Difficult LATAM Market Hits Syngenta Sales, ChemChina Merger Delayed
Syngenta reported sales fell 3% in the third quarter on a tough Latin American market, and said the regulatory process for its proposed merger with ChemChina will be delayed into the first quarter of 2017.
The company posted sales of $2.5 billion at constant exchange rates compared with the third quarter of 2015. Reported sales were also 3% lower, with the dollar broadly stable against major selling currencies. For the first nine months of 2016, sales declined 3% at constant exchange rates to $9.6 billion. Excluding the impact from the change in sales terms in Brazil, sales at constant exchange rates were up 2% in the quarter and were unchanged in the first nine months.
Regional sales of $2.4 billion were 4% lower at constant exchange rates. Volumes were 7% lower. Prices were 3% higher, driven by increases in Brazil and in the CIS to offset prior year local currency depreciation.
Sales in Europe, Africa and the Middle East rose by 8%, benefiting from robust fungicides sales and successful seedcare campaigns. Growth in seeds reflected good performances for cereals in North Europe and sunflower in South East Europe. For the first nine months, regional sales were up 3%, despite adverse weather conditions in the second quarter.
In North America, growth of 11% was driven by selective herbicides, reflecting the continuing success of Syngenta’s weed management solutions. Non-selective herbicides sales were down, largely due to the deliberate reduction in solo glyphosate. Corn and soybean seeds sales were higher, as end-season closing adjustments were below last year’s level.
Sales in Latin America were 21% lower. Excluding the change in sales terms, sales were 10% lower. In Brazil, volumes continued to be affected by high levels of insecticide inventories, with pest pressure remaining low and increased soybean trait adoption. In Argentina, with the improved market environment, we registered double-digit growth.
Asia Pacific recorded a 22% sales increase, helped by the ending of El Niño and a better monsoon in South Asia. Demand for crop protection products was strong, particularly for fungicides in ASEAN and insecticides in South Asia. Seeds sales were driven by high demand for conventional corn in South Asia and for GM hybrids in the Philippines.
Growth in selective herbicides was largely driven by North America, where sales of ACURON in the USA almost tripled: for the first nine months sales of this product exceeded $200 million. Sales of non-selective herbicides were lower, largely due to the deliberate reduction in solo glyphosate in North America, which will be completed by year end. Sales of fungicides in Brazil were negatively affected by the change in sales terms and the effect of the previous season’s drought. This was partially offset by strong demand in ASEAN, notably for AMISTAR and SCORE. In the USA the successful launch of TRIVAPRO, a product based on SOLATENOL, continued. Insecticides sales were lower, with the volume reduction in Brazil partially offset by growth in South Asia. Seedcare sales further increased compared with a strong quarter in 2015, driven by technology adoption in China and South East Europe.
Corn and soybean seeds increased in all regions, led by corn in Latin America and Asia. Diverse field crops sales were higher, with sunflower growth in South East Europe and a good start to the planting season in Argentina. Vegetables were up 5% with strong hybrid performance in Mexico and in China.
Lawn and Garden sales were up 3% driven by solid volume growth for Pest Management and Vector Control solutions in all regions.
Erik Fyrwald, Chief Executive Officer, said: “In a challenging year for the industry, it is encouraging to see strong uptake of our new technologies in a number of markets. This reflects the success of our R&D investments, which will continue to bring broad-based innovation to growers around the world.
“For the fourth quarter of 2016, we expect a continuation of the recovery in Asia Pacific and an improved performance in Latin America, with no further impact from the change in sales terms in Brazil. We confirm our full year guidance of slightly lower sales at constant exchange rates, with a mid-single digit decline in reported sales. The EBITDA margin is expected to be around last year’s level despite the non-recurrence of the $200 million trait revenue received in the fourth quarter of 2015. Our ongoing focus on working capital management should result in free cash flow for the year of over $1 billion.
“The transaction with ChemChina will ensure continuing choice and broad-based innovation for growers worldwide. The process of obtaining regulatory approvals is well underway, with CFIUS clearance and 11 anti-trust approvals already received. In a context of industry consolidation, regulators in the EU and elsewhere have recently requested a large amount of additional information, and we now expect the regulatory process to extend into the first quarter of 2017. ChemChina and Syngenta remain fully committed to the transaction and are confident of its closure.”
A presentation illustrating the third quarter 2016 sales is available here