Syngenta releases 2009 half year sales results

First half resilience: higher prices, successful risk management

  ·Sales $6.7 billion: up 2 percent CER(1), 9 percent lower as reported 
  ·Crop Protection sales up 1 percent(1) at $5.0 billion 
  ·Seeds sales up 7 percent(1) to $1.7 billion 
  ·EBITDA $2.0 billion, up 4 percent CER 
  ·Earnings per share(2) $15.18, 8 percent lower 
  ·Earnings per share $14.78 after restructuring and impairment

Crop Protection

In the first half of 2009, Syngenta continued to demonstrate price leadership, achieving an overall increase of seven percent, ahead of target. Excluding glyphosate, prices were up by eight percent. Sales volume was affected by a late start to the season caused by unfavorable weather. In a number of emerging markets, we deliberately reduced volume to take account of higher levels of risk.

These risk management measures had a marked impact in Eastern Europe, Africa and the Middle East. Sales in Western Europe were slightly up with a strong performance in France following new product registrations. NAFTA showed robust sales following an exceptional performance in 2008, with price realization augmented by strong volume growth in Canada. Sales in Latin America, where the main season takes place in the second half, were lower due to drought in Argentina and southern Brazil, and to risk management. In Asia-Pacific, the farm economy has proved resilient to the global economic crisis and sales continued to grow strongly across the region.

Product line growth was led by Selective Herbicides, with strong growth incereal herbicides and a resurgence in demand for soybean herbicides in the USA as a consequence of increased acreage and weed resistance. Non-selective Herbicides also performed well, with positive contributions from both REGLONE((R)) and TOUCHDOWN((R)). Accounting for seven percent of Crop Protection sales, TOUCHDOWN((R) )showed modest growth in both volume and price, with pressures in the US glyphosate market apparent only towards the end of the period. Both Fungicides and Insecticides were particularly affected by the risk management measures taken in Latin America. In the Northern hemisphere, fungicide usage was reduced owing to lower cereals acreage and adverse weather. Seed Care sales continued to grow strongly driven by CRUISER((R)).

In the non-agricultural Professional Products businesses, the effects of the economic downturn were clearly apparent in the golf course and professional horticulture segments, where customers purchased more cautiously.

New products: Sales of new products (defined as those launched since 2006) increased by 28 percent (CER) to $241 million. AXIAL((R)) continued to grow strongly particularly in Canada. The roll-out of REVUS((R)) and DURIVO((R)) in new markets augmented underlying growth.

R&D pipeline: The combined peak sales potential of our Crop Protection pipeline is in excess of $2 billion. We have several new products in late development including INVINSA(TM), a unique product for crop stress protection in field crops; isopyrazam (520), a broad spectrum cereal fungicide; sedaxane (524), a seed treatment fungicide; and bicyclopyrone (449), a new herbicide for corn and sugar cane.

EBITDA increased by one percent (CER) to $1.7 billion with a margin (CER) of 36.6 percent (2008: 36.3 percent).

Outlook

Mike Mack, Chief Executive Officer, said:

"I am pleased with the resilience of the companys first half performance in the face of currency and raw material headwinds and the second quarter impact of a late spring. We maintained our focus on rigorous risk management throughout the period in order to preserve balance sheet quality. For the full year, achieving earnings growth has become more challenging. However, in the second half currency and raw material trends are more favorable and, assuming current supportive conditions in Latin America continue, we are targeting full year earnings per share** close to the record level achieved in 2008.

"We look ahead with confidence. The fundamental drivers for our industry are unchanged, and we expect the need for increased global food production to result in ongoing demand growth, which our broad portfolio is uniquely placed to capture."

Crop Protection

For a definition of constant exchange rates, see Appendix A. 

Selective Herbicides: major brands AXIAL((R)), CALLISTO((R)) family, DUAL((R))/BICEP((R)) MAGNUM, FUSILADE((R))MAX, TOPIK((R))

Sales were up on broad-based price increases reflecting Syngentas leading global position in selective herbicides. Growth was led by AXIAL((R)) and TOPIK((R)) with both products performing strongly on cereals in North America. In the USA, increased soybean acreage and weed resistance resulted in renewed demand for soybean herbicides.

Non-selective Herbicides: major brands GRAMOXONE((R)), TOUCHDOWN((R))

Higher non-selective herbicide sales reflected continuing demand growth in NAFTA. Growth was led by TOUCHDOWN((R)), with volume increases due to increasing glyphosate-tolerant acres and minimum tillage practices accompanied by further price realization in the USA and Canada. In its second year, HALEX((R)) demonstrated continued success in the USA as a differentiator in the TOUCHDOWN((R)) range. Sales of REGLONE((R) )also increased in Canada and Western Europe.

Fungicides: major brands ALTO((R)), AMISTAR((R)), BRAVO((R)), REVUS((R)), RIDOMIL GOLD((R)), SCORE((R)), TILT((R)), UNIX((R))

Fungicide sales were lower as a result of challenging market conditions including drought in Latin America and reduced wheat acreage in Europe and the USA. Sales were further constrained by emerging market risk management and by supply shortages in advance of new capacity coming on-stream. Price increases across the fungicide portfolio partially offset volume declines and illustrated the yield-enhancing value of the companys technology. REVUS((R)) sales increased significantly with successful launches in new markets, notably France and Italy.

Insecticides: major brands ACTARA((R)), DURIVO((R)), FORCE((R)), KARATE((R)), PROCLAIM((R)), VERTIMEC((R))

Reduced pest pressure in Latin America and Western Europe together with risk management measures in emerging markets resulted in lower insecticide sales. KARATE((R)) sales declined as a result of dry weather in Northern Europe and Latin America. Sales of FORCE((R)) increased as sales declines in the USA were more than offset by increasing corn rootworm pressure in Western Europe. In Asia Pacific, sales of insecticides increased significantly supported by the successful roll-out of DURIVO((R)).

Seed Care: major brands AVICTA((R)), CRUISER((R)), DIVIDEND((R)), MAXIM((R))

Sales continued to increase globally. CRUISER((R) )sales increased significantly with double-digit growth in all regions. In NAFTA, sales increased on higher soybean acres, the launch of CRUISER MAXX((R) )on soybean in Canada and increased sales to Pioneer Hi-Bred. In Europe, CRUISER((R)) benefited from a registration in France in late 2008.

Professional Products: major brands FAFARD((R)), HERITAGE((R)), ICON((R))

The economic environment had an adverse impact on sales of the non-agricultural businesses. A reduction in consumer spending and a shift to just-in-time purchasing by retailers resulted in lower sales in the Lawn & Garden and home care markets. FAFARD((R) )sales were further affected by increased risk management activities.

Europe, Africa and Middle East sales were slightly lower reflecting risk management and reduced grower liquidity in Eastern Europe. In Western Europe sales were unchanged despite unfavorable weather in the second quarter. In France, sales increased significantly led by CRUISER((R)).

In NAFTA, sales increased owing to our leading market position which supported broad-based price increases across the portfolio. Significant growth was recorded in Canada and Mexico due to portfolio expansion as well as the strong performance of established brands. In the USA, price increases more than offset volume declines attributable to delayed corn plantings.

Latin America sales were lower in a challenging market environment reinforcing the importance of effective risk management. Drought in Argentina and southern Brazil, as well as lower Brazilian corn acreage in the smaller second season, resulted in reduced applications.

In Asia Pacific, growth was broad-based as increases were recorded across the region and notably in South Korea and Vietnam. Adequate access to liquidity enabled growers to continue investing in technology. Growth in the region was supplemented by new product launches including the successful expansion of DURIVO((R)).