Cheminova agrochemicals sales up 11% in 2012

Cheminova agrochemical sales were up by 11.2% to DKK 5,949 million in 2012, due to high crop prices, which is encouraging growers to protect their crops through the use of crop protection products.Consolidated group revenues were up by 9.4% to DKK 6,263 million in 2012.

Consolidated earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 16.6% to DKK 577 million. EBIT rose by 28% to DKK 407 million.

For the fourth quarter, Cheminova agrochemical sales increased by 9.2% to DKK 1,404 million in. EBITDA fell 79.1% to DKK 19 million, while the company posted an operating loss of DKK 29 million.

In 2012, Cheminova made the most of the good market conditions and achieved organic growth for crop protection products of more than 12% CER. The growth is due to both increased market penetration for products which have already been introduced and the introduction of new products from the development pipeline. Also, a broader and more differentiated product portfolio improved the gross margin by 2.5percentage points from 27.1% to 29.6%.

Sales by region

The agrochemical industry benefited from an early start to the season in northern Europe and North America, and the year finished positively with strong growth in Latin America,the compamy said. However, market growth was softened by serious drought in the USA, Australia and India.

During H1, the Europe region was favored by a promising and early start to the season in northern Europe, while the end of the season in H2 was also satisfactory. Good growth was achieved in Eastern Europe, while Southern Europe has been impacted by difficult climatic and economic conditions. Altogether, the region realized growth of 11%, primarily driven by increased market penetration for new products such as pethoxamid, gamma-cyhalothrin and fluazinam. The restructuring of Stähler in Germany and the initiatives implemented in the local company in France have strengthened the market position and are contributing positively to the region’s growth in earnings.

The North American market benefited from the early start to the season in H1, but serious drought across large parts of the USA meant difficult market conditions in H2. Despite reduced sales of glyphosate, it was possible to successfully increase revenue by 23% in the region. The launch of new products based on the active ingredient kresoxim and increased penetration with differentiated products based on flutriafol, gamma-cyhalothrin and selective herbicides have contributed to the growth. At the same time, a good insecticide market resulted in strong demand for traditional insecticides such as dimethoate and chlorpyrifos. The market position and business in the region is being
strengthened in step with the introduction of several new products.

The market in Latin America is positively influenced by the good conditions for agriculture, resulting in a satisfactory end to the year, particularly in Brazil. Revenue in the region increased by 16%. The product portfolio is continually being improved, with less profitable products being phased out. In H2, a unique mixture formulation, Authority® (azoxystrobin+flutriafol), was introduced for controlling the Asian rust fungal disease in soybeans in Brazil. The improved product portfolio with several new, differentiated products resulted in a satisfactory growth in earnings.

The International region has faced difficult market conditions as a result of climatic changes in the form of a late and very scattered monsoon in India, drought in Australia and political unrest in several Arab countries. The CIS states have performed well, but altogether the region realized negative growth of 9%. An improved product portfolio made it possible to increase the gross margin, but difficult market conditions resulted in revenue and earnings being somewhat lower than expected.

Growth of 3% reduced the herbicides’ share of revenue to 27% (29%). Sales of glyphosate declined to approx. 10% of revenue, and the most significant growth has been achieved for the selective herbicides based on the active ingredients pethoxamid, fenoxaprop and the sulfonylurea herbicides. In H2, the competitive production of pethoxamid started at a converted plant at the factory in Denmark, while the formulation and filling activities relating to pethoxamid has taken place at the factory in Germany.

The insecticides achieved growth of 15% and accounted for 41% (39%) of revenue. Several new products, including fipronil and abamectin, have seen growth, while sales of gamma-cyhalothrin have also grown well after registrations were achieved in France and Germany. Several traditional products such as dimethoate and chlorpyrifos have developed positively and are contributing to growth.

The fungicides recorded growth of 17% and accounted for 21% (20%) of revenue. Fluazinam has developed positively and is, among other things, approved for use against potato mildew in Germany. In H1, flutriafol was introduced for use in cotton in the US and in H2 successfully introduced in a mixture with azoxystrobin in Brazil.

Other crop protection products, including Headland micronutrients and growth regulators such as trinexapac, have developed satisfactorily and accounted for 6% (6%) of revenue. Other activities declined to 5% (6%) of revenue after an expected lower activity level for fine chemicals.

Based on the assumption that the market conditions remain positive, Cheminova expects a positive growth with progress in earnings and value creation in 2013.Continued positive developments within the strategic focus areas are to bring the company closer to realizing the strategic objectives defined for the post-2013 period.

In Q1 2013, a local company in Switzerland with revenue exceeding DKKm 100 was divested which will contribute with a profit for accounting purposes of just below DKKm 40 and a net interestbearing debt reduction of more than DKKm 100.

In 2013, Cheminova expects further positive growth of approx. 10%, with revenue of up towards DKK 6.8 billion and an EBITDA margin of approx. 12%. Continued focus will be on improving the working capital to realize a positive free cash flow despite maintaining the investment level within product development and production plants.