July 23, 2014 / 6:36 AM / 5 years ago

Syngenta reaffirms 2014 target despite sluggish North America sales

ZURICH (Reuters) - Syngenta AG SYNN.VX, the world’s largest maker of crop chemicals, reaffirmed its full-year sales target on Wednesday, despite prolonged cold weather hurting North American sales in the first half.

Agrochemicals maker Syngenta's logo is seen in front of the company's headquarters in Basel February 6, 2013. REUTERS/Arnd Wiegmann

The Swiss company, which makes products to kill weeds and insects as well as genetically-modified seeds, said first-half sales were $8.5 billion. Net profit fell by 1 percent to $1.4 billion.

Revenue from North America, which was Syngenta’s third most important market in sales in 2013, dropped 7 percent in the first six months of the year as cold temperatures delayed the start of the season until late May. All other regions posted sales growth of at least 4 percent.

Syngenta Chief Executive Mike Mack said the company still expected to hit its full-year sales growth target.

“When we came out with our full-year forecast in February, we called for a growth rate for 6 percent globally and we’re on track to make that,” Mack said in an interview.

Syngenta’s Chief Financial Officer John Ramsay told Reuters the company was targeting sales growth of 8-9 percent in the second half of the year, around half of it from Latin America.

In Latin America, the company plans to launch its new ELATUS fungicide in Brazil in September after earlier launches in Paraguay and Bolivia. Ramsay told analysts in a call that ELATUS sales in Brazil could hit $300 million in the second half of the year.

CEO Mack told Reuters it might not take long for the product to hit blockbuster status - sales of more than $500 million.

“If it goes as we think it will, we could be looking at a blockbuster in two seasons,” Mack said.

Earnings before interest, tax, depreciation and amortization (EDITDA) came in 3 percent lower than last year at $2.1 billion. Syngenta said this was down to currency movements.

The company also lowered its guidance for targeted free cash flow before acquisitions to around $1.3 billion from around $1.5 billion.

Group sales rose 2 percent in constant currency terms, but were flat in real terms at $3.8 billion in the second quarter of the year, falling short of the Reuters analyst consensus of $3.9 billion.

As of Tuesday, Syngenta’s shares had lagged those of its European rivals this year, falling by more than 7 percent versus a rise of around 1 percent in the European chemicals sector .SX4P.

At 0909 GMT, shares in Syngenta were trading down 0.3 percent, underperforming the European chemicals sector, which was up 0.6 percent.


Rival Monsanto Co MON.N last month announced authorization of a $10 billion share repurchase and Main First analyst Ronald Koehler said there was a growing feeling Syngenta could do the same.

“Syngenta’s balance sheet remains strong, which would allow it to resume its share buy-back program,” Koehler, who has an “outperform” rating on the stock, wrote in a note.

“After Monsanto announced a $10 billion share buy-back, we would assume the pressure on management is increasing to give back cash to shareholders.”

Last month there was a media report that the company had been in talks about a $40 billion takeover by Monsanto to create the world’s largest agrochemical company.

Syngenta CEO Mack declined to comment on any rumors involving Monsanto.

Any deal between the two would allow Monsanto to benefit from lower holding taxes in Switzerland, where Syngenta is headquartered.

The head of the U.S. Senate Finance Committee said on Tuesday immediate government action is needed to stop U.S. corporations from avoiding federal taxes by shifting their tax domiciles overseas through deals known as inversions.

Analysts are expecting more deals in the sector as larger players like Monsanto, Bayer (BAYGn.DE) and BASF (BASFn.DE) look to bulk up and broaden their reach in crop protection and seeds.

Reporting by Joshua Franklin; editing by Jason Neely and Ruth Pitchford

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