Hello, ladies and gentlemen, and welcome to the KWS Fiscal Year 2020 to 2023 results. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Eva Kienle. Please go ahead.
Good afternoon. Hello, ladies and gentlemen. From my side, also, a welcome to our KWS conference call on the occasion of today's publication of our financial results for the fiscal year 2022/23. Today, we at KWS are proud to look back on an extraordinarily successful financial year, in which we have underpinned our leading position in the global seed market. In Germany, we are the leading field seed supplier and now number two in the European, and number 4 in the global ranking. With the recent delisting of our French competitor, Limagrain, KWS is also the only remaining stock-listed supplier with a global presence, focused solely on seed breeding. Not only did our sales increase significantly by double digits in the past financial year, but we were also able to significantly improve our key earnings figure.
On the basis of this very successful business development, we intend to pay a higher dividend of EUR 0.90 per share as part of our dividend policy. Looking ahead to the current fiscal year, we are very optimistic that we will be able to continue to grow despite the existing challenges and continue the successful KWS story. Let's take a more detailed look at some of the financials of the past fiscal year. First of all, the very strong sales growth of 18.2% is clearly standing out. Excluding slightly negative currency effects, the increase in sales would have been even as high as 19.3%. This huge increase is mainly due to the strength of our innovative product portfolio, but also an overall inflationary and economic environment, which gave us significant scope for price increases last season.
With a five year CAGR of 13%, we have grown significantly faster than the overall market in terms of sales in recent years, and see this as a confirmation of our strategic positioning and the intensity of our research and development activity. The significant expansion of our business is also reflected in the key operating earnings figures. EBITDA rose from EUR 252 million to EUR 318 million. EBIT from EUR 155 million to around EUR 223 million, which corresponds to an astonishing increase of around 44%. Accordingly, our EBIT margin also recorded a significant improvement, rising from 10.1% last year to 12.2% today. As you know it from KWS, research and development is of paramount importance to us.
At 17.3%, the R&D ratio was slightly below the previous year's level, but in absolute terms, we have spent around EUR 37 million or 13% more on future innovations. The financial results, on the other hand, were significantly lower than in the previous year, and this is due to two effects. First, we recorded lower earnings contributions from our corn joint ventures in North America and China. Second, higher interest expenses led to lower net interest income. Our income tax also rose as a result of higher earnings, but at the same time, unlike in previous years, we did not record any positive special effects, so that the tax rate rose from 22% to 27.7%.
Earnings after taxes and earnings per share were nevertheless significantly higher than the previous year, with an increase of around 18%, which is a net earnings development in the same pace as sales growth. Our free cash flow also developed very positively, from EUR 9.5 million in the previous year to around EUR 45 million, despite an increase in our investment of around EUR 60 million and a further growth-related increase in net working capital. On the basis of this very pleasing business development, the executive board and supervisory board have decided to propose a higher dividend of EUR 0.90 at the annual general meeting in December. This means that we continue to operate in line with our continuous dividend policy, with a payout ratio of 20% to 25% of our net profit. Now, let's move on to the individual product segments.
Sales in the corn segment increased significantly by 12%, breaking the EUR 1 billion mark for the first time this fiscal year. Growth in the corn segment was once again driven by Brazil and Europe, where we were able to grow, in particular, due to higher selling prices. By contrast, our joint ventures in the United States and China were rather disappointing, with the earnings contributions declining significantly. This also explains the decline in the segment's result from EUR 57 million to EUR 46 million, which corresponds to a low margin of 4.4%. In the new fiscal year, we expect a slight increase in sales in the corn segment and expect margins to rise again. Now, let's move on to the sugar beet segment. With a 22% increase in sales, we are once again underpinning our global market leadership position in this area.
This development is closely linked to the success of our innovations, such as CONVISO SMART and CR+, which now account for about half of our total sales of the segment. The positive business development is also clearly reflected in EBIT, where earnings rose from EUR 195 million to EUR 253 million. This current bond corresponds to a further increase in the outstanding EBIT margin of 34.54%. For the new fiscal year, we expect further revenue growth in the segment, with stable, continued strong profitability. Now to the Cereals segment, which generates the majority of the business already in the first half of the fiscal year. Here, we recorded a strong increase in sales of 19% compared to the previous year.
The main driver of growth this year was once again our rapeseed business, with an increase of 28%, followed by wheat and rye. The segment's very positive business performance is also reflected in our earnings figures. With a segment result of EUR 40 million, we achieved significant growth of a good 30% compared to the prior year, prior year, mainly driven by price effects and product mix. In the new fiscal year, we expect a slight increase in sales for the Cereals segment, with a continued very good profit margin at the previous year's level. Sales in the Vegetable segment recovered after a lean period in the wake of the pandemic. In particular, we saw significant growth in sales of spinach seeds in the USA and China. As a result of the business development, the underlying profitability of the existing business has recovered.
In addition, we recorded lower effects from the amortization of purchased assets, so that the segment result also improved overall. In line with our long-term planning, we are continuing to invest in the expansion of our breeding activities. We have now established breeding teams in Italy, Spain, the Netherlands, Turkey, Mexico, and Brazil to drive our breeding programs forward. We are well underway on our strategic path, and this will be reflected in growing business in the medium term. The associated planned R&D expenses were in the low double-digit million EUR range and represent a burden on the segment's profitability in the startup phase. For the current fiscal year, we expect stable sales in the Vegetable segment and, for the reasons already mentioned, continued negative earnings. The establishment of our vegetable breeding in Spain is currently one of our most important investment projects.
This includes the establishment of two breeding stations with completely new facilities in Almería and Murcia in southern Spain, in the heart of one of Europe's most important areas for vegetable breeding. The total volume of this investment is around EUR 17 million, and we want to have completed the work in about two years in order to concentrate fully on the breeding of new vegetable varieties in accordance with our long-term segment strategy. Another important project that is very close to our heart at KWS, is the expansion of our capacities in western Ukraine at our Kamianets-Podilskyi site. We have been active in Ukraine for a long time, since the opening of our first international location in Vinnytsia in 1900. By expanding our capacities, we want to make a concrete contribution to the reconstruction and resilience of Ukrainian agriculture.
Our investment is mainly about expanding capacity for the processing of corn seeds, both for Ukraine and potentially for the European market. The total project volume is EUR 40 million, and we expect completion as early as the end of this year. Now, let's move on to our outlook for the current fiscal year. We currently expect revenue growth of 3% to 5% on a comparable basis and expect a stable EBIT margin in the range of 11% to 13%. At the same time, we will continue to maintain our R&D investments at a high level in the range of 18% to 19% of sales. On the one hand, opportunities arise from the prices for agricultural commodities, which are still above their long-term averages, and on the other hand, the potential increase in arable land.
Since those prices are quite volatile, it's difficult for the farmer to predict which crop is best to grow. However, thanks to our very broad seed portfolio, we believe we are very well positioned to be able to compensate for these fluctuations. On the other hand, we are also affected by inflation, and as you know, some of our multiplication costs are directly linked to commodity prices, so that some increases can also be expected here. Also, the effect of climate change and adverse weather impacts pose growing risks to our seed production, as lately seen in northern Italy, so we need to take appropriate precautions here. We also see little improvement in geopolitical risks, with the Ukraine war, in particular, having the potential for further disruptions in the global food supply.
Nevertheless, despite an overall challenging situation, we remain cautiously optimistic for the new financial year and want to build on the last year's successes. At the end of my presentation, I would like to talk about the current status of our sustainability activities. As you know, we have set ourselves specific goals in various areas as part of our 2030 sustainability initiative. We report in detail on the status of target achievement, including in our sustainability report published today. I would like to go into more detail about the carbon footprint at this point. As part of our sustainability initiative, we have set ourselves the goal of halving our Scope one and Scope two emissions by 2030 , baseline year being 2020, 2021. First, let's look at the status quo.
Overall, our total greenhouse gas emissions increased slightly in the past fiscal year, mainly due to higher Scope one emissions, a result of the increase in Brazilian corn production, mainly drying. In contrast, we recorded a slight decline in Scope two. However, for both issues, we are above our baseline for the 2021 financial year. This is not surprising, because planned reductions can only be realized once we have completed the investments in the appropriate energy infrastructure and adapted our energy mix. To achieve this, we have developed a corresponding roadmap for our sites in Germany, which combines local components such as photovoltaic systems with a Germany-wide support of green energy. As you can see, a lot is still in the planning and preparation stage, but we're already expecting the first visible successes for the current calendar year.
Our roadmap for the German site investigates realizing additional savings in each of the years, if possible, in order to finally achieve the 50% target as early as 2027. Of course, these are projections, the achievement of which also depends on external factors. But we have our sights firmly set on this goal and are determined to improve our future environmental footprint significantly. Last but not least, and not entirely unimportant for investors these days, how are KWS's ESG ratings developing? As you can see here in the overview, we have gradually improved in recent years. At MSCI, we were in a and we were able to maintain this. However, it is also room for improvement. By 2025, we aim to improve all the ratings mentioned here, thereby underpinning our profile as a company with a strong, sustainable profile.
With this, I would like to conclude my presentation. Thank you for your attention, and I'm now looking forward to your questions.
Ladies and gentlemen, if you would like to ask a question, please press nine and the star key on your telephone keypad. In case you wish to cancel your question, press nine and the star key again. Please press nine and the star key now to state your question. The first question comes from Markus Mayer. Please go ahead.
Yeah, good afternoon, Ms. Kienle, and congratulations to this very strong result. I have two questions, if I may. I'm a little bit struggling on the outlook, in particular on the outlook, margin outlook for sugar beet and cereals. And this lower soft commodity prices, we see normally this would be translate or would be translated as in lower costs, for next year for you. So this flat margins, is this solely due to the higher R&D investments you're guiding, or are there other effects you should take into consideration? That's my first question. And then the second question is on digitalization, in particular, digitalization of your distribution partners, like BayWa or others. Can you also help us to understand what kind of effect here KWS should expect from this digitalization efforts of these kind of partners?
Okay. Starting with the last question, just to come to, to have that properly understood, are you talking about the platforms that the dealers are launching?
Exactly, yeah, about platforms.
Okay.
Yeah.
Good. Okay, so let me start then with that question. And that's quite some years already now that a lot of players, including competitors, have started initiatives of platform offerings, either the platform or platform plus services, or services that come along with digital solutions, and so do we. So we have with myKWS platform and apps that the farmer can use for different purposes, depending on the crop, et cetera. So now some of the main dealers have done first initiatives to come forward with those trading platforms, I would call it, for the farmers. And we do still see quite some reluctance of the farmers to fully buy into one of the offerings that is out there.
Digitalization clearly helps to improve the interaction, the dialogue, the product offering, detail exchange with the farmers, mainly for the dealers as well as for the industry, seed suppliers or other suppliers for the farmer. However, there is not yet a business model where we see those services paying off. So it comes in most cases for free. And the question is, if you want to make it an economic solution, you have to take money sooner or later for entering such a platform or for putting your apps or anything on the platforms. So we rather prefer to do direct offering on our platforms that we do have, that provide a clear solution. We have also online shops, of course, in some of the countries that the farmers can go directly and order and inform themselves about our products.
But we do not see that the traders will come up here with a sort of barrier to entry and to interact with the farmer, as it's still too heterogeneous and still not in large scale adopted by the farmers.
Okay, understood.
First question, outlook on sugar beet and cereals for the current year. You were a little concerned. I want to understand why there is slight margins prediction, and we have to know that especially the seed availability is not yet fully known. I mentioned it that we have had very bad weather effects in northern Italy, where sugar beet multiplication takes place. So the question is, are we fully available with all products? That means classical varieties, CONVISO varieties, CR+ varieties, and depending on the portfolio that we have available, we might see a negative mix on the production costs. That's why the margins might come under pressure here for the current year. And in cereals, it's depending on the mix, a lot on the mix.
So we have had a very, very positive mix of 2022, 2023, with a high performance of oilseed rape and rye. Also very good wheat, but wheat has lower margins. So if there is a shift, what we expect, a shift not so strong again in oilseed rape, we might see that the margin deteriorates just as effect of the product mix. So that's mainly the reason why we're a little more conservative here for the current provisions.
Okay, perfect. Well understood. Thank you so much.
Okay, so at the moment, there seem to be no further questions. If you would like to state another question, please press nine and the star key on your telephone keypad. We'll leave the line open for a couple more seconds. And we have a follow-up question from Mr. Mayer. Please go ahead.
Yeah. If no one asks a question, then I'm happy to, to take this chance. Maybe a question on the competitive landscape. If I realized this correctly, Vilmorin, there are some changes, and also then the larger seed, and in particular, crop protection companies like Corteva, Bayer, and also Syngenta are moving further and how current business environment or the competitive environment. Is this ongoing consolidation something which is positive for KWS, where you also see chances, or is it also that you see certain risks arising out of that?
Okay. So as for doing business, I would say, I do not see any major changes right now. Just the fact that Vilmorin has delisted and has sort of taken back their shares does not imply that they will change their product development or their going to market and their strategy execution. So they will remain a strong competitor and a good partner in our joint ventures. They just, so to say, have changed the way how they finance themselves going forward. So that's not expected to do a lot to the competitive change. Bayer, Corteva, Syngenta, there is very little movement in here. Bayer, we do not expect huge things right now. Depends a lot on what the new CEO will do with regards to the further development.
That's not yet known, so we can't say anything on that. What we know is you did not mention BASF, but here and there-
Yeah
We see that BASF has started to divest bits and pieces of their seed business, which we are very closely monitoring, and in the one or the other case, we might be interested to tap into discussions with them, whether we could acquire one of the assets that they want to dispose of. But with the go-to-market competition, there is not a big change. So everyone is providing good products, everyone is executing on the strategy, everyone is working on the major problem of increasing insect resistance due to climate change or insect pressure. So there is not a large shift in the competitive landscape.
Okay. Thank you so much.
Okay, since there have been no further questions asked, I would like to hand over the call to your host again for some closing remarks.
Thank you very much for listening in to our call, and happy that you are interested in KWS. Thanks a lot for the questions, Mr. Meyer, and I wish you all a very nice rest of the day. Greetings, and bye-bye from Frankfurt.