Cheminova agrochemical sales up 8% in Q2 2013

Cheminova’s agrochemicals sales posted a 7.8% increase to DKK 1,763 million in the second quarter ended June 30, 2013. Growth was driven by price increases of approx. 3%, while the effect of exchange rate changes represented a negative impact of just over 2% or DKK 40 million, particularly due to decreased Brazilian reals(BRL) and Indian rupees(INR) exchange rates. The divestment of Stähler Switzerland reduced revenues at DKK 31 million.

Cheminova’s sales results (DKK million)
Q2 ended Jun. 30	Q2 2013	Q2 2012	%change	Six-month 2013	Six -month 2012	%change
Sales	1,851	1,727	+7.2	3,521	3,337	+5.5
-Agrochemicals	1,763	1,635	+7.8	3,337	3,145	+6.1
EBITDA*	268	250	+7.2	529	437	+21.1
EBIT**	224	208	+7.7	432	356	+21.3
* earnings before interest and tax depreciation and amortization ** earnings before interest, tax

Consolidated revenues were up by 7.2% to DKK 1,851 million. Consolidated earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 7.2% to DKK 268 million. EBIT was up 7.7% to DKK 224 million. The gross profit improved at DKK 580 million (DKK 532 million), and the gross margin was up 0.5 percentage points at 31.3% (30.8%). The gross margin primarily increased through an improved product mix, while the higher sales prices offset the increase in energy and raw materials costs.

Agrochemical sales for the first half year rose by 6.1% to DKK 3,337 million. The divestment of Stähler Switzerland decreased revenues of DKK 109 million. The lower exchange rates for BRL and INR reduced revenue by DKK81 million for first half year of 2013.

Six-month consolidated EBITDA improved by 21.1% to DKK 529 million corresponding to an EBITDA margin of 15.0% (13.1%). EBIT rose by 21.3% to DKK 432 million corresponding to an EBIT margin of 12.3% (10.7%).

Sales by region

Cheminova noted :”the crop protection industry is favored by a growing demand for food and high crop prices, which is encouraging farmers to protect their crops through the increased use of crop protection products. Despite a late start to the season in the northern hemisphere, which led to higher distribution channel inventories in the first quarter o f 2013, the industry experienced growth in the second quarter of 2013.”

Cheminova’s sales by region (DKK million)
Region	Q2 2013	Q2 2012	%change	Six-month 2013	Six-month 2012	%change
Europe	858	830	+3.4	1,744	1,685	+3.5
North America	188	163	+15.3	369	274	+34.7
Latin America	286	216	+32.4	563	530	+6.2
International*	429	408	+5.1	662	660	+0.3
Global activities	90	110	-18.2	183	188	-2.7
Total	1851	1727	+7.2	3,521	3,337	+5.5
*Covering India, Australia, New Zealand, the CIS countries: Russia, Ukraine etc., Asia,the Middle East and Africa

Europe was Cheminova's largest business region, which posted a 3.5% increase to DKK 858 million in the second quarter of 2013, accounting for around 46% of total sales despite northern Europe being affected by cold and wet weather. “The market in Eastern Europe and the companies in France and Germany continued the positive developments. Like the smaller companies in Eastern Europe, the company in Poland experienced increasing sales and improved earnings. In France, recently introduced products such as pethoxamide and epoxiconazole contributed to a considerable improvement in earnings. In Germany, the restructuring of Cheminova Deutschland has strengthened the business, and a successful introduction of trinexapac contributed to improved earnings.” said Cheminova.

Sales in North America , contributing to about 10% of total sales, rose by 15.3% to DKK 188 million in the second quarter, even though cold weather resulted in a late growing season start. Increased market penetration with more differentiated products, including selective herbicides and gamma-cyhalothrin, have in combination with the successful introduction of a new mixture based on flutriafol contributed to growth. A strong demand for glyphosate at higher prices, but continued low margins, increased revenue. Traditional OP insecticides such as dimethoate, chlorpyrifos and malathion also impacted sales positively. New product introductions, including fungicides based on azoxystrobin and several selective herbicides, are expected to strengthen the market position in the region further in the years to come.

Sales in Latin America, making up around 16% of total sales in this quarter, considerably increased by 32.4% to DKK 286 million.Growth is especially driven by positive developments in Brazil, where the increasing demand for crop protection products is driven by the high crop prices. The market penetration for products based on gamma-cyhalothrin, flutriafol and azoxystrobin continues, while the market for fluazinam declined due to fewer outbreaks of white mold in soybeans.The region maintains focus on improving the product portfolio and earnings by introducing new products and phasing out less profitable products.

The international region (India, Australia, New Zealand, the CIS countries: Russia, Ukraine etc., Asia, the Middle East and Africa), accounting for 23% of total sales of this quarter. Sales recorded a 5.1% rise to DKK 429 million. “Satisfactory monsoon rains in India ensured a positive start to the growing season. In Australia, the outlook for the coming season is more positive than in 2012, and the ongoing improvement of the product portfolio is expected to support earnings in the competitive market.” Cheminova said.

Sales by category

Insecticides were the largest category, accounting for 36.8% of agrochemical sales. Sales rose up by 6.4% to DKK 648 million.Traditional products such as chlorpyrifos, malathion and dimethoate also developed positively. Several of the newer products experienced healthy growth, including differentiated products based on gammacyhalothrin, thereby leading to increased activity levels in H1 on the production plant at the factory in Denmark.

Cheminova’s sales by category (DKK million)
Category	Q2 2013	Q2 2012	%change	Six-month 2013	Six -month 2012	%change
Herbicides	639	575	+11.1	1,208	1,114	+8.4
Insecticides	648	609	+6.4	1,199	1,139	+5.3
Fungicides	332	339	-2.1	654	654	0
others	144	112	+28.6	276	238	+16.0
Total	1763	1635	+7.8	3,337	3,145	+6.1

Sales of herbicides increased by 11.1% to DKK 639 million and comprised 36.2% of agrochemical sales. The sulfonylurea herbicides have developed positively. Also, the selective herbicides based on the active ingredient pethoxamide experienced satisfactory growth. Glyphosate accounted for just over 10% of revenue due to higher market prices.

Fungicide sales were down by 2.1% to DKK332 million and accounted for 18.8% of agrochemical sales. Flutriafol performed particularly well, especially following a successful introduction in a new mixture in the US. The market penetration with azoxystrobin continues with registrations in several countries, and a registration application has been submitted in the US. Products based on the active ingredient epoxiconazole also experienced solid growth in Europe.

Sales of other crop protection products, including micronutrients, growth regulators, etc. have developed satisfactorily accounting for 8.2% of agrochemical sales in this quarter among other as a result of a successful introduction of trinexapac in the first markets in Europe.

Outlook

Cheminova anticipates that the market conditions in H2 will continue to be positive with a healthy end to the season in the northern hemisphere in addition to continued high crop prices, which raises expectations for a good season in i.a. Latin America where large parts of the sales will happen towards the very end of the calendar year.

Cheminova maintains the previously announced outlook for 2013 of growth of approx. 10%, with revenue of up towards DKK 6.8 billion and an EBITDA margin of approx 12%.