February 9, 2012

 

Syngenta halts further rises in 2012 seed, spray prices

 

 

Syngenta has stopped adding increase in agrichemical and seed prices for 2012, as aided by the increasing spread of glyphosate-resistant crops it set course for "sustained sales growth" and rising profit margins.

 

The Swiss-based group, the world's largest farm sprays company, said it was targeting "sustained volume growth and higher prices" in 2012, in an effort to meet targets of increasing average market share by 0.5% a year over the next five years, and its ebitda margin to 22-24% by 2015.

 

While price rises in seeds have been relatively easy to achieve, and Syngenta achieved increases of 3% in 2011, a return to increased agrichemicals values is something of a novelty.

 

A jump in Chinese output of generic sprays, combined with the world economic downturn, sent agrichemical prices tumbling in 2009 and 2010, with the decline reaching 10% in the April-to-June quarter of 2010, with price still declining early last year.

 

However, Syngenta noted a "marked improvement" in pricing in the second half of last year, "when all regions showed higher prices".

 

The group highlighted "determined price actions" in North America and "positive pricing" in Latin America, both regions where sales were boosted by demand by farmers wishing to eliminate weeds resistant to glyphosate-based herbicides.

 

Syngenta said that demand for its Touchdown brand "intensified in Latin Americas, reflecting the increased acreage of glyphosate-tolerant crops", while in North America sales of Callisto and Gramoxone products "benefited from concerns relating to glyphosate resistance".

 

Glyphosate tolerance has become an increasing issue for seed companies, given that many genetically modified products, such as Monsanto's Roundup Ready labels, are sold on the story that farmers can spray off weeds without damaging the biotech-enhanced crops.

 

Last year, Iowa State University found also corn rootworms had had developed resistance to plants genetically modified to thwart the bugs.

 

However, it is not clear how widespread resistance problems are.

 

Syngenta, unveiling a 14% rise to US$13.2 billion in sales last year and a 14.5% increase to US$1.60 billion in earnings, also highlighted a boost to its performance from shake-up to integrate the company along crop lines, rather than operating separate seed and sprays silos.

 

The drive, which Syngenta introduced as taking on "the mindset of a grower", achieved efficiency savings of US$112 million last year, leaving it ahead of pace to hit a target of US$650 million by 2015.

 

This result had raised "our confidence that we will outperform in an expanding market", Mike Mack, the Syngenta chief executive, said.

 

"We also expect the combined business to achieve a further advance in earnings before interest, tax, depreciation and amortisation (ebitda) margin at constant exchange rates."

 

He added, "As we enter the 2012 season, notwithstanding the current economic uncertainty, we look forward to sustained sales growth and further market share gains."

 

The results were termed "robust" by Credit Suisse, which highlighted the strength of Syngenta's seed margins and its double-digit growth in Latin America, a market in which other seed and sprays groups, such as DuPont, Dow and Monsanto, have also unveiled growing sales.