Cheminova sales up 6% in H1 2011

Date:08-30-2011

Cheminova posted a 6% rise in sales to DKK 2,968 million in the first half year of 2011, despite unfavourable climatic conditions in Europe and North America in Q2 2011. The new products continued to generate double-digit growth rates, while glyphosate’s share of revenue was reduced as planned.  Average working capital improved, and the NIBD/EBITDA ratio was reduced to 5.4 (18.1). Earnings (EBITDA margin) was up 1 percentage point in H1 at 9.5% (8.5%), corresponding to an improvement of the operating profit before depreciation and amortisation (EBITDA) to DKK 283 million (DKK 238 million). The target is an EBITDA margin of 13-18% after 2013.

The prices of the most important crops remain high, historically speaking, and crop growers are experiencing healthy economies. This is leading to further positive developments in the market for crop protection products, contributing to higher yields and higher-quality crops. Despite difficult climatic conditions in Q2 2011 in both Europe and North America, the industry saw growth of 5-10% in H1 2011, driven by increasing volumes, while prices were stable with only a few examples of price increases.

In H1 2011, the group achieved 6% growth after posting revenue for Q2 2011 at the same high level as for the prior-year period. Glyphosate’s share of revenue was reduced to 11% (15%) as planned, while growth for other products totalled 11% in H1 2011.
 

Products

Herbicides accounted for 33% (34%) of revenue, while the new selective herbicides such as pethoxamid, fenoxaprop and the sulfonylurea products realised satisfactory growth. Growth from new products has thus resulted in an increase of total revenue from sales of herbicides despite the declining sales of glyphosate.

Despite the phase-out of class I products, insecticides have maintained their share of 33% (33%) of sales. Both traditional OP products and the new products, including abamectin and gamma-cyhalothrin, have seen satisfactory growth.

Fungicides accounted for 18% (18%) of revenue after satisfactory growth from new products such as flutriafol and fluazinam.

Other crop protection products accounted for 8% (7%) of sales. The Headland micronutrients have done particularly well in this segment.

Other activities have maintained an 8% (8%) share of revenue after a good performance within fine chemicals.

Regional sales

Fifty per cent of total revenue for H1 was generated by region Europe, clearly illustrating the importance of the region for Cheminova. Growth of 13% was posted in H1 2011 despite lack of rain in northern Europe for part of Q2 2011. The market share varies from country to country, but over the years, particularly strong positions have been built in Spain, the UK, Germany and Italy, while the French market is still being developed.

Continued satisfactory growth from new products is resulting in improved earnings, while the acquisition of Rogor® (dimethoate) has strengthened sales of traditional products. While most local companies are posting very satisfactory growth, Germany has not realised the expected results. Following the full ownership of Stähler in July this year, initiatives have been launched by the new local management aimed at strengthening the company and improving earnings in future.

Climatic conditions in North America have delayed the season, while flooding along the Mississippi and Missouri rivers and drought in Texas have led to the destruction of crops. However, the region achieved satisfactory growth in earnings, driven primarily by satisfactory growth in sales of new products and a significant decline in sales of glyphosate. The successful introduction of flutriafol and several other new products are expected to further strengthen the business in the region in future.

The high prices of agricultural crops are leading to a growing market, e.g. in Brazil, and the outlook for the coming season is good. However, earnings from some products are under pressure from foreign exchange rate developments and intensifying competition. Developments in the other regional sales companies in Argentina, Mexico and Colombia are satisfactory. The continued development and improvement of the product portfolio is expected to result in satisfactory earnings for the year as a whole.

The company in India continues to develop very satisfactorily, while positive developments are also seen for the CIS countries (Russia, Ukraine etc.) due to growth from new products. The political unrest in several Arabic countries has resulted in declining sales for the period. However, in the longer term, it is expected to lead to a stronger focus on agricultural production and thus improved market opportunities.
 

Outlook

Cheminova maintains the outlook announced earlier of revenue of approx. DKK 5,800 million, an EBITDA margin of 8-10% and an EBIT in the range of DKK 300-400 million as well as an improved cash flow from operating activities relative to 2010. The outlook is based on current foreign exchange rates and continued growth from new products as well as favourable market conditions during the coming season in Latin America. The group’s results are dependent on developments in the agricultural sector, and on climatic, economic and market conditions, including the possibilities for registrations and reregistrations.