Devgen reports 2010 Half Year Results
(Thomson Reuters ONE) -
Regulated information
GHENT, Belgium, 25 August 2010 - Devgen nv [Euronext Brussels: DEVG], announced
today its results for the six month period ending 30 June 2010, which have been
prepared in accordance with the IAS 34 'Interim Financial Reporting'.
Financial highlights
+---------------------------------+---------------+-------------------+
| ? million | H1 2010 | H1 2009 |
+---------------------------------+---------------+-------------------+
| Revenues | 12.3 | 8.6 |
+---------------------------------+---------------+-------------------+
| Gross profit | 6.6 | 4.5 |
+---------------------------------+---------------+-------------------+
| R&D expenditure | 4.1 | 4.6 |
+---------------------------------+---------------+-------------------+
| Net loss from cont'd operations | -2.3 | -5.1 |
+---------------------------------+---------------+-------------------+
| | June 30, 2010 | December 31, 2009 |
+---------------------------------+---------------+-------------------+
| Cash Position((1)) | 32.7 | 45.8 |
+---------------------------------+---------------+-------------------+
((1) )Including restricted cash for an amount of ? 5.5 million as per June
30, 2010 and ? 5.6 million as per December 31, 2009.
Business highlights
Seed business India
Devgen is active in hybrid seeds of 4 crops in India. The 2010 sales season for
rice, sorghum and pearl millet hybrid seeds is essentially completed to date.
For Sunflower, the main sales season starts in Q4.
Rice:
* Devgen has grown its sales volume and revenues by 25%, despite poor market
conditions. Both the 2009 and 2010 Kharif[1] seasons witnessed late arrival
and shortfalls of rains. Under these conditions farmers tend to switch to a
different crop to minimize their financial exposure and/or tend to plant
varietal seed requiring less upfront investments. As a consequence the
overall hybrid rice market has remained at approximately 16,000 ton,
unchanged from 2009. The top 3 players (Devgen is nr 3), gained market share
from the smaller players and increased their combined market share from an
estimated 54% in 2009, to 60 % in 2010. Assuming normal weather patterns in
2011, the hybrid rice market is expected to resume growing.
· Devgen maintained its sales prices, based on the quality of its products,
while the overall trend in the market was price reduction.
· Devgen launched Frontline Gold, a new premium seed product. A large number
of demo trials during the 2009 season in addition to excellent results achieved
in the 2009 government trials allowed for a successful launch this year.
Frontline gold is a high yielding, premium quality, medium duration hybrid rice
product..
· Devgen expanded its introduction of direct seeded rice in Northern India.
In collaboration with CIMMYT India[2], Devgen developed and widely promoted an
agronomy package for direct seeding of rice. Direct seeded rice results in
savings in labor, time to harvest and on average reduces water usage by 30%
(3,000 m³ per hectare per season).
Sorghum:
· Devgen strengthened its number one position in volume and value with a 26%
increase in sorghum sales over the previous year. This achievement occurred in a
hybrid sorghum market that shrunk 40% compared to last year due to adverse
weather and unfavorable crop economics[3].
· Devgen launched, Sorghum 296 Gold, a hybrid delivering higher yield than
DJ60, launched last year by Devgen. Until now DJ60 was the most premium product
in the market.
· The hybrid sorghum sales in India are mainly for the Kharif season and
represent 45% of the addressable market (2.4 million hectares). Devgen targets
future growth in the remainder sorghum market by developing specialized
products:
- The 5 million hectare market for the Rabi season[4] is nearly
exclusively supplied with cheap varietal seed. This Rabi season, Devgen is
launching a new sorghum hybrid with the same grain quality but offering a
considerable yield advantage.
- Today only 10% of the fodder sorghum market consists of branded,
commercial seeds. This market is expected to grow as the milk industry in India
increasingly encourages the farmer to move to quality fodder sorghum to feed his
cattle. Devgen's SX17 sorghum fodder hybrid, is in its second year in the market
and already obtained a 15% market share of the branded seed market segment. The
total sorghum fodder market represents 1 million hectares or 50 K tons of seed.
Pearl millet:
· Devgen today sells pearl millet mainly in Central India (Maharashtra and
Karnataka states). Devgen maintained its volume and value in this market, which
overall was down by 28% compared to 2009, due to adverse weather conditions.
· To enter markets which are not served by the existing product portfolio,
such as the large Northern India market, Devgen launched two new hybrids in
2010:
- Mahalaxmi DB5000 a premium product for the warm and dry North-west
region of India.
- "Tilak" a high yielding product with wide adaptability across India.
Sunflower:
- The 2009 Rabi market was significantly lower than normal: an estimated
4,500 tons compared to 6,500 tons in normal years and 7,000 tons in peak years.
The currently depressed sunflower oil prices make growing other crops for
farmers more profitable. Sunflower prices typically follow a multi-year cycle
influenced by import of edible oil by the government. This trend continued in
2010, resulting in unexpected sales returns in H1 2010 which impacts 2010 sales.
- Devgen's currently estimates that the 2010 sunflower market (which starts
in Q4) will decrease by approximately 30% compared to last year and only reach
3100 tons. Prices are expected to be under pressure due to high stock levels in
the market (2009 returns).
- As a consequence of these market conditions, Devgen does not expect value
growth in this crop but expects to retain its nr 3 position in this market.
- Devgen's strong product portfolio and pipeline places it in a good position
to grow again as markets return to pre-2008 levels over the next 2 years.
Hybrid rice Philippines
As Devgen is gaining experience in Philippines, the production capability, the
trained staff and the upgraded infrastructure are gradually put in place.
Devgen's hybrid rice product, Masuwerte, was introduced in the dry season market
(November 09 to April 10) and was sold for the first time during the wet season
(June 10 to October 10). Sales of this hybrid were expanded to the three main
rice growing islands (Luzon, Visayas and Mindanao), and stocks, albeit limited,
were fully liquidated. The wet season gives more challenging weather and disease
pressure than the dry season. To date this crop is in flowering stage. Early
farmer's feedback is positive.
The research team in Philippines is now operational and has evaluated new
hybrids for different market segments in Philippines and S.E. Asia. Several
potential candidates for launch in 2011 and 2012 have been identified.
Hybrid rice Indonesia
Awaiting import clearance by Indonesian authorities, Devgen is still expecting
to launch DG-1-SHS in the course of 2010.
Devgen strengthened its relationship with PT (Persero) Sang Hyang Seri. A
memorandum of understanding was signed between both companies on the
introduction of biotech rice in Indonesia.
Research
Devgen management is confident that the pipeline in its four crops is delivering
the products that will fuel growth. While Devgen is further expanding its
sunflower, sorghum and pearl millet pipelines, the main research investment
targets the development of a new generation of superior hybrid rice seeds. Such
products will be essential to convince farmers to convert from traditional rice
to hybrid rice. Devgen targets to launch several new hybrid rice products in
2011 and 2012.
Devgen is on track with implementing its strategy of bottom-up redesign of
hybrid rice. Devgen expects to reach important milestones following the
completion of product trials currently ongoing in India and to be initiated
shortly in Philippines. The results of these trials will be analyzed in Q1
2011. Launch of such new products is targeted for 2013.
With yields increasingly affected by drought, heat, and irrigation shortages,
the development of a-biotic stress tolerant rice is increasingly critical.
Devgen has both a biotech as well as a non-biotech research program towards this
goal:
- In Q1 2010, Devgen and IRRI formed a partnership for the development of
drought-tolerant hybrid rice.
- In parallel, several promising biotech traits for a-biotic tolerance and
biotic stress resistance (pest and diseases) are being tested in the laboratory
and the greenhouse.
Nematicides
Devgen remains on track for obtaining efficacy, registration and
commercialization of its nematicide in a wide range of crops and countries. As
expected and considered normal when launching new products for use in an
agriculture environment, volumes sold remain on the low side to date.
Turkey is an important producer of high value crops with substantial exports
into the EU. In 2009, Devgen successfully launched its nematicide under the
brand name Devguard(®) in Turkey for use in tomatoes and cucumbers, peppers and
eggplant. Experience was accumulated during the first season and allowed to
build and enhance the pest management strategy which is being implemented in
this year's main season. The new and enhanced protocols allow for broadening the
potential of the product.
In H1 2010, Devgen launched its nematicide in the US under the brand name
Enclosure(®) for use in peanut production. A focused market introduction in key
peanut growing states in the US enables Devgen to gain experience and achieve
further optimization of its product. To date customer feedback is positive.
In Europe, progress has been made with the next steps for the registration of
Devguard(®) as a nematicide on selected crops. In Italy the finalization of the
review is now expected before end 2011. In Spain Devgen has submitted in Q2 its
registration dossier for the use of Devguard(®) on tomatoes, peppers, cucumbers
and melons.
In South-Africa, the registration review process is ongoing. Large scale
demonstration trials on tomatoes and potatoes are now planned for the upcoming
season. A distribution agreement is being finalized and further crop and label
expansion is being progressed.
In Morocco, registration trials for the use of Devguard(®) on tomatoes are
ongoing. The trials are performed in close cooperation with the Moroccan
Ministry of Agriculture and Devgen's commercial partner in Morocco. Tomato is
the most important vegetable crop grown under protective cover in Morocco.
Key figures June 30, 2010
+--------------------------------------------+-------------+-----------------+
| | H1 2010| H1 2009|
|EUR 000 (except for earnings per share) | | |
+--------------------------------------------+-------------+-----------------+
|Revenue | 12,252| 8,618|
+--------------------------------------------+-------------+-----------------+
|EBITDA | -1,040| -3,760|
+--------------------------------------------+-------------+-----------------+
|Operating loss from continued operations | -2,120| -4,645|
+--------------------------------------------+-------------+-----------------+
|Net of financial income/cost | -212| -339|
+--------------------------------------------+-------------+-----------------+
|Net loss from continued operations | -2,332| -4,985|
+--------------------------------------------+-------------+-----------------+
|Basic earnings per share from continued | -0.12 | -0.28 |
|operations (EUR) | | |
+--------------------------------------------+-------------+-----------------+
|Net profit/loss from discontinued operations| 0| -162|
+--------------------------------------------+-------------+-----------------+
|Net Loss for the year continued & | -2,332| -5,147|
|discontinued operations | | |
+--------------------------------------------+-------------+-----------------+
|Basic earnings per share from continued & | -0.12 | -0.29 |
|discontinued operations (EUR) | | |
+--------------------------------------------+-------------+-----------------+
| |June 30, 2010|December 31, 2009|
+--------------------------------------------+-------------+-----------------+
|Cash and cash equivalents((1)) | 32,724| 45,763|
+--------------------------------------------+-------------+-----------------+
(1) Including restricted cash for an amount of ? 5.5 million as per June
30, 2010 and ? 5.6 million as per December 31, 2009.
Revenue
Devgen's revenue for the first six months of 2010 totaled ? 12.3 million,
compared to ? 8.6 million for the same period of 2009, an increase by 42%.
Revenue from sales of goods amounted to ? 6.0 million for the first six months
of 2010 as compared to 5.7 million in the same period of 2009. Seed sales
figures in H1 were negatively impacted (? 1.8 million) by unexpected sales
returns on sunflower in India due to shifting crop economics for farmers,
traditionally growing sunflower. Sunflower sales during the upcoming Rabi
season, export sales of seeds out of India and nematicides sales (in Turkey) are
expected to further add to the revenue line in H2.
Revenue from research and development increased from ? 2.9 million for the first
six months of 2009 to ? 6.2 million for the first six months of 2010, an
increase by 112%. This is due to the income recognition of the update of the
Research and Technology agreement with Monsanto Company and to the renewed
Collaboration Agreement with Sumitomo Chemical Company.
Expenditure
Cost of goods sold was ? 5.6 million, compared to ? 4.1 million in H1 2009, an
increase by 36%. Cost of Goods is negatively impacted by major investments in
growing our production capacity. Following the decision to operate in many new
areas it was necessary to identify and train a large number of new farmers which
before were not familiar with the production of hybrid seeds. Identifying area
specific planting windows and matching soil types impacted further on the
achieved productivity and as consequence on cost of goods.
Gross profit increased from ? 4.5 million in H1 2009 to ? 6.6 million in H1
2010, an increase by 47% due to the contribution of research and development.
Research and development expenses for the first six months of 2010 amounted to ?
4.1 million (or ? 3.6 million excluding depreciation) as compared to ? 4.6
million (or ? 4.2 million excluding depreciation) last year. The decrease of ?
0.5 million or 12% is mainly due to lower research expenditure for the
nematicide program.
General and administrative expenses for the first six months of 2010 amount to ?
3.1 million, an increase by ? 0.7 million or 30% as compared to ? 2.3 million in
the same period last year. This is mainly explained by the geographic expansion
of our business activities in India, Singapore, Philippines, Indonesia, the US
and South-Africa.
Marketing and distribution expenses amounted to ? 2.3 million (or ? 1.9 million
excluding amortization of intangible assets) for the first six months of 2010,
in line with expenditure over the same period of 2009.
Other operating income amounted to ? 0.7 million as per June 30, 2010 as
compared to ? 0.1 million as per June 30, 2009. In 2010 a value gain was
recorded for an amount of ? 0.5 million on a financial participation. Devgen
obtained shares of a newly established bio-pharmaceutical company, Amakem NV,
following a contribution in kind of one of Devgen's former pharmaceutical
research projects.
Results
The net loss from continuing operations for the first six months of 2010 amounts
to ? 2.3 million versus ? 5.0 million over the same period last year.
Earnings before interest, taxes, depreciation and amortization (EBITDA) for H1
2010 improved to ? - 1.0 million from ? - 3.8 million for the first six months
of 2009 (continued operations). Higher gross profit and lower expenditure for
R&D is more than offsetting higher expenditure for SG&A. The operating loss
improved from ? 4.6 million in the first half of 2009 to ? 2.1 million in the
same period of 2010.
Cash flow and cash position
Devgen's cash and cash equivalents amounted to ? 32.7 million on June 30, 2010,
as compared to ? 45.8 million on December 31, 2009, a decrease by ? 13
million(([5]))(.)
The cash used in operations amounted to ? 10.4 million including the effect of
the net loss of ? 2.3 million and working capital requirements of ? 9.4 million.
Last year the cash provided by operating activities was exceptionally favored by
the cash received from the update of the Research and Technology Agreement with
Monsanto Company. This was posted as deferred income to be spread over the
remaining term of the contract (ending October 2011).
Cash used in investing activities for the first six months of 2010 amounted to ?
0.8 million. Investment in property, plant and equipment amounted to ? 0.9
million (seed infrastructure).
Cash flow from financing activities amounted to ? -1.5 million for the first six
months of 2010, mainly due to the repayment of a bank loan in India.
Consolidated balance sheet
The balance sheet total at June 30, 2010 amounted to ? 72.5 million versus ? 80
million at December 31, 2009. The balance sheet remains solid with a solvency
rate (equity versus total assets) of 62% and a cash position of ? 32.7 million
vs. ? 45.8 million at December 31, 2009.
Trade receivables have increased from ? 3.9 million at December 31, 2009 to ?
5.7 million at June 30, 2010 due to business seasonality (receivables relating
to Kharif season). Growth in rice and sorghum strengthen the impact.
Inventory at June 30 amounting to ? 6.8 million compared to ? 2.4 million on
December 31, 2009 holds mainly inventories for rice, sunflower and nematicides.
The inventory for rice seed caters for planned export sales, early Kharif sales
in India and buffer stock for future growth. Sunflower seed inventory is ready
for shipment into the Rabi market (Q4).
Trade payables on June 30, 2010 amount to ? 6.2 million compared to ? 4.9
million at December 31, 2009 again reflecting seasonality with numerous
liabilities with respect to production and marketing related expenses accounting
for the main balance.
Deferred income decreased by ? 4.1 million to ? 11.1 million and mainly relates
to gradual revenue intake of the ? 20 million received in cash from Monsanto
Company in 2009.
Outlook full year 2010
Revenues
Devgen forecasted top-line growth of 35 to 40% which was considered achievable
under normal weather and market conditions in India. Both the Rabi season and
the Kharif season gave highly exceptional weather scenarios (especially late
arrival of the monsoon initially and excessive rains during the Kharif).
Late arrival of rains in key market areas for hybrid rice impacted the planned
growth for rice. The achieved 25% growth is below our initial expectations but
in the stagnating market significantly outperforms the industry as a whole.
Changed crop economics whereby the farmers chose to grow more cotton and pulses
rather than sunflower, resulted in sales returns during the Kharif season.
Excessive rains in key markets in August, the high stock levels of hybrid
sunflower seeds in the market, together with the reduced market for sunflower
leads us to anticipate a tough sunflower Rabi sales season, from both a volume
and value perspective. This will further impact our forecasted top line. The
strong growth in sorghum (+26%), is not offsetting the impact of the above. With
both seed sales in Philippines and nematicides sales in Turkey and the US in
ramp-up mode the expected top-line growth from sales of goods is now set at
approximately 20%. Revenue growth for contract research will remain at 35%
resulting in an overall growth reforecast of still 25%.
R&D expenditure
Forecasted expenditure on R&D remains at ? 10 million required to progress
Devgen's R&D pipeline which should contribute to future top- and bottom-line
growth.
Cash flow
Cash flow including working capital is now set at ? -21 million compared to an
initial forecast of ? -15 million. Lower than expected sales and higher cost of
goods are impacting on gross margin because of:
- weather conditions and
- because Devgen expands into new areas to increase its production
capacity and to mitigate weather risk.
The higher use of cash is further due to higher working capital requirements:
- inventory increase, partially due to returns and do to strategic stock
built-up in support of growth;
- increase in debtors as Devgen is accessing the government subsidy
channel to be supplied with notified products. Sales through this channel are
with guaranteed payment in Q1.
Auditors Report
Limited review report on the consolidated half-year financial information for
the six-month period ended 30 June 2010
To the board of directors
We have performed a limited review of the accompanying consolidated condensed
balance sheet, condensed income statement, condensed statement of comprehensive
income, condensed cash flow statement, condensed statement of changes in equity
and selective notes 1 to 15 (jointly the "interim financial information") of
Devgen NV ("the company") and its subsidiaries (jointly "the group") for the
six-month period ended 30 June 2010. The board of directors of the company is
responsible for the preparation and fair presentation of this interim financial
information. Our responsibility is to express a conclusion on this interim
financial information based on our review.
The interim financial information has been prepared in accordance with IAS 34,
"Interim Financial Reporting" as adopted by the EU.
Our limited review of the interim financial information was conducted in
accordance with the recommended auditing standards on limited reviews applicable
in Belgium, as issued by the "Institut des Réviseurs d'Entreprises/Instituut van
de Bedrijfsrevisoren". A limited review consists of making inquiries of group
management and applying analytical and other review procedures to the interim
financial information and underlying financial data. A limited review is
substantially less in scope than an audit performed in accordance with the
auditing standards on consolidated annual accounts as issued by the "Institut
des Réviseurs d'Entreprises/Instituut van de Bedrijfsrevisoren". Accordingly, we
do not express an audit opinion.
Based on our limited review, nothing has come to our attention that causes us to
believe that the interim financial information for the six-month period ended
30 June 2010 is not prepared, in all material respects, in accordance with IAS
34 "Interim Financial Reporting" as adopted by the EU.
Diegem, 24 August 2010
The statutory auditor
________________________________________________
DELOITTE Bedrijfsrevisoren / Reviseurs d'Entreprises
BV o.v.v.e. CVBA / SC s.f.d. SCRL
Represented by Gert Vanhees
About Devgen nv
Devgen's mission is to enable farmers to sustainably grow more food on less
land, with less water, agrochemicals and labour.
Devgen uses advanced biotechnology and molecular breeding technology to make
high yielding seeds and crop protection solutions with a superior environmental
profile. Devgen brings this technology to the market in the world's major food
and feed crops through two complementary strategies:
- licensing Devgen technology for use in corn, cotton and soy and selected
other crops in exchange for R&D funding, and milestone and royalty payments;
- producing and selling its premium hybrid seeds in major field crops such as
rice, sunflower, sorghum, and pearl millet, in the Indian subcontinent and
South-East Asia.
In its Crop Protection unit, Devgen developed an agro-chemical product that
protects crops from damage by parasitic nematodes. This nematicide was launched
in Turkey and in US.
Incorporated in 1997, Devgen has offices in Ghent (Belgium), and has
subsidiaries in Singapore, Hyderabad (India), General Santos (Philippines) and
Delaware (US), totalling about 280 employees.
For more information please contact:
Thierry Bogaert, CEO Wim Goemaere, CFO
Tel. +32 9 324 24 24 Tel. +32 9 324 24 24
Thierry.Bogaert(at)devgen.com Wim.Goemaere(at)devgen.com
Or visit: www.devgen.com
This press release may contain forward-looking statements containing the words
"anticipates", "expects" , "intends", "plans", "estimates", "may" and
"continues" as well as similar expressions. Such forward looking statements may
involve known and unknown risks, uncertainties and other factors which might
cause the actual results, performance or achievements of Devgen to be materially
different from any future results or achievements expressed or implied by such
forward-looking statements. Factors that could cause or contribute to such
differences include, among others: agricultural risks and difficulties,
including weather factors, diseases and pests, the costs and requirements of
regulatory compliance and the speed with which approvals are received; public
acceptance of biotechnology products; political, economic and social
developments in countries where Devgen operates and other risks and factors
detailed in the company's most recent annual report.
These forward looking statements speak only as of the date of publication of
this document. Devgen disclaims any obligation to update such forward looking
statements in this document to reflect any change in its expectations,
conditions or circumstances on which such statement is based, unless required by
law or regulation. This document does not constitute, or form part of, any offer
or invitation to sell or issue, or any solicitation of any offer, to purchase or
subscribe for any securities issued by Devgen nv.
--------------------------------------------------------------------------------
[1] The Kharif or monsoon season in India refers to the period from June to
November. Kharif crops are usually sown with the first rains coming in
June-July, during the south-west monsoon season.
[2] The Indian branch of the CIMMYT, the International Maize and Wheat
Improvement Center (www.CIMMYT.org).
[3] Crop economics refer to the fact that farmers make decisions on which crop
to grow based on an economic analysis of which crop will give them the maximum
return under given conditions (expected yield x expected output price - cost)
[4] The Rabi season in India usually spans from November to May. The so called
winter crops are harvested during spring.
[5] Including restricted cash for an amount of ? 5.5 million as per June
30, 2010 and ? 5.6 million as per December 31, 2009.
[HUG#1440032]
PR ENG FINAL:
http://hugin.info/135721/R/1440032/384425.pdf
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
All reproduction for further distribution is prohibited.
Source: Devgen via Thomson Reuters ONE
Unternehmensinformation / Kurzprofil:
Datum: 25.08.2010 - 06:16 Uhr
Sprache: Deutsch
News-ID 39946
Anzahl Zeichen: 0
contact information:
Town:
Gent-Zwijnaarde
Kategorie:
Business News
Diese Pressemitteilung wurde bisher 176 mal aufgerufen.
Die Pressemitteilung mit dem Titel:
"Devgen reports 2010 Half Year Results"
steht unter der journalistisch-redaktionellen Verantwortung von
Devgen (Nachricht senden)
Beachten Sie bitte die weiteren Informationen zum Haftungsauschluß (gemäß TMG - TeleMedianGesetz) und dem Datenschutz (gemäß der DSGVO).
