Cheminova’s revenue up 14% in Q1 2011

Agrochemical company Cheminova announced that continued transformation of the product portfolio and a more normal beginning of the year than in 2010 resulted in a satisfactory growth in revenue and earnings. Revenue for Q1 2011 totalled DKK 1,393 million (DKK 1,218 million), up 14% when measured in Danish kroner and 12% in local currencies. New products account for an increasing share of revenue, while glyphosate sales are declining, as expected.

Operating profit before amortisation and depreciation (EBITDA) was up at DKK 124 million (DKK 48 million), corresponding to an EBITDA margin of 8.9% (4.0%). Operating profit (EBIT) totalled DKK 80 million (DKK 3 million), while a profit before tax of DKK 46 million (DKK -15 million) was posted.

High crop prices are creating good market conditions for the industry, and the beginning of the year has been more normal than last year’s long and hard winter in the northern hemisphere. Consequently, market growth of approx. 10% was seen in Q1 2011 after a good start to the year in Europe and North America. Also, Latin America saw a strong end to the season. Growth is driven by increasing volumes, while prices have stabilized and in a few cases increased.

The transformation of the group’s product portfolio will be completed in 2011, after which a continued positive development of the product portfolio is expected. In Q1 2011, glyphosate accounted for 11% (18%) of revenue.

Growth is continuing for the new products, which saw a 20% increase in sales, bringing total growth to 14%.

Region Europe

Early-season sales have, as expected, been impacted by the positive outlook for 2011 as some of the sales cover the distributors’ and the farmers’ purchases for the coming season. Increasing revenue and higher earnings have been achieved through continued growth from the new products with their high contribution margins. The acquisition of Rogor® (dimethoate) in May 2010 also contributed to growth in Q1 2011. The local companies in the UK, Spain and Poland have posted more good results, while high cost levels have resulted in unsatisfactory earnings in Germany.

Region North America

The transformation of the product portfolio has resulted in a substantial decline in glyphosate sales, now accounting for a significantly lower share of revenue. It is highly satisfactory that – in line with the strategy – revenue from new products has been increased more than expected among other things through the successful introduction of flutriafol. The new products with their high contribution margins have resulted in improved earnings.

Region Latin America

In South America, the season has been positively impacted by high crop prices, which has led to improved results over the season. After a strong Q4 2010, revenue remains high towards the end of the season in Brazil, which also contributed to satisfactory growth in Q1 2011. However, lower contribution margin on some products and higher costs impacted by exchange rates have resulted in a minor reduction of earnings during this period.

Region International

Despite difficult climatic conditions in Australia, the results returned are satisfactory. The very positive developments in India continue, while sales to distributors in the CIS states are satisfactory. Growth is driven by the new products, contributing to improved earnings.

Sales by region

Regions	Q1 2011(DKK million)	Q1 2010(DKK million)	change%
Europe	761	620	+22.7
North America	73	142	-48.6
Latin America	223	203	+9.9
International	238	168	+41.7
Global activities	98	85	+15.3
Total	1,393	1,218	+14.4

Herbicides account for 33% (38%) of revenue following the decline in glyphosate sales. The new selective herbicides, such as pethoxamid, fenoxaprop and the sulphonylurea products, have shown satisfactory growth, primarily in Europe, which has contributed to increasing total sales of herbicides despite declining sales of glyphosate.

Insecticides’ share of sales increased to 30% (28%) despite the phase-out of the class I products, which is now complete. Growth is attributable, in particular, to new products such as gamma-cyhalothrin, abamectin and imidacloprid, but traditional OP products, such as dimethoate and chlorpyrifos, have developed satisfactorily.

Fungicides accounted for 19% (19%) of revenue after satisfactory growth from new products, but also flutriafol demonstrated satisfactory growth, among other things due to sound sales in regions International and North America.

Other crop protection products still account for 8% (8%) of revenue. The Headland micronutrients did well in this segment, which also includes growth regulators such as trinexapac.

Revenue from other activities is up at 10% (7%) due to growth within fine chemicals.

Sales by product category

Category	Q1 2011(DKK million)	Q1 2010(DKK million)	change%
Herbicides	464	461	+0.7
Insecticides	422	340	+24.1
Fungicides	259	230	+12.6
Other products	109	97	+12.4
Other activities	139	90	+54.4
Total	1,393	1,218	+14.4

Outlook

The market for crop protection products is still expected to grow in 2011 despite climatic challenges in some markets. Cheminova maintains the outlook announced of revenue of approx. DKK 5,800 million, an EBITDA margin of 8-10% and EBIT in the range of DKK 300-400 million as well as an improved cash flow from operating activities relative to 2010.