UPDATE 2-Cold, wet spring weighs on Syngenta first-half results

Wed Jul 24, 2013 4:47am EDT

* H1 sales up 2 pct to $8.4 bln vs $8.644 bln in poll

* Net profit $1.409 bln vs $1.464 forecast

* Confident about outlook for the rest of the year

* Shares fall 4.2 pct, underperform sector

By Caroline Copley

ZURICH, July 24 (Reuters) - Syngenta AG, the world's largest maker of crop chemicals, said on Wednesday it expected underlying sales growth to pick up pace in the second half of the year, after a cold, wet spring hit earnings in the first six months.

Syngenta said it was confident high commodity prices would encourage farmers to invest in crops in the second half of the year, when demand is driven by South American farmers, and help its 2013 sales surpass last year's record of $14.2 billion.

But its shares fell after first-half sales and profits missed expectations, hit by the cold, wet weather, particularly in Germany, and delayed planting in the United States.

By 0820 GMT Shares in Syngenta - which have underperformed rivals Monsanto and DuPont so far this year - were down 4.2 percent to trade at 370.0 Swiss francs, compared to a 0.3 percent weaker European chemicals sector.

The shares trade at 16.1 times estimated earnings over the next 12 months at a discount to Monsanto's 19.8 times but at a premium to Bayer's 13.9 times.

"We still see upside to our fair value forecast if the company executes and delivers on its long term growth plans," said Patrick Rafaisz, an analyst at Vontobel, who has a 'hold' rating on the stock.

"But today's results are a miss vs market expectations and hence unlikely to provide for a positive sentiment towards the stock short term."

Syngenta is banking on growing demand for its seeds, pesticides, fertilisers and support services, as farmers grappling with erratic weather and a shortage of labour turn to technology to boost yields.

"For the second half of the year we expect an acceleration of underlying sales growth, based on the positive outlook for Latin America and Asia Pacific," Chief Executive Mike Mack said in a statement.

His comments echo those from rival DuPont, which said earnings would be "significantly better" in the second half of 2013 than in the same period last year due to agricultural growth in the Americas.

The group maintained its target for an earnings before interest tax depreciation and amortisation (EBITDA) margin in the range of 22 to 24 percent in 2015 and said it was confident it could achieve its 2020 target of sales of $25 billion for its top eight crops.

Sales at Syngenta rose 2 percent in the first half to $8.39 billion, falling short of the Reuters analyst consensus of $8.64 billion.

Higher seed production costs, lower royalties and increased marketing costs also took a toll on profitability. Net profit fell 5 percent to $1.409 billion.

Syngenta said it planned tactical share repurchases throughout the rest of the year in the range of up to $100 million, but stressed that M&A still remained its priority.

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.