2nd UPDATE: Syngenta 1Q Revenue Hit By USD Rise, Keeps EPS Goal
April 15 2009 - 3:41AM
Dow Jones News
Swiss agrochemical company Syngenta AG (SYT) Wednesday reported
a worse-than-expected 4% drop in first-quarter sales, mainly due to
the rise in the dollar, which will also hit operating profit in
2009.
But the Basel-based company said it still expects to increase
earnings per share this year, as price rises will make up for the
currency movements.
"The impact from currency fluctuations has been stronger than we
anticipated," Chief Financial Officer John Ramsey told Dow Jones
Newswires. "The impact this year might exceed $150 million on a net
basis," but is unlikely to rise above $200 million."
In February, Syngenta said it expects currency fluctuations,
especially in struggling emerging markets, to cut 2009 operating
profit by up to $150 million.
"Syngenta reported a strong set of figures," Credit Suisse
analysts said in a first note to customers. "The numbers should go
a long way to reassure investors that the agrochemicals story is
not over. Currency effects dampened some of the shine, but this
should not impact profits."
Credit Suisse rates Syngenta at neutral with a CHF300 price
target.
The Basel-based producer of crop-protection chemicals and seeds
said sales in the three months to March 31 fell to $3.6 billion,
from $3.79 billion a year earlier, below analysts' expectations of
$3.74 billion.
The company said it still expects its 2009 fully diluted
earnings per share, excluding non-recurring income, restructuring
and impairments, to be above 2008.
At constant exchange rates, Syngenta will improve its margins in
2009, mainly due to higher prices for its products, Chief Executive
Mike Mack said told Dow Jones Newswires.
Sales in Crop Protection fell 3% to $2.59 billion, from $2.67
billion a year-earlier, as dry weather in Argentina and Southern
Brazil led to lower demand for the company's products there.
Analysts had expected sales of $2.57 billion.
However, in local currencies, sales rose 10% when excluding the
professional products contribution. The unit makes seeds and
herbicides for businesses that depend on private household
spending, such as for gardens and the home, and therefore has a
higher exposure to the economic downturn.
"We're seeing continued strong demand for crop protection
products across the different regions, especially in Asia," CEO
Mike Mack said.
Analysts were pleased with the performance of Crop
Protection.
"Prices rose more than expected, by 8% versus our estimate of
6%," said Helvea analyst Martin Flueckiger. "Excluding professional
products, volumes in crop protection were up 2% which is good
because acreage was actually down on the year," said the analyst,
who rates Syngenta at buy with a CHF300 price target.
The ailing Seeds division saw sales drop 6% on the year,
although they rose 3% to $1.1 billion in local currency terms.
"The weak spot here is soybeans and corn, which rose only 7%,"
Helvea analyst Flueckiger said.
Seeds is more affected by individual circumstances. We've seen
contractions in soil in America and field crops faced difficulties
in Eastern Europe," Syngenta's CEO said.
Syngenta's shares closed Tuesday at CHF221.50. The shares have
fallen about 24% in the past 12 months but are up 14% year-to-date,
helped by strong demand from agricultural markets.
Company Web Site: www.syngenta.com
-By Julia Mengewein, Dow Jones Newswires; +41 43 443 80 45;
julia.mengewein@dowjones.com