Syngenta 2009 Full Year Results

BASEL, Switzerland, Feb. 5 /PRNewswire-FirstCall/ --

Sustained cash generation, positioned for further growth

• Sales $11 billion, up 1 percent at constant exchange rates
• EBITDA(2) margin maintained at 21.6 percent: Seeds margin 9.5 percent
• Earnings per share(3) $15.76, 3 percent lower
• Earnings per share $14.62 after restructuring and impairment, unchanged
• Free cash flow $580 million
• 2010 cash return around $750 million: maintained dividend, share repurchase

    
    
               Reported Financial Highlights    Excluding Restructuring, 
                                                        Impairment
                      2009     2008  Actual   2009     2008  Actual  CER(1)
                       $m       $m       %     $m       $m       %      %
    Sales            10,992   11,624    -5   10,992   11,624    -5     +1
      Crop
       Protection     8,491    9,231    -8    8,491    9,231    -8     -2
      Seeds           2,564    2,442    +5    2,564    2,442    +5    +13
    Net Income(4)     1,371    1,385    -1    1,478    1,540    -4      -
      Earnings 
       per share     $14.62   $14.63     -   $15.76   $16.26    -3      -

Mike Mack, Chief Executive Officer, said:

"In 2009 Syngenta achieved earnings close to the record level of 2008 in the face of considerable challenges including negative currency movements and higher raw material costs.  This achievement reflects our discipline in pricing, made possible by the proven value of our products to growers, and strong growth in Seeds accompanied by a significant improvement in profitability.  It also reflects our ability to restrain costs in a difficult environment and to continue generating substantial free cash flow.  Our active management of risk in Latin America and Eastern Europe also contributed to the ongoing strength of our balance sheet, and placed us in a good position to benefit from the upturn in these regions which began towards year end.  In the emerging markets of Asia Pacific, growth continued throughout the year as growers continued to invest in yield improvement.  

"Strong growth in sales of new Crop Protection products and accelerating returns in Seeds attest to the success of Syngenta's sustained investment in R&D.  We also continued to make targeted acquisitions.  Around the world we are focusing on the longer term expansion of our business, for which the fundamental drivers of population growth and evolving diets remain unchanged."

Financial Performance 2009

Sales $11 billion

Sales at constant exchange rates (CER) increased by one percent.  Reported sales were five percent lower owing to the strength of the dollar in the first half of the year.  Crop Protection sales* were two percent lower (CER); Seeds sales increased by 13 percent (CER).

EBITDA margin 21.6 percent

EBITDA increased by nine percent (CER) to $2.4 billion.  Price increases offset higher raw material costs and Seeds profitability increased significantly as a result of portfolio improvements.

Currency movements

The impact of currencies on reported sales was particularly marked in the first half, following the substantial devaluation of emerging market currencies against the dollar towards the end of 2008.  The impact of these devaluations on operating income was partly offset by price increases.  The weakening of the dollar against all currencies in the second half resulted in a positive currency effect on fourth quarter sales.

Earnings per share $15.76

Earnings per share excluding restructuring and impairment were three percent lower owing to the adverse currency movements.  Including restructuring and impairment, earnings per share were unchanged at $14.62.

Business Highlights

Crop Protection

Crop Protection sales excluding Professional Products were one percent lower (CER) compared with a record 2008.  This demonstrates the resilience of the business in the face of lower crop prices, a shorter northern hemisphere season and weather conditions that were unfavorable for our business.  Performance was underpinned by price increases made possible by the significant value which our products offer to growers. Our discipline on price was accompanied by an estimated gain in market share, a clear testimony to the strength of our portfolio.

In Europe, Africa & the Middle East the year was characterized by a late start to the season and subsequent low disease pressure.  In addition, sales in Eastern Europe were restricted for most of the year by rigorous risk management, although the operating environment improved towards the year end.  NAFTA was also affected by a late season and low pest pressure, offset by a strong performance in cereal and soybean herbicides.  In Latin America, risk management and drought in the south of the region reduced first half sales; improved economic conditions, as well as higher commodity prices, contributed to a rebound in the second half.  In Asia-Pacific, demand was sustained throughout the year, particularly in the emerging markets, where growers continued to invest in order to improve yield.

In Selective herbicides, growth in cereals and soybean compensated for lower corn sales.  Sales of Non-selective herbicides declined owing to a significant price reduction in glyphosate in the second half of the year.  Fungicides were unchanged despite lower pest pressure in the northern hemisphere: sales in the second half registered double digit growth, as Syngenta reinforced its leading market position in a larger Latin American market.  Insecticides sales were slightly lower because of lower insect infestation in the Americas; in Asia Pacific sales showed good growth.  Seed Care also performed particularly well in Asia Pacific, with new registrations and an ongoing move towards higher value seed.    Professional Products sales were lower owing to the impact of the economic environment on the golf and horticulture markets.

New Products:  Sales of new products (defined as those launched since 2006) increased by 32 percent to reach $308 million.  The cereal herbicide AXIAL® continued to grow in the key Canadian wheat market, where sales were up by more than 50 percent.  The fungicide REVUS® doubled sales in its main region Europe and showed significant growth in all other regions.  Following its 2008 launch in Indonesia, the insecticide DURIVO® was rolled out in a number of Asian markets with notable success in China.  Sales of AVICTA® are set to expand with a launch in 2010 on corn.  Overall the peak sales potential of new products exceeds $1.3 billion.

R&D pipeline:  Our Crop Protection pipeline has combined peak sales potential of over $2 billion.  In 2010 we will make the initial launches of INVINSA™, a unique product for crop stress protection in field crops, and of isopyrazam, a broad spectrum cereal fungicide.  The late development pipeline also includes sedaxane, a seed treatment fungicide; bicyclopyrone, a corn and sugar cane herbicide; and an insecticide cyantraniliprole.

EBITDA of $2.24 billion represented a margin of 26.4 percent (2008: 26.6 percent).  At constant exchange rates EBITDA was three percent higher with a margin of 27.8 percent.  The underlying improvement in profitability reflected the benefit of price increases in offsetting both higher raw material costs and emerging market currency devaluations.

Seeds

Seeds sales were 13 percent higher at constant exchange rates with growth in all product lines.  Price increases across the portfolio reflected value capture from new technology as well as the ability to pass on higher raw material costs.  

Corn & Soybean: Syngenta has a broad geographic presence in corn, with sales evenly distributed between US and non-US markets.  In 2009, sales expanded in all regions with the exception of Latin America, where acreage was lower.  In the USA, our AGRISURE® 3000 GT proprietary triple stack seed accounted for 25 percent of the portfolio compared with 11 percent in 2008, and the proportion is expected to exceed 50 percent in 2010.  Further advances in portfolio quality will be achieved through stepping up the combination of our proprietary traits with top performing germplasm.  In soybean, solid underlying sales growth for the full year reflected price discipline and the quality of our germplasm.  In our third year in the Brazilian market, we achieved a market share of 10 percent.

Sales of Corn & Soybean in the USA benefited from a fourth quarter change in sales terms in line with industry standards.  

Diverse Field Crops:  In Eastern Europe, a key area for sunflower and sugar beet, we managed risk carefully and saw an improvement in credit conditions in the course of the year.  The scope of our sunflower germplasm has been further expanded through the acquisition of Monsanto's sunflower business, which also builds on our significant emerging market investments.  Sales of glyphosate tolerant sugar beet in the USA again showed good growth.

Vegetables:  Sales continued their record of strong growth with a focus on high value crops.  We established a significant position in the US lettuce market with the acquisition of Synergene Seed & Technology, Inc. and Pybas Vegetable Seed Co., Inc. which bring a broad range of proprietary germplasm combined with strong breeding and production capabilities.

Flowers growth reflected the consolidation of Goldsmith Seeds, Inc. and Yoder; the underlying business was affected by the impact of the economic downturn on the horticulture market.

R&D pipeline: Our global corn pipeline has peak sales potential of over $2 billion.  The near term pipeline includes Agrisure Viptera™ (MIR 162) for broad lepidoptera control and Enogen™ for improved productivity and sustainability in the manufacture of ethanol from corn.  Both traits are awaiting final USDA approval.  MIR 162 received full approval from the Brazilian authorities in November, along with the double stack Bt11xGA21.  The double stack was also approved in Argentina in December.

In April, Syngenta and Dow AgroSciences announced an agreement to cross-license their respective corn traits for commercialization within their branded seed businesses.  The agreement will allow Syngenta, from 2011, to offer its US customers multiple modes of action targeting refuge reduction and improved efficiency.

EBITDA of $244 million represented a margin of 9.5 percent (2008: 5.5 percent).  At constant exchange rates EBITDA increased by 128 percent with a margin of 11.2 percent.  The improvement reflects the transformation of our corn offer in the USA and the further development of our high margin vegetables business.  Seeds is firmly on track to achieve the targeted EBITDA margin of 15 percent in 2011.

Net financial expense

Net financial expense of $122 million was below the 2008 level of $169 million owing to the non-recurrence of fourth quarter exchange rate losses in 2008.  Interest cover remains high at 15 times.

Taxation

Further tax optimization including some non-recurring benefits resulted in an underlying tax rate of 17 percent (2008: 19 percent).  A tax rate in the low to mid-twenties is expected over the medium term.

Cash flow

Free cash flow was $580 million and demonstrated the strongly cash generative nature of Syngenta's business.  Fixed capital expenditure of $652 million was above previous levels and included investment in capacity expansion for two major Crop Protection products.  Acquisition spend totaled $188 million.  Average trade working capital as a percentage of sales increased to 42 percent from an exceptionally low level of 37 percent in 2008 with an increase in inventories as a result of a reduced northern hemisphere season.

Balance sheet

The ratio of net debt to equity was 25 percent.  The profile of borrowings was enhanced through the issue of a euro 500 million Eurobond in June.  Return on invested capital at 24 percent again exceeded the 20 percent target.

Dividend and share repurchase

In the light of continuing strong free cash flow generation, the company proposes to pay a maintained dividend of CHF 6.00 per share and plans a share repurchase in 2010.  The total cash return will be around $750 million.

Outlook

Mike Mack, Chief Executive Officer, said:

"Improved conditions in emerging markets are contributing to a more positive outlook for 2010 and lead us to expect volume growth starting in the second quarter.  In Crop Protection we will build on our innovation and strong market positions in a more competitive environment; in Seeds, we expect further expansion of sales and profitability.  The benefit of lower raw material costs and favorable currency movements should offset increased growth investments and a higher tax rate, enabling us to grow full year earnings per share.  We also expect substantial free cash flow.  We are proposing to pay a maintained dividend for 2009 and also plan a share repurchase, representing a total cash return of around $750 million."

Crop Protection

For a definition of constant exchange rates, see Appendix A in full English version.

    
    
    
                       Full Year       Growth      4th Quarter      Growth
    
    Product line     2009     2008 Actual    CER  2009     2008  Actual   CER
                      $m       $m      %      %    $m       $m       %     %
    
    Selective
     Herbicides     2,221    2,412    - 8      -   334      349     - 4   -10
    Non-selective
     Herbicides     1,141    1,329    -14    - 8   180      228     -21   -24
    Fungicides      2,442    2,620    - 7      -   632      517     +22   +18
    Insecticides    1,312    1,423    - 8    - 1   317      334     - 5   - 7
    Seed Care         821      830    - 1     +4   243      208     +17   +14
    Professional
     Products         458      527    -13    -11   141      140      +1   - 1
    Others             96       90     +6     +9    35       26     +33   +31
    Total           8,491    9,231    - 8    - 2 1,882    1,802      +4    +1
    

Selective Herbicides:  major brands AXIAL®, CALLISTO® family, DUAL®/BICEP® MAGNUM,  FUSILADE®MAX and TOPIK®.

Sales were unchanged with broad-based price increases offsetting lower volume.  AXIAL® and TOPIK® both performed strongly on cereals in North America.  In the USA, increased soybean acreage and weed resistance resulted in a resurgence of demand for soybean herbicides.  Corn herbicide sales were lower reflecting reduced acreage and risk management in emerging markets, as well as the impact of late planting in the USA.

Non-selective Herbicides:  major brands GRAMOXONE® and TOUCHDOWN®

Sales were lower owing to price reductions for TOUCHDOWN® in the second half of the year, which were accompanied by a recovery in volume growth.  GRAMOXONE® sales were also lower with declines in Australia, due to drought, and in emerging markets.

Fungicides:  major brands ALTO®, AMISTAR®, BRAVO®, REVUS®, RIDOMIL GOLD®, SCORE®, TILT® and UNIX®.  

Fungicides saw strong demand on rice in Asia Pacific and, in the second half, on soybean in Latin America.  REVUS® was launched in a number of new markets and sales almost doubled.  Northern hemisphere sales overall were lower due to a shorter season and reduced disease pressure.  Fungicide pricing was significantly higher and offset the decline in volume.

Insecticides: major brands ACTARA®, DURIVO®, FORCE®, KARATE®, PROCLAIM®, VERTIMEC®

Sales were slightly lower with a lack of soybean pest pressure in the USA and Latin America.  Sales in Asia Pacific grew strongly throughout the year with in particular a successful roll-out of DURIVO®, offering growers new crop enhancement benefits.

Seed Care: major brands AVICTA®, CRUISER®, DIVIDEND®, MAXIM®

Seed care sales increased broadly.  The main driver was CRUISER®, where growth was volume driven with a modest increase in price, and benefited in particular from a registration in France and a new soybean application in Canada.

Professional Products: major brands FAFARD®, HERITAGE®, ICON®

Professional products were affected by the economic downturn, which reduced demand in the golf and horticulture segments and led customers to purchase more cautiously.

    
    
    
                       Full Year        Growth     4th Quarter       Growth
    Crop
     Protection      2009     2008  Actual   CER  2009     2008   Actual  CER
     by region        $m       $m      %      %    $m       $m       %     %
    
    Europe, Africa,
     Mid. East      2,667    3,214    -17    - 5   455      401     +13    +2
    NAFTA           2,567    2,693    - 5      -   281      338     -17   -17
    Latin America   1,907    2,037    - 6    - 6   842      824      +2    +2
    Asia Pacific    1,350    1,287     +5    +11   304      239     +27   +18
    Total           8,491    9,231    - 8    - 2 1,882    1,802      +4    +1
    

Europe, Africa and the Middle East:  Sales were lower owing to a shorter season with lower disease pressure and to risk management in Eastern Europe.  Above average price increases partly offset the decline in volume.  Operating conditions in Eastern Europe improved towards the end of the year.

NAFTA:  Prices overall were higher despite pressure in the glyphosate market and offset a modest volume decline due to reduced pest pressure.  In Canada volume growth was robust as we further strengthened our market position in cereal herbicides and Seed Care.

Latin America:  Dynamic volume growth in the second half largely offset a first half decline due to drought in the south and to rigorous credit management.  The second half growth reflected greater use of technology on increased soybean acres.  Lower prices related mainly to glyphosate and to currency-related adjustments in a competitive environment.

In Asia Pacific, the farm economy proved resilient to the economic crisis.  Ample liquidity enabled growers to continue investing in yield improvement.  Syngenta strengthened its market position with broad-based growth led by innovation and the adaptation of the portfolio to local needs.

Seeds

For a definition of constant exchange rates, see Appendix A in full English version.

    
    
    
                        Full Year       Growth    4th Quarter       Growth
    
    Product line      2009    2008  Actual   CER  2009    2008  Actual   CER
                       $m      $m     %       %    $m      $m     %       %
    
    Corn & Soybean   1,210   1,040    +16    +21   241      82   +195    +193
    Diverse Field
     Crops             429     462    - 7    +11    55      42    +29     +28
    Vegetables         594     603    - 2     +5   133     114    +16     +13
    Flowers            331     337    - 2     +5    53      48    +13     +10
    Total            2,564   2,442     +5    +13   482     286    +69     +67
    

Corn & Soybean: major brands AGRISURE®, GARST®, GOLDEN HARVEST®, NK®

Growth across all regions was led by significant increases in NAFTA and Asia Pacific. Underlying growth was augmented in the fourth quarter by a change in sales terms in the USA, implemented in alignment with industry practice.  Sales of our proprietary triple stack corn AGRISURE® 3000 GT in the USA showed a significant advance.  Soybean sales were also higher with premium pricing for our high quality germplasm.  Soybean also showed strong growth in Brazil due to the popularity of our V-Max offer.  In Asia Pacific, our leading tropical corn germplasm enabled us to outperform in a growing market.

Diverse Field Crops:  major brands NK® oilseeds, HILLESHOG® sugar beet

Sales increased in all regions, with Europe and NAFTA accounting for most of the business.  Sales showed solid growth in Western Europe; in Eastern Europe higher prices more than offset the impact of risk management measures on volume.  In the USA, sales of glyphosate-tolerant sugar beet continued to expand.

Vegetables: major brands DULCINEA®, ROGERS®, S&G®, Zeraim Gedera

Growth reflected the ongoing expansion of high value products in our strategic crops.  Sales growth was especially strong in Latin America and in the emerging markets of Asia.

Flowers: major brands Fischer, Goldfisch, Goldsmith Seeds, S&G®, Yoder

Growth reflected the consolidation of Goldsmith Seeds Inc. and Yoder; underlying sales were affected by the economic environment.

    
    
    
                        Full Year        Growth    4th Quarter       Growth
    
    Seeds by region    2009    2008  Actual   CER  2009    2008  Actual   CER
                        $m      $m      %      %    $m      $m      %      %
    Europe, Africa,
     Mid. East          933   1,077    -13     +3   115      93    +24    +21
    NAFTA             1,187     979    +21    +22   213     107   +100   +100
    Latin America       243     216    +12    +12    87      43   +100   +100
    Asia Pacific        201     170    +18    +28    67      43    +56    +49
    Total             2,564   2,442     +5    +13   482     286    +69    +67
    

Announcements and Meetings

Syngenta is one of the world's leading companies with more than 25,000 employees in over 90 countries dedicated to our purpose: Bringing plant potential to life.  Through world-class science, global reach and commitment to our customers we help to increase crop productivity, protect the environment and improve health and quality of life.  For more information about us please go to www.syngenta.com.

Cautionary Statement Regarding Forward-Looking Statements

This document contains forward-looking statements, which can be identified by terminology such as 'expect', 'would', 'will', 'potential', 'plans', 'prospects', 'estimated', 'aiming', 'on track' and similar expressions. Such statements may be subject to risks and uncertainties that could cause the actual results to differ materially from these statements. We refer you to Syngenta's publicly available filings with the U.S. Securities and Exchange Commission for information about these and other risks and uncertainties. Syngenta assumes no obligation to update forward-looking statements to reflect actual results, changed assumptions or other factors. This document does not constitute, or form part of, any offer or invitation to sell or issue, or any solicitation of any offer, to purchase or subscribe for any ordinary shares in Syngenta AG, or Syngenta ADSs, nor shall it form the basis of, or be relied on in connection with, any contract therefor.

(1) Growth at constant exchange rates, see Appendix A in full English version.

(2) EBITDA, a non-GAAP measure, is in regular use as a measure of operating performance and is defined in Appendix B in full English version.

(3) EPS on a fully-diluted basis, excluding restructuring and impairment.

(4) Net income to shareholders of Syngenta AG.

*   Crop Protection sales include $71 million of inter-segment sales.

SOURCE Syngenta