Syngenta Profit Misses Goal, CEO Targets $1 Billion SavingsPatrick Winters
Syngenta AG, the world’s largest maker of crop chemicals, reported profit that missed analysts’ estimates and Chief Executive Officer Mike Mack pledged to cut $1 billion in costs by 2018 to boost efficiency.
Earnings per share excluding one-time items fell 12 percent to $19.30 in 2013, the Basel-based company said in a statement today. That compares with a $19.91 average prediction of analysts surveyed by Bloomberg.
After scaling back profit guidance in October, Mack needs to show that his redesign of the company along crop lines three years ago is paying off. Demand in Latin America couldn’t make up for a writedown of U.S. corn seed inventories and currency expenses. The company said it expects to be at the lower end of its target range for profitability in 2015.
“Overall, the year broadly disappointed,” Mack said in a phone interview. “The fourth quarter needed to be really strong for us in Brazil.”
Syngenta failed to get registration in the South American country for its Solatenol fungicide that has the potential to eventually generate annual sales of $850 million.
Mack, who became chief in 2008, has seen Syngenta shares dip 11 percent this year, prior to today, more than competitors Monsanto Co. and DuPont Co. which have dropped 8.5 percent and 5 percent respectively. Syngenta declined 1.9 percent to 311 francs in Zurich today as of 9:18 a.m.
Sales at the Swiss maker of Cruiser and Celest agrochemicals rose 3 percent to $14.7 billion, short of the $14.9 billion predicted. The company said it will propose a dividend of 10 Swiss francs ($11), an increase of 5 percent.
Syngenta is launching a new, larger efficiency drive to reap more savings from a merger of its seeds and crop chemical businesses along eight key crops such as corn and soybean.
The new program, to be completed by 2018, should push profitability to 24 percent to 26 percent, the company said today. The program is 54 percent bigger than its existing $650 million savings program which ends in 2015.
Syngenta will target production efficiencies in seeds, as well as savings in sales and research, Chief Financial Officer John Ramsay said in a phone interview.
Dow CEO Andrew Liveris said Jan. 29 that his AgroSciences division has the potential to boost margins by as much as 400 basis points, after fourth-quarter revenue rising 13 percent to a record.
Syngenta said it’s on track to meet growth objectives for 2015. It has forecast an earnings before interest, taxes, amortization and depreciation margin of 22 to 24 percent in 2015, and $25 billion in sales in 2020.
Separately, Syngenta has said it won’t comply with a request from U.S. grain associations to halt sales of two genetically modified corn traits, Agrisure Viptera and Agrisure Duracade, after China blocked shipments containing the corn because it hasn’t been approved for import. China’s administration said in a statement in December that as of Dec. 19 it had rejected 12 regular corn shipments from the U.S. totaling 545,000 metric tons.
“It seems to be a bit of a trade war going on here between China and the U.S.,” Mack said, adding that Syngenta has been waiting for four years for Chinese import approval and corn sales have not been affected.
“They are not waiting on anything from us, and haven’t been waiting on anything from us for a long time,” he said.