 55 and the mini- A retirement age of 63 years is imputed for Germany, mum vesting period must be five years whereas a retirement age of 65 years is imputed for the ■■ A pro-rata pension if the employee reaches the minimum U.S. vesting period of five years, but is below 55 Nature and scope of the pension benefits The pension plans are mainly subject to the following risks: In Germany Investment and return The following benefits are provided under a company agree- The present value of the defined benefit obligation from the ment relating to the company retirement pension program: pension plan is calculated using a discount rate defined on the basis of the returns on high-quality fixed-income corpo- ■■ An old-age pension at the age of 65 rate bonds. If the income from the planned assets is below ■■ An early retirement pension before the age of 65, coupled this rate of interest, the result is a shortfall in the plan. The with benefits from the early retirement pension from the corporate bonds and share funds are chosen to ensure risk statutory pension insurance program diversification and managed by an external fund manager. ■■ An invalidity pension for persons who suffer from occu- pational disability or incapacity to work as defined by the Change in interest rates statutory pension insurance program The fall in the returns on corporate bonds and thus the dis- ■■ A widow’s or widower’s pension count rate will result in an increase in the obligations, which is only partly compensated for by a change in the value of For benefit obligations backed by a guarantee by an insurance the planned assets. company toward three former members of the Executive Board, the planned assets of €9,446 (9,275) thousand corre- Life expectancy spond to the present value of the obligation. In accordance The present value of the defined benefit obligation from the with IAS 19 (2011), the pension commitments are netted off plan is calculated on the basis of the best-possible estimate against the corresponding assets (planned assets). using mortality tables. An increase in the life expectancy of the entitled employees results in an increase in the plan Abroad liabilities. The defined benefit obligations abroad mainly relate to pen- sion commitments in the U.S. Share funds and bonds were Wage increases mainly invested in to cover them. All employees who have The present value of the defined benefit obligation from the reached the age of 21 are entitled to benefits. In addition, plan is calculated on the basis of future salaries. Conse- each employee must have worked at least one year and at quently, increases in the salary of the entitled employees least 1,000 working hours to earn an entitlement. results in an increase in the plan liabilities. 4. Notes to the balance sheet | Notes for the KWS Group 2014/2015 | Annual Financial Statements 111 KWS Group | Annual Report 2014/2015 In previous years, KWS countered the usual risks of direct ob- by planned assets, are funded from the operating cash flow ligations by converting the pension obligations from defined and are subject to the familiar measurement risks. benefit to defined contribution plans. As a result, subsequent benefits will be provided by a provident fund backed by a The tables below show the changes in the accrued benefit guarantee. The existing obligations, which are partly covered and planned assets: Changes in accrued benefit entitlements Accrued benefit entitlements from retirement obligations on July 1 Service cost Interest expense Actuarial gains (–)/losses (+) of which due to a change in financial assumptions used for calculation of which due to experience adjustments Pension payments made Exchange rate changes Other changes in value Accrued benefit entitlements from retirement obligations on June 30 Change in planned assets Germany Abroad Total Germany Abroad Total 2014/2015 2013/2014 95,942 13,865 109,807 88,122 11,948 100,070 691 2,713 12,402 12,010 392 – 4,911 689 671 986 747 239 – 678 2,365 510 1,380 3,384 13,388 647 3,003 8,691 1,418 528 1,218 2,065 3,531 9,909 12,757 7,712 1,058 8,770 979 – 4,521 631 – 5,589 2,365 510 160 – 837 18 – 428 1,139 – 5,358 18 – 428 106,837 18,408 125,245 95,942 13,865 109,807 Fair value of the planned assets on July 1 Interest income Income from planned assets excluding amounts already recognized as interest income Pension payments made Exchange rate changes Other changes in value 2014/2015 2013/2014 Germany Abroad Total Germany Abroad 9,275 260 491 – 580 10,698 19,973 603 –47 – 485 2,309 520 863 444 –1,065 2,309 520 9,058 307 490 – 580 9,500 450 1,136 – 388 0 0 Total 18,558 757 1,626 – 968 0 0 Fair value of the planned assets on June 30 9,446 13,598 23,044 9,275 10,698 19,973 112 Annual Financial Statements | Notes for the KWS Group 2014/2015 | 4. Notes to the balance sheet Annual Report 2014/2015 | KWS Group In order to allow reconciliation with the figures in the bal- ance sheet, the accrued benefit must be netted off with the planned assets. Reconciliation with the balance sheet values for pensions Accrued benefit entitlements from retirement obligations on June 30 Fair value of the planned assets on June 30 Balance sheet values on June 30 of which pension provisions of which planned assets Germany Abroad Total Germany Abroad Total 06/30/2015 06/30/2014 106,837 18,408 125,245 95,942 13,865 109,807 9,446 97,391 106,837 9,446 13,598 4,810 18,408 13,598 23,044 102,201 125,245 23,044 9,275 86,667 95,942 9,275 10,698 3,167 13,865 10,698 19,973 89,834 109,807 19,973 The following amounts were recognized in the statement of comprehensive income: Effects on the statement of comprehensive income Service cost Net interest expense (+)/income (–) Amounts recognized in the income statement Gains (–)/losses (+) from revaluation of the planned assets (excluding amounts already recognized as interest income) Actuarial gains (–)/losses (+) due to a change in financial assumptions used for calculation Actuarial gains (–)/losses (+) due to experience adjustments Amounts recognized in other comprehensive income Total (amounts recognized in the statement of comprehensive income) Germany Abroad 691 2,452 3,143 698 68 766 2014/2015 Total 1,389 2,520 Germany Abroad 647 2,697 1,418 77 2013/2014 Total 2,065 2,774 3,909 3,344 1,495 4,839 –491 47 –444 – 490 –1,136 –1,626 12,011 392 747 239 631 979 12,758 7,712 1,007 8,719 160 31 1,139 8,232 11,912 1,033 12,945 8,201 15,055 1,799 16,854 11,545 1,526 13,071 The service cost is recognized in operating income in the respective functional areas by means of an appropriate for- mula. Net interest expenses and income are carried in the interest result. 4. Notes to the balance sheet | Notes for the KWS Group 2014/2015 | Annual Financial Statements 113 KWS Group | Annual Report 2014/2015 The fair value of the planned assets was split over the fol- lowing investment categories: Breakdown of the planned assets by investment category in € thousand 06/30/2015 06/30/2014 Germany Abroad Corporate bonds Equity funds Consumer industry Finance Industry Technology Healthcare Other Cash and cash equivalents Reinsurance policies Planned assets on June 30 9,446 9,446 3,646 9,071 2,010 1,068 698 1,396 1,337 2,562 881 Total 3,646 9,071 881 9,446 Germany Abroad 3,043 7,173 1,722 889 746 1,169 1,040 1,607 482 9,275 9,275 Total 3,043 7,173 482 9,275 13,598 23,044 10,698 19,973 The planned assets abroad relate solely to the U.S. The following sensitivity analysis at June 30, 2015, shows There is no active market for the reinsurance policies in change in the actuarial assumptions. No correlations between Germany. There is an active market for the other planned the individual assumptions were taken into account in this, i.e. assets: the fair value can be derived from their stock market if an assumption varies, the other assumptions were kept con- prices. 82.0% (83.8%) of the corporate bonds and the cash stant. The projected unit credit method used to calculate the and cash equivalents have a AAA rating. balance sheet values was also used in the sensitivity analysis. how the present value of the obligation would change given a Sensitivity analysis in € thousand Discount rate Anticipated annual pay increases Anticipated annual pension increase Life expectancy Effect on obligation in 2014/2015 Effect on obligation in 2013/2014 Change in assumption +/– 100 basis points +/– 50 basis points +/– 25 basis points +/– 1 year Decrease Increase 21,889 –17,286 – 915 991 – 3,848 – 4,489 3,991 4,563 Change in assumption +/– 100 basis points +/– 50 basis points +/– 25 basis points +/– 1 year Decrease Increase 17,602 –13,852 – 508 533 – 2,471 – 3,006 2,578 3,067 114 Annual Financial Statements | Notes for the KWS Group 2014/2015 | 4. Notes to the balance sheet Annual Report 2014/2015 | KWS Group The following undiscounted payments for pensions (with their due dates) are expected in the following years: Anticipated payments for pensions Anticipated payments for pensions in € thousand 2014/2015 in € thousand 2013/2014 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020 Germany Abroad 5,050 4,948 4,909 4,864 4,986 535 594 623 751 756 Total 5,585 5,542 5,532 5,615 5,742 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019 Germany Abroad 4,784 4,681 4,595 4,577 4,566 408 419 436 488 539 Total 5,192 5,100 5,031 5,065 5,105 2020/2021–2024/2025 24,425 4,713 29,138 2019/2020 –2023/2024 23,260 3,224 26,484 The weighted average time at which the pension obligations above and beyond payment of the contributions (defined con- are due is 15.2 (14.9) years in Germany and 16.0 (15.5) years tribution plans). These comprise benefits that are funded sole- abroad. ly by the employer and allowances for conversion of earnings Apart from the above-described pension obligations, there are by employees. other old-age pension systems. However, no provisions have The total pension costs for fiscal 2014/2015 were as follows: to be set up for them, since there are no further obligations Pension costs in € thousand Germany Abroad Cost for defined contribution plans 2,070 1,095 Service cost for the defined benefit obligations Pension costs 691 2,761 698 1,793 2014/2015 2013/2014 Total 3,165 1,389 4,554 Germany Abroad 1,728 849 647 2,375 1,418 2,267 Total 2,577 2,065 4,642 In addition, contributions of €12,947 (11,676) thousand interest of between 1.75% and 2.25%. In addition, the benefit were paid to statutory pension insurance institutions. obligation from salary conversion was backed by a guarantee that exactly matches the present value of the obligation of The costs for defined contribution plans in Germany main- €4,048 (3,709) thousand (defined contribution plan). ly related to the provident fund backed by a guarantee. The contributions to this pension plan were €1,649 (1,330) The long-term financial borrowings include loans from thousand. The return and income from the planned assets banks amounting to €152,534 (79,056) thousand. They depend on the reinsurance policy, which yields guaranteed have remaining maturities through 2017. 4. Notes to the balance sheet | Notes for the KWS Group 2014/2015 | Annual Financial Statements 115 KWS Group | Annual Report 2014/2015 Under IAS 12, deferred tax liabilities are calculated as the €28,095 (26,165) thousand. The composition of the de- difference between the IFRS balance sheet amount and ferred tax liabilities is explained in more detail under (24) the tax base. They are reported on a gross basis and total Taxes. (15) Current liabilities in € thousand Shortterm provisions Current liabilities to banks Current financial liabilities to affiliates Other current financial liabilities Shortterm borrowings Trade payables to affiliates Other trade payables Trade payables Tax liabilities Other current financial liabilities Other current liabilities Shortterm provisions 06/30/2015 06/30/2014 87,355 31,857 308 118 74,825 39,537 301 248 32,283 40,086 1,108 58,550 59,658 30,111 15,952 56,589 129 56,692 56,821 35,426 11,617 55,410 281,948 274,185 in € thousand 06/30/2014 Changes in the con solidated group, currency Addition Con sumption Reversal 06/30/2015 Obligations from sales transactions Obligations from purchase transactions Other obligations 59,577 9,068 6,180 74,825 4,462 70,333 58,000 103 283 3,439 4,648 4,119 2,204 4,848 78,420 64,323 3,220 3,096 99 6,415 73,152 5,395 8,808 87,355 The obligations from sales transactions essentially relate to The tax liabilities of €30,111 (35,426) thousand include provisions for licenses and returns. The obligations from pur- amounts for the year under review and the period not yet chase transactions include provisions for procurement trans- concluded by the external tax audit. actions, such as compensation for breeding areas. The other obligations relate to litigation risks and other provisions that cannot be assigned to the group of sales transactions or the group of purchase transactions. 116 Annual Financial Statements | Notes for the KWS Group 2014/2015 | 4. Notes to the balance sheet Annual Report 2014/2015 | KWS Group (16) Derivative financial instruments in € thousand 06/30/2015 06/30/2014 Currency hedges Interest-rate hedges Commodity hedges Total Nominal volume Carrying amounts Fair value Nominal volume Carrying amounts Fair value 95,003 34,000 148 1,182 –130 0 1,182 –130 0 52,873 54,500 0 129,151 1,052 1,052 107,373 272 26 0 298 272 26 0 298 Of the currency hedges, hedges with a nominal volume of or liabilities in question, the market that maximizes the €89,248 (48,465) thousand have a remaining maturity of amount that would be received to sell the asset or minimizes less than one year and hedges with a nominal volume of the amount that would be paid to transfer the liability, after €5,755 (4,408) thousand have a remaining maturity of be- taking into account transaction costs, is used. These are tween one and five years. Of the interest-rate derivatives, active and accessible markets for identical assets and lia- hedges with a nominal volume of €19,000 (39,500) thousand bilities, where the fair value results from quoted prices that will mature within one year and hedges with a nominal value are observable (level 1 input factors). At the KWS Group, of €15,000 (15,000) thousand will mature in more than five this relates to securities in the category “available-for-sale years. The commodity hedges have remaining maturities of financial assets”, as well as fund shares at banks and other less than one (one) year. financial assets whose price is likewise quoted in active (17) Financial instruments markets. In general, the fair values of financial assets and liabilities The level 2 input factors relate to derivative financial instru- are calculated on the basis of the market data available ments that have been concluded between KWS companies on the balance sheet date and are assigned to one of the and banks. The prices can thus be derived indirectly from three hierarchy levels in accordance with IFRS 13. The active market prices for similar assets and liabilities. The principal market, i.e. the market with the largest volume of level 3 input factors cannot be derived from observable trading and the greatest business activity, is used to calcu- market information. late the fair value. If this market does not exist for the asset 4. Notes to the balance sheet | Notes for the KWS Group 2014/2015 | Annual Financial Statements 117 KWS Group | Annual Report 2014/2015 The carrying amounts and fair values of the financial assets (financial instruments), split into the measurement catego- ries in accordance with IAS 39, are as follows: 06/30/2015 in € thousand Financial assets Financial assets Trade receivables Securities Cash and cash equivalents Other current financial assets of which derivative financial instruments Total 06/30/2014 in € thousand Financial assets Financial assets Trade receivables Securities Cash and cash equivalents Other current financial assets of which derivative financial instruments Total Fair Values Financial instruments Carrying amounts Loans and receivables Financial assets held for trading Available forsale financial assets 2,465 309,665 66,973 41,211 26,758 (3,002) 447,072 0 309,665 0 41,211 23,756 (0) 374,632 0 0 0 0 3,002 (3,002) 3,002 2,465 0 66,973 0 0 (0) 69,438 Total carrying amount 2,465 309,665 66,973 41,211 26,758 (3,002) 447,072 Fair Values Financial instruments Carrying amounts Loans and receivables Financial assets held for trading Available forsale financial assets 2,700 297,780 69,188 53,076 14,883 (879) 437,627 0 297,780 0 53,076 14,004 (0) 364,860 0 0 0 0 879 (879) 879 2,700 0 69,188 0 0 (0) 71,888 Total carrying amount 2,700 297,780 69,188 53,076 14,883 (879) 437,627 118 Annual Financial Statements | Notes for the KWS Group 2014/2015 | 4. Notes to the balance sheet Annual Report 2014/2015 | KWS Group The fair value of financial assets (equity instruments) mea- The fair values of securities classified as current assets are sured at amortized costs cannot be reliably determined based on the price for them quoted on active markets (level 1). because there are no active markets. These assets relate The fair value of derivative financial instruments is the pres- to shares in unconsolidated subsidiaries and associated ent values of the payments related to these balance sheet companies. It is assumed that the carrying amounts are items. These instruments are mainly forward exchange the same as the fair values. In addition, the financial assets deals. They are measured on the basis of quoted exchange include securities classified as noncurrent assets, whose rates and yield curves available from the market data and fair value is measured by their prices on the stock market allowing for counterparty risks (level 2). (level 1). The fair value of trade receivables, other current financial ties (financial instruments), split into the measurement cate- assets and cash and cash equivalents is the same as the gories in accordance with IAS 39, are as follows: The carrying amounts and fair values of the financial liabili- carrying amounts as a result of the short time in which these instruments are due. 06/30/2015 in € thousand Fair Values Financial instruments Carrying amounts Financial liabilities measured at amortized cost Financial liabilities held for trading Disclosure in acc. with IFRS 7 Total carrying amount Financial liabilities Long-term borrowings of which outstanding purchase price obligations for consolidated subsidiaries Long-term trade payables Short-term borrowings Short-term trade payables Other current financial liabilities of which derivative financial instruments 183,428 152,534 (29,249) 1,600 32,283 59,658 15,952 (1,949) (0) 1,600 32,283 59,658 14,003 (0) Total 292,921 260,078 0 (0) 0 0 0 1,949 (1,949) 1,949 29,249 181,783 (29,249) (29,249) 0 0 0 0 (0) 1,600 32,283 59,658 15,952 (1,949) 29,249 291,276 4. Notes to the balance sheet | Notes for the KWS Group 2014/2015 | Annual Financial Statements 119 KWS Group | Annual Report 2014/2015 06/30/2014 in € thousand Fair Values Financial instruments Carrying amounts Financial liabilities measured at amortized cost Financial liabilities held for trading Disclosure in acc. with IFRS 7 Total carrying amount Financial liabilities Long-term borrowings of which outstanding purchase price obliga- tions for consolidated subsidiaries Long-term trade payables Short-term borrowings Short-term trade payables Other current financial liabilities of which derivative financial instruments 114,224 79,056 (34,698) 1,469 40,086 56,821 11,617 (581) (0) 1,469 40,086 56,821 11,036 (0) Total 224,217 188,468 0 (0) 0 0 0 581 (581) 581 34,698 113,754 (34,698) (34,698) 0 0 0 0 (0) 1,469 40,086 56,821 11,617 (581) 34,698 223,747 The fair value of long-term borrowings was calculated on the Due to the mainly short times in which trade payables and basis of discounted cash flows. To enable that, interest rates other financial liabilities (excluding derivatives) are due by, it is for comparable transactions and yield curves were used assumed that their carrying amounts are equal to the fair value. (level 2). The outstanding purchase price obligation for consolidated instruments has been presented above under the comments The method of calculating the fair values of derivative financial subsidiaries must be carried at the present value of the on financial assets. anticipated future purchase price payments for minority interests. This is derived from the anticipated operating income None of the reported financial instruments will be held to of the subsidiary and a risk-adjusted discount rate (level 3). maturity. 120 Annual Financial Statements | Notes for the KWS Group 2014/2015 | 4. Notes to the balance sheet Annual Report 2014/2015 | KWS Group The table below shows the financial assets and liabilities measured at fair value: in € thousand 06/30/2015 06/30/2014 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Derivative financial instruments not part of a hedge under IAS 39 Available-for-sale financial assets Financial assets Derivative financial instruments not part of a hedge under IAS 39 Financial liabilities 0 3,002 69,104 0 69,104 3,002 0 0 1,949 1,949 0 0 0 0 0 3,002 0 69,104 71,443 72,106 71,443 1,949 1,949 0 0 879 0 879 581 581 0 0 0 0 0 879 71,443 72,322 581 581 The derivative financial instruments mainly consists of for- The table below presents the net gains/losses carried in the ward exchange deals, whose fair value is derived from the income statement for financial instruments in each measure- forward exchange rates and the use of option pricing models ment category: (level 2). in € thousand Available-for-sale financial assets Financial assets held for trading Loans and receivables Financial liabilities measured at amortized cost Financial liabilities held for trading 06/30/2015 06/30/2014 141 2,141 3,854 –10,644 –1,471 119 81 –1,080 –10,688 314 4. Notes to the balance sheet | Notes for the KWS Group 2014/2015 | Annual Financial Statements 121 KWS Group | Annual Report 2014/2015 The net income from available-for-sale financial assets financial transactions are controlled centrally by Corporate essentially includes income from equity investments in Finance/Treasury. In order to minimize risks, financial trans- cooperatives. actions are exclusively conducted within defined limits with banks and partners who always have an investment grade. The net gains from financial assets held for trading and Compliance with the risk limits is constantly monitored. The financial liabilities held for trading solely comprise changes limits are adjusted depending on the credit volume only sub- in the market value of derivative financial instruments. ject to the approval of the regional or divisional management and the Executive Board. The net gain/loss from loans and receivables mainly includes effects from changes in the allowances for impair- Liquidity is managed in the euro zone by the central Treasury ment. unit using a cash pooling system. Liquidity requirements are generally determined by means of cash planning and The net losses from financial liabilities measured at are covered by cash and promised credit lines. In order to amortized cost result mainly from interest expense. finance acquisition of the shares in KWS LOCHOW GMBH Interest income from financial assets that are not measured sued a borrower’s note loan with a volume of €100 million in at fair value and recognized in the income statement was September 2014. As part of that, €19.5 million of the existing €1,480 (1,583) thousand. Interest expenses for financial bor- borrower’s note loan from 2012 was repaid. and the SOCIETE DE MARTINVAL Group, KWS SAAT SE is- rowings were €10,644 (10,688) thousand. There are unutilized credit lines totaling €222 million. A In order to control the credit risk resulting from receivables syndicated loan of €200 million was renegotiated in October from customers, a regular creditworthiness analysis is con- 2014. It runs until October 2019, with the option of extending ducted by the responsible Credit Manager in accordance it up to October 2021. Unlike the old loan, the new agree- with the credit volume. Security is available for some of ment only contains one financial covenant. In the case of these receivables and is used depending on the local cir- financial covenants, the dynamic gearing ratio is used as cumstances. This includes in particular credit insurance, a financial indicator. Compliance with the covenants is down payments and guarantees. In general, reservation regularly reviewed by KWS SAAT SE’s Treasury unit and of ownership of goods is agreed with our customers. reported to the banks every quarter in connection with the Credit limits are defined for all customers. Credit risks from quarterly and annual financial statements. 122 Annual Financial Statements | Notes for the KWS Group 2014/2015 | 4. Notes to the balance sheet Annual Report 2014/2015 | KWS Group The table below shows the KWS Group’s liquidity analysis for non-derivative and derivative financial liabilities. The table is based on contractually agreed, undiscounted pay- ment flows: in € thousand Book value Liquidity analysis of financial liabilities 06/30/2015 06/30/2015 Total Financial liabilities Trade payables Other financial liabilities 214,066 197,425 61,258 14,003 61,258 14,003 Due in > 1 year and < 5 years 98,814 1,189 Cash flows Due in > 5 years 56,326 411 Due in < 1 year 42,285 59,658 14,003 Nonderivative financial liabilities 289,327 272,686 115,946 100,003 56,737 Payment claim Payment obligation Derivative financial liabilities 1,949 40,134 43,812 3,678 39,868 43,168 3,300 266 644 378 in € thousand Book value Liquidity analysis of financial liabilities 06/30/2014 06/30/2014 Total Financial liabilities Trade payables Other financial liabilities 153,840 185,894 58,290 11,036 58,290 11,036 Due in > 1 year and < 5 years 125,090 1,146 Due in < 1 year 60,611 56,821 11,036 Nonderivative financial liabilities 223,166 255,221 128,468 126,237 Payment claim Payment obligation Derivative financial liabilities 581 22,531 23,221 690 22,531 23,221 690 Cash flows Due in > 5 years 193 323 516 4. Notes to the balance sheet | Notes for the KWS Group 2014/2015 | Annual Financial Statements 123 KWS Group | Annual Report 2014/2015 The cash flows of the derivative financial liabilities mainly In order to assess the risk of interest rate changes, the sen- relate to forward exchange deals and include both inter- sitivity of interest rates to fluctuations was determined. The est payments and redemption payments. These derivative average rate of interest in the fiscal year was 0.16% (0.26%). financial instruments are settled in gross. An increase in the rate of interest of 1 percentage point The following sensitivity analyses show the impact on in- ous year: increase of €0.2 million); equity would improve by come and equity. The calculated figures relate to the port- €0.1 million (previous year: an improvement of €0.1 million). folio at the balance sheet date and show the hypothetical A reduction in the rate of interest to 0 percentage points would add a further €0.1 million to the interest result (previ- effect for one year. would add a further €1.1 (1.3) million to the interest result. Equity would increase by €+0.7 (+0.8) million in the event of After the euro, the US dollar is the most important currency such a change in the rate of interest. in the KWS Group. All other currencies are of minor impor- tance. The average exchange rate in the fiscal year was The Management Report addresses possible risks resulting 1.19 (1.36) USD/€. If the US dollar depreciated by 10%, the from agreements regarding financial dependencies. financial instruments would be worth €233 (170) thousand. If the US dollar appreciated by 10%, the financial instruments (18) Contingent liabilities would have a value of €285 (208) thousand. The net income As in the previous year, there are no contingent liabilities to for the year and equity would change accordingly. report at the balance sheet date. Due to seasonally related fluctuations in borrowing require- (19) Other financial obligations ments, the impact of changes in market interest rates is cal- There was a €11,875 (9,815) thousand obligation from un- culated across the board on the basis of the current interest completed capital expenditure projects, mainly relating result. to property, plant, and equipment. The largest item is the obligations from investment in the new office and research building in Einbeck totaling €1.2 million. Obligations under rental agreements and leases in € thousand Due within one year Due between 1 and 5 years Due after 5 years 06/30/2015 06/30/2014 15,063 20,788 7,530 43,381 14,038 18,303 6,939 39,280 The leases relate primarily to full-service agreements for IT year under review. The main leasehold obligations relate to equipment and fleet vehicles, which also include services land under cultivation. for which a total of €4,544 (1,300) thousand was paid in the 124 Annual Financial Statements | Notes for the KWS Group 2014/2015 | 4. Notes to the balance sheet Annual Report 2014/2015 | KWS Group 5. Notes to the income statement Income statement in € millions Net sales Cost of sales Gross profit on sales Selling expenses Research & development expenses General and administrative expenses Other operating income Other operating expenses Operating income Net financial income/expenses Result of ordinary activities Taxes Net income for the year Share of minority interest Net income after minority interest (20) Net sales and function costs By product category in € thousand Certified seed sales Royalties income Basic seed sales Services fee income Other sales 2014/2015 % of sales Previous year % of sales 986.0 453.5 532.5 189.0 174.6 74.8 88.0 68.7 113.4 16.7 130.1 46.1 84.0 1.3 82.7 100.0 46.0 54.0 19.2 17.7 7.6 8.9 7.0 11.5 1.7 13.2 4.7 8.5 0.1 8.4 923.5 429.3 494.2 170.0 149.4 71.9 58.2 42.8 118.3 7.5 125.8 45.5 80.3 3.2 77.1 100.0 46.5 53.5 18.4 16.2 7.8 6.3 4.6 12.8 0.8 13.6 4.9 8.7 0.3 8.3 2014/2015 Previous year 877,494 821,673 72,626 14,318 780 20,797 986,015 64,435 14,698 684 21,991 923,481 5. Notes to the income statement | Notes for the KWS Group 2014/2015 | Annual Financial Statements 125 KWS Group | Annual Report 2014/2015 By region in € thousand Germany Europe North and South America Rest of world 2014/2015 Previous year 223,885 441,526 254,709 65,895 986,015 225,149 435,508 205,600 57,224 923,481 The other sales include net sales from barter transactions totaling €2,440 thousand were required in the Sugarbeet totaling €571 (774) thousand. Segment (previous year: lower by €1,087 thousand). For further details of sales, see segment reporting. Sales are The €18,967 thousand increase in selling expenses to recognized when the agreed goods or services have been €188,991 (170,024) thousand is attributable to the creation supplied and risk and title pass to the buyer. Any rebates or and expansion of distribution structures. This is 19.2% of discounts are taken into account. net sales, up from 18.4% the year before. The cost of sales increased by 5.6% to €453,498 (429,272) Research & development is recognized as an expense thousand, or 46.0% (46.5%) of sales. The total cost of goods in the year it is incurred; in the year under review, this sold was €272,836 (269,012) thousand. amounted to €174,627 (149,382) thousand. Development costs for new varieties are not recognized as an asset Allowances on inventories totaling €1,755 thousand more because evidence of future economic benefit can only be (previous year: lower by €226 thousand) were required. The provided after the variety has been officially certified. allowances were lower by €1,065 thousand for the Cereals Segment (previous year: lower by €181 thousand), while they General and administrative expenses increased by were lower by €1,750 thousand for the Corn Segment (previ- €2,890 thousand to €74,756 thousand, representing 7.6% ous year: higher by €1,042 thousand). Additional allowances of sales, after 7.8% the year before. (21) Other operating income in € thousand Income from sales of fixed assets Income from the reversal of provisions Exchange rate gains and gains from currency and interest rate hedges Income from reversal of allowances on receivables Performance-based public grants Income relating to previous periods Income from loss compensation received Miscellaneous other operating income 2014/2015 Previous year 877 6,427 36,640 10,852 4,845 8,227 862 19,230 87,960 333 15,638 13,512 4,858 5,454 6,315 191 11,806 58,107 The other operating income mainly comprises foreign ex- well as income from the reversal of provisions and miscel- change gains and income from interest rate hedges, as laneous other operating income. 126 Annual Financial Statements | Notes for the KWS Group 2014/2015 | 5. Notes to the income statement Annual Report 2014/2015 | KWS Group (22) Other operating expenses in € thousand Legal form expenses Allowances on receivables Counterparty default Exchange rate losses and losses on currency and interest rate hedges Losses from sales of fixed assets Expenses relating to previous periods Expense from remeasurement of intangible assets Other expenses 2014/2015 Previous year 1,712 8,478 8 44,304 717 1,199 238 12,030 68,686 1,056 7,520 392 22,285 241 1,098 2,366 7,819 42,777 In the year under review, allowances for receivables of Sugarbeet Segment, €251 (70) thousand at the Cereals €5,636 (3,144) thousand were recognized as an expense Segment and €0 (64) thousand at the Corporate Segment. at the Corn Segment, €2,591 (4,242) thousand at the (23) Net financial income/expenses in € thousand Interest income Interest expenses Income from other financial assets Write-down on securities Interest effects from pension provisions Interest expense for other long-term provisions Financial lease interest expense Interest result Result from equity-accounted financial assets Gain from remeasurement of the existing shares in SOCIéTé DE MARTINVAL S.A. Net income from equity investments 2014/2015 Previous year 1,480 9,709 141 9 2,518 158 7 –10,780 23,747 3,722 27,469 1,598 11,471 119 0 2,762 192 3 –12,711 20,208 0 20,208 Net financial income/expenses 16,689 7,497 Net income from equity investments increased to interest result of € –10,780 (–12,711) thousand, net €27,469 (20,208) thousand, largely due to improved in- financial income/expenses rose by €9,192 thousand to come from equity-accounted financial assets totaling €16,689 (7,497) thousand. The interest effects from pen- €23,747 (20,208) thousand and gains from remeasurement sion provisions comprise interest expenses (compounding) of the existing shares in SOCIéTé DE MARTINVAL S.A. and the planned income. totaling €3,722 (0) thousand. Together with an 5. Notes to the income statement | Notes for the KWS Group 2014/2015 | Annual Financial Statements 127 KWS Group | Annual Report 2014/2015 (24) Taxes Income tax expense is computed as follows: in € thousand Income taxes, Germany Income taxes, other countries Current expenses from income taxes Thereof from previous years Deferred taxes, Germany Deferred taxes, other countries Deferred tax income/expense Reported income tax expense 2014/2015 Previous year 15,723 36,231 51,954 (294) – 634 – 5,262 – 5,896 46,058 15,824 34,289 50,113 (– 6,829) –111 – 4,514 – 4,625 45,488 Adjusted for tax relating to previous periods, KWS pays present value totaling €3,702 (4,933) thousand at June 30, tax in Germany at a rate of 29.1%. Corporate income tax of 2015. €1,235 (1,235) thousand was recovered in the year 15.0% (15.0%) and solidarity tax of 5.5% (5.5%) are applied under review and recognized directly in equity. uniformly to distributed and retained profits. In addition, mu- nicipal trade tax is payable on profits generated in Germany. Under German tax law, both German and foreign dividends Trade income tax is applied at a weighted average rate of are 95% tax exempt. 13.3% (13.3%), resulting in a total tax rate of 29.1% (29.1%). The “Law on Tax Measures Accompanying Introduction of Germany are taxed at the rates applicable in the country The profits generated by Group companies outside the Societas Europaea and Amending Further Tax Regu- in which they are based. lations” (SEStEG), which was passed at the end of 2006, means that the corporate income tax credit balance at For the German Group companies, deferred tax was December 31, 2006, can be realized. It will be paid out in calculated at 29.1% (29.1%). For foreign Group companies, ten equal annual amounts from 2008 to 2017. The German deferred tax was calculated using the tax rates applicable in Group companies carried these claims as assets at their the country in which they are based. 128 Annual Financial Statements | Notes for the KWS Group 2014/2015 | 5. Notes to the income statement Annual Report 2014/2015 | KWS Group Deferred taxes result from the following: in € thousand Deferred tax assets Deferred tax liabilities 2014/2015 Previous year Change 2014/2015 Previous year Intangible assets Biological assets Property, plant and equipment Financial assets Inventories Current assets Noncurrent liabilities Current liabilities Tax loss carryforward Other consolidation transactions Deferred taxes recognized 273 0 515 1,655 9,645 4,760 18,145 11,547 6,660 1,119 54,319 12 0 284 1,529 9,527 2,351 14,327 14,404 5,115 386 47,935 261 0 231 126 118 2,409 3,818 – 2,857 1,545 733 6,384 8,118 36 15,375 1 187 3,363 954 87 0 10 9,431 33 13,886 634 166 1,139 888 16 0 5 Change –1,313 3 1,489 – 633 21 2,224 66 71 0 5 28,095 26,165 1,930 The other income includes exchange rate-related changes The deferred taxes from temporary differences recognized to the deferred taxes of €54 (–735) thousand, which were di- in the income statement changed as follows: rectly credited to equity, without recognition in profit or loss. Deferred tax expense/income per balance sheet item in € thousand Temporary differences from: Intangible assets Property, plant and equipment Financial assets Inventories Current assets Noncurrent liabilities Current liabilities Tax loss carryforward Other Recognized in the income statement 2014/2015 Previous year 5,012 – 74 953 – 315 752 – 39 – 3,111 2,664 725 6,567 3,038 206 –1,005 –123 – 2,088 1,673 – 698 3,784 58 4,845 5. Notes to the income statement | Notes for the KWS Group 2014/2015 | Annual Financial Statements 129 KWS Group | Annual Report 2014/2015 Deferred tax assets totaling €1,308 thousand were written that made losses in the past period or the previous period. down and recognized in the income statement, while de- These were considered recoverable, since it is assumed that ferred tax assets totaling €56 thousand were written down the companies in question will post taxable profits in the and not recognized in the income statement. Deferred taxes future. due to tax loss carryforwards totaling €289 thousand were recognized in the income statement. The following schedule reconciles the expected income tax expense to the reported income tax expense. The calcula- In the year under review, there were surpluses of deferred tion assumes an expected tax expense, applying the Ger- tax assets from temporary differences and loss carryfor- man tax rate to the profit before tax of the entire Group: wards totaling €9,506 (7,430) thousand at group companies in € thousand Earnings before income taxes Expected income tax expense 1 Difference in income tax liability outside Germany Tax portion for: Tax-free income Expenses not deductible for tax purposes Temporary differences and losses for which no deferred taxes have been recognized Tax credits Taxes relating to previous years Other tax effects Reported income tax expense Effective tax rate 1 Tax rate in Germany: 29.1% 2014/2015 Previous year 130,106 37,861 4,228 – 2,989 6,654 0 – 313 294 323 46,058 35.4% 125,764 36,597 13,573 110 2,600 143 – 2 – 6,829 – 704 45,488 36.2% This increase in the effective tax rate in the year under re- Personnel costs went up by €26,944 thousand to €216,873 view compared with the tax rate of 29.1% in Germany was thousand, an increase of 14.2%. The number of employees due to strong income growth in countries with higher tax increased by 541 to 4,691, or by 13.0%. rates and tax effects on non-deductible expenses. Other taxes, primarily real estate tax, are allocated to the in the previous year to €176,088 thousand. Social security Compensation increased by 15.3% from €152,751 thousand relevant functions. (25) Personnel costs/employees in € thousand Wages and salaries Social security contributions, expenses for pension plans and benefits contributions, expenses for pension plans and benefits were €3,607 thousand higher than in the previous year. Employees 1 2014/2015 Previous year 176,088 152,751 Germany 40,785 37,178 216,873 189,929 Rest of Europe (without Germany) North and South America Rest of world Total 1 Annual average 2014/2015 Previous year 1,868 1,763 1,401 1,234 188 4,691 1,163 1,073 151 4,150 130 Annual Financial Statements | Notes for the KWS Group 2014/2015 | 5. Notes to the income statement Annual Report 2014/2015 | KWS Group Acquisition of the remaining shares in the SOCIETE DE shares in KWS SAAT SE every year in a freely selectable MARTINVAL Group meant that its headcount was included amount ranging between 20% and 50% of the gross per- in full in the figures this year. If our joint ventures are in- formance-related bonus. Along with that, all members of cluded proportionately, the headcount is 5,322 (4,847). The the second management level can likewise take part in an reported number of employees is greatly influenced by sea- LTI program. As part of this program, they are obligated sonal labor. (26) Sharebased payment Employee Share Program to invest in shares in KWS SAAT SE every year in a freely selectable amount ranging between 10% and 40% of the gross performance-related bonus. The members of the Executive Board and the second management level may sell these shares at the earliest after a regular holding pe- KWS has established a share program for employees. All riod of five years beginning at the time they are acquired employees who have been with the company for at least one (end of the quarter in which the shares were acquired). year without interruption and have a permanent employment The entitled persons are paid a long-term incentive (LTI) in relationship that has not been terminated at a KWS Group the form of cash compensation after the holding period for company that participates in the program are eligible to take the tranche in question. Its level is calculated on the basis part. That also includes employees who are on maternity of KWS SAAT SE’s share performance and on the KWS leave or parental leave or who are in semi-retirement. Group’s return on sales (ROS), measured as the ratio of operating income to net sales, over the holding period. For Each employee can acquire up to 500 shares. A bonus of persons with contracts as of July 1, 2014, the cash com- 20% is deducted from the purchase price, which depends pensation for members of the Executive Board is a maxi- on the price applicable on the key date. The shares are mum of one-and-half times (for the Chief Executive Officer subject to a lock-up period of four years beginning when they two times), and for members of the second management are posted to the employee’s securities account. The right level a maximum of two times their own investment (LTI to a dividend, if KWS SAAT SE pays one out, exists during cap). The costs of this compensation are recognized in the the lock-up period. Holders can also exercise their right to income statement over the period and were €1,044 (718) participate in the Annual Shareholders’ Meeting during the thousand in the period under review. The provision for it lock-up period. They can dispose freely of the shares after at June 30, 2015, was €2,170 (1,200) thousand. The LTI fair the lock-up period. values are calculated by an external expert. 9,878 (11,028) shares were repurchased for the Employee (27) Net income for the year Share Program at a total price of €2,684 (2,834) thousand in The KWS Group’s net income for the year was €84,048 the year under review. (80,276) thousand on operating income of €113,417 (118,267) Longterm incentive (LTI) thousand and net financial income/expenses of €16,689 (7,497) thousand. The return on sales fell slightly to 8.5% The stock-based compensation plans awarded at the (8.7%). Net income for the year after minority interest is KWS Group are recognized in accordance with IFRS 2 €82,712 (77,124) thousand. Due to the acquisition of the “Share-based Payment”. The incentive program, which remaining shares held by the Momont family, the share of was launched in fiscal 2009/2010, involves stock-based minority interests in the KWS Group’s income fell sharply payment transactions with cash compensation, which year on year. Earnings per share in the year under review are measured at fair value at every balance sheet date. were €12.53 (11.69). Members of the Executive Board are obligated to acquire 5. Notes to the income statement | Notes for the KWS Group 2014/2015 | Annual Financial Statements 131 KWS Group | Annual Report 2014/2015 6. Notes to the cash flow statement The cash flow statement, which has been prepared according disposals of assets. €31,727 (0) thousand was paid to acquire to IAS 7 (indirect method), shows the changes in cash and shares in consolidated companies and other business units. cash equivalents of the KWS Group in the three categories of operating activities, investing activities, and financing activi- (3) Net cash from financing activities ties. The effects of exchange rate changes and changes in the Financing activities resulted in cash proceeds of €48,398 consolidated group have been eliminated from the respective thousand (previous year: cash payments of €43,558 thou- balance sheet items, except those affecting cash and cash sand). The dividend payments to parent shareholders and equivalents. other shareholders comprise the dividends of €19,800 (19,800) thousand paid to the shareholders of KWS SAAT SE, (1) Net cash from operating activities as well as profit distributions paid to other shareholders of The cash proceeds from operating activities are substantially and at fully consolidated subsidiaries of €0 (1,328) thousand. determined by cash earnings. In the year under review they In the previous year, this also related to acquisition of the were €92,063 (84,954) thousand. The proportion of cash remaining minority interests in KWS LOCHOW GMBH. In earnings included in sales was 9.3% (9.2%). Capital tie-up addition, net borrowings totaling €68,198 (23,357) thousand amounted to €72,809 (62,626) thousand, mainly due to an were raised. increase in assets not attributable to financing or investing activity. The cash proceeds from operating activities also in- (4) Supplementary information on the clude interest income of €1,479 (1,592) thousand and interest cash flow statement expense of €6,843 (7,288) thousand. Income tax payments Of the changes in cash and cash equivalents caused by ex- amounted to €69,552 (67,497) thousand. The dividends re- change rate, consolidated group, and measurement changes, ceived from the joint ventures are also carried here and total a total of €6,879 (–2,909) thousand results from exchange €12,157 (11,272) thousand. rate-related adjustments and a total of €6,285 (0) thousand from adjustments relating to changes in the consolidated (2) Net cash from investing activities companies. A net total of €123,761 (63,089) thousand was required to finance investing activities. An amount of €86,576 (63,556) As in previous years, cash and cash equivalents are com- thousand was paid for intangible and tangible assets and an posed of cash (on hand and balances with banks) and current amount of €7,535 (874) thousand for financial assets. There available-for-sale securities. were total cash receipts of €2,077 (1,341) thousand for 7. Other notes Proposal for the appropriation of net retained profits The balance of €66 (199) thousand is to be carried forward to KWS SAAT SE posted operating income of € –23,242 thousand the new account. compared with € –14,331 thousand for the previous year. Allowing for net financial income/expenses of €45,017 (37,911) Total remuneration of the Supervisory Board and thousand and income taxes totaling €2,108 (–265) thousand, Executive Board and of former members of the Super net income in accordance with the German commercial law visory Board and Executive Board of KWS SAAT SE regulations was €19,667 (23,845) thousand. Adding the net The compensation of the members of the Supervisory Board profit of €199 (154) thousand brought forward from the previ- consists of a fixed and a variable component, with the vari- ous year, a net retained profit of €19,866 thousand is available able component being limited to the level of the fixed com- for distribution. pensation. As in the previous year, the total compensation for members of Supervisory Board amounts to €516 (516) thou- A proposal will be made to the Annual Shareholders’ Meeting sand, excluding value-added tax. €238 (238) thousand of the that an amount of €19,800 thousand of KWS SAAT SE’s net total compensation is performance-related. retained profit should be distributed as a dividend of €3.00 (3.00) for each of the 6,600,000 shares. 132 Annual Financial Statements | Notes for the KWS Group 2014/2015 | 6. Notes to the cash flow statement Annual Report 2014/2015 | KWS Group In fiscal year 2014/2015, total Executive Board compen- Related party disclosures sation amounted to €4,007 (3,481) thousand. The variable As part of its operations, KWS procures goods and services compensation, which is calculated on the basis of the net worldwide from a large number of business partners, in- profit for the period of the KWS Group, is made up of a cluding companies in which KWS has an interest. Business bonus and a long-term incentive. The bonus totals €1,772 dealings with these companies are always conducted on (1,884) thousand; there are contributions from the long-term an arm’s length basis; from the KWS Group’s perspective, incentive tranche for 2013/2014 totaling €881 thousand these dealings have not been material. As part of Group (tranche for 2012/2013: €610 thousand). financing, short- and medium-term loans are taken out from and granted to subsidiaries at market interest rates. A total Compensation of former members of the Executive Board of 14 shareholders declared to KWS SAAT SE in 2002 that and their surviving dependents amounted to €1,693 (1,476) as a result of mutual allocations, they respectively hold a thousand. Pension provisions recognized for this group of total of more than 50% of the voting rights. The Executive persons amounted to €7,131 (7,018) thousand as of June 30, Board, Supervisory Board and the families of their members 2015, before being netted off with the relevant planned were also defined as related parties. There were no business assets. transactions or legal transactions that required reporting for this group of persons in fiscal 2014/2015. The compensa- Shareholdings of members of the Supervisory Board tion that has to be disclosed in accordance with IAS 24 for and the Executive Board (as of July 31, 2015) management in key positons at the Group comprises remu- Dr. Arend Oetker indirectly holds a total of 1,650,010 neration for the active Executive Board and the Supervisory (1,650,010) shares and Dr. Andreas J. Büchting 108,030 Board. It is presented in the Group Management Report. No (108,030) shares in KWS SAAT SE. The members other related parties have been identified for whom there is a of the Supervisory Board hold a total of 1,758,735 special reporting requirement under IAS 24. (1,758,725) shares in KWS SAAT SE. All together, the members of the Executive Board hold €132 (132) thousand between Hans-Joachim Tessner and 14,445 (14,699) shares in KWS SAAT SE. KWS SAAT SE. The three equity-accounted joint ventures There are lease agreements with an annual lease of provided breeding services for KWS SAAT SE on an arm’s length basis. Related parties in € thousand Deliveries and services provided Received deliveries and services Previous Previous Receivables Previous 2014/2015 year 2014/2015 year 06/30/2015 year 06/30/2015 Unconsolidated subsidaries 0 2 0 0 332 262 0 Equity-accounted joint ventures Other related parties 7,887 9,035 22,016 19,360 6,394 5,693 1,108 0 0 132 132 0 0 0 Payables Previous year 0 68 0 The receivables from unconsolidated companies in the current fiscal year total €332 thousand. They are classified as dubious and so have been completely written down. 7. Other notes | Notes for the KWS Group 2014/2015 | Annual Financial Statements 133 KWS Group | Annual Report 2014/2015 Audit of the annual financial statements Membership of other legally mandated Supervisory Boards: On December 18, 2014, the Annual Shareholders’ Meeting of KWS SAAT SE elected the accounting firm Deloitte & ■■ Schwartauer Werke GmbH & Co. KGaA, Touche GmbH, Hanover, to be the Group’s auditors for fiscal Bad Schwartau (Chairman) year 2014/2015. ■■ Cognos AG, Hamburg (Chairman) Fee paid to the external auditors under Section 314 (1) No. 9 of the HGB Membership of comparable German and foreign oversight boards: in € thousand a) Audit of the consolidated financial statements b) Other certification services c) Tax consulting d) Other services Total fee paid 2014/2015 Previous year ■■ Leipziger Messe GmbH, Leipzig 741 710 Hubertus von Baumbach 2 0 52 795 2 0 45 757 Ingelheim am Rhein Businessman Member of Management of Boehringer Ingelheim, Ingelheim am Rhein Jürgen Bolduan Einbeck For fiscal year 2015/2016, fees for consulting services (ex- Seed Breeding Employee cluding auditing) of to up to €75 thousand are expected. Chairman of the Central Works Committee Declaration of compliance with the German Corporate Governance Code Cathrina ClaasMühlhäuser KWS SAAT SE has issued the declaration of compliance Frankfurt am Main with the German Corporate Governance Code required by Businesswoman of KWS SAAT SE section 161 of the Aktiengesetz (AktG – German Stock Cor- Chairwoman of the Supervisory Board of poration Act) and made it accessible to its shareholders on CLAAS KGaA mbH, Harsewinkel the company’s home page at www.kws.com. Supervisory and Executive Boards of KWS SAAT SE Supervisory Board Membership of other legally mandated Supervisory Boards: ■■ CLAAS KGaA mbH, Harsewinkel (Chairwoman) Membership of comparable German and foreign Dr. Drs. h.c. Andreas J. Büchting oversight boards: Einbeck Agricultural Biologist ■■ CLAAS KGaA mbH, Harsewinkel Chairman of the Supervisory Board of KWS SAAT SE (Deputy Chairwoman of the Shareholders’ Committee) Membership of comparable German and foreign oversight Dr. Berthold Niehoff boards: Einbeck Agricultural Scientist ■■ Member of the Board of Directors of Ball Horticultural Employee Representative Company, West Chicago, Illinois (U.S.) Dr. Arend Oetker Berlin Businessman Managing Partner of Kommanditgesellschaft Dr. Arend Oetker Vermögensverwaltungsgesellschaft mbH & Co., Berlin Deputy Chairman of the Supervisory Board of KWS SAAT SE 134 Annual Financial Statements | Notes for the KWS Group 2014/2015 | 7. Other notes Annual Report 2014/2015 | KWS Group Supervisory Board Committees Dr. Hagen Duenbostel Einbeck Audit Committee Chief Executive Officer (since January 1, 2015) Chairman: Hubertus von Baumbach Corn, Corporate Development and Communication, Members: Andreas J. Büchting, Jürgen Bolduan Corporate Compliance Committee for Executive Board Affairs Membership of comparable German and foreign oversight Chairman: Andreas J. Büchting boards: Members: Arend Oetker, Cathrina Claas-Mühlhäuser ■■ Hero AG, Lenzburg, CH Nominating Committee Chairman: Andreas J. Büchting (Member of the Board of Administration) Dr. Léon Broers Members: Arend Oetker, Cathrina Claas-Mühlhäuser Einbeck Executive Board Research and Breeding Dr. Peter Hofmann (since October 1, 2014) Philip von dem Bussche (until December 31, 2014) Einbeck Einbeck Sugarbeet, Cereals, Marketing Chief Executive Officer (until December 31, 2014) Corporate Development and Communication, Human Resources Eva Kienle Göttingen Finance, Controlling, Global Services, IT, Legal, Human Resources 8. Declaration by legal representatives We declare to the best of our knowledge that the con- Report, and that it describes the main opportunities and solidated financial statements give a true and fair view of risks of the Group’s anticipated development. the assets, financial position and earnings of the Group in compliance with the generally accepted standards of Einbeck, October 1, 2015 consoli dated accounting, and that an accurate picture of KWS SAAT SE the course of business, including business results, and the The Executive Board Group’s situation is conveyed by the Group Management H. Duenbostel L. Broers E. Kienle P. Hofmann 8. Declaration by legal representatives | Notes for the KWS Group 2014/2015 | Annual Financial Statements 135 KWS Group | Annual Report 2014/2015 Auditors’ Report We have audited the annual financial statements of the basis of test samples within the framework of the audit. KWS Group – consisting of the Balance Sheet, the State- The audit includes the assessment of the annual financial ment of Comprehensive Income, the Notes, the Cash statements of the companies included in the consolidat- Flow Statement, Segment Reporting and the Statement of ed financial statements, the definition of the companies Changes in Equity – and the Combined Group Management consolidated, the accounting and consolidation principles Report for the fiscal year from July 1, 2014, to June 30, 2015, used and any significant estimates made by the Executive all of which were prepared by KWS SAAT SE, Einbeck. The Board, as well as the evaluation of the overall presentation preparation of the consolidated financial statements and of the consolidated financial statements and the Group the Group Management Report according to the Interna- Management Report. We believe that our audit provides a tional Financial Reporting Standards (IFRS) as applicable reasonable basis for our opinion. in the EU, and in addition according to the commercial law regulations to be applied pursuant to Section 315a (1) of the On the basis of our audit, we have no reservations to note. HGB (German Commercial Code), is the responsibility of the Executive Board of the company. Our task is to give, on In our opinion pursuant to the findings gained during the basis of the audit we have conducted, an opinion on the the audit, the consolidated financial statements of consolidated financial statements and the Group Manage- KWS SAAT SE, Einbeck, comply with the IFRS as appli- ment Report. cable in the EU, and in addition with the commercial law regulations to be applied pursuant to Section 315a (1) of We conducted our audit of the annual financial statements the HGB (German Commercial Code), and give a true and in accordance with Section 317 HGB and the generally fair view of the assets, financial position and earnings accepted standards for the audit of financial statements of the Group, taking into account these regulations. The promulgated by the Institut der Wirtschaftsprüfer (German Group Management Report accords with the consolidated Institute of Certified Public Accountants). According to these financial statements, conveys overall an accurate view of standards, the audit must be planned and executed in such the Group’s position and accurately presents the opportu- a way that misstatements and violations materially affecting nities and risks of future development. the presentation of the view of the assets, financial position and earnings conveyed by the consolidated financial state- Hanover, October 1, 2015 ments, taking into account the applicable regulations on orderly accounting, and by the Group Management Report are detected with reasonable certainty. Knowledge of the Deloitte & Touche GmbH business activities and the economic and legal operating Wirtschaftsprüfungsgesellschaft environment of the Group and evaluations of possible errors are taken into account. The effectiveness of the internal accounting control system and the evidence supporting the disclosures in the consolidated financial statements and (Kompenhans) the Group Management Report are evaluated mainly on the Auditor (Bukowski) Auditor 136 Annual Financial Statements | Notes for the KWS Group 2014/2015 | Auditors’ Report Annual Report 2014/2015 | KWS Group Report on the 1st quarter of 2015/2016 Annual Shareholders’ Meeting in Einbeck Report on the 2nd quarter of 2015/2016 Report on the 3rd quarter of 2015/2016 Publication of 2015/2016 financial statements, annual press and analyst conference in Frankfurt Annual Shareholders’ Meeting 707400 DE0007074007 KWS Prime Standard SDAX Individual share certificates 6,600,000 Financial calendar Date November 24, 2015 December 17, 2015 February 25, 2016 May 26, 2016 October 25, 2016 December 15, 2016 KWS share Key data of KWS SAAT SE Securities identification number ISIN Stock exchange identifier Transparency level Index Share class Number of shares Address Grimsehlstrasse 31 P. O. Box 14 63 37555 Einbeck Germany Contact Phone +49 (0) 5561 311 0 Fax +49 (0) 5561 311 322 info@kws.com www.kws.com This translation of the original German version of the Annual Report has been prepared for the convenience of our English-speaking shareholders. The German version is legally binding. Photos/Illustrations: Tomasz Ciesielski ■ Jan Eric Euler ■ Eberhard Franke ■ Frank Stefan Kimmel ■ Dominik Obertreis KWS SAAT SE Grimsehlstrasse 31 P.O. Box 1463 37555 Einbeck/Germany www.kws.com
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