KWS Group Annual Report 2021

Plain-text annual report

Annual Report 2021 | 2022 KWS in Figures The KWS Group (in € millions) 2021/2022 2020/2021 2019/2020 2018/2019 2017/2018 2016/2017 Net sales and income Net sales EBITDA EBIT as a % of net sales (EBIT margin) Net financial income/expense Net income for the year Other figures on earnings R&D intensity in % 1,539.5 1,310.2 1,282.6 1,113.3 1,068.0 1,075.2 252.4 155.1 10.1 –16.9 107.8 230.9 137.0 10.5 5.2 110.6 225.5 137.4 10.7 –7.8 95.2 199.7 150.0 13.5 –5.5 104.0 182.7 132.6 12.4 5.4 99.7 181.0 131.6 12.2 16.6 97.7 18.6 19.3 18.4 18.5 18.5 17.7 Key figures on the financial position and assets Capital expenditure Depreciation and amortization Equity Equity ratio in % Return on equity in % Return on assets in % Net debt 1 Total assets Capital employed (avg.) 2 ROCE (avg.) in % 3 Cash flow from operating activities Free cash flow 4 Employees Number of employees (avg.) 5 Personnel expenses Key figures for the share in € Earnings per share in € 6 Dividend per share in € 6, 7 Segments (in € millions) 93.5 97.4 81.3 93.8 1,245.9 1,053.7 47.0 10.5 5.1 521.9 2,651.8 1,667.9 9.3 100.3 9.5 4,865 355.8 3.27 0.80 44.3 10.9 5.7 475.6 2,376.7 1,604.7 8.5 168.3 84.2 4,549 326.3 3.35 0.80 108.0 88.2 994.5 44.5 10.1 5.3 495.7 2,235.5 1,640.5 8.4 136.2 31.5 4,317 310.1 2.89 0.70 96.6 49.7 963.5 45.5 12.1 7.6 497.9 2,115.0 1,047.1 14.3 72.9 –5.6 4,126 280.7 3.15 0.67 71.7 50.1 881.8 58.1 12.3 7.1 37.4 1,517.7 981.1 13.8 98.1 30.0 3,852 253.9 3.02 0.67 63.3 49.4 836.9 56.0 13.1 7.3 48.5 1,495.2 990.1 13.3 122.4 57.6 3,705 247.0 2.96 0.64 Corn Sugarbeet Cereals Vegetables Corporate 20.8% 935 774 12.2% 588 524 –20.8% 71 57 11.6% 175 195 13.2% 191 216 38.7% 21 30 Net sales EBIT Net sales EBIT Net sales EBIT 2020/2021 2021/2022 Reconciliation (in € millions) Net sales EBIT – 6.8% 58 54 –2.3% EBIT Net sales –18 –19 38.5% – 6.0% 6 8 Net sales EBIT –92 –97 Segments Reconciliation KWS Group 1,802.5 165.7 –263.3 –10.6 1,539.5 155.1 1 Short-term + long-term borrowings – cash and cash equivalents – securities 2 Total capital employed at the end of the quarters (intangible assets + property, plant and equipment + inventories + trade receivables – trade payables)/4 3 EBIT/Capital Employed (avg.) 4 Adjusted for special effects from acquisition of the Pop Vriend Seeds Group. Information on interest paid changed 2 5 FTE: Full-time equivalents 6 Earnings and dividend per share of previous periods adjusted due to share split 7 The dividend for 2021/2022 is subject to the consent of the 2022 Annual Shareholders’ Meeting in December. To Our Shareholders | Annual Report 2021/2022 | KWS Group Contents 1. To Our Shareholders Foreword of the Executive Board Report of the Supervisory Board KWS on the Capital Market 2. Combined Management Report 2021/2022 of the KWS Group 2.1 Fundamentals of the KWS Group 2.2 Research & Development Report 2.3 Economic Report 2.4 EU Taxonomy 2.5 Environmental Report 2.6 Employee Report 2.7 Corporate Governance 2.8 Social Report 2.9 Opportunity and Risk Report 2.10 Forecast Report 2.11 Report on KWS SAAT SE & Co. KGaA and Non-Financial Declaration (Declaration Based on the German Commercial Code (HGB)) 2 2 5 12 15 16 23 26 43 44 49 55 61 63 77 79 3. Consolidated Financial Statements of 82 KWS SAAT SE & Co. KGaA 2021/2022 The cover photo shows ripening peas on a test field in southern Lower Saxony. Compared to other field crops, grain peas have a high crude protein content, which is interesting for feeding and for human nutrition. This is also the reason that in terms of the classic breeding goals, the protein content is the primary focus, in addition to stability and a high yield. | To Our Shareholders 1 KWS Group | Annual Report 2021/2022Executive Board Peter Hofmann Sugarbeet, Vegetables, Cereals, Oilseed Rape/Special Crops & Organic Seed, Marketing & Communications Nicolás Wielandt Corn Europe and South America Eva Kienle Finance & Procurement, Controlling, Global Transaction Center, Legal Services & IP, IT, Compliance, Governance & Risk Management Hagen Duenbostel (CEO) Corn North America, Corn China, Strategy Felix Büchting Research & Breeding, Human Resources, Farming Foreword of the Executive Board 2 To Our Shareholders | Foreword of the Executive Board Annual Report 2021/2022 | KWS GroupTo Our Share holders Foreword of the Executive Board A sustainable food system – good for us, good for the planet. Those are the words used by the EU Commission to herald in the realignment of agriculture in Europe. Sustainable food systems are at the core of the Farm to Fork Strategy for sustainable and inclusive growth. The objective is to boost the economy, increase people’s health and quality of life, and enhance nature conservation. The EU Commission’s goals are to safeguard the food supply despite climate change and biodiversity loss, reduce the ecological footprint of the EU’s food system, and transition to competitive sustainability and a crisis-proof food system. We’re currently witnessing dramatic proof of the need for that. Russia’s attack on Ukraine is causing immeasurable suffering to the population and is also negatively impacting food security and price stability around the world – especially in poorer countries. Our task as a food producer is to supply farmers with seed, even under these tough circumstances. We’re not losing sight of our focus on delivering solutions for sustainable agriculture in the face of more difficult climatic conditions. Our products and services are major production factors that contribute to the commercial success of a farm. Our research & development activities extend far beyond breeding high- yielding varieties. Our focus is also on crops with improved resistance to drought stress, pests and diseases, and thus on reducing the use of pesticides and on conserving the precious resource of water. Our digital solutions help farmers secure and further increase the yields per hectare they need. As a partner to farmers, we are thus making a clear contribution to more ecological agriculture, while enabling subsequent generations to run their farms successfully under constantly changing conditions. Foreword of the Executive Board | To Our Shareholders 3 KWS Group | Annual Report 2021/2022We can now offer our customers innovative Cercospora-tolerant sugarbeet varieties, for example. This widespread leaf disease regularly causes significant losses in yield. The effectiveness of the available chemical fungicides is diminishing, and they aren’t an ecological solution, either. The result of our many years of breeding is now the new CR+ varieties, which combine very high protection with excellent yield, thereby strengthening the position of sugarbeet as an important part of diverse crop rotations. Another example is the development of new rapeseed varieties that can withstand one of the main pests, the cabbage stem flea beetle. The harvest of entire areas infested with this insect may be lost completely. The excellent genetics of KWS’ new varieties are significantly less susceptible to infestation and help ensure profitable and sustainable rapeseed cultivation in Europe, particularly given the current shortages of oil plants. These examples illustrate that innovative seed can and will play a key role in the transformation toward more sustainable agriculture. This means KWS, one of the world’s leading plant breeding companies, has considerable economic potential – and we intend to leverage it. As part of our strategic planning in the past fiscal year, we identified four main areas in which we aim to grow in the future through innovation: products and services for sustainable agriculture, linking our seed to digital offerings, expanding digital sales channels that foster customer proximity, and innovations for the growing market of plant proteins as the basis for sustainable food. We’re thus aligning our business rigorously and promptly to the defining megatrends in agriculture. Our motto “Seeding the Future – since 1856” stands over all our activities to promote sustainable agriculture. This is more than just a slogan. It’s an expression of how we think and act in terms of generations. We continue to abide by this maxim, and at our last Annual Shareholders’ Meeting we initiated a multistage generational change on the Executive and Supervisory Boards. Continuity, our character as a family business and independence will remain at the heart of how we run our company. These guiding principles will help us to stay on course and expand our business even in troubled waters. My heartfelt thanks go out to KWS’ employees worldwide for their great commitment and efforts. I also thank our customers, partners and shareholders for the successful working relationship and their trust in KWS. I hope you find this Annual Report both informative and interesting. Dr. Hagen Duenbostel Chief Executive Officer 4 To Our Shareholders | Foreword of the Executive Board Annual Report 2021/2022 | KWS Group Report of the Supervisory Board Russia’s invasion of Ukraine not only marked a in all key decisions. The Supervisory Board was geopolitical turning point, but also deeply shook us provided with the necessary information in written at KWS. We have had ties with Ukraine that extend and oral form regularly, promptly and comprehen- as far back as 1900, when we opened our first sively. This included all key information on relevant foreign location in Vinnytsia, in western Ukraine. Our questions, in particular relating to strategy, plan- thanks and support today go to our approximately ning, the business performance and the situation of 170 employees who have made it possible for us to the Company and the KWS Group, including the risk supply farmers with seed under extremely difficult situation, risk management and compliance. In the conditions and have thus made an important contri- year under review, there were no transactions with bution to the country’s future. However, we would related parties that require the Supervisory Board’s also like to pay tribute to the many private initiatives approval in accordance with Section 111b of the by KWS colleagues who provided urgently needed, German Stock Corporation Act (AktG). practical help. As a company, we will continue to stand by Ukraine and its people and help in its The Company’s business policy, corporate and reconstruction in the shape of concrete projects. financial planning, profitability and situation, market trends and the competitive environment, research & KWS SAAT SE & Co. KGaA and the personally liable breeding and, along with important individual partner, KWS SE, both have a separate Supervisory projects, risk management at the KWS Group, in Board, each with the same shareholder represen- particular in relation to preventive healthcare in the tatives serving on them. The Supervisory Board wake of the COVID-19 pandemic, were the subject of KWS SAAT SE & Co. KGaA has two employee of detailed discussions in the year under review. representatives in addition to the shareholder representatives. Both boards predominantly hold The Chairman of the Supervisory Board continued joint meetings, with the result that the employee the direct discussions with the Chief Executive representatives are integrated at an early stage in Officer of KWS SE and individual members of the upcoming decisions by the personally liable partner. Executive Board in regular talks outside the meet- ings of the Supervisory Board in the year under The Supervisory Board of KWS SAAT SE & review. In addition, there were monthly meetings Co. KGaA discharged the duties incumbent on it in between the Chairman of the Supervisory Board accordance with the law, the Company’s Articles of and the Executive Board as a whole, where the Association and the bylaws, regularly advised and Company’s current business development and, monitored the personally liable partner, represented in particular, its strategy, occurrences of special by its Executive Board, in its activities and satisfied importance and individual aspects were dealt with. itself that the Company was run properly and in The Chairman of the Supervisory Board informed compliance with the law, and that it was organized the Supervisory Board of the results of these efficiently and cost-effectively. The Supervisory meetings. The Supervisory Board did not make use Board extensively discussed all significant busi- of its right to conduct an examination granted by ness transactions and carefully accompanied the Section 111 (2) of the German Stock Corporation Executive Board in all fundamental decisions of Act (AktG) since the reporting by the Executive importance to the Company. As is customary, the Board meant there was no reason to do so. Executive Board involved the Supervisory Board Report of the Supervisory Board | To Our Shareholders 5 Report of the Supervisory Board KWS Group | Annual Report 2021/2022 Focal areas of deliberations situation in Ukraine at short, regular intervals. As The Supervisory Board of KWS SAAT SE & scheduled, the status of the breeding programs for Co. KGaA convened four times in fiscal 2021/2022, all major crops was also presented to the Supervi- holding these meetings in hybrid form due to the sory Board at this meeting. pandemic. In addition, the Supervisory Board gathered at Pop Vriend Seeds in Andijk, in the On June 23, 2022, the Supervisory Board discussed Netherlands, for its budget meeting in June 2022. the budget and medium-term planning, including The presence of the Supervisory Board was always ways of countering the significant cost increases. complete, but with Cathrina Claas-Mühlhäuser The Supervisory Board of KWS SE subsequently being prevented from attending two meetings. adopted the budget and planning. At the beginning of the year under review, the Corporate governance Supervisory Board of KWS SAAT SE & Co. KGaA The Supervisory Board discussed compliance with convened its meeting to discuss the financial the recommendations of the “German Commission statements on October 21, 2021. At this meeting, for the Corporate Governance Code” and issued which was also attended by the independent a new Declaration of Compliance with the German auditor for fiscal 2020/2021, the Supervisory Board Corporate Governance Code in the version dated examined and approved the financial statements April 22, 2022, in accordance with Section 161 of of KWS SAAT SE & Co. KGaA and approved the German Stock Corporation Act (AktG) together the consolidated financial statements of the with the personally liable partner in September KWS Group as of June 30, 2021. This meeting was 2022. The Declaration of Compliance can be followed by a joint meeting of the two boards, at obtained on the Company’s website at which the Supervisory Board heard reports on the www.kws.com/corp/en/company/investor-relations/ Company’s anticipated business performance in corporate-governance. the current year and on the status of the “Strategic Planning 31,” which covers a timescale of ten years. In the year under review, the Supervisory Board regularly addressed the question of any conflicts The Supervisory Board adopted the “Strategic of interest on the part of its members and those of Planning 31,” which – in addition to operational the Executive Board. In the year under review, there goals – primarily defines far-reaching sustainability were no such conflicts of interests that had to be objectives, on December 1, 2021. In addition, the disclosed immediately to the Supervisory Board new Head of KWS Research, Dr. Thomas Ehrhardt, and reported to the Annual Shareholders’ Meeting. informed the Supervisory Board about the status of the most important research projects. On The Supervisory Board conducted a self-assess- December 2, 2021, the Supervisory Board was ment in the year under review, in accordance with given a presentation of the “Succession Manage- recommendation D.12 of the German Corporate ment System,” which envisages structured Governance Code. It is carried out every two succession planning for all key positions at the years and was accompanied by Deloitte GmbH KWS Group. Wirtschaftsprüfungsgesellschaft. Based on the evaluation of specific questionnaires for the full The meeting on March 15, 2022, focused on the Supervisory Board, the Audit Committee and the geopolitical crisis in Eastern Europe and the ways Executive Board, Deloitte determined that the KWS’ 170 employees in Ukraine and their families Supervisory Board works in compliance with best could be supported. In addition, the Supervisory practices. Board received written reports on the current 6 To Our Shareholders | Report of the Supervisory Board Annual Report 2021/2022 | KWS GroupThe Annual General Meeting on December 2, 2021 was held again in a virtual format. Supervisory Board committees for 2021/2022 were discussed in particular at the In the year under review, the Supervisory Board meeting on November 16, 2021. The meeting on of KWS SAAT SE & Co. KGaA had two commit- February 11, 2022, discussed and defined the focus tees: the Audit Committee and the Nominating of the audit for fiscal year 2021/2022 in the pres- Committee. ence of the appointed independent auditor. It also discussed the situation as regards the KWS Group’s The Audit Committee convened for four joint financing and the Semiannual Report 2021/2022 in meetings in fiscal 2021/2022, each of which was detail. In addition, the report by Internal Auditing attended by all members either in person or online for fiscal 2021/2022 was discussed and the audit (with the exception of the meeting in February 2022, plan for the subsequent years was defined and which Dr. Andreas J. Büchting was prevented from adopted at the meeting on May 10, 2022. The risk attending). In its meeting on September 23, 2021, situation, the 9M Quarterly Report for 2021/2022 the Audit Committee discussed the annual financial and tax-related issues of the KWS Group were also statements and accounting of KWS SAAT SE & discussed. Co. KGaA and the consolidated financial state- ments of the KWS Group for the fiscal year In addition, the Audit Committee obtained the state- 2020/2021, along with the Combined Manage- ment of independence from the auditor, ascertained ment Report and the proposal by the Executive and monitored the auditor’s independence and Board on the appropriation of the profits. The examined its qualifications. The Audit Committee Compliance Report and the 1st Quarterly Report also satisfied itself that the regulations on internal Report of the Supervisory Board | To Our Shareholders 7 KWS Group | Annual Report 2021/2022rotation were observed by the independent auditor Annual Shareholders’ Meeting of KWS SAAT SE & and dealt with the issue of any additional services Co. KGaA on December 6, 2022. He will thus be rendered by the independent auditor. released from his duties on the Executive Board The Supervisory Board of KWS SAAT SE & ment. Felix Büchting will succeed him as Chief Co. KGaA does not hold personnel responsibility Executive Officer of KWS SE, as we also announced and leave KWS SAAT SE & Co. KGaA’s top manage- as regards management, in particular in relation in last year’s report. to the Executive Board of KWS SE. Nevertheless, we would like to take this opportunity to inform The Nominating Committee dealt with the revision you about the personnel changes at the personally of the profile of skills for the Supervisory Board liable partner. of KWS SAAT SE & Co. KGaA in the year under review. The profile had to be adapted, in particular As we announced in last year’s report, in view of the anticipated new recommendations Dr. Léon Broers retired from the Executive Board in the German Corporate Governance Code. At of KWS SE when his contract of employment ended its meeting on June 26, 2022, the Supervisory on December 31, 2021, after having been respon- Board adopted the revised profile of skills along sible for Research & Breeding on the Executive with a corresponding qualification matrix. We have Board for 15 years. One indicator of our innova- published both of them on our homepage as part tiveness has always been the number of official of the “Declaration on Corporate Governance.” On marketing approvals for new KWS varieties. It the basis of the new profile of skills, the Nominating almost doubled during his tenure in the Executive Committee then drew up proposals for candidates Board to around 500 product approvals per annum. for the forthcoming election of the new Supervi- Our product portfolio also increased significantly sory Board. The Supervisory Board endorsed the with the addition of sunflower breeding in 2010, the proposals of the Nominating Committee, with the tropical corn breeding program in Brazil in 2012, result that it will propose the following shareholder cereal breeding in North America starting in 2013, representatives for election to the Supervisory and most recently vegetable breeding in 2019 Board of KWS SAAT SE & Co. KGaA at the Annual during the time he worked with us. We are well Shareholders’ Meeting on December 6, 2022: The positioned in basic research and in our numerous Deputy Chairwoman of the Supervisory Board, application-oriented research projects. The large Dr. Marie Th. Schnell, and the current Chairman number of patents we hold is also testimony to this. of the Audit Committee, Victor W. Balli, will be Léon Broers is thus handing over a well-kept ship to proposed for reelection. As reported last year, his successor. our former Chief Executive Officer, Philip Freiherr von dem Bussche, has agreed to stand for elec- As had been announced at the Annual tion during an interim period (cooling-off period Shareholders’ Meeting in December 2020, of Hagen Duenbostel in 2023 and 2024). We are Dr. Felix Büchting took charge of Research & also delighted to announce that we have been able Development on January 1, 2022. He also to win the services of Professor Dr. Dr. h.c. mult. remains in charge of Human Resources, but Stefan W. Hell from Göttingen, who will strengthen has handed over responsibility for cereals busi- our Supervisory Board’s scientific expertise. The ness to Dr. Peter Hofmann. At the same time, résumés of the candidates and a corresponding Peter Hofmann took over the Vegetables Segment qualification matrix will be published along with from Léon Broers. Nicolás Wielandt joined the the Notice of the Annual Shareholders’ Meeting. Executive Board as its fifth member effective I would add that these candidates will also be January 1, 2022. A native of Chile, he is now proposed for election to the Supervisory Board at responsible for Corn Europe and South America. the Annual Shareholders’ Meeting of KWS SE on Dr. Hagen Duenbostel will embark on his envis- November 24, 2022. aged two-year cooling-off period at the end of the 8 To Our Shareholders | Report of the Supervisory Board Annual Report 2021/2022 | KWS GroupAndreas J. Büchting, Chairman of the Supervisory Board The committee satisfied itself that all the candidates The employees of KWS’ European subsidiaries also had the time expected for them to discharge (in the EU) elected their representatives for the their duties on the board. The aspect of diversity future Supervisory Board of KWS SAAT SE & Co. should be taken into account in filling posts on the KGaA on July 26, 2022. Under the regulations, Supervisory Board. In this context, the Supervisory one representative from Germany and a further Board decided in accordance with Section 111 (5) representative from a foreign subsidiary were to of the German Stock Corporation Act (AktG) that be elected. The Chairwoman of the European the ratio of women and men among the shareholder Employees’ Committee (EEC), Christine Coenen, representatives on the Supervisory Board should was once again successful and will therefore begin not be less than 25% by June 30, 2027. However, her second term of office on our Supervisory Board the Supervisory Board is not responsible for setting in December. The workforce elected Eric Gombert a target figure for the employee representatives, from KWS France as a further representative. He since the regulations for election of employee is 54 years of age and is the head of our breeding representatives on the Supervisory Board do not station in Buzet, France. Eric Gombert has worked specify any targets or a minimum figure for the ratio in the seed industry for more than 30 years, 15 of of women and men. them with KWS. He has been a member of the EEC since 2015. I would like to take this opportunity to congratulate both employee representatives on their election. Report of the Supervisory Board | To Our Shareholders 9 KWS Group | Annual Report 2021/2022Annual and consolidated financial statements Supervisory Board as preparation. For example, and auditing all of them were provided with the annual financial Ernst & Young GmbH Wirtschaftsprüfungs- statements, consolidated financial statements, gesellschaft, Hanover, the independent auditor Combined Management Report, audit reports chosen at the Annual Shareholders’ Meeting on by the independent auditor, and the proposal by December 2, 2021, and commissioned by the Audit the personally liable partner on the appropria- Committee, has audited the financial statements of tion of the profits. The Supervisory Board like- KWS SAAT SE & Co. KGaA that were presented by wise received and discussed the Non-Financial the personally liable partner, KWS SE, and prepared Declaration (Section 289b and Section 315b of in accordance with the provisions of the German the German Commercial Code (HGB)), which is Commercial Code (HGB) for fiscal 2021/2022 and part of the Combined Management Report and the financial statements of the KWS Group (IFRS contains disclosures on the KWS Group and the consolidated financial statements), as well as the parent company KWS SAAT SE & Co. KGaA, as Combined Management Report of KWS SAAT SE & well as the related audit report by the independent Co. KGaA and the KWS Group (Group Manage- auditor (Section 111 (2) Sentence 4 of the German ment Report), including the accounting reports, Stock Corporation Act (AktG)) as part of a limited and awarded them its unqualified audit certificate. assurance engagement. In addition, the auditor concluded that the audit of the financial statements did not reveal any facts The Audit Committee convened on Septem - that might indicate a misstatement in the Declara- ber 9, 2022, to discuss the annual financial state- tion of Compliance issued by the personally liable ments of KWS SAAT SE & Co. KGaA and the partner and the Supervisory Board in accordance KWS Group’s consolidated financial statements for with Section 161 of the German Stock Corporation the 2021/2022 fiscal year and accounting, along Act (AktG) with respect to the recommendations with the Combined Management Report. The inde- of the “Government Commission for the German pendent auditor for fiscal 2021/2022 explained the Corporate Governance Code.” The Non-Financial results of its audit of the annual financial statements Declaration (Section 289b and Section 315b of the and consolidated financial statements. It pointed German Commercial Code (HGB)) in the Combined out that there were no grounds for assuming a Management Report was likewise audited by the lack of impartiality on the part of the independent independent auditor. auditor in its audit. The Audit Committee also dealt with the proposal by the personally liable partner The Supervisory Board received and discussed the on the appropriation of the net retained profit of financial statements of KWS SAAT SE & Co. KGaA KWS SAAT SE & Co. KGaA and recommended that and the consolidated financial statements of the the Supervisory Board approve it. KWS Group and Combined Management Report of KWS SAAT SE & Co. KGaA and the KWS Group, The Supervisory Board also held detailed along with the report by the independent auditor of discussions of questions on the agenda at its KWS SAAT SE & Co. KGaA and the KWS Group and meeting to discuss the financial statements on the proposal on appropriation of the net retained September 26, 2022. The auditor took part in the profit for the year made by KWS SAAT SE & meeting. It reported on the main results of the Co. KGaA, in due time. Comprehensive documents audit and was also available to answer additional and drafts were submitted to the members of the questions and provide further information for the 10 To Our Shareholders | Report of the Supervisory Board Annual Report 2021/2022 | KWS GroupSupervisory Board. According to the report of the independent auditor, there were no material weak- nesses in the internal control and risk manage- ment system in relation to the accounting process. There were also no circumstances that might raise concerns about a lack of impartiality on the part of the independent auditor. The independent auditor did not provide any additional services. In accordance with the final results of its own exam- ination, the Supervisory Board endorsed the results of the audit and of the audit of the Non-Financial Declaration, among other things as a result of the preliminary examination by the Audit Committee, and did not raise any objections. The Supervisory Board gave its consent to the annual financial statements of KWS SAAT SE & Co. KGaA submitted by the personally liable partner, and to the consol- idated financial statements of the KWS Group and the Combined Management Report of KWS SAAT SE & Co. KGaA and the KWS Group and recom- mended that the Annual Shareholders’ Meeting on December 6, 2022, approve the annual financial statements of KWS SAAT SE & Co. KGaA prepared by the personally liable partner. The Supervisory Board also endorsed the proposal by the personally liable partner to the Annual Shareholders’ Meeting on the appropriation of the net retained profit of KWS SAAT SE & Co. KGaA after having examined it. The Supervisory Board expresses its thanks to the Executive Board and all employees of the KWS Group for their commitment and contribution to the successful further development of KWS in the past fiscal year. Einbeck, September 26, 2022 Dr. Drs. h. c. Andreas J. Büchting Chairman of the Supervisory Board KWS SAAT SE & Co. KGaA Report of the Supervisory Board | To Our Shareholders 11 KWS Group | Annual Report 2021/2022KWS on the Capital Market Stock markets and share performance KWS’ share was not able to buck this trend, Global stock markets proved very robust up to falling by around 20% in fiscal 2021/2022. It the end of 2021, despite the ongoing COVID-19 stood at €55.80 at the end of June 2021 (previous pandemic and rising inflation. Leading stock year: €69.40). The average trading volume per day indexes worldwide reached new highs in the wake on XETRA fell from around 9,000 shares to approxi- of massive economic stimulus programs and central mately 7,700. banks’ expansionary monetary policy. The DAX recorded a new all-time high of 16,272 points on Employee Stock Purchase Plan January 5, 2022. For more than 30 years KWS has offered its employees the chance to become shareholders However, global stock markets suffered heavy in the Company and thus share in its success. losses in the first half of 2022 against the back- 594 (592) employees in nine (eight) European drop of growing risks from the significant rise in countries participated in this year’s Employee inflation, Russia's invasion of Ukraine and tighter Stock Purchase Plan and purchased a total of monetary policy. The DAX closed at 12,784 points 68,998 (76,120) shares. The acquired shares are on June 30, 2022, well down from the previous year subject to a lock-up period of four years. They (15,531). The SDAX, on which the KWS share is cannot be sold, transferred or pledged during this listed, fell by around 26% to stand at 11,881 on the period. As in previous years, the shares used for balance sheet date (previous year: 16,021). the Employee Stock Purchase Plan were acquired in accordance with Section 71 (1) No. 2 of the German Stock Corporation Act (AktG). More details have been published in information released for the capital market and can be viewed on our website at www.kws.com. The KWS share’s performance over ten years 400% 350% 300% 250% 200% 150% 100% 50% July 1, 2012 KWS DAX SDAX +148% +97% +36% June 30, 2022 KWS on the Capital Market 12 To Our Shareholders | KWS on the Capital Market Annual Report 2021/2022 | KWS Group Shareholder structure at June 30, 2022 (33,000,000 shares) Free float 30.9% 69.1% Families Büchting, Arend Oetker, Tessner (thereof 15.4% Tessner Beteiligungs GmbH) Planned appropriation of profits Key figures for the KWS share (Xetra®) In view of the Company’s good performance, ISIN the Executive and Supervisory Boards will again Share class propose a dividend of €0.80 (0.80) per share for Number of shares fiscal year 2021/2022 to the Annual Shareholders’ Index Meeting on December 6, 2022. €26.4 (26.4) million would thus be distributed to KWS SAAT SE & Co. KGaA’s shareholders. This corresponds to a dividend payout ratio of 24.5% (23.9%), once again in line with the KWS Group’s earnings-oriented policy of paying a dividend of 20% to 25% of its net income. Closing price June 30, 2022 June 30, 2021 High and low High (November 15, 2021) Low (March 7, 2022) DE0007074007 Non-par 33,000,000 SDAX in € 55.80 69.40 in € 76.50 56.10 Average trading volume in shares/day 2021/2022 2020/2021 7,687 9,203 Market capitalization in € millions June 30, 2022 June 30, 2021 1,841 2,290 KWS on the Capital Market | To Our Shareholders 13 KWS Group | Annual Report 2021/2022 14 To Our Shareholders | KWS on the Capital Market Annual Report 2021/2022 | KWS Group 2. Combined Management Report 2021/2022 of the KWS Group 2.1 Fundamentals of the KWS Group 2.1.1 Business Model 2.1.2 Branches 2.1.3 Responsible Business Activity 2.1.4 Objectives and Strategy 2.1.5 Control System 2.1.6 Fundamentals of Research & Development 2.2 Research & Development Report 2.3 Economic Report 2.3.1 Business Performance 2.3.2 Earnings, Financial Position and Assets 2.3.3 Segment Reports 2.4 EU Taxonomy 2.5 Environmental Report 2.5.1 Product Innovations 2.5.2 Product Quality and Safety 2.5.3 Emissions & Water 2.6 Employee Report 2.6.1 Employment Trends 2.6.2 Occupational Health and Safety 2.6.3 Recruitment & Employee Loyalty 2.6.4 Qualification, Further Training and Development 2.6.5 Labor and Social Standards 16 16 18 18 19 21 22 23 26 26 29 33 43 44 44 45 46 49 49 49 50 51 53 2.7 Corporate Governance 2.7.1 Corporate Governance and Declaration on Corporate Governance 2.7.2 Declaration of Compliance in Accordance with Section 161 AktG (German Stock Corporation Act) 2.7.3 Business Ethics & Compliance 2.7.4 Responsibility in the Supply Chain 2.7.5 Remuneration Report 2.7.6 Explanatory Report of the Personally Liable Partner (KWS SE) of KWS SAAT SE & Co. KGaA in Accordance with Section 176 (1) Sentence 1 AktG (German Stock Corporation Act) on the Disclosures in Accordance with Section 289a (1) and Section 315a (1) HGB (German Commercial Code) 2.8 Social Report 2.8.1 Use of Genetic Resources and Intellectual Property 2.8.2 Social Commitment 2.9 Opportunity and Risk Report 2.9.1 Opportunity Management 2.9.2 Risk Management 2.10 Forecast Report 2.10.1 Changes in the KWS Group’s Composition that are Significant for the Forecast 55 55 55 55 57 58 58 61 61 62 63 63 65 77 77 2.10.2 Forecast for the KWS Group’s Statement of 77 Comprehensive Income 2.10.3 Forecast for the Segments 2.11 Report on KWS SAAT SE & Co. KGaA and Non-Financial Declaration (Declaration Based on the German Commercial Code (HGB)) 2.11.1 KWS SAAT SE & Co. KGaA 2.11.2 Combined Non-Financial Declaration for the KWS Group 78 79 79 80 KWS on the Capital Market | To Our Shareholders 15 KWS Group | Annual Report 2021/2022 2. Combined Management Report The Combined Management Report comprises aspects of sustainability reporting in addition to content related to finan- cial reporting. Our objective is to illustrate the relationship between ecological, social and financial factors and highlight their impact on our long-term commercial success. We refer to the report aspects required under Sections 289b et seq. and Sections 315b et seq. of the German Commercial Code (HGB) in our “Non-Financial Declaration” on page 80. The contents of the Non-Financial Declaration were not audited as part of the audit of the annual and consolidated financial statements, but underwent a voluntary external examination by an auditor. They are indicated by the acronym . The Combined Management Report also includes voluntary components that are not audited separately. These are indicated by footnotes. 2.1 Fundamentals of the KWS Group 2.1.1 Business Model The Corn Segment is the KWS Group’s largest Since it was founded in 1856, KWS has specialized segment in terms of net sales. It covers breeding, in breeding, producing and distributing high-quality production and distribution of seed for corn and seed for agriculture. From its beginnings in sugar- sunflowers, as well as production and distribution beet breeding, KWS has evolved into an innova- of soybeans. Its operating performance depends tive, international supplier with a broad portfolio largely on the spring sowing season in the northern of crops. The Company covers the complete value hemisphere. This means the lion’s share of the chain of a modern seed producer – from developing segment’s net sales is generated in the second half new varieties, multiplication and processing, to of the fiscal year (January to June). The segment marketing of the seed and consulting for farmers. generates a lower share of its revenue in the first KWS’ core competence lies in breeding new, two quarters, mainly from corn and soybean seed in high-performance varieties that are adapted to South America. KWS is the market leader for silage regional needs, such as climatic and soil conditions. corn in Europe. Targeted breeding of resistances against fungi or viruses, for example, also enables a significant The Sugarbeet Segment comprises sugarbeet reduction in the use of chemical pesticides in seed breeding, production and distribution, as well agriculture. Every new variety delivers sustainable as the development of diploid hybrid potatoes. added value for our customers. KWS’ business KWS’ high-quality sugarbeet varieties are consis- model is based on this added value – which is ulti- tently some of the highest-yielding in the industry. mately attributable to breeding progress, optimiza- KWS is the world market leader in sugarbeet seed, tion of seed quality and pinpointed consulting. not least thanks to many innovations. Its main sales markets are the European Union, Eastern Europe, Organization and segments of the KWS Group North America and Turkey, where the Company In fiscal 2021/2022, the KWS Group’s operational offers farmers efficient solutions for growing business consisted of five Business Units, which sugarbeet in the shape of locally adapted, multiple- were grouped in the four product segments Corn, resistant varieties. Sugarbeet is sown in the spring, Sugarbeet, Cereals and Vegetables. The Business which means that net sales in this segment are Units Sugarbeet, Cereals and Vegetables are iden- likewise largely generated in the second half of the tical to the segments of the same name. The Corn fiscal year (January to June). Segment contains the Business Unit Corn Europe/ Asia and the Business Unit Corn Americas. 16 Combined Management Report | 2.1 Fundamentals of the KWS Group Annual Report 2021/2022 | KWS GroupThe Cereals Segment includes breeding, produc- Main business processes tion and distribution of seed for rye, wheat, barley KWS’ breeding processes are geared toward and rapeseed. Rye accounts for the largest share exploiting plants’ potential as much as possible of revenue from cereals (around 40%), followed and leveraging that potential to tackle the major by rapeseed, wheat and barley. KWS generates challenges of modern sustainable agriculture. the remainder from other crops such as sorghum, Whether it is plants for producing food, fodder or peas, catch crops (e.g., mustard) and oats. Farmers energy, conventional, organic or genetically modi- in KWS’ core markets (Germany, Poland, the UK, fied: KWS offers its customers a broad portfolio of France and Scandinavia) predominantly sow cereals high-performance varieties. It takes an average of seed in the fall. Consequently, the segment gener- eight to ten years to breed a new variety. Thanks ates most of its revenue in the first half of the fiscal to its large network of breeding and trial stations in year (July to December). all the world’s key markets, the Company can test the individual candidates under a wide range of The Vegetables Segment comprises vegetable climatic and local conditions to determine whether seed breeding, production and distribution. KWS is the varieties are suitable for cultivation. In most the world leader in spinach seed, which accounts markets, variety development ends in an official for around 60% of the segment’s net sales. Its approval process in which candidates have to meet portfolio also includes seed for beans, Swiss chard, high quality standards, usually in three-year field red beet and tomatoes. The segment generates just trials. Seed multiplication in selected cultivation about half its revenue in the U.S. KWS’ strategic regions also takes up to two years. Only then can objective is to build a significant position in the the varieties be marketed via the various distribution vegetable seed market long-term. Our focus apart channels. from spinach is on the world’s five most important crops in this segment: tomatoes, peppers, cucum- Products, markets and external factors bers, watermelons and melons. KWS offers its customers – farmers – a broad range of agricultural crops that have been adapted by Apart from the operating segments, there is also breeding to the conditions of their specific loca- Corporate, a segment which by and large does tion. They include corn, sugarbeet, the cereals not conduct any operational activities. Its relatively rye, wheat and barley, oil plants such as sunflower low net sales come from the revenue from our own and rapeseed, catch crops, and alternative protein farms in Germany, France and Poland. Since the sources with a highly promising future, such as KWS Group’s basic research expenditure and costs soybeans, peas and oats. Since KWS entered the for administrative functions are charged to the vegetable business, its portfolio has also included Corporate Segment, its income is usually negative. spinach, tomato and bean seed. In addition to distributing seed, its consultants are also on hand There were no significant changes in the to offer farmers advice on choosing and cultivating KWS Group’s composition and organization in varieties. Moreover, we offer expert consulting with fiscal 2021/2022. More details on the net sales and our digital services and on our website. income contributed by the segments, including our joint ventures, can be found in our segment reports Our breeding and seed multiplication activities are starting on page 33. subject to weather influences that cannot always be quickly compensated for with countermeasures. Economic policy decisions in the agricultural industry, which is strongly regulated worldwide, may also impact our business. You can find more details on the external factors in our Opportunity and Risk Report on pages 63 to 76. 2.1 Fundamentals of the KWS Group | Combined Management Report 17 KWS Group | Annual Report 2021/2022Breeding and test activities of the KWS Group in over 70 countries Breeding stations Test locations for trial cultivation 2.1.2 Branches 2.1.3 Responsible Business Activity * KWS SAAT SE & Co. KGaA is the parent company Mission and principles of the KWS Group. Strategic management of all As a company with a tradition of family owner- of KWS’ global activities is pooled under its roof. ship, we think across generations. Apart from It is headquartered in Einbeck, Germany, and our corporate objectives, responsible business controls breeding of the KWS Group’s range of activity with regard to people and the environment varieties. It conducts basic research, produces and is therefore a firmly entrenched principle of how distributes sugarbeet and corn seed, and is home we run our company. As a profitable company that to a number of central functions. There are also acts sustainably, we have the necessary entre- currently 87 subsidiaries and associated companies preneurial stability and freedom to operate largely in 34 countries. You can find a detailed breakdown independently of short-term interests. of net sales by region on page 30. An overview of our subsidiaries and associated companies can be Guidelines found in the Notes on pages 140 to 143. Our guiding principles define the framework for our everyday work, so that we are able to create sustainable and profitable growth for our customers, employees and investors. Our strategic decisions and day-to-day actions in operational business are guided by the following company principles: 18 Combined Management Report | 2.1 Fundamentals of the KWS Group * Not an audited part of the Combined Management Report Annual Report 2021/2022 | KWS Group We leverage genetic potential through As part of the strategic planning we updated in outstanding research and top-class breeding fiscal 2021/2022, we have honed our fundamental programs. business model and the strategic contributions a We supply our farmers with seed of the very best seed company makes to these future topics with quality. regard to long-term megatrends and classified them We aim to be a strong partner that earns the trust into fields of growth that are to support KWS’ future of our customers. success: We create entrepreneurial freedom and help people unfold their talents. Sustainable Agricultural Practices: products and services that address climate change and promote We also have a central policy framework (Group sustainability in agriculture Standards) with which we create a common under- standing of the freedoms and decision-making Connected Seeds: solutions that generate added processes within the KWS Group. The Group value for farmers by linking our seeds with digital Standards are continuously improved by means of offerings constant monitoring and feedback. They comple- ment our existing guiding principles, with the Future Sales Models: more e-commerce offer- objective of preserving KWS’ unmistakable profile, ings to expand distribution channels and enable also against the backdrop of the Group’s increasing personalized addressing of customers internationalization. 2.1.4 Objectives and Strategy growing market of plant proteins as the basis for Nutritional Food Ingredients: innovations for the Our strategic planning is the foundation for the KWS sustainable food. Group’s further development. It defines strategic objectives, initiatives and core measures for existing We expect the successful implementation of this activities and for potential new fields of business. strategic agenda to further boost KWS’ growth. The planning is based on a long-term horizon (ten years) and includes an analysis and assessment of Corporate objectives of the KWS Group market trends, competitors and the KWS Group’s Sustainable solutions for agriculture have always position. Strategic planning is carried out regularly been the foundation and driver of our business on a rolling basis. model. We use them as the basis for deriving our objectives, which form the framework for all divi- sions and strategic decisions: independence, profit- able growth, constant innovation and sustainability. 2.1 Fundamentals of the KWS Group | Combined Management Report 19 KWS Group | Annual Report 2021/2022The KWS Group’s medium- and long-term objectives Main strategic subject areas Explanation Profitable growth An average increase in consolidated Page 26 et seq. net sales of at least 5% p.a. EBIT margin ≥ 10% A dividend payout ratio of 20% to 25% of the KWS Group’s net income for the year Page 26 et seq. Page 138 (Notes) Innovation R&D intensity of at least 17% of Page 23 consolidated net sales Independence Retention of a control structure shaped by the family owners Page 58 et seq. Sustainability Implementation of the KWS Sustainability Ambition 2030 Page 43 et seq. (NFD) and Sustainability Report 2021/2022 Profitable growth Sustainability is vital for our future development. Long-term is and always will be both an obligation and an profitable growth ensures we can retain our opportunity for us. Agriculture faces huge chal- commercial freedom of action. We strive to increase en ges globally. They include the world’s growing net sales by an average of at least 5% p.a. and population, the increasingly severe consequences achieve an EBIT margin of at least 10%. of climate change and the preservation of biodi- Innovation versity and natural resources. Innovations in plant breeding play a key role in tackling these drives our business model. The need for innovative challenges. technology in plant breeding continues to increase. Climate change, significant population growth and With our KWS Sustainability Ambition 2030, we changes in eating habits, where alternative protein clearly define the framework for the focus of KWS’ sources are growing in importance, pose chal - sustainable development – economically, ecologi- enges for us. In addition, digitization is playing a cally and socially – in the coming years. greater and greater role in agriculture. In the year under review, we devoted around €286 million to Guided by the principle that “sustainability in research & development, and thus once again a agriculture begins with seed,” we pursue concrete significant share of our net sales. We are tackling goals. these challenges with this spending and regard it as an investment in future growth. We refer you to the 2021/2022 Sustainability Report and to our homepage www.kws.com for details of Independence our sustainability program. has always been a key corporate objective for KWS. It is part of the shared values held by our customers Our business developed largely in line with our and employees. Our independence and long- strategic objectives in the year under review. We term orientation enable us in particular to invest deal with this and other details regarding the in research & breeding projects with an eye to the achievement of our objectives in the respective future. sections, which are referred to in the table on the corporate objectives. 20 Combined Management Report | 2.1 Fundamentals of the KWS Group Annual Report 2021/2022 | KWS Group1 Farm-to-Fork-Strategie 1 Farm-to-Fork-Strategie KWS Sustainability Ambition 2030 Safeguard food production Enhance crop diversity Improve operational footprint 1.5% annual yield gain for farmers through progress in plant breeding and digital farming solutions on > 6 million hectares Increase number of crops with dedicated breeding programs from 24 to 27 Reduce scope 1 and 2 emissions by 50% until 2030 and to net-zero by 2050 Establish score cards to provide transparency on ecological footprint of all seed production sites Minimize input required Support sustainable diets Foster social engagement Enable > 50% reduction of chemical crop protection (in line with European Farm to Fork Strategy). Invest > 30% p.a. of R&D budget into reduction of inputs > 25% of KWS varieties are suitable for low input cultivation > 40% of KWS varieties are suitable for predominantly direct use in human nutrition Min. 1% EBIT p.a. into social projects Measurement and continuous improvement of employee engagement Continuous decline in the number of occupational accidents/illness ratio 2.1.5 Control System The planning is compared every quarter with the Detailed annual and medium-term operational plans Company’s actual business performance and the are used to control the Group and our Business underlying general conditions. If necessary, we Units. The medium-term plan covers the time frame initiate suitable countermeasures and make adjust- of the annual plan and the three subsequent fiscal ments. We update the forecast for the current fiscal years. It is thus an anchor point for our strategic year at the end of every quarter. At the end of each planning, which covers a timescale of ten years. fiscal year, all the units conduct a detailed variance The targets set in the annual planning (“top-down to optimize the quality of our planning assumptions. analysis of the planned and actual results. It serves target”) are arrived at on the basis of the strategic planning, results achieved, regional economic Controlling is responsible for coordinating and and legal situation, anticipated macroeconomic documenting all planning processes and our current trends and assessments of the Company’s position expectations. It reports on compliance with adopted in the market and the potential product perfor- budgets and analyzes the efficiency and cost- mance. In a subsequent bottom-up process, effectiveness of business processes and measures. which also includes the development of our joint Controlling and the Business Partner Finance also ventures, we use these premises to plan figures for advise our decision makers on economic optimi- sales volumes and net sales, breeding activities, zation measures. In particular, the heads of the production capacities and quantities, the alloca- product segments, the regional directors and the tion of resources (including capital spending and heads of research & breeding activities and the personnel), the level of material costs and internal central functions are responsible for the content of charge allocation and the resultant balance sheet the planning and current forecasts. data, along with the financial budget. In principle, part of the planning documentation is also an The Executive Board uses various indicators for opportunity/risk assessment, which every manager planning, controlling and monitoring the business must conduct for his or her unit. performance of the KWS Group and its operating 2.1 Fundamentals of the KWS Group | Combined Management Report 21 KWS Group | Annual Report 2021/2022units. The main indicators for the KWS Group are governance in accordance with Section 289f of net sales, operating profitability (EBIT margin) and the German Commercial Code (HGB) contains R&D intensity 2. KWS’ product segments, which detailed information on the extensive and close are divided into Business Units, are in turn geared cooperation between the Executive Board and toward the main indicators of net sales and EBIT the Supervisory Board and has been published at margin. All cross-segment costs for the KWS www.kws.com/corp/en/company/investor-relations/ Group’s central functions and research expenditure corporate-governance. are charged to the Corporate Segment; the key performance indicator for controlling here is EBIT. 2.1.6 Fundamentals of Research & Development The objective of KWS’ research & development Management and control work is to create high-performance varieties The Company is a partnership limited by shares that meet various environmental and application (KGaA). The personally liable partner is responsible requirements and deliver continuous value added for the tasks of running the business of a partner- to farmers. They include absolute yield, as well ship limited by shares. The Company’s sole person- as issues such as yield stability, resistance to ally liable partner is KWS SE, whose Executive diseases, resource efficiency, cultivation charac- Board is therefore responsible for management of teristics or constituent properties. We accordingly the Company’s business. continue to invest in expanding our research & breeding capacities. The rights and obligations of the Supervisory Board at a partnership limited by shares differ greatly from Plant breeding is a very research-intensive and those at a stock corporation (AG) or a European long-term business. It takes an average of eight Company (societas Europaea or SE). In particular, to ten years to develop a new, high-performance the Supervisory Board at a partnership limited by variety. As part of this, the new varieties are shares does not hold personnel responsibility as adapted to the specific environmental conditions regards management; moreover, it cannot appoint of their target markets. Our breeders are assisted any further personally liable partners and define the in that by a global network of various breeding and contractual terms and conditions for them, enact trial stations. This means candidate varieties can be bylaws for the Executive Board, or define business tested under the location-specific conditions of their transactions requiring its consent. target markets over several years. The Annual Shareholders’ Meeting of a partnership By applying leading-edge breeding methods, which limited by shares basically has the same rights as are continually optimized by the use of molecular the Annual Shareholders’ Meeting of a stock corpo- biology, IT or technical approaches, KWS has ration or SE. It also adopts resolutions on whether created sustainable progress in yields for decades. to approve the Company’s annual financial state- The Company also increases genetic diversity ments and ratify the acts of the personally liable by new crossings, which is vital to improving partner. Certain resolutions adopted by the Annual crops. We contribute to sustainable agriculture Shareholders’ Meeting of a partnership limited by by continuously improving yields, minimizing the shares also require the approval of the person- use of resources, increasing varietal diversity and ally liable partner. The declaration on corporate supporting sustainable nutrition. 2 R&D expenditure as a % of net sales 22 Combined Management Report | 2.1 Fundamentals of the KWS Group Annual Report 2021/2022 | KWS Group2.2 Research & Development Report Key research & development figures R&D employees 1 Share of R&D employees relative to the total workforce R&D expenditure R&D intensity 2 Variety approvals 3 1 Average headcount 2 As a % of net sales 3 Previous year’s figure adjusted avg. in % in % 2021/2022 2020/2021 1,834 1,669 35.8 286.4 18.6 486 34.5 252.2 19.3 494 +/- 9.9% – 13.6% – –1.6% Innovative seed plays a key role in tackling climate particular, countries in Eastern and southeastern change and enabling sustainability in agriculture. Europe are now affected by significant climatic With its 1,834 (1,669) employees and 486 (494) changes with prolonged dry periods. In view of that, variety approvals worldwide, KWS’ research & we are developing grain corn varieties with lower development organization made important contribu- losses in yield under drought stress as part of a tions to achieving those goals in fiscal 2021/2022. special research and breeding program. We can now offer KWS HYPOLITO, for example, a medi- Our R&D activities focus on four main areas: um-late variety that exhibits excellent performance securing food production through higher agricultural and yield stability under drought stress conditions. yields, minimizing the use of resources, increasing varietal diversity and supporting sustainable The results from the official performance tests nutrition. As part of the KWS Sustainability Ambi- across regions, locations and maturity groups also tion 2030 (see also section 2.1.4 Objectives and point to further growth in our grain corn portfolio in Strategy) we have set ourselves long-term, chal- the coming years. lenging and measurable objectives in these areas. Sugarbeet: Two powerful technologies There are also numerous current examples of combined – CONVISO ® SMART and CR+ how KWS’ research & development helps deliver CONVISO® SMART and CR+ are two success sustainable solutions in agriculture. Some of them stories at KWS. The innovative CONVISO® SMART are presented in this Research & Development system for controlling weeds in sugarbeet culti- Report to illustrate our work. vation has now been successfully launched in 25 markets, achieving a share of up to 60% in some Corn: KWS is growing in the European grain countries. CONVISO® SMART enables a significant corn market with new varieties reduction in the use of herbicides and thus helps In recent years, KWS has continuously increased protect the environment in beet cultivation. its competitiveness in Europe’s major grain corn regions, such as France, Hungary and Romania. In The Cercospora-tolerant CR+ sugarbeet varieties what is still a fairly young market for us, our KWS offer maximum leaf health and a very high level KASHMIR variety is now one of the main corn vari- of performance on fields that are heavily or lightly eties in Europe. The 2022 sowing season confirmed infested by the phytopathogenic Cercospora the strong trend in KWS’ grain corn breeding, fungus. CR+ varieties also have the potential to with numerous new approvals being awarded to significantly reduce the use of chemical fungicides. high-performance varieties in the medium-early to medium-late market segment. The infestation pressure from Cercospora is also very high in many regions where we are enjoying Our portfolio now also includes grain corn vari- market success with CONVISO® SMART. To enable eties that are better adapted to climate change. In our CONVISO® SMART customers to benefit 2.2 Research & Development Report | Combined Management Report 23 KWS Group | Annual Report 2021/2022from the breakthrough in Cercospora resistance Peas and oats: Big chance for small crops breeding, too, we are now combining both technol- KWS sees great potential in the coming years ogies in one product. Initial variety candidates with for what have been regarded as “small” crops both traits have already been developed and will to date, such as peas and oats, which will gain be tested for the first time in official approval trials in importance as people move toward a more in 2022. plant-based diet. Rye: New varieties to defend against ergot We started breeding yellow grain peas back in One major focus in our cereal breeding is on the 1980s and are now the leader in France, the protection against ergot. The ergot fungus is a most important European market for peas. It takes parasite that grows on plant ears and mainly affects an average of about seven years – from the initial rye and triticales. When a plant is infected during crossing to market maturity – to develop new pea flowering, black resting structures called sclerotia varieties. KWS cultivates trial fields for this purpose are formed, especially when little pollen is avail- in numerous countries, including the U.S., Canada, able due to variety traits or poor weather. Ergot Lithuania and Spain. In the future, we intend to sclerotia contain toxic alkaloids that can cause further expand breeding activities and focus on severe poisoning symptoms in humans and animals optimizing specific traits, such as protein concen- if consumed. Stricter limits on maximum levels tration and flavor. of ergot sclerotia and alkaloids for rye intended for consumption will apply in the European Union Demand for oats also continues to rise. The high- beginning in 2024. This makes protection against fiber cereal has many positive properties for human ergot even more important for rye farmers, and we nutrition and is not only consumed in the traditional expect demand for our varieties with very high ergot form of flakes or bars, but is also increasingly used resistance to increase. as oat milk and in producing meat substitutes. In addition, oats are a summer cereal and therefore In recent years, we have expanded our R&D activi- of interest to farmers because they can expand ties aimed at improving ergot resistance in rye and the crop rotation and help suppress weeds. This supplemented our PollenPlus® technology with crop therefore contributes to greater sustainability additional pollen shedding genes through breeding. in agriculture. KWS has been successful for many The result is varieties such as KWS GATANO or years in breeding leading oat varieties, with a KWS TREBIANO, which exhibit greatly increased focus on France. Given the increased move toward pollen shedding and therefore have exceptionally plant-based nutrition, KWS will expand its breeding good ergot resistance. Our breeding success can program to markets such as Germany and the UK in also be seen in the shape of KWS TUTOR, a variety the future. that gained approval in 2021. It impresses with one of the best ergot resistances compared to the other Vegetables: New breeding stations start varieties examined in official tests. In the coming operating years, we will continue to expand the proportion of KWS made important progress in vegetable rye varieties with greatly increased pollen shedding breeding in the last fiscal year. In Brazil and Mexico, in order to meet growing demand. we are working intensively to establish our own breeding stations. We have taken out a long-term lease on 13 hectares of land near Uberlândia in the Brazilian state of Minas Gerais, and construction work has commenced there. 24 Combined Management Report | 2.2 Research & Development Report Annual Report 2021/2022 | KWS GroupIn the focus of our research & development is the green peach aphid – a carrier of numerous plantpathogenic viruses. Alongside this, our local breeding team has Research: More disease resistance – launched activities relating to tomatoes, peppers, less chemical pesticide melons and watermelons. The first variety candi- Insect pests are a growing challenge for agricul- dates for watermelons and melons are expected ture. They can either damage plants directly or act as early as fiscal 2022/2023. In Mexico, KWS has as vectors for plant diseases. Increasing regu- acquired ten hectares of land near Culiacan to latory restrictions on the use of chemical pesti- set up its own breeding station and drive tomato cides have intensified the trend away from using breeding there. A pepper breeding program for the them to protect crops. KWS is therefore pursuing Mexican market is also being prepared. new approaches to reduce the use of pesticides, yet safeguard yields in a more sustainable way. In the center of European vegetable breeding near Expansion of our phytopathology (plant diseases) Almería, in Spain, we have acquired a 14.5-hectare unit is of key importance in this context. We took site to build a breeding station with trial areas and the first step in the last fiscal year by expanding offices. The location’s focus will be on breeding insect breeding capacities. Insect-borne yellowing tomatoes, cucumbers and peppers. viruses that infect sugarbeet are a focus here. In the coming years, we will expand capacities to include We also pressed ahead with expanding our further insects, crop species and fungal diseases. research capacities. KWS is establishing a cell In addition to sugarbeet, our activities center on culture laboratory at Wageningen, in the Nether- rapeseed, corn and cereals. The goal is to provide lands. The research lab is scheduled to start work resistance breeding with the data needed to select at the beginning of the new fiscal year and will resistant varieties throughout the year and in a high- support our vegetable breeding activities with inno- throughput process. vative technologies. 2.2 Research & Development Report | Combined Management Report 25 KWS Group | Annual Report 2021/20222.3 Economic Report 2.3.1 Business Performance Exchange rates for main currencies General macroeconomic conditions Fiscal 2021/2022 was again dominated by global challenges. In Europe and the U.S., government support programs and catch-up effects in connec- tion with the COVID-19 pandemic led to a significant recovery in economic output. At the same time, inflationary tendencies intensified as a result of expansionary monetary policy and disruptions to supply chains. Rate on balance sheet date 06/30/2022 06/30/2021 Argentina 131.27 113.68 Brazil UK Russia Turkey Ukraine USA 5.51 0.86 53.86 17.52 30.78 1.05 5.89 0.86 86.20 10.36 32.30 1.19 Russia’s invasion of Ukraine in February 2022 and In addition, if a country is suffering from hyperin- the subsequent international sanctions sparked a flation, this erodes the value of its currency and is further appreciable rise in the prices of raw mate- thus a relevant factor for KWS’ business. According rials in particular, such as fossil fuels and agricul- to the International Financial Reporting Standards, tural goods. At the end of the period under review, hyperinflation must be reflected in the accounts in the rate of inflation was 8.6% in the European Union relation to countries where the cumulative infla- and 9.1% in the U.S. tion rate has exceeded 100% over the past three years. That has been true of Argentina since fiscal The export-driven economies of Brazil and Argen- 2018/2019. However, it has also applied to Turkey tina, our main markets in South America, benefited since the year under review. from rising demand for agricultural and industrial products. In Brazil alone, a year-on-year increase General conditions in the agricultural sector in agricultural cultivation area of around 6% is The agricultural sector underwent far-reaching assumed in 2021/2022. At the same time, high changes in fiscal 2021/2022. Prices for key agri- vaccination rates against the coronavirus allowed cultural raw materials, such as corn, soybean and economic and social activities to be largely wheat, rose sharply in the period under review (see maintained. the chart), reaching all-time highs. This trend was reinforced by Russia’s invasion of Ukraine, as both KWS’ international orientation means that changes countries are considered major exporters of agricul- in exchange rates impact our key economic figures. tural products. The following overview shows the changes in the most important currencies for KWS relative to Commodity Price Data the euro: 200% 175% 150% 125% 100% 75% 50% July 2021 June 2022 Corn Soybeans Wheat Source: World Bank 26 Combined Management Report | 2.3 Economic Report Annual Report 2021/2022 | KWS Group In connection with the war in Ukraine and the The higher prices for agricultural raw materials also possible loss of agricultural exports, the United impact the production costs of seed companies Nations, among others, fears the outbreak of food such as KWS. This particularly affects the costs crises and starvation in the poorest countries of of external seed multiplication. In some cases – Africa and the Middle East. Although a large part of depending on the contractual arrangements – they the agricultural area in Ukraine was able to be culti- are directly linked to the prices on international vated in the spring of 2022, there is a risk that crops commodity markets. cannot be harvested or exported if the hostilities continue. Guidance versus actual business performance of the KWS Group Climate-related crop failures also exacerbated Due to the overall economic and sector-specific the availability of key agricultural raw materials on uncertainties, there were significant changes to our the world market in the period under review. For estimates for 2021/2022 as a whole in the course of example, a lengthy heat wave in Canada in the the year. They can be seen in the table below. summer of 2021 led to a 27% drop in the cereal harvest, and even a 43% fall for wheat. The KWS Group’s consolidated net sales rose by more than 17% to €1,539.5 million and were thus Given the significantly higher purchase prices for well above the forecasts made during the year. The agricultural raw materials, farmers can expect R&D intensity was 18.6%, within the forecast range higher income in the current growing season and of 18% to 20%. had a strong incentive to expand cultivation area. At the same time, their costs for fertilizers, pesticides The EBIT margin was 10.1% and was thus below our and other operating resources also rose signifi- original forecast. During the year, we had assumed cantly during the year under review. a lower margin due to uncertainties in the wake of Russia’s invasion of Ukraine, price increases and volatile currencies (including the effects of adjustments due to hyperinflation in Argentina and Turkey). Guidance versus actual business performance of the KWS Group Results in 2020/2021 Guidance for 2021/2022 Adjustments to the guidance during the year Results in 2021/2022 Annual Report 2020/2021 Semiannual Report Ad hoc release as at 03/04/2022 9M Report Net sales €1,310 million R&D intensity EBIT margin 19.3% 10.5% 5–7% 18–20% ca. 10% 9–11% 18–20% ca. 10% 6–8% 18–20% 8–9% ca. 10% 18–20% 8–9% €1,540 million 17.5% 18.6% 10.1% 1 1 EBIT margin since FY 2021/2022 excluding net exchange rate gains or losses from financing activities of the KWS Group 2.3 Economic Report | Combined Management Report 27 KWS Group | Annual Report 2021/2022Summary of the segments’ course of business Net sales in the Vegetables Segment, in which and comparison with the guidance ¹ the activities of Pop Vriend Seeds, the vegetable Net sales in the Corn Segment rose sharply by seed company acquired effective July 1, 2019, 20.9% to €935.4 (774.0) million, in particular due are consolidated, fell to €54.3 (58.2) million in the to further expansion of business in South America, year under review. The segment’s net sales were and were thus in line with our guidance (sharp therefore lower than stated in the updated guidance increase). in the 9M Quarterly Report for 2020/2021 (net sales at the level of the previous year). At the beginning of A sharp increase in the cost of sales, expansion the fiscal year, we still assumed that net sales would of our business in Brazil and negative impacts increase sharply. Restrictions due to the corona- from the war in Ukraine weighed on the segment’s virus, poor weather conditions in seed multiplication income, which fell to €57.2 (71.3) million. Lower in New Zealand and strong competition necessi- contributions to earnings from the joint venture tated adjustments during the year. AgReliant due to product-mix effects also had a negative impact. The segment’s EBIT margin fell As a result of the course of business and from 9.2% to 6.1%, in line with the updated guid- the planned expansion of our breeding activ- ance of a decline in the EBIT margin we issued in ities, the segment’s income fell slightly the 9M Quarterly Report for 2020/2021 (previously: to €–18.5 (–18.1) million. Excluding effects from at the level of the previous year). the purchase price allocation as part of company acquisitions, the segment’s income declined Net sales in the Sugarbeet Segment rose by to €0.6 (7.9) million. As forecast in the 9M Quarterly 12.2% to €588.4 (524.3) million, in line with our Report for 2020/2021, the EBIT margin was conse- updated guidance in the Semiannual Report quently below that of the previous year. At the 2021/2022 (sharp increase, previously: at the level beginning of the year, we had expected a significant of the previous year). The significant expansion of improvement in it, but that did not materialize due to business is attributable to the market success of the above-mentioned effects. innovative CONVISO® SMART and CR+ varieties. The EBIT margin in the Sugarbeet Segment was Revenue (albeit slight) from our farms in Germany, 33.1% and was thus, as forecast, at the level of the France and Poland is grouped in the Corporate previous year (33.3%). Segment. Since all cross-segment costs for the KWS Group’s central functions and research Net sales in the Cereals Segment rose sharply expenditure are still charged to the Corporate by 13.0% to €216.4 (191.2) million and were thus in Segment, its income is usually negative. The line with the updated guidance in the Semiannual segment’s income fell to €–97.7 (–92.0) million, Report 2021/2022 (sharp increase, previously: slight mainly due to positive exchange rate effects from increase). This positive trend was mainly driven by financial instruments reported in the previous year growing business in rapeseed, rye and wheat seed. and higher research expenditure due to reclas- The segment’s EBIT margin likewise rose sharply to sification, and was thus in line with the guidance 13.6% (11.1%) and was thus in line with the updated (“around €–100 million”). guidance in the Semiannual Report 2021/2022 (sharp increase, previously: slight increase). 1 Including equity-accounted companies. Details on the segments’ business performance and their economic environment can be found in the segment reports. 28 Combined Management Report | 2.3 Economic Report Annual Report 2021/2022 | KWS Group2.3.2 Earnings, Financial Position and Assets Earnings Condensed income statement in € millions Net sales EBITDA EBIT Net financial income/expense Result of ordinary activities Income taxes Net income for the year Earnings per share EBIT margin 2021/2022 2020/2021 1,539.5 1,310.2 252.4 155.1 –16.9 138.1 30.4 107.8 230.9 137.0 5.2 142.2 31.6 110.6 +/– 17.5% 9.3% 13.2% – –2.9% –3.8% –2.5% in € in % 3.27 3.35 –2.6% 10.1 10.5 – Strong net sales growth, low exchange rate accounted for 32.1% (27.3%) of our total net sales. effects as a whole Revenues from our North American and Chinese The KWS Group increased its net sales sharply in equity-accounted companies are only included the year under review to €1,539.5 (1,310.2) million at the segment level (see our segment reporting or by 17.5% compared with the previous year. While starting on page 33). the Corn, Sugarbeet and Cereals Segments posted double-digit growth, net sales from vegetable seed Sharp increase in EBITDA and EBIT declined. Overall, exchange rate effects had a small The KWS Group’s operating income before deprecia- impact throughout the fiscal year due to counter- tion and amortization (EBITDA), including effects from acting trends. While we benefited considerably leases and hyperinflation, increased in fiscal 2021/2022 from changes in the value of the Brazilian real and by 9.3% to €252.4 (230.9) million, while operating the US dollar, high inflation in Turkey resulted in a income (EBIT) rose by 13.2% to €155.1 (137.0) million. significant depreciation of the Turkish lira against The increase was mainly due to the pleasing perfor- the euro. mance of the Sugarbeet and Cereals Segments. The EBIT margin was 10.1% and thus almost matched the The Corn and Sugarbeet Segments accounted for previous year’s figure (10.5%). a major share of total net sales, namely 43.7% and 38.2%, respectively, (40.3% and 40.0%). The share The KWS Group’s cost of sales rose sharply by of the Cereals Segment in the year under review 21.7% to €694.3 (570.7) million in the year under was virtually constant at 14.1% (14.6%). The Vege- review against the backdrop of the strong expan- tables Segment accounted for 3.5% (4.4%) of total sion of business, higher prices for agricultural raw net sales. materials and higher inventory write-downs. The cost of sales ratio was therefore 45.1% (43.6%). The region where we generated most of our busi- ness was Europe, which accounted for 61.6% of net Selling expenses rose by 15.2% to sales (Germany: 16.3%). The share of net sales in €281.3 (244.2) million and thus less strongly North and South America increased sharply, mainly than net sales. The selling expense ratio due to the expansion of business in Brazil, and therefore improved slightly to 18.3% (18.6%). 2.3 Economic Report | Combined Management Report 29 KWS Group | Annual Report 2021/2022Net sales by region Total net sales €1,539.5 million 1 Rest of world 7% North and South America 32% 16% Germany 45% Europe (excluding Germany) Net sales by segment Total net sales €1,539.5 million 1 Corporate 1% Vegetables 4% Cereals 14% 43% Corn 38% Sugarbeet 1 Without sales of our at-equity-accounted consolidated companies Research & development expenditure Net income for the year and earnings per share rose by 13.6% in the period under review at the level of the previous year to €286.4 (252.2) million; the R&D intensity was Our net financial income/expense is made up of the 18.6% and thus at the high level of the previous net income from equity investments and the interest year (19.3%). result. In addition, realized and unrealized foreign exchange differences from financing activities Administrative expenses rose only slightly by 4.0% were reported within net financial income/expense to €132.2 (127.1) million, among other things due to for the first time in the year under review. The the phase-out of expenditure on the transformation net exchange loss amounted to €11.5 million. Net project ONEGLOBE (optimization of the adminis- income from equity investments includes the earn- trative functions and processes). The administra- ings from equity-accounted joint ventures, which tive expense ratio thus improved significantly to decreased to €7.7 (17.4) million, in particular due 8.6% (9.7%). to AgReliant’s weak operating performance. The interest result fell slightly to €–13.1 (–12.2) million. The balance of other operating income and other Net financial income/expense declined sharply operating expenses fell to €9.7 (21.1) million, in to €–16.9 (5.2) million particular due to exchange rate effects. The related on the back of these effects. individual items are explained in detail in the Notes on pages 107 to 108. Earnings before taxes remained stable at €138.1 (142.2) million. Income taxes were €30.4 million compared with €31.6 million in the previous year, giving a tax rate of 22.0% (22.2%). Overall, the KWS Group generated net income of €107.8 (110.6) million in the year under review. Given that the number of shares is 33,000,000, earnings per share were €3.27 (3.35). 30 Combined Management Report | 2.3 Economic Report Annual Report 2021/2022 | KWS Group Financial situation Selected key figures on the financial position in € millions Cash and cash equivalents Net cash from operating activities Net cash from investing activities Free cash flow 2021/2022 2020/2021 203.7 100.3 –90.9 9.4 222.7 168.3 –84.2 84.2 Net cash from financing activities –28.4 34.9 +/– –8.5% –40.4% – – – Securing the KWS Group’s financial flexibility, The main focus of the KWS Group’s capital enabling its profitable growth and preserving its spending in the year under review was again on independence are the core tasks of our financial erecting and expanding production and research & management. Among other things, we ensure that development capacities. A sugarbeet seed by extensive liquidity planning, monitoring of cash production plant was completed in Russia. Invest- flows, and hedging the risk of interest rate changes ments were also made in warehouses in Italy and and currency risks. The main financial instruments Germany. Expansion of drying and production used by the Group in the fiscal year, apart from a capacities for corn seed was continued in South syndicated credit line, were in particular borrowers’ America, especially in Brazil. Investments were notes and commercial papers with different loan also made in new breeding capacities in Spain. periods and terms. Further tranches of the loan Across all segments, investments were made in from the European Investment Bank (EIB) to fund office and laboratory equipment and in IT systems, research & development were also utilized. The among other things. Total capital spending in fiscal maturity profile of the Group’s borrowings has a 2021/2022 (excluding acquisitions, interest received broad spread, with a high proportion of medium- and noncash additions) totaled €93.5 (81.3) million. and long-term financing. Depreciation and amortization increased as planned In order to secure KWS’ growth, we also consider the option of a capital increase in exceptional The free cash flow was €9.4 million compared cases, for example to fund a further large with €84.2 million in the previous year, due to an in the year under review to €97.4 (93.8) million. acquisition. increase in working capital requirements. The net cash from financing activities was €–28.4 million, The net cash from operating activities decreased well below the figure for the previous year significantly to €100.3 (168.3) million, due in partic- (€34.9 million); this was mainly attributable to the ular to the increase in working capital as part of repayment of loans. Cash and cash equivalents fell the expansion of business in South America. In slightly to €203.7 (222.7) million. Brazil in particular, trade receivables increased sharply due to the high growth and longer payment periods customary in the market. Inventories likewise increased further against the backdrop of our growth targets. The net cash from investing activities totaled €–90.9 (–84.2) million in fiscal 2021/2022. 2.3 Economic Report | Combined Management Report 31 KWS Group | Annual Report 2021/2022Capital expenditure by segment Total capital expenditure €93.5 million 1 Corporate 20% Vegetables 10% Cereals 7% 28% Corn 35% Sugarbeet 1 Without capital expenditure of our equity accounted companies Capital expenditure by region Total capital expenditure €93.5 million 1 Rest of world 2% North and South America 19% 39% Germany 40% Europe (excluding Germany) 1 Without capital expenditures of our at-equity-accounted consolidated companies Assets Equity increased to €1,245.9 (1,053.7) million, The KWS Group’s balance sheet is impacted by the mainly as a result of the positive net income for seasonal nature of our business. In the course of the year and effects from currency translation for the year, there are usually balance sheet items that subsidiaries and the remeasurement of defined differ significantly from the corresponding figures benefit plans. The equity ratio rose to 47.0% at the balance sheet date, in particular in relation to (44.3%). working capital. The fall in noncurrent liabilities to €814.2 (839.0) mil- Total assets at June 30, 2022, were lion is attributable to higher interest rates used in €2,651.8 (2,376.7) million. The rise was mainly remeasurement of pension commitments. attributable to an increase in current assets as a result of the expansion of business in South America; Trade payables increased sharply, among other they totaled €1,329.0 (1,111.0) million, with trade things due to the expansion of business in South receivables rising to €518.5 (449.5) million. Inven- America. Contract liabilities increased as a result tories increased sharply to €354.6 (266.6) million, of payments on account received for the upcoming mainly due to the planned business expansion and sales season in Eastern Europe. As a conse- higher prime costs in seed multiplication. quence, current liabilities likewise rose sharply to €591.7 (484.0) million. Noncurrent assets increased to €1,318.8 (1,265.0) mil- lion. The increase in property, plant and equipment as Net debt (long-term and short-term borrowings from part of our investing activities in the Corn, Sugarbeet banks less cash and cash equivalents) increased and Corporate Segments is mainly offset by depreci- to €521.9 (475.6) million. ation of property, plant and equipment and amortiza- tion of intangible assets identified as part of company acquisitions. 32 Combined Management Report | 2.3 Economic Report Annual Report 2021/2022 | KWS Group Condensed balance sheet in € millions Assets Noncurrent assets Current assets Assets held for sale Equity and liabilities Equity Noncurrent liabilities Current liabilities Total assets 2.3.3 Segment Report 06/30/2022 06/30/2021 +/– 1,318.8 1,329.0 4.0 1,265.0 1,111.0 0.7 1,245.9 1,053.7 814.2 591.7 839.0 484.0 2,651.8 2,376.7 4.3% 19.6% – 18.2% –3.0% 22.3% 11.6% Reconciliation with the KWS Group are therefore lower than the total for the segments. The KWS Group’s consolidated financial state- The earnings contributed by the equity-accounted ments are prepared in accordance with the Inter- companies are instead included under net financial national Financial Reporting Standards (IFRS). income/expense. Our equity-accounted compa- The segments are presented in the Management nies are included proportionately in the segment Report in line with our internal corporate controlling reports in line with our internal corporate controlling structure in accordance with GAS 20. The main structure. difference is that we do not carry the revenues and costs of our equity-accounted companies in the The difference from the KWS Group’s statement of statement of comprehensive income (in accordance comprehensive income is summarized for a number with IFRS 11). The KWS Group’s net sales and EBIT of key indicators in the reconciliation table: Reconciliation table in € millions Net sales EBIT Number of employees avg. Capital expenditure Total assets Segments Reconciliation KWS Group 1,802.8 165.7 5,507 98.9 2,776.9 –263.3 –10.6 –387 –5.4 –125.1 1,539.5 155.1 5,120 93.5 2,651.8 The reconciliation between the KWS Group’s state- ment of comprehensive income and the reporting by segments in fiscal 2021/2022 is impacted by our equity-accounted companies in the North American and Chinese corn markets. This applies to all key figures in the table above, with the main influences coming from North America. 2.3 Economic Report | Combined Management Report 33 KWS Group | Annual Report 2021/2022Corn Corn Segment General industry-specific conditions: Prices for Production of agricultural goods in Brazil, our most agricultural raw materials remain high important sales market in Latin America, again grew The general economic conditions for the Corn on the back of strong global demand. Corn cultiva- Segment were still positive in the year under tion area there rose by around 9% year over year. review as sales prices for agricultural raw mate- rials and, related to that, demand for high-quality The segment’s performance: Sharp rise in net seed remained high. Although Russia’s invasion of sales; earnings decline Ukraine and general inflation meant that farmers’ The Corn Segment again grew its net sales sharply input costs, such as for energy, fertilizer, pesticides by 20.9% to €935.4 (774.0) million in the year and seed, increased (in some cases sharply), profit under review. The South America region, where per hectare remained relatively high. The COVID-19 net sales increased by more than 70%, made a pandemic only had a regional impact on agricultural major contribution to this. In addition to significant production, such as in China. volume effects, we were also able to raise our The U.S. saw a significant shift in cultivation area movements. In Brazil’s important winter season from corn to soybean, as higher fertilizer costs (safrinha), we supplied the second-largest variety made it advantageous for some farmers to grow and were thus able to expand our market share. In soybean due to its lower nitrogen requirements. Europe, we achieved sales growth of around 7% prices and benefited from favorable exchange rate 34 Combined Management Report | 2.3 Economic Report Annual Report 2021/2022 | KWS Groupin a highly competitive environment, while corn development expenditure increased above- cultivation areas declined due to the war in Ukraine. proportionately as a result of the expansion of our In particular, our high-performance hybrid grain corn Brazilian business. Lower contributions to earnings varieties again performed positively, enabling us to from the joint venture AgReliant due to product mix further strengthen our market position in this area effects also had a negative impact. The segment’s and gain market share overall. Sunflower in partic- EBIT margin fell from 9.2% to 6.1%. ular recorded the largest increase in cultivation area in the EU 27, due to the shortage of vegetable oils. Investments in further growth KWS has only been able to gain a slight share of The segment’s capital spending was €32.0 (28.7) mil- growth in the sunflower market so far. We expect to lion in the year under review. Alongside routine launch new, high-performance varieties in 2023. Net maintenance measures, the main focus was on sales of our U.S. joint venture AgReliant increased the renewed expansion of our production and by around 3% in local currency terms, mainly on processing plant in Brazil. Having increased our the back of higher sales volumes of soybean seed. annual capacity from 900,000 to more than two In China, our business declined slightly against the million units in 2019, we now plan to expand it to backdrop of the restrictions due to the coronavirus. more than four million units by fiscal 2026/2027. In Europe, we invested in particular in expanding our A sharp increase in the cost of sales and negative breeding capacities, for example for sunflower in impacts from the war in Ukraine weighed on the France. We also expanded our seed processing segment’s income, which fell to €57.2 (71.3) million. operations in Romania and Ukraine. In addition, selling expenses and research & Key figures in € millions Net sales EBITDA EBIT EBIT margin Capital expenditure Capital employed (avg.) ¹ ROCE (avg.) ² 2021/2022 2020/2021 935.4 95.8 57.2 6.1 32.0 788.9 7.2 774.0 106.1 71.3 9.2 28.6 694.6 10.3 +/– 20.9% –9.7% –19.8% – 11.9% 13.6% – in % in % 1 Capital employed (average capital employed) = (quarterly figures at the reporting date for intangible assets + property, plant and equipment + inventories + trade receivables – trade payables) / 4 2 ROCE = EBIT / capital employed (avg.) 2.3 Economic Report | Combined Management Report 35 KWS Group | Annual Report 2021/2022 Sugarbeet Sugarbeet Segment General industry-specific conditions: While cultivation area in the European Union and Recovery in sugar prices; cultivation area stable North America declined slightly, it rose slightly in Against the backdrop of growing global sugar Eastern Europe and the other markets. demand coupled with lower availability, world prices for raw and white sugar continued to rise during the The segment’s performance: Net sales fiscal year, reaching multiyear highs. In particular, and EBIT grow sharply below-average harvests in Brazil, the world’s largest The segment’s net sales increased sharply by sugar producer, contributed to the supply shortage. 12.2% to €588.4 (524.3) million due to the great The prices paid for sugarbeet also increased as a growing faster than the market and again under- consequence of higher sugar prices, offering favor- scoring KWS’ leading position in the global sugar- able conditions for growing it. After a lengthy phase beet seed market. success of innovative KWS varieties. We are thus of decline globally, cultivation areas for sugarbeet remained stable overall in the period under review. 36 Combined Management Report | 2.3 Economic Report Annual Report 2021/2022 | KWS GroupEurope is the segment’s most important market, The segment’s income rose to €195.0 (174.7) million accounting for 59% (59%) of total net sales, on the back of the positive net sales. followed by North America with 31% (32%). Strong demand for CONVISO® SMART – an inno- were higher selling expenses (+10%) and increased vative system for controlling weeds – again drove research and development expenditure (+15%). The our growth in the past fiscal year. These varieties EBIT margin was 33.1% and thus at the level of the While gross profit was much higher (+13%), there are now available in 25 countries and accounted for previous year (33.3%). 19%, and thus a significant share, of the segment’s net sales. CONVISO® SMART enables stable yields We are continuing to invest strongly in expanding in sugarbeet cultivation while reducing the use of our breeding programs so that we can continue to pesticides, thus making a concrete contribution to provide sugarbeet growers with innovative seed sustainable agriculture. in the future. The focus is on solutions to combat disease or insect infestation and to enable effective Our new varieties with Cercospora tolerance (CR+) weed control. proved to be another growth driver. Against the backdrop of the growing spread of Cercospora, a Important capital spending projects completed leaf disease that reduces yields in sugarbeet culti- We completed extensive, multiyear capital spending vation, our CR+ varieties saw very strong demand in projects in fiscal 2021/2022. The PIA (Production only their second year on the market. The new vari- Extension and Innovation Einbeck) project, in which eties were initially available only in some markets in we are expanding our seed production plant in the past sowing season. We plan to introduce CR+ Einbeck, was completed in early 2022. In addition, varieties gradually in other markets moving ahead. we put a production plant in Russia into operation in January 2022. The segment invested a total of €32.4 million compared to €26.5 million in the previous year. Key figures in € millions Net sales EBITDA EBIT EBIT margin Capital expenditure Capital employed (avg.) ROCE (avg.) 2021/2022 2020/2021 588.4 216.1 195.0 33.1 32.4 386.5 50.4 524.3 192.8 174.7 33.3 26.5 357.9 48.8 +/– 12.2% 12.1% 11.6% – 22.3% 8.0% – in % in % 2.3 Economic Report | Combined Management Report 37 KWS Group | Annual Report 2021/2022 Cereals Cereals Segment General industry-specific conditions: Sharp Given the significantly higher purchase prices for increase in prices for agricultural products agricultural raw materials, farmers can expect The industry environment in the period under review higher income in the current growing season and was characterized by significant price increases for had a strong incentive to expand cultivation area. agricultural products. After first being impacted by At the same time, their costs for fertilizers, pesti- declining harvests, prices reached long-term highs cides and other operating resources also rose following the outbreak of the Ukraine war, as Russia significantly during the year under review. and Ukraine are considered major exporters of agricultural raw materials. For example, the price of The segment’s performance: High growth in wheat, one of the world’s most important cereals, net sales and earnings increased from around €200 to approximately Net sales at the Cereals Segment rose sharply by €350 a ton on the Euronext exchange in the course 13.2% to €216.4 (191.2) million. This positive result of the year under review, reaching an all-time high was mainly driven by strong growth from rapeseed of €450 a ton in May 2022. There were also similar seed. That business was boosted by 42%, in partic- price rises for other important agricultural raw ular on the back of favorable market conditions and materials. an improved performance by the variety portfolio. 38 Combined Management Report | 2.3 Economic Report Annual Report 2021/2022 | KWS GroupThe largest increases were achieved in our core While gross profit increased (+13%), there were – markets of Germany and France. as planned – higher selling expenses (+8%) due Our rye seed business also performed very well, further increased our research and development to numerous growth initiatives. In addition, we particularly in Germany, increasing by 4%. Demand expenditure (+10%). for rye seed is underpinned by the increasing use of rye in fodder and its high yield stability under dry The focus of our research and development work conditions. Sales volumes of rye seed set a new in the year under review remained on breeding record in the year under review, enabling us once high-performance varieties and their resource again to underscore our leading position in this efficiency. market segment. Rye seed business accounts for around 40%, and thus a significant share, of the KWS aims to continue growing on the back of segment’s net sales. hybrid rye seed. In particular, the Eastern Europe and North America regions offer additional potential Net sales from wheat seed business increased by here. around 7% thanks to positive market conditions, with the biggest growth being recorded in Germany, Another focus is on breeding hybrid seed for wheat France and the UK. However, net sales from barley and barley. The Company also pressed ahead with seed were slightly below the level of the previous its breeding programs for sorghum, wheat in the year. U.S., new rapeseed varieties in Europe and alterna- tive protein sources with a highly promising future, There was a sharp increase in net sales from busi- such as peas and oats. ness with sorghum, a type of millet adapted to hot and dry climatic conditions, mainly due to higher Investment in breeding and production sales volumes in Brazil. continued The segment’s income rose sharply by 39% review was €6.6 (7.3) million and thus on a par with to €29.5 (21.3) million thanks to the pleasing level of the previous year. The main focus of investment net sales. The EBIT margin increased to 13.6% and activity was again on expanding and modernizing was thus well above the level of the previous year production plants, in particular in Germany and The segment’s capital spending in the year under (11.1%). Key figures in € millions Net sales EBITDA EBIT EBIT margin Capital expenditure Capital employed (avg.) ROCE (avg.) France, and modernizing breeding stations. 2021/2022 2020/2021 216.4 39.2 29.5 13.6 6.6 156.6 18.9 191.2 30.7 21.3 11.1 7.3 147.3 14.5 +/– 13.2% 27.7% 38.5% – –9.6% 6.3% – in % in % 2.3 Economic Report | Combined Management Report 39 KWS Group | Annual Report 2021/2022Vegetables Vegetables Segment General industry-specific conditions: The segment’s performance: Net sales and Challenging market environment earnings lower year on year The general conditions for vegetable seed were Net sales in the Vegetables Segment, in which again challenging in the year under review. While the activities of Pop Vriend Seeds, the vegetable restrictions caused particularly by the coronavirus seed company acquired effective July 1, 2019, are had recently curbed demand, out-of-home food consolidated, fell to €54.3 (58.2) million in the year consumption in particular recovered significantly in under review. the current year, but did not reach its former level. Higher costs for energy and fertilizers, a shortage Spinach seed again accounted for the largest share of raw materials and disruptions in supply chains of the segment’s net sales, contributing just under aggravated the general conditions in vegetable 60%. While sales in the U.S. recovered slightly, we farming. Far higher retail prices for fruit and vege- recorded declining demand in Europe and Asia. table products also dampened consumer demand. Although there was a noticeable pickup in out-of- home food consumption of spinach, there were also In addition, climate-related challenges have high seed inventories at distributors and intense continued to increase, with heat waves in southern competition. In addition, poor weather conditions Europe and the U.S. and torrential rains in India and during seed multiplication in New Zealand resulted New Zealand resulting in crop failures. in lower product availability. 40 Combined Management Report | 2.3 Economic Report Annual Report 2021/2022 | KWS GroupMoreover, the resistance of our varieties to the Faster expansion of vegetable breeding fungal disease downy mildew, which is widespread KWS made important progress in vegetable in spinach cultivation, was no longer strong enough breeding in the last fiscal year and thus laid the in some regions. In view of this, KWS developed foundation for future growth. In Brazil and Mexico, new mildew-resistant varieties in the year under we are working intensively to establish our own review and will commence production of them in the breeding stations for tomatoes, peppers, melons current fiscal year. and watermelons. The first variety candidates for watermelons and melons are expected as early as Bean seed business, which accounts for around fiscal 2022/2023. 27% of net sales, was robust compared to the previous year. High prices for agricultural raw mate- In the center of European vegetable breeding near rials in Europe partly made the cultivation of beans Almería, in Spain, we have acquired a 14.5-hectare less attractive for some farmers, thus preventing site to build a breeding station with trial areas and further growth in this area. In the year under review, offices. The location’s focus will be on breeding KWS also posted initial net sales from the tomato tomatoes, cucumbers and peppers. breeding activities it acquired in the previous year. We also pressed ahead with expanding our As a result of the course of business and the research capacities. KWS is establishing a planned expansion of our breeding activities, the cell culture laboratory at Wageningen, in the segment’s income fell slightly to €–18.5 (–18.1) mil- Netherlands. The research lab is scheduled to lion. Excluding effects from the purchase price start work in the current fiscal year and will allocation as part of company acquisitions, the support our vegetable breeding activities with segment’s income declined to €0.6 (7.9) million. innovative technologies. Capital spending in the Vegetables Segment increased sharply overall from €1.3 million in the previous year to €9.0 million. Key figures in € millions Net sales EBITDA EBIT EBIT margin Capital expenditure Capital employed (avg.) ROCE (avg.) 2021/2022 2020/2021 54.3 3.0 –18.5 –34.1 9.0 420.4 –4.4 58.2 5.5 –18.1 –31.1 1.3 437.6 –4.1 +/– –6.7% –45.5% –2.2% – – –3.9% – in % in % 2.3 Economic Report | Combined Management Report 41 KWS Group | Annual Report 2021/2022 Corporate Corporate Segment Key figures in € millions Net sales EBITDA EBIT Capital expenditure 2021/2022 2020/2021 8.3 –77.8 –97.5 18.9 6.0 –70.3 –92.0 23.0 +/– 38.3% –10.7% –6.0% –17.8% Net sales in the Corporate Segment to positive effects from financial instruments in totaled €8.3 (6.0) million. This was attributable in the previous year, and to higher research expen- particular to a price-related increase in net sales at diture due to reclassification. Capital spending our farms in Germany, France and Poland. was €18.9 (23.0) million and thus below that of the previous year. At the same time, since all cross-segment costs for the KWS Group’s central functions and research Alongside general spending on office and labora- expenditure are charged to the Corporate Segment, tory equipment and IT systems, one focus of our its income is usually negative. The segment’s investment activity was the construction of a new income fell to €–97.5 (–92.0) million, mainly due grain storage facility for the farm in Germany. 42 Combined Management Report | 2.3 Economic Report Annual Report 2021/2022 | KWS Group2.4 EU Taxonomy capital expenditures (CapEx) or operating expenses (OpEx) as defined by the EU taxonomy are not The EU is also striving to transform the economy considered material and are therefore not included by specifying “green” investment requirements for in reporting. The taxonomy-eligible activities the capital market. To this end, capital market-ori- classified as non-material each total less than one ented companies such as KWS have been obliged percent of net sales, capital expenditures (CapEx) to report on the nature and scope of ecologically or operating expenses (OpEx) in the fiscal year sustainable economic activities using a predefined 2021/2022. classification system termed the EU taxonomy. All net sales were analyzed internally to determine There is still some easing of this reporting obli- whether they were taxonomy-eligible. Taxonomy- gation for fiscal 2021/2022. The proportions of eligible net sales were determined on the basis business activities regarded as taxonomy-eligible of the relevant business transactions identified. have to be reported. Taxonomy-eligible in this Furthermore, an analysis was performed to deter- context denotes that an activity described by the mine whether the identified revenues can be allo- EU taxonomy is performed by the Company. In turn, cated to revenue in accordance with IFRS. Capital the proportions of taxonomy-eligible activities must expenditures (CapEx) and operating expenditures be reported on using the defined key figures of (OpEx) assigned to taxonomy-eligible activities are revenue, capital expenditure (CapEx) and operating aggregated at the level of the relevant asset items expenses (OpEx). Taxonomy-eligible economic and income statement accounts. activities within the meaning of Article 1 No. 5 of the Delegated Act dated July 6, 2021, supple- As a plant breeding and seed company, our core menting Article 8 of Regulation (EU) 2020/852 are business activities are not currently defined in defined and stipulated in detail for the first two Annexes I and II. Consequently, our revenue-gener- environmental objectives in Annexes I and II to the ating activities are not currently taxonomy-eligible. Delegated Act dated June 4, 2021. The described There were also no material taxonomy-eligible economic activities relate to the environmental operating expenses (OpEx). Non-taxonomy-eligible objectives of climate change mitigation (Annex I) net sales and operating expenses (OpEx) amounted and climate change adaptation (Annex II). Business to €1,539.5 million and €308.9 million, respectively, activities that are not listed in these annexes or that in the 2021/2022 fiscal year. However, there are do not match the descriptions of business activities capital expenditures (CapEx) we were able to assign given there are not taxonomy-eligible. to taxonomy-eligible activities. These activities are all exclusively assigned to the environmental To determine whether activities are taxonomy- objective of climate change mitigation and relate eligible, the Sustainability, Finance and Controlling to transportation by means of passenger cars and departments compared all of KWS’ material busi- light commercial vehicles as well as the renovation ness activities with those defined by the taxonomy and construction of buildings. in Annexes I and II and predefined relevant activities by means of a preliminary analysis focusing on Our capital expenditures (CapEx) in accordance KWS SAAT SE & Co. KGaA. The relevant activi- with the taxonomy 1 in the fiscal year totaled ties were then specifically selected by means of €103.5 million and are disclosed on pages 105 internal screening of the emissions database and and 136 in the Notes for the KWS Group. Of this an external benchmark. To avoid double counting, amount, 26.09% (€27.0 million) was spent as a all activities were evaluated in terms of their impact taxonomy- eligible proportion for transportation on the aspects of climate change mitigation and by means of passenger cars and light commer- climate change adaptation and assigned to one cial vehicles as well as for the renovation and of the two aspects. As part of this, individual construction of buildings. A proportion of 73.91% taxonomy -eligible activities that account for less (€76.5 million) was thus identified as being than one percent (<1%) of KWS’ revenue (net sales), non-taxonomy-eligible. 1 Delegated Regulation (EU) 2021/2139; Annex I; number 1.1.2.1. 2.4 EU Taxonomy | Combined Management Report 43 KWS Group | Annual Report 2021/20222.5 Environmental Report 2.5.1 Product Innovations Initial data for measuring the defined sustainability Every year, KWS develops new varieties that have goals was collected in fiscal 2021/2022. As a result, to meet the differing requirements of its customers, KWS supported farmers on around 1.7 million hect- i.e., farmers, and reflect the conditions at the partic- ares with digital solutions by the end of the fiscal ular location and the regional climate. With our seed year. These solutions can be used to calculate the for sugarbeet, corn, various cereals and vegetables, seed rate for specific subplots or to determine when rapeseed and catch crops, for example, we offer to harvest plants, for example. In addition, 19.8% a broad range of products for conventional and of the R&D budget 1 was invested in breeding and organic farming. developing resource-conserving varieties, enabling them to contribute to a reduction in the use of We continuously work to further develop our agricultural resources such as water, fertilizers or varieties as part of our breeding programs. At the pesticides. KWS had breeding programs for a total start of fiscal 2020/2021, we geared our breeding of 24 crops at the end of the fiscal year. objectives more strongly to sustainability aspects, in particular by defining measurable goals (see Another indicator of our breeding progress, and section 2.1.4 Objectives and Strategy). Our focus in one that has been reported on in previous years, this is on increasing yields by an average of 1.5% a is the number of official variety approvals granted year, as well as on enhancing our varieties’ resource each year. Only varieties that offer a clear improve- efficiency, with the potential that offers for reducing ment in cultivation or further processing (what use of necessary agricultural resources, such as is termed “value for cultivation and use”) over fertilizers and pesticides. We also aim to increase already approved ones can be marketed in the EU, the share of our varieties that are suitable for human for example. We obtained 486 variety approvals consumption and expand our breeding programs worldwide in the fiscal year compared to 494 in the from 24 to 27 crops in order to preserve biodiver- previous year 2. sity. Moreover, we strive to constantly improve the resilience of our varieties so as to further reduce One example of our breeding success is the potential losses due to diseases or extreme envi- following rye and sugarbeet varieties we have ronmental influences. These crop-specific devel- developed. opment objectives are agreed annually between Research, the respective breeding departments, In the past years, we have worked on rye ergot Production and Sales, submitted for the Executive resistance and added further pollen shedding genes Board to decide on and reported to the Supervisory to our PollenPlus technology through breeding. Board. The progress made over the past years is The result is varieties such as KWS GATANO or also examined and reported on regularly as part TREBIANO, which exhibit increased pollen shed- of that. 44 Combined Management Report | 2.5 Environmental Report ding and therefore boast better resistance to the ergot fungus. Our success has also been confirmed by KWS TUTOR, a variety that gained approval in February 2021. It has one of the best ergot resis- tances compared to the other varieties examined in official tests. 1 In R&D controlling, not all research & breeding activities that contribute to reducing the use of resources can be clearly separated from other breeding activities such as increasing yield. Consequently, the key figure includes the actual costs for individual R&D projects and a pro-rata share of the total costs for the breeding programs for corn, cereals and vegetables. This share is based on the ratio reported for sugarbeet, which was approximately 19% for fiscal year 2021/2022. The ratio of the pro-rata R&D costs relative to the total key figure is 52% in the year under review. 2 The previous year’s figure has been revised due to the inclusion of catch crop varieties. Annual Report 2021/2022 | KWS GroupThe infestation pressure from Cercospora is also approval so that biological seed treatments devel- very high in many regions where sugarbeet is oped by us can be offered in additional countries. grown and where we are enjoying market success We also expanded our screening capabilities to with CONVISO® SMART. To enable our CONVISO® identify usable biologicals and are supporting the SMART customers to leverage our Cercospora development of these sustainable applications in resistance CR+, too, we are now combining both academic research partnerships. technologies in one product. Initial variety candi- dates with both traits have already been devel- We intend to expand our portfolio of varieties for oped and will be tested for the first time in official organic farming in the future. As part of this, we approval trials in 2022. Compared to those without hired new personnel with specific expertise in CR+, CR+ sugarbeet varieties boast greater leaf organic farming for our breeding activities and for health coupled with higher yield potential on fields our trial technology in the period under review. that are heavily or lightly infested by the phyto- With a location in Wiebrechtshausen, KWS has had pathogenic fungus. its own site for organic farming in Germany for 20 years. In addition, we are continuously expanding With our KWS FIT4NEXT range of catch crop our trial areas and improving the quality of trials mixtures, we offer farmers in Europe an additional by means of statistical analyses, enabling even element for common crop rotations that they can more precise selection of candidate varieties under use as break crops. Catch crop mixtures containing ecological conditions. legumes can further improve the nitrogen efficiency of the entire crop rotation. The additional nitrogen 2.5.2 Product Quality and Safety that generates reduces the amount of fertilizer We want to supply top-quality seed to our farmers. farmers need, while ensuring a favorable carbon So that we live up to that corporate principle, the footprint. Our catch crop mixtures also help improve entire process from breeding to seed processing soil fertility by binding nitrogen and forming humus, is accompanied by extensive quality testing. KWS which can help protect the climate. In addition, keeps on developing and establishing new tech- other properties of catch crop mixtures, such as nologies, processes and methods for improving preventing erosion, suppressing weeds, reducing product quality and safety. They include X-raying nematodes and increasing the diversity of beneficial sugarbeet seed so as to obtain information on the organisms, enable sustainable and future-oriented seedling’s development or the use of image analysis arable farming. methods in examining germination speed. In addition, we have worked for years on developing We set internal quality requirements, some of biologicals as an alternative or complement to which exceed those demanded by law, such as chemical means of seed treatment. They comprise our QualityPlus standard for cereals. These quality microorganisms such as fungi and bacteria, as assurance measures are flanked by our Group-wide well as substances obtained from plants or micro- Integrated Management System (IMS), in which the organisms. We have treated sugarbeet, rapeseed, various quality management systems are combined. corn and rye seed with biologicals since fiscal The IMS not only comprises our internal rules and 2019/2020. Biological applications for further crops, regulations and extensive process descriptions, such as sorghum, are being developed. In the year but also audit management for controlling our under review, we submitted further applications for internal and external audits. The majority of our 2.5 Environmental Report | Combined Management Report 45 KWS Group | Annual Report 2021/2022German locations hold ISO 9001 (quality manage- A key component of our internal quality manage- ment) certification. Certification in accordance with ment is the annual Management Review Report, ISO 14001 (environmental management) has previ- which is used as the basis for top management to ously focused on our Einbeck location, but is to be confirm the effectiveness of the Integrated Manage- extended in fiscal 2022/2023 to include the German ment System. In addition, there is regular dialogue locations that were likewise already certified under between the person in charge of governance and ISO 9001. The extended certification is expected to the responsible Executive Board member. In the be awarded in August. period under review, interaction between gover- nance and risk management was also intensified, We also hold further external certification. One since the effectiveness of risk mitigation measures example is SeedGuard, an industry-specific stan- is to be reviewed in the future by means of internal dard relating to proper use of seed treatments. audits. Seven treatment facilities in Germany currently 2.5.3 Emissions & Water hold SeedGuard certification. Further locations will As a seed company, KWS is part of the agricul- also be certified moving ahead. A further important tural value chain. For production-related reasons, certificate in the seed industry is the “Heubach seed development, multiplication and processing test,” a quality assurance measure to reduce accounts for a significant proportion of the dust-off in treated seed. In fiscal 2020/2021, the resources the Company uses. KWS uses cold laboratory in Einbeck responsible for sample testing storage cells in sugarbeet research and develop- was awarded this recertification. ment to simulate cold weather dormancy, while an important factor in seed multiplication is to supply Responsible use of genetically modified organisms plants with water and nutrients, as well as the use has always been an important issue. KWS works in of pesticides. Moreover, energy is used in drying compliance with the international “ETS – Excellence and treating seed in the pre-cleaning and further through Stewardship” industry standard, which processing stages. is tailored specifically to this field. Here, too, we apply our quality management maxim “plan-do- In order to minimize the ecological impacts of its check-act”: Documented processes throughout locations and operations, KWS strives to continu- the life cycle, training, defined quality controls, ously improve internal processes, the technologies a network of local contact persons, internal and it uses and internal company standards. The loca- external audits, and a standardized approach to tions themselves are responsible for the concrete handling unforeseen events are key pillars of the application and operational implementation of system. The whole KWS Group has also been certi- resource-conserving measures. Concrete minimum fied in accordance with this standard since 2015, requirements in our global HSE (health, safety and and this certification was confirmed in 2022. environment) management activities ensure that all KWS locations are governed by comparable regulations. We have recorded key consumption indicators for all German locations since fiscal 2008/2009. That process was internationalized in fiscal 2017/2018 and has been continuously expanded since. The internal materiality analysis we conducted in fiscal 46 Combined Management Report | 2.5 Environmental Report Annual Report 2021/2022 | KWS Group2019/2020 focused on the Company’s own emis- sions and water consumption, among other things. As part of its Sustainability Ambition 2030, KWS rolled out scorecards for evaluating internal produc- tion sites, including the processing plants and internal seed multiplication areas, and has already analyzed them for some locations. Our goal is to leverage greater transparency on our production sites in the future, in order to support the choice of sustainable locations and investment planning. New approaches and developments are presented to the Executive Board and discussed as part of the Sustainability Ambition 2030. In addition, the Exec- utive Board and Supervisory Board are informed about progress in sustainability management as part of annual reporting. Agricultural value chain Seed Cultivation Improvement/ processing Trade Consumer industry R&D Multiplication Cleaning Processing Packaging Sales & administration Distribution Farming Consumer KWS activities with high water and energy consumption Emissions Scope 1 emissions are produced directly through In fiscal 2020/2021, we defined quantitative targets the use of resources (such as combustion of gas or for continuously reducing the emissions caused emissions from fertilizing fields). Scope 2 emissions, by KWS. The Company aims to reduce all Scope 1 on the other hand, are caused indirectly by the and Scope 2 emissions it causes by 50% by 2030. purchase of electricity, district heating and district The goal is then to cut them to net zero by 2050 cooling. All emissions are recorded worldwide and in accordance with current, science-based stan- consolidated centrally. That covers all companies dards. The base year for that is fiscal 2020/2021. in which KWS owns a stake of more than 50%, with The Company is aiming at moving ahead to expand the exception of holding companies. In the current the target to include Scope 3 emissions, which are fiscal year, emissions caused by the application of attributable to purchased goods and the use of fertilizer by KWS were included in data collection. services, for example. Total emissions in fiscal 2021/2022 were 70,388 tons of CO2e ¹, of which the parent company KWS SAAT SE & Co. KGaA produced 23,443 tons. 1 The total emissions also include emissions from biomass. 2.5 Environmental Report | Combined Management Report 47 KWS Group | Annual Report 2021/2022resources in construction projects must be exam- ined so that, for example, use of groundwater can Emissions 1 of the KWS Group 2 Delta (%) In tons of CO2e 3 Scope 1 emissions 5 – direct Scope 2 emissions – indirect 2021/2022 2020/2021 4 be reduced further. For example, energy-efficient +10% 41,601 37,657 6 construction of buildings, the use of solar energy, heat recovery from processes and also the use of other heat sources (use of effluents from the sewage treatment plant to generate heat for build- +4% 28,787 27,741 ings) are aspects that are to be pursued in planning and implemented in new buildings. Emissions 1 of KWS SAAT SE & Co. KGaA 2 In tons of CO2e 3 Scope 1 emissions 5 – direct Scope 2 emissions – indirect Delta (%) 2021/2022 2020/2021 4 research buildings, the highest levels of fresh water Alongside water consumption in offices and +2% 15,539 15,280 6 are used in watering the plants at our trial and multi- plication locations. This is necessary so as to create the best-possible conditions for healthy seed and ensure a high yield in multiplication. The water we +3% 7,904 7,699 need is taken from local water supply networks or, 1 Calculated in accordance with the Greenhouse Gas Protocol guidelines and using the location-based method. Does not match the Greenhouse Gas Protocol, as the emission factors used also include emissions from the upstream and downstream value chain if possible in a region, we use groundwater, surface water or rainwater. The issue of water was taken into account in defining the contents of our internal 2 As a rule, the emissions relate to the fiscal year. In individual cases, the consumption figures for the calendar year were used due to lack of availability. scorecards. In the future, we will ascertain whether 3 According to Ecoinvent cut-off 3.8 - IPCC 2013-climate change- GWP 100a-(kg CO2-Eq) per 1 unit of reference product 4 Errors in the previous year’s figures corrected 5 Emissions from fertilizer were calculated in accordance with “Metodologia do GHG Protocol da agricultura” (https://ghgprotocol.org/sites/default/files/stan- dards_supporting/Metodologia.pdf) 6 Emissions from fertilizer application were included for the first time this year, and the previous year’s figures were adjusted accordingly. Water production sites can use renewable water sources and whether sites are located at or within areas of water stress, for instance. A reduction in absolute water consumption is unlikely due to KWS’ growth trajectory and high dependence on the weather. We are currently Water is an important business resource for KWS recording and consolidating our global water as a seed specialist and plant breeder. It is vital in consumption inside the Company. We are striving to every phase of seed production – from research develop a normative key performance indicator for to the finished product that is ready for sale. We water use intensity and suitable auditing systems in believe it is therefore our obligation to maximize the future. eco-friendliness and efficiency in consuming water. Apart from our HSE Guidelines, our internal KWS-specific HSE Manual specifies that we aim to work in a way that conserves resources and to avoid process-related effluents as far as possible. Internal guidelines state that the use of renewable 48 Combined Management Report | 2.5 Environmental Report Annual Report 2021/2022 | KWS Group2.6 Employee Report Over the generations, our employees have made 2.6.2 Occupational Health and Safety KWS what it is today: an innovative, world- The health and safety of our employees at all loca- leading plant breeding company. This is due in tions have top priority for us. We have internal stipu- great measure to their skills, mindsets, ideas and lations that define local and international standards commitment. As a company with a tradition of and communicate statutory requirements transpar- family ownership, we attach importance to a high ently so as to help achieve that objective. degree of personal initiative, personal and profes- sional development, and a work culture marked by One key component is our HSE Guidelines (Health, respect, openness, trust and team spirit. Safety and Environment). It contains consistent regulations on the issues of occupational health 2.6.1 Employment Trends and safety, emergency preparedness, risk preven- The KWS Group employed an average of 5,120 tion and protection of the environment. Examples (4,833) people (excluding seasonal workers) in the that can be cited here include regulations on what fiscal year, a year-on-year increase of around 6%. to do in the event of an emergency, prevention of explosions or procedures relating to emission-pro- A total of 2,294 (2,201), or around 44.8% (45.6%) ducing facilities. Under the HSE Guidelines, a of the workforce, was employed in Germany. workplace risk assessment must be created as Once again, the area that accounted for the most the foundation for all technical, organizational employees was research and development, which and personal measures. This can be used as the made up 35.8% (34.5%) of the total workforce. basis for training and instruction required by law or appropriate to employees’ functions. The Global KWS was again able to offer reliable employment HSE Manager is responsible for developing the conditions worldwide in the third fiscal year under HSE standards further. The currently applicable the coronavirus. It did not resort to short-time work HSE stipulations and updates to them are usually or layoffs due to COVID-19, nor did it stop hiring communicated to the local companies through the employees for key projects. local HSE Managers. The location’s management is responsible for implementing them. Employees by region Number of employees 5,120 Rest of world 193 North- and South America 1,007 2,294 Germany 1,626 Europe (excluding Germany) Employees by function Number of employees 5,120 Administration 863 Distribution 1,384 1,834 Research & Development 1,039 Production 2.6 Employee Report | Combined Management Report 49 KWS Group | Annual Report 2021/2022 In fiscal 2021/2022, we also revised the globally We also revised and expanded central recording applicable HSE Guidelines and specified in more of occupational accidents at the KWS Group. As detail the role of managers in relation to occu- part of this, we rolled out an adapted process pational health and safety for employees. That relating to a new recording system, with the objec- involved new regulations on the issue of entrepre- tive of gaining greater transparency globally on the neurs’ and operators’ duties applicable to Germany. number of accidents and days lost in all areas of the In addition to the globally valid contents of the HSE Company. Moving forward, KWS aims to leverage Guidelines, the associated defined procedures this transparency to measure annual accident rates describe additional occupational health and safety and thus keep on improving employees’ health and obligations for employees who are tasked with safety in the workplace. The accident rate (OSHA ¹ entrepreneurs’ and operators’ duties in relation to incident rate) at the KWS Group ² was 1.2, while that buildings and technical facilities. Employees’ occu- for KWS SAAT SE & Co. KGaA was 1.9. We regret pational health and safety is a subject of continuous to report that an employee in Chile suffered a fatal dialogue between internal specialists and external accident due to storm damage at a copse. (insurance) partners. For example, our non-life insurer conducts multiple risk assessments a year Since February 2022, our HSE activities have at the KWS Group’s locations in order to examine focused in particular on protecting our employees fire and explosion prevention measures, among in Ukraine. Together with local colleagues and in other things, and issues appropriate recommen- intensive cooperation with our HR department, dations if necessary. In the year under review, the KWS employees and their families were supported Einbeck location was awarded the HPR (Highly in relocating within Ukraine and to neighboring Protected Risk) status by our non-life insurer. KWS countries. thus meets a very high industry standard in terms of protection of property and its emergency organiza- 2.6.3 Recruitment & Employee Loyalty tion at this location. As an international company and in view of its growth plans, the KWS Group endeavors to win and Our global and local HSE activities were signifi- keep suitable employees. cantly impacted by crisis management activities in the year under review. In cooperation with an We use digital and traditional channels to reach out incident team, HSE management used a global to potential applicants. This enables us to address pandemic network that had been established each target group specifically, for example on in fiscal 2019/2020 in order to ensure efficient social networks such as LinkedIn, XING, Glassdoor, implementation of consistent internal and external kununu and Facebook. As a result, we were able requirements governing how to deal with the to increase the number of our direct followers (e.g., corona- virus at the Company. The incident team on LinkedIn from around 84,000 in June 2021 to and, in particular, the HSE Manager acted here as around 107,000 in June 2022) by staging targeted the central point of contact within the KWS Group. campaigns (in Berlin, for example) and actively As in the previous year, KWS has been able to publishing job advertisements on these networks. maintain all core processes during the ongoing Apart from using common digital channels, we pandemic. continued to take part in virtual career fairs in fiscal 2021/2022. This gave students the chance to partic- The first internationally planned HSE audits in the ipate in online presentations and – workshops and first half of fiscal 2021/2022 had to be canceled due chat directly with employees. to the COVID-19 pandemic. However, audits exam- ining implementation of the HSE Guidelines were able to be held at multiple international locations in the second half. 1 OSHA incident rate = (number of fatal occupational accidents + incidents involving loss of 1 day or more) * 200,000 / total number of hours worked in the year under review. 2 Excluding the companies KWS Vegetables Italia SRL, Genective USA Corp., Pop Vriend Group, KWS Mexico and KWS Seeds Canada Ltd. 50 Combined Management Report | 2.6 Employee Report Annual Report 2021/2022 | KWS GroupThrough the position of Lead of Global Scientific including the corporate and unit strategy, as well as Affairs, we again engaged in intensive and direct the opportunity to network with each other and with dialogue with universities and research institutes in top management. the field of research and development, in order to deepen our cooperation with them, with the goal of We continue to believe that it is important to take recruiting employees. We also award scholarships the changing individual life circumstances of at universities and offer induction programs. As a employees into account, especially as regards result, we again accompanied many young people organization of their working time. Depending on successfully on their path to gaining vocational their field of activity, we therefore offer various qualifications in the past fiscal year. In Germany, 63 working time models, which allow them to strike (79) trainees were employed in vocational training a good work-life balance. For example, we have and seven (nine) students were on dual courses of developed a global policy that generally permits study in the period under review. mobile working for employees, where that is compatible with their specific activity and in compli- Keeping employees with our company is very ance with local legislation. Where legally and oper- important for us. Our goal is therefore to continu- ationally feasible, we also offer various part-time ously measure employee engagement in the future models on a temporary or permanent basis, as well in order to identify action areas based on the results as the possibility of taking leave in order to care for and to develop measures that will help to further family members, for example. strengthen employee engagement. Our mission is to create the right conditions for them in every In the annual independent rankings by the phase of their employment. As part of onboarding, consulting firm Universum in 2022, KWS came in for example, we attach great importance not only 54th (2020/2021: 43rd) in the area of sciences in the to introducing new employees to their field of list of the 100 most popular employers in Germany. work and assignments, but also communicating Our goal is to be among the top 50 employers again the Company’s values. With this goal in mind, we next year. We aim to achieve that in particular by have developed the “Local Ambassador Program,” attending career fairs and university events, where which is used worldwide. Our “local ambassa- we can present KWS and persuade potential candi- dors” are experienced, committed employees who dates of its great attractiveness as an employer. We organize the local induction events, accompany enhance KWS’ attractiveness as an employer with our new colleagues in their first days and weeks, these measures. and act as contacts for any questions they may have, so that they can feel at home with us from 2.6.4 Qualification, Further Training day one. Parts of our onboarding process, such as and Development the monthly induction events in Berlin or Einbeck, KWS’ long-term commercial success is founded not were held virtually during the COVID-19 pandemic. only on its employees’ commitment and satisfac- In addition, a multi-day International Onboarding tion, but also on their personal skills and profes- and Networking Summit (IONS) is held once a sional qualifications. KWS’ range of education and year specifically for managers who are new to the development offerings is diverse and supports Company or are promoted from their previous various learning objectives. position to a management role. Participants gain extensive insights into all areas of the Company, 2.6 Employee Report | Combined Management Report 51 KWS Group | Annual Report 2021/2022We support our employees with tailored education In the International Development Program (IDP) we and further training measures to help them build on give identified high-potential individuals the oppor- their expertise and abilities. They are generally held tunity to gain experience through cross-functional as in-person or online events, although in-person project work in an international team and to develop training was largely suspended again in the period their management and leadership skills. The under review given the restrictions imposed as a established development program was expanded result of the pandemic. To compensate for that, in the past fiscal year to include a refined selection we kept on expanding our range of online training process using interviews and psychometric tests and continued our cooperation with a large online specifically tailored to this group. This enabled self-study platform. As a result, we can give our more pinpointed selection of the final participants. employees free digital access to various learning The accompanying events were held virtually and in content during the COVID-19 pandemic and person in the past fiscal year. beyond. We are particularly committed to having all In regular in-person or virtual development meet- employees receive qualified leadership and support ings, which are part of the annual performance from their managers. KWS’ existing competence and career development reviews, our employees model, which defines the core competencies of formulate perspectives for their further develop- managers, was developed further in a participa- ment at KWS together with their managers. The tory process over the past two years by means of meetings are to be used not only to jointly agree on interviews and an employee survey and renamed future goals but also to define concrete continuing the “Leadership Capability Model” (LCM). Rollout education and development measures aimed at of the new model is scheduled for fiscal 2022/2023. enhancing employees’ personal and professional The objective of the enhanced model is to support skills and competence. continuous development of the whole organization against the backdrop of an increasingly agile and In addition to the individual performance and dynamic working world, and also to reflect the skills career development reviews between employees that are additionally required. and their managers, we continued our global talent and successor management process in the year We are also continuously expanding the manage- under review. As part of that, we identify talents ment development program we launched at the end up to the fourth tier and critical positions up to of 2018. The new module “Leading Leaders” for the third tier below the Executive Board, in order experienced managers was rolled out in May 2022. to ensure that functions that are critical to KWS’ Around 95 participants completed either the basic success are (re)filled. The Orientation Center (OC), module “Leading Self” or the module “Leading Indi- an intensive evaluation of potential successors for viduals” or began the “Leading Leaders” module in senior management posts, was held annually up to the current period under review. the outbreak of the pandemic, but was suspended in the period under review due to COVID-19. The The development program launched in October concept of the Orientation Center was revised in 2020 specifically for managers in our research and the current fiscal year and it will be staged again development organization was expanded further. at shorter intervals starting in September of fiscal It allows them to acquire management skills that 2022/2023. promote innovation and flexibility in developing 52 Combined Management Report | 2.6 Employee Report Annual Report 2021/2022 | KWS Groupsolutions. Around 200 managers are to take part 2.6.5 Labor and Social Standards in the program over a period of three years. Its As an international, innovation-oriented company contents include issues such as feedback and that aims to keep on growing, we believe that innovation culture, leadership in uncertain times and upholding labor and social standards at KWS and in conflict management. our supply chain is of great importance. To support the further transition to our GLOBE Our global internal labor standards comprise (Global Business Excellence) target structure for technical, organizational and occupational health administrative functions and the related implemen- measures to prevent accidents and diseases at work. tation of the role of Business Partner, we initiated a A major part of that is global, cross-functional crisis Business Partner Academy for KWS Business Part- management, where the prime goal is to ensure the ners in all functions in October 2020 and continued safety of our employees in situations such as the it in the period under review. The Business Partner coronavirus pandemic and the war in Ukraine. Academy comprises development measures aimed at the role of Business Partner and necessary key A crisis team was therefore formed in January 2022. competencies, and focuses on imparting more As a precautionary measure in the event of war in in-depth knowledge of KWS’ business activities. Ukraine, it developed a contingency plan with a Approximately 70 Business Partners have partic- package of measures to support the 164 employees ipated in the academy’s various modules since who work for us at four locations in Ukraine. it was launched. We intend to continue focusing on qualifying and developing our employees and When the war broke out, we set up an interna- managers in the future and will expand our training tional crisis network with appropriate communi- portfolio nationally and internationally to enable this. cation channels so as to be able to keep in daily contact with our employees and offer them the In order to reach high-potential individuals for KWS greatest possible security. In this context, it was at an early stage, a new graduate program for a also important for us to provide the families of carefully selected group of talents entering the labor our employees with assistance, for example by market for the first time was initiated in October establishing a safe point of contact and organizing 2021. The two-year program has two paths: the accommodation as well as supplies. commercially oriented Growing into the Future, with its four six-month rotations in various business and At the same time, we took measures to give our functional areas, and the research-focused Growing employees and their families the best possible with Science, in which participants spend twelve support after leaving Ukraine, including by orga- months within research and four three-month rota- nizing transportation and accommodation and tions in research-related units. Both paths include offering financial assistance. Numerous KWS at least one international rotation. The program will employees from many countries, especially Poland be continued in the future. and Romania, also supported their Ukrainian colleagues in their free time during this difficult period and in some cases took them into their own families. 2.6 Employee Report | Combined Management Report 53 KWS Group | Annual Report 2021/2022KWS is committed to internationally recognized or belief, ethnic origin, age, disability, skin color, human rights standards, such as those of the language or sexual orientation. We have enshrined International Labour Organization (ILO) proscribing this in our Code of Business Ethics, which is child, forced and compulsory labor. To this end, binding on all employees. We believe that the we launched a project in the last year under review diversity of our employees, as displayed in their and expanded it further this year with the aim of individual experience, knowledge, skills and ideas, integrating new internal standards defined in writing is a key value and a competitive advantage. In as well as appropriate measures and controls in our this connection, KWS aims to further increase the supply chains. ratio of female managers. The envisaged targets for KWS SAAT SE & Co. KGaA of 15% in the first The contractual working conditions of employees of management tier and 10% in the second manage- the KWS Group are defined in writing and comply ment tier have already been achieved with local labor and social insurance legislation. The overall compensation package for KWS employees Employees’ interests are represented collectively to takes into account their individual expertise, profes- management by the locally elected Works Coun- sional experience and local market circumstances. cils and the persons entrusted with representing Depending on general local conditions, it consists young people and trainees. We also have a Euro- of a basic salary, social benefits, performance-re- pean Employees’ Committee (EEC), a body that lated payment components (if applicable), benefits represents European employees and is responsible in kind (if applicable) and Employee Stock Purchase for cross-border matters within the EU. In regions Plans (if applicable) where staff can buy shares in where there is no collective employee represen- the Company. Equal pay for the same activities is tative body, we also attach importance to mutual a fundamental principle of our basic compensation respect and dialogue between regional manage- policy. ment and employees. KWS is committed to the principle of non-dis- crimination and to equal opportunities and rights for its employees, regardless of gender, religion 54 Combined Management Report | 2.6 Employee Report Annual Report 2021/2022 | KWS Group2.7 Corporate Governance 2.7.1 Corporate Governance and Declaration on 2.7.3 Business Ethics & Compliance Corporate Governance * The basis of our compliance concept is the imple- Responsible corporate governance has always mentation of our corporate culture. KWS’ values are been of great importance at KWS SAAT SE & Co. practiced when the compliance rules are applied. KGaA. Since it was founded 165 years ago, our Compliance with basic principles of business company’s successful development has been ethics is vital to our license to operate. Accord- based on thinking in the long term and acting in ingly, the compliance rules apply to all employees terms of sustainability. The Executive Board (the in the KWS Group. That is the foundation for KWS’ personally liable partner KWS SE, whose Executive compliance objectives, namely to gain and retain Board is responsible for management of the customers’ trust through ethical conduct and to Company’s business) and the Supervisory Board protect the Company’s employees, reputation run and accompany KWS with the goal of ensuring and assets. Information, training and continuous it creates sustainable value added. They once intensive consulting help integrate compliance in again examined in the year under review whether business processes and support management in the Company complies with the stipulations of the making business decisions rooted in our corporate German Corporate Governance Code and issued culture. the Declaration of Compliance in Accordance with Section 161 AktG (German Stock Corporation Act) Our Code of Business Ethics, with its accompa- to the effect that the Company complies almost fully nying guidelines defining the basic regulations with the code’s recommendations. relating to compliance with the law, fair competition, prevention of corruption and money laundering, You can find detailed information on corporate safety at work, protection of the environment, and governance in our declaration on corporate gover- the need to treat each other, customers, business nance in accordance with Section 289f of the partners, other third parties and public authorities German Commercial Code (HGB), which is available with respect, gives our employees crucial guidance in full on our website at www.kws.com/corp/en/ in their day-to-day work. All employees undertake company/investor-relations/corporate-governance. to comply with the code by signing a commitment The Remuneration Report for fiscal 2021/2022 is to do so when they are hired and are provided with also available there. 2.7.2 Declaration of Compliance in Accordance with Section 161 AktG (German Stock Cor- poration Act) * generally applicable information on compliance, as well as related information specific to their function. Our Code of Business Ethics also covers the issue of international anti-corruption management as The final version of the Declaration of Compliance in an integral part of our compliance system. On the accordance with Section 161 AktG (German Stock basis of the regulations in the code, there is a policy Corporation Act) is available to shareholders on the of zero tolerance toward any form of corruption at website https://www.kws.com/corp/en/company/ the KWS Group, and that principle is stipulated as a investor-relations/declaration-of-corporate-gover- Group-wide standard in the Anti-Corruption Policy. nance.html. This standard applies regardless of whether bribery is prohibited by law, tolerated or permitted in the country in question. The Group-wide Anti-Corrup- tion Policy defines the responsibilities, processes and regulations in relation to preventing corruption and bribery at the KWS Group. * Not an audited part of the Combined Management Report 2.7 Corporate Governance | Combined Management Report 55 KWS Group | Annual Report 2021/2022The Governance, Compliance and Risk Manage- Implementation and observance of individual ment (GCR) unit is the central point of contact for compliance aspects are reviewed as part of questions on our Code of Business Ethics and audits. No significant violations of the international other related issues. It advises all divisions of the Anti-Corruption Policy or antitrust, data protection KWS Group in complying with laws, regulations and or money laundering regulations resulting in disci- internal rules of conduct and controlling their obser- plinary consequences or official measures such as vance. The focus is on the subjects of antitrust law, fines were reported to the compliance function in anti-corruption, prevention of money laundering, the year under review. data protection and capital market law. If an examination or report reveals indications The Compliance Officers regularly provide informa- of a compliance violation, the investigation is tion about the compliance system and its princi- conducted in accordance with KWS’ regulations ples, as well as about frequently asked questions “Procedures of Internal Compliance Notification.” and the latest developments, in training courses, KWS’ employees are obligated to report suspected information events and workshops. Apart from this violations; the open door principle applies to that. information, a broad range of aids is also available Employees can supply information on suspected to our employees. Checklists, toolkits, instructional violations to their supervisor, to the Compliance leaflets and other guides provide practical tips on department or to the Compliance Reporting Plat- observing compliance rules in everyday work. All form. Information can be sent to the platform in any information and rules of conduct can be accessed required language. Reports of suspected violations by employees worldwide in the Compliance Portal can also be submitted anonymously. The reported on KWS’ intranet. Around 80% (81%) of the total cases are investigated by KWS. Whistleblowers workforce has access to the Compliance Portal. In do not suffer any disadvantages unless they have addition, all supervisors are obliged to inform their obviously abused their right to report violations. employees about compliance issues. They receive confirmation that their report has been The entire system for compliance training and asked to provide further information. Finally, whis- workshops was reorganized to enable the events to tleblowers are informed when the investigation has received and may be contacted via the portal and be held online due to global travel restrictions and been completed. home-office regulations. Large on-site workshops were replaced by numerous smaller online events. If suspected cases prove to be violations, the system of sanctions is applied. In general, it can In the year under review, the e-learning course be applied to all types of compliance violations. on anti-corruption and antitrust law was rolled The system of sanctions defines various criteria out further and a total of 2,285 employees were governing the measures to be taken, such as the additionally invited to participate. Of these, 1,658 gravity of the violations, the degree of the person’s (73%) had completed the course by the end of breach of duty, the functional level, behavior after the year under review. In addition, data protection the violation – help in investigating it or attempts training for employees at the EU companies was to cover it up – as well as consequences of the integrated in the e-learning program in the final violation, such as the threat of damage or actu- quarter of the fiscal year. A total of 3,384 staff were ally incurred damage, among other things. The enrolled for the training; 2,332 (69%) of the invited sanctions range from cautions and warnings to employees had completed it by the end of the year immediate dismissal and the filing of charges. under review. Further e-learning modules are being prepared and will be rolled out gradually. 56 Combined Management Report | 2.7 Corporate Governance Annual Report 2021/2022 | KWS GroupThe Executive Board and the Supervisory Board’s Our Sourcing Policy, which defines the funda- Audit Committee are informed once a year about mental principles in the procurement process, and the current status and latest developments of the a largely centralized process landscape are the Compliance Management System. basis for making sure that our purchasing transac- tions worldwide can be conducted in accordance 2.7.4 Responsibility in the Supply Chain with consistent regulations. Purchase agreements Compliance with norms and standards is an integral relating to the supply of goods and services are part of our corporate culture. We also demand the concluded on the basis of standardized templates same from our suppliers and other service providers and specify the general conditions, including appli- (termed “suppliers” in the following). We therefore cation of the Code of Business Ethics for Suppliers. obligate our suppliers to observe our Code of Busi- A central Seed Purchasing Policy also stipulates ness Ethics for Suppliers and abide by its principles that these standards are also to be applied in on ethics and socially responsible conduct. The agreements concluded with external seed multipli- code states, for example, that our suppliers must cation partners. not permit forced labor or child labor and must comply with the regulations on the minimum age KWS has further centralized its supplier data for admission to employment defined in the latest management over the past years. All countries are version of ILO Convention No. 138. They are also to be included in it as part of the centralization of to comply with the provisions on safety at work, administrative functions by the end of 2022. As product safety, protection of the environment and part of supplier onboarding, a cross-unit prelimi- avoidance of corruption, as well as on the require- nary check on various aspects relating to suppliers ment to ensure fair competition and protection of was carried out this fiscal year, with the objective personal data and third-party know-how. of enabling KWS to centrally monitor and track compliance with its standards before any substan- The central sourcing concept aims to support tial business is concluded with a supplier. This standardized and cost-effective cooperation with process will be developed into a more extensive external partners and observance of specific social means of supplier validation that is to be automated or environmental standards. We will also include moving forward. All existing suppliers are screened requirements from the German Supply Chain Due regularly to ascertain whether they are on sanctions Diligence Act, which will be binding on KWS from lists. January 1, 2024, or the expansion of our emissions management to cover Scope 3 emissions in our Due to the COVID-19 pandemic, the audits planned sourcing concept and related purchasing processes for the first time to monitor compliance with the in the future. Initial calculations were conducted Code of Business Ethics for Suppliers could still not during the fiscal year and are expected to be vali- be carried out, but are planned for the future. dated by fiscal 2024/2025. 2.7 Corporate Governance | Combined Management Report 57 KWS Group | Annual Report 2021/20222.7.5 Remuneration Report partnership limited by shares (KGaA). In addition, no The Remuneration Report outlines the principles voting rights accrue to the Company on the basis of and salient features of the compensation systems the shares it holds (Section 71b AktG). for the Executive Board of KWS SE, the managing partner of KWS SAAT SE & Co. KGaA, and its The personally liable partner is not aware of any Supervisory Board. It is no longer part of the Group contractual restrictions relating to voting rights or Management Report. The Remuneration Report transfer of shares. If there are no restrictions on pursuant to Section 162 of the German Stock voting rights, all shareholders who register for the Corporation Act (AktG) for the fiscal year 2021/2022, Annual Shareholders’ Meeting in time and have together with the report on the substantive and submitted proof of their authorization to participate formal audit by the independent auditor, can be in the Annual Shareholders’ Meeting and exercise found on our website at www.kws.com. their voting rights are authorized to exercise the voting rights conferred by all the shares they hold 2.7.6 Explanatory Report of the Personally Liable and have registered. If members of the Executive Partner (KWS SE) of KWS SAAT SE & Co. KGaA in Accordance with Section 176 (1) Sentence 1 AktG (German Stock Corpora- tion Act) on the Disclosures in Accordance with Section 289a (1) and Section 315a (1) HGB (German Commercial Code) Board of the personally liable partner or executive employees of the Company have acquired shares as part of the long-term incentive programs, these shares are subject to a lock-up period until the end of the fifth year after the end of the quarter in The personally liable partner of KWS SAAT SE & which they were acquired. The lock-up period for Co. KGaA provides the following explanation on the shares that employees have acquired as part of the following disclosures in accordance with Section Employee Stock Purchase Plans runs until the end 289a and Section 315a HGB (German Commercial of the fourth year as of when they are posted to the Code): employee’s securities account. Composition of the subscribed capital Direct and indirect participating interests The subscribed capital of KWS SAAT SE & Co. in excess of 10% of the voting rights KGaA is €99,000,000.00 and is divided into The Company has been informed by shareholders 33,000,000 bearer shares. The pro-rata share of of the following direct or indirect participating inter- each share in the capital stock is €3.00. Each share ests in the capital of KWS SAAT SE & Co. KGaA in grants the holder the right to cast one vote at the excess of 10% of the voting rights in accordance Annual Shareholders’ Meeting. The rights of share- with Section 33 and Section 34 of the German holders are governed by the German Stock Corpo- Securities Trading Act (WpHG) or elsewhere. ration Act (AktG) and the Articles of Association. Restrictions relating to voting rights of the persons, companies and foundations or the transfer of shares stated below each exceed 10% and total 69.1%: 1. The voting shares, including mutual allocations, There may be restrictions relating to voting rights or the transfer of shares as a result of statutory or AKB Stiftung, Hanover contractual provisions. For example, shareholders Büchting Beteiligungsgesellschaft mbH, Hanover are barred from voting under certain conditions Zukunftsstiftung Jugend, Umwelt und Kultur, pursuant to Section 136 of the German Stock Einbeck Corporation Act (AktG) in conjunction with Section Dr. Drs. h.c. Andreas J. Büchting, Germany 278 (3) of the German Stock Corporation Act (AktG) RETOKE Holding Vermögensverwaltungs- or Section 44 of the German Securities Trading Act gesellschaft mbH & Co. KG, Bad Schwartau (WpHG); the bars on voting pursuant to Section 285 Tessner Beteiligungs GmbH, Goslar of the German Stock Corporation Act (AktG) must Tessner Holding KG, Goslar also be observed for personally liable partners at a 58 Combined Management Report | 2.7 Corporate Governance Annual Report 2021/2022 | KWS Group2. The voting shares of the persons stated below, Shares with special rights and voting control including mutual allocations and allocations Shares with special rights that grant powers of of voting shares of Dr. Drs. h.c. Andreas J. control have not been issued by the Company. Büchting, Germany, AKB Stiftung, Hanover, There is no special type of voting control for the Büchting Beteiligungsgesellschaft mbH, participating interests of employees. Employees Hanover, Zukunftsstiftung Jugend, Umwelt und who have an interest in the Company’s capital exer- Kultur, Einbeck, and RETOKE Holding Vermö- cise their control rights in the same way as other gensverwaltungsgesellschaft mbH & Co. KG, shareholders. Bad Schwartau, each exceed 10% and total 54.7%: Christiane Stratmann, Germany Dorothea Schuppert, Germany Appointment and removal of management The personally liable partner, KWS SE, is respon- sible for managing the business of KWS SAAT SE & Co. KGaA under Section 7.2 of the Articles of Michael C.-E. Büchting, Germany Association of KWS SAAT SE & Co. KGaA. Annette Büchting, Germany Stephan O. Büchting, Germany In accordance with Section 6 (3) of the Articles Christa Nagel, Germany of Association of KWS SAAT SE & Co. KGaA, the Matthias Sohnemann, Germany personally liable partner shall leave the Company Malte Sohnemann, Germany Arne Sohnemann, Germany if the majority of shares in the personally liable partner can no longer be held directly and/or indi- rectly for a time longer than 30 calendar days by 3. The voting shares of the shareholder named persons who hold a combined total of more than below, including allocations of the persons, 15% of the Company’s capital stock directly and/ companies and foundations named in 1. above, or indirectly through a company that is dependent exceed 10% and total 69.2%: in accordance with Section 17 (1) of the German Hans-Joachim Tessner, Germany accordance with Section 290 (2) of the German Stock Corporation Act (AktG) or is controlled in Commercial Code (HGB). This shall not apply if all 4. The voting shares of the shareholder named shares in the personally liable partner are held by below, including allocations of all the persons, the Company. companies and foundations named in 2. above, exceed 10% and total 55.9%: Furthermore, Section 6 (4) of the Articles of Asso- ciation of KWS SAAT SE & Co. KGaA stipulates Dr. Arend Oetker, Germany that the personally liable partner shall leave the Company if a person who is not a family share- 5. The voting shares of the shareholders named holder (acquiring party) obtains control over the below, including allocations of all the persons, personally liable partner directly or indirectly companies and foundations named in 2. above, (acquisition of control) and does not submit to the exceed 10% and total 54.8%: Company’s limited partners a takeover or manda- Dr. Marie Th. Schnell, Germany otherwise in accordance with the provisions in Johanna Sophie Oetker, Germany the German Securities Acquisition and Takeover Leopold Heinrich Oetker, Germany Act (WpÜG) within three months of acquisition of tory offer in accordance with this provision and Clara Christina Oetker, Germany Ludwig August Oetker, Germany control. 2.7 Corporate Governance | Combined Management Report 59 KWS Group | Annual Report 2021/2022Under Section 6.5 of the Articles of Association of majority of the votes cast and a simple majority of KWS SAAT SE & Co. KGaA, the personally liable the capital stock represented in adoption of the partner shall also leave the Company by means of resolution, unless obligatory statutory regulations termination. Notice of termination shall be given to or the Articles of Association otherwise compel. all the limited partners at the Annual Shareholders’ Meeting. Outside of the Annual Shareholders’ The power to make amendments to the Articles of Meeting, notice of termination shall be given to the Association that only affect the wording (Section Chairperson of the Supervisory Board or his or her 179 (1) Sentence 2 AktG) has been conferred on the deputy. The notice of termination shall be at least Supervisory Board in accordance with Section 22 six months before the end of, and effective the end of the Articles of Association of KWS SAAT SE & of, a fiscal year. Co. KGaA. The other statutory grounds for the personally Powers of the personally liable partner, liable partner leaving the Company shall remain in particular in relation to issuing or buying unaffected. back shares The personally liable partner is authorized, with the The members of the Executive Board of the consent of the Supervisory Board, to increase the personally liable partner, which is responsible for capital stock of the Company in the period up to managing the Company’s business, are appointed midnight on December 15, 2025, once or in install- and removed by the Supervisory Board of the ments by a total of up to €9,900,000.00 by issuing personally liable partner, KWS SE. Pursuant to new shares in exchange for cash contributions Article 46 (1) of Council Regulation (EC) 2157/2001 and/or contributions in kind (Authorized Capital in conjunction with Section 6 of the Articles of 2020). As a matter of principle, shareholders have Association of KWS SE, members of the Executive a subscription right to the shares. The shares can Board are appointed for a maximum period of six also be assumed by one or more credit institutions years. Members may be reappointed. or enterprises within the meaning of Section 186 (5) Sentence 1 of the German Stock Corporation Act Amendments to the Articles of Association (AktG) appointed by the personally liable partner, Amendments to the Company’s Articles of Associ- with the obligation to offer them for subscription ation are made pursuant to a resolution adopted by solely to the shareholders (indirect subscription the Annual Shareholders’ Meeting in accordance right). However, shareholders’ subscription with Section 278 (3) in conjunction with Section rights can be excluded with the consent of the 179 of the German Stock Corporation Act (AktG). Supervisory Board, subject to certain conditions Section 285 (2) Sentence 1 of the German Stock defined in the authorization. Corporation Act (AktG) stipulates that amendments to the Articles of Association require the approval of Significant agreements in the event of a the personally liable partner. change of control, compensation agreements Significant agreements subject to the condition of In accordance with Section 133, Section 179 (2) a change in control pursuant to a takeover bid have of the German Stock Corporation Act (AktG) and not been concluded. The agreements with members Section 18 (1) of the Articles of Association of of the Executive Board of the personally liable KWS SAAT SE & Co. KGaA, a resolution by the partner stipulate that any commitments in the case Annual Shareholders’ Meeting to amend the Arti- of a change in control are limited to the maximum cles of Association must be adopted by a simple amounts specified by the German Corporate Governance Code. 60 Combined Management Report | 2.7 Corporate Governance Annual Report 2021/2022 | KWS Group2.8 Social Report 2.8.1 Use of Genetic Resources and The Breeding Information Circle, which is currently Intellectual Property being developed, is a digital platform for inte- KWS runs a broad network of worldwide stations grating research information on all of KWS’ crops. and trial fields for seed breeding. We test different It enables information currently stored and used in genetic material for the respective application areas individual tools to be linked and aggregated. there. Where this genetic material is used, the rights of the indigenous peoples in all regions the material There is regular dialogue during the year with the originates from must be respected. Executive Board member responsible for research and breeding both in the context of the semiannual KWS is aware of its obligations in this regard and meetings of the ISF and also as and when required. supports the various international access and An annual report to the Executive Board is only benefit-sharing frameworks to protect the rights drawn up if specific issues or incidents have been of indigenous peoples and sustainable use of identified as part of the due diligence process. No biodiversity. Of prime mention in this respect are such incidents were reported in the year under the Convention on Biological Diversity with the review. Nagoya Protocol and the International Treaty on Plant Genetic Resources for Food and Agriculture Access to genetic resources is also important with (ITPGRFA). The ITPGRFA is particularly relevant to regard to intellectual property. That is why there regulating transfer of genetic resources. KWS works is variety protection in plant breeding. It protects through industrial associations, such as Euroseeds intellectual property, as well as ensuring access and the International Seed Federation (ISF), to to protected varieties by means of the breeder’s ensure practicable means of securing sustainable exemption, so that they can be used for further access to genetic resources and preserving them breeding. At the same time, patented traits that now and in the future. have been technically developed and are intended to offer resistance to pests or diseases, for We have implemented a due diligence process example, are increasingly found in plant varieties. to ensure compliance with these guidelines. All This trend will probably intensify as new breeding employees who work with genetic material are methods grow in importance. These traits have not obligated to digitally register all materials used. Our yet been accessible for breeding in all European Intellectual Property department then instigates countries; KWS is therefore a strong advocate of an examination of where the genetic material has licensing platforms that enable guaranteed access come from. Colleagues from our Legal department to genetic material and traits on fair terms. In the also provide assistance in more complex cases. In area of vegetables, KWS is thus a member of the addition, new employees are offered training, and International Licensing Platform Vegetable (ILP). an annual seminar is held for all the employees A group of companies including KWS is currently involved. If an examination should find that the developing a platform that is basically similar for origin of the genetic material or the process by crops, namely the Agricultural Crop Licensing which it was obtained is unclear, we refrain from Platform (ACLP), and it is to be implemented in using it. this calendar year 2022. In addition, KWS offers its own patents relating to patented traits for licensing No deviations were identified as part of the above to interested parties. A standard licensing model due diligence process in fiscal 2021/2022. As part of for this is currently being formulated and is to be the Breeding Information Circle, KWS has begun to published on KWS’ website soon. optimize IT processes relating to the documentation and approval of access to new genetic resources. 2.8 Social Report | Combined Management Report 61 KWS Group | Annual Report 2021/20222.8.2 Social Commitment The focus is on corn and quinoa in Peru and on Irrespective of its business activities, KWS wants to barley and wheat in Ethiopia. In Zambia, we teamed assume responsibility and contribute to developing up with various partners to launch a project that is solutions to social problems. KWS sees itself as an intended to enable local farmers to improve their active member of society and thus wants to propa- seed development skills and knowledge of, and gate its corporate values – such as farsightedness, access to, different varieties of corn, sunflower, proximity and reliability – beyond the Company and beans and sorghum. Above and beyond develop- to society. ment cooperation, we initiated a project in Brazil that creates school gardens and also supports The content of our activity in this area is geared small infrastructure projects in less developed toward the United Nations’ Sustainable Develop- regions where seasonal workers mainly live. ment Goals ¹ and toward company-related topics. That is why KWS focuses its supraregional social The Company’s social commitment in Germany is commitment on promoting education in the field organized centrally and is concentrated mainly at of natural and agricultural sciences. KWS’ regional the Company’s headquarters in Einbeck. social engagement focuses on cultural, social and socioeconomic development in its – mostly rural – The COVID-19 pandemic also impacted organiza- surrounding areas in order to increase the loca- tion of our commitment at the Einbeck location in tions’ attractiveness as a whole. the past fiscal year, although cultural events were still able to be supported. KWS also promoted the KWS’ management underscores the importance of digitization of schools to enable remote teaching. social commitment with its target of using around In addition, we supported social and educational 1% of the Group’s operating income (EBIT) for institutions. We added a special form of engage- social commitment and social projects. ment at the Einbeck location this year, when KWS sponsored the “Jugend forscht – Schüler experi- Internationally, our social commitment is organized mentieren” (“Youth Researches – School Students on a decentralized basis and includes various Experiment”) contest for young scientists. long-term scholarship programs in cooperation with different universities as well as development In fiscal 2021/2022, KWS spent around €1.3 million ² partnerships. Our ongoing development cooper- – or approximately 0.8% of its operating income ation activities in Peru and Ethiopia from the past (EBIT) – on its social commitment worldwide. Of years were supplemented by our engagement in that sum, approximately €0.7 million was spent on Zambia in the last fiscal year. In Peru and Ethiopia, donations, development programs and corporate we support young researchers, in particular, in citizenship projects and €0.6 million on sponsorship the conservation of plant genetic resources, plant activities. KWS SAAT SE & Co. KGaA accounted for breeding and the establishment of seed systems. 0.7% of this spending relative to the Group’s oper- KWS implements the regulations stipulated in the ating income (EBIT). International Treaty on Plant Genetic Resources for Food and Agriculture as part of that. 1 No. 2 Zero Hunger and no. 17 Partnerships for the Goals 2 Does not include KWS Peru S. A. C., KWS Maroc S. A. R. L. A. U., Kant-Hartwig & Vogel GmbH, KWS Vegetables Italia SRL a Socio Unico and KWS Vegetables Mexico S. A. de C. V. 62 Combined Management Report | 2.8 Social Report Annual Report 2021/2022 | KWS Group2.9 Opportunity and Risk Report The opportunities and risks as part of our business account by adapting our administration or opening activity as an international plant breeding company, new lines of business, for example. We wish to as well as the processes for identifying them, are report on our progress transparently. We will there- described in the following. fore expand the key performance indicators we 2.9.1 Opportunity Management Strategic opportunities publish in the future. In addition to the fundamental goal of sustainable development of agriculture as described above, we By strategic opportunities, we mean developments see further strategic areas of opportunity and risk that are of major importance for the KWS Group for the KWS Group. We summarize them below. and may have a lasting positive impact on our commercial success. In particular, we see major Innovative varieties and product performance strategic opportunities in promoting the sustain- To succeed in achieving sustainable, profitable able further development of agricultural practice. growth in the future as well, our prime goal must be Our breeding processes are geared toward deliv- to retain and increase our innovativeness. It is vital ering new variety traits to achieve continuous to increase plants’ yield potential, enhance resource improvements in yield and – alongside other efficiency or develop their resistance to detrimental breeding objectives – reduce the use of fertilizer influences, of whatever type. That requires contin- and pesticide. As a result, we give our customers uous and intensive research work. It takes up to ten the potential to cut costs and enhance their emis- years for a new variety to gain approval and be put sion footprint in the battle against climate change. on the market. We therefore invest a large propor- Our diverse product range enables soil-conserving tion of our net sales in research and development crop rotations, fosters humus formation to bind projects every year, with the goal of achieving an emissions, and serves conventional and organic average yield progress of 1.5% p.a. Alongside the markets. We want to provide new varieties in order opportunities that arise, our complex research and to further expand the range of products for direct breeding processes are subject to risks that may and balanced human nutrition. result in local weaknesses in our portfolio. They include internal factors such as technical problems We can leverage these opportunities success- and process delays, and external factors such as fully only if we keep on improving our company in climate change, new diseases or restrictions on the areas of economics, ecology, social aspects the use of operating resources. The varieties we and governance. To this end, we conduct internal develop must meet high quality requirements. The analyses, set ourselves challenging goals, such as performance of our varieties is reassessed every under the KWS Sustainability Ambition 2030, and year by management and the Supervisory Board so work unswervingly toward achieving them. In our that we can respond immediately to weaknesses in strategic planning, we regularly review whether our portfolio if necessary. our objectives are still appropriate. The strategic planning covers a ten-year time frame and is Plant breeding has great potential to make agri- jointly formulated on a rolling basis, discussed cultural processes more sustainable through and adopted by the Executive Board. Our strategy continuous and proactive further development. The processes are oriented toward identifying future development and use of innovative crop rotations, trends in good time, analyzing them and translating new cultivation systems, new resistances and them into innovative company processes by means tolerances or nutrient efficiencies have the potential of strategic initiatives. We take new findings into to increase and stabilize yields, reduce the use of 2.9 Opportunity and Risk Report | Combined Management Report 63 KWS Group | Annual Report 2021/2022resources such as fertilizer, pesticide or water, and Changes in demand increase biodiversity. Higher yields can also result New, permanent customer needs – differing from in less cultivation area being required. The carbon region to region – are emerging, which entail footprint per unit yield can be reduced with more long-term opportunities and risks. While meat efficient plant varieties. KWS is working to develop consumption in countries such as Germany, France such products, crop rotations and cultivation or Italy has declined continuously in recent years, systems to leverage this potential. for example, it continues to grow in other countries such as China, Russia or Portugal. The product Modern breeding technology portfolio for agriculture must therefore be broad State-of-the-art breeding technologies and analysis so that opportunities that arise can be seized and methods are used in developing new resource-con- one-sided dependencies can be reduced. We take serving varieties, so as to speed up our devel- into account relevant long-term trends by estab- opment work and improve its precision. The new lishing and expanding new product lines and by breeding methods complement plant breeders’ including new crops in our portfolio. We are also toolsets and offer additional opportunities to committed to expanding our direct contact with improve plants in a targeted way through breeding. customers on a lasting basis, so that we can sell our The consequences of climate change, new harmful products successfully. We already have a presence fungi and the desire for less fertilizer on the field in global sales networks and so can be reached and high-quality agricultural products – plant directly by our customers. breeders are responding to all these challenges demanded of sustainable agriculture by delivering Operational opportunities new varieties and using the most suitable breeding We understand an operational opportunity as a technologies. New data analysis methods also development that is consistent with our strategic increase efficiency in plant breeding and agricul- planning and might have a positive short-term ture. Agricultural areas can be farmed in a tailored impact on our earnings, financial position and way thanks to automated communication, big data assets and has not yet been reflected fully or at all analytics, robotics or artificial intelligence. Drones in the Company’s financial planning. Operational and satellites, for example, supply information that opportunities are identified and assessed by our helps improve analysis of plant stands in the field. Business Units. We leverage them by pinpointed As a result, infestation by pests or infection by investment in production capacities, research and diseases can be detected quickly, pinpointed and development activities and expansion of distribu- combated in a targeted manner. Pinpointing where tion, for example. crops are infested or infected helps reduce the use of pesticides and the number of times machines We have opportunities as a result of our still-young have to run over the field. These technologies will activities in the vegetables market or expansion of gain in practical relevance in the future. We already our portfolio of corn varieties in tropical regions. use them in our research and breeding processes. Our corn activities in Brazil will enable us to tap We need to develop and establish new, highly additional sales potential for the KWS Group in the promising technologies in order to avoid risks such medium to long term, including in other tropical as competitive disadvantages. markets, by developing varieties tailored to their climatic conditions. 64 Combined Management Report | 2.9 Opportunity and Risk Report Annual Report 2021/2022 | KWS GroupInvesting in expansion of our production capacities If a risk does not entail any relevant opportunities, and modernization of our seed processing offers or if risks jeopardize achievement of the Group’s opportunities in existing and adjacent markets. key financial targets (10% EBIT margin, at least 5% Further development of our variety portfolio and net sales growth), they are to be avoided or their expansion of capacities are accompanied by expan- impact must be reduced as far as possible, taking sion of our international distribution structures cost-benefit considerations into account. Violations to enable tailored information and advice for our of the law and important corporate principles, such customers on the possible uses of our seed and so as respect for human rights, are totally unaccept- allow us to leverage further sales potential. In addi- able. To assess our risk-bearing capacity, we tion, continuous optimization of processes offers compare our equity and liquidity with the aggregate the KWS Group opportunities to increase produc- risk situation. As part of that, we also consider tivity and digitization and improve cost structures. anticipated developments for the coming fiscal year. The results are included in the Executive Board’s Recording of operational opportunities was inte- overall assessment of the risk situation. grated in risk management in the year under review. Responsibility 2.9.2 Risk Management The Executive Board is responsible for Group-wide risk management. The Supervisory Board or the Risk management strategy and objectives Audit Committee reviews the risk management The objective of the KWS Group’s Central Risk system at least once a year to assess its suitability Management is to identify high risks at an early and effectiveness. It is assisted in that by the stage, mitigate financial, reputational, environ- independent auditor of the financial statements as mental, legal, strategic or health-related damage, part of the statutory audit assignment. In addition, and ensure compliance with key corporate prin- a Risk Committee consisting of representatives ciples and social standards. We consequently from all divisions who have a good knowledge of understand the term “risks” as denoting events and the issue of risks has been established. It usually potential developments, both inside and outside convenes twice a year, discusses and reviews the the KWS Group, that have a negative impact on risks maintained in the risk management system achievement of our corporate objectives or princi- and measures to control them, and formulates ples. That also includes events that impair our value recommendations for the Executive Board, if neces- chain and harm the environment, and which we can sary. Responsibility for identifying, assessing and influence. controlling risks lies with the divisions, while Central Risk Management coordinates the processes and We strive to address risks openly. A proactive and ensures reporting to company management. Other open risk culture is part of that. Speaking about roles in our risk management are specified in the risks should be established practice in our daily chart “Players and systems in managing risks work. KWS applies an entrepreneurial attitude at KWS.” to risk, i.e., deliberate risks can be taken if that offers opportunities that are consistent with the KWS Group’s strategic planning and corporate objectives. 2.9 Opportunity and Risk Report | Combined Management Report 65 KWS Group | Annual Report 2021/2022Players and systems in managing risks at KWS in accordance with the Three Lines of Defense model Supervisory Board Executive Board Risk Committee Central Risk Management Divisions (1st line) Control and monitoring systems (2nd line) Process-independent controls (3rd line) Business Units Controlling (incl. early detection) Internal auditing Research & Development Global Functions, incl. the Internal control system, accounting processes Transaction Center Compliance Management Risk Management Other systems (such as Quality Management, Stewardship, etc.) KWS Governance (vision, mission, cornerstones, Group Standards, etc.) Central Risk Management processes for all risks and classify the risks as “moderate,” Our Central Risk Management process consists of “medium” and “high.” This allows us to priori- the phases of identification, assessment, control, tize the risks we record in a consistent manner documentation, monitoring of risks and risk in managing them. We query linkages between reporting. It is conducted regularly, usually twice a risks as part of risk identification, document them year. As part of risk identification, we record indi- and take them into account in risk assessment in vidual risks on an electronic platform and assess evaluating the likelihood of their occurrence. We them qualitatively or quantitatively on the basis of record risks that impact our short-term (one-year), Group-wide standards, in each case before (gross medium-term (four-year) and long-term (ten-year) risk) and after (net risk) any countermeasures. As planning horizon. The individual risks are classified part of this, we calculate expected monetary values as follows: Scheme for assessing individual risks Likelihood of occurrence Unlikely < 10% Possible 10% – 50% Likely 50% – 90% Almost certain ≥ 90% l i a c n a n F i Very low €0.1 million – €3.0 million Low ≥ €3 million – €7.5 million Medium ≥ €7.5 million – €15.0 million ) T B E ( t c a p m i High ≥ €15 million In the risk situation section, we report risks in the area framed in black. 66 Combined Management Report | 2.9 Opportunity and Risk Report Annual Report 2021/2022 | KWS Group Risk classification for single risks Formula assessment of single risks Risk level Moderate Medium High Risk Score Smaller than 1 Between 1 and 5 Above 5 Risk scoring Net financial damage (in € million) x net likelihood = risk score for an individual risk We decide systematically on what appropriate 1st line: Decentralized risk management by the countermeasures to take to manage risks, in partic- divisions, such as transaction controls, quality ular high risks. They may be measures to reduce controls, certification, contract management or IP risks, constant monitoring of them or taking out due diligence insurance, or the acceptance of risks (where no measures are possible or make economic sense), 2nd line: Global controls by means of higher-level for example. The KWS Group’s current risk situation systems, such as our risk management, compliance is aggregated by Central Risk Management into risk management or controlling systems categories and reported first to the Risk Committee. On that basis, the Risk Committee discusses how 3rd line: Independent audits by Internal Auditing to deal with the risks and submits recommendations to company management if required. Central Risk The various levels are supported, among other Management coordinates the entire risk manage- things, by Group-wide internal guidelines as well as ment process and supports the departments in their centralized and standardized process definitions that tasks. enable variance analyses. The principle of separation of functions is also laid down in our guidelines, as is We meet the statutory requirements for early detec- a system of information classification. tion of risks with our financial controlling and risk management processes. To supplement the Central In the current fiscal year, the Executive Board and Risk Management process, we carry out standard- Supervisory Board had no information to indicate ized, monthly early risk identification processes with any significant inefficiencies in the effectiveness of the product segments and Research & Develop- or any inadequacy in, the internal control system. In ment and report their results in writing to KWS’ top principle, however, it should be borne in mind that two management tiers. an internal control system, regardless of its design, does not provide absolute certainty that errors in our Control and monitoring systems * business processes will be detected. We structure the internal control system at KWS on the basis of the Three Lines of Defense model. It In the following, we deal with the internal control enables a systematic approach to monitoring and system for accounting in more detail. managing risks. We make a distinction here between three different levels (see also the chart “Players and The internal control and risk management systems in managing risks at KWS in accordance system in relation to the accounting process with the Three Lines of Defense model”): (Section 315 (4) of the German Commercial Code (HGB)) Global Finance has structures and processes that enable proper and effective accounting and finan- cial reporting. They include: * Not an audited part of the Combined Management Report 2.9 Opportunity and Risk Report | Combined Management Report 67 KWS Group | Annual Report 2021/2022 Process-integrated controls, such as validation Description of the KWS Group’s current of reported data, separation of functions and risk situation the four-eyes principle, as well as regular ana- Here we provide a summarized report on the lytical controls by Business Partner Finance and medium or high individual risks that are known to us Controlling and involve net financial damage of at least €7.5 million and a horizon of up to ten years. We Standardized financial accounting processes group the individual risks by their type and cate- through the use of the Global Transaction Cen- gory. If the risk classes of the categories have ter, in which a large part of all Group companies changed compared to the previous year, we explain are integrated, and appropriate assurance that this in the respective sections. Our strategic risk business transactions are included in accounting categories are linked to long-term opportunities. We consistently, promptly and correctly and that all therefore explain the latter separately in the section applicable statutory accounting regulations, stan- “Opportunity Management.” dards and internal guidelines are implemented throughout the Group There are currently no non-financial risks whose Ensuring that the consolidated financial state- on aspects that require reporting in accordance ments (including the Management Report) comply with Section 289c of the German Commercial Code occurrence is very likely and entail serious impacts with the rules by means of Group-wide specifica- (HGB). tions relating to accounting guidelines, charts of accounts and uniform reporting processes In view of new requirements defined in the auditing standard IDW PS 340 and relating to measures by Central preparation of the consolidated financial the Executive Board in accordance with Section 91 statements using the uniform reporting process as (2) of the German Stock Corporation Act (AktG), well as system and manual controls with regard to we made a number of adaptations to our risk accounting-specific interconnections management processes in the year under review. They included revising our risk categories and Notification of employees in the Global Trans- reallocating individual risks. Changes have been action Center, Business Partner Finance and indicated where necessary. The affected catego- Controlling, as well as other relevant contact ries therefore do not directly match those of the persons at the Group companies, about changes previous year. The changes in the risk situation as a in the financial statement preparation process on whole are addressed in the overall statement on the a quarterly basis risk situation by the Executive Board. Protection of accounting-related IT systems Operational risks against unapproved access by means of authori- IT zation and access regulations for the IT account- The KWS Group’s business and production ing systems processes, as well as its internal and external communications, are run on globally networked IT Ensuring the professional aptitude of employees systems. Attacks or outages can lead to a loss of involved in the accounting and financial reporting confidentiality, availability, integrity and/or authen- process by means of selection processes and ticity of data, information and systems. This harbors training risks, such as loss of know-how, data manipulation, loss of personal data and loss of image, and may result in large financial losses. We reduce these risks by means of organizational and technical measures. IT service providers constantly examine our IT security so as to issue recommendations 68 Combined Management Report | 2.9 Opportunity and Risk Report Annual Report 2021/2022 | KWS Groupfor optimization measures on the basis of their risk The category’s risk situation increased significantly assessment. Uncontrolled and/or undetected loss compared to the previous year due to the Ukraine and damage as a result of hacking and malware crisis. Gas shortages in particular pose a risk for are still possible even if very good precautionary European production sites and may potentially measures are in place. In the year under review, our lead to restrictions or interruptions to business risk assessment for the category increased slightly operations. We are countering this risk – as far as due to potential external attacks in connection with possible – by expanding our emergency heating oil the Ukraine crisis. Product quality reserves in the short term, making technical adjust- ments, for example to use LNG, taking contingency measures such as the establishment of crisis and We have established detailed checks and tests expert teams, and switching in the medium to to determine the performance and quality of our long term to a self-sufficient, low-emission energy seed. Quality controls, such as germination and supply based on renewable energies. The spread sprouting strength tests, are conducted at all of hostilities in Ukraine may result in interruptions stages of production. These checks and tests are to business operations (corn seed production). The also intended to reduce risks such as claims for further tightening of sanctions against Russia may damages due to product liability, which may be in turn lead to restrictions on our local sugarbeet significant, especially in Anglo-American juris- seed production. Where necessary, we are coun- dictions. We also have product liability insurance tering this risk by expanding production at other to defend against unjustified claims and to settle locations. justified claims. Very strict requirements must be met regarding management of genetically modified Projects, company organization, products, in particular, to prevent GMOs becoming process management mixed with conventional seed. KWS is a member So that we can continue to grow profitably and of the “Excellence Through Stewardship” (ETS) sustainably with the support of an efficient organi- initiative, an internationally standardized quality zation and harmonized processes that also reflect management program. The category’s risk situation the increasing complexity of the requirements in the year under review decreased in the wake of demanded of our workforce, we regularly review the regular expert assessments. their adequacy and realign them where necessary. Without appropriate realignment, there may be Production, interruptions to business operations organizational risks, such as an excessive workload KWS uses technically complex seed processing on individual departments. In turn, a realignment plants. Interruptions to business operations may may entail integration risks (M&As), for example, have a negative impact on the volumes that are or temporarily result in process inefficiencies available for sale and represent significant risks, or unplanned costs. Our measures to counter especially if they occur in our sales season. In these risks include the establishment of special- order to reduce these risks, we conduct regular risk ized functions (such as M&A experts), rollout of inspections, carry out preventive maintenance, and a new standard process model and automation, have property and business interruption insurance. complemented by our globally applicable company standards. In the year under review, we reassessed Seed multiplication is dependent on the weather. efficiency risks that were already known in connec- We reduce the risk of crop failures by multiplying tion with our internal standards, which is why the seed – depending on the crop – in separate risk situation in this category has increased. locations and regions in Europe, North and South America and Asia. We can carry out contra- seasonal multiplication in the winter half-year in the southern hemisphere if there are bottlenecks in the volume of seed produced. 2.9 Opportunity and Risk Report | Combined Management Report 69 KWS Group | Annual Report 2021/2022Health, safety and environment Human Resources Accidents, technical problems or misconduct in our Recruiting the right employees for KWS, offering business processes may result in injury to persons them diverse development opportunities and and environmental damage and are high risks. One striving for a long-term working relationship with measure we have taken to reduce these risks is to them are factors that are crucial to our business implement a global health, safety and environment success. In order to counter potential risks such standard, which the central HSE Manager function as the loss of employees or lengthy vacancies, we will keep on developing. regularly review our attractiveness and positioning as an employer. In this way, we prevent any future In Ukraine, we implemented a preventive crisis staffing risks through structured succession plan- management system in January 2022, the prime ning, continuously expand our employer brand on goal of which was to protect all local employees the external market and strengthen our employees’ and their families in the event of an outbreak of loyalty through attractive development programs war. When the war broke out, we provided not only and compensation at a fair market level. The inten- financial support, but also emergency accommoda- sifying battle for talents and experts on the labor tion in and outside Ukraine, and we also organized market and the associated rise in internal require- transportation, food supplies and modern commu- ments as regards retaining employees led to the nications technology. A crisis team continues to higher risk classification in this risk category in the support local colleagues and collectively reas- year under review. sesses the situation on a weekly basis. Our busi- ness activities are not currently in close proximity Finance and capital markets to the fighting; however, we see a high risk to the Tax risks health of our local colleagues due to the continuing KWS operates in about 70 countries and is there- air raids throughout the country and the ongoing fore subject to an array of complex national tax war, factors that determine this category’s current requirements and laws. Changes that are not risk classification. detected in time and/or incomplete implementation of tax law, court rulings and interpretations by the The pandemic continues to pose a health risk to our fiscal authorities may have an effect on tax assets employees, but we do not currently view this risk and liabilities, as well as on deferred tax assets and critically given that vaccination rates are generally deferred tax liabilities. This can result in significant high. The risk situation is reassessed regularly, for risks, which we counter by continuously identifying example on the basis of changes in the sickness and assessing the tax frameworks and by central absence rate at KWS. coordination through our Finance department. If necessary, tax provisions are formed on the basis of We consider the risk of technical accidents at our estimates. In the year under review, we completed seed production plants and the resulting danger to the establishment of the central Group Tax depart- life and limb and the threat to the environment to be ment, which reassessed our tax exposure and lower – also due to the fact that we have expanded initiated necessary measures. The category’s risk our internal audits in this area. classification fell. 70 Combined Management Report | 2.9 Opportunity and Risk Report Annual Report 2021/2022 | KWS GroupCurrency risks Capital market Currency risks arise in particular from receivables In view of the diverse and increasing demands and liabilities denominated in foreign currency. placed on business by the capital market, inade- We address currency risks to a reasonable extent quate data and processes, especially non-financial through the usual hedging instruments and internal ones, can lead to reputational risks and, in the standards in order to reduce the influence on the medium term, to poorer conditions on the capital KWS Group’s earnings and assets situation. We market. We are countering these risks by, among also reduce our transaction risks by means of other things, increasing the number of staff (in natural hedging, when expenses are incurred in terms of FTEs) in sustainability activities in the the same currency in which we generate revenue. Corporate Segment in order to accelerate the Remaining currency risks from cash flows from implementation of processes from our Sustainability operating activities in foreign currency are gener- Ambition 2030 in addition to proactively providing ally of minor significance. In fiscal 2021/2022, we relevant non-financial data. hedged our intra-Group loans to a large part by using standard currency derivatives in order to Politics and the law reduce currency risks. In response to the Ukraine Compliance crisis, our foreign currency positions in Russia and We are exposed to potential compliance risks, for Ukraine in particular were continuously reviewed to example under antitrust, competition, anti-corrup- determine whether they were appropriate, and were tion and money laundering law and data protection reduced if necessary and where legally possible. requirements. Violations of statutory requirements Liquidity risks may have consequences under criminal and civil law, including fines and other financial disadvan- The overriding goal of our liquidity management is tages. Under our compliance policy, the Code of to ensure we meet our payment obligations on time. Business Ethics and our Group Standards, we External factors, such as global crises, may restrict obligate our managers and employees to undertake the availability of credit lines and/or mean we can to act in accordance with laws, contracts, internal only obtain economically disadvantageous terms guidelines and our corporate values and raise their and conditions. Our central Treasury department awareness in this regard. Regular communication, determines what funding we require in its liquidity instruction and training are intended to ensure planning and covers those needs by providing compliance. We rigorously investigate reports of cash, promised credit lines and other financial compliance violations. As is expressly pointed instruments. We have agreed customary financial out, sanctions are imposed if our compliance covenants for part of these promised credit lines. If regulations are violated. The new measures such these covenants are breached, the lender has the as sanctions or comparable legal requirements right to terminate the agreement. that are now being continuously adopted against or by Russia in the wake of the Ukraine crisis Risk of counterparty defaults are analyzed, assessed and implemented by the We nurture extensive business relationships with relevant departments, also with the involvement various customer groups – from the sugar industry of external experts. Nevertheless, unwitting viola- and agricultural wholesalers to individual farmers. tions, substantive inconsistencies or legal unclarity If, in particular, large customers are not able to may result in financial penalties or revocation of meet their contractual payment obligations to us, the business license, and these were the main we could suffer losses. We reduce such credit factors behind the increase in the category’s risk risks through our receivables management and, classification. where possible and expedient, by means of credit insurance. The risks of counterparty defaults in Ukraine and Russia were largely manageable due to the introduction of advance payments and remained low. 2.9 Opportunity and Risk Report | Combined Management Report 71 KWS Group | Annual Report 2021/2022Intellectual property (IP) Eastern Europe. In the fiscal year, the outbreak of Protecting intellectual property is vital to compa- the Ukraine war in Eastern Europe had profound nies that conduct research if they wish to preserve negative impacts on our business activities in their freedom of action and keep on generating Ukraine, Russia and Belarus. It resulted in health value. The seed-specific property rights under risks for our Ukrainian employees (see the section “variety protection” ensure they are compensated “Health, safety and environment”), but also a large for the years-long process of research, breeding number of business risks, such as a decline in the and development of new varieties and that third cultivation area in Ukraine, an important future parties cannot market the same variety at no costs market for KWS, and the lack of export opportuni- to themselves. KWS uses patents to protect certain ties for farmers there. The repercussions were also plant traits, in particular if they have been devel- felt at our other European locations, for example oped or produced by means of technical methods. as a result of the prevailing energy crisis (see in In order to secure its freedom of action and avoid particular the sections “Price developments and infringing third-party proprietary rights, KWS has procurement” and “Production, interruptions to implemented far-reaching due diligence processes business operations”). Our business activities in throughout the Company. Russia were impacted by the imposition of require- Regulatory risks ments and sanctions, despite the humanitarian importance of the seed market for the world food As part of modern agriculture and as an inno- situation and prices. The reduced availability of vative plant breeding company, KWS also uses services and spare parts may result in delays in state-of the-art breeding technologies to develop operational processes and even critical interrup- new, resource-conserving varieties. There is still a tions to business operations. Thanks to prompt, negative perception of new breeding technologies centralized and local crisis management, we were among the general public, despite the high stan- able to mitigate individual risks, keep our business dards in force and scientific facts to the contrary. operations running in all affected countries and New breeding technologies could speed up our reduce the expected financial damage. All devel- variety development and improve its precision. The opments continue to be monitored by the Central EU continues to impose tougher regulations on Risk Management department and our product important research technologies and restrict the segments, pooled centrally and reported regularly use of established operating resources. We conduct to the Executive Board and Supervisory Board. an intensive dialogue with all stakeholders on this issue and are increasing the internationalization of General legal risks our research – without reducing our commitment in KWS faces risks from official proceedings and legal the EU. Political instability disputes. Legal disputes with suppliers, licensors, customers, employees, lenders and investors are possible and may result in payments or other obli- KWS faces political risks in many countries in the gations. There were no legal proceedings involving strongly regulated international agricultural industry. significant amounts in fiscal 2021/2022. In addition, the tense global geopolitical situation in recent years has led to further risks for our business activities and growth plans in the Middle East and 72 Combined Management Report | 2.9 Opportunity and Risk Report Annual Report 2021/2022 | KWS GroupMarkets and competition Changes in cultivation area Competition and business partners Strong competitive pressure, such as that due Slight declines and shifts in cultivation areas are to aggressive pricing strategies by other market typical in agriculture and usually have no signifi- players, may have a negative impact on our busi- cant net impact on our business success. Extreme ness success. In particular, good local variety changes in cultivation areas – in particular where performance is the most effective means of they affect strategically important crops and protecting against this. Acquisition or licensing markets – have the potential to impact our local of technologies – such as genetically modified market success significantly due to lower demand traits – is customary in the industry and necessary for seed. They may be caused by factors such as in markets such as North and South America. We a sudden drop in agricultural prices due to global strive to reduce the related risks by developing crises or extreme weather events, or may be the our own innovations, which may also be attractive consequence of high inventories as a result of good to competitors, and through long-term license harvests. We counter such risks in the medium and agreements. long term by diversifying our product portfolio and expanding our market footprint. Risks from changes Price developments and procurement in cultivation area are impossible or difficult to We are exposed to potential price fluctuations, reduce in the short term, but usually impact all delays and reduced availability in our global market players alike. In Ukraine, the develop- purchasing activities. We counter these risks by ment of corn cultivation areas in 2023 depends, in pooling our purchasing power in a centralized particular, on whether the current massive export Procurement Management unit and, in particular, restrictions can be lifted. Market trends we adopt a structured approach in relation to the organization, management and long-term develop- ment of supplier relationships. Hedging instruments This covers local external risks in particular that in the form of commodity derivatives are used to may impact our business success and over whose offset fluctuations in the prices of raw materials to emergence we have no – or currently only limited – a limited extent. Derivative financial instruments direct influence. They include changes in demand are used exclusively for hedging purposes and are and the local conditions of the respective market. insignificant overall. We are currently revising and In China, the opening of the market for genetically improving the management of potential supply modified corn varieties by the authorities may turn chain risks and plan to complete the project in into a disadvantage for KWS if our own product the coming fiscal year. Due to rampant inflation pipeline cannot deliver any, or cannot supply worldwide and the ongoing supply crisis fueled by enough genetically modified traits, or government the war in Ukraine, additional massive price rises stipulations exclude KWS from this market. We are are to be expected in all relevant price indices, reducing this risk by reviewing our cooperation with which resulted in the increase in the risk classi- local partners, through new licenses or by devel- fication in this category. We explain the risks of oping proprietary variety traits. possible shortages in the supply of natural gas in the category “Production, interruptions to business operations.” 2.9 Opportunity and Risk Report | Combined Management Report 73 KWS Group | Annual Report 2021/2022Weather events and natural disasters enables two cultivation cycles a year. In addition Extreme weather events such as heavy rain, to extreme weather events, climate change is also flooding, storms or drought may impact key busi- causing a gradual increase in average temperatures, ness processes. We mainly develop new varieties changes in regional average rainfall, and changes in and multiply our seed outdoors, meaning these disease or pest pressure. We counter this by contin- activities are exposed to weather events. More- uously developing our varieties as part of our global over, weather risks can be insured against only at breeding programs. The breeding objectives as part economically unfavorable terms and conditions, if at of this include drought resistance, standing power, all. In addition to local protection measures such as better nutrient utilization and new resistances. irrigation, flood control or greenhouses, we can limit Climate change thus also entails significant oppor- risks through regional diversification. Contra-sea- tunities for KWS, which we explain in the section sonal production in the southern hemisphere “Opportunity Management.” Strategic risk categories with an horizon up to ten years Risk type Strategic Risk category Category classification Previous year Limited Access to Technology Noticeable Structural Change of Demand Substantial Structural Underperformance Substantial – – – of Products 74 Combined Management Report | 2.9 Opportunity and Risk Report Annual Report 2021/2022 | KWS GroupRisk categories with an horizon up to four years Risk type Operational Risk category Human Resources Information Technology Product Quality Production and Business Interruption Category classification Noticeable Substantial Noticeable Substantial Previous year Medium Substantial Substantial Substantial Projects, Corporate Substantial Substantial Organization and Process Management Health, Safety and Substantial Substantial Finance and capital markets Environment Capital Markets FX Risks Liquidity Risks Receivable Risks Tax Risks Political and legal Compliance Risks General Legal Risks Intellectual Property (IP) Political Instability Regulatory Risks Markets and competition Acreage Developments Competition and Business Partners Market Developments Price Developments and Supply Severe Weather and Natural Disasters Medium Medium Low Low Medium Substantial Low Medium Substantial Low Medium Medium Medium Substantial Medium – Medium Low Low Noticeable Noticeable Low Medium Low Low Medium Medium Medium Medium – 2.9 Opportunity and Risk Report | Combined Management Report 75 KWS Group | Annual Report 2021/2022Formulas aggregated view Risk classification for aggregated risk categories Formula 1: Net impact (in € million) x Net likelihood = Risk scoring of a single risk 2: ∑ of reported risk scores within a category = Risk scoring of a category Risk class Low Medium Noticeable Substantial Total sum of risk score of the category Smaller than 3 Between 3 and 8 Between 8 and 15 Above 15 The strategic risk categories are linked to significant In view of the available assessments and counter- strategic opportunities and are therefore explained measures we have initiated, risks that jeopardize in the Opportunity Report. the Company’s existence are not discernible at present. Furthermore, based on the analysis of Overall statement on the risk situation our risk-bearing capacity with our aggregated risk by the Executive Board situation, we did not identify any potential threat to The KWS Group’s risk situation increased signifi- the Company’s existence. We feel sure that, thanks cantly in the fiscal year compared with the previous to our global footprint, innovative strength and the year, in particular due to the outbreak of the war quality of our products, we can seize opportuni- in Ukraine, the very sharp rise in inflation and the ties and successfully manage risks as they arise. disruptions to supply chains. In the context of the However, we cannot rule out the possibility that Ukraine crisis, initial measures were taken to protect other factors that are currently unknown or which employees and business processes even before the are not assessed as significant may jeopardize the outbreak of war. In the course of this, the central continued existence of the KWS Group in the future. crisis management team, together with the depart- ments, ensured continuous monitoring of all devel- opments, conducted regular analyses and initiated countermeasures where necessary and technically feasible. Reports were submitted directly to the Executive Board and the Supervisory Board. 76 Combined Management Report | 2.9 Opportunity and Risk Report Annual Report 2021/2022 | KWS Group2.10 Forecast Report The expectations of management outlined here are 2.10.2 Forecast for the KWS Group’s Statement based on our corporate planning and the informa- of Comprehensive Income tion it takes into account, including market expec- The KWS Group’s economic performance in fiscal tations, strategic decisions, regulatory measures or 2022/2023 will continue to be impacted by the exchange rate trends. They are subject to the same challenging changes on global agricultural markets. premises as the consolidated financial statements Significantly higher prices for agricultural raw and forecast of our business performance up to the materials as a result of the war in Ukraine and lower end of fiscal 2022/2023 on June 30, 2023. In our harvests in some cases are expected to fuel high forecast for the KWS Group’s statement of compre- global demand for seeds. In this context, KWS also hensive income in accordance with IFRS, we deal expects a sharp increase in sales prices for innova- with the KWS Group’s anticipated net sales, EBIT tive seed. and R&D intensity. Our forecast for the segments contains comments on our net sales and EBIT At the same time, higher prices for agricultural raw expectations, including the contributions made materials will drive up the costs for seed multiplica- by our equity-accounted companies, which are tion. We also anticipate above-average price rises included proportionately in the segment reports in in most procurement categories as well as higher line with our internal corporate controlling structure. personnel costs as a consequence of strong infla- 2.10.1 Changes in the KWS Group’s Composition that are Significant for the Forecast There have not been any changes in the tionary trends. There are still significant currency risks in important markets, in particular in South America and Eastern Europe. KWS Group’s composition that are of significance We expect the KWS Group to grow its net sales (on for the forecast for its business performance in a comparable basis, excluding exchange rate and fiscal 2022/2023. portfolio effects) by 7% to 9% in fiscal 2022/2023 compared with the previous year (€1,539.5 million). We anticipate that the EBIT margin will be in the range of 10% to 11%. Our R&D intensity is expected to be in the range of 18% to 20%. Due to the strongly seasonal nature of our business as a result of the great importance of the spring sowing season and external factors that are difficult to anticipate, such as the weather and fluctuations in cultivation area, we are providing ranges in our forecasts here, since more detailed statements on our net sales and earnings performance cannot yet be made with sufficient reliability. 2.10 Forecast Report | Combined Management Report 77 KWS Group | Annual Report 2021/20222.10.3 Forecast for the Segments We also anticipate a higher cost of sales, in partic- In fiscal 2022/2023, we anticipate that the ular from seed multiplication. All in all, we expect Corn Segment (on a comparable basis) will the EBIT margin to remain the same as in the grow its net sales¹ sharply over the previous year previous year (13.6%). (€935.1 million), in particular on the back of rising sales volumes in South America and Europe. We The Vegetables Segment essentially comprises assume that competition will remain intense in the net sales and earnings contributed by acquired North America. As far as can be seen at present, vegetable seed businesses. Assuming a recovery the EBIT margin is expected to be at the level of the in the market environment, in particular for spinach previous year (6.1%). seed, we expect the segment’s net sales ¹ (on a comparable basis) to rise sharply compared to the In the Sugarbeet Segment, our high-yielding previous year (€54.3 million). There are also costs portfolio of varieties will likely mean another for establishing an international breeding program successful fiscal year for us. We assume that and the Business Unit in the segment. Conse- sugarbeet cultivation area will remain stable all in quently, the number of employees will probably all. The segment’s business performance should increase further. We anticipate that the EBIT margin benefit from further growth due to CONVISO® will be above that of the previous year, among other SMART seed and demand for Cercospora-tolerant things due to a sharp fall in noncash effects from (CR+) varieties. We expect that the segment’s net the purchase price allocation as part of company sales (on a comparable basis) will increase ¹ sharply acquisitions. We anticipate that the EBIT margin compared with the previous year (€588.4 million) after adjustment for the above-mentioned effects and that the EBIT margin will be at the level of the will be on a par with that of the previous year (1.1%). previous year (33.1%). Revenue (albeit slight) from our farms in Germany, We assume that net sales in the Cereals Segment France and Poland is grouped in the Corporate (on a comparable basis) will rise ¹ sharply compared Segment. Since all cross-segment costs for the to the previous year (€216.4 million). In particular, KWS Group’s central functions and research expen- we expect rapeseed and hybrid rye seed business diture are still charged to the Corporate Segment, to boost growth here. The segment’s earnings will its income is usually negative. In view of the planned benefit from an increase in sales of rye seed; at the cost developments and continuation of the trans- same time, we are planning to expand our research formation project GLOBE, we expect the segment’s and development and distribution activities further. EBIT to be around €–110.0 (–97.7) million. Forecast for the 2022/2023 fiscal year Statement of comprehensive income of the KWS Group Net sales EBIT margin R&D intensity 7–9% 10–11% 18–20% 1 Increase of more than 7% 78 Combined Management Report | 2.10 Forecast Report Annual Report 2021/2022 | KWS Group2.11 Report on KWS SAAT SE & Co. KGaA and NonFinancial Declaration 2.11 Report on KWS SAAT SE & Co. KGaA and NonFinancial Declaration (Declaration Based on the German Commercial Code (HGB)) 2.11.1 KWS SAAT SE & Co. KGaA with Section 289f of the German Commercial Code (HGB), which also contains the compliance declara- References to KWS SAAT SE & Co. KGaA in the tion in accordance with Section 161 AktG (German KWS Group’s Annual Report Stock Corporation Act), has been published on the The Management Reports of KWS SAAT SE & Internet at www.kws.com. The following disclosures Co. KGaA and the KWS Group are combined. The are identical to those of the KWS Group and are declaration on corporate governance in accordance printed in this Annual Report: References to KWS SAAT SE & Co. KGaA in the KWS Group’s Annual Report Disclosures Report in accordance with Section 289 (4) of the German Commercial Code (HGB) and explanatory report of the Executive Board Disclosures on business activity, corporate strategy, corporate controlling and management, as well as explanations on business performance Disclosures on the dividend Disclosures on research and development Disclosures on the report on events after the balance sheet date Page(s) 58 to 60 16 to 42 138 (Notes) 23 to 25 139 (Notes) KWS SAAT SE & Co. KGaA is the parent company The balance of other operating income and of the KWS Group. It is responsible for strategic other operating expenses was €1.7 (8.2) million. management and, among other things, multiplies and KWS SAAT SE & Co. KGaA’s operating income distributes sugarbeet and corn seed. It finances basic improved slightly to €–40.8 million compared research and breeding of the main range of varieties at with €–46.5 million in the previous year (guidance: the KWS Group and provides its subsidiaries with new slight decline). Net financial income/expense is varieties every year for the purpose of multiplication made up of the net income from equity invest- and distribution. Earnings ments and the interest result. Net income from equity investments fell sharply to €20.0 million (378.1) million. The high figure for the previous year Net sales at KWS SAAT SE & Co. KGaA was mainly due to dividend payouts from retained in fiscal 2021/2022 increased sharply profits of foreign subsidiaries in connection with to €691.1 (618.0) million (guidance: slight increase intra-Group financing. The interest result improved in net sales). That increase is attributable to our year on year to €–2.3 (–4.1) million, in particular as a corn and sugarbeet business. Gross profit like- result of lower interest expenses and higher interest wise rose sharply to €390.5 (343.2) million due income. Taking into account tax income, the net to the expansion in business. Research and loss for the year was €13.0 million (previous year: development expenditure, which is pooled at net income of €321.4 million). KWS SAAT SE & Co. KGaA, was increased as planned to €226.2 (204.5) million. Selling expenses Financial position and assets rose to €82.9 (73.1) million. Most of the adminis- KWS SAAT SE & Co. KGaA’s total trative expenses at the KWS Group are incurred assets in fiscal 2021/2022 increased at KWS SAAT SE & Co. KGaA. General and to €1,687.5 (1,623.1) million. Fixed assets at the administrative expenses in the year under review balance sheet date were €1,031.5 (1,016.3) million. totaled €120.5 (120.3) million. 2.11 Report on KWS SAAT SE & Co. KGaA and Non-Financial Declaration | Combined Management Report 79 KWS Group | Annual Report 2021/2022Property, plant and equipment rose slightly, while 2.11.2 Combined Non-Financial Declaration for financial assets and intangible assets were at the the KWS Group level of the previous year. Inventories, in particular In accordance with Sections 289b et seq. and of unfinished goods, rose to €104.4 (79.8) million Sections 315b et seq. of the German Commer- due to the planned increase in production quan- cial Code (HGB), KWS is obliged to prepare a tities. Receivables and other assets declined Non-Financial Declaration for the parent company to €479.9 (495.7) million, in particular as a result KWS SAAT SE & Co. KGaA and the Group of the fall in receivables from affiliated compa- disclosing details of the business model and nies. Liabilities at the balance sheet date rose related material corporate social responsibility to €1,012.4 (914.3) million, mainly due to an (CSR) aspects (environmental issues, social issues, increase in liabilities to affiliated companies. employee issues, human rights, and prevention of KWS SAAT SE & Co. KGaA’s equity decreased corruption and bribery), where these are necessary to €492.1 (531.3) million, giving an equity ratio of for an understanding of the course of business, 29.2% (32.7%). Employees business results, the situation of KWS SAAT SE & Co. KGaA and the KWS Group, and the effects on said aspects. The disclosures in the Combined An average of 1,681 (1,633) people were employed Non- Financial Declaration relate to both at KWS SAAT SE & Co. KGaA in the year under KWS SAAT SE & Co. KGaA and the KWS Group, review. unless otherwise specified. Risks and opportunities In order to identify aspects that need to be reported The opportunities and risks at KWS SAAT SE & in the Non-Financial Declaration, the relevant Co. KGaA are essentially the same as at the issues based on a Global Reporting Initiative (GRI) KWS Group. It shares the risks of its subsidiaries materiality analysis in fiscal year 2020/2021 were and associated companies in accordance with its systematically reassessed to determine their impact respective stake in them. You can find a detailed on the environment and society and on the position description of the opportunities and risks and of the KWS Group. The analysis was reviewed in an explanation of the internal control and risk the past fiscal year. As part of the Sustainability management system (Section 289 (4) of the German Ambition 2030, social commitment was included Commercial Code (HGB)) on pages 63 to 76. as a further material issue in our reporting. Further Forecast Report material issues were not identified. As a result, the subject areas of innovative and sustainable product KWS SAAT SE & Co. KGaA generates the main development, product quality and safety, emissions, part of its net sales from sugarbeet and corn seed water, occupational health and safety, recruitment business and royalties from basic corn seed. Its and employee loyalty, qualification, further training further development depends, among other things, and development, employee engagement, human on the performance of our varieties, cultivation and labor rights, business ethics and compliance, areas in our key markets and developments in our responsibility in the supply chain, use of genetic growth markets. On the basis of our planning, we resources and social commitment are therefore anticipate a slight increase in net sales, in particular also defined as material within the meaning of the due to growing cereals and sugarbeet business. statutory regulations. KWS SAAT SE & Co. KGaA’s operating income is mainly impacted by the costs of central functions of Significant effects of current developments on the the KWS Group and cross-segment research and non-financial issues, such as COVID-19 or devel- development activities. As a result of the anticipated opments in Ukraine, are reported in the respective higher spending on research and development sections. Given that we aim to conduct the GRI and on distribution activities, KWS SAAT SE & materiality analysis every two years, the next one is Co. KGaA’s EBIT will likely be below that of the year scheduled for fiscal 2022/2023. under review. 80 Combined Management Report | 2.11 Report on KWS SAAT SE & Co. KGaA and Non-Financial Declaration Annual Report 2021/2022 | KWS GroupThe Executive Board concretized its comprehensive We did not identify any risks that exceeded sustainability program with relevant targets and key the statutory materiality threshold defined in performance indicators in the year under review. Section 289c (3) of the German Commercial Code They are explained in the Non-Financial Declaration (HGB). In addition, the KWS Group has not defined (starting on page 44). any non-financial performance indicators relating to controlling at present. The table below gives an overview of the CSR report aspects stipulated by law in accordance As part of preparation of the Non-Financial with Section 289c of the German Commercial Code Declaration, we were guided by the GRI standards (HGB) and other associated issues that require in conducting the materiality analysis. We did not reporting, as well as references to the sections in use any other framework apart from that. which the required disclosures on concepts, results, risks and key performance indicators are made. Index for the Non-Financial Declaration Required HGB disclosures Material issues for KWS Reference to sections – Business model Environmental issues Employee issues – – Innovative & Sustainable Product Development Product Quality and Safety Emissions Water Occupational Health and Safety Recruitment & Employee Loyalty Qualification, Further Training and Development Employee Engagement Human and Labor Rights 2.4 EU Taxonomy 2.1.1 Business Model 2.5.1 Product Innovations 2.5.2 Product Quality and Safety 2.5.3 Emissions & Water 2.6.2 Occupational Health and Safety 2.6.3 Recruitment & Employee Loyalty 2.6.4 Qualification, Further Training and Development 2.6.5 Labor and Social Standards Corruption and bribery Business Ethics & Compliance 2.7.3 Business Ethics & Compliance Human rights Responsibility in the Supply Chain Human and Labor Rights 2.7.4 Responsibility in the Supply Chain Social issues Use of Genetic Resources 2.8.1 Use of Genetic Resources and Intellectual Property 2.8.2 Social Commitment Einbeck, September 14, 2022 KWS SE Dr. Hagen Duenbostel | Dr. Felix Büchting | Dr. Peter Hofmann | Eva Kienle | Nicolás Wielandt 2.11 Report on KWS SAAT SE & Co. KGaA and Non-Financial Declaration | Combined Management Report 81 KWS Group | Annual Report 2021/2022 3. Consolidated Financial Statements for KWS SAAT SE & Co. KGaA 2021/2022 Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Consolidated Statement of Changes in Equity Consolidated Cash Flow Statement Notes for KWS SAAT SE & Co. KGaA 2021/2022 1. General Disclosures 2. Standards and Interpretations Applied for the First Time 3. Accounting Policies 4. Consolidated Group and Changes in the Consolidated Group 5. Segment Reporting for the KWS Group 84 85 86 88 90 90 90 91 102 103 6. Notes to the Consolidated Statement of Comprehensive Income 106 7. Notes to the Consolidated Balance Sheet 8. Notes to the Consolidated Cash Flow Statement 9. Other Notes Independent Auditor’s Report Independent Auditor’s Limited Assurance Report Declaration by Legal Representatives Additional Information 113 137 138 146 154 157 158 Consolidated Statement of Comprehensive Income July 1 to June 30 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 Financial income Financial expenses Income from equity-accounted financial assets Financial result Earnings before taxes Taxes Net income for the year II. Other comprehensive income Changes in reserve for currency translation differences on foreign operations Income from equity-accounted financial assets Items that may have to be subsequently reclassified as profit or loss Net gain/(loss) on equity instruments designated at fair value through other comprehensive income Remeasurement gain/(loss) in 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 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 Note no. 2021/2022 2020/2021 1,539,518 1,310,232 6.4 –16,934 6.1 6.1 6.1 6.1 6.1 6.2 6.3 6.5 6.8 7.9 7.9 7.9 7.9 7.9 694,306 845,212 281,270 286,423 132,161 85,628 75,928 155,058 12,242 36,855 7,679 138,124 30,365 107,760 570,690 739,542 244,218 252,226 127,142 71,446 50,369 137,032 6,145 18,338 17,374 5,181 142,214 31,624 110,590 36,452 18,021 –38,993 –912 54,473 –39,905 550 25,723 26,274 80,746 188,506 107,760 0 2,666 4,073 6,738 –33,167 77,423 110,609 –19 6.8 107,760 110,590 188,506 0 188,506 77,442 –19 77,423 Diluted and basic earnings per share (in €) 6.8 3.27 3.35 84 Consolidated Financial Statements | Consolidated Statement of Comprehensive Income Annual Report 2021/2022 | KWS Group Consolidated Balance Sheet Assets in € thousand Goodwill Intangible assets Right-of-use assets Property, plant and equipment Equity-accounted financial assets Financial assets Noncurrent tax assets Other non-current receivables Deferred tax assets Noncurrent assets Inventories Biological assets Trade receivables Cash and cash equivalents Current tax assets Other current financial assets Other current assets Current assets Assets held for sale Total assets Equity and liabilities Subscribed capital Capital reserve Retained earnings Equity Long-term provisions Long-term borrowings Noncurrent lease liabilities Deferred tax liabilities Other noncurrent financial / non-financial liabilities Noncurrent liabilities Short-term provisions Short-term borrowings Current lease liabilities Trade payables Current tax liabilities Other current financial liabilities Contract liabilities Other current liabilities Current liabilities Liabilities Total equity and liabilities Note no. 06/30/2022 06/30/2021 7.1 7.1 7.15 7.2 7.3 7.5 7.14 6.5 7.6 7.6 7.7 7.8 7.7 7.7 7.7 4 7.9 7.9 7.9 7.9 7.11 7.11 7.15; 7.11 6.5 7.11 7.11 7.12 7.12 7.15; 7.12 7.12 7.12 7.12 7.12 7.12 7.12 122,991 332,999 44,414 565,870 186,776 10,104 553 14,388 40,704 122,643 353,701 43,671 506,267 173,736 9,436 606 7,330 47,642 1,318,800 1,265,033 354,618 8,955 518,508 203,664 124,475 55,257 63,524 266,606 5,546 449,501 222,745 91,546 40,592 34,488 1,329,001 1,111,024 3,995 686 2,651,796 2,376,743 99,000 5,530 1,141,382 1,245,911 95,225 613,588 37,228 63,984 4,141 814,165 41,878 111,991 11,923 201,702 25,313 41,857 50,377 106,679 591,719 99,000 5,530 949,188 1,053,718 132,500 601,080 37,465 66,359 1,605 839,009 39,455 97,225 10,961 153,748 31,503 14,203 25,234 111,687 484,016 1,405,885 2,651,796 1,323,025 2,376,743 Consolidated Balance Sheet | Consolidated Financial Statements 85 KWS Group | Annual Report 2021/2022 Consolidated Statement of Changes in Equity July 1 to June 30 in € thousand Comprehensive other Group income Subscribed capital Capital reserve Accumulated Group equity from earnings Comprehensive other Group income Reserve for currency translation differences on foreign operations Reserve for currency trans lation differences on at equity accounted financial assets 99,000 5,530 1,031,127 –92,821 7,216 –23,100 110,609 0 0 0 0 0 –38,993 –6,635 110,609 –38,993 –6,635 0 0 5,016 1,123,652 1,123,652 –26,400 107,760 0 0 0 –131,814 –131,814 0 0 0 0 0 581 581 0 0 36,452 20,404 99,000 99,000 5,530 5,530 99,000 5,530 1,235,099 –95,362 107,760 30,088 36,452 0 20,404 0 20,985 06/30/2020 Dividends paid Net income for the year Other comprehensive income after tax Total consolidated gains (losses) Change in shares of minority interests Capital increase from company funds Other changes 06/30/2021 07/01/2021 Dividends paid Net income for the year Other comprehensive income after tax Total consolidated gains (losses) Other changes 06/30/2022 86 Consolidated Financial Statements | Consolidated Statement of Changes in Equity Annual Report 2021/2022 | KWS Group Consolidated Statement of Changes in Equity July 1 to June 30 in € thousand Comprehensive other Group income Parent company Minority interest Group equity Subscribed capital Capital reserve Accumulated Group equity from earnings Comprehensive other Group income Comprehensive other Group income Total Reserve for currency translation differences on foreign Reserve for currency trans lation differences on at equity accounted operations financial assets Reserve for cash flow hedge on at equity accounted financial assets Net gain/ (loss) on equity instruments designated at fair value through other comprehensive income Revaluation of defined benefit plans 2,186 –57,879 06/30/2020 Dividends paid Net income for the year Other comprehensive income after tax (losses) Total consolidated gains Change in shares of minority interests Capital increase from company funds Other changes 06/30/2021 07/01/2021 Dividends paid after tax (losses) Other changes 06/30/2022 Net income for the year Other comprehensive income Total consolidated gains 99,000 5,530 1,031,127 –92,821 7,216 –38,993 –6,635 110,609 –38,993 –6,635 –23,100 110,609 0 0 0 5,016 1,123,652 1,123,652 –26,400 107,760 107,760 30,088 0 0 0 0 0 0 0 0 99,000 99,000 5,530 5,530 –131,814 –131,814 581 581 36,452 20,404 36,452 20,404 99,000 5,530 1,235,099 –95,362 20,985 0 0 0 0 0 0 0 0 0 0 0 5,723 5,723 0 0 0 5,723 5,723 0 0 –2,384 –2,384 0 3,339 0 0 2,666 2,666 0 0 0 4,852 4,852 0 0 550 550 0 5,402 0 0 4,073 4,073 0 0 0 –53,806 –53,806 0 0 994,360 –23,100 110,609 –33,167 77,442 0 0 5,016 1,053,718 1,053,718 –26,400 107,760 25,723 80,746 25,723 0 –28,083 188,506 30,088 1,245,911 139 0 –19 0 –19 –120 0 0 0 0 0 0 0 0 0 0 994,498 –23,100 110,590 –33,167 77,423 –120 0 5,016 1,053,718 1,053,718 –26,400 107,760 80,746 188,506 30,088 1,245,911 Consolidated Statement of Changes in Equity | Consolidated Financial Statements 87 KWS Group | Annual Report 2021/2022 Consolidated Cash Flow Statement July 1 to June 30 in € thousand Net income for the year Depreciation/amortization and impairment on fixed assets Increase/decrease (–) in long-term provisions Increase/decrease (–) in short-term provisions Net gain (–)/loss (+) from the disposal of assetss Income tax expense (+)/-income (–) Income tax payments (–)/-refunds (+) Interest expense (+)/Interest income (–) 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 Other noncash expenses/income (–) Net cash from operating activities Proceeds from disposals of intangible assets Payments (–) for capital expenditure on intangible assets Proceeds from disposal of fixed assets Payments (–) for capital expenditures for fixed assets Proceeds from disposals of financial assets Payments (–) for capital expenditure on financial assets Receipts from the disposal of consolidated subsidiaries and other business units Cash outflows (–) for the acquisition of additional interests in subsidiaries Interest received (+) Net cash from investing activities Note no. 2021/2022 2020/2021 6.8 7.2; 7.1; 7.15 6.5 6.4 107,760 94,540 –1,666 1,131 332 30,365 –35,577 11,917 110,590 93,828 –1,660 –12,430 –465 31,382 –37,347 10,885 –196,788 –75,173 71,927 12,660 3,723 100,323 155 –10,725 510 –83,425 0 0 0 0 2,610 –90,874 50,402 5,609 –7,298 168,322 154 –12,269 1,876 –68,644 –518 0 0 –8,285 3,524 –84,161 88 Consolidated Financial Statements | Consolidated Cash Flow Statement Annual Report 2021/2022 | KWS Group July 1 to June 30 in € thousand Dividend payments (–) to owners Payment (–) of principal portion of lease liabilities Payment (–) of interest portion of lease liabilities Interest paid (–) incl. transaction costs on issuance of promissory notes and borrowings Proceeds from long-term borrowings Repayment from long-term borrowings Changes from proceeds (+)/repayments (–) of short-term borrowings Net cash from financing activities Net cash changes in cash and cash equivalents and restricted cash Changes in chash and cash equivalents and restricted cash due to exchange rate, consolidated group and measurement changes Cash and cash equivalents, including restricted cash, at beginning of year Cash and cash equivalents, including restricted cash, at end of year thereof restricted cash and cash equivalents at end of year Note no. 2021/2022 2020/2021 7.9 7.15 7.15 –26,400 –9,628 –936 –14,378 178,537 –153,068 –2,554 –28,427 –23,100 –11,905 –876 –11,572 206,201 –116,695 –7,123 34,930 –18,978 119,091 –103 –16,083 222,745 119,737 8 203,664 222,745 44 46 Consolidated Cash Flow Statement | Consolidated Financial Statements 89 KWS Group | Annual Report 2021/2022Notes for the KWS Group Notes for KWS SAAT SE & Co. KGaA 2021/2022 1. General Disclosures 2. Standards and Interpretations The consolidated financial statements of KWS SAAT SE & Applied for the First Time Co. KGaA and its subsidiaries were prepared under The following standards and interpretations have been the assumption that the operations of the companies adopted and applied for the first time in fiscal year will be continued and applying Section 315e of the 2021/2022: German Commercial Code (HGB). They comply with the International Financial Reporting Standards (IFRS) as applicable in the European Union (EU). KWS SAAT SE & Co. KGaA, the ultimate parent company of the KWS Group, is an international company based in Germany, has its headquarters at Grimsehlstraße 31, 37574 Einbeck, Germany, and is registered at Göttingen Local Court under the number HRB 205722. Since it was founded in 1856, KWS has specialized in developing, producing and distributing high-quality seed for Standards and interpretations applied for the first time Financial reporting standards and interpretations IFRS 9/IAS 39/ IFRS 7/ IFRS 4/ IFRS 16 – Interest Rate Benchmark Reform (Phase 2) IFRS 16 – Covid–19-Related Rent Concessions beyond 30 June 2021 IFRS 4 – Extension of the temporary exemption from applying IFRS 9 agriculture. KWS covers the complete value chain of a All changes to the accounting standards and interpretations modern seed producer – from breeding of new varieties, and interpretations have no material effect on the impact on multiplication and processing to marketing of the seed the consolidated financial statements of the KWS Group. and consulting for farmers. KWS’ core competence is in breeding new, high-performance varieties that are adapted Standards and interpretations to be applied in future to regional needs, such as climatic and soil conditions. The IASB has issued the following standards and The Executive Board of KWS SE, the personally liable yet mandatory for the 2021/2022 fiscal year and for some partner of KWS SAAT SE & Co. KGaA, prepared the of which the European Union had not yet completed the consolidated financial statements on September 14, 2022, endorsement process. The following standards have not and released them for distribution to the Supervisory yet been applied by the KWS Group: amendments to standards whose application was not Board. The Supervisory Board has the task of examining the consolidated financial statements and declaring whether it approves them. 90 Consolidated Financial Statements | Notes for the KWS Group | 1. General Disclosures 2. Standards and Interpretations Applied for the First Time Annual Report 2021/2022 | KWS Group Standards and Interpretations to be applied in future Financial reporting standards and interpretations Annual Improvements to IFRS 2018–2020 Cycle IFRS 3 – Amendments to IFRS 3: Business Combinations – Reference to the Conceptual Framework IAS 16 – Amendments to IAS 16: Property, Plant and Equipment: Proceeds before Intended Use IAS 37 – Amendments to IAS 37: Provisions, Contingent Liabilities and Contingent Assets: Onerous Contracts: – Costs of Fulfilling a Contract IFRS 17 – Insurance Contracts, including amendments to IFRS 17: Initial application of IFRS 17 and IFRS 9 – Comparative Information Mandatory first-time application Fiscal year 2022/2023 Fiscal year 2022/2023 Fiscal year 2022/2023 Fiscal year 2022/2023 Fiscal year 2023/2024 IAS 1 – Amendments to IAS 1: Presentation of Financial Statements: Classification of Liabilities as Current or Non-current including Deferral of Effective Date Fiscal year 2023/2024 IAS 1 – Amendments to IAS 1: Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting Policies Fiscal year 2023/2024 IAS 8 – Amendments to IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates Fiscal year 2023/2024 IAS 12 – Amendments to IAS 12: Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction Fiscal year 2023/2024 IFRS 17 – Initial Application of IFRS 17 and IFRS 9: Comparative Information Fiscal year 2023/2024 Based on an analysis, the standards and interpretations to differences in the income statement in relation to the be applied in future are not expected to have a significant KWS Group’s financing activities, the aim of which was impact on the consolidated financial statements of the to improve clarity. The accounting policies for currency KWS Group. translation can be found in section 3.4. 3. Accounting Policies Foreign currency differences from internal and external financing activities recognized in profit or loss are no longer carried under the items “Other operating income” 3.1 Consistency of accounting policies or “Other operating expenses.” Instead, they are carried Consistent accounting policies are applied in the financial in the financial result under the items “Financial income” statements of the companies included in the consolidated and “Financial expenses.” All foreign currency differences financial statements. There were no changes to accounting from operating activities recognized in profit or loss are policies from the previous financial year, with the exception still reported under the items “Other operating income” of the standards to be applied for the first time and the and “Other operating expenses.” The following presents a following change in presentation. reconciliation of the previous year’s figures. The KWS Group published new Group-wide guidelines All estimates and assessments as part of accounting and on currency management at the beginning of fiscal year measurement are continually reviewed; they are based 2021/2022. As a consequence, there was a change in the on historical patterns and expectations about the future presentation of realized and unrealized foreign exchange regarded as reasonable in the particular circumstances. 2. Standards and Interpretations Applied for the First Time | Notes for the KWS Group | Consolidated Financial Statements 3. Accounting Policies 91 KWS Group | Annual Report 2021/2022July 1 to June 30 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 Financial income Financial expenses Income from equity-accounted financial assets Net financial income/expenses Earnings before taxes Taxes Net income for the year Reported Adjustment 2020/2021 After adjustment 2020/2021 1,310,232 1,310,232 570,690 739,542 244,218 252,226 127,142 71,446 50,369 137,032 6,145 18,338 17,374 5,181 142,214 31,624 110,590 23,368 21,276 23,368 21,276 570,690 739,542 244,218 252,226 127,142 48,078 29,093 134,941 29,513 39,613 17,374 7,274 142,214 31,624 110,590 3.2 Companies consolidated in the KWS Group 3.3 Consolidation methods The consolidated financial statements of the KWS Group The single-entity financial statements of the individual include the single-entity financial statements of subsidiaries included in the consolidated financial KWS SAAT SE & Co. KGaA and its subsidiaries in statements and the single-entity financial statements of the Germany and other countries, as well as joint ventures and joint ventures and associated companies included using associated companies, which are carried using the equity the equity method and of the proportionately consolidated method, and joint operations. A company is a subsidiary joint operations were uniformly prepared on the basis if KWS SAAT SE & Co. KGaA currently has existing rights of the accounting and measurement policies applied at that give it the ability to control its relevant activities. KWS SAAT SE & Co. KGaA. For business combinations, Relevant activities are the activities that significantly affect capital consolidation is performed according to the the Company’s returns. Control therefore only exists if acquisition method by allocating the cost of acquisition to KWS SAAT SE & Co. KGaA has the ability to use its power the Group’s interest in the subsidiary’s remeasured equity to affect the amount of the variable returns. Control can at the time of acquisition. Any excess of interest in equity usually be derived from holding a majority of the voting over cost is recognized as an asset, up to the amount by rights directly or indirectly. Details on the changes in the which fair value exceeds the carrying amount. Any goodwill consolidated group are provided in section 4. Consolidated remaining after first-time consolidation is recognized as Group and Changes in the Consolidated Group. an intangible asset. Costs incurred as part of the business combination are recognized as an expense and carried as administrative expenses. 92 Consolidated Financial Statements | Notes for the KWS Group | 3. Accounting Policies Annual Report 2021/2022 | KWS GroupAccording to IAS 36, goodwill is not amortized, but tested Deferred taxes on consolidation transactions recognized for impairment at least once a year at the end of the year in income are calculated at the tax rate applicable to the (impairment-only approach). Investments in insignificant Company concerned. These deferred taxes are aggregated unconsolidated subsidiaries are carried at fair value. with the deferred taxes recognized in the separate financial statements. Joint ventures are consolidated using the equity method in application of IFRS 11 and IAS 28. The basis for a joint As part of the elimination of intra-Group balances, venture is a contractual agreement with a third party to borrowings, receivables, liabilities, and provisions control and manage a venture collectively. In the case of are netted between the consolidated companies. joint ventures, the parties who exercise joint management Intercompany profits not realized at Group level are have rights to the net assets of the agreement. eliminated from intra-Group transactions. Sales, In the case of joint ventures carried in accordance with companies, and intra-Group distributions of profit are income, and expenses are netted between consolidated the equity method, the carrying amount is increased eliminated. or reduced annually by the equity capital changes corresponding to the KWS Group’s share. In the case of Non-controlling interests are recognized in the amount first-time consolidation of equity investments using the of the imputed percentage of equity in the consolidated equity method, differences from first-time consolidation companies. are treated in accordance with the principles of full consolidation. The changes in the proportionate equity 3.4 Currency translation that are recognized in profit or loss are included, along Under IAS 21, the financial statements of the consolidated with impairment of goodwill, under the item “Income from foreign subsidiaries that conduct their business as equity-accounted financial assets” in the net financial financially, economically, and organizationally independent income/expenses. Associated companies in which the entities are translated into euros using the functional KWS Group exerts a significant influence because it holds currency method and rounded in accordance with a stake of between 20% and 50% are likewise measured standard commercial practice as follows: using the equity method. Income statement items at the average exchange rate The basis for a joint operation is likewise a contractual for the year on a monthly basis; agreement with a third party to manage the Company’s Balance sheet items at the exchange rate on the activities jointly. In this case, the parties have rights to balance sheet date. the assets that can be ascribed to the agreement and obligations in respect of the liabilities. The assets and The following exchange rates were applied in the liabilities and revenue and expenses are included in the consolidated financial statements for the main foreign consolidated financial statements proportionately in currencies relative to the euro: accordance with the KWS Group’s stake (50%). 3. Accounting Policies | Notes for the KWS Group | Consolidated Financial Statements 93 KWS Group | Annual Report 2021/2022Exchange rates for main currencies 1 EUR/ ARS1 BRL GBP RUB TRY1 UAH USD Argentina Brazil UK Russia Turkey Ukraine USA Rate on balance sheet date Average rate 06/30/2022 06/30/2021 2021/2022 2020/2021 131.27 113.68 131.27 113.68 5.51 0.86 53.86 17.52 30.78 1.05 5.89 0.86 86.20 10.36 32.30 1.19 5.92 0.85 85.14 17.52 31.51 1.13 6.43 0.89 89.04 9.21 33.22 1.19 1 The average rate corresponds to the rate at balance sheet date due to application of IAS 29 for KWS ARGENTINA S.A and KWS TÜRK TARIM TICARET A.S. The difference resulting from the application of annual hyperinflationary economy. The net gains or losses from average rates on a monthly basis to the net income for the the ongoing inflation of non-monetary assets and liabilities year in the income statement at the rate on balance sheet as well as equity and all items in the income statement are date is taken directly to equity. recognized in profit or loss under “Other operating result.” Differences arising from currency translation are The financial statements of these subsidiaries are generally recognized in profit or loss under “Other operating income” based on the historical cost approach. Due to changes in or “Other operating expenses” and, where they result the general purchasing power of the functional currency, from financial transactions, under “Financial income” or these financial statements had to be adjusted to the unit of “Financial expenses.” An exception is currency translation measure applicable at the balance sheet date. differences from loan receivables that represent part of the net investment in a foreign subsidiary. According to IAS 21, Argentina’s IPC price index was 483.60 points at these translation differences are recognized in the Other July 1, 2021, and rose by 64.0% in the current fiscal year comprehensive income and are not reclassified to profit or to 793.03 points at June 30, 2022. Turkey’s Consumer loss until disposal of the net investment. The accumulated Price Index (CPI) was 557.36 points at July 1, 2021, and amount is recognized in the income statement only when rose by 75.5% in the current fiscal year to 977.9 points at the net investment is disposed of. June 30, 2022. Argentina was still classified as a hyperinflationary 3.5 Classification of the statement of economy this fiscal year, as a result of which IAS 29 comprehensive income “Financial Reporting in Hyperinflationary Economies” was The KWS Group has prepared the income statement using applied to KWS ARGENTINA S.A. In addition, inflation the cost-of-sales method. The costs for the functions increased significantly in Turkey in fiscal year 2021/2022. include all directly attributable costs, including other taxes. The Turkish Statistical Institute reported a three-year cumulative inflation rate of 109% and a twelve-month 3.6 Recognition of income and expenses inflation rate of 61% for March 2022. Given the current Revenue from contracts with customers is primarily economic environment, it is expected that the cumulative generated from the sale of seed. It is recognized when inflation rate over the past three years will continue to the KWS Group transfers control over products to the exceed 100%. Accordingly, Turkey was classified as customer. That is usually the time when risk passes to the a hyperinflationary economy in fiscal year 2021/2022, customer. The revenue is recognized at the amount of the with the result that IAS 29 was applied for the first time consideration promised in the contract. to subsidiaries based in Turkey. It was applied for the first time as if Turkey had always been classified as a 94 Consolidated Financial Statements | Notes for the KWS Group | 3. Accounting Policies Annual Report 2021/2022 | KWS Group The KWS Group’s contracts with customers do not Intangible assets acquired as part of business usually have any significant separable performance combinations are carried separately from goodwill if they obligations apart from the delivery of seed. Consequently, are separable according to the definition in IAS 38 or result splitting of the transaction price is not required for most from a contractual or legal right. of the KWS Group’s contracts with customers. The total purchase price must be recognized at a point in time. The useful life of intangible assets is as follows: If the contracts specify further performance obligations, Useful life of intangible assets such as granting of discount coupons, credit memos for returned goods and bonus points, in addition to seed delivery, they must be measured separately. The Breeding material, proprietary rights to varieties and trademarks KWS Group uses empirical country-specific and seasonal figures and information on already announced returns to Other rights Software estimate the anticipated returns. The level of the promised consideration is not adjusted by the effects of a financing component because the period Distribution rights Customer relationships Useful life 10–30 years 3–10 years 3–8 years 5–20 years 1–5 years for payment is usually less than 12 months. 3.8 Property, plant, and equipment The incremental costs of obtaining a contract are straight-line depreciation over its expected useful life and recognized as a current expense in the period. impairment losses. Depreciation of an asset commences Property, plant, and equipment is measured at cost less Revenue from service transactions is recognized over necessary for it to be capable of operating in the manner the period of time in which the service is provided intended by management. Depreciation of an asset ends and measured on an output-oriented basis using the when the asset has been fully expensed or is classified percentage of completion method. Revenue from royalties as held for sale in accordance with IFRS 5 or at the latest when the asset is at its location and is in the condition and other income, such as interest and dividends, are when it is derecognized. recognized in the period in which they accrue as soon as there is a contractual or legal entitlement to them. If property, plant, and equipment is sold or scrapped, the profit or loss from the difference between the proceeds Performance-based public grants are presented under the and residual carrying amount is recognized under the other other operating income as part of profit/loss. operating income or other operating expenses. Operating expenses are recognized in the income In addition to directly attributable costs, the cost of self- statement upon the service in question being used or as of produced plant or equipment also includes a proportion of the date on which they occur. the overheads and depreciation/amortization. 3.7 Intangible assets Purchased intangible assets are carried at cost less straight-line amortization and impairment losses. It is necessary to examine whether the useful life of intangible assets is finite or indefinite. Goodwill has an indefinite useful life. Goodwill and intangible assets with an indefinite useful life are not amortized, but tested for impairment at least once a year. 3. Accounting Policies | Notes for the KWS Group | Consolidated Financial Statements 95 KWS Group | Annual Report 2021/2022 Useful life of property, plant and equipment If the KWS Group is the lessee, leases are recognized Buildings Operating equipment and other facilities Technical equipment and machinery Laboratory and research facilities Other equipment, operating and office equipment Useful life 10–50 years as a right-of-use asset and lease liability in the balance sheet in accordance with the regulations of IFRS 16. In subsequent periods, the right-of-use asset is depreciated 5–25 years over the lease’s term, taking into account the exercise of 5–15 years 5–13 years any renewal options. This depreciation is recognized in the respective function costs. Interest expense is accrued on the lease liability in the course of the lease and the liability 3–15 years is reduced by the lease payments that have been made. The effect from the accrued interest is recognized in the interest expense under net financial income/expenses. Low-value assets are fully expensed in the year of purchase; they are reported as additions and disposals in The lease payments for short-term leases and leases of the year of purchase in the statement of changes in fixed low-value assets are recognized as operating expenses in assets. accordance with the available exemption. If there is evidence of a possible impairment, an The right-of-use assets are recognized to the amount of impairment test on the property, plant, and equipment or the corresponding lease liabilities, adjusted for any prepaid at a cash-generating unit is carried out in accordance with or accrued lease payments if applicable. The right-of-use IAS 36. An impairment is recognized if the recoverable assets and lease liabilities are each reported in the balance amount for the asset/cash-generating unit has fallen below sheet under a separate item. the residual carrying amount. The recoverable amount is the higher of the fair value less costs to sell or the value If the KWS Group is the lessor and the main risks and in use. If the reason for an earlier impairment loss on rewards from use of the leased object are transferred property, plant, and equipment no longer applies, its value to the contractual partner, the lease is deemed to be is increased to up to the amount that would have resulted if a financial lease. The net investment in the lease is the impairment loss had not occurred, taking depreciation recognized as a receivable. into account. In accordance with IAS 20, government grants for assets are deducted from the costs of the asset. If the KWS Group acts as a lessor as part of an operating Any deferred income is not recognized. lease, the lease payments are recognized as other operating income in the income statement on a straight- The residual values, useful economic lives and methods line basis over the lease’s term. of depreciation for property, plant, and equipment are reviewed at the end of each fiscal year and adjusted The KWS Group’s leases mainly relate to tenancy prospectively if necessary. agreements for office space, lease agreements and leased In accordance with IAS 23, borrowing costs are capitalized if they can be classified as qualifying assets. 3.10 Financial instruments vehicles. 3.9 Leases Classification and measurement A lease is an agreement whereby the lessor conveys the Apart from equity instruments, financial instruments are right to use an asset for an agreed period of time to the financial assets and financial liabilities. lessee in exchange for a payment or a series of payments. 96 Consolidated Financial Statements | Notes for the KWS Group | 3. Accounting Policies Annual Report 2021/2022 | KWS GroupWhen financial assets are initially recognized, they are Impairment losses assigned to one of the following three categories for the The credit risk is the risk that a contractual partner purpose of subsequent measurement: at amortized cost, does not fulfill its payment obligations as part of a at fair value through other comprehensive income, or at fair financial instrument. The risks of default are monitored value through profit or loss. and controlled constantly and reflected by means of impairment losses. The KWS Group ascertains the need Equity instruments are generally measured at fair value to recognize an impairment loss for all financial assets through profit or loss, unless an option to classify them not classified in the category “at fair value through profit irrevocably as being measured at fair value through other or loss.” That is calculated on the basis of the expected comprehensive income is exercised when they are initially losses. The expected losses are in general the present recognized. Such an option is available if the financial value resulting from the difference between the cash flows investments in equity instruments are neither held for defined in the contract and the cash flows the KWS Group trading nor constitute a contingent consideration as part of expects to receive. a company acquisition. The debt instruments are classified taking into account the KWS Group’s business model for In general, a two-stage model must be applied in controlling these financial assets and the contractual cash calculating the expected losses. If the credit risk for flow characteristics for the financial instrument. A financial financial instruments has not increased significantly, the asset is measured at amortized cost if it is held with the risk provision is recognized only on the basis of losses objective of collecting contractual cash flows and the latter resulting from default events within the next twelve months. comprise solely payments of interest and principal. If the In the case of financial instruments whose credit risk has financial assets are held as part of the business model increased significantly since first-time recognition, the to collect contractual cash flows and sell the financial entire remaining lifetime is used to calculate the expected instruments, these are classified as being measured at fair losses. value through other comprehensive income. All the other financial instruments are classified in the category “at fair The KWS Group uses a simplified approach under IFRS 9 value through profit or loss.” There is also the option of to determine the expected losses because the financial designating the debt instrument as being measured at fair assets mainly consist of short-term trade receivables. value through profit or loss under certain conditions when Measurement and first-time recognition of the receivables it is carried for the first time. and also their subsequent measurement therefore take into account expectations of default on the item in question The financial assets consist of bank balances and cash over its entire lifetime. on hand, trade receivables, loans, fund shares, securities, derivatives and other financial assets. Regular-way The KWS Group determines the expected counterparty purchases and sales of financial assets are recognized default on the basis of the probability of default and the or derecognized in general at the settlement date. loss rate in the event of default. Because fund shares have the characteristics of equity, they are classified irrevocably as being measured at The probability of default is generally determined on the fair value through other comprehensive income. The basis of customer-specific ratings. The probability of changes to fair value in subsequent measurement are default relates to a year, which is usually the maximum recognized as unrealized gains and losses directly in other lifetime of receivables at the KWS Group. Since specific comprehensive income. ratings are not available for all customers, an average rating based on all classified customers is calculated for The other financial assets are measured at amortized each country, regardless of the receivables per customer. cost. The carrying amount of receivables, money market It is then applied to the total amount for all the receivables accounts and cash is assumed as the fair value. in the country in question. If that information is not available for a country, the average rating of a country with a comparable risk is applied. 3. Accounting Policies | Notes for the KWS Group | Consolidated Financial Statements 97 KWS Group | Annual Report 2021/2022The loss rate is the percentage loss in the event of default measurement at fair value. The fair value of financial and corresponds to the amount of the unpaid receivables liabilities with a long-term fixed interest rate is determined less an expected recovery rate. The KWS Group applies a as present values of the payments related to the liabilities, uniform recovery rate determined regardless of customer using a yield curve applicable on the balance sheet date. group, due date and country over a long period of time and over a broad total number of company insolvencies. All financial liabilities at the KWS Group, with the exception Changes to the level of the risk provision must be carried in amortized cost using the effective interest method. The the income statement as a reversal of an impairment loss liabilities are derecognized at the time they are settled or or as an impairment loss. when the reason why they were formed no longer exists. of derivative financial instruments, are measured at Cash and cash equivalents are exposed only to an Financial instruments in level 1 are measured using quoted insignificant risk of fluctuations in their value. The seasonal prices in active markets for identical assets or liabilities. In nature of the KWS Group’s liquidity situation over the level 2, they are measured by directly observable market fiscal year only permits short-term cash deposits in the inputs or derived indirectly on the basis of prices for similar period from May to August. The bank balances and short- instruments. Finally, input factors not based on observable term cash deposits are mainly with banks that have high market data are used to calculate the value of level 3 and stable creditworthiness. Given the external credit financial instruments. rating for these banks, the KWS Group’s cash and cash equivalents are regarded as low-risk. Moreover, bank 3.11 Derivatives balances are spread over multiple banks in order to avoid The KWS Group uses derivatives to reduce currency and any concentration of them. Impairment losses on cash and commodity price risks. It mainly uses forward exchange cash equivalents are regularly calculated on the basis of and currency swap deals as well as commodity options credit default swaps (CDS) of the banks. Bank balances are that are customary in the market for that purpose. recognized at nominal value less any necessary allowance The KWS Group (with the exception of the equity- for expected credit losses. accounted joint venture AGRELIANT GENETICS LLC.) has not designated any existing derivatives as a hedging Financial assets are mainly derecognized once the instrument. contractual rights to obtain cash flows from financial assets have expired or the financial assets with all Derivative instruments are measured at fair value; they their risks and rewards have been transferred to a third can be assets or liabilities. The fair value of the financial party. When the contractual rights are transferred, the instruments is measured on the basis of the market KWS Group assesses whether and to what extent risks information available on the balance sheet date and using and rewards associated with ownership of them remain recognized mathematical models, such as present value with the Group. If the risks and rewards are not transferred or Black-Scholes, to calculate option values, taking their in full, the KWS Group continues to recognize the asset volatility, remaining maturity and capital market interest to the extent of its continuing involvement. In that case, a rates into account. The instruments must also be classified related liability is also recognized. in a level of the fair value hierarchy. The financial liabilities mainly comprise trade payables, The changes in the market value of derivatives not loans from banks, derivatives and other financial liabilities. designated as hedging instruments are recognized in the When financial liabilities are initially recognized, they are income statement. Derivatives are derecognized on their classified as being measured at fair value through profit day of settlement. or loss or at amortized cost. KWS Group adopts first-time 98 Consolidated Financial Statements | Notes for the KWS Group | 3. Accounting Policies Annual Report 2021/2022 | KWS Group3.12 Inventories and biological assets Deferred tax assets are recognized if it is considered Inventories are measured at the lower of cost or net probable that there will be sufficient future taxable profit realizable value less an allowance for obsolescent or slow- against which the deductible temporary differences, tax moving items. In addition to directly attributable costs, loss carryforwards, tax credits and interest carryforwards the cost of sales also includes indirect labor and materials can be offset. Deferred tax liabilities must be recognized including depreciation under IAS 2. for all taxable temporary differences. All deferred taxes must be assessed individually at each balance sheet date. Biological assets mainly result from the KWS Group’s farming activities at its locations in Germany, France Deferred tax liabilities on taxable temporary differences and Poland. At these locations, the KWS Group has associated with investments in subsidiaries, branches and farms that carry out all agricultural activities as part of associated companies, and interests in joint arrangements, seed multiplication. Under IAS 41, biological assets are are not recognized if the entity is able to control the timing measured at fair value less the estimated costs to sell. of the reversal of the temporary differences and it is If their fair value cannot be reliably determined, they are probable that the reversal will not occur in the foreseeable measured at cost. Immature biological assets are carried future. as inventories as of the time they are harvested. 3.14 Income tax liabilities 3.13 Deferred taxes The income tax liabilities comprise obligations from actual Deferred taxes are calculated in accordance with IAS 12. income taxes. The actual income taxes are calculated Deferred taxes are calculated on differences between on the basis of the respective national taxable profit the carrying amounts of assets and liabilities between and regulations for the year. In addition, the actual taxes the IFRS and their tax base, including differences from recognized in the fiscal year also include adjustments for consolidation measures, and on tax loss carryforwards, any tax payments or refunds in respect of years that have tax credits and interest carryforwards. Since it is not not yet been definitively assessed, but excluding interest permissible to recognize deferred tax liabilities arising from payments, interest refunds and penalties on payments of initial recognition of goodwill, the KWS Group does not tax arrears. calculate any deferred taxes on them. If there is uncertainty over the income tax treatment, the Deferred taxes are measured on the basis of the applicable KWS Group measures actual or deferred tax claims or local income tax rates anticipated at the time the asset liabilities in accordance with the regulations of IAS 12 is realized or the liability is settled. Deferred tax assets and IFRIC 23. The KWS Group decides on a case-by- and liabilities are measured based on the tax rates/laws case basis whether the uncertain tax treatment should that apply or have been enacted or substantively enacted be considered independently or collectively together with by the balance sheet date. No discounting is carried out. one or more other uncertain tax treatments, depending Deferred taxes and actual taxes are generally recognized on which approach provides better predictions of the as an expense, unless they relate to transactions or events resolution of the uncertainty. that are recognized outside of profit or loss. Deferred tax assets are netted off against deferred tax accept an uncertain tax treatment, the KWS Group liabilities if there is a legally enforceable right to set off recognizes the effects of the uncertainty at the amount actual tax refund claims against actual tax liabilities and of the anticipated tax payment (the expected value or if the deferred taxes relate to income taxes levied by the most likely amount of the tax treatment). Tax assets from same taxing authority. uncertain tax positions are recognized if it is probable If it is considered improbable that the tax authority will 3. Accounting Policies | Notes for the KWS Group | Consolidated Financial Statements 99 KWS Group | Annual Report 2021/2022that they can be realized. No tax liability is recognized 3.16 Other provisions for these uncertain tax positions only if there is a tax loss Provisions are recognized for present legal and carryforward or an unused tax credit; instead, the deferred constructive obligations arising from past events that will asset is adjusted for the unused tax loss carryforwards likely give rise to a future outflow of resources, provided and tax credits. that a reliable estimate can be made of the amount of the In assessing whether and how an uncertain tax treatment obligations. affects determination of the taxable profits/taxable losses, Provisions are measured at their expected amount or tax bases, unused loss carryforwards, unused tax credits most likely amount, depending on whether they comprise and tax rates, the KWS Group assumes that a tax authority a large number of items or constitute a single obligation. will examine the amounts it is authorized to examine and Provisions are reviewed regularly and adjusted to reflect has full knowledge of all related information as part of such new findings or changes in circumstances. If it is no longer examinations. likely that economic outflow of a provision will occur, or the conditions for why it was recognized no longer apply, The KWS Group operates in a large number of countries the provision is reversed by the corresponding amount and and is therefore subject to various tax jurisdictions. the resulting income recognized in the operating expense Determining the tax liabilities requires a number of item(s) in which the original charge was recognized. If the assessments by management. Management has reversal amount is material and so the effect not related conducted an extensive assessment of tax-related to the period must be classified as material, the reversal uncertainties; however, it is not possible to rule out a is carried as income from the reversal of provisions under deviation from the results of that and the actual outcome of other operating income not related to the period. the uncertainties. Any deviations may impact the amount of tax liabilities or future cost increases and using a market interest rate that deferred taxes in the year the decision is made. adequately reflects the risk, provided the interest effect is Long-term provisions are discounted taking into account 3.15 Provisions for pensions and other employee benefits material. 3.17 Contingent liabilities The provisions for pensions and other employee benefits The contingent liabilities result from debt obligations where are calculated using actuarial principles in accordance outflow of the resource is not probable or the level of the with the projected unit credit method. Actuarial gains obligation cannot be estimated with sufficient reliability or and losses must be recognized directly in equity in Other from potential obligations for loan amounts drawn down by comprehensive income. The service costs (including third parties as of the balance sheet date. past service costs) are recognized in operating income in accordance with the employees’ assignment to the 3.18 Significant accounting judgments, functions. If there are plan assets and the relevant estimates and assumptions requirements for netting them off are met, they are netted In preparing the consolidated financial statements, off against the associated obligations. management has to make certain assumptions and estimates that may substantially impact the presentation of The provisions for semi-retirement include obligations from the Group’s financial position and / or results of operations. concluded semi-retirement agreements. Payment arrears Essential estimates and assumptions that may affect and top-up amounts for semi-retirement pay and for the reporting in the various item categories of the financial contributions to the statutory pension insurance program statements are described in the following: are recognized in measuring them. 100 Consolidated Financial Statements | Notes for the KWS Group | 3. Accounting Policies Annual Report 2021/2022 | KWS Group Calculation of the expected returns from customers at Both these significant events and their impact on overall the balance sheet date (section 3.6 of the Notes) economic conditions were taken into account in the Determination of the useful life of the depreciable asset accounting policies at June 30, 2022. (sections 3.7 and 3.8 of the Notes) Assessment by management of whether deferred tax Goodwill and intangible assets with an indefinite useful life assets can be realized, taking into account the time underwent an annual impairment test at June 30, 2022, at which deferred tax liabilities are reversed and the while the changes in the market situation due to the anticipated future taxable income in the period under coronavirus pandemic and the war between Russia and review (section 6.5 of the Notes) Ukraine were reflected in the adopted budget and medium- Assessment of uncertain tax positions in accordance term planning. All in all, there were no impairments for with IFRIC 23 (section 6.5 of the Notes) the cash-generating units and intangible assets with an Definition of measurement assumptions and future indefinite useful life. In addition, indications of impairment results in connection with impairment tests, above all for of property, plant, and equipment and other intangible capitalized goodwill and brands with an indefinite useful assets were examined against the backdrop of the conflict life (section 7.1 of the Notes) between Russia and Ukraine. All in all, the examination did Determination of the need to recognize impairment not reveal any impairment losses. losses on inventories (section 7.6 of the Notes) Definition of the parameters required for measuring The effect on other assets, such as trade receivables and pension provisions (section 7.11 of the Notes) inventories, was continually examined with regard to the Measurement of other provisions (section 7.12 of the impact of the coronavirus pandemic and the war in Ukraine Notes) on the economic environment. The KWS Group’s business Determination whether there is reasonable certainty as model is seasonal in nature, which is why it generates most to whether extension or termination options as a part of its net sales by the end of the third quarter and collects of a lease will be exercised or not (section 7.15 of the a large proportion of the receivables owed to it in the fourth Notes). quarter. As regards customers’ solvency, no circumstances justifying impairment of the receivables above and beyond Estimates are based on historical experience and other the existing approach were identified. Potential industry- assumptions that are considered reasonable under given and country-specific risks were, and will continue to be, circumstances. They are continually reviewed but may vary taken into account in assessing the potential impact of the from the actual values. two significant events on trade receivables. 3.19 Impact of significant events The Group Management Report provides a more detailed There were two significant events in fiscal 2021/2022 that explanation of the effects of these two significant events. have an impact on the assumptions and judgments of the KWS Group’s accounting policies and resulted in an examination. They are the coronavirus pandemic and the war between Russia and Ukraine. The coronavirus pandemic also impacted the global economy in fiscal year 2021/2022. In view of its influence on the KWS Group’s activities, its potential impacts on assets, financial position and earnings are continuously analyzed. The security situation in Europe has changed as a result of the war between Russia and Ukraine, resulting in significant impacts on the political, geopolitical and macroeconomic environment facing the KWS Group. Russia and Ukraine are important countries for the KWS Group from a business perspective. 3. Accounting Policies | Notes for the KWS Group | Consolidated Financial Statements 101 KWS Group | Annual Report 2021/20224. Consolidated Group and Changes in the Consolidated Group The number of companies consolidated in the KWS Group increased from 86 at June 30, 2021, to 87. Number of companies including KWS SAAT SE & Co. KGaA Germany Abroad Total Germany Abroad Total 06/30/2022 06/30/2021 Fully consolidated Equity method Joint operation Total 13 0 0 13 61 5 8 74 74 5 8 87 13 0 0 13 60 5 8 73 73 5 8 86 Changes in the consolidated group trading business, which mainly generates its net sales in The KWS Group established the fully consolidated the Middle East, Africa and Asia. Its disposal is expected subsidiary KWS SEEDS CANADA LTD (Canada) on to be completed in the course of fiscal year 2022/2023. January 31, 2022. Its objective is to strengthen future expansion of hybrid rye business. All the assets of the PV Veg division were classified as held for sale. They were still measured at their carrying amount, The fully consolidated subsidiary KWS SEEDS INDIA since it is lower than the fair value. The fair value was PRIVATE LIMITED (India) was founded on June 24, 2022, determined on the basis of the anticipated sales price less for the purpose of establishing future vegetable seed costs to sell. breeding. The fully consolidated subsidiary KWS SERVICES allocated to the PV Veg division: NORTH AMERICA LLC (USA) was dissolved effective The table below presents the main groups of assets June 30, 2022. Disposal group At the end of March 2022, the KWS Group made the decision to sell the “PV Veg” (Pop Vriend Vegetable Seeds) division within the Vegetables Segment, as this division is not part of the core business of the Business Unit Vegetables. PV Veg comprises the POP VRIEND Group’s Assets held for sale “PV Veg” in € thousand Goodwill Inventories Trade receivables Total assets 06/30/2022 500 1,971 895 3,366 102 Consolidated Financial Statements | Notes for the KWS Group | 4. Consolidated Group and Changes in the Consolidated Group Annual Report 2021/2022 | KWS Group 5. Segment Reporting for the KWS Group In accordance with its internal reporting and controlling The Executive Board is the main decision-making body system, the KWS Group is primarily organized according to and is responsible for allocating resources and assessing the following business segments: the earnings strength of the business segments. The Corn Sugarbeet Cereals Vegetables Corporate segments and regions are defined in compliance with the internal controlling and reporting systems (management approach). The accounting policies used to determine the information for the segments are adopted in line with those used for the KWS Group. The only exception relates to consolidation of the equity-accounted joint ventures and associated companies that are assigned to The core competency for the KWS Group’s entire the Corn Segment, namely AGRELIANT GENETICS LLC., product range, plant breeding, including the related AGRELIANT GENETICS INC., FARMDESK B.V. and biotechnology research, is essentially concentrated KENFENG – KWS SEEDS CO., LTD. In accordance at the parent company KWS SAAT SE & Co. KGaA in with internal controlling practices, they are included Einbeck. The breeding material, including the relevant proportionately as part of segment reporting. information and expertise about how to use it, is owned by KWS SAAT SE & Co. KGaA with respect to sugarbeet The presentation of net sales, income, depreciation and and corn and by KWS LOCHOW GMBH with respect to amortization, other noncash items, operating assets, cereals. Product-related R&D costs are carried directly in operating liabilities and capital expenditure on noncurrent the product segments Corn, Sugarbeet and Cereals. The assets by segment have been determined in accordance activities of the Vegetables Segment are pooled at KWS with the internal operational controlling structure. The VEGETABLES B.V. in Wageningen (the Netherlands) and its allocation of the above joint ventures and associated subsidiaries. Centrally controlled corporate functions are companies are consolidated proportionately on the same grouped in the Corporate Segment. The distribution and basis. In order to permit better comparability, they have production of oil and field seed are reported in the Cereals been reconciled with the figures in the consolidated and Corn Segments, in keeping with the legal entities financial statements. currently involved. 5. Segment Reporting for the KWS Group | Notes for the KWS Group | Consolidated Financial Statements 103 KWS Group | Annual Report 2021/2022Sales per segment in € thousand Corn Sugarbeet Cereals Vegetables Corporate Segment sales Internal sales External sales 2021/2022 2020/2021 2021/2022 2020/2021 2021/2022 2020/2021 935,461 588,544 216,426 54,284 22,211 774,167 524,370 191,581 58,268 18,702 85 105 24 16 13,913 14,143 120 63 342 30 12,712 935,376 588,439 216,402 54,268 8,298 774,047 524,307 191,240 58,238 5,990 13,266 1,802,783 1,553,822 –263,265 –243,590 1,539,518 1,310,232 Segments total 1,816,925 1,567,088 Elimination of equity-accounted financial assets Sales according to group profit and loss statement Segment sales contains both net sales from third parties Technology revenues from genetically modified properties (external sales) and net sales between the segments (“tech fees”) are paid as a per-unit royalty on the basis of (intersegment sales). The prices for intersegment sales are the number of units sold, due to their growing competitive determined on an arm’s-length basis. Uniform royalty rates importance. per segment for breeding genetics are used as the basis. Earnings, depreciation and amortization and other non-cash items per segment in € thousand Segment earnings Depreciation and amortization Other noncash items 2021/2022 2020/2021 2021/2022 2020/2021 2021/2022 2020/2021 Corn Sugarbeet Cereals Vegetables Corporate Segments total Elimination of at equity-accounted financial assets Total without consideration of at equity-accounted fincancial assets 57,162 194,970 29,519 –18,526 –97,474 165,651 71,292 174,748 21,290 –18,106 –91,976 157,247 38,591 21,149 9,706 21,529 19,723 34,852 18,064 9,435 23,633 21,707 –40,288 –10,957 –7,731 –1,591 –412 –13,298 –1,742 –1,701 –2,220 –14,722 –31,342 110,699 107,692 –63,320 –10,593 –20,214 –13,326 –13,864 18,916 29,600 155,058 137,032 97,373 93,828 –44,404 –1,742 Net financial income/expenses Earnings before taxes –16,934 138,124 5,181 142,214 The income statements of the consolidated companies attributable are allocated to the segments on the basis of are assigned to the segments by means of profit center an appropriate formula. Depreciation and amortization allocation. Operating income, an important internal charges allocated to the segments relate exclusively to parameter and an indicator of the earnings strength intangible assets and property, plant, and equipment. in the KWS Group, is used as the segment result. The operating income of each segment is reported as the The other noncash items recognized in the income segment result. The segment results are presented on statement relate to noncash changes in the allowances on a consolidated basis and include all directly attributable inventories and receivables, and in provisions. income and expenses. Items that are not directly 104 Consolidated Financial Statements | Notes for the KWS Group | 5. Segment Reporting for the KWS Group Annual Report 2021/2022 | KWS GroupOperating assets and operating liabilities per segment in € thousand Corn Sugarbeet Cereals Vegetables Corporate Segments total Operating assets Operating liabilities 2021/2022 2020/2021 2021/2022 2020/2021 932,424 451,189 160,069 427,682 225,651 787,432 389,606 138,734 437,148 213,708 212,152 102,961 45,546 7,944 80,962 151,699 82,461 41,036 7,969 112,724 2,197,015 1,966,627 449,566 395,888 Elimination of equity-accounted financial assets –239,003 –216,076 –60,028 –39,696 Total without consideration of at equity-accounted fincancial assets Others 1,958,011 1,750,551 389,539 693,785 626,192 1,016,346 356,193 966,832 KWS Group acc. to consolidated financial statements 2,651,796 2,376,743 1,405,885 1,323,025 The operating assets of the segments are composed The operating liabilities attributable to the segments of intangible assets, property, plant, and equipment, include the borrowings reported on the balance sheet in inventories, biological assets and trade receivables that accordance with the management approach, less financial can be charged directly to the segments or indirectly liabilities, provisions for taxes and the portion of other allocated to them by means of an appropriate formula. liabilities that cannot be charged directly to the segments or indirectly allocated to them by means of an appropriate formula. Investments in long-term assets by segment1 in € thousand Corn Sugarbeet Cereals Vegetables Corporate Segments total Elimination of at equity-accounted financial assets Investments according to group statement 1 Excluding Right-of-Use assets according to IFRS 16 2021/2022 2020/2021 31,960 32,384 6,606 8,989 18,948 98,887 –5,387 93,500 28,601 26,464 7,264 1,273 22,971 86,573 –5,235 81,337 The main capital spending for each segment is as follows: Cereals: Expansion and modernization of production plants, in particular in Germany Corn: Expansion and modernization of production and Vegetables: Acquisition of breeding areas in Spain and processing plants, namely in Brazil Mexico Sugarbeet: Expansion of storage capacities in Italy and Corporate: Expansion of the production plant in Einbeck the production plant in Russia and implementation of new ERP software 5. Segment Reporting for the KWS Group | Notes for the KWS Group | Consolidated Financial Statements 105 KWS Group | Annual Report 2021/2022 Disclosures by region assets comprise goodwill, other intangible assets, The disclosures on the regional composition of net sales property, plant, and equipment, and financial assets. and noncurrent operating assets have been made in accordance with the accounting policies to be applied to The external net sales by sales region are broken down on the consolidated financial statements of the KWS Group the basis of the country where the customer is based. No and thus without proportionate consolidation of the equity- individual customer accounted for more than 10% of total accounted financial investments. Noncurrent operating net sales in the current and the previous fiscal years. 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 Long-term assets by region in € thousand Germany Europe (excluding Germany) thereof in France thereof in the Netherlands North and South America thereof in Brazil thereof in the U.S. Rest of world KWS Group 2021/2022 2020/2021 251,333 696,460 138,131 493,837 205,837 216,066 97,888 242,468 620,869 122,678 358,189 109,152 194,623 88,706 1,539,518 1,310,232 2021/2022 2020/2021 327,073 637,948 59,135 435,010 287,763 42,149 212,642 10,371 318,919 627,590 60,932 453,390 257,007 35,214 197,867 5,937 1,263,155 1,209,454 6. Notes to the Consolidated State ment of Comprehensive Income 6.1 Net sales and function costs inventory write-downs. The total cost of goods sold Net sales increased by 17.5% to € 1,539,518 was € 493,122 (400,215) thousand. The impairment losses (1,310,232) thousand. Net sales are mainly generated on inventories and the decreases in the impairment loss, from seed deliveries (€ 1,392,427 thousand; which are carried as a reduction in the cost of materials in previous year: € 1,200,594 thousand) and royalties the period, are as follows: (€ 92,974 thousand; previous year: € 81,025 thousand). A breakdown by segments and regions is provided in the segment reporting in section 5 of the Notes. The cost of sales increased by 21.7% to € 694,306 (570,690) thousand, or 45.1% (43.6%) of sales. The main factors driving that were the strong expansion of business in the Corn, Sugarbeet and Cereals Segments and higher July 1 to June 30 in € thousand Impairment losses Decreases in impairment loss 106 Consolidated Financial Statements | Notes for the KWS Group | 5. Segment Reporting for the KWS Group 2021/2022 2020/2021 63,263 42,749 4,683 4,597 Annual Report 2021/2022 | KWS Group The impairment losses relate mainly to unsold seed. They Research and development is recognized as an expense are based on, among other things, empirical values (such in the year it is incurred; in the year under review, this as germination capacity) and expectations as to their amounted to € 286,423 (252,226) thousand. That was substitution by new varieties. 18.6% (19.3%) of sales. Development costs for new varieties are not recognized as an asset because evidence Selling expenses increased by € 37,052 thousand of future economic benefit can only be provided after the to € 281,270 (244,218) thousand, or 18.3% (18.6%) of variety has been officially certified. sales. The increase is mainly due to the expansion of business and increased travel activity compared with the General and administrative expenses rose only slightly by € 5,019 thousand to € 132,161 (127,142) thousand, among other things due to lower costs for the transformation project ONEGLOBE (optimization of the administrative functions and processes); they are thus 8.6% (9.7%) of sales. previous year. 6.2 Other operating income July 1 to June 30 in € thousand Foreign exchange gains Performance-based public grants Income from the reversal of provisions Income from reversal of valuation allowance for trade receivables and recovery of written off receivables Income from sales of fixed assets Other income related to previous periods Unrealized gain on derivatives measured at fair value through profit or loss Income from loss compensation received Miscellaneous other operating income Total 2021/2022 2020/2021 53,008 12,227 1,826 9,252 77 123 101 239 8,776 85,628 33,197 9,910 5,607 3,505 2,940 1,405 239 14 14,629 71,446 The other operating income mainly comprises foreign receivables. The performance-based government grants exchange gains. The significant increase in foreign mainly relate to breeding allowances and farm payments. exchange gains is largely attributable to the high volatility The increase in income from the reversal of allowances of various currencies during the year, particularly in Eastern is mainly attributable to receivables in Brazil. They were Europe and South America. reversed in connection with the deposit of security for trade receivables. The other operating income also comprises government grants, and income from the reversal of allowances on 6.3 Other operating expenses July 1 to June 30 in € thousand Foreign exchange losses Valuation allowance on receivables Loss on net monetary position (hyperinflation) Unrealized loss on derivatives measured at fair value through profit or loss Expenses relating to previous periods Other expenses Total 2021/2022 2020/2021 52,774 5,832 4,473 1,109 347 11,393 75,928 35,799 6,754 541 148 2 7,127 50,369 6. Notes to the Consolidated Statement of Comprehensive Income | Notes for the KWS Group | Consolidated Financial Statements 107 KWS Group | Annual Report 2021/2022 The other operating expenses mainly comprise foreign The increase in losses from the net monetary position exchange losses and valuation allowances on receivables. (hyperinflation) is due to above-proportionate inflation in The significant increase in foreign exchange losses of IAS 29 for the Turkish subsidiaries (€ 484 thousand). Argentina (€ 3,989 thousand) and the first-time application is largely attributable to the high volatility of various currencies during the year, particularly in Eastern Europe, Turkey and South America. 6.4 Net financial income/expenses July 1 to June 30 in € thousand Interest income Income from other financial assets Foreign exchange income Financial income Interest expense Interest effects from pension provisions Interest expenses for lease liabilities Interest expense for other long-term provision Foreign exchange losses Financial expenses Result from equity-accounted financial assets Financial result 2021/2022 2020/2021 6,806 42 5,394 12,242 17,831 1,162 936 49 16,876 36,855 7,679 –16,934 6,132 14 0 6,145 16,151 1,273 876 38 0 18,338 17,374 5,181 Net financial income/expenses deteriorated compared Net income from the equity-accounted joint ventures and to prior year, mainly due to net exchange losses from associated companies fell sharply compared to prior year financing activities at the KWS Group, which are carried for due to lower earnings by AGRELIANT GENETICS LLC. the first time in the financial result. 6.5 Taxes Income tax expenses in € thousand Actual income taxes thereof from previous years Deferred taxes Income taxes 2021/2022 2020/2021 37,089 –1,266 –6,724 30,365 36,174 6,624 –4,550 31,624 The KWS Group pays tax in Germany at a rate of 29.7% The profits generated by group companies outside (29.8%). Corporate income tax of 15.0% (15.0%) and Germany are taxed at the rates applicable in the country solidarity tax of 5.5% (5.5%) are applied uniformly to in which they are based. The tax rates in foreign countries distributed and retained profits. In addition, trade tax is vary between 2.0% (5.0%) and 35.0% (34.4%). payable on profits generated in Germany. Trade income tax is applied at a weighted average rate of 13.9% (14.0%), resulting in a total tax rate of 29.7% (29.8%). 108 Consolidated Financial Statements | Notes for the KWS Group | 6. Notes to the Consolidated Statement of Comprehensive Income Annual Report 2021/2022 | KWS GroupThe deferred taxes that are recognized relate to the following balance sheet items and tax loss carryforwards: Deferred taxes in € thousand At 06/30/2021 Movements current year Deferred tax assets Deferred tax liabilities Net value Recog- nized in profit or loss Other Compre- hensive Income Currency Intangible assets Property, plant and equipment Biological assets Financial assets Inventories Current assets Noncurrent liabilities of which pension provisions Current liabilities 298 276 0 5,062 11,757 10,598 43,306 21,316 20,738 66,858 18,809 0 5,005 4,174 11,731 5,983 0 3,741 –66,559 –18,534 0 57 7,583 –1,133 37,323 21,316 16,996 7,460 –1,326 0 374 1,002 2,106 2,788 –10 –11 0 –508 0 –256 –10,439 –245 –10,439 –5,836 0 Deferred taxes recognized (gross) 92,034 116,302 –24,268 6,569 –11,223 Tax loss carryforward 5,552 0 5,552 Setting off –49,943 –49,943 0 154 0 0 0 69 –479 0 75 –723 –207 587 40 338 –341 277 0 Recog- nized in other compre- hensive income 59 –490 0 –433 –723 –462 –9,852 –10,399 338 –11,564 277 0 Deferred taxes recognized (net) 47,642 66,359 –18,717 6,724 –11,223 –64 –11,287 Deferred taxes in € thousand Intangible assets Property, plant and equipment Biological assets Financial assets Inventories Current assets Noncurrent liabilities of which pension provisions Current liabilities Deferred taxes recognized (gross) Tax loss carryforward Setting off Deferred taxes recognized (net) Deferred tax assets Deferred tax liabilities 403 570 0 4,326 14,838 7,861 31,699 10,932 13,566 73,264 5,983 –38,543 40,704 59,443 20,921 0 4,329 6,977 7,350 1,441 260 2,067 102,527 0 –38,543 63,984 At 06/30/2022 Net value –59,040 –20,350 0 –2 7,861 511 30,258 10,672 11,499 –29,263 5,983 0 –23,280 6. Notes to the Consolidated Statement of Comprehensive Income | Notes for the KWS Group | Consolidated Financial Statements 109 KWS Group | Annual Report 2021/2022 Due to the use of tax loss carryforwards and tax credits on with investments in subsidiaries, branches and associated which no deferred taxes were recognized in the past, the companies, and interests in joint arrangements, where the actual tax expense fell by € 3 (113) thousand. KWS Group is able to control the timing of the reversal of the differences and it is probable that the reversal will not There is a deferred tax expense of € 514 (2,304) thousand occur in the foreseeable future. from the allowance for deferred taxes on tax loss carryforwards and temporary differences in the year under In the year under review, there were surpluses of deferred tax review. The first-time recognition of deferred taxes and assets from temporary differences and loss carryforwards use of deferred taxes on loss carryforwards that had not totaling € 18,885 (17,052) thousand at Group companies that previously been recognized result in deferred tax income made losses in the past period or the previous period. These of € 593 (5) thousand. were considered recoverable, since it is assumed that the companies in question will post taxable profits in the future. No deferred taxes were formed for tax loss carryforwards The fact is taken into account here that the KWS Group may totaling € 4,944 (14,337) thousand that have not yet realize income with a delay due to the long-term nature of been utilized. Of these, € 0 (72) thousand must be research and development spending. utilized within a period of five years. Loss carryforwards totaling € 4,944 (14,265) thousand can be utilized without The reconciliation of the expected income tax expense to any time limit. the reported income tax expense is derived on the basis of the consolidated income before taxes and the nominal tax No deferred taxes were recognized on temporary rate for the Group of 29.7% (29.8%), taking into account differences totaling € 27,929 (25,290) thousand associated the following effects: Reconciliation of income taxes in € thousand Earnings before income taxes Expected income tax expense1 Reconciliation with the reported income tax expense Differences from the Group’s tax rate Effects of changes in the tax rate Tax effects from: Expenses not deductible for tax purposes and other additions Tax-free income Other permanent deviations Reassessment of the recognition and measurement of deferred tax assets Tax credits Taxes relating to previous years Other effects2 Reported income tax expense Effective tax rate 1 Tax rate in Germany: 29.7% (29.8%) 2 In other effects are € 2m from the application of IAS 29 (Hyperinflation) included 2021/2022 2020/2021 138,124 41,031 142,214 42,422 –8,655 –2,375 6,643 –6,216 –2,975 –166 0 –348 3,426 –8,313 –8,216 6,451 –9,430 –353 2,186 –505 8,093 –710 30,365 21.98% 31,624 22.24% 110 Consolidated Financial Statements | Notes for the KWS Group | 6. Notes to the Consolidated Statement of Comprehensive Income Annual Report 2021/2022 | KWS GroupThe item “Taxes relating to previous periods” also includes Employees (FTE) by region the effects of estimating uncertain tax positions in connection with field tax audits at the KWS Group. Effects from changes in tax rates relate in particular to the Dutch companies. The future realization of recognized deferred taxes for the Netherlands takes into account the influence of research and development activities on the effective tax. Tax rates have also changed in Argentina and Turkey in particular. There is no definitive tax assessment in respect of Employees (FTE) Germany Europe (excluding Germany) North and South America Rest of world Total 2021/2022 2020/2021 2,083 1,590 994 199 1,978 1,475 913 183 4,865 4,549 Apprentices and interns 116 109 several years at the Group. A tax audit in Germany and With our joint ventures and associated companies in a number of other countries has currently not been consolidated proportionately, the number of employees concluded. Since the KWS Group operates multinationally was 5,286 (5,004). and there are numerous relationships between affiliated companies, queries on the subject of transfer prices in 6.7 Share-based payment particular are expected from the local fiscal authorities. The KWS Group believes it has made adequate provisions Employee Stock Purchase Plan for these years where the tax assessment is not KWS has an Employee Stock Purchase Plan. All employees concluded. As a result of future legislation or changes in who have been with the Company for at least one year the opinions of the fiscal authorities, and allowing for the without interruption and have an employment relationship fact that there is fundamentally some uncertainty in the that has not been terminated at a KWS Group company area of transfer pricing, it is not possible to rule out that that participates in the program are eligible to take part. there may be tax refunds or payments of tax arrears for That also includes employees who are on maternity leave past years. or parental leave or who are in semi-retirement. Other taxes, primarily real estate tax, are allocated to the Each employee can acquire up to 2,000 shares. A bonus of relevant functions. 20% is deducted from the purchase price, which depends on the price applicable on the key date. The shares are 6.6 Personnel costs/employees subject to a lock-up period of four years beginning when July 1 to June 30 in € thousand Wages and salaries Social security contributions, expenses for pension plans and benefits Total they are posted to the employee’s securities account. The right to a dividend, if declared by KWS SAAT SE & 2021/2022 2020/2021 Co. KGaA, exists during the lock-up period. Holders 282,792 259,697 can also exercise their right to participate in the Annual 73,052 66,600 355,844 326,297 Shareholders’ Meeting during the lock-up period. They can dispose freely of the shares after the lock-up period. In the year under review, 68,998 (76,120) shares were repurchased for the Employee Stock Purchase Plan at a total price of € 4,730 (5,558) thousand and transferred Personnel costs went up by 9.1%. The number of directly to the employees. The total cost for issuing shares employees increased from 4,549 to 4,865, or by 6.9%. at a reduced price was € 640 thousand in the past fiscal Of the 4,865 (4,549) employees, 4,631 (4,307) are year (previous year: € 1,521 thousand). permanent employees and 234 (242) are temporary employees. The number of trainees and interns is recorded separately and not included in the headcount. There were 116 (109) apprentices and interns at KWS at June 30, 2022. 6. Notes to the Consolidated Statement of Comprehensive Income | Notes for the KWS Group | Consolidated Financial Statements 111 KWS Group | Annual Report 2021/2022Long-term incentive (LTI) 6.8 Net income for the year The stock-based compensation plans awarded at the The net income for the year denotes the KWS Group’s KWS Group are recognized in accordance with IFRS 2 after-tax profit. It was € 107,760 (110,590) thousand on “Share-based Payment.” The incentive program, which operating income of € 155,058 (137,032) thousand and net was launched in fiscal 2009/2010, involves stock-based financial income/expenses of € –16,934 (5,181) thousand payment transactions with cash compensation, which and after taxes totaling € 30,365 (31,624) thousand. are measured at fair value at every balance sheet date. The return on sales (net income for the year relative Members of the Executive Board are obligated to acquire to net sales) was 7.0% and thus below the previous shares in KWS SAAT SE & Co. KGaA every year in a year (8.4%). Net income for the year after minority freely selectable amount ranging between 35% and 50% interest was € 107,760 (110,609) thousand. Diluted/ of the gross performance-related bonus. Along with undiluted earnings per share are calculated by dividing that, members of the first management level below the the net income for the year (€ 107,760 thousand) by Executive Board likewise take part in an LTI program. 33,000,000 shares and was € 3.27 (3.35). As part of this program, they are obligated to invest in shares in KWS SAAT SE & Co. KGaA every year in a freely selectable amount ranging between 10% and 40% of the gross performance-related bonus. The shares acquired under the LTI program may be sold at the earliest after a regular holding period of five years beginning at the time they are acquired (end of the quarter in which the shares were acquired). In addition to the shares being unlocked, the entitled persons are paid a long-term incentive (LTI) in the form of cash compensation after the holding period for the tranche in question. Its level is calculated on the basis of KWS SAAT SE & Co. KGaA’s share performance and on the KWS Group’s return on sales (ROS), measured as the ratio of operating income to net sales, over the holding period. For persons with contracts as of July 1, 2014, the cash compensation for members of the Executive Board is a maximum of one-and-half times (for the Chief Executive Officer two times), and for members of the first management level below the Executive Board a maximum of two times their own investment (LTI cap). The costs of this compensation are recognized in the income statement over the period and, taking the cash compensation in January and February 2022 into account, were € 697 (737) thousand in the period under review. The provision for it at June 30, 2022, was € 2,780 (2,920) thousand. The LTI fair values are calculated by an external expert. 112 Consolidated Financial Statements | Notes for the KWS Group | 6. Notes to the Consolidated Statement of Comprehensive Income Annual Report 2021/2022 | KWS Group7. Notes to the Consolidated Balance Sheet 7.1 Intangible assets Intangible assets in € thousand Gross book values: 07/01/2021 Currency translation Adjustment for hyperinflation IAS 29 Additions Disposals Transfers Transfers held for sale (IFRS 5) At 06/30/2022 Amortization and impairment: 07/01/2021 Currency translation Additions Disposals Transfers Gross book values: 06/30/2022 Net book values: 06/30/2022 Net book values: 06/30/2021 € thousand Gross book values: 07/01/2020 Currency translation Change in consolidation scope Additions Disposals Transfers At 06/30/2021 Amortization and impairment: 07/01/2021 Currency translation Additions Impairment Disposals Transfers Gross book values: 06/30/2021 Net book values: 06/30/2021 Net book values: 06/30/2020 Patents, industrial property rights and software 477,474 1,471 29 10,725 401 –21 0 489,275 123,773 1,360 31,469 246 –79 156,277 332,998 353,701 Patents, industrial property rights and software 460,327 178 4,144 12,417 3,200 3,608 477,474 91,966 232 33,092 2,223 3,046 –694 123,773 353,701 368,361 Goodwill 122,642 848 0 0 0 0 500 122,990 –1 0 0 0 0 –1 122,990 122,643 Goodwill 117,289 403 4,950 0 0 0 122,642 –1 0 0 0 0 0 –1 122,643 117,290 Intangible Assets 600,116 2,318 29 10,725 401 –21 500 612,265 123,772 1,360 31,469 246 –79 156,276 455,989 476,344 Intangible Assets 577,616 581 9,094 12,417 3,200 3,608 600,116 91,965 232 33,092 2,223 3,046 –694 123,772 476,344 485,651 7. Notes to the Consolidated Balance Sheet | Notes for the KWS Group | Consolidated Financial Statements 113 KWS Group | Annual Report 2021/2022Intangible assets include purchased varieties, rights Goodwill and intangible assets with an indefinite useful to varieties and distribution rights, brands, customer life obtained as part of company acquisitions are tested relationships, software licenses for electronic data for impairment at least once a year. To enable that, cash- processing, and goodwill. The current additions generating units have been defined in line with internal of € 10,725 (12,417) thousand related to software licenses budgeting and reporting processes. In the KWS Group, and patents, as well as ongoing implementation of a these are the Business Units. To test for impairment, the new ERP system. Amortization of intangible assets carrying amount of each Business Unit is determined by amounted to € 31,469 (33,092) thousand. The carrying allocating the assets and liabilities, including attributable amount of the technology from acquisition of the goodwill and intangible assets. An impairment loss is POP VRIEND SEEDS Group is € 257,907 (266,708) thousand. recognized if the recoverable amount of a Business Unit The POP VRIEND brand is regarded as having an indefinite is the higher of the fair value less costs to sell and the useful life, since the KWS Group intends to keep on using value in use of a cash-generating unit. The recoverable it and the period of time in which the brand yields an amount in fiscal 2021/2022 was determined on the basis economic benefit can therefore not be determined. The of the value in use of the respective cash-generating unit carrying amount is € 20,752 thousand, as in the previous excluding the Business Unit Vegetables. is less than its carrying amount. The recoverable amount year. The recoverable amount of the POP VRIEND brand was calculated in fiscal 2021/2022 by applying the value in The impairment test uses the expected future cash flows use at the level of the relevant cash-generating unit of the on which the medium-term plans of the companies, POP VRIEND Group. In the previous year, the recoverable which are grouped in segments, are based; these plans, amount for the POP VRIEND brand was assessed which cover a period of four years in general, have been separately using the license price analogy method approved by the Executive Board. They are based on due to the fact that the POP VRIEND Group had been historical patterns and expectations about future market acquired recently. In determining the value in use of the development and include an allocation of the KWS Group’s POP VRIEND cash-generating unit, the forecast cash flows corporate units. of the budgeting and medium-term and long-term planning are used in accordance with the technology assets’ For all Business Units for which the recoverable amount remaining useful life of 27 years. The planning is based on is calculated by means of the value in use, the key the long-term expectations of the POP VRIEND Group with assumptions on which corporate planning is based include average annual net sales growth in the mid single-digit assumptions about price trends for seed, in addition to range, an average operating margin in the mid double-digit the development of market shares and the regulatory range and using a WACC before taxes of 6.26% (5.24%). framework. In this connection, average net sales growth Sensitivity analyses were also carried out, in which a 10% in the mid single-digit percentage range has been reduction in future net sales and a 10% increase in the cost assumed for the KWS Group’s detailed planning horizon. of capital were assumed. The sensitivity analyses did not Company-internal projections take the assumptions of reveal the need to recognize an impairment loss. industry-specific market analyses, company-related growth perspectives and appropriate cost efficiencies into account. 114 Consolidated Financial Statements | Notes for the KWS Group | 7. Notes to the Consolidated Balance Sheet Annual Report 2021/2022 | KWS GroupThe recoverable amount for the Business Unit Vegetables The impairment tests conducted at the end of fiscal year is calculated as the fair value less costs to sell. 2021/2022 confirmed that the existing goodwill is not Measurement is based on the present value of future cash impaired. flows derived from planning (fair value hierarchy level 3). This takes into account not only the medium-term but also the long-term net sales and earnings expectations from establishment of KWS’ vegetable breeding operations. For this reason, the estimate of future cash flows covers a long-term period extending beyond the basic detailed planning period until a stable state is reached in fiscal 2039/2040. Further important foundations were laid for the Business Unit’s future long-term growth in fiscal 2021/2022. The Company is working to establish its own breeding stations for tomatoes, peppers, melons and Goodwill in € thousand Vegetables Corn America Cereals Others Total 06/30/2022 06/30/2021 99,576 17,020 3,984 2,411 100,076 16,185 3,989 2,392 122,991 122,643 watermelons at its locations in Brazil and Mexico. The Sensitivity analyses were also carried out for all cash- focus of vegetable breeding in Spain is on tomatoes, generating units to which goodwill is allocated. As part cucumbers and peppers. In addition to the long-term of that, it was assumed that the future cash flows would developments in the Business Unit Vegetables, we also fall by 10%, the weighted average cost of capital would assume that the market environment for existing vegetable increase by 10% and the long-term growth rate would fall seed crops, particularly for spinach seed, will soon by 1 percentage point. The sensitivity analyses did not recover. Accordingly, we expect a significant year-on-year reveal the need to recognize an impairment loss for any increase in net sales as early as fiscal 2022/2023. cash-generating unit. The discount rate at the KWS Group has been derived as the weighted average cost of capital (WACC). WACC before taxes Business Unit in % 2021/2022 2020/2021 Corn America Corn Europe/Asia Sugarbeet Cereals Vegetables 9.92 8.14 7.73 7.78 6.13 8.63 7.08 7.02 6.85 7.29 The change in the WACC before taxes of the Business Unit Corn America is mainly attributable to the increase in the underlying country risk premium. A long-term growth rate of 1.5% (1.5%) has been assumed here for all Business Units beyond the detailed planning horizon in order to allow for extrapolation in line with the expected inflation rate. 7. Notes to the Consolidated Balance Sheet | Notes for the KWS Group | Consolidated Financial Statements 115 KWS Group | Annual Report 2021/20227.2 Property, plant, and equipment Reconciliation of carrying amount of property, plant and equipment in € thousand Technical equipment and machinery Operating and office equipment Prepayments for assets under construction Property, plant and equipment Land and buildings Gross book values: 07/01/2021 420,204 307,538 131,760 49,349 908,851 Currency translation Adjustment for hyperinflation IAS 29 Additions Disposals Transfers At 06/30/2022 Depreciation and impairment: 07/01/2021 Currency translation Adjustment for hyperinflation IAS 29 Additions Disposals Transfers Gross book values: 06/30/2022 Net book values: 06/30/2022 Net book values: 06/30/2021 6,513 8,893 18,620 338 20,768 474,660 4,537 8,249 21,154 1,551 31,427 2,457 2,745 10,505 2,577 3,045 9,564 273 32,496 221 –55,292 23,071 20,159 82,775 4,687 –51 371,355 147,935 36,168 1,030,118 125,987 188,509 2,251 2,258 13,587 97 –546 143,440 331,220 294,218 4,638 4,685 22,837 1,380 553 219,842 151,513 119,029 88,089 2,014 1,387 11,845 2,368 0 100,967 46,968 43,671 0 0 0 0 0 0 0 36,168 49,349 402,585 8,903 8,329 48,270 3,845 7 464,248 565,870 506,266 in € thousand Technical equipment and machinery Operating and office equipment Prepayments for assets under construction Property, plant and equipment Land and buildings Gross book values: 07/01/2020 389,360 299,341 130,179 36,889 Currency translation Adjustment for hyperinflation IAS 29 Change in consolidation scope Additions Disposals Transfers At 06/30/2021 Depreciation and impairment: 07/01/2020 Currency translation Adjustment for hyperinflation IAS 29 Additions Disposals Transfers Gross book values: 06/30/2021 Net book values: 06/30/2021 Net book values: 06/30/2020 –6,103 3,028 10 13,768 1,303 21,444 –5,426 1,964 20 11,520 6,312 6,431 –1,994 1,171 11 10,386 2,593 –5,400 420,204 307,538 131,760 105,120 –999 637 12,801 1,011 9,438 125,987 294,218 284,240 174,559 –2,790 730 21,481 5,616 145 188,509 119,029 124,782 81,912 –830 593 11,701 2,302 –2,986 88,089 43,671 48,267 –214 –260 0 33,246 131 –20,181 49,349 0 0 0 0 0 0 0 49,349 36,889 855,769 –13,738 5,904 40 68,920 10,340 2,295 908,851 361,591 –4,619 1,961 45,983 8,929 6,597 402,585 506,266 494,178 116 Consolidated Financial Statements | Notes for the KWS Group | 7. Notes to the Consolidated Balance Sheet Annual Report 2021/2022 | KWS Group The main focus of the KWS Group’s capital spending in the year under review was again on erecting and expanding Disclosures on equity-accounted joint ventures (with the partner Vilmorin) production and research and development capacities. in € thousand 06/30/2022 06/30/2021 A sugarbeet seed production plant was completed in Russia. Stake in the joint ventures 50% 50% Investments were also made in warehouses in Italy and Current assets 346,361 275,652 Germany. Expansion of drying and production capacities for corn seed was continued in South America, especially thereof cash and cash equivalents in Brazil. Investments were also made in new breeding capacities in Spain and Mexico. Noncurrent assets Current liabilities 43,488 230,509 255,197 32,584 213,537 194,684 First-time application of IAS 29 in Turkey results in an effect on the opening balance sheet values of the net carrying amounts for property, plant, and equipment totaling € 3,235 thousand (of which gross carrying amounts are € 6,068 thousand and depreciation is € 2,833 thousand). 7.3 Equity-accounted financial assets Equity-accounted joint ventures 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 The joint ventures AGRELIANT GENETICS LLC. and Net sales AGRELIANT GENETICS INC., which the KWS Group operates together with its joint venture partner Vilmorin, are recognized at equity. They are both classified together as significant joint ventures. The joint ventures AGRELIANT GENETICS LLC. and AGRELIANT GENETICS INC. are closely affiliated operating Depreciation and amortization Net income for the year Comprehensive income (100%) Comprehensive income (50%) Group share of comprehensive income units. The main business activity of the two joint ventures Dividend payment (100%) is the production and sale of corn and soybean seed in North America. 119,850 105,527 4,576 2,646 317,096 291,859 158,548 145,929 8,802 8,802 167,350 154,731 512,158 466,908 26,772 7,286 39,995 19,997 19,997 13,624 26,207 24,070 21,062 10,531 10,531 5,837 The following disclosures relate to the two joint ventures, insignificant joint venture in the KWS Group’s consolidated which KWS runs with its joint venture partner Vilmorin and financial statements using the equity method. In addition, FARMDESK B.V. was included as an an identical management team. Equity-accounted associated companies In the year under review, the Chinese joint venture KENFENG – KWS SEED CO., LTD. was classified as a significant associated company and is included in the KWS Group’s consolidated financial statements using the equity method. 7. Notes to the Consolidated Balance Sheet | Notes for the KWS Group | Consolidated Financial Statements 117 KWS Group | Annual Report 2021/2022Disclosures on significant associated companies accounted for using the equity method 7.6 Inventories and biological assets in € thousand 06/30/2022 06/30/2021 Inventories and biological assets Stake in the associated company Current assets thereof cash and cash equivalents Noncurrent assets Current liabilities Noncurrent liabilities Net assets (100%) Group share of net assets (49%) Carrying amount for the stake in the associated company Net sales Depreciation and amortization Net income for the year Comprehensive income (100%) Comprehensive income (49%) Group share of comprehensive income Dividend payment (100%) 49% 28,046 22,552 15,884 7,047 156 49% 28,657 11,493 15,864 8,087 124 36,728 36,309 17,996 17,792 17,996 40,813 1,793 8,948 12,350 6,051 6,051 11,933 17,792 42,770 1,566 11,333 10,125 4,961 4,961 5,491 in € thousand Raw materials and consumables Work in progress Immature biological assets Finished goods Right of return Total 06/30/2022 06/30/2021 66,423 152,619 8,955 43,721 114,042 5,546 132,766 106,118 2,810 2,725 363,573 272,152 Inventories and biological assets increased by € 91,421 thousand or 33.6%. Immature biological assets relate to living plants in the process of growing (before harvest) at the farms. The field inventories of the previous year have been harvested in full and the fields have been newly tilled in the year under review. Government subsidies of € 1,083 (1,744) thousand, for which all the requirements were met at the balance sheet date, were granted for agricultural activity in the fiscal year. Future government subsidies depend on the further development of European agricultural policy. In addition, IMPETUS AGRICULTURE, INC. was also included as an insignificant associated company in the 7.7 Current receivables and other assets Current receivables and other assets KWS Group’s consolidated financial statements at a carrying in € thousand 06/30/2022 06/30/2021 amount of € 637 (851) thousand using the equity method. Trade receivables Current tax assets 7.4 Proportionately consolidated joint operations Other current financial assets The assets and liabilities and revenue and expenses from Other current assets the joint operations are included proportionately (at 50%) Total in the consolidated financial statements. The main activity of the proportionately consolidated GENECTIVE S.A., 518,508 124,475 55,257 63,524 449,501 91,546 40,592 34,488 761,764 616,127 including its subsidiaries, is development of genetically The trade receivables include € 13,955 (12,999) thousand in improved traits for crops. The proportionately consolidated receivables from joint ventures and joint operations. joint operation AARDEVO B.V., including its subsidiary, specializes in developing potato seed. The need to recognize impairment losses at June 30, 2022, 7.5 Financial assets was analyzed using the provision matrix on the basis of the expected losses. To enable that, the receivables were This item mainly comprises the investments in the grouped by geographical region and the length of time they capital investment fund MLS Capital Fund II (financing were overdue and multiplied by appropriate default rates. of projects / access to biotechnology developments) Receivables that are overdue by more than 360 days and totaling € 9,435 (8,777) thousand, which are measured at are no longer subject to an enforcement measure have fair value through other comprehensive income due to the been classified as uncollectible and written off in full. long-term nature of the investment. The remainder relates to a large number of financial investments that – taken individually – are insignificant, such as other interest- bearing loans, shares in cooperatives, and other securities. 118 Consolidated Financial Statements | Notes for the KWS Group | 7. Notes to the Consolidated Balance Sheet Annual Report 2021/2022 | KWS Group The maximum exposure to the risk of default from trade receivables is the carrying amount reported on the balance sheet and is as follows at June 30, 2022: Credit risk exposure on trade receivables in € thousand 06/30/2022 Expected credit loss rate Total gross amount at default Expected credit loss 06/30/2021 Expected credit loss rate Total gross amount at default Expected credit loss not overdue 1–180 days 181–360 days > 360 days Total Overdue in days 1.00% 463,920 3,567 1.00% 397,702 3,839 2.00% 52,613 1,198 4.00% 54,204 2,094 38.00% 6,231 2,393 53.00% 7,260 3,872 87.00% 22,019 19,116 99.00% 21,316 21,177 544,783 26,274 480,482 30,982 The credit risks were reflected by the following allowances Other current assets include advance payments made on at June 30, 2022, and in the previous year: account totaling € 52,317 (25,108) thousand. Change in allowances on receivables 7.8 Cash and cash equivalents in € thousand 07/01 Changes in consolidation scope and exchange rates Addition Disposal Reversal 06/30 2021/2022 2020/2021 30,981 33,848 This item comprises cash and cash equivalents in the form of cash on hand, checks, and immediately available balances at banks, as well as securities. –1,084 5,832 208 9,247 993 5,947 6,328 3,479 26,274 30,981 Cash and cash equivalents at June 30, 2022, were € 203,613 (177,169) thousand. Securities at the balance sheet data amounted to € 51 (45,577) thousand. As in the previous year, the annual impairment test of cash and cash equivalents did not result in any need to The current tax assets of € 124,475 (91,546) thousand recognize impairment losses. mainly comprise value-added tax claims, tax subsidies from research and development, and receivables from The change in cash and cash equivalents compared to the other taxes. previous year is explained in the cash flow statement. Other current financial assets include deposited security At June 30, 2022, the KWS Group had undrawn promised related to derivative positions totaling € 1,243 (0) thousand. loan facilitates totaling € 379,000 (250,000) thousand. 7. Notes to the Consolidated Balance Sheet | Notes for the KWS Group | Consolidated Financial Statements 119 KWS Group | Annual Report 2021/20227.9 Equity of at equity instruments (with changes in value in the The fully paid-up capital of KWS remains € 99,000 thou- other comprehensive income) are also comprised here. sand. The no-par bearer shares are certificated by a global Differences from translation of the functional currency certificate for 33,000,000 shares. The Company does not of foreign business operations into the currency used hold any shares of its own. KWS has Authorized Capital of by the Group in reporting (euro) are carried in the item up to € 9,900 thousand at the balance sheet date. Reserve from currency translation differences on foreign operations. The item Revaluation of net liabilities/assets The capital reserves essentially comprise the premium from defined benefit plans includes the actuarial gains obtained as part of share issues. and losses on defined benefit plans. Differences from translation of the functional currency of equity-accounted The other reserves and net retained profit essentially foreign business units into the currency used by the Group comprise the net income generated in the past by in reporting (euro) are carried in the reserve for currency the companies included in the consolidated financial translation for equity-accounted financial assets. statements, minus dividends paid to shareholders, and the net retained profit. The reserve for currency translation, The other changes in equity include effects from the the reserve for remeasurement gains and losses on hyperinflation of the equity components of the subsidiaries defined benefit plans, the reserve for currency translation in Argentina and Turkey in accordance with IAS 29. First- for equity-accounted financial assets, the reserve for the time application of IAS 29 in Turkey results in an effect on changes in value of the cash flow hedges of the equity- the opening balance sheet values for the Group’s equity accounted joint ventures, and the reserve for revaluation totaling € 3,702 thousand. Other comprehensive income in € thousand Items that may have to be subsequently reclassified as profit or loss Changes in reserve for currency translation differences on foreign operations Changes on reserve for currency translation differences on at equity accounted financial assets Items not reclassified as profit or loss Net gain/(loss) on equity instruments designated at fair value through other comprehensive income Revaluation of net liabilities/assets from defined benefit plans Other comprehensive income 2021/2022 2020/2021 Before taxes Tax effect After taxes Before taxes Tax effect After taxes 54,473 36,452 18,021 0 0 0 54,473 –39,905 36,452 –38,993 18,021 –912 0 0 0 –39,905 –38,993 –912 36,967 –10,694 26,274 8,813 –2,074 6,738 657 –107 550 3,300 –635 2,666 36,310 91,440 –10,587 –10,694 25,723 80,746 5,513 –31,092 –1,439 –2,074 4,073 –33,167 120 Consolidated Financial Statements | Notes for the KWS Group | 7. Notes to the Consolidated Balance Sheet Annual Report 2021/2022 | KWS Group The objective of the KWS Group’s capital management management activities intend to optimize the average activities is to pursue the interests of shareholders and cost of capital. Another goal is a balanced mix of equity employees in accordance with the corporate strategy and and debt capital. Consolidated net income for the year earn a reasonable return on investment. The KWS Group is (after taxes and minority interests) is € 107,760 (110,609) not subject to any external minimum capital requirements. thousand. However, there was a total dividend payout One main goal is to retain the trust of investors, lenders of € 26,400 (23,100) thousand in December 2021. This and the market so as to strengthen the Company’s ensures the adequate financing of future operating future business development. The KWS Group’s capital business expansion in the long term. Capital structure in € thousand Equity Long-term financial borrowings Other noncurrent liabilities Short-term borrowings Other noncurrent liabilities Total capital Equity ratio (%) 06/30/2022 06/30/2021 1,245,911 1,053,718 613,588 200,577 111,991 479,728 601,080 237,929 97,225 386,791 2,651,796 2,376,743 47.0 44.3 The focus in selecting financial instruments is on Noncurrent liabilities financing with matching maturities, which is achieved by controlling the maturities. Long-term financial borrowings increased by € 12,508 thousand (previous year: increase of € 79,336 thousand). 7.10 Minority interests There are no minority interests in the KWS Group at June 30, 2022. 7.11 Noncurrent liabilities Noncurrent liabilities decreased by € 24,844 thousand in € thousand 06/30/2022 06/30/2021 Long-term provisions Long-term borrowings Trade payables1 95,225 613,588 304 132,500 601,080 242 Deferred tax liabilities 63,984 66,359 Other noncurrent financial liabilities1 Lease liabilities Other noncurrent liabilities1 0 37,228 3,837 62 37,465 1,301 Total 814,165 839,009 (previous year: increase of 43,544 thousand). A borrower’s 1 These positions are shown consolidated in the balance sheet. note loan totaling € 37,000 thousand was repaid during the fiscal year. Consequently, the remaining liabilities from borrower’s note loans, using the effective interest method, were € 309,662 thousand at June 30, 2022, and have remaining maturities through 2029. 7. Notes to the Consolidated Balance Sheet | Notes for the KWS Group | Consolidated Financial Statements 121 KWS Group | Annual Report 2021/2022 Long-term provisions in € thousand 06/30/2021 Changes in the consoli- dated group, currency Interest expenses from com- pounding Adjust- ment not affecting profit or loss Addition Con- sumption Reversal 06/30/2022 Pension provisions Other provisions Total 122,388 10,111 132,500 727 –26 701 1,173 1,898 –36,310 4,239 0 85,638 49 1,222 7,242 9,140 0 –36,310 7,583 11,822 207 207 9,587 95,224 The pension provisions are based on defined benefit 2.95% the year before, and between 2.74% and 7.00% obligations, determined by years of service and (0.25% and 1.65%) in the rest of the world. pensionable compensation. They are measured using the accrued benefit method under IAS 19, on the basis of The following mortality tables were used at June 30, 2022: assumptions about future development. The assumptions in detail are that wages and salaries in Germany will In Germany: The 2018 G mortality table of Klaus increase by 3.00% (3.00%) annually, in the U.S. by 4.50% Heubeck (3.50%) annually and in the rest of the world by 2.63% Abroad: Mainly Pri–2012 Private Retirement Plans to 7.00% (2.00% to 2.10%) annually. An annual increase Mortality Table Projection Scale MP–2021 and INSEE in pensions of 2.00% (2.00%) is assumed in Germany. TD/TV 15–17. The discount rate in Germany was 3.20% compared with 0.89% the year before, 4.65% in the U.S. compared with A retirement age of 65 years is imputed for Germany, a retirement age of 65 years is imputed for the U.S., and a retirement age of 66 years is imputed for France. 122 Consolidated Financial Statements | Notes for the KWS Group | 7. Notes to the Consolidated Balance Sheet Annual Report 2021/2022 | KWS GroupNature and scope of the pension benefits A pro-rata pension if the employee reaches the In Germany minimum vesting period of five years, but is below 55. The following benefits are provided under a company agreement relating to the Company retirement pension The pension plans are mainly subject to the following risks: program: Investment and return An old-age pension at the age of 65 The present value of the defined benefit obligation from the An early retirement pension before the age of 65, pension plan is calculated using a discount rate defined coupled with benefits from the early retirement pension on the basis of the returns on high-quality fixed-income from the statutory pension insurance program corporate bonds. If the income from the plan assets is An invalidity pension for persons who suffer from below this rate of interest, that may result in general in a occupational disability or incapacity to work as defined shortfall in the plan. The corporate bonds and share funds by the statutory pension insurance program are chosen to ensure risk diversification and managed by A widow’s or widower’s pension an external fund manager. For benefit obligations backed by a guarantee by an Change in interest rates insurance company toward three former members of the The fall in the returns on corporate bonds and thus the Executive Board, the plan assets of € 7,064 (8,776) thousand discount rate will result in an increase in the obligations, correspond to the present value of the obligation. In which is only partly compensated for by a change in the accordance with IAS 19, the pension commitments are value of the plan assets. netted off against the corresponding plan assets. Life expectancy Abroad The present value of the defined benefit obligation from The defined benefit obligations abroad mainly relate to the plan is calculated on the basis of the best-possible pension commitments in the U.S. Share funds and bonds estimate using mortality tables. An increase in the life were mainly invested as plan assets to cover them. All expectancy of the entitled employees results in an increase employees who have reached the age of 21 are entitled to in the plan liabilities. benefits. In addition, each employee must have worked at least one year and at least 1,000 working hours to earn an Salary and pension trends entitlement. The present value of the defined benefit obligation from the plan is calculated on the basis of future salaries/pensions. The legal and regulatory framework of the pension plan in Consequently, increases in the salary and pension of the U.S. is based on the U.S. Employee Retirement Income the entitled employees results in an increase in the plan Security Act (ERISA), which sets minimum standards liabilities. for pension plans, including the minimum funding level. In accordance with U.S. regulations, the funding level is In previous years, the KWS Group countered the usual determined on the basis of a regular assessment in order risks of direct obligations by converting the pension to avoid benefit restrictions. obligations from defined benefit to defined contribution plans. As a result, subsequent benefits will be provided The following benefits are granted from the pension plan: by a provident fund backed by a guarantee. The existing obligations, which are partly covered by plan assets, are An old-age pension at the age of 65 An early retirement pension before the age of 65 – to be eligible, the employee must be at least 55 and the minimum vesting period is five years 7. Notes to the Consolidated Balance Sheet | Notes for the KWS Group | Consolidated Financial Statements 123 KWS Group | Annual Report 2021/2022funded from the operating cash flow and are subject to the previously mentioned measurement risks. Changes in accrued benefit entitlements in € thousand 2021/2022 2020/2021 Germany Abroad Total Germany Abroad Total Accrued benefit entitlements from retirement obligations on July 1 Service cost Interest expense 122,864 32,007 154,871 127,760 32,318 160,078 748 1,072 2,037 964 2,785 2,036 789 1,099 –1,650 1,723 789 –474 2,512 1,888 –2,125 Actuarial gains (–)/losses (+) –32,993 –8,584 –41,577 of which due to a change in financial assumptions used for calculation of which due to demographic assumptions 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 in € thousand 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 Contributions to plan assets Exchange rate changes Other changes in value Fair value of the planned assets on June 30 –32,079 –7,924 –40,003 –758 –435 –1,193 0 130 130 0 –878 –878 –914 –4,823 0 0 –790 –893 3,801 0 –1,705 –5,716 3,801 0 –892 –5,133 0 0 838 –736 –1,644 32 –54 –5,870 –1,644 32 86,868 29,332 116,199 122,864 32,007 154,871 Germany Abroad Total Germany Abroad Total 2021/2022 2020/2021 8,776 75 –1,164 –624 0 0 0 23,707 32,483 10,361 20,620 30,981 787 863 85 529 614 –4,103 –769 886 3,073 –85 –5,266 –1,392 886 3,073 –85 –997 –673 0 0 0 4,385 –639 0 –1,134 –54 3,388 –1,312 0 –1,134 –54 7,064 23,496 30,561 8,776 23,707 32,483 124 Consolidated Financial Statements | Notes for the KWS Group | 7. Notes to the Consolidated Balance Sheet Annual Report 2021/2022 | KWS Group In order to allow reconciliation with the figures in the balance sheet, the accrued benefit must be netted off with the plan assets. Reconciliation with the balance sheet values for pensions in € thousand 2021/2022 2020/2021 Germany Abroad Total Germany Abroad Total Accrued benefit entitlements from retirement obligations on June 30 Fair value of the planned assets on June 30 Balance sheet values on June 30 86,867 29,332 116,199 122,864 32,007 154,871 7,064 79,803 23,496 5,836 30,561 85,638 8,776 114,088 23,706 8,301 32,482 122,389 The following amounts were recognized in the statement of comprehensive income: Effects on the statement of comprehensive income n € thousand 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 a change in demographic assumptions Actuarial gains (–)/losses (+) due to experience adjustments Amounts recognized in other comprehensive income Total (amounts recognized in the statement of comprehensive income) 2021/2022 2020/2021 Germany Abroad 748 996 2,037 177 Total 2,785 1,173 Germany Abroad 789 1,013 1,723 260 Total 2,512 1,274 1,744 2,214 3,958 1,802 1,983 3,785 1,164 4,103 5,266 997 –4,385 –3,388 –32,079 –7,924 –40,003 –758 –878 –1,636 0 130 130 0 –435 –435 –914 –790 –1,705 –892 838 –54 –31,829 –4,481 –36,311 –653 –4,859 –5,513 –30,085 –2,268 –32,353 1,149 –2,876 –1,727 The service cost is recognized in operating income in the respective functional areas by means of an appropriate formula. Net interest expenses and income are carried in the interest result. 7. Notes to the Consolidated Balance Sheet | Notes for the KWS Group | Consolidated Financial Statements 125 KWS Group | Annual Report 2021/2022The fair value of the plan assets was split over the following investment categories: Breakdown of the planned assets by investment category in € thousand Corporate bonds Equity funds Consumer industry Finance Industry Technology Health care Other Cash and cash equivalents Reinsurance policies Planned assets on June 30 7,064 7,064 Germany Abroad 2021/2022 2020/2021 6,714 15,283 2,486 2,411 1,646 2,871 1,954 3,915 1,499 Total 6,714 15,283 2,486 2,411 1,646 2,871 1,954 3,915 1,499 7,064 Germany Abroad 6,398 15,714 2,874 2,391 1,808 2,950 1,897 3,794 1,595 8,776 8,776 Total 6,398 15,714 2,874 2,391 1,808 2,950 1,897 3,794 1,595 8,776 23,496 30,560 23,707 32,483 The plan assets abroad relate mainly to the U.S. The following sensitivity analysis at June 30, 2022, shows how the present value of the obligation would change given There is no active market for the reinsurance policies in a change in the actuarial assumptions. No correlations Germany. There is an active market for the other plan between the individual assumptions were taken into assets: The fair value can be derived from their stock account in this, i.e. if an assumption varies, the other market prices. 69.24% (previous year: 65.81%) of the assumptions were kept constant. The projected unit credit corporate bonds have an AAA rating. method used to calculate the balance sheet values was also used in the sensitivity analysis. Sensitivity analysis in € thousand Effect on obligation in 2021/2022 Effect on obligation in 2020/2021 Change in assump- tion Decrease Increase Change in assump- tion Discount rate +/–100 bps1 16,954 –13,600 +/–100 bps1 Anticipated annual pay increases +/–50 bps Anticipated annual pension increase +/–25 bps Life expectancy +/–1 year –887 –2,127 –3,315 961 +/–50 bps 2,215 3,357 +/–25 bps +/–1 year Decrease Increase 27,767 –1,263 –3,585 –5,510 –21,655 1,361 3,755 5,656 1 Lower limit 0% 126 Consolidated Financial Statements | Notes for the KWS Group | 7. Notes to the Consolidated Balance Sheet Annual Report 2021/2022 | KWS Group The following undiscounted payments for pensions (with their due dates) are expected in the following years: Anticipated payments for pensions in € thousand 2022/2023 2023/2024 2024/2025 2025/2026 2026/2027 2027/2028–2031/2032 Anticipated payments for pensions in € thousand 2021/2022 2022/2023 2023/2024 2024/2025 2025/2026 2026/2027–2030/2031 Germany Abroad 4,854 4,917 4,929 4,864 4,855 24,136 1,142 1,118 1,339 1,314 1,484 9,120 Germany Abroad 4,936 4,955 5,005 4,990 4,929 24,373 933 995 1,012 1,207 1,238 8,039 2021/2022 Total 5,997 6,035 6,268 6,178 6,338 33,256 2020/2021 Total 5,869 5,950 6,017 6,197 6,166 32,412 The weighted average time at which the pension Defined contribution plans obligations are due is 12.7 (15.5) years in Germany and Apart from the above-described pension obligations, 18.0 (21.0) years abroad. there are other old-age pension systems. However, no provisions have to be recognized for them, since there are no further obligations above and beyond payment of the contributions (defined contribution plans). These comprise benefits that are funded solely by the employer and allowances for conversion of earnings by employees. 7. Notes to the Consolidated Balance Sheet | Notes for the KWS Group | Consolidated Financial Statements 127 KWS Group | Annual Report 2021/2022The total pension costs for fiscal 2021/2022 were as follows: Pension costs in € thousand Germany Abroad Cost for defined contribution plans 3,467 881 Service cost for the defined benefit obligations Pension costs 748 4,215 2,037 2,918 2021/2022 2020/2021 Total 4,348 2,785 7,132 Germany Abroad 2,855 789 3,643 838 1,723 2,561 Total 3,693 2,512 6,204 In addition, contributions of € 15,724 (15,799) thousand Other provisions were paid to statutory pension insurance institutions. The other provisions mainly comprise provisions by the German companies for semi-retirement and loyalty The costs for defined contribution plans in Germany bonuses. mainly related to the provident fund backed by a guarantee. The contributions to this pension plan were € 3,212 (2,968) thousand. In addition, the benefit obligation from salary conversion was backed by a guarantee that exactly matches the present value of the obligation of € 5,584 (5,223) thousand. 7.12 Current liabilities Current liabilities in € thousand Short-term provisions Current liabilities to banks Other current financial liabilities Short-term borrowings Trade payables Tax liabilities Other current financial liabilities Lease liabilities Other current liabilities Contract liabilities Total 06/30/2022 06/30/2021 41,878 107,256 4,735 111,991 39,455 92,694 4,531 97,225 201,702 153,748 25,313 41,857 11,923 106,679 50,377 591,719 31,503 14,203 10,961 111,687 25,234 484,016 128 Consolidated Financial Statements | Notes for the KWS Group | 7. Notes to the Consolidated Balance Sheet Annual Report 2021/2022 | KWS Group Trade payables include liabilities of € 519 (301) thousand and other taxes (in particular value-added tax) account resulting from reverse factoring agreements between for € 11,382 (10,125) thousand. suppliers and financial institutions. There is no change in presentation, as such liabilities continue to constitute The increase in contract liabilities to € 50,377 (25,234) thou- debts for the payment of goods received or delivered and sand is mainly due to advance payments received are realized within the normal business cycle. from our customers in Eastern Europe in connection The tax liabilities of € 25,313 (31,503) thousand include Advance payments received are always recognized amounts for the year under review and the period for which as revenues in the next fiscal year. Contract liabilities the external tax audit has not yet been concluded. Of that increased from € 19,191 thousand in the previous year figure, income taxes account for € 13,931 (21,377) thousand to € 25,234 thousand. with seed deliveries for the upcoming sales season. Short-term provisions in € thousand 06/30/2021 06/30/2022 Changes in the con- solidated group, currency Addition Consump- tion Reversal Obligations from sales transactions Other obligations Total 16,950 22,505 39,455 793 500 1,292 4,481 20,190 24,671 8,948 12,766 21,714 304 1,522 1,826 12,972 28,907 41,878 The obligations from sales transactions essentially relate to other obligations relate to litigation risks, provisions guarantees, obligations for services received that have not from procurement transactions, such as compensation been invoiced (licenses) and sales commission obligations, for breeding areas, and other provisions that cannot be where they are not contained in the trade payables. The assigned to the group of sales transactions. 7.13 Hedging instruments and derivative financial instruments Hedging transactions in € thousand Currency hedges Interest-rate hedges Commodity hedges Total 06/30/2022 06/30/2021 Nominal volume Net book values Fair value Nominal volume Net book values Fair value 18,988 0 14,920 33,908 1,003 0 –567 436 1,003 0 –567 436 16,634 8,000 0 24,634 205 –62 0 143 205 –62 0 143 Currency hedges have a remaining maturity of up to four years. All commodity derivatives have a maturity of less than one year. 7. Notes to the Consolidated Balance Sheet | Notes for the KWS Group | Consolidated Financial Statements 129 KWS Group | Annual Report 2021/20227.14 Financial instruments The KWS Group has commodity derivatives that are In general, the fair values of financial assets and liabilities assigned to level 1 in the current fiscal year. are calculated on the basis of the market data available on the balance sheet date and are assigned to one of the The level 2 input factors relate to equity instruments (fund three hierarchy levels in accordance with IFRS 13. The shares) and derivative financial instruments that have been principal market, i.e. the market with the largest volume concluded between Group companies and banks. The fair of trading and the greatest business activity, is used to values of such financial instruments are measured on the calculate the fair value. If this market does not exist for the basis of market data that is directly or indirectly connected asset or liabilities in question, the market that maximizes with the financial instrument. The level 3 input factors the amount that would be received to sell the asset or cannot be derived from observable market information. minimizes the amount that would be paid to transfer the There were no reclassifications between the levels in the liability, after taking into account transaction costs, is fiscal year. used. These are active and accessible markets for identical assets and liabilities, where the fair value results from The carrying amounts and fair values of the financial quoted prices that are observable (level 1 input factors). assets (financial instruments), split into the measurement categories in accordance with IFRS 9, are as follows: 06/30/2022 in € thousand Fair values Financial assets Carrying amounts At amortized cost At fair value through other comprehen- sive income At fair value through profit and loss Total carrying amount Financial assets Financial assets Other non-current receivables of which derivative financial instruments Trade receivables Cash and cash equivalents Other current financial assets of which derivative financial instruments 10,104 14,388 1,408 518,508 203,664 55,257 2 12,981 0 518,508 203,664 55,049 208 0 10,102 0 0 0 0 0 0 Total 801,922 790,204 10,102 0 1,408 1,408 0 0 208 208 1,616 10,104 14,388 1,408 518,508 203,664 55,257 208 801,922 130 Consolidated Financial Statements | Notes for the KWS Group | 7. Notes to the Consolidated Balance Sheet Annual Report 2021/2022 | KWS Group 06/30/2021 in € thousand Fair values Financial liabilities Carrying amounts At amortized cost At fair value through other comprehen- sive income At fair value through profit and loss Total carrying amount Financial assets Financial assets Other non-current receivables Trade receivables Cash and cash equivalents Other current financial assets of which derivative financial instruments 9,433 7,330 449,501 222,745 40,592 2 7,330 449,501 222,745 40,352 239 0 9,433 0 0 0 0 0 Total 729,602 719,932 9,433 0 0 0 0 239 239 239 9,436 7,330 449,501 222,745 40,592 239 729,604 The financial assets and derivative financial instruments The fair value of currency derivatives is the present values are measured and carried at fair value. The fair value of of the payments related to these balance sheet items. the long-term fund shares contained in the financial assets These instruments are mainly forward exchange and is measured using generally accepted methods based on currency swap deals. They are measured on the basis of directly and indirectly observable market inputs. quoted exchange rates and yield curves available from the market data and allowing for counterparty risks. Commodity derivatives are mainly measured on the basis of current market prices. 7. Notes to the Consolidated Balance Sheet | Notes for the KWS Group | Consolidated Financial Statements 131 KWS Group | Annual Report 2021/2022The carrying amounts and fair values of the financial liabilities (financial instruments), split into the measurement categories in accordance with IFRS 9, are as follows: 06/30/2022 in € thousand Financial liabilities Long-term borrowings Long-term trade payables Short-term borrowings Short-term trade payables Other current financial liabilities of which derivative financial instruments Total 06/30/2021 in € thousand Fair values Financial liabilities Carrying amounts At amortized cost At fair value through other comprehen- sive income 567,555 304 111,991 201,702 41,857 1,180 923,410 613,588 304 111,991 201,702 40,677 0 968,263 0 0 0 0 1,180 1,180 1,180 Total carrying amount 613,588 304 111,991 201,702 41,857 1,180 969,443 Fair Values Financial liabilities Carrying amounts At amortized cost At fair value through other comprehen- sive income Financial liabilities Long-term borrowings Long-term trade payables Other noncurrent financial liabilities of which derivative financial instruments Short-term borrowings Short-term trade payables Other current financial liabilities of which derivative financial instruments 615,308 601,080 242 62 62 97,225 153,748 14,203 34 242 0 0 97,225 153,748 14,169 0 Total 880,786 866,463 0 0 62 62 0 0 34 34 96 Total carrying amount 601,080 242 62 62 97,225 153,748 14,203 34 866,559 The fair value of long-term borrowings was calculated on the Due to the generally short times by which trade payables basis of discounted cash flows. To enable that, interest rates and other current financial liabilities (excluding derivatives) for comparable transactions and yield curves were used. are due, it is assumed that their carrying amounts are equal to the fair value. 132 Consolidated Financial Statements | Notes for the KWS Group | 7. Notes to the Consolidated Balance Sheet Annual Report 2021/2022 | KWS GroupThe table below shows the financial assets and liabilities measured at fair value: Assets and liabilities measured at fair value in € thousand 06/30/2022 06/30/2021 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Derivative financial instruments without application of hedge accounting under IFRS 9 Financial assets Financial assets Derivative financial instruments without application of hedge accounting under IFRS 9 Financial liabilities 0 0 0 1,616 10,102 11,718 513 513 666 666 0 0 0 0 0 1,616 10,102 11,718 1,180 1,180 0 0 0 0 0 239 9,433 9,673 96 96 0 0 0 0 0 239 9,433 9,673 96 96 The table below presents the net gains/losses carried in The net losses from financial liabilities measured at the income statement for financial instruments in each amortized cost result mainly from interest expense. measurement category: Credit risks Net gain/losses of financial instruments (gain(+)/loss(-)) The credit risk is the risk that a business partner does not fulfill its obligations as part of a financial instrument or in € thousand 2021/2022 2020/2021 contract with a customer, resulting in a financial loss. The Financial assets measured at fair value through other comprehensive income Financial assets measured at fair value through profit or loss Financial assets measured at amortized cost Financial liabilities measured at amortized cost Financial liabilities measured at fair value through profit or loss 550 2,666 1,679 239 9,764 2,883 KWS Group is exposed to credit risks in its operational activities mainly in relation to trade receivables. In order to control the credit risks resulting from receivables from customers, a regular creditworthiness analysis is conducted in accordance with the credit volume. If a customer’s credit risk is classified as high, –17,831 –16,153 it is reduced by means of security. This includes, in –1,330 –148 particular, credit insurance, prepayments, down payments, promissory notes and guarantees. Depending on the contract’s design, reservation of ownership of goods is agreed with our customers. Credit limits are defined for our customers. Credit limits, outstanding claims and the The net gains for assets measured at fair value through other collection of receivables are analyzed in regular meetings comprehensive income include income from non-terminable of the Credit Committee. For details of the exposure interests in investment funds. to the risk of default at June 30, 2022, please refer to The net gains from financial assets and net losses in section 7.7 of the Notes. financial liabilities measured at fair value through profit or loss solely comprise changes in the market value of Credit risks from financial transactions are controlled derivative financial instruments. centrally by the Treasury department. In order to minimize The net gains from financial assets measured at amortized within defined limits with banks and partners who always cost mainly include effects from changes in the allowances have an investment grade. Compliance with the risk risks, financial transactions are exclusively conducted for impairment. limits is constantly monitored. The limits are adjusted depending on the credit volume only subject to the approval of the regional or divisional management and the Executive Board. 7. Notes to the Consolidated Balance Sheet | Notes for the KWS Group | Consolidated Financial Statements 133 KWS Group | Annual Report 2021/2022Liquidity risks have been agreed as part of specific interest-bearing Liquidity risk is the risk that funds to settle due payment loans and relate to the capital structure. The lenders have obligations cannot be obtained on time or at all. the right to terminate the loan agreements in question immediately if these requirements are not met. The Liquidity is managed in the Eurozone by the central Treasury KWS Group complied with all agreed financial covenants in unit using a cash pooling system. Liquidity requirements are the fiscal year. generally determined by means of cash planning and are covered by cash and promised credit lines. The table below shows the KWS Group’s liquidity analysis for non-derivative and derivative financial liabilities. The As part of its liquidity management, the KWS Group table is based on contractually agreed, undiscounted ensures that it complies with the financial covenants that payment flows (interest and payments of principal): Fiscal year 2021/2022 in € thousand Book value Liquidity analysis of financial liabilities 06/30/2022 06/30/2022 total Financial liabilities Trade payables Other financial liabilities Lease liabilities 725,580 202,006 40,677 49,151 740,560 202,006 40,677 52,187 Nonderivative financial liabilities 1,017,414 1,035,430 Payment claim Payment obligation Derivative financial liabilities 0 0 1,180 5,420 5,865 445 Fiscal year 2020/2021 in € thousand Book value Liquidity analysis of financial liabilities 06/30/2021 06/30/2021 total Financial liabilities Trade payables Other financial liabilities Lease liabilities Nonderivative financial liabilities Payment claim Payment obligation Derivative financial liabilities 698,305 153,989 14,169 48,426 914,889 0 0 96 723,402 153,989 14,169 49,908 941,469 13,685 13,806 121 Due in < 1 year 120,873 201,702 40,677 12,017 375,269 5,420 5,865 445 Due in < 1 year 86,138 153,748 14,169 18,277 272,331 13,685 13,540 –145 Due in > 1 year and < 5 years 433,825 304 0 24,251 458,380 0 0 0 Due in > 1 year and < 5 years 333,048 242 0 20,685 353,975 0 206 206 Cash flows Due in > 5 years 185,862 0 0 15,919 201,781 0 0 0 Cash flows Due in > 5 years 304,217 0 0 10,946 315,163 0 61 61 The cash flows of the derivative financial liabilities for forward exchange deals are presented as an undiscounted gross amount. These derivative financial instruments are settled in gross. Net settlement is envisaged for commodity derivatives. Accordingly, cash flows are presented on a net basis. 134 Consolidated Financial Statements | Notes for the KWS Group | 7. Notes to the Consolidated Balance Sheet Annual Report 2021/2022 | KWS Group Currency risks Interest rate sensitivity is a measure for showing the Currency risks are where the fair value or future cash interest rate risk. The interest rate sensitivity analysis flows of a financial instrument are subject to fluctuations was conducted for the portfolio of financial instruments due to exchange rate changes. The KWS Group is mainly with a variable interest rate at the balance sheet date exposed to currency risks as part of its financing activities and shows the hypothetical effect on income for with foreign subsidiaries. Derivative financial instruments one year. The variable-interest components of the (forward exchange deals and currency swaps) are KWS Group’s interest expenses and interest income were concluded to hedge against currency risks from intra-Group determined to calculate it. In a scenario analysis, the financing. The Company ensures that the derivative financial effects of an increase/reduction of one percentage point instrument is commensurate with the risk to be hedged. (100 base points) in the relevant underlying capital market In order to assess the currency risk, the sensitivity of a increase in all relevant rates of interest of 1 percentage currency to fluctuations was determined. The calculated point would result in additional interest expense figures relate to the portfolio of financial instruments at of € 187 (243) thousand. A reduction in the rate of interest the balance sheet date and show the hypothetical effect of 1 percentage point would add a further € 187 thousand interest rate on the interest result were calculated. An on income and equity for one year. After the euro, the US in income. dollar is the most important currency in the KWS Group. All other currencies are of minor importance. The currency Commodity price risks risk mainly results from intra-Group receivables and Price volatility of certain agricultural raw commodities liabilities from financing activity. The average USD/EUR has an impact on the KWS Group. In its procurement exchange rate in the fiscal year was 1.13 (1.19). If the US transactions, the KWS Group is partly exposed to a risk dollar depreciated by 10%, the extra expense would from fluctuating market prices for agricultural commodities. be € 2,584 (1,005) thousand. If the US dollar appreciated by 10%, the extra income would be € 2,584 (1,005) thousand. The KWS Group mitigates the impact of market price risks on operating income by hedging them with derivative Risk of changes in interest rates financial instruments. Options and swaps on commodity The risk of changes in interest rates is where the fair value futures exchanges are used in that. or future cash flows of a financial instrument are subject to fluctuations due to changes in market interest rates. As part of analysis of the market price risk, a sensitivity analysis is performed based on the portfolio of financial The risk of changes in interest rates is controlled by means instruments at the balance sheet date. The values of a balanced portfolio of fixed-interest and variable- calculated show the hypothetical impact of a 10% change interest loans. Interest rate swaps are concluded if there is in forward market quotations on operating income for a high risk of interest rate variability in the portfolio. As part one year. of them, the KWS Group exchanges the difference between fixed-interest and variable-interest amounts determined A 10% increase in the year-end price of commodity futures with reference to a previously agreed nominal amount with a would result in additional expense of € 571 thousand. contractual partner at defined intervals of time. A 10% decrease in the year-end price of commodity futures would add a further € 634 thousand in income. 7. Notes to the Consolidated Balance Sheet | Notes for the KWS Group | Consolidated Financial Statements 135 KWS Group | Annual Report 2021/20227.15 Leases Book values of right-of-use assets extend a property rental agreement were not included in determining the lease liabilities since there is no reasonable certainty as to whether the options will be in € thousand Land and buildings Technical equipment and machinery Operating and office equipment Total 06/30/2022 06/30/2021 exercised. 34,468 34,592 321 664 a long-term sublease agreement, which has been The KWS Group also acts as a lessor. There is currently 9,625 44,414 8,415 43,671 classified as a financial lease in relation to the main lease agreement. The interest income was € 30 (55) thousand. The sublease is reported under the other noncurrent receivables to an amount of € 3,936 (4,328) thousand and under the other current receivables to an amount Additions to rights of use for leased assets of € 627 (598) thousand. The annual income from the totaling € 9,947 (8,703) thousand were recognized in fiscal sublease is € 697 (692) thousand. The lease agreement 2021/2022 and the amortization on them was as follows: contains a clause permitting annual adjustment of the lease payment depending on market circumstances. Depreciation of right-of-use assets in € thousand Land and buildings Technical equipment and machinery Operating and office equipment Total 2021/2022 2020/2021 4,428 5,874 7.16 Contingent liabilities and other financial obligations The obligations from uncompleted capital expenditure projects, mainly relating to property, plant, and 359 420 equipment, and other capital commitments amount to € 32,606 (16,661) thousand. 4,517 9,304 4,275 10,569 There are guarantees with respect to third parties amounting to € 188,171 (76,412) thousand. As in previous years, they are mainly guarantees KWS has given to banks for the credit Expenses for short-term leases and for leases relating to lines of the subsidiary KWS SEMENTES LTDA. There are low-value assets totaled € 16,615 (14,426) thousand in the also still guarantees toward non-Group third parties for the period under review. obligations of the joint venture AGRELIANT GENETICS, LLC (which include payment obligations to banks and Short-term lease liabilities totaled € 11,923 (10,961) thousand license payments). The likelihood that these guarantees and long-term lease liabilities € 37,228 (37,465) thousand at will be utilized is seen as low, based on the experience of June 30, 2022. The maturity analysis of the lease liabilities previous years. No claims have yet been made. is presented in section 7.14 of the Notes. Lease payments totaled € 9,628 (11,905) thousand in fiscal 2021/2022. Interest There were contingent liabilities from tax-related matters expenses from interest accrued on the lease liabilities at June 30, 2022. € 18,958 thousand of these contingent were € 936 (876) thousand. liabilities relate to possible obligations of the Brazilian subsidiary KWS SEMENTES LTDA. to pay certain tax In general, lease agreements are concluded without levies on agricultural companies. KWS SEMENTES LTDA.’s extension or termination options. Possible cash outflows obligation to pay contributions is being clarified and the of € 21,902 (20,880) thousand for existing options to probability of the obligation occurring is considered to be low. 136 Consolidated Financial Statements | Notes for the KWS Group | 7. Notes to the Consolidated Balance Sheet Annual Report 2021/2022 | KWS Group8. Notes to the Consolidated Cash Flow Statement The cash flow statement shows the changes in cash and cash equivalents of the KWS Group in the three categories of operating activities, investing activities and financing activities. The effects of exchange rate changes and changes in the consolidated group have been eliminated from the respective balance sheet items, except those affecting cash and cash equivalents. As in previous years, cash and cash equivalents are composed of cash (on hand and balances with banks) and current securities. Financial liabilities changed as follows this year and in the previous year: Changes in financial liabilities in € thousand Cash flows Non-cash- effective changes 06/30/2021 Financial liabilities Lease liabilities 698,305 48,426 22,915 –9,628 06/30/2020 Financial liabilities 615,407 82,383 Lease liabilities 51,300 –11,905 Changes in the scope of consolidation Currency New IFRS 16 contracts Other effects 0 0 355 0 4,345 1,363 74 557 0 9,947 0 8,703 15 –957 86 –229 06/30/2022 725,580 49,151 06/30/2021 698,305 48,426 8. Notes to the Consolidated Cash Flow Statement | Notes for the KWS Group | Consolidated Financial Statements 137 KWS Group | Annual Report 2021/20229. Other Notes 9.1 Proposal for the appropriation of net retained profits The variable compensation, which is calculated The net retained profits of KWS SAAT SE & Co. KGaA on the basis of the net income for the year of the are € 282,010 (321,395) thousand. KWS Group, is made up of a bonus and a long-term incentive. The bonus totals € 2,558 (2,644) thousand; A proposal will be made to the Annual Shareholders’ there are contributions from the long-term incentive Meeting that an amount of € 26,400 (26,400) thousand tranche for 2021/2022 totaling € 458 thousand should be used to pay a dividend of € 0.80 (0.80) for each (tranche for 2020/2021: € 650 thousand). Pension of the 33,000,000 shares. provisions totaling € 984 (1,612) thousand were formed for two members of the Executive Board at 9.2 Total remuneration of the Supervisory Board and KWS SAAT SE & Co. KGaA. the Executive Board and of former members of the Supervisory Board and the Executive Board of KWS SAAT SE & Co. KGaA Compensation of former members of the Executive Board and their surviving dependents amounted The compensation of the members of the Supervisory to € 1,315 (1,238) thousand. Pension provisions recognized Board was converted to a purely fixed compensation for this group of persons amounted to € 4,484 (6,780) pursuant to the resolution adopted by the Annual thousand as of June 30, 2022, before being netted off with Shareholders’ Meeting in December 2017. Members of the relevant plan assets. the Supervisory Board who are members of a committee – with the exception of the Chairman of the Supervisory 9.3 Related party disclosures Board – receive an additional fixed payment therefor. Transactions with related parties in accordance with IAS 24 The total compensation for members of the Supervisory are all business dealings that are conducted with the Board amounts to € 620 (620) thousand, excluding value- reporting entity by entities or natural persons or their close added tax. The total compensation for members of the family members, if the party or person in question controls Supervisory Board of KWS SE, the personally liable the reporting entity or is a member of its key management partner of KWS SAAT SE & Co. KGaA, in the year under personnel, for example. review amounted to € 195 (195) thousand, excluding value- added tax. The personally liable partner KWS SE provides business management services on behalf of In fiscal year 2021/2022, total Executive Board KWS SAAT SE & Co. KGaA. compensation amounted to € 6,193 (5,773) thousand. Related parties in € thousand KWS SE At equity accounted joint ventures At equity accounted associ- ated companies Other related parties Deliveries and services provided Received deliveries and services Receivables Payables 2021/2022 2020/2021 2021/2022 2020/2021 2021/2022 2020/2021 2021/2022 2020/2021 0 0 6,221 5,885 0 0 3,132 3,721 6,685 4,919 5,103 5,106 6,505 5,463 3,545 2,552 6,655 6,602 36 37 0 115 0 6,367 6,366 116 0 0 100 836 100 947 138 Consolidated Financial Statements | Notes for the KWS Group | 9. Other Notes Annual Report 2021/2022 | KWS Group As part of its operations, the KWS Group procures goods KWS SAAT SE & Co. KGaA prepares the consolidated and services worldwide from a large number of business financial statements for the largest and smallest group of partners. They also include companies in which the companies. KWS Group has an interest or on which representatives of the KWS Group’s Supervisory Board exert a significant 9.5 Audit of the annual financial statements influence. The services for joint ventures and associated On December 2, 2021, the Annual Shareholders’ Meeting of companies are mainly rendered under existing license KWS SAAT SE & Co. KGaA elected the accounting firm Ernst agreements. The services received from joint ventures & Young GmbH Wirtschaftsprüfungsgesellschaft, Stuttgart, relate to research activities. Transactions with related to be the Group’s auditors for fiscal year 2021/2022. companies are generally conducted at arm’s length and are of minor importance for the Group in terms of volume. As part of Group financing, short- and medium-term term loans are taken out from and granted to subsidiaries at market interest rates. Fee paid to the external auditors under Section 314 (1) No. 9 HGB in € thousand a) Audit of the consolidated financial statements b) Other certification services 2021/2022 2020/2021 843 89 0 0 932 927 60 0 0 987 The compensation of members of the Executive Board c) Tax consulting comprises short-term employee benefits, share-based payment benefits and post-employment benefits. Individualized disclosures on the compensation of members of the Executive Board and the Supervisory d) Other services Total fee paid Board are presented in the Compensation Report. The Other certification services in fiscal 2021/2022 essentially Compensation Report can be found on our website at: comprised non-audit services as part of the voluntary www.kws.com. audit of the Non-Financial Declaration and auditing of the There were also no business transactions or legal transactions that required reporting for related parties in 9.6 Report on events after the balance sheet date Compensation Report. fiscal 2021/2022. 9.4 Disclosure There have been no events of particular significance that might have an impact on the presentation of the KWS Group’s earnings, financial position and assets since The following subsidiaries with the legal form of a the end of the fiscal year. corporation within the meaning of Section 264 (3) and 264b of the German Commercial Code (HGB) have utilized 9.7 Declaration of compliance with the German the exemption provided in Section 264 (3) of the German Corporate Governance Code Commercial Code (HGB) as regards preparation of KWS SAAT SE & Co. KGaA issued the declaration of financial statements and their publication: compliance with the German Corporate Governance Code required by Section 161 of the Aktiengesetz KWS LOCHOW GmbH, Bergen (AktG – German Stock Corporation Act) in September 2022 KWS Landwirtschaft GmbH, Einbeck and made it accessible to its shareholders on the Company’s homepage at www.kws.com. Betaseed GmbH, Frankfurt am Main KWS SAATFINANZ GmbH, Einbeck Delitzsch Pflanzenzucht GmbH, Einbeck Kant-Hartwig & Vogel GmbH, Einbeck Agromais GmbH, Everswinkel KWS Berlin GmbH, Berlin KWS INTERSAAT GmbH, Einbeck Euro-Hybrid Gesellschaft für Getreidezüchtung mbH, Einbeck KWS Klostergut Wiebrechtshausen GmbH, Northeim-Wiebrechtshausen RAGIS Kartoffelzucht- und Handelsgesellschaft mbH, Einbeck 9. Other Notes | Notes for the KWS Group | Consolidated Financial Statements 139 KWS Group | Annual Report 2021/20229.8 List of shareholdings List of shareholdings in accordance with Section 313 (2) HGB (German Commercial Code) Fiscal year 2021/2022 Name and Company’s registered office Fully consolidated subsidiaries (direct) Germany AGROMAIS GMBH, Everswinkel BETASEED GMBH, Frankfurt am Main DELITZSCH PFLANZENZUCHT GMBH, Einbeck EURO-HYBRID GESELLSCHAFT FÜR GETREIDEZÜCH- TUNG MBH, Einbeck KANT-HARTWIG & VOGEL GMBH, Einbeck KWS BERLIN GMBH, Berlin KWS INTERSAAT GMBH, Einbeck KWS KLOSTERGUT WIEBRECHTSHAUSEN GMBH, Northeim-Wiebrechtshausen KWS LANDWIRTSCHAFT GMBH, Einbeck KWS LOCHOW GMBH, Bergen KWS SAATFINANZ GMBH, Einbeck RAGIS KARTOFFELZUCHT- UND HANDELS- GESELLSCHAFT MBH, Einbeck Foreign KWS ARGENTINA S.A., Balcarce/Argentinia KWS BULGARIA EOOD., Sofia/Bulgaria KWS SEMENA S.R.O., Bratislava/Slovakia KWS SRBIJA D.O.O., Neu Belgrad/Serbia SEMILLAS KWS CHILE LTDA., Rancagua/Chile Currency Interest held Total in % Footnote € € € € € € € € € € € € ARS BGN € RSD CLP 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 1 1 1 1 1 1 1 28 140 Consolidated Financial Statements | Notes for the KWS Group | 9. Other Notes Annual Report 2021/2022 | KWS GroupFiscal year 2021/2022 Name and Company’s registered office Fully consolidated subsidiaries (indirect) Foreign BEIJING KWS AGRICULTURE TECHNOLOGY CO., LTD., Beijing/China BETASEED FRANCE S.A.R.L., Bethune/France BETASEED RUS LLC, Moskau/Russia BTS TURKEY TARIM TICARET LIMITED SIRKETI, Eskisehir/Turkey EUROPSEEDS B.V., Enkhuizen/Netherlands GLH SEEDS INC., Bloomington/USA KLEIN WANZLEBENER SAATZUCHT MAROC S.A.R.L.A.U., Casablanca/Marocco KWS AGRICULTURE RESEARCH & DEVELOPMENT CENTER, Hefei/China KWS AUSTRIA SAAT GMBH, Vienna, Austria KWS BENELUX B.V., Amsterdam/Netherlands KWS CEREALS USA LLC, Champagne/USA KWS FIDC, Rio de Janeiro/Brazil KWS FRANCE S.A.R.L., Roye/France KWS GATEWAY RESEARCH CENTER LLC, St. Louis/ USA KWS INTERNATIONAL HOLDING B.V., Emmeloord/ Netherlands KWS INTERNATIONAL HOLDING II B.V., Emmeloord/ Netherlands KWS ITALIA S.P.A., Forli/Italy KWS KUBAN O.O.O., Krasnodar/Russia Currency Interest held Total in % Footnote CNY € RUB TRY € USD MAD CNY € € USD BRL € USD € € € RUB 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 8 3 32 3 18 4 9 8 3 3 4 33 3 4 6 3 3 7 9. Other Notes | Notes for the KWS Group | Consolidated Financial Statements 141 KWS Group | Annual Report 2021/2022Fiscal year 2021/2022 Name and Company’s registered office KWS LOCHOW POLSKA SP.Z O.O., Kondratowice/Poland KWS MAGYARORSZÁG KFT., Györ/Hungary KWS MAIS FRANCE S.A.R.L., Champol/France KWS MOMONT RECHERCHE S.A.R.L., Mons-en-Pevele/France KWS MOMONT S.A.S., Mons-en-Pevele/France KWS OSIVA S.R.O, Velké Mezirici/Czech Republic KWS PARAGUAY SRL, Asuncion/Paraguay KWS PERU S.A.C., Lima/Peru KWS PODILLYA T.O.V., Kiew/Ukraine KWS POLSKA SP.Z O.O., Poznan/Poland KWS R&D INVEST B.V., Emmeloord/Netherlands KWS R&D RUS LLC, Lipezk/Russia KWS RUS O.O.O., Lipezk/Russia KWS SCANDINAVIA A/S, Guldborgsund/Denmark KWS Seed Science & Technology (Sanya) Co., Ltd., Sanya/China KWS Seeds Canada, LTD., Calgary/Canada KWS SEEDS INC., Bloomington/USA KWS SEEDS INDIA PRIVATE LIMITED, New Delhi/ India KWS SEEDS LLC, Bloomington/USA KWS SEMENTES LTDA., Patos de Minas/Brazil KWS SEMILLAS CANARIAS S.L.U., Gran Canaria/Spain KWS SEMILLAS IBÉRICA S.L., Zaratán/Spain KWS SEMINTE S.R.L., Bukarest/Romania KWS SERVICOS E PARTICIPACOES SOUTH AMERICA LTDA., São Paulo/Brazil KWS SJEME D.O.O., Osijek/Croatia KWS SUISSE S.A., Basel/Switzerland KWS TÜRK TARIM TICARET A.S., Eskisehir/Turkey KWS UK LTD., Thriplow/Great Britain KWS UKRAINA T.O.V., Kiew/Ukraine KWS VEGETABLES B.V., Heythuysen/Netherlands KWS VEGETABLES ITALIA S.R.L A SOCIO UNICO, Noceto/Parma/Italy KWS VEGETABLES MEXICO S.A. de C.V., Mexico City/ Mexico POP VRIEND HOLDING B.V., Amsterdam/Netherlands POP VRIEND INTERNATIONAAL B.V., Andijk/ Netherlands POP VRIEND SEEDS B.V., Andijk/Netherlands POP VRIEND TOHUMCULUK VE TARIM ÜRÜNLERI SANAYI VE TICARET LIMITED SIRKETI , Istanbul/Turkey Currency Interest held Total in % Footnote PLN HUF € € € CZK PYG PEN UAH PLN € RUB RUB DKK CNY CAD USD INR USD BRL € € RON BRL HRK CHF TRY GBP UAH € € MXN € € € TRY 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 3 3 3 11 3 3 12 5 10 3 3 7 23 3 3 3 3 3 4 29 3 3 25 30 3 3 3 3 23 3 16 31 16 18 18 19 142 Consolidated Financial Statements | Notes for the KWS Group | 9. Other Notes Annual Report 2021/2022 | KWS GroupCurrency Interest held Total in % Footnote Fiscal year 2021/2022 Name and Company’s registered office PV TOHUMCULUK TARIM ÜRÜNLERI SANAYI VE TICARET LIMITED SIRKETI, Izmir/Turkey SEED PLANT KWS O.O.O., Lipetsk/Russia Equity-accounted joint ventures AGRELIANT GENETICS INC., Chatham/Canada AGRELIANT GENETICS LLC, Westfield/U.S. FARMDESK B.V., Antwerp/Belgium Equity-accounted associated companies IMPETUS AGRICULTURE INC., Lewes/USA KENFENG - KWS SEED CO., LTD., Beijing/China Joint operations (proportionately consolidated) AARDEVO B.V., Nagele/Netherlands AARDEVO NORTH AMERICA LLC, Boise/USA GENECTIVE CANADA INC., Montreal/Canada GENECTIVE Japan K.K., Chiba/Japan GENECTIVE KOREA, Sangdaewon-dong/Korea GENECTIVE S.A., Chappes/France GENECTIVE TAIWAN LTD., Taipeh City/Taiwan GENECTIVE USA Corp., Weldon/USA TRY RUB CAD USD € USD CNY USD USD CAD JPY KRW € TWD USD 100.00 100.00 50.00 50.00 50.00 38.82 49.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 20 7 13 22 21 14 15 26 26 26 26 26 2 Unconsolidated subsidiaries VAN RIJN BALCAN S.R.L., Vulcan/Romania RON 100.00 1 Profit and loss transfer agreement 2 In liquidation 3 Subsidiary of KWS INTERNATIONAL HOLDING B.V. 4 Subsidiary of KWS SEEDS INC. 5 Subsidiary of SEMILLAS KWS CHILE LTDA. and KWS SERVICOS E PARTICIPA- COES SOUTH AMERICA LTDA. 6 Subsidiary of KWS INTERSAAT GMBH 7 Subsidiary of KWS RUS O.O.O. 8 Subsidiary of EURO-HYBRID GESELLSCHAFT FÜR GETREIDEZÜCHTUNG MBH 9 Subsidiary of KWS BENELUX B.V. 10 Subsidiary of KWS UKRAINA T.O.V. 11 Subsidiary of KWS MOMONT S.A.S. 12 Subsidiary of KWS SERVICOS E PARTICIPACOES SOUTH AMERICA LTDA. and KWS SEMENTES LTDA. 13 Participation of GLH SEEDS INC. 14 Participation of RAGIS RAGIS KARTOFFELZUCHT- UND HANDELSGESELLSCHAFT MBH 15 Subsidiary of AARDEVO B.V. 16 Subsidiary of KWS VEGETABLES B.V. 17 Subsidiary of POP VRIEND HOLDING B.V. and KWS VEGETABLES B.V. 18 Subsidiary of POP VRIEND HOLDING B.V and CHURA B.V. 19 Subsidiary of POP VRIEND INTERNATIONAL B.V. 20 Subsidiary of POP VRIEND TOHUMCULUK VE TARIM ÜRÜNLERI SANAYI VE TICARET LIMITED SIRKETI 21 Participation of KWS R&D INVEST B.V. 22 Participation of KWS INTERNATIONAL HOLDING B.V. 23 Subsidiary of EURO-HYBRID GESELLSCHAFT FÜR GETREIDEZÜCHTUNG and KWS SAATFINANZ GMBH 24 Subsidiary of KWS SEEDS Inc. 25 Subsidiary of KWS INTERSAAT GMBH and der KWS SAATFINANZ GMBH 26 Subsidiary of GENECTIVE S.A. 27 Subsidiary of KWS KLOSTERGUT WIEBRECHTSHAUSEN GMBH 28 Subsidiary of KWS SERVICOS E PARTICIPACOES SOUTH AMERICA LTDA. 29 Subsidiary of KWS SERVICOS E PARTICIPACOES SOUTH AMERICA LTDA. and KWS INTERSAAT GMBH 30 Subsidiary of KWS INTERNATIONAL HOLDING B.V. and KWS SAATFINANZ GMBH 31 Subsidiary of KWS INTERNATIONAL HOLDING B.V. and KWS VEGETABLES B.V. 32 Subsidiary of KWS INTERNATIONAL HOLDING B.V. and KWS INTERNATIONAL HOLDING II B.V. 33 Subsidiary of KWS SEMENTES LTDA. 9. Other Notes | Notes for the KWS Group | Consolidated Financial Statements 143 KWS Group | Annual Report 2021/2022 9.9 Supervisory Board and Executive Board of KWS SAAT SE & Co. KGaA in fiscal 2021/2022 Other seats 2021/2022 Membership of comparable German and foreign oversight boards: DR. SCHNELL GmbH & Co. KGaA, Munich (member of the Advisory Board) Membership of comparable German and foreign oversight boards: Givaudan SA, Vernier (Switzerland) (Chairman of the Audit Committee, member of the Board of Directors and the Compensation Committee) Medacta International SA, Frauenfeld (Switzerland) (member of the Board of Directors and Chairman of the Audit Committee) Hemro AG, Bachenbülach (Switzerland) (member of the Management Board) Sika AG, Baar (Switzerland) (member of the Board of Directors,of the Audit Committee and of the ESG Committee) Louis Dreyfus Holding B.V., Amsterdam (Netherlands) (member of the Supervisory Board and Chairman of the Audit Committee) Membership in other legally required supervisory boards: CLAAS KGaA mbH, Harsewinkel (Chairwoman) Membership of comparable German and foreign oversight boards: CLAAS KGaA mbH, Harsewinkel (Chairwoman of the Shareholder's Committee) 9.9.1 Supervisory Board Members Dr. Drs. h. c. Andreas J. Büchting Göttingen Agricultural Biologist Chairman of the Supervisory Board of KWS SAAT SE & Co. KGaA and KWS SE Dr. Marie Theres Schnell Munich Graduate in Communications Deputy Chairman of the Supervisory Board of KWS SAAT SE & Co. KGaA and KWS SE Victor W. Balli Zurich (Switzerland) Chemical Engineer Chairman of the Audit Committee of KWS SAAT SE & Co. KGaA and KWS SE Jürgen Bolduan Einbeck Seed Breeding Employee Member of the Supervisory Board of KWS SAAT SE & Co. KGaA Chairman of the Central Works Council of KWS SAAT SE & Co. KGaA Cathrina Claas-Mühlhäuser Frankfurt am Main Businesswoman Member of the Supervisory Board of KWS SAAT SE & Co. KGaA and KWS SE Christine Coenen Einbeck Interpreter Member of the supervisory board of KWS SAAT SE & Co. KGaA Chairwoman of the European Employees’ Committee (EEC) of KWS SAAT SE & Co. KGaA Dr. Arend Oetker Berlin Honorary member of the Supervisory Board of KWS SAAT SE & Co. KGaA and KWS SE 144 Consolidated Financial Statements | Notes for the KWS Group | 9. Other Notes Annual Report 2021/2022 | KWS Group 9.9.2 Supervisory Board committees Committee Audit Committee Victor W. Balli Chairman/Chairwoman Members 2021/2022 Nominating Committee Dr. Marie Theres Schnell Dr. Drs. h. c. Andreas J. Büchting Jürgen Bolduan Dr. Drs. h. c. Andreas J. Büchting Cathrina Claas-Mühlhäuser 9.9.3 Executive Board Members Other seats Dr. Hagen Duenbostel Einbeck Chief Executive Officer Corn Southamerica, Group Compliance, Group Governance & Risk Management (until 12/31/2021) Corn Northamerica, Corn China/Asia, Group Strategy, Corporate Office & Services Membership in other legally required supervisory boards: Hero AG, Lenzburg (Switzerland) (member of the Board of Administration) C.H. Boehringer Sohn AG & Co. KG, Ingelheim (member of the advisory group) Dr. Léon Broers (until 12/31/2021) Einbeck Research & Breeding, Vegetables Dr. Felix Büchting Einbeck Cereals, Oilseed Rape/Special Crops & Organic Seed (until 12/31/2021) Research & Breeding (since 01/01/2022) Human Resources, Farming Dr. Peter Hofmann Einbeck Corn Europe (until 12/31/2021) Cereals, Oilseed Rape/Special Crops & Organic Seed (since 01/01/2022) Sugarbeet, Global Marketing & Communications Eva Kienle Göttingen Group Compliance, Group Governance & Risk Management (since 01/01/2022) Finance & Procurement, Controlling, Global Transaction Center Legal Services & IP, IT, KWS Digital Innovation Accelerator Nicolás Wielandt (since 01/01/2022) Einbeck Corn Europe and Southamerica Einbeck, September 14, 2022 KWS SE Membership in other legally required supervisory boards: Zumtobel Group AG, Dornbirn (Austria) (member of the Supervisory Board and Chairwoman of the Audit Committee) Dr. Hagen Duenbostel | Dr. Felix Büchting | Dr. Peter Hofmann | Eva Kienle | Nicolás Wielandt 9. Other Notes | Notes for the KWS Group | Consolidated Financial Statements 145 KWS Group | Annual Report 2021/2022 Independent Auditor’s Report To KWS SAAT SE & Co. KGaA management report does not cover the content of the parts of the group management report listed in the Report on the audit of the consolidated financial appendix to the auditor’s report. statements and of the group management report Opinions Pursuant to Sec. 322 (3) Sentence 1 HGB, we declare that our audit has not led to any reservations relating to the We have audited the consolidated financial statements of legal compliance of the consolidated financial statements KWS SAAT SE & Co. KGaA, Einbeck, and its subsidiaries and of the group management report. (the Group), which comprise the consolidated statement of comprehensive income for the fiscal year from 1 July 2021 Basis for the opinions to 30 June 2022, and the consolidated balance sheet as We conducted our audit of the consolidated financial at 30 June 2022, consolidated statement of changes in statements and of the group management report equity and consolidated cash flow statement for the fiscal in accordance with Sec. 317 HGB and the EU Audit year from 1 July 2021 to 30 June 2022, and notes to the Regulation (No 537/2014, referred to subsequently as consolidated financial statements, including a summary “EU Audit Regulation”) and in compliance with German of significant accounting policies. In addition, we have Generally Accepted Standards for Financial Statement audited the group management report of KWS SAAT SE & Audits promulgated by the Institut der Wirtschaftsprüfer Co. KGaA, which was combined with the management [Institute of Public Auditors in Germany] (IDW). Our report of the Company, for the fiscal year from 1 July 2021 responsibilities under those requirements and principles to 30 June 2022. We have not audited the content of are further described in the “Auditor’s responsibilities for the parts of the group management report specified in the audit of the consolidated financial statements and of the appendix to the auditor’s report and the Company the group management report” section of our auditor’s information stated therein that is provided outside of the report. We are independent of the group entities in annual report and is referenced in the group management accordance with the requirements of European law and report. German commercial and professional law, and we have fulfilled our other German professional responsibilities In our opinion, on the basis of the knowledge obtained in in accordance with these requirements. In addition, in the audit, accordance with Art. 10 (2) f) of the EU Audit Regulation, we declare that we have not provided non-audit services the accompanying consolidated financial statements prohibited under Art. 5 (1) of the EU Audit Regulation. comply, in all material respects, with the IFRSs as We believe that the audit evidence we have obtained adopted by the EU, and the additional requirements of is sufficient and appropriate to provide a basis for our German commercial law pursuant to Sec. 315e (1) HGB opinions on the consolidated financial statements and on [“Handelsgesetzbuch”: German Commercial Code] and, the group management report. in compliance with these requirements, give a true and fair view of the assets, liabilities and financial position Key audit matters in the audit of the consolidated of the Group as at 30 June 2022 and of its financial financial statements performance for the fiscal year from 1 July 2021 to Key audit matters are those matters that, in our 30 June 2022, and professional judgment, were of most significance in our the accompanying group management report as a whole audit of the consolidated financial statements for the fiscal provides an appropriate view of the Group’s position. year from 1 July 2021 to 30 June 2022. These matters were In all material respects, this group management addressed in the context of our audit of the consolidated report is consistent with the consolidated financial financial statements as a whole, and in forming our opinion statements, complies with German legal requirements thereon; we do not provide a separate opinion on these and appropriately presents the opportunities and matters. risks of future development. Our opinion on the group 146 Consolidated Financial Statements | Independent Auditor’s Report Annual Report 2021/2022 | KWS Group Below, we describe what we consider to be the key audit Overall, our procedures relating to the recognition matters: of revenue from the sale of seed did not lead to any (1) Revenue recognition from the sale of seed reservations. Reference to related disclosures Reasons why the matter was determined to be With regard to the recognition and measurement policies a key audit matter applied for the recognition of revenue from the sale of In the consolidated financial statements of seed, refer to the disclosure in note 3.6 “Recognition of KWS SAAT SE & Co. KGaA, revenue from the sale of income and expenses” in section 3 “Accounting Policies” seed is recognized when control is transferred to the in the notes to the consolidated financial statements. customer, allowing for contractually agreed returns. Due to different contractual agreements and judgment exercised (2) Impairment testing of goodwill and brands in assessing expected return deliveries, therefore is an elevated risk of misstatement in relation to the proper Reasons why the matter was determined to be recognition of revenue on an accrual basis. a key audit matter Auditor’s response The goodwill and brands with an indefinite useful life presented in the consolidated financial statements of During our audit, we considered, based on the criteria KWS SAAT SE & Co. KGaA result from the acquisition of defined in IFRS 15, the accounting policies applied in subsidiaries and are a significant balance sheet item. accordance with the internal accounting instructions in the consolidated financial statements of KWS SAAT SE & Goodwill and brands with an indefinite useful life are tested Co. KGaA for the recognition of revenue. Our response for impairment as of 30 June each year. The result of included an examination of whether control was these tests is highly dependent on the executive directors’ transferred to the customers upon the sale of seed. We estimate of future cash flows and the respective discount analyzed the process implemented by the Executive Board rates used. of KWS SAAT SE & Co. KGaA for the recognition of seed sales, taking into account knowledge about actual returns. In light of the definition of the cash-generating units, the Based on analytical procedures defined group-wide, we complexity of the valuation and the judgment exercised examined whether the significant revenue items for fiscal during valuation, the impairment tests for goodwill and year 2021/2022 correlate with the corresponding trade brands with an indefinite useful life were a key audit matter. receivables to identify any irregularities in the development of revenue. With a view to the recognition of revenue on an accrual basis, we also obtained balance confirmations from customers and performed data analyses to identify any irregularities in comparison with the prior year. We analyzed the recognition of revenue based on the contractual arrangements on a sample basis with regard to the requirements of IFRS 15. Based on analytical procedures carried out on historical data and the analysis of the underlying contracts, we examined the calculation of expected returns of seed and their deduction from revenue. KWS Group | Annual Report 2021/2022 Independent Auditor’s Report | Consolidated Financial Statements 147 Auditor’s response Reference to related disclosures During our audit, among other things, we obtained an With regard to the recognition and measurement policies understanding of the methods used to carry out the applied for goodwill and brands with an indefinite useful impairment tests including an examination of the suitability life, refer to the disclosure on intangible assets in section of the procedure for performing an impairment test in 3 “Accounting Policies” in the notes to the consolidated accordance with IAS 36. In doing so, we analyzed the financial statements. For the related disclosures on planning process and the operating effectiveness of the judgments by the executive directors and sources of controls implemented therein. We discussed the significant estimation uncertainty as well as the disclosures on planning assumptions with the executive directors goodwill and brands with an indefinite useful life, refer and compared these with the results and cash inflows to note 7.1 “Intangible assets” in section 7 “Notes to realized in the past. Our assessment of the results of the the Consolidated Balance Sheet” in the notes to the impairment tests as of 30 June was based among other consolidated financial statements. things on a comparison with general and industry-specific market expectations underlying the expected cash inflows. (3) Current and deferred income taxes Based on our understanding that even relatively small changes in the discount rates used can at times have Reasons why the matter was determined to be significant effects on the amount of the business value a key audit matter calculated, we analyzed the inputs used to determine The KWS SAAT SE & Co. KGaA Group operates in different the discount rates and reperformed the calculation with legal jurisdictions with the resulting complexity of the regard to the relevant requirements of IAS 36. In addition, recognition of current and deferred income taxes, namely we analyzed the sensitivity analyses performed by the the transfer prices used, changes in tax legislation and executive directors of KWS SAAT SE & Co. KGaA on the intragroup financing. To calculate the provision for tax impairment tests of goodwill and brands with an indefinite obligations and deferred tax items, the executive directors useful life in order to estimate any potential impairment risk of KWS SAAT SE & Co. KGaA must exercise judgment in associated with a reasonably possible change in one of the assessing tax matters, estimating tax risks and with regard significant assumptions used in the valuation. to the realization of deferred tax assets. We obtained evidence that the divisions represent the Auditor’s response lowest level within the Group at which independent cash The executive directors of KWS SAAT SE & Co. KGaA inflows are generated and goodwill is monitored for internal regularly engage external tax experts to validate their management purposes. Our auditor’s response also own risk assessment. We called on our tax specialists included the disclosures in the notes to the consolidated to consider these tax assessments. Our specialists financial statements of KWS SAAT SE & Co. KGaA in also analyzed the correspondence with the competent relation to the requirements of IAS 36. tax authorities and the assumptions used to calculate provisions for current taxes and deferred taxes, Our procedures did not lead to any reservations relating considering in particular the applicable transfer prices, to the valuation of goodwill and brands with an indefinite based on their knowledge and experience of how the useful life. authorities and courts currently apply the relevant legal provisions. In addition, we involved tax specialists from our international network with the relevant knowledge of the respective local jurisdictions and regulations. We critically assessed the assumptions on the recoverability of deferred tax assets, in particular by analyzing the assumptions with respect to projected future taxable income and by comparing them to the internal business plan. Our auditor’s response also included the disclosures in the notes to the consolidated financial statements of KWS SAAT SE & Co. KGaA on current and deferred income taxes. 148 Consolidated Financial Statements | Independent Auditor’s Report Annual Report 2021/2022 | KWS Group Our procedures did not lead to any reservations relating to Responsibilities of the executive directors and the the recognition of current and deferred income taxes. Supervisory Board for the consolidated financial statements and the group management report Reference to related disclosures The executive directors are responsible for the preparation With regard to the recognition and measurement policies of the consolidated financial statements that comply, applied for current and deferred income taxes, refer to in all material respects, with IFRSs as adopted by the disclosure on deferred taxes and income tax liabilities the EU and the additional requirements of German in section 3 “Accounting Policies” in the notes to the commercial law pursuant to Sec. 315e (1) HGB, and that consolidated financial statements and, with regard to the the consolidated financial statements, in compliance information on income taxes, no. 6.5 “Taxes” in section 6 with these requirements, give a true and fair view of “Notes to the Consolidated Statement of Comprehensive the assets, liabilities, financial position and financial Income” in the notes to the consolidated financial performance of the Group. In addition, the executive statements. Other information directors are responsible for such internal control as they have determined necessary to enable the preparation of consolidated financial statements that are free from The Supervisory Board is responsible for the Report of material misstatement, whether due to fraud or error. the Supervisory Board. The executive directors and the Supervisory Board are responsible for the declaration In preparing the consolidated financial statements, the pursuant to Sec. 161 AktG [“Aktiengesetz”: German Stock executive directors are responsible for assessing the Corporation Act] on the German Corporate Governance Group’s ability to continue as a going concern. They Code, which is part of the Declaration on Corporate also have the responsibility for disclosing, as applicable, Governance, as well as for the paragraph “Control and matters related to going concern. In addition, they are monitoring systems” in section 2.9.2 “Risk Management” responsible for financial reporting based on the going of the group management report. In all other respects, concern basis of accounting unless there is an intention to the executive directors are responsible for the other liquidate the Group or to cease operations, or there is no information. The other information comprises the parts realistic alternative but to do so. of the annual report listed in the appendix. We obtained a version of this other information prior to issuing our Furthermore, the executive directors are responsible for auditor’s report. the preparation of the group management report that, as a whole, provides an appropriate view of the Group’s Our opinions on the consolidated financial statements position and is, in all material respects, consistent with and on the group management report do not cover the the consolidated financial statements, complies with other information, and consequently we do not express an German legal requirements, and appropriately presents opinion or any other form of assurance conclusion thereon. the opportunities and risks of future development. In addition, the executive directors are responsible for such In connection with our audit, our responsibility is to read arrangements and measures (systems) as they have the other information and, in so doing, to consider whether considered necessary to enable the preparation of a the other information group management report that is in accordance with the applicable German legal requirements, and to be able to is materially inconsistent with the consolidated financial provide sufficient appropriate evidence for the assertions statements, with the group management report or our in the group management report. knowledge obtained in the audit, or otherwise appears to be materially misstated. The Supervisory Board is responsible for overseeing the Group’s financial reporting process for the preparation of the consolidated financial statements and of the group management report. KWS Group | Annual Report 2021/2022 Independent Auditor’s Report | Consolidated Financial Statements 149 Auditor’s responsibilities for the audit of the Obtain an understanding of internal control relevant consolidated financial statements and of the to the audit of the consolidated financial statements group management report and of arrangements and measures (systems) relevant Our objectives are to obtain reasonable assurance about to the audit of the group management report in order whether the consolidated financial statements as a whole to design audit procedures that are appropriate in the are free from material misstatement, whether due to fraud circumstances, but not for the purpose of expressing an or error, and whether the group management report as opinion on the effectiveness of these systems. a whole provides an appropriate view of the Group’s Evaluate the appropriateness of accounting policies position and, in all material respects, is consistent with used by the executive directors and the reasonableness the consolidated financial statements and the knowledge of estimates made by the executive directors and obtained in the audit, complies with the German legal related disclosures. requirements and appropriately presents the opportunities Conclude on the appropriateness of the executive and risks of future development, as well as to issue directors’ use of the going concern basis of accounting an auditor’s report that includes our opinions on the and, based on the audit evidence obtained, whether consolidated financial statements and on the group a material uncertainty exists related to events or management report. conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we Reasonable assurance is a high level of assurance, but is conclude that a material uncertainty exists, we are not a guarantee that an audit conducted in accordance required to draw attention in the auditor’s report to with Sec. 317 HGB and the EU Audit Regulation and in the related disclosures in the consolidated financial compliance with German Generally Accepted Standards statements and in the group management report or, for Financial Statement Audits promulgated by the Institut if such disclosures are inadequate, to modify our der Wirtschaftsprüfer (IDW) will always detect a material respective opinions. Our conclusions are based on the misstatement. Misstatements can arise from fraud or audit evidence obtained up to the date of our auditor’s error and are considered material if, individually or in the report. However, future events or conditions may cause aggregate, they could reasonably be expected to influence the Group to cease to be able to continue as a going the economic decisions of users taken on the basis of concern. these consolidated financial statements and this group Evaluate the overall presentation, structure and content management report. of the consolidated financial statements, including the disclosures, and whether the consolidated financial We exercise professional judgment and maintain statements present the underlying transactions and professional skepticism throughout the audit. We also: events in a manner that the consolidated financial statements give a true and fair view of the net assets, Identify and assess the risks of material misstatement of financial position and profitability of the Group in the consolidated financial statements and of the group compliance with IFRSs as adopted by the EU and the management report, whether due to fraud or error, additional requirements of German commercial law design and perform audit procedures responsive to pursuant to Sec. 315e (1) HGB. those risks, and obtain audit evidence that is sufficient Obtain sufficient appropriate audit evidence regarding and appropriate to provide a basis for our opinions. The the financial information of the entities or business risk of not detecting a material misstatement resulting activities within the Group to express opinions on from fraud is higher than for one resulting from error, the consolidated financial statements and on the as fraud may involve collusion, forgery, intentional group management report. We are responsible for the omissions, misrepresentations, or the override of direction, supervision and performance of the group internal control. audit. We remain solely responsible for our audit opinions. 150 Consolidated Financial Statements | Independent Auditor’s Report Annual Report 2021/2022 | KWS Group Evaluate the consistency of the group management Other legal and regulatory requirements report with the consolidated financial statements, its conformity with [German] law, and the view of the Report on the assurance on the electronic rendering Group’s position it provides. of the consolidated financial statements and the group Perform audit procedures on the prospective management report prepared for publication purposes information presented by the executive directors in the in accordance with Sec. 317 (3a) HGB group management report. On the basis of sufficient appropriate audit evidence we evaluate, in particular, the Opinion significant assumptions used by the executive directors We have performed assurance work in accordance as a basis for the prospective information, and evaluate with Sec. 317 (3a) HGB to obtain reasonable assurance the proper derivation of the prospective information about whether the rendering of the consolidated financial from these assumptions. We do not express a separate statements and the group management report (hereinafter opinion on the prospective information and on the the “ESEF documents”) contained in the attached file assumptions used as a basis. There is a substantial KWS_SAAT_SE_KA_LB_ESEF_30.06.2022.zip and unavoidable risk that future events will differ materially prepared for publication purposes complies in all material from the prospective information. respects with the requirements of Sec. 328 (1) HGB for the electronic reporting format (“ESEF format”). In accordance We communicate with those charged with governance with German legal requirements, this assurance work regarding, among other matters, the planned scope and extends only to the conversion of the information timing of the audit and significant audit findings, including contained in the consolidated financial statements and any significant deficiencies in internal control that we the group management report into the ESEF format and identify during our audit. therefore relates neither to the information contained within these renderings nor to any other information contained in We also provide those charged with governance with the file identified above. a statement that we have complied with the relevant independence requirements, and communicate with them In our opinion, the rendering of the consolidated financial all relationships and other matters that may reasonably statements and the group management report contained be thought to bear on our independence and where in the accompanying file identified above and prepared for applicable, the related safeguards. publication purposes complies in all material respects with the requirements of Sec. 328 (1) HGB for the electronic From the matters communicated with those charged with reporting format. Beyond this assurance opinion and our governance, we determine those matters that were of audit opinions on the accompanying consolidated financial most significance in the audit of the consolidated financial statements and the accompanying group management statements of the current period and are therefore the key report for the fiscal year from 1 July 2021 to 30 June 2022 audit matters. We describe these matters in our auditor’s contained in the “Report on the audit of the consolidated report unless law or regulation precludes public disclosure financial statements and of the group management report” about the matter. above, we do not express any assurance opinion on the information contained within these renderings or on the other information contained in the file identified above. KWS Group | Annual Report 2021/2022 Independent Auditor’s Report | Consolidated Financial Statements 151 Basis for the opinion Obtain an understanding of internal control relevant We conducted our assurance work on the rendering of to the assurance on the ESEF documents in order to the consolidated financial statements and the group design assurance procedures that are appropriate in the management report contained in the accompanying file circumstances, but not for the purpose of expressing identified above in accordance with Sec. 317 (3a) HGB and an assurance opinion on the effectiveness of these the IDW Assurance Standard: Assurance on the Electronic controls. Rendering of Financial Statements and Management Evaluate the technical validity of the ESEF documents, Reports Prepared for Publication Purposes in Accordance i.e., whether the file containing the ESEF documents with Sec. 317 (3a) HGB (IDW AsS 410 10.2021). Our meets the requirements of Commission Delegated responsibility in accordance therewith is further described Regulation (EU) 2019/815, in the version in force at in the “Group auditor’s responsibilities for the assurance the date of the financial statements, on the technical work on the ESEF documents” section. Our audit firm specification for this file. applies the IDW Standard on Quality Management 1: Evaluate whether the ESEF documents enable an Requirements for Quality Management in the Audit Firm XHTML rendering with content equivalent to the audited (IDW QS 1). consolidated financial statements and to the audited group management report. Responsibilities of the executive directors and the Evaluate whether the tagging of the ESEF documents Supervisory Board for the ESEF documents with Inline XBRL technology (iXBRL) in accordance The executive directors of the Company are responsible with the requirements of Arts. 4 and 6 of Commission for the preparation of the ESEF documents including Delegated Regulation (EU) 2019/815, in the version in the electronic rendering of the consolidated financial force at the date of the financial statements, enables an statements and the group management report in appropriate and complete machine-readable XBRL copy accordance with Sec. 328 (1) Sentence 4 No. 1 HGB and of the XHTML rendering. for the tagging of the consolidated financial statements in accordance with Sec. 328 (1) Sentence 4 No. 2 HGB. Further information pursuant to Art. 10 of the EU Audit Regulation In addition, the executive directors of the Company We were elected as group auditor by the Annual are responsible for such internal control as they have Shareholders’ Meeting on 2 December 2021. We were determined necessary to enable the preparation of ESEF engaged by the Supervisory Board on 30 May 2022. We documents that are free from material intentional or have been the group auditor of KWS SAAT SE & Co. KGaA unintentional non-compliance with the requirements of without interruption since fiscal year 2016/2017. Sec. 328 (1) HGB for the electronic reporting format. The Supervisory Board is responsible for overseeing the report are consistent with the additional report to the audit preparation of the ESEF documents as part of the financial committee pursuant to Art. 11 of the EU Audit Regulation reporting process. (long-form audit report). We declare that the opinions expressed in this auditor’s Group auditor’s responsibilities for the assurance Other matter – Use of the auditor’s report work on the ESEF documents Our auditor’s report must always be read together with Our objective is to obtain reasonable assurance about the audited consolidated financial statements and the whether the ESEF documents are free from material audited group management report as well as the assured intentional or unintentional non-compliance with ESEF documents. The consolidated financial statements the requirements of Sec. 328 (1) HGB. We exercise and the group management report converted to the ESEF professional judgment and maintain professional format – including the version to be published in the skepticism throughout the engagement. We also: Bundesanzeiger [German Federal Gazette] – are merely Identify and assess the risks of material intentional or statements and the audited management report and do unintentional non-compliance with the requirements not take their place. In particular, the ESEF report and our of Sec. 328 (1) HGB, design and perform assurance assurance opinion contained therein are to be used solely procedures responsive to those risks, and obtain together with the assured ESEF documents made available electronic renderings of the audited consolidated financial assurance evidence that is sufficient and appropriate to in electronic form. provide a basis for our assurance opinion. 152 Consolidated Financial Statements | Independent Auditor’s Report Annual Report 2021/2022 | KWS Group German Public Auditor responsible for the 2. Additional other information engagement The German Public Auditor responsible for the The other information comprises the following parts of engagement is Martin von Michaelis. the annual report, of which we obtained a version prior to issuing this auditor’s report, in particular the sections: Appendix to the auditor’s report: 1. Parts of the group management report whose content is Foreword of the Executive Board unaudited Report of the Supervisory Board KWS on the Capital Market We have not audited the content of the following parts of KWS in Figures the group management report: but not the consolidated financial statements, not the The combined non-financial declaration for management report disclosures whose content is audited KWS SAAT SE & Co. KGaA and the KWS Group and not our auditor’s report thereon. contained in section 2.11.2 “Combined Non-Financial Declaration for the KWS Group” of the group 3. Company information outside of the annual report management report, including any information in other referenced in the group management report sections referred to in this declaration. The respective sections are marked “NFE” in the margin. We have not audited the content of the following The declaration on corporate governance and information that is cross-referenced in the management the declaration of compliance in accordance with report: Sec. 161 AktG which are published on the websites stated in sections 2.7.1 “Corporate Governance and Remuneration Report pursuant to Section 162 of the Declaration on Corporate Governance” and 2.7.2 German Stock Corporation Act (AktG) “Declaration of Compliance in Accordance with Section 161 AktG (German Stock Corporation Act),” which are part of the group management report. Berlin, 14 September 2022 Furthermore, we have not audited the content of the Ernst & Young GmbH following disclosures extraneous to group management Wirtschaftsprüfungsgesellschaft reports. Disclosures extraneous to group management reports are such disclosures that are not required pursuant von Michaelis Dr. Janze to Secs. 315, 315a HGB or Secs. 315b to 315d HGB: Wirtschaftsprüfer Wirtschaftsprüfer [German Public Auditor] [German Public Auditor] Section 2.1.3 “Responsible Business Activity” Section 2.4 “EU Taxonomy” Section 2.5 “Environmental Report” Section 2.6.2 “Occupational Health and Safety” Section 2.6.3 “Recruitment & Employee Loyalty” Section 2.6.4 “Qualification, Further Training and Development” Section 2.6.5 “Labor and Social Standards” Section 2.7.3 “Business Ethics and Compliance” Section 2.7.4 “Responsibility in the Supply Chain” Section 2.8 “Social Report” Section 2.9.2 “Risk Management,” paragraph “Control and monitoring systems” KWS Group | Annual Report 2021/2022 Independent Auditor’s Report | Consolidated Financial Statements 153 Independent Auditor’s Report on a Limited Assurance Engagement To KWS SAAT SE & Co. KGaA, Einbeck These responsibilities of the Company’s executive We have performed a limited assurance engagement on directors include the selection and application of the non-financial statement of KWS SAAT SE & Co. KGaA, appropriate non-financial reporting methods and making Einbeck, (hereinafter the “Company”), which is combined assumptions and estimates about individual non-financial with the non-financial statement of the Group, comprising disclosures that are reasonable in the circumstances. the chapter “2.11.2 Combined Non-Financial Declaration Furthermore, the executive directors are responsible for for the KWS Group” of the combined management such internal control as the executive directors consider report and the chapters “2.1.1 Business Model”, “2.4 EU necessary to enable the preparation of a combined Taxonomy”, “2.5.1 Product Innovations”, “2.5.2 Product non-financial that is free from material misstatement, Quality and Safety”, “2.5.3 Emissions & Water”, “2.6.2 whether due to fraud (manipulation of the combined Occupational Health and Safety”, “2.6.3 Recruitment & non-financial statement) or error. Employee Loyalty”, “2.6.4 Qualification, Further Training and Development”, “2.6.5 Labor and Social The EU Taxonomy Regulation and the Delegated Acts Standards”, “2.7.3 Business Ethics and Compliance”, adopted thereunder contain wording and terms that are “2.7.4 Responsibility in the Supply Chain”, “2.8.1 Use of still subject to considerable interpretation uncertainties Genetic Resources and Intellectual Property” and “2.8.2 and for which clarifications have not yet been published Social Commitment” in the combined management report in every case. Therefore, the executive directors have being incorporated by reference for the period from 1 disclosed their interpretation of the EU Taxonomy July 2021 to 30 June 2022 (hereinafter the “combined Regulation and the Delegated Acts adopted thereunder in non-financial statement”). section “2.4 EU Taxonomy” of the combined non-financial statement. They are responsible for the defensibility of this Responsibilities of the executive directors interpretation. Due to the immanent risk that undefined The executive directors of the Company are responsible for legal terms may be interpreted differently, the legal the preparation of the combined non-financial statement conformity of the interpretation is subject to uncertainties. in accordance with Sec. 315c in conjunction with Secs. 289c to 289e HGB [“Handelsgesetzbuch”: German Independence and quality assurance Commercial Code] and Art. 8 of Regulation (EU) 2020/852 of the auditor’s firm of the European Parliament and of the Council of 18 June We have complied with the German professional 2020 on the establishment of a framework to facilitate requirements on independence as well as other sustainable investment and amending Regulation (EU) professional conduct requirements. 2019/2088 (hereinafter the “EU Taxonomy Regulation”) and the Delegated Acts adopted thereunder as well as in Our audit firm applies the national legal requirements and accordance with their own interpretation of the wording professional pronouncements – in particular the BS WP/ and terms contained in the EU Taxonomy Regulation vBP [“Berufssatzung für Wirtschaftsprüfer/vereidigte and the Delegated Acts adopted thereunder as set out in Buchprüfer”: Professional Charter for German Public section “2.4 EU Taxonomy” of the combined non-financial Accountants/German Sworn Auditors] in the exercise statement. 154 Consolidated Financial Statements | Independent Auditor’s Report Annual Report 2021/2022 | KWS Group of their Profession and the IDW Standard on Quality In the course of our assurance engagement we have, Management issued by the Institute of Public Auditors in among other things, performed the following assurance Germany (IDW): Requirements for Quality Management procedures and other activities: in the Audit Firm (IDW QS 1) and accordingly maintains a comprehensive quality management system that Gain an understanding of the structure of the includes documented policies and procedures with regard sustainability organization and stakeholder engagement, to compliance with professional ethical requirements, Inquiries of the executive directors and relevant professional standards as well as relevant statutory and employees involved in the preparation of the combined other legal requirements. non-financial statement about the preparation process, about the internal control system related to this process, Responsibilities of the auditor and about disclosures in the combined non-financial Our responsibility is to express a conclusion with limited statement, assurance on the combined non-financial statement based Inquiries of the employees regarding the selection of on our assurance engagement. topics for the combined non-financial statement, the risk assessment and the policies of the Company and the We conducted our assurance engagement in accordance Group for the topics identified as material, with International Standard on Assurance Engagements Inquiries of employees of the Company and the Group (ISAE) 3000 (Revised): “Assurance Engagements other responsible for data capture and consolidation as than Audits or Reviews of Historical Financial Information” well as the preparation of the combined non-financial issued by the IAASB. This standard requires that we plan statement, to evaluate the reporting system, the data and perform the assurance engagement to obtain limited capture and compilation methods as well as internal assurance about whether any matters have come to our controls to the extent relevant for the assurance of the attention that cause us to believe that the Company’s disclosures in the combined non-financial statement, combined non-financial statement is not prepared, in Identification of likely risks of material misstatement in all material respects, in accordance with Sec. 315c in the combined non-financial statement, conjunction with Secs. 289c to 289e HGB and the EU Inspection of the relevant documentation of the systems Taxonomy Regulation and the Delegated Acts adopted and processes for collecting, aggregating and validating thereunder as well as the interpretation by the executive the relevant data in the reporting period and testing directors disclosed in section “2.4 EU Taxonomy” of the such documentation on a sample basis, combined non-financial statement. Analytical procedures on selected disclosures in the combined non-financial at the level of the Company and In a limited assurance engagement, the procedures the Group, performed are less extensive than in a reasonable Inquiries and inspection of documents on a sample assurance engagement, and accordingly, a substantially basis relating to the collection and reporting of selected lower level of assurance is obtained. The selection of data, the assurance procedures is subject to the professional Evaluation of the process to identify the economic judgment of the auditor. activities taxonomy-eligible and the corresponding disclosures in the combined non-financial statement, Evaluation of the presentation of the combined non-financial statement. KWS Group | Annual Report 2021/2022 Independent Auditor’s Report | Consolidated Financial Statements 155 In determining the disclosures in accordance with Art. 8 General Engagement Terms and Liability of the EU Taxonomy Regulation, the executive directors The “General Engagement Terms for Wirtschaftsprüfer are required to interpret undefined legal terms. Due and Wirtschaftsprüfungsgesellschaften [German Public to the immanent risk that undefined legal terms may Auditors and Public Audit Firms]” dated 1 January 2017 be interpreted differently, the legal conformity of their are applicable to this engagement and also govern interpretation and, accordingly, our assurance engagement our relations with third parties in the context of this thereon are subject to uncertainties. engagement (www.de.ey.com/general-engagement-terms). Assurance conclusion there in no. 9 and to the exclusion of liability towards Based on the assurance procedures performed and the third parties. We accept no responsibility, liability or other evidence obtained, nothing has come to our attention obligations towards third parties unless we have concluded that causes us to believe that the combined non-financial a written agreement to the contrary with the respective statement of the Company for the period from 1 July 2021 third party or liability cannot effectively be precluded. In addition, please refer to the liability provisions contained to 30 June 2022 is not prepared, in all material respects, in accordance with Sec. 315c in conjunction with Secs. We make express reference to the fact that we will not 289c to 289e HGB and the EU Taxonomy Regulation and update the report to reflect events or circumstances the Delegated Acts adopted thereunder as well as the arising after it was issued, unless required to do so by law. interpretation by the executive directors as disclosed in It is the sole responsibility of anyone taking note of the section “2.4 EU Taxonomy” of the combined non-financial summarized result of our work contained in this report to statement. Restriction of use decide whether and in what way this information is useful or suitable for their purposes and to supplement, verify or update it by means of their own review procedures. We draw attention to the fact that the assurance engagement was conducted for the Company’s purposes Eschborn/Frankfurt am Main, 14 September 2022 and that the report is intended solely to inform the Company about the result of the assurance engagement. Ernst & Young GmbH As a result, it may not be suitable for another purpose than Wirtschaftsprüfungsgesellschaft the aforementioned. Accordingly, the report is not intended to be used by third parties for making (financial) decisions Meyer Johne based on it. Our responsibility is to the Company alone. Wirtschaftsprüferin Wirtschaftsprüferin We do not accept any responsibility to third parties. Our [German Public Auditor] [German Public Auditor] assurance conclusion is not modified in this respect. 156 Consolidated Financial Statements | Independent Auditor’s Report Annual Report 2021/2022 | KWS Group Declaration by Legal Representatives We declare to the best of our knowledge that the consolidated financial statements give a true and fair view of the assets, financial position and earnings of the Group in compliance with the generally accepted standards of consolidated accounting, and that an accurate picture of the course of business, including business results, and the Group’s situation is conveyed by the Group Management Report, which is combined with the Management Report of KWS SAAT SE & Co. KGaA, and that it describes the main opportunities and risks of the Group’s anticipated development. Einbeck, 14 September 2022 KWS SE Dr. Hagen Duenbostel Dr. Felix Büchting Dr. Peter Hofmann Eva Kienle Nicolás Wielandt KWS Group | Annual Report 2021/2022 Declaration by Legal Representatives 157 Additional Information Financial calendar Date November 14, 2022 December 6, 2022 February 9, 2023 May 11, 2023 September 27, 2023 KWS share Key data of KWS SAAT SE &Co. KGaA Securities identification number ISIN Stock exchange identifier Transparency level Index Share class Number of shares Quarterly Report Q1 2022/2023 Annual Shareholders’ Meeting Semiannual Report 2022/2023 Quarterly Report 9M 2022/2023 Publication of 2022/2023 financial statements, annual press and analyst conference 707400 DE0007074007 KWS Prime Standard SDAX Non-par 33,000,000 Dividend Dividend payment and dividend ratios of the past ten years 0.60 0.60 0.60 0.60 0.64 0.64 0.67 0.70 0.80 0.80 24.7 23.6 23.2 21.7 21.6 21.2 21.3 24.3 23.9 24.5 25% 20% 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 Dividend proposal 2022 Dividend payment in € Dividend ratio (total dividends/net income) in % 158 Additional Information Annual Report 2021/2022 | KWS Group About this report The Annual Report can be downloaded on our Internet sites at www.kws.de and www.kws.com. The KWS Group´s fiscal year begins on July 1 and ends on June 30. Unless otherwise specified, figures in parentheses relate to the same period or date in the previous year. There may be rounding differences for percentages and numbers Contact Investor Relations and Press Financial Press Peter Vogt Gina Wied press@kws.com Sustainability Marcel Agena Editor KWS SAAT SE & Co. KGaA sustainability@kws.com Grimsehlstrasse 31 investor.relations@kws.com Phone: +49 5561 311-1427 Phone: +49 5561 311-1393 P.O. Box 1463 Phone: +49 (0) 30 816914-490 Safe harbor statement 37555 Einbeck Germany This Annual Report includes forward-looking statements based on the assumptions and estimates of KWS SAAT SE & Co. KGaA’s management. These forward-looking statements may be identified by words such as “forecast,” “assume,” “believe,”“assess,” “expect,” “intend,” “can/may/might,” “plan,” “should” or similar expressions. These statements are based on current assessments and forecasts of the Executive Board and the information currently available to it and are subject to certain elements of uncertainty, risks and other factors that may result in significant deviations between expectations and actual circumstances. These factors may be, for example, changes in the overall economic situation, the general statutory and regulatory framework, and the industry. KWS SAAT SE & Co. KGaA does not warrant that the future development and actual results achieved in the future match the assumptions and estimates expressed in this Annual Report and shall not assume any liability if they do not. Forward- looking statements must therefore not be regarded as a guarantee or pledge that the developments or events they describe will actually occur. KWS SAAT SE & Co. KGaA does not intend, nor does it assume any obligation, to update forward-looking statements in order to adapt them to events or developments after the date of this report. Photo credits Frank Stefan Kimmel Roman Thomas Date of publication: September 27, 2022 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. KWS SAAT SE & Co. KGaA Grimsehlstrasse 31 P.O. Box 1463 37555 Einbeck/Germany www.kws.com

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