Syngenta shares fall after EU chill hurts profits


Shares in Syngenta dipped 4% after the seed and sprays giant revealed a larger-than-expected drop in half-year profits, reflecting the cold spring in Europe and a hangover from last year's drought on US seed sales.

Investors had forecast a small decline, of some $23m to $1.46bn, in earnings for the January-to-June period, given the boost to results last year from a $256m royalty payment on genetic seed traits to counter corn rootworm.

However, the group's earnings actually fell by $76m, to $1.41bn, depressed by a fall in sales in Europe of 1.6%, to $1.25bn, in the April-to-June period as cold weather depressed demand for agrichemicals, of which Syngenta is the world's top producer.

"A strong first quarter was followed by a cold wet spring which reduced the number of crop protection applications, particularly for fungicides in northern Europe," Syngenta said.

'Constrained by the drought'

In North America, Syngenta acknowledged a dent from a limitation on seed sales from last year's poor drought, which curtailed availability of crop to sale, and for some groups has meant imports from the likes of Argentina.

"Seed sales were constrained by the drought of 2012 which reduced the availability of new traited hybrids," Syngenta said.

However, a "strong" performance in agrichemicals helped North American sales grow by an underlying 4% during the period.

And sales in Latin America soared 13% to $1.17bn, driven by Brazil and Argentina, "where grower sentiment remains strong in a buoyant crop price environment".

A shortage of glyphosate weedkillers in the region also boosted sales of Syngenta's own broad-spectrum herbicide, Touchdown.

Brighter outlook

Mike Mack, the Syngenta chief executive, said that the group was looking to the "positive outlook" in Latin America, where farmers will soon be preparing to sow corn and soybeans crops for early 2014 harvest, and in Asia to lead "an acceleration of underlying sales growth" in the July-to-December half.

"In Latin America, we expect the high commodity price to encourage further investment in soybeans, where we continue to have a leading market position," Mr Mack said.

"We also see ongoing expansion of the opportunity in sugar cane and significant further potential for our corn trait portfolio."

Syngenta maintained a target of earnings before interest, taxation, depreciation and amortisation (ebitda) margin of 22-24% for 2015, and said it was confident in achieving its long-term aim of sales of $25bn for major crops in 2020.

However, Syngenta shares hit SFr369.30 in early deals before recovery some ground to stand at SFr371.70, a drop of 3.8% on the day.