PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 11:02 UK, 5th Feb 2014, by Agrimoney.com
Syngenta to cut $1bn in costs after earnings fall

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 low.

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%.

Margin falls

Nonetheless, Mr Mack acknowledged that, for 2015, Syngenta looked like delivering an ebitda margin "at the lower end" of a target range of 22-24%.

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 before.

After-tax earnings dropped 11.0% to $1.64bn, below market forecasts for a $1.7bn result.

'Did not meet expectations'

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.

Dividend raised

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.

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