21 February 2003 16:42 [Source: ICIS news]
Syngenta is hardly enthusiastic about agrochemicals growth this year. Global agricultural uncertainties persist in the wake of a dismal 2002 and the company says it can only expect flat earnings in 2003.
Clearly, that has disappointed analysts and others who, following positive noises from fertiliser producers, were looking to call the end of the sector downturn.
Remarks made by Syngenta management on Thursday underscored their caution and the fact that the company is not seeing an upturn yet. All chief executive, Michael Pragnell, could say was that Syngenta would have a better idea of where it is headed in 2003 when it reports on the first quarter in late April.
In 2002 sales fell by 2% but Syngenta managed to lift earnings before interest, tax, depreciation and amortisation (EBITDA) by 5% as it continued to weed out the product portfolio. The EBITDA margin before special charges and gains rose to 18.6% from 17.8%. The EBITDA margin target remains 25% although the company has indicated that margin growth this year is likely to be less than 1%.
The company did not do as well in 2002 as some might have liked but the performance was driven by new product growth and effective life cycle management in difficult market conditions. The crop protection product portfolio was further streamlined and the number of active ingredients cut to 89 from 103 at the start of the year (the target is 76). Syngenta also managed to cut stocks in the chain to the grower in the US and Japan. Negative currency effects masked better returns in the seeds business.
Syngenta has committed spending of $170m to biotechnology this year as it begins to build on the broadened technology alliance with Diversa. It has focused biotechnology expertise in the plant science segment (formerly known as new technology) and is working towards segment breakeven by 2006.
Syngenta expects to spend much of this year looking to gain market share in the crop protection business although it does think it can grow further in seeds where it is looking for a stronger presence in higher growth markets. There will also be greater focus on building new relationships with growers and other downstream partners, it says, to maximise opportunities.
In the US, the company has piloted a retail project called the new product network, or NPN, where it has worked with growers, logistics and marketing companies to take a new strain of melon to the consumer. Launched on the West Coast the project has moved to the East Coast of the US and this year will be developed with partners in Spain, Egypt and Italy.
Ideas like this could help Syngenta capitalise more on the money to be made taking new food products to the consumer. The company looks to growth but is constrained by depressed global agriculture markets and the slow uptake of biotechnology so it needs to capitalise on new ideas wherever it can. Following a period of fast consolidation the momentum for improvement has slowed so the focus has to be on making more from new products and lifting market share in key product areas.
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