Syngenta unveiled a $1bn cost-cutting drive after admitting
that its performance last year, when profits fell 11%, "did not meet
expectations" - but the plan failed to stop its shares falling to a seven-month
The group, the world's biggest agrichemicals company, said
it would from 2015-18 cut about $400m from its production costs, through
measures such as group-wide sourcing deals, chop $400m from marketing spending,
and save $200m by boosting efficiency in research and development.
"We will accelerate operational leverage through significant
efficiency gains," said Mike Mack, the Syngenta chief executive.
The programme, which will cost $900m to implement, will
follow on from an existing drive announced three years ago to cut costs by $650m
by 2015 – a target which Syngenta said it was "on track" to meet.
It will also allow the group to target a raised margin for earnings
before interest, taxation, depreciation and amortisation (ebitda) of 24-26%.
Nonetheless, Mr Mack acknowledged that, for 2015, Syngenta
looked like delivering an ebitda margin "at the lower end" of a target range of
The comments came as the group unveiled a 7.0% drop to $2.90bn
in ebitda for last year, despite a rise of 11.3% to $14.69bn in revenues.
The ebitda margin fell to 19.7%, down from 22% the year
After-tax earnings dropped 11.0% to $1.64bn, below market forecasts
for a $1.7bn result.
'Did not meet
Mr Mack said: "Our financial performance in 2013 did not
meet expectations," a shortfall which was "largely due to non-recurdding costs
in our seed business."
These included currency movements and a $170m writedown
announced in October on forecasts for a surplus in corn seed.
Ironically, that followed a $175m hike in corn seed
production costs following the US drought in 2012, which many farmers had
feared would lead to a shortage of seed to plant for last year's crop.
The group made no mention in its statement of the rumpus
over its MIR-162 genetically modified corn at the centre of a series of
rejections of US cargos by China, which has yet to approve the variety.
Mr Mack forecast a better year ahead for Syngenta in 2014,
with sales growth forecast in line with that last year, and margins to "improve
with lower seeds costs".
"We are determined to intensify our focus on cost and
capital efficiency while maintaining our ambitious growth objectives," he added,
forecasting a rise to $1.5bn in free cash flow before acquisitions this year.
Syngenta proposed raising its dividend by SFr0.50 to
SFr10.00 despite the lower profits, a reflection of "confidence in cash
generation for the current year".
However, Syngenta shares fell to SFr304.60, their lowest
since June last year, before recovering some ground to stand at SFr306.50 in midday
deals, down 3.6% on the day.