Swiss Syngenta AG (SYT) said Friday it had 2008 sales of $11.6
billion, up 21% at constant exchange rates, but edged away from
earlier guidance.
Crop Protection sales up 22% at $9.2 billion
Seeds sales up 16% to $2.4 billion
Earnings per share up 42% to $16.26
Earnings per share $14.63 after restructuring and impairment
Free cash flow $761 million
Proposed dividend increase: up 25% to CHF 6.00
Mike Mack, Chief Executive Officer, said:
"2008 was an extraordinary year for agriculture in which acreage
expanded and technology adoption accelerated. Growers worldwide
increased usage intensity for crop protection and planted higher
value seeds, resulting in excellent crop yields globally. Syngenta
was able to take full advantage of the favorable market environment
thanks to the breadth of our portfolio and our global presence. We
achieved particularly strong growth in emerging markets, which now
account for over a third of our sales. Growth in food and feed
demand is centered in these countries and underlies their ongoing
drive to realize yield potential.
"Sales growth was broad-based and was accompanied by higher
profitability, despite substantial growth investments which will
ensure the further expansion of our business. In Seeds, we
successfully launched our proprietary triple stack in the USA and
demonstrated the broad scope of our traits and germplasm globally.
In Crop Protection, we gained market share for the fourth
consecutive year. New products launched since 2006 showed dynamic
growth and we added major projects to our strong pipeline. The
potential of existing products was exemplified by AMISTAR, with
sales now in excess of $1 billion, and by ACTARA/CRUISER. We
commenced a major capacity expansion program to enable us to
realize this potential. At the same time we returned over $1
billion to shareholders while retaining the financial flexibility
to make several acquisitions in strategic areas."
Financial performance 2008
Sales up 26%
Sales at constant exchange rates (CER) increased by 21%, with
growth across all product lines and regions. Volume growth of 15%
was supplemented by a six% contribution from price. Crop Protection
sales* rose by 22% (CER) and Seeds sales by 16% (CER).
EBITDA margin 21.5%
EBITDA increased by 22% (CER) to $2.5 billion primarily
reflecting the growth in volume. Price increases and operational
efficiency savings more than offset higher raw material costs and
are enabling the company to continue investing in growth.
Currency movements
The impact of currencies on reported sales was positive in the
first half of the year and neutral in the second half reflecting
the appreciation of the dollar towards the end of the year, notably
against emerging market currencies. For the full year, currencies
had a positive impact of $164 million on EBITDA.
Earnings per share up 28%
Excluding restructuring and impairment, earnings per share rose
42% to $16.26. On the same basis and excluding non-recurring income
in 2007, earnings per share rose by 47%. The increase was driven by
higher operating income and a lower tax rate. After charges for
restructuring and impairment, earnings per share were $14.63 (2007:
$11.42, including non-recurring income).
Business highlights
Crop Protection: outperformance
2008 was a year in which greater usage intensity of Crop
Protection products brought increased realization of the benefits
they bring. These benefits go beyond pest control and deliver
improved crop yield and vigor. Syngenta's modern portfolio has the
breadth needed to offer full programs and solutions to growers
enabling them to improve yield and therefore profitability. The
value of our products to growers allowed us to achieve a price
increase of six% in 2008.
In Europe, higher crop prices and the elimination of the EU
set-aside requirement resulted in increased acreage in Western
Europe. Strong demand for cereals favored the development of the
fungicide market in particular. Sales of AMISTAR, BRAVO and our
leading triazole ALTO all rose by over 30%, illustrating the
importance of a broad portfolio in the treatment of disease, where
resistance means that single compounds are often ineffective. In
Eastern Europe growth across all product lines reflected the
ongoing modernization of agriculture and the strengthening of our
market-leading position, a result of our long-standing presence in
the region and of recent investments in the product range and in
marketing. In NAFTA we played a key role in the development of the
US corn fungicide market with our combination product QUILT, while
in Seed Care, CRUISER continued to prove its efficacy on both corn
and soybean. We also benefited from significant volume and price
gains in the glyphosate market, where our TOUCHDOWN range was
further differentiated through the introduction of HALEX. Latin
America had a record year despite a deterioration of economic
conditions in the second half. In Asia Pacific, growth was
particularly strong in the emerging markets with a focus on the key
crops of rice and vegetables.
Crop Protection sales include $73 million of inter-segment
sales.
Sales growth was strong across the range. For the first time
Fungicides were our largest product line, led by AMISTAR for which
sales reached $1 billion. An exceptional performance in
Non-selective herbicides reflected a buoyant glyphosate market in
which TOUCHDOWN gained market share thanks to the success of the
TOUCHDOWN brand ladder and to the launch of HALEX. ACTARA and
CRUISER, based on the same active ingredient thiamethoxam, drove
growth in Insecticides and Seed Care respectively. Growth in
Professional Products was led by growing media sales from
Fafard.
Seed Care sales were driven by a technology shift and market
share gain: we market our seed treatments to major seed companies
and in 2008 announced a multi-year agreement to sell CRUISER to
Pioneer Hi-Bred for use on their corn seed products in NAFTA. We
are expanding the scope of our technology with the planned launch
of AVICTA on corn and the announcement of Plene , a new technology
which will dramatically improve the cost efficiency of sugar cane
planting in Brazil. In December we announced an R&D agreement
with Dow AgroSciences to evaluate Dow compounds for incorporation
into our Seed Care portfolio.
New products: Sales of new products (defined as those launched
since 2006) totaled $263 million. The largest contribution came
from the cereal herbicide AXIAL, which was well positioned to gain
share in a buoyant cereals market. The fungicide REVUS, used on
vegetables, vines and potatoes, expanded rapidly with registrations
in over 50 countries planned. The insecticide DURIVO was launched
on rice in Indonesia and was an immediate success. In Seed Care
AVICTA sales were lower owing to reduced US cotton acres.
R&D pipeline: The combined peak sales potential of our Crop
Protection pipeline is in excess of $2 billion. We have several
products in late development including 520, a broad spectrum cereal
fungicide, which made significant advances during the year and is
now scheduled for launch in 2010; 524, a seed treatment fungicide;
and 449, a new herbicide for corn and sugar cane. We signed a
strategic alliance with Rohm & Haas to develop and
commercialize INVINSA technology as a unique product for crop
stress protection in field crops. We will also prepare regulatory
studies jointly with DuPont for DuPont's Cyazypyr , a new broad
spectrum insecticide with significant potential for combination
with our own products.
EBITDA increased by 28% (CER) to $2.5 billion with a record
margin of 26.6% (2007: 25.0%). Substantial volume growth and price
increases more than offset a $68 million impact from higher raw
material costs, while allowing significant investment in growth
opportunities.
Seeds: broad-based growth
In 2008 our diversified Seeds portfolio was well placed to
respond to the global shifts in crop acreages. We also benefited
from the scale of our presence in emerging markets, where the trend
in favor of high value seeds is a key milestone in the
modernization of farming practice.
Corn & Soybean: In the USA, where GM penetration continued
to expand, our proprietary triple stack seed AGRISURE 3000 GT was
successfully launched in limited quantities. Availability will
increase rapidly and further advances in portfolio quality will be
achieved through combination of the traits with elite germplasm. In
soybean, where Syngenta already has a full traited offer, quality
of germplasm plays a key differentiating role and allowed us again
to gain market share. With lower US corn acres, growers outside the
USA responded by increasing corn plantings. This gave rise to new
opportunities with a broadening of our hybrid maturity profile in
Europe and the expansion of our traited offer in Latin America. In
Brazil, approval of our Bt11 trait was confirmed in May, enabling
us to introduce the trait for the 2008/2009 season. Approval for
GA21 herbicide tolerance later in the year opens up future
potential for double-stack products. Brazilian soybean sales
progressed rapidly with excellent acceptance of the early maturity
V-Max variety. In Argentina, the acquisition of SPS Argentina SA
will complement our existing strong corn position while giving us a
platform for the launch of soybean technology.
Diverse Field Crops: Sunflower sales expanded rapidly, notably
in Eastern Europe, where growing demand for healthy eating oils has
fuelled acreage expansion and a move away from open pollination
towards higher quality hybrids. We strengthened our position in
oilseed rape and doubled our market share in US sugar beet
following the launch of our glyphosate-tolerant variety.
Vegetables & Flowers: In Vegetables we successfully
integrated Zeraim Gedera which strengthened our focus on high value
crops and our presence in the Mediterranean region. Flowers growth
reflected the acquisition of Fischer which has reinforced our world
leading position. In the fourth quarter we completed two more
acquisitions which further expand our genetic pool:
industry-leading breeder and producer Goldsmith Seeds Inc., and the
chrysanthemum and aster business of US flowers producer Yoder
Brothers Inc.
R&D pipeline: We have a promising pipeline of traits in both
corn and soybean, which focuses on delivering improved solutions
for growers throughout the Americas. These include drought
tolerance, nitrogen efficiency and corn amylase, an enzyme which
improves the productivity of ethanol plants. In December we
received EPA approval for the first of our corn pipeline traits,
AGRISURE VIPTERA (VIP broad lep). The value of our technology is
increasingly recognized externally as demonstrated by the licensing
of dicamba-enabling technology to Monsanto and of VIP broad lep to
Pioneer Hi-Bred. Among our many Vegetable projects are complex
native traits to protect sweet peppers from sucking insects,
developed through a joint approach by entomologists in India and
Switzerland.
EBITDA of $135 million (2007: $98 million) was driven by volume
growth and an improvement in gross margin, partly offset by
increased investment in R&D and marketing. The EBITDA margin
improved to 5.5% and is on track to reach the target of 15% in
2011, driven by the development of a fully traited offer in corn
and growth in high margin businesses such as Vegetables.
Net financial expense
Net financial expense increased to $169 million (2007: $42
million) due to a negative impact from currencies, which in 2007
were favorable. The company's ongoing financial strength is
demonstrated by interest cover (EBITDA/net interest) of 16.7x.
Taxation
The favorable resolution of several statutory tax audits
resulted in an underlying tax rate for the period of 19% (2007:
24%). A tax rate in the low to mid-twenties is expected over the
medium term.
Cash flow
Free cash flow was $761 million. Average trade working capital
as a%age of sales was 37% (2007: 39%) primarily reflecting good
receivables collection. Fixed capital expenditure of $444 million
(2007: $317 million) was higher as investment in both Seeds and
Crop Protection was increased.
Capacity expansion
In July, Syngenta announced a phased capacity expansion program
with an expected total investment of $600 million over the three
years 2008-2010. The main products concerned are the fungicide
azoxystrobin (AMISTAR) and the insecticide thiamethoxam
(ACTARA/CRUISER). Expenditure under the program in 2008 was $40
million.
Cash return to shareholders
A dividend of CHF 4.80 per share (2007: CHF 3.80) was paid in
April representing a total payout of $450 million. In addition
Syngenta repurchased 2.3 million shares, bringing the total cash
return for the year to $1042 million. The cumulative cash return
over the last five years is $3.7 billion.
A significant increase in the dividend for 2008 to CHF 6.00 per
share will be submitted for shareholder approval at the AGM on 21
April 2009.
Outlook
Mike Mack, Chief Executive Officer, said: "In 2008, buoyant
agricultural markets demonstrated the central role of technology in
an ongoing drive to raise yields. Syngenta capitalized on the
favorable environment, reinforcing our global leadership position.
In 2009, adverse currency effects and the need for tight risk
management may limit growth in the emerging markets. Early signs
for the northern hemisphere season are encouraging and we are well
placed again to outperform the overall market, enabling us to
continue targeting growth in earnings per share in 2009 despite
economic uncertainty. We remain confident in the strong
fundamentals for agriculture and the outlook for our business, as
demonstrated by the continuation of growth investments, our
capacity expansion program and the significant dividend increase
announced today."
Company Web Site: http://www.syngenta.com
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