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Syngenta sales fall 12 percent on Brazil weakness

ZURICH/FRANKFURT -- Third-quarter sales at Swiss agricultural chemicals group Syngenta AG fell by more than expected as the weak currency in Brazil, its second-largest market, eroded the value of overseas business.

Syngenta
Reuters

ZURICH/FRANKFURT -- Third-quarter sales at Swiss agricultural chemicals group Syngenta AG fell by more than expected as the weak currency in Brazil, its second-largest market, eroded the value of overseas business.

The company is under pressure to boost shareholder returns after fending off a $47 billion takeover approach from U.S. seeds rival Monsanto in August.

Sales fell 12 percent to $2.62 billion, whereas analysts polled by Reuters had on average expected only a 5 percent decline to $2.82 billion.

"Sharp depreciation of the (Brazilian) real in the quarter created major market disruptions. Because of its suddenness we were not immediately able to increase prices to compensate," finance chief John Ramsay told analysts in a conference call.

The company planned to push up prices in Latin America, he added.

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Syngenta said its earnings before interest, tax, depreciation and amortisation (EBITDA) would fall by a figure of around 5 percent this year because of currency effects.

Brazil's real hit an all-time low in September amid a political crisis coupled with an economy in recession, which has also proved a headache for rivals.

The shares dropped 2.7 percent to a more than nine-month low, amid rising scepticism about the group's medium-term profitability and sales targets.

"The expected growth from 2016 is fraught with uncertainty because of potentially longer-lasting market weakness," Zuercher Kantonalbank analysts said.

Rival DuPont this month cut its full-year operating profit forecast by 11 percent, citing weak pesticides and seeds demand in Brazil.

Also this month, Monsanto said it expected low prices for agricultural produce to squeeze results well into 2016 and unveiled plans to cut 2,600 jobs.

Latin America typically accounts for about 45 percent of Syngenta's total sales in the second half.

Brazil, which is a big producer of soybeans, sugarcane and maize, was Syngenta's second-most important market in 2014, generating 19 percent of sales.

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In Brazil, low commodity prices weighed on pesticides and seeds markets, as did the sharp currency depreciation and tight credit conditions for farmers, the Swiss company said.

The company maintained its 2015 target of an improvement in its EBITDA margin from 19.3 percent last year, helped by cost cutting efforts.

It will also get a boost from a $200 million upfront payment from selling some rights to genetically modified corn traits to Germany's KWS and France's Limagrain.

As part of an expansion of its licensing collaboration with the two companies and their joint ventures AgReliant and Genective, Syngenta also stands to receive future royalty and milestone payments over 20 years.

Syngenta last month unveiled plans to buy back more than $2 billion of stock to boost shareholder returns after rejecting Monsanto's takeover approach, and is putting its vegetable seeds business on the block to fund the measure.

Related Topics: AGRIBUSINESS
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