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Syngenta’s agchem sales down 7% in Q2 2016
Jul. 26, 2016
Syngenta’s crop protection sales were down by 7% to $2,640 million in the second quarter ended on June 30th, and seed business dropped by 11% to 565 million. Total group sales decreased by 7.3% to $3,352million.
For the first half year of 2016, crop protection sales were down by7.7% to $5,244 million. Seeds sales fell by 6.6% to $1,544 million. Total group sales decreased by 7.1% to $7,094 million.
According to Syngenta CEO Erik Fyrwald, “In the short term, the industry continues to experience tough market conditions, with low commodity prices and economic and currency challenges. I am pleased that we took early action to improve operating efficiency with the Accelerating Operational Leverage program, which this year is again expected to deliver savings ahead of target. ”
“The transaction with ChemChina will ensure continuing choice for growers at a time of industry consolidation. We are having constructive discussions with all regulatory authorities which reinforce our confidence in closing the transaction by the end of the year. ChemChina’s long term commitment to the business will underpin our ongoing investment in innovation, so that growers will continue to benefit from our broad technology platforms for decades to come.”
Regional sales In H1 2016
Europe, Africa and the Middle East: Growth in the region in the first half was driven by an excellent performance in the CIS, with further expansion of strong market positions in crop protection and seeds. Volumes increased in both Russia and Ukraine, with further price increases implemented to offset the impact of currency depreciation. Elsewhere in Europe, adverse weather conditions impacted the business in the second quarter. North-west Europe in particular was affected by heavy rainfall which reduced applications of crop protection products: in Germany, for example, the market registered a double digit decline for the first half.
North America: Crop protection sales were only slightly lower despite challenging grower economics and the deliberate reduction in glyphosate. New product introductions made a significant contribution, with the launch of the fungicides SOLATENOL™ and ORONDIS™ and the ramp-up of ACURON™ in the corn herbicide market. Seeds sales were lower in the second quarter, mainly due to a competitive soybean market.
Latin America: Excluding the impact of the change in sales terms, sales were up 3 percent, despite a significant decline in Venezuela. In fungicides, ELATUS™ continues to perform well against soybean rust in Brazil. Insecticides sales continue to be constrained by the high level of channel inventories and by soybean trait adoption. Seeds sales showed strong growth driven by second season corn in Brazil and by higher corn acreage in Argentina.
Asia Pacific: Weather conditions started to improve towards the end of the second quarter but the impact of El Niño on first half performance was still significant. Severe drought in Vietnam led to a reduction in rice acreage and to lower investment on those acres that were planted. Conditions were also dry in the Philippines and in Thailand, where the rice market has been further affected by changes in government policy.
Sales by product category
Selective herbicides: major brands ACURON™, AXIAL®, CALLISTO® family, DUAL MAGNUM®, BICEP® II MAGNUM, FUSILADE® Max, FLEX®, TOPIK®
Sales were slightly lower due to Latin America, where they were affected by a decline in Venezuela. In North America the main growth driver was the continued adoption by US growers of the corn herbicide ACURON™. In Europe, Africa and the Middle East, growth was driven by strong demand in the CIS, which more than offset the impact of adverse weather in Central Europe.
Non-selective herbicides: major brands GRAMOXONE®, TOUCHDOWN®
2016 is the final year in which TOUCHDOWN® sales are being deliberately reduced in order to improve profitability. At the same time glyphosate prices continue to decline. There is also some price weakness in GRAMOXONE®, with volumes affected by dry weather in ASEAN countries.
Fungicides: major brands ALTO®, AMISTAR®, BONTIMA™, BRAVO®, ELATUS™, MODDUS®, ORONDIS™, REVUS®, RIDOMIL GOLD®, SCORE®, SEGURIS®, TILT®, TRIVAPRO™, UNIX®
Double digit growth was achieved in North America as new products ORONDIS™ and TRIVAPRO™ (based on SOLATENOL™) saw strong momentum. Volumes were lower in Europe, due to exceptionally wet weather, and in Asia Pacific, where rice growers faced severe drought. ELATUS™ continued to perform strongly, with double-digit growth in Brazil.
Insecticides: major brands ACTARA®, DURIVO®, FORCE®, KARATE®, PROCLAIM®, VERTIMEC®
Insecticides saw growth across the northern hemisphere, with particularly good performances by ACTARA®, DURIVO® and KARATE® in North America. In Asia Pacific and Latin America, sales were affected by low insect pressure, which resulted in a continuing high level of channel inventories in Brazil.
Seedcare: major brands AVICTA®, CELEST®, CRUISER®, DIVIDEND®, FORTENZA®, MAXIM®, VIBRANCE®
Emerging market growers continue to adopt new technology, with notable growth for CRUISER® in the CIS and South East Europe, and MAXIM® in Latin America South. Sales in Canada staged a strong recovery, led by the SDHI fungicide VIBRANCE®, which was more than offset by lower treatment intensity and higher inventory in the USA.
Corn and soybean: major brands AGRISURE®, GOLDEN HARVEST®, NK®, VIPTERA™
Corn branded sales were up in the USA with strong late season orders reflecting increased planted acreage. Corn trait licensing income was lower due to the phasing of payments. The impact of lower acreage in Europe was largely offset by a strong start to the summer season in Latin America and the adoption of VIPTERA™ trait technology. Soybean sales were lower in a competitive US environment.
Diverse field crops: major brands NK® oilseeds, HILLESHÖG® sugar beet
Sunflower sales grew strongly in the CIS countries and in South East Europe. In addition to increased acreage, growers continue to adopt superior genetics with a proven track record on the field.
Vegetables: major brands ROGERS®, S&G®
Demand was strong in Latin America, notably in Brazil and Mexico, as favorable currency rates improved growers’ profitability in export markets. Broad-based price increases were achieved in all regions, reflecting the ability to capture value from a high quality portfolio of hybrids.
Accelerating Operational Leverage
The Accelerating Operational Leverage (AOL) program, announced in February 2014, targets savings of $1 billion by 2018 through a combination of cost savings, efficiencies and growth leverage. The program has three main pillars: Commercial; Research and Development; and Global Operations. The program’s aim is to optimize the cost structure across the business in order to attain industry-leading efficiency. In 2015, the company exceeded its first year target with savings of $300 million. The company achieved savings of $140 million in the first half 2016 and is on track to achieve full year savings of $300 million, again ahead of the original target.
Outlook
Erik Fyrwald, Chief Executive Officer, said:“After a resilient first quarter, market conditions were more difficult in the second quarter, notably for the high margin Europe, Africa and the Middle East business. Looking at the prospects for the second half, we expect a return to growth in Asia Pacific with the recent easing of drought conditions in several countries. In Latin America, growers in Brazil continue to face economic uncertainty and credit constraints, although their underlying profitability remains robust. Group sales for the year are expected to be slightly below last year at constant exchange rates; reported sales are likely to show a mid-single digit decline due to the continuing strength of the dollar.
“We remain fully on track with the measures we are taking on costs, with projected AOL savings for the full year of $300 million and a further reduction in raw material costs. This, together with our successful management of currency risks during the forthcoming Latin American season, should enable us to maintain the full year EBITDA margin at around last year’s level. Our ongoing focus on working capital management underpins our expectation of an increase in free cash flow for the year to over $1 billion1.
“Our new products continue to perform strongly even in difficult markets, and we look forward to another major new launch - ADEPIDYN™ - towards the end of this year, pending registration. Further enhancements in sales force effectiveness will also enable us to grow market share on a sustainable basis.”
For the first half year of 2016, crop protection sales were down by7.7% to $5,244 million. Seeds sales fell by 6.6% to $1,544 million. Total group sales decreased by 7.1% to $7,094 million.
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According to Syngenta CEO Erik Fyrwald, “In the short term, the industry continues to experience tough market conditions, with low commodity prices and economic and currency challenges. I am pleased that we took early action to improve operating efficiency with the Accelerating Operational Leverage program, which this year is again expected to deliver savings ahead of target. ”
“The transaction with ChemChina will ensure continuing choice for growers at a time of industry consolidation. We are having constructive discussions with all regulatory authorities which reinforce our confidence in closing the transaction by the end of the year. ChemChina’s long term commitment to the business will underpin our ongoing investment in innovation, so that growers will continue to benefit from our broad technology platforms for decades to come.”
Regional sales In H1 2016
|
|
Europe, Africa and the Middle East: Growth in the region in the first half was driven by an excellent performance in the CIS, with further expansion of strong market positions in crop protection and seeds. Volumes increased in both Russia and Ukraine, with further price increases implemented to offset the impact of currency depreciation. Elsewhere in Europe, adverse weather conditions impacted the business in the second quarter. North-west Europe in particular was affected by heavy rainfall which reduced applications of crop protection products: in Germany, for example, the market registered a double digit decline for the first half.
North America: Crop protection sales were only slightly lower despite challenging grower economics and the deliberate reduction in glyphosate. New product introductions made a significant contribution, with the launch of the fungicides SOLATENOL™ and ORONDIS™ and the ramp-up of ACURON™ in the corn herbicide market. Seeds sales were lower in the second quarter, mainly due to a competitive soybean market.
Latin America: Excluding the impact of the change in sales terms, sales were up 3 percent, despite a significant decline in Venezuela. In fungicides, ELATUS™ continues to perform well against soybean rust in Brazil. Insecticides sales continue to be constrained by the high level of channel inventories and by soybean trait adoption. Seeds sales showed strong growth driven by second season corn in Brazil and by higher corn acreage in Argentina.
Asia Pacific: Weather conditions started to improve towards the end of the second quarter but the impact of El Niño on first half performance was still significant. Severe drought in Vietnam led to a reduction in rice acreage and to lower investment on those acres that were planted. Conditions were also dry in the Philippines and in Thailand, where the rice market has been further affected by changes in government policy.
Sales by product category
|
Selective herbicides: major brands ACURON™, AXIAL®, CALLISTO® family, DUAL MAGNUM®, BICEP® II MAGNUM, FUSILADE® Max, FLEX®, TOPIK®
Sales were slightly lower due to Latin America, where they were affected by a decline in Venezuela. In North America the main growth driver was the continued adoption by US growers of the corn herbicide ACURON™. In Europe, Africa and the Middle East, growth was driven by strong demand in the CIS, which more than offset the impact of adverse weather in Central Europe.
Non-selective herbicides: major brands GRAMOXONE®, TOUCHDOWN®
2016 is the final year in which TOUCHDOWN® sales are being deliberately reduced in order to improve profitability. At the same time glyphosate prices continue to decline. There is also some price weakness in GRAMOXONE®, with volumes affected by dry weather in ASEAN countries.
Fungicides: major brands ALTO®, AMISTAR®, BONTIMA™, BRAVO®, ELATUS™, MODDUS®, ORONDIS™, REVUS®, RIDOMIL GOLD®, SCORE®, SEGURIS®, TILT®, TRIVAPRO™, UNIX®
Double digit growth was achieved in North America as new products ORONDIS™ and TRIVAPRO™ (based on SOLATENOL™) saw strong momentum. Volumes were lower in Europe, due to exceptionally wet weather, and in Asia Pacific, where rice growers faced severe drought. ELATUS™ continued to perform strongly, with double-digit growth in Brazil.
Insecticides: major brands ACTARA®, DURIVO®, FORCE®, KARATE®, PROCLAIM®, VERTIMEC®
Insecticides saw growth across the northern hemisphere, with particularly good performances by ACTARA®, DURIVO® and KARATE® in North America. In Asia Pacific and Latin America, sales were affected by low insect pressure, which resulted in a continuing high level of channel inventories in Brazil.
Seedcare: major brands AVICTA®, CELEST®, CRUISER®, DIVIDEND®, FORTENZA®, MAXIM®, VIBRANCE®
Emerging market growers continue to adopt new technology, with notable growth for CRUISER® in the CIS and South East Europe, and MAXIM® in Latin America South. Sales in Canada staged a strong recovery, led by the SDHI fungicide VIBRANCE®, which was more than offset by lower treatment intensity and higher inventory in the USA.
Corn and soybean: major brands AGRISURE®, GOLDEN HARVEST®, NK®, VIPTERA™
Corn branded sales were up in the USA with strong late season orders reflecting increased planted acreage. Corn trait licensing income was lower due to the phasing of payments. The impact of lower acreage in Europe was largely offset by a strong start to the summer season in Latin America and the adoption of VIPTERA™ trait technology. Soybean sales were lower in a competitive US environment.
Diverse field crops: major brands NK® oilseeds, HILLESHÖG® sugar beet
Sunflower sales grew strongly in the CIS countries and in South East Europe. In addition to increased acreage, growers continue to adopt superior genetics with a proven track record on the field.
Vegetables: major brands ROGERS®, S&G®
Demand was strong in Latin America, notably in Brazil and Mexico, as favorable currency rates improved growers’ profitability in export markets. Broad-based price increases were achieved in all regions, reflecting the ability to capture value from a high quality portfolio of hybrids.
Accelerating Operational Leverage
The Accelerating Operational Leverage (AOL) program, announced in February 2014, targets savings of $1 billion by 2018 through a combination of cost savings, efficiencies and growth leverage. The program has three main pillars: Commercial; Research and Development; and Global Operations. The program’s aim is to optimize the cost structure across the business in order to attain industry-leading efficiency. In 2015, the company exceeded its first year target with savings of $300 million. The company achieved savings of $140 million in the first half 2016 and is on track to achieve full year savings of $300 million, again ahead of the original target.
Outlook
Erik Fyrwald, Chief Executive Officer, said:“After a resilient first quarter, market conditions were more difficult in the second quarter, notably for the high margin Europe, Africa and the Middle East business. Looking at the prospects for the second half, we expect a return to growth in Asia Pacific with the recent easing of drought conditions in several countries. In Latin America, growers in Brazil continue to face economic uncertainty and credit constraints, although their underlying profitability remains robust. Group sales for the year are expected to be slightly below last year at constant exchange rates; reported sales are likely to show a mid-single digit decline due to the continuing strength of the dollar.
“We remain fully on track with the measures we are taking on costs, with projected AOL savings for the full year of $300 million and a further reduction in raw material costs. This, together with our successful management of currency risks during the forthcoming Latin American season, should enable us to maintain the full year EBITDA margin at around last year’s level. Our ongoing focus on working capital management underpins our expectation of an increase in free cash flow for the year to over $1 billion1.
“Our new products continue to perform strongly even in difficult markets, and we look forward to another major new launch - ADEPIDYN™ - towards the end of this year, pending registration. Further enhancements in sales force effectiveness will also enable us to grow market share on a sustainable basis.”
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