Linked In
News In
Linked In

You are viewing your 1 complimentary article.

Register now to receive full access.

Already registered?

Login | Join us now

Brazil's agrichemicals downturn not over yet, says Bayer

Twitter Linkedin eCard

Bayer underlined the continued difficulties for agrichemicals groups in Latin American even as the drugs-to-seed group unveiled forecast-beating results, and hailed as "entirely logical" its $66bn takeover of Monsanto.

The German-based conglomerate, reporting a 1.2% decline to $2.08bn in sales from its agriculture division in the July-to-September quarter, revealed that the drop reflected a 6.3% decline in Latin American takings, which more than offset gains in Europe, Asia and North America.

Indeed, an "ongoing weak environment" in the sector was "particularly" evident in Latin America, the group said, highlighting headwinds in Brazil, the region's most important agriculture market.

"We again registered a substantial decrease in sales in Brazil, due to the difficult market and liquidity situation," Bayer said, adding that "business contracted at both insecticides and herbicides".

'Low insect pressure'

The comments extend a long trend of downbeat assessments of the farm sprays market in Latin America, with a number of companies, such as Syngenta, blaming Brazil in particular for earnings weakness last year.

And they tally with comments on Tuesday from rival DuPont, which flagged "lower crop protection volumes [in Brazil] due to the continued low pest pressure and high inventory in the industry".

Jim Collins, the DuPont executive vice-president, agriculture said that "we've got low insect pressure still in that [Latin America] market", with the expansion of crops genetically modified to resist insect pests also "putting downward pressure on that".

He added, that "we're just going to need some time to work through" elevated inventories in the region, which was suffering "a little credit tightness" too.

Also on Tuesday, Syngenta, the world's top agrichemicals group, flagging a 10% drop in Latin America sales in the July-to-September period, said that "in Brazil, volumes continued to be affected by high levels of insecticide inventories, with pest pressure remaining low and increased soybean trait adoption".

'Very encouraging'

However, in seeds Bayer did flag improvement in soybean products in Latin America, saying that its "business developed… very encouragingly" in the market in a particularly important period, coming ahead of the ongoing sowing season.

Syngenta flagged particularly strong Latin American corn seed sales in the latest quarter, while

DuPont, owner of the Pioneer seeds giant, also flagged strong corn seed sales in Latin America, saying that "farmers chose a stronger mix of Pioneer's newest corn hybrids, resulting in higher net corn [seed] price".

Brazilian, and Argentine, farmers are expected to raise corn seedings this year, encouraged by price signals, with the extra area seen coming in part at the expense of soybean plantings.

Results beat forecasts

Bayer's comments came as it unveiled underlying group earnings before interest, taxes, depreciation and amortisation (ebitda) up 6% at E2.68bn ($2.92bn), ahead of market expectations of a E2.52bn result.

Growth was fuelled by a 7% rise in sales of prescription drugs, led by stroke-prevention pill Xarelto and eye drug Eylea, with strong Chinese business helping the Covestro plastics arm to better-than-expected results.

The group raised its estimate for growth in underlying ebitda this year to a "high-single-digit percentage", from previous guidance of "mid- to high-single-digit percentage" expansion.

'Entirely logical'

Werner Baumann, the Bayer chief executive, said that the group "remained on a path of growth", and hailed too the "major strategic step forward" the company had taken with its $66bn takeover of Monsanto, which has been agreed by the US group's board, if not yet by global antitrust officials.

The takeover, which some investors have criticised as too expensive, "is entirely logical", Mr Baumann said, adding that "the two companies are a perfect fit and complement each other ideally".

In terms of antitrust approvals – a process revealed this week to be holding up ChemChina's purchase of Syngenta – Mr Baumann said that Bayer" intends to submit the necessary application in the US before the end of this year and in the European Union probably in the first quarter of 2017".

The deal was expected to close "by the end of 2017", he added.

Bayer shares stood 2.3% lower at E89.42 in lunchtime deals in Frankfurt.

By Mike Verdin

Twitter Linkedin eCard
Related Stories

Evening markets: Soybean futures gain, cotton prices jump on US data

Initial USDA forecasts for crop supply and demand for 2018-19 lift soy and cotton prices, but are not so well received in the cotton market

US soy exports to rebound to record top in 2018-19 - but corn, wheat volumes to fall

The USDA, in much-anticipated forecasts, sees a boost to soybean trade from Argentina’s woes. But corn, wheat exports face strong competition

Demand for US soybeans, soymeal tumbles, as prices soar

US export sales of soymeal hit a 2017-18 low, and those of soybeans turn negative. But in cotton, buyers step in as prices fall

World wheat output to fall this year - but not barley, corn, rapeseed harvests

But corn stocks, like wheat inventories, look like declining over 2018-19, the IGC says, in its first forecast for the grain
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© 2017 and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of AgriBriefing Ltd
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069