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Syngenta warns of 'slowing growth' in GM seeds sector

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Syngenta warned of a slowdown in the market for genetically modified crops as the ag giant, being pursued by biotech seeds champion Monsanto, unveiled better-than-expected profits and hailed its agrichemicals portfolio.

The Swiss-based group, for which Monsanto has unveiled a $45bn takeover offer, said that the market for GM crops was "slowing", having reached "saturation levels" in markets where the technology is permitted, and still being restricted in the likes of Europe, Japan and Russia.

Already, well over 90% or canola, corn, cotton and soybeans grown in the US is from biotech seed.

In South America, the technology has penetrated more than 80% of the Argentine and Brazilian corn markets, and in corn has a 93% share in Brazil and 100% share in Argentina.

'Game changing'

However, the group said that its own revenues from GM seed traits would more than double over the next five years, to approaching $1bn, fuelled by China's approval of its MIR 162 corn seed, which offers particular protection against insect pests, and has been licensed to rivals including Monsanto.

MIR 162 was the seed at the centre of China's rejection of a series of cargos of US corn last year, provoking losses for merchants and a series of lawsuits lodged against Syngenta, before the technology was approved by Beijing officials.

Furthermore, Syngenta underlined its progress in developing higher yielding seed through non-GM technologies, including in barley, where it claimed peak sales potential of more than $500m for its hybrid seed.

In wheat seed, it boasted of "game changing non-GM technology" with peak sales potential of more than $3bn a year.

'Excellent grower reception'

Syngenta, the world's biggest agrichemicals company, also underlined the potential of its sprays portfolio too, revealing a further nine products with combined peak sales potential of more than $3.6bn a year.

The list excluded Acuron, a herbicide for clearing weeds from corn fields, for which Syngenta doubled to $500m its estimate for peak sales potential, after a "successful" launch in the US, where it received approval in April.

The "excellent grower reception" for the product "reinforces our confidence in the innovation upturn that is now underway", said Mike Mack, the Syngenta chief executive.

Currency headwinds

The comments came as the group unveiled earnings before interest, tax, depreciation and amortisation (ebitda) of $2.00bn for the January-to-June half.

While down 5% year on year, the decline reflected the strength of the dollar, with ebitda up 21% excluding currency moves.

First-half earnings per share of $14.70, while down 6% year on year, beat analysts' expectations, as did sales of $7.63bn, a drop of 10% year on year on raw terms, but an increase of 3% excluding foreign exchange fluctuations.

"Our performance in the first half of the year demonstrates our ability to improve profitability even in a difficult market environment," Mr Mack said, adding that Syngenta was standing by expectations of flat sales and ebitda this year, excluding currency moves.

The group was "firmly on track" to achieve its target of an ebitda margin of 24-26% in 2018.

Syngenta shares stood 1.4% lower at SFr398.00 in morning deals.

By Agrimoney.com

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