Firm close to 2012 underpins Syngenta 'confidence'

A strong finish to 2012 in North America, where farmers are planning huge spring sowings, and Latin America prompted Syngenta to express "confidence" in its prospects - but failed to lift the agrichemical giant's shares.

Mike Mack, the Syngenta chief executive, said the group was expecting "further business momentum" in 2013, backed by a portfolio stretching from sunflower seed to insecticides, and the ditching of its historic division between seed and agrichemical businesses.

He added: "Our confidence is reinforced by the fourth-quarter business strength, notably in North and Latin America," both markets in which the group reported double-digit growth in sales in the period, at rates exceeding that achieved over 2012 as a whole.

US dynamics

In North America, "strong demand in advance of the 2013 season led to an acceleration of growth" in the October-to-December period, with the impact accentuated by low inventories in the wholesale network.

Regional sales of agrichemicals soared 47% to $422m to farmers, in Syngenta's broad Gramoxone herbicide, seeking alternatives to glyphosate, for which weeds in some areas are showing resistance a factor which underpinned sales of some specialist weedkillers, such as Callisto, too.

Seed sales rose 10% to $292m, amid concerns over US supplies in particular of corn seeds, following a poor harvest last year, and expectations of sowings this spring hitting their highest in more than 70 years.

Brazil boost

Latin American agrichemical sales rose by 17% to $1.41m in the quarter, and seed sales by 26% to $148m, reflecting the quest by growers to expand sowings and yields to take advantage of historically high crop prices.

Syngenta highlighted in particular sales in soybeans, of which Brazil is expecting a record harvest, taking it to top rank among world producers, as well as the growing popularity of second-crop, safrinha corn.

The growth in safrinha corn, now being planted in Brazil as a follow-on crop to soybeans "is favouring technology adoption in both crop protection and seeds", said Syngenta.

Separately, the company announced a $77m investment to quadruple to 1.6m bags annual output from a corn seed plant in Goias, in central Brazil.

The group also flagged a boost from the quest by cane growers to "boost productivity", after a disappointing 2011 result, a drive "reflected in strong growth in herbicide sales and the identification of new opportunities in seedlings and young plants".

Market reaction

The group's overall sales in the fourth quarter rose 11.6% to $3.34bn, helping lift the full-year figure to a record $14.20bn, a rise of 7.0%.

Full-year earnings rose 17.1% to $1.87bn, narrowly ahead of forecasts.

Nonetheless, even though the Swiss-based group also revealed an increase to SFr9.50 a share, from SFr8.00 a share, in its dividend, the data received a cautious response from investors, with a lower tax rate also seen as underpinning profitability.

A rise of 8.4% to $2.91bn in annual earnings before interest, tax, depreciation and amortisation (ebitda) came in a little below market expectations.

Credit Suisse analyst Chris Counihan, while retaining an "outperform" rating on Syngenta stock, and a price target of SFr450, said: "We expect share price easing on an operational result moderately below our and market expectations."

The shares fell 2.1% to close at SFr387.10.

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