Cheminova agchem sales up 1% in Q2 2014

Date:08-15-2014

Cheminova agchem sales rose slightly by 1.3% to DKK 1,786 million in the second quarter ended on June 30, 2014. Consolidated group revenues increased by 3.0% to DKK 1,907 million, with the organic growth of 7%. Consolidated EBITDA rose by 13.8% to DKK 305 million. EBIT was up by 15.6% to DKK 259 million. Net profits grew greatly by 27% to DKK 146 million. Sales growth in Q2 2014 was driven by strong results in International and Latin America. Europe delivered in line with Q2 last year, which was all time high, while North America suffered from the delayed season.   

For the first half of 2014, agchem sales grew by 5.6% to DKK 3,523 million. Consolidated EBITDA was up by 6.6% to DKK 564 million, while net profit increased by 4.9% to DKK 255 million.  

Chminova’s sales results (DKK million)
Q2 ended June 30 2014	Q2 2014	Q2 2013	% changes	H1 2014	H1 2013	% changes
Sales	1,907	1,851	+3.0	3,733	3,521	+6.0
-Agrochemical	1,786	1,763	+1.3	3,523	3,337	+5.6
EBITDA	305	268	+13.8	564	529	+6.6
EBIT	259	224	+15.6	472	432	+9.3
Net profit	146	115	+27.0	255	243	+4.9
* earnings before interest and tax depreciation and amortization ** earnings before interest, tax

Sales by region

The sales in Europe was still the largest among all the regions, which posted DKK 958 million in Q2 of 2014. The organic growth was negative of 1%, as the early start benefitted Q1, but still accounting for 50%  of total sales. Good sales results were achieved in all countries except for Russia and CIS, where sales were constrained due to a policy decision to limit risks following the political crisis. Herbicide sales lost momentum in Q2, but were compensated by fungicide sales, boosted by the wet weather in Central and Western Europe, as well as increased insecticide sales, helped by the mild and dry weather in the South.

Chminova’s sales by region (DKK million)
Regions	Q2 2014	Q2 2013	% changes	H1 2014	H1 2013	% changes
Europe	958	971	-1.3	2,064	1,897	+8.8
North America	169	188	-10.1	310	369	-16.0
Latin America	306	286	+7.0	576	563	+2.3
International	357	319	+11.9	548	509	+7.7
Other activities	117	87	+34.5	235	183	+28.4
Total	1,907	1,851	+3.0	3,733	3,521	+6.0

The sales in North America dropped by 10.1% to DKK 169 million. The delayed season and prolonged winter led to a negative organic growth of 5%, accounting for 9% of sales. Fungicide sales were boosted by new product introductions, but not enough to offset the decline in the insecticide sales, struggling with a low pest infestation due to the long winter as well as reduced herbicide sales.

In Latin America, sales posted 7% increase to DKK 306 million. The positive development led to organic growth of 16%, accounting for 16% of sales. Recovering from the drought in Q1, Brazil enjoyed increased demand for fungicidestowards the end of Q2, while herbicidesand insecticides continued the satisfactory performance in the region.

The International sales rose by 11.9% to DKK 357 million, including regions of Asia, Australia, New Zealand, the CIS countries, the Middle East and Africa. This strong performance led to organic growth of 23%, accounting for 19% of sales. The very good quarterly sales results were achieved across all product groups driven by India, partially due to a positive market, enabling pre-sales for the upcoming season.

Sales by category

Insecticides represent the largest category, with sales up by 4.2% to DKK 675 million. Organic growth of 9% was achieved, accounting for 35% of sales. The main drivers were dimethoate and chlorpyrifos, but also products based on gamma-cyhalothrin were performing well, for example Nexide® in Brazil.

Chminova’s sales by category (DKK million)
Category	Q2 2014	Q2 2013	% changes	H1 2014	H1 2013	% changes
Herbicides	613	639	-4.1	1,248	1,208	+3.3
Insecticides	675	648	+4.2	1,241	1,199	+3.5
Fungicides	371	332	+11.7	701	654	+7.2
Other CPP	127	144	-11.8	333	276	+20.7
Others	121	88	+37.5	210	184	+14.1
Total	1,907	1,851	+3.0	3,733	3,521	+6.0
CPP: crop protection products

Herbicides sales was down by 4.1% to DKK 613 million. However, organic growth of 1% was achieved, accounting for 32% of sales. Glyphosate sales were deliberately constrained on account of low profitability. The main contributor of non-glyphosate products were based on pethoxamid, sulfonylureas and fenoxaprop among a wide range of herbicide solutions. During Q2, new florasulam registrations were achieved in Great Britain and France.

The sales of fungicides grew greatly by 11.7% to DKK 371 million. Organic growth of 15% was achieved, accounting for 20% of sales. The main drivers were flutriafol and epoxiconazole, but tebuconazole and azoxystrobin were also growing. Towards the end of Q2, the azoxystrobin based products Azaka™ and Equation™ were introduced in the US supporting a broader portfolio.

The sales of other crop protection products dropped by 11.8% to DKK 127 million. Organic growth was negative of 14%, accounting for 7% of sales. The main contributor was trinexapac, performing well in Europe.

Outlook

Cheminova expects an organic sales growth of 8-10% in 2014, and due to the higher key currency rates, a reported revenue growth of 4-6% against previously expected 3-5%, an EBITDA margin above 13% and a positive free cash flow.