Cheminova agrochemical sales up 5% in Q3

Cheminova’s agrochemicals sales were increased by 4.6% compared with last year to DKK 1,400 million in the third quarter of 2012. Total revenue increased in Q3 2012 by 2.0% to DKK 1,469 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) was DKK 121 million which unchanged comparing with the same period of last year, and EBIT was up by 2.6% to DKK 80 million. The soft growth was seen in Q3 as a result of the early season start and the strong growth in the first half of the year.

Sales of agrochemical in the first nine months rose by 11.8% to DKK 4,545 million. Total revenue was DKK 4,806 million, up by 9.0%. EBITDA was boosted by 38.1% to DKK 558 million and EBIT was up 59.1% to DKK 436 million. The growth is largely volume-driven, although sales prices saw a slight increase.

Sales by region

High crop prices provide  a strong incentive for growers to protect crop yields through the optimum use of crop protection products.  In Q3, Cheminova’s total sales of crop protection products increased by 5%, corresponding to a growth rate for the first nine months of the year of 12%. The season in Latin America has got off to a good start with a revenue growth of 18% for the quarter.

After an early, good season in the first half of the year, the end of the season in Europe was very satisfactory with 17.9% growth in revenue to DKK 369 million in Q3. The growth was driven by further market penetration by new products in step with new approvals being obtained, such as the registration of fluazinam in Germany and several products in France. This has contributed to a considerable strengthening of the company’s position in these major European markets. The restructuring of Stähler in Germany has also made a significant contribution to the improved results in the region.

The severe drought in the USA led to a difficult market in Q3 after a good start to the year. The reduction in sales of glyphosate resulted in a revenue decline of 17.1% to DKK 87 million for the quarter, but despite this, revenue for the first nine months of the year was up28.9% to DKK 361 million. Continued growth was achieved for differentiated products based on flutriafol and gamma-cyhalothrin and for selective herbicides. A good insecticide market resulted in continued positive developments for traditional insecticides. The improved product portfolio is leading to a significant strengthening of the gross margin and thereby earnings in the region. In step with the introduction of several new products in the coming years, the market share will be increased and business in the region improved. 

The start of the season saw a growing demand for crop protection products in Latin America. Growth of 18.1% to DKK 654 million was realized in the quarter, and the outlook for the rest of the season is positive. The product portfolio is being improved both through the introduction of new products and through the ongoing streamlining of the product portfolio implying the phase-out of less profitable products. In this season, a unique mixture (azoxystrobin+flutriafol) has been introduced in Brazil for combating a rust fungal disease in soybeans. The result is a higher gross margin and thereby improved earnings.

The climatic conditions in, for example, India, where the monsoon rains arrived late and were more scattered, in addition to the political turmoil in several Arabic countries resulted in a difficult market in the region in Q3. At the same time, the product portfolio is being streamlined leading to reduced sales of glyphosate and other low-margin products. During the quarter, revenue fell by 25.7% to DKK 315 million, and a negative growth of 7.5% has now been realized for the first nine months of the year. However, the average gross margin has been increased, and earnings have been improved.

Growth has primarily been created by increased market penetration for already introduced products, but the introduction of new products from the development pipeline has also made a positive contribution.

The herbicides realized growth of 5.1% to DKK 1,434 million during the first nine months of the year and accounted for 30% of revenue. Sales of glyphosate accounted for approx. 10% of revenue, and the growth is largely generated by the selective herbicides, for example based on the active ingredients pethoxamid, fenoxaprop and the sulfonylurea herbicides.

The insecticides realized growth of 14.8% to DKK 1,853 million during the first nine months of the year and accounted for 39% of revenue. The growth has been achieved after progress for several new products, including products based on the active ingredients gamma-cyhalothrin and abamectin, as well as strong demand for several of the traditional products based on dimethoate and chlorpyrifos.

With  growth of 17.8%, fungicides saw marked growth during the first three quarters of 2012 and now account for 20% of revenue. Earlier this year, flutriafol was introduced in cotton in the USA; flutriafol is, together with other fungicides, helping to strengthen Cheminova’s position in the North American market. Fluazinam has obtained registration for use against potato mildew in Germany, while azoxystrobin has been registered in several countries.

Sales of other crop protection products (micro nutrients, growth regulators etc.) accounted for 6% of revenue, while other activities declined to 5% after a lower-than-expected level of activity within fine chemicals.

Cheminova is maintaining the previously announced outlook for  2012 of revenue of approx. DKK 6,300 million, an EBITDA margin of more than 10%, an operating profit of DKK 450-550 million and a positive free cash flow.