“I see enormous potential in breeding”

The numbers in the 3rd quarterly report published on May 19 were very good, and the guidance envisages very satisfactory results for the fiscal year as a whole. Isn’t KWS being hit by the coronavirus crisis?

The numbers are indeed more than satisfactory and show that our strategy has been exactly right. Even when the measures to contain coronavirus were toughened more and more, we managed to supply our seed to farmers and dealers. That’s a huge achievement and I’d like to take this opportunity, on behalf of the Executive Board, to thank all colleagues very much for their great commitment. However, it’s also obvious that we will have to view the next fiscal year starting in July with new eyes.

What do you mean by that?

The good results of the past months are due to orders that were largely received before the coronavirus crisis and that we were able to deliver on time. Now we have to take into account that the restrictions due to coronavirus are compounded by a further factor affecting our business: The prices for commodities, such as oil, as well as for agricultural goods are sliding. That means we have to monitor closely what effects that has on agriculture and orders from our customers.

Just what impact do low oil prices have on agriculture?

In Brazil, a large part of the sugar cane harvest goes to producing ethanol for use as a fuel. When the oil price falls sharply, ethanol is no longer competitive as a fuel. Instead, the cane is used increasingly to make sugar – but a surplus supply on the world market reduces the price of sugar, which in turn is felt by sugarbeet farmers and sugar factories. The same goes for grain corn in the U.S., where a large share of the harvest is used to produce ethanol. The low oil price means producing ethanol is hardly worthwhile at the moment, and a number of ethanol plants have already closed down. Corn cultivation area and consequently demand for corn seed might therefore fall in the U.S.

What action is KWS taking in these unusual times?

We have to think here on several levels, namely how to protect employees, ensure business continuity, make KWS “weatherproof” and speed up forward-looking developments. Specifically, that means that protecting our employees’ health remains our top priority. The containment measures will be with us for as long as there’s no effective remedy against coronavirus. We can therefore expect a situation where we still have to obey social distancing rules, work from home and face severe travel restrictions. That will help us minimize the risk of losses, while enabling us to keep up our breeding work and produce seed.

From the economic perspective, too, safety first applies at KWS. The Executive Board and the Global Leadership Team have jointly formulated strategies on how we can and intend to shape the coming months and even years. After all, our goal is to keep on growing. Nevertheless, we have to keep a keen eye on developments in the markets and political and financial measures and, if necessary, be in a position to respond to them. At the same time, we want to maintain a good balance between caution and risk. You might even put it this way: It’s better to take your foot off the gas pedal a little, reach your destination safely and accelerate again later than to carry on driving in a carefree way and then have to slam on the brakes if in doubt.

What are the specific repercussions?

If low market prices force farmers to think twice about every penny they spend, they’ll perhaps buy less of our high-quality KWS seed. That might come about, but it’s not inevitable. But we aim to be ready so that we don’t suffer a rude awakening financially. That’s why we’re paring back new investments that aren’t absolutely necessary and are by and large not adding extra jobs. However, posts that become vacant will still be filled. I’m very pleased we’re able to operate from a very healthy economic position and don’t have to launch any far-reaching cost-cutting programs, as companies from harder-hit industries are currently doing.

What do you mean by speeding up “forward-looking developments”?

Our colleagues everywhere are working flat out and finding creative solutions for their or their team’s work. Our well-developed IT landscape gives us a lot of options in this regard. This pioneering spirit inspires me and we definitely have to continue to cultivate it. I feel sure we’ll retain some of these solutions even when the pandemic’s over. We could integrate the possibilities the home office offers even better in KWS’ working world, for instance. I also see a great chance to raise the relationship with our customers to a whole new level using digital tools. I therefore explicitly urge our colleagues: Pitch in with your experience from this time – your ideas are needed and can make a valuable contribution to KWS. “Make yourself grow” is as true now as it’s ever been.

Looking ahead: Where does KWS have opportunities?

As a plant breeder and seed producer, KWS is an essential business. Our products are right at the fore of the value chain when it comes to supplying people with high-quality food. That gives us a certain degree of security. However, it also comes with a social responsibility, since agriculture as a whole has to become more resource-conserving and sustainable. And we aim to achieve that with our products and services. I see enormous potential in breeding when it comes to reducing the use of pesticides or making plants more tolerant to drought stress, for example. Carefully thought-out crop rotation preserves the soil’s fertility and health. Our broad portfolio has the plants required for that. New breeding methods can speed up development of new varieties, digital services help farmers work their fields even better, and we’re addressing the trend toward healthy eating by expanding our vegetables business long term. |