Maize products boost Amvac in 2007

The maize soil insecticides, Counter (terbufos) and Aztec (tebupirimfos + cyfluthrin), contributed "significantly" to the revenues of US agrochemical company American Vanguard (Amvac - Los Angeles, California) in the fourth quarter of 2007. The company's sales were up by 25.5% to $69.1 million during the three-month period. Sales of the cotton insecticide, Bidrin (dicrotophos), also rose in the fourth quarter, but full-year sales were down due to acreage shifts from cotton to maize, the company points out.

Amvac's maize insecticides and the maize herbicide, Impact (BASF's topramezone), were important contributors to the company's 11.8% rise in full-year sales to $216.7 million. Amvac's maize soil insecticide sales rose by 11% in 2007, with sales of all maize products up by 50%, says the company's president and CEO, Eric Wintemute. The business also saw improved sales of products for use on potatoes, vegetables, fruit and specialty turf, ornamental and consumer markets. The latest results demonstrate "considerable improvement over 2006", Mr Wintemute notes.

The company points to significant increases in fourth-quarter and full-year earnings. Its gross profit margin rose from 44% in the fourth quarter of 2006 to 45% in the same period last year. For the year as whole, the gross profit margin increased from 43% to 44%. The figures reflect a "premium product mix" and efforts to pass on rising raw material costs, notes chief financial officer James Barry. Operating expenses were up in the fourth quarter because of sales rebate programmes and higher fuel costs, but full-year operating expenses as a percentage of sales remained steady at about 27.5%, Mr Barry adds.

Amvac continued its strategy last year of acquiring products with a view to "capitalising on our ability to integrate them operationally and refresh their market position", Mr Wintemute points out. The acquisition of Chemtura's quintozene-based fungicides, Turfcide and Terraclor , are expected to improve Amvac's position in the turf and ornamental sector and to boost its international sales. The purchase of the US Orthene (acephate) insecticide business from Sumitomo Chemical's subsidiary, Valent, should strengthen Amvac's position in tobacco, vegetable and specialty markets. It would also broaden the company's offering to the cotton market "in a way that may offset some of the declines that we have seen as a result of acreage shifting from cotton to corn", Mr Wintemute says.

Amvac has been manufacturing quintozene for Chemtura at its Los Angeles plant since 1991. It is formulated at the facility in Marsing, Idaho, which Amvac acquired from Bayer CropScience last month. Amvac took a number of steps last year to increase its production capacity. It is creating a metam fumigant manufacturing unit at its facility in Axis, Alabama, which is due to come onstream in the third quarter of 2008. The Axis site is well placed to serve the south-eastern US and it makes more sense to supply these markets from there than from Los Angeles, Mr Wintemute points out. Amvac exports metam to Central and South America from Los Angeles, but it has yet to determine the logistics of exporting from the Axis site.

The company acquired an insecticide manufacturing facility in Hannibal, Missouri, from BASF last year. The unit produces Counter and Thimet (phorate), which Amvac acquired from BASF in 2005 and 2006, respectively. The facility is "not running anywhere near capacity" and could be used to produce similar insecticides, such as Orthene, Mr Wintemute indicates. The product has historically been sourced from Asia, where "we are beginning to see some pretty significant price increases", the CEO points out. Amvac's strategy of building up its US production capacity allows closer control of costs over the long term, Mr Wintemute adds.

outlook
The new product and manufacturing facility acquisitions contribute to "considerable optimism" about the outlook for 2008. The company expects to see further market share gains for Impact, following its recognition as a complementary product to Monsanto's Roundup (glyphosate). Amvac remains positive about the prospects for its maize soil insecticides despite the dominance of genetically modified insect-resistant maize. The company continues to promote its products for use on non-GM maize refuge areas and sees yield benefits from secondary pest control on GM maize.

Relatively dry weather conditions in 2006 and 2007 hampered sales of Amvac's mosquito control product, Dibrom (naled). However, the company hopes that more normal rainfall patterns will permit some recovery in 2008. Amvac's international sales increased every quarter last year and the company aims to extend its penetration of Central and South American markets this year.

          American Vanguard's results ($ 000) 

Year ended Dec 31st        2006 %    change         2007 

Sales                            193,771     +11.8        216,662 

Operating expenses        53,142     +12.4         59,717 

Operating income          29,216     +23.3         36,013 

Net income                   15,448     +21.2         18,728 

Fourth quarter 

Sales                            55,062     +25.5         69,087 

Operating expenses        13,369     +35.4         18,096 

Operating income          10,697     +19.9         12,829 

Net income                 5,409     +39.8          7,564