GENT-ZWIJNAARDE, BELGIUM--(Marketwire - August 28, 2009) -
Strong seed and technology revenue growth - Devgen’s nematicide launched - Loss H1 substantially reduced
Regulated information
Financial highlights
+-------------------------------------------------------------------+ | EUR million | H1 2009 | H1 2008 | |----------------------+-----------------------+--------------------| | Revenues | 8.6 | 5.8 | |----------------------+-----------------------+--------------------| | R&D expenditure | 4.6 | 7.2 | |----------------------+-----------------------+--------------------| | Burn Rate | 7.7 | 7.1 | |----------------------+-----------------------+--------------------| | Net loss from cont’d | -5.0 | -7.4 | | operations | | | |----------------------+-----------------------+--------------------| | | June 30, 2009 | December 31, 2008 | |----------------------+-----------------------+--------------------| | Cash Position | 36.2 | 24.2 | +-------------------------------------------------------------------+
Business highlights
Devgen’s novel nematicide, an agro-chemical product that protects crops from damage by parasitic nematodes, is ready to enter the market:
- Devgen obtained regulatory approval in the US for usage of its new nematicide on peanuts. Devgen will promote its nematicide under the brand name Enclosure®. Sales are planned to start early 2010 and demo trials and information campaigns are currently ongoing;
- Devgen obtained regulatory approval in Turkey for use of its nematicide on tomato and cucumber grown under protective cover. The product was launched in Turkey at the beginning of August under the brand name Devguard®.
In India strong growth was achieved in the hybrid seed business despite adverse weather conditions:
- Devgen achieved a 40% growth in turnover during the first half of the year.
- Sales of Devgen’s hybrid rice, pearl millet, sunflower and sorghum for the entire Kharif season (ending September) are now estimated to exceed last year sales during the same period with respectively 100%, 70%, 22% and 16%.
- Taking into account that part of the sunflower sales are planned for the Rabi season (running from October until February), turnover for the year is expected to grow by 50% for the full year 2009.
- Growth of turnover in India is lower than planned, but Devgen performs amongst the best in the Indian seed industry in a year when adverse weather conditions had a negative influence on seed production and late and weak Monsoon rains substantially affected the country’s farming industry as a whole (e.g. in anticipation of lower production, the Indian government has banned rice exports for the remainder of the year).
- By the end of 2009, having completed its first full year of operations, Devgen aims to be the top 4 player in hybrid rice, to regain the number one position in premium hybrid sorghum and targets to be the number 3 hybrid sunflower seed provider in India.
In Indonesia and the Philippines Devgen is preparing to launch its premium hybrid rice varieties:
- In the Philippines, Devgen has entered into a distribution agreement with Leads Agri, one of the leading agrochemical distributors with nationwide presence and familiar with farmer needs. A Devgen production and commercial support team is put in place. The Philippine breeding team has been strengthened and focuses on evaluating and breeding new rice hybrids that meet the needs of the Philippine farmer. Production is ongoing in preparation of the November sales season.
- In Indonesia Devgen has strengthened its relationship with Pt. Sang Hyang Seri (Persero) through the creation of a Strategic Business Unit for hybrid rice seed production. Registration of Devgen’s product is pending and first sales targeted for Q4 2009 or Q1 2010.
Devgen realized significant progress and obtained further industry validation of its R&D programs and capabilities:
- Devgen and Monsanto Company updated their Research and Technology Agreement, resulting in a payment of EUR 20 million in cash by Monsanto Company to Devgen.
- Devgen renewed the Agrochemical Compound Discovery Agreement with Sumitomo Chemical Company continuing a successful joined research collaboration.
- Devgen’s pipeline of biotech traits is expanding and progressing on track.
Key figures H1 2009
+-------------------------------------------------------------------+ | EUR 000 (except for | H1 2009 | H1 2008 | | earnings per share) | | | |------------------------------+---------------------+--------------| | Revenue | 8,618 | 5,846 | |------------------------------+---------------------+--------------| | EBITDA | -3,615 | -6,793 | |------------------------------+---------------------+--------------| | Loss from continued | -4,645 | -7,937 | | operations | | | |------------------------------+---------------------+--------------| | Net of financial income/cost | -339 | 490 | |------------------------------+---------------------+--------------| | Net loss from continued | -4,985 | -7,447 | | operations | | | |------------------------------+---------------------+--------------| | Basic earnings per share | | | | from continued | -0.28 | -0.42 | | operations (EUR) | | | |------------------------------+---------------------+--------------| | Net loss from discontinued | -162 | -4,122 | | operations | | | |------------------------------+---------------------+--------------| | Net Loss for the year for | | | | continued & | -5,147 | -11,568 | | discontinued operations | | | |------------------------------+---------------------+--------------| | Basic earnings per share | | | | from continued & | -0.29 | -0.65 | | discontinued operations | | | | (EUR) | | | |------------------------------+---------------------+--------------| | | June 30, 2009 | Dec 31, 2008 | |------------------------------+---------------------+--------------| | Cash and cash equivalents[1] | 36,173 | 24,218 | +-------------------------------------------------------------------+
Revenue
Devgen’s revenue for the first six months of 2009 totaled EUR 8.6 million, compared to EUR 5.8 million for the same period of 2008, an increase with 47%.
Revenue from seed sales amounted to EUR 5.7 million for the first six months of 2009 as compared to 4.1 million in the same period of 2008, an increase with 40%. Higher sales are explained by higher volumes and pricing for premium quality. Seed sales will continue in H2 with the sunflower season still to come into full effect. Furthermore export sales (Indonesia and Pakistan) are expected to further add to the top line whilst first sales in the Philippines are expected in Q4.
Revenue from research and development services increased from EUR 1.8 million for the first six months of 2008 to EUR 2.9 million for the first six months of 2009. Revenues recorded from the update of the Research and Technology agreement with Monsanto Company and from the renewed collaboration with Sumitomo Chemical Company explain this increase. The EUR 20 million received from Monsanto, as a result of the update, will be reflected in the P&L for an amount of KEUR 667 per month as of May 2009 till October 2011, the end of the contract period.
Expenditure
Cost of goods sold was EUR 4.1 million, fully relating to sales of seed, compared to EUR 2.9 million in H1 2008.
Research and development expenses for the first six months of 2009 amounted to EUR 4.6 million (or EUR 4.2 million excluding depreciation) as compared to EUR 7.2 million (or EUR 6.6 million excluding depreciation) last year, a decrease of EUR 2.6 million or 36%, mainly due to lower research expenditure for the nematicide program and lower depreciation.
General and administrative expenses for the first six months of 2009 are EUR 0.5 million lower than during the same period last year, amounting to EUR 2.3 million.
Marketing and distribution expenses amounted to EUR 2.3 million (or EUR 1.9 million excluding amortization of intangible assets) for the first six months of 2009, as compared to EUR 0.9 million (or EUR 0.4 million excluding amortization) in the same period of 2008. This is the direct result of a major intensification of sales efforts (e.g. increased number of sales people in the field) to support Devgen’s aggressive growth path.
Results
The net loss with respect to continuing operations for the first six months of 2009 amounts to EUR 5.0 million versus EUR 7.4 million over the same period last year. A small amount of loss was recorded for discontinued operations during H1 2009, leading to a total net loss of EUR 5.1 million compared to the net loss including discontinued operations at the end of June last year of EUR 11.6 million.
Earnings before interest, taxes, depreciation and amortization (EBITDA) for H1 2009 improved to EUR - 3.6 million from EUR - 6.8 million for the first six months of 2008 (continued operations). Higher gross profit and lower expenditure for General & Administrative expenses and Research & Development is more than offsetting higher expenditure for Marketing & Distribution. The operating loss improved from EUR 7.9 million in the first half of 2008 to EUR 4.6 million in the same period of 2009.
Cash flow and cash position
Devgen’s cash and cash equivalents amounted to EUR 36.2 million on June 30, 2009, as compared to EUR 24.2 million on December 31, 2008, an increase of EUR 12 million[2].
The cash provided by operating activities for the first six months of 2009 amounted to EUR 15.3 million. Net loss for the period of EUR 5.1 million was offset by working capital movements with as major component cash received for the update of the Research and Technology Agreement with Monsanto Company which 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 2009 amounted to EUR 0.7 million. Investment in property, plant and equipment amounted to EUR 1.1 million partly offset by interest received for an amount of EUR 0.17 million and proceeds of sales of property, plant and equipment (fixed assets relating to discontinued operations) for an amount of EUR 0.2 million.
Cash flow from financing activities amounted to EUR -2.6 million for the first six months of 2008. The repayment of a bank loan in India almost entirely explains the use of cash for financing activities.
Consolidated balance sheet
The balance sheet total at June 30, 2009 amounted to EUR 71 million versus EUR 57 million at December 31, 2008. Despite a reduction of the solvency rate (equity versus total assets), down to 50% at June 30, 2009 (vs. 71% at December 31, 2008), the balance sheet remains solid, with a cash position of EUR 36.2 million (vs. EUR 24.2 million at December 31, 2008). Current liabilities increased to EUR 28.6 million from EUR 9.3 million. This includes deferred income for an amount of EUR 19.4 million mainly relating to the EUR 20 million received in cash from Monsanto Company in Q2, 2009.
Outlook full year 2009
Revenues
Seed sales are expected to exceed EUR 9.0 million, representing 50 percent growth versus last year. This is lower than targeted because of adverse climatic conditions, during both the production and the sales season in combination with a weak Indian rupee (-5%). In India, based on premium pricing and strong demand for our products combined with good cost management and low product returns, the company is targeting a bottom line corresponding to plan. The shortfall in seed sales is foreseen to be compensated by higher income out of research collaborations (EUR 6 million). Sales of nematicides in 2009 are expected to not yet contribute significantly to the top line.
Total revenues are therefore expected to exceed EUR 15 million.
Burn rate and cash position
The burn rate is estimated at EUR 12 million by year end down from an initial forecast of EUR 19 million. This is mainly due to higher revenues out of research collaborations. The effect of movements in working capital will however completely offset the operational burn rate, including investments and the repayment of a loan. Net effect on the cash position is estimated to be positive for an amount of EUR 2 million resulting in a cash position at year end of approximately EUR 26 million.
R&D expenditure is expected to total approximately EUR 9 million, slightly lower than initially budgeted.
AUDITOR’S REPORT
LIMITED REVIEW REPORT ON THE CONSOLIDATED HALF-YEAR FINANCIAL INFORMATION FOR THE SIX MONTHS PERIOD ENDED 30 JUNE 2009
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 and condensed statement of changes in equity (jointly the “interim financial information”) of DEVGEN NV (“the company”) and its subsidiaries (jointly “the group”) for the six-month period ended June 30, 2009. 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 June 30, 2009 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.
Diegem, 26 August 2009
The statutory auditor DELOITTE Bedrijfsrevisoren / Reviseurs d’Entreprises SC s.f.d. SCRL Represented by Gert Van Hees and Gino Desmet
For the Interim financial report for the first six months endede 30 June, 2009 please consult www.devgen.com
CONFERENCE CALL AND WEBCAST
Devgen will conduct a conference call on Friday, August 28, 2009 at 11 am which will also be simultaneously broadcasted via internet. The event is open to the public and is accessible via www.devgen.com and via telephone at +32 (0)2 290 14 07. To ask questions during the Q&A session, please join the event via telephone 10 minutes prior to the start of the conference call. A recording of the event will also be made available at www.devgen.com shortly after the call.
For more information on Devgen, see www.devgen.com
or contact:
Thierry Bogaert, CEO Wim Goemaere, CFO Tel. +32 9 324.24.24 Tel. +32 9324.24.24 Thierry.Bogaert@devgen.com Wim.Goemaere@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] Including restricted cash for an amount of EUR 1.4 million as per June 30, 2009 and EUR 4.8 million as per December 31, 2008.
[2] Including restricted cash for an amount of EUR 1.4 million as per June 30, 2009 and EUR 4.8 million as per December 31, 2008.
press release ENG: http://hugin.info/135721/R/1337802/318924.pdf
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