Latin American Drought Crimps Syngenta Sale
Syngenta, the world's largest agrochemicals company, posted a smaller-than-expected rise in quarterly sales, as the impact of a drought in Latin America offset the benefits from bumper seed sales and an early start to the planting season.
The Swiss company, which makes products to kill weeds and bugs as genetically modified seeds, said on Wednesday first-quarter sales rose 7% to $4.30 billion, compared with a forecast for $4.34 billion in a Reuters poll
Spiralling prices for wheat, corn and soyabean have encouraged farmers to buy more products from Syngenta and rivals Dupont and Monsanto to help boost yields.
In Latin America, growth in seed sales of over 40% helped to shake off the effects of drought in Argentina and Southern Brazil, Syngenta said. Crop protection sales, however, were down 8% in the region.
"Fundamentals in agriculture remain promising, the implementation of the new corporate strategy is well on track and valuation still offers upside, in our view," Bank Vontobel analyst Patrick Rafaisz said. He kept his "buy" rating on the shares and 370 Swiss franc target.
Early planting
Early U.S. spring planting also helped Monsanto post record second-quarter sales in its seed and genomic business earlier this month.
Syngenta chief executive Mick Mack said a 24% increase in crop protection sales in North America was a good indication for a buoyant season in the northern hemisphere.
"The weather is always a bit of a wild card but it looks like farmers are going to be able to get into their fields to use our products," he told Reuters in an interview.
He said Syngenta was on track to hike prices by between 2 and 3% this year, after it raised prices by 4% in the first quarter.
The Basel-based company expects to further increase its target for earnings before interest, tax, depreciation and amortisation (EBITDA) at constant exchange rates this year, despite headwinds from currencies and raw materials.
Syngenta is also sticking with its savings goal of $650 million by 2015 and earnings margin before interest, tax, depreciation and amortisation of 22-24% by 2015, Chief Financial Officer John Ramsay said.
