DEVGEN : Business update

Regulated information

 

Devgen nv
Business update

 

Zwijnaarde, Belgium - November 16, 2010 - Devgen nv (Euronext Brussels; DEVG) issues today a business and financial update for the third quarter 2010.

 

Seed business

 

In India, where Devgen already holds the nr 3 position in the hybrid rice seed market, its newly launched products performed well in the market. Devgen expects to grow market share for these products as of next year. In Q3 Devgen selected new rice hybrids from its pipeline, for launch in 2011 and 2012. These premium products address big market segments in India where Devgen is not present today, give high yield to the farmer and improved seed production yields to Devgen. These new pipeline products should also support Devgen to achieve important improvements with respect of gross margins in its rice business in the future.

 

In Philippines Devgen received positive feedback from farmers on the performance of its hybrid rice Masuwerte^® in the rainy season. Few hybrids perform well in the rainy season because of its strong winds and high disease pressures. Previously the product launch of Masuwerte^® in the dry season was also well received by the farmers.

 

In Q3 several Devgen products that meet farmer and consumer requirements were selected for provincial and national registration in Vietnam. In Vietnam Devgen focuses on the South, a 4 million ha market, where extensive testing of Devgen`s hybrid rice pipeline was done for the last 2 years. If successful, this offers Devgen the potential to sell its hybrids in this market by mid 2012.

 

Devgen, together with its partner PT. (Persero) Sang Hyang Seri, started this week sales of DG 1 SHS hybrid rice seed, across the key rice growing areas in Indonesia (Java, Sumatra and Sulawesi), in time for the upcoming planting season. This is a major milestone, as Indonesia is the third largest potential hybrid rice market (12m ha) after India and China.

 

In Q3 Devgen furthermore entered a new phase in its introduction of biotech traits in India. Devgen`s new greenhouses were inaugurated in Hyderabad in September.

 

Nematicides

 

Two important milestones were reached in our nematicide business:
(1) Devgen`s nematicide was Annex I listed by the EU regulatory authorities, which is a key milestone towards its market introduction in Europe.
(2) Devgen`s nematicide proved itself in a new market: we received positive feedback from peanut farmers in the US regarding the efficacy of Devguard^®. This forms the basis for expanding sales activities next year.

 

Thierry Bogaert, CEO of Devgen comments on the key achievements in Q3 2010:
"Overall Devgen made in 2010 significant progress in validating its business and technology strategy and remains in a good position to be top 5 in hybrid rice seed in India and South East Asia. With products for each of its target countries, Devgen can proceed confidently with expanding its teams and seed supply infrastructure in its selected markets: India, Indonesia, Philippines and Vietnam. In the background, the need for growing more rice on less land and the increasing value of rice as a basic food source is also becoming more and more apparent (IRRI congress, Hanoi Nov 2011) and further validates our investment case."

 

Thierry Bogaert continues: "We are especially pleased with our most recent business developments in Indonesia. Devgen is fully committed to be part of the successful introduction of hybrid rice in the country together with its partner PT (Persero) Sang Hyang Seri."

 

Financial update for the first three quarters of 2010

 

In 2010, Devgen`s overall turnover for seed is under pressure, caused by multiple challenges including anomalous weather conditions and output price reductions for sunflower making farmers decide to plant another crop. Despite an overall shortage of vegetable oil production in India, sunflower oil prices and the acreage of sunflower planted fluctuate in a 4-5 year cycle which in 2010 was expected to be at its lowest point. Devgen`s entire substantial growth in hybrid sorghum sales in India and in hybrid rice sales in India and the Philippines is neutralized by low sales of hybrid sunflower seed in India. Considering the progress made in its core business case and the cyclical nature of the sunflower oil prices in India, Devgen expects this to be transitory.

• Revenues for the first 3 quarters amount to 15.8 million ? compared to 14.5 million ? over the same period last year. Revenues during Q3 amounted to 3.5 million ? compared to 5.9 million ? last year. Revenues for Q3 related to both R&D and sunflower sales with the overall reduction entirely for the account of sunflower sales. 
• EBITDA up to September 30, 2010 amounts to a loss of -1.9 million ? down from -3.2 million ? for the same period last year.
• Net loss to date amounts to -3.7 million ? compared to -4.9 million ? over the same period last year.
• Cash and cash equivalents are at 30.7 million ? on September 30, down from 33.3 million ? reported on June 30.

  

Key financials up to end of September 2010 (? `000)	Quarter 3 2010	Quarter 3 2009	Quarter 3 YTD 2010	Quarter 3 YTD 2009
Revenues from continued operations	3,518	5,886	15,770	14,504
EBITDA from continued operations	-894	877	-1,934	-3,163
Net loss from continued operations	-1,360	299	-3,692	-4,685
Net loss from discontinued operations	0	-38	0	-200
Total net loss for the period	-1,360	262	-3,692	-4,884
			30.09.10	31.12.09
Cash and cash equivalents			30,749	45,762

 

Outlook 2010

 

Revenues are now expected to amount to 20 million ?, up 10% compared to last year entirely due to an increase of the R&D income (+34%) with sales of product affected by a poor sunflower season offsetting growth in other crops and sales realized in new areas such as the Philippines and Indonesia.

 

R&D expenditure is now set at approximately 9 million ? including depreciation.

 

Cash at year-end is expected to amount to 20 million ?.

 

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), totaling about 280 employees.

 

 

 

For more information please contact:

 

Thierry Bogaert, CEO	Wim Goemaere, CFO
Tel. [phone]	Tel. [phone]
[e-mail]: mailto:[e-mail]	[e-mail]: mailto:[e-mail]

 

 

 

Or visit: www.devgen.com:
http://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.

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