3rd UPDATE: Syngenta 1Q Revenue Hit By USD Rise, Keeps EPS Goal
April 15 2009 - 5:00AM
Dow Jones News
Swiss agrochemical company Syngenta AG (SYT) Wednesday reported
a worse-than-expected 4% drop in first-quarter sales, but saw its
shares rise sharply as robust demand for some of its products meant
it was able to push through higher-than-expected price
increases.
The Basel-based producer of crop protection chemicals and seeds
said sales in the three months to March 31 fell to $3.6 billion,
from $3.79 billion a year earlier, below analysts' expectations of
$3.74 billion as the rise in the value of the dollar weighed more
than the company had expected.
Calculated in the currencies of the countries where the goods
were sold, sales rose 7%, Syngenta said.
The company said the dollar's strength will also hit its 2009
operating profit. It had expected a hit of up to $150 million, but
Chief Financial Officer John Ramsey told Dow Jones Newswires
admitted: "The impact this year might exceed $150 million on a net
basis, but is unlikely to rise above $200 million."
But the Basel-based company said it still expects to increase
earnings per share, excluding non-recurring income, restructuring
and impairments, this year, as price rises will make up for the
currency movements.
At 0800 GMT, Syngenta shares traded up 7.4%, or CHF16.40, at
CHF237.90. The shares have fallen about 24% in the past 12 months
but are up 14% year-to-date, helped by strong demand from
agricultural markets.
"Prices (for crop protection products) rose more than expected,
by 8% versus our estimate of 6%," said Helvea analyst Martin
Flueckiger. "Excluding professional products, volumes in crop
protection were up 2% which is good because acreage was actually
down on the year," said the analyst, who rates Syngenta at buy with
a CHF300 price target.
"We're seeing continued strong demand for crop protection
products across the different regions, especially in Asia," CEO
Mike Mack said in an interview with Dow Jones Newswires.
At constant exchange rates, Syngenta will improve its margins in
2009, mainly due to higher prices for its products, Mack said.
Overall sales in crop protection fell 3% to $2.59 billion, as
dry weather in Argentina and Southern Brazil led to lower demand
for the company's products there.
However, in local currencies, sales rose 10% when excluding the
professional products contribution. The unit makes seeds and
herbicides for businesses that depend on private household
spending, such as for gardens and the home, and therefore has a
higher exposure to the economic downturn.
"The numbers should go a long way to reassure investors that the
agrochemicals story is not over. Currency effects dampened some of
the shine, but this should not impact profits," Credit Suisse
analysts said in a note to customers.
Credit Suisse rates Syngenta at neutral with a CHF300 price
target.
The ailing seeds division saw sales drop 6% on the year,
although they rose 3% to $1.1 billion in local currency terms.
"The weak spot here is soybeans and corn, which rose only 7%,"
Helvea analyst Flueckiger said.
"Seeds is more affected by individual circumstances. We've seen
contractions in soil in America and field crops faced difficulties
in Eastern Europe," Syngenta's CEO said.
Company Web Site: www.syngenta.com
-By Julia Mengewein, Dow Jones Newswires; +41 43 443 80 45;
julia.mengewein@dowjones.com