Syngenta Hurt by Declining Corn Acres in Americas
4 February 2015 Syngenta’s fourth-quarter profit fell below expectations, hurt by currency volatility and declining corn acres in the Americas.
Crop protection sales were up 8% for the quarter to $2.8 billion. The company decided to deliberately reduce low-margin sales of Touchdown glyphosate to focus on higher-margin mixtures including selective herbicides addressing weed resistance. The impact on 2014 sales was about $150 million. This was partly offset by strong growth in Gramoxone with robust demand and tight supply leading to volume and price increases, primarily in ASEAN and Latin America.
By region, Europe, Africa and Middle East performed strongest in the fourth quarter with a 23% rise in crop protection sales. North American crop protection sales fell 18%, while Latin America and Asia rose 10% and 12%, respectively.
Syngenta’s key success in the quarter, said Chief Executive Michael Mack, was the launch of the new fungicide Elatus for soybean rust in Brazil, for which sales topped its target of $300 million.
For the year, fungicides including Elatus rose 17%. The business also showed strong growth across most products, in particular, Seguris and Amistar in Europe. In insecticides, growth of 10% was broad based. Brazil saw high levels of insect pressure and this helped global sales of Durivo to exceed the original target of $400 million, more than offsetting the lower insecticide sales in North America. Syngenta expects approvals for its Solatenol fungicide for a variety of crops in the United States and in the European Union over the next two years.
The company noted that in Asia Pacific, with the Vietnamese market now opening up for its corn traits, it has the opportunity to leverage its technology investment while expanding products for corn. In Latin America, it expects Elatus and its new registration for Avicta to expand its market there.
“In Asia Pacific, price increases largely offset currency weakness in emerging markets. The rice market in ASEAN was challenging, owing to governments’ intervention to reduce stocks. Vegetables however showed good growth,” Chief Financial Officer John Ramsay stated.
For its seeds business, Syngenta posted 6% sales growth for the quarter to $716 million, reflecting a shift from corn to soybean sales in both North and Latin America. North American seed sales fell 6% in the period to $308 million.
Looking ahead, Mack said the company expects to offset a significant part of emerging market currency devaluations through price increases. It sees sales in 2015 flat at constant exchange rates. In 2016, the company expects lower raw material costs to offset the recent Swiss franc appreciation on its cost base. Sales and margins will increasingly benefit from new product launches and cost efficiencies, Syngenta said.
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