Shares in Syngenta fell to their lowest in nearly eight months after UBS ditched its "buy" rating on the stock, citing weakness in agrichemical markets, and a potential strategy change at rival Bayer.

UBS analysts cut their forecast for Syngenta's earnings per share by 10%, and slashed their price target for the stock by 19% to SFr268, giving it a "neutral" rating.

The revisions reflected a slower-than-expected rundown in the high inventories with which chemicals distributors started 2010, as Europe's cold spring delayed farmers' progress in spring sowings.

"We had hoped that a combination of moderate price rebates and favourable weather would clean out excess fungicide and herbicide stock," the investment bank said in a report.

"Our channel checks suggest that there was some destocking but that has some way to go."

With Syngenta the world's biggest crop protection chemicals group, boasting a market share of about 20%, the Swiss-based company "will find it hard to avoid being drawn down by the negative momentum" in the sector.

Bayer changes

Furthermore, the weakness of the euro against the dollar might tempt some European groups to maintain discounts in the North American market, where UBS saw price cuts reaching 10% compared with a previous forecast of 3%.

In particular, Bayer, the German industrial conglomerate, may change tack under its new chief executive, Marijn Dekkers, who succeeds Werner Wenning on October 1 as part of a reshuffle which is also changing leadership of the agrichemicals unit

"Whilst Bayer's strategy is in flux, the company might possibly focus on growth compared to a previous commitment to margins," the report said.

The market was difficult to read, meaing that bank's "conviction levels and visibility have deteriorated rapidly over the past few weeks".

Share weakness

UBS added that the magnitude of its earnings downgrade left it no choice but to advise investors "to go into wait and see mode".

Syngenta shares closed down 2.6% at SFr236.00, their lowest since early October.

The stock has dropped 18% this year, undermined by the weak agrichemicals market, which has also prompted declines in rivals such as Monsanto, the US seeds and sprays giant which earlier this week unveiled a 45% drop in quarterly profits.