RSS
Twitter
Linked In
News In
News
Linked In
RSS
https://twitter.com/Agrimoney
http://www.newsnow.co.uk/h/Industry+Sectors/Agriculture

You are viewing your 1 complimentary article.

Register now to receive full access.

Already registered?

Login | Join us now

Syngenta shares hit 8-month low as Brazil woes sting

Twitter Linkedin eCard

Syngenta shares fell to their lowest since January, extending to 24% their tumble since Monsanto pulled its bid, as the agrichemicals group unveiled a bigger-than-expected drop in sales, deepening the cloud over the sector.

The Swiss-based group, the world's top agrichemicals company, reported sales down 12.1% at $2.62bn for the July-to-September quarter, falling well short of the figure $2.82bn that investors had expected.

And the decline would have been larger were it not for a change of contract terms in Brazil, which means that Syngenta now books sales to distributors on delivery instead of when the products are sold on to growers.

Although Latin American sales were reported 3% lower at $1.23bn, Syngenta said that they fell by an underlying 8%, even before the impact of a weak real was taken into account.

'Challenging conditions'

Indeed, Syngenta underlined the "challenging conditions" in Latin America during the quarter, in comments which come two days after US-based rival FMC Corp cut its earnings forecast for a second time this year, citing weak conditions in Brazil.

Last week, Platform Specialty Products, the owner of agrichemicals group Arysta, cut its profits outlook for a second time, while Monsanto announced 2,600 job cuts and issued an earnings forecast well short of market expectations.

Syngenta said that the in Brazil, "the impact on the market of low commodity prices was exacerbated by the sharp depreciation of the real… and by liquidity constraints".

The weaker real, while protecting growers from lower values of dollar-denominated crops, has raised the cost of imported inputs.

Syngenta also flagged "tight" credit in Argentina, where "growers continue to be penalised by export taxes on soybeans". Farmers are hoping that elections later this month will herald a less punitive taxation regime.

Licensing deal

The July-to-September period is particularly important for Latin American business, being the run-up to the southern hemisphere spring sowings period, ahead of harvests early in 2016.

Indeed, Mike Mack, the Syngenta chief executive, said that the group's performance in the region for the full year was "unlikely to meet our original expectations".

In a boost to its profit hopes, the group also unveiled a $200m upfront payment from seed groups KWS and Limagrain over licensing Syngenta genetically modified corn seed technology.

"The creation of additional value through trait outlicensing…. will be an important driver in improving the profitability of our seeds portfolio," said Davor Pisk, the Syngenta chief operating officer.

The group acknowledged that its soybean seed operations had faced a "competitive market with lower-than-expected acreage".

Nonetheless, Syngenta forecast a "mid-single digit decline" in full year group earnings before interest, tax, depreciation and amortisation (ebitda), compared with a previous forecast of a result at "around the 2014 level".

Market reaction

The statement received a cool response from investors, who sent Syngenta shares down 3.3% to SFr288.50 in early deals, their lowest level since late January.

It is also well below the SFr470 per share that Monsanto had proposed in its outline bid.

"Currency continues to be a significant headwind," said Credit Suisse analysts, estimating that, excluding the licensing deal, Syngenta would have been looking at a "10% reduction to guidance, largely due to currency and a deterioration in Latin American market.

"We expect a negative share price reaction to the guidance reduction - albeit challenging markets were flagged by US peers in recent weeks."

Shares in Syngenta - which has, since Monsanto walked away, unveiled a share buyback of more than $2bn and put its vegetable seeds arm up for sale - recovered some ground in late morning deals to stand at SFr289.90, a drop of 2.8% on the day.

By Agrimoney.com

Twitter Linkedin eCard
Related Stories

World phosphate, potash shipments to grow in 2018, helped by Chinese needs

Mosaic forecasts further demand expansion, as it heralds a "transformational year" for its own fortunes, after a 2017 marred by a one-time tax charge

Deere lifts sales hopes - even as it unveils biggest loss in 25 years

The maker of John Deere tractors flags "strengthening" market conditions, but swallows a huge writedown prompted by US tax retorms

Plant Impact agrees takeover by Croda, after failure of Bayer contract

The crop enhancement group, floored by the failure of a supply deal with Bayer, agrees a takeover by a maker of chemicals from anti-wrinkle creams to floor coatings

Cautions mount over cost to US agriculture of trucking safety clampdown

US officials reference tightened trucking rules in a cotton export forecast downgrade, while Tyson Foods forecasts an extra $200m in costs
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© Agrimoney.com 2017

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