Financial Highlights (unaudited)
1st Half 1st Half
2002 2001 Actual CER
$m $m % %
Sales 3902 4031 - 3 - 2
EBITDA(1) 1099 1059 + 4 + 6
Profit before Tax(1) 751 716 + 5 + 8
Net Income(1) 448 400 +12
Earnings per Share(1)
(diluted) $4.41 $3.95 +12
Net Income (statutory) 328 377
Earnings per Share
(statutory & diluted) $3.23 $3.72
Growth rates in the following narrative are at constant exchange
rates (CER).
-- Crop Protection sales down 2 percent; Seeds sales down 1 percent
-- EBITDA(1) margin up to 28.2 percent (2001: 26.3 percent)
-- Synergies ahead of plan; program target increased to $625 million
-- Earnings(1) up 12 percent
-- Free cash flow $398 million; gearing reduced to 40 percent
Michael Pragnell, Chief Executive Officer, said:
"These results represent a strong performance against a background of continuing
tough market conditions. Sustained cost and working capital reductions have
underpinned earnings growth; results have also benefited from early action to
reduce exposure in Latin America. New product launches have been very successful
and together with innovative marketing programs are contributing to an improving
product mix."
(1) Excluding special items of $157 million (2001: $35 million) being a
net charge in respect of merger and restructuring costs. Diluted EPS
calculated on 101,581,456 shares.
Highlights for 1st Half 2002
Growth rates in the following narrative are at constant exchange rates (CER).
Sales during the first half of 2002 were two percent lower as agricultural
markets showed no improvement and distribution channel inventories remain high
in a number of major territories. In aggregate, prices were down one percent.
EBITDA improved by six percent and margins increased by two percent due to
reduced cost and improved product mix through range rationalization. Larger than
projected cost reductions were achieved in all functions; savings in General and
Administrative were offset by project expenditure to improve future organization
effectiveness and efficiency.
Earnings per share excluding special items were up 12 percent helped by lower
financial expenses and a lower tax rate.
Currency: sales were reduced by one percent primarily due to Euro weakness
during most of the first half; a stronger Swiss Franc combined with Euro
weakness reduced EBITDA by two percent.
Latin America: Early implementation in late 2000 of risk control measures in
Argentina and Brazil mitigated the worst effects of the economic crises in both
countries. The early action in Argentina has established a smaller but robust
business, selling only on secure terms, which is well positioned to capitalize
on future recovery. The drive to reduce in-channel inventories and control
receivables in Brazil has resulted in reduced sales and will continue to
constrain sales in the important second half for this market particularly given
current economic volatility.
Crop Protection: Active management of the product portfolio has continued to be
a key focus. The launches and roll-out of the major new products ACANTO(R),
ACTARA(R)/CRUISER(R) and CALLISTO(R) have been very successful with innovative
marketing programs. Sales growth of new products contributed $155 million during
the first half of the year. During the same period, the phase-out program
resulted in a reduction in sales of $96 million; a further four Active
Ingredients (AIs) were phased-out, bringing the total of proprietary AIs to 99
with plans well advanced to achieve the portfolio target of 76. Ten AIs have
already been approved in the European Union re-registration process and a
program is in place for the balance.
The combination of new launches and product rationalization is leading to a
higher quality portfolio and improved working capital ratios. Gross profit has
increased from 51.1 percent to 52.7 percent with around one third resulting from
improvements in product mix and the balance from reductions in cost of goods.
This was achieved against an aggregate price decline of one percent.
Distribution channel inventories for the industry in general are high, including
in the major markets of the USA, Brazil, France and Japan. Syngenta has made
progress in reducing in-channel stocks and aligning sales more closely to
consumption whilst responding to the need of distributors to improve efficiency.
Seeds: Sales declined by one percent; continued growth in vegetables and an
encouraging performance from flowers were more than offset by a decline in field
crop sales, largely in the USA. The business remains focused on raising
profitability through an improved product mix, reduced product costs and
continued expense containment.
Synergies: Synergies totaling $105 million were realized in the first half of
the year, with delivery from merger to the end of 2002 now expected to reach
$340 million.
Cash Flow and Balance Sheet: Free cash flow of $398 million (2001 first half:
$278 million, including the receipt of $191 million from mandated divestments)
was achieved through tight control of working capital and the impact of
accelerated collection of receivables. Trade working capital as a percentage of
sales improved to 51 percent (2001 first half: 54 percent) while fixed capital
expenditure was contained significantly below depreciation.
At the period end, net debt was $1.8 billion (2001 first half: $2.4 billion)
representing a gearing ratio of 40 percent (2001 first half: 54 percent).
Outlook
Michael Pragnell, Chief Executive Officer, said:
"We expect the sales trend in the second half to be broadly in line with the
first half result. Recent currency movements are likely to constrain the full
year EBITDA margin improvement to around one percent.
"We remain committed to steadily improving our performance ratios and have
identified a further $100 million of cost savings; this increases the total
program to $625 million, to be completed in 2005. Achievement of our 25 percent
EBITDA target is likely to be delayed until we see some recovery in agricultural
markets.
"As we build a strong organization for the future, my confidence in our
innovative skills in marketing and technology remains high and these are
reinforcing our strong competitive position."
Syngenta is a world-leading agribusiness. The company ranks first in crop
protection, and third in the high-value commercial seeds market. Sales in 2001
were approximately US $6.3 billion. Syngenta employs more than 20,000 people in
over 50 countries. The company is committed to sustainable agriculture through
innovative Research and Technology. Syngenta is listed on the Swiss stock
exchange and in London, New York and Stockholm. Further information is available
at
www.syngenta.com.
Crop Protection Sales
Except where stated, all narrative in this section refers to the half year.
Product line variances take into account minor reclassifications made in 2002.
Growth rates are at constant exchange rates (CER).
Half Year Growth
Product line 2002 2001 Actual CER
$m $m % %
Selective herbicides 1125 1224 - 8 - 7
Non-selective herbicides 381 412 - 4 - 4
Fungicides 871 887 - 2 - 1
Insecticides 480 507 - 3 - 2
Professional products 304 270 +7 +8
Others 95 67 +20 +19
Total 3256 3367 - 3 - 2
2nd Quarter Growth
2002 2001 Actual CER
$m $m % %
591 659 -10 -11
230 245 - 4 - 5
473 475 - 1 - 2
286 295 -- - 1
154 141 + 2 --
50 34 +32 +24
1784 1849 - 3 - 5
Selective Herbicides: major brands BICEP(R) MAGNUM, CALLISTO(R), DUAL(R) MAGNUM,
FLEX(R), FUSILADE(R), TOPIK(R)
In corn herbicides, CALLISTO(R) sales grew strongly to reach $88 million
following its first full-season of marketing and more than offset a decline in
DUAL(R)/BICEP(R) MAGNUM largely in the USA. In soybeans, sales of FLEX(R) and
FUSILADE(R) were also lower with increased herbicide-tolerant crop plantings. In
cereals, sales of the grass herbicide TOPIK(R) declined mainly in France and
Canada. Lower sales of older brands and the phase-out of smaller products
coupled with channel de-stocking significantly impacted overall sales of
selective herbicides.
Non-selective Herbicides: major brands GRAMOXONE(R), TOUCHDOWN(R)
Continued strong growth of TOUCHDOWN(R) IQ(R) in the USA underpinned growth for
the TOUCHDOWN(R) brand; this was partly offset by lower sales in Brazil and
Argentina. GRAMOXONE(R) sales were lower as the benefits of new marketing
programs in Australia did not fully offset delayed sales in China and channel
de-stocking elsewhere in Asia and in Brazil.
Fungicides: major brands ACANTO(R), AMISTAR(R), BRAVO(R), RIDOMIL GOLD(R),
SCORE(R), TILT(R), UNIX(R)
First full-season launches of the new strobilurin, ACANTO(R), in Europe resulted
in sales of $26 million. Sales of AMISTAR(R), the largest product in the
portfolio, were four percent lower; growth in North America and Japan was
insufficient to offset declines in Western Europe, particularly France, due to
increased competition. Sales of SCORE(R) continued to grow in Europe for fruit
and vegetables; sales of RIDOMIL(R), BRAVO(R) and TILT(R) were lower. Phase-out
of older products more than offset underlying sales growth in fungicides.
Insecticides: major brands ACTARA(R), FORCE(R), KARATE(R), PROCLAIM(R),
VERTIMEC(R)
ACTARA(R) achieved sales of $48 million, with strong growth in the USA, Japan
and India following launch last year. Sales of KARATE(R) sustained good growth
driven by the launch of KARATE(R) ZEON(R) in Germany and increased sales in
Asia, and more than offset a decline in the USA. VERTIMEC(R) sales were reduced
by increased competition in the acaricides market. Phase-out of older products,
notably in Asia, more than offset underlying growth in insecticides.
Professional Products: major brands CRUISER(R), DIVIDEND(R), HERITAGE(R),
ICON(R), MAXIM(R)
Seed Treatment sales sustained very strong growth with sales of CRUISER(R)
reaching $31 million, driven by strong demand in canola in North America and new
launches in Europe and Africa. Growth of MAXIM(R) continued in the USA. Sales of Turf and Ornamentals were slightly higher with growth largely offset by product
phase-outs. Public Health sales were down mainly due to reduced tenders for
ICON(R) in Asia.
Half Year Growth
Regional 2002 2001 Actual CER
$m $m % %
Europe, Africa and
Middle East 1218 1211 +1 +2
NAFTA 1378 1433 - 4 - 4
Latin America 210 235 -11 -10
Asia Pacific 450 488 - 8 - 5
Total 3256 3367 - 3 - 2
2nd Quarter Growth
2002 2001 Actual CER
$m $m % %
609 583 +4 +1
831 882 - 6 - 6
114 140 -19 -18
230 244 - 5 - 7
1784 1849 - 3 - 5
Sales in Europe, Africa and the Middle East were up due to new product
introductions throughout the region, a modest market recovery in the UK, and
strong performances in Germany and Eastern Europe. These factors more than
offset a weak performance in France where a contracting market, increased
competition in fungicides and the impact of a heavy phase-out program all
adversely affected results.
In NAFTA sales were down due to a number of factors in the USA; channel
de-stocking, a competitive corn market and product phase-outs more than offset
the increase in sales from new products. Sales in Canada increased slightly,
with a strong performance from new product introductions offsetting the effects
of drought during the second quarter. Sales in Mexico continued to grow strongly
following new product introductions.
With the continued risk reduction program, lower sales in Brazil (as highlighted
on page two) resulted in an overall decline in sales in Latin America. Sales on
secure terms in Argentina were up compared to last year.
In Asia Pacific sales were down due to product phase-outs and re-phased sales
following changes in distribution arrangements particularly in Japan, Korea and
China. These effects more than offset growth from new product introductions and
higher sales in Australia.
Seeds Sales
Except where stated, all narrative in this section refers to the half year.
Growth rates are at constant exchange rates (CER)
Half Year Growth
Product line 2002 2001 Actual CER
$m $m % %
Field Crops 381 407 - 7 - 5
Vegetables and Flowers 265 257 +3 +4
Total 646 664 - 3 - 1
2nd Quarter Growth
2002 2001 Actual CER
$m $m % %
141 146 - 4 - 4
133 131 +1 --
274 277 - 1 - 2
Field Crops: major brands NK(R) corn, NK(R) oilseeds, HILLESHOG(R) sugar beet
Sales of NK(R) corn declined; intense competition in the US market primarily due
to shifts in technology and lower sales in Brazil more than offset increases in
Europe and Asia. Oilseed sales also declined; soybean sales were lower while sunflowers grew strongly in Eastern Europe. Sales of HILLESHOG(R) sugar beet
grew in a flat European market.
Sales of GM product accounted for 17 percent of total Seeds sales.
Vegetables and Flowers: major brands S&G(R) vegetables, ROGERS(R) vegetables,
S&G(R) flowers
Sales of S&G(R) vegetables continued to grow with particularly strong results
from peppers, tomatoes and melons in Europe; growth was offset by reduced sales
in Korea.
Sales of S&G(R) flowers increased in both Europe and the USA.
Half Year Growth
Regional 2002 2001 Actual CER
$m $m % %
Europe, Africa and Middle
East 316 299 +6 +8
NAFTA 270 292 - 8 - 8
Latin America 33 43 -23 -23
Asia Pacific 27 30 - 9 - 6
Total 646 664 - 3 - 1
2nd Quarter Growth
2002 2001 Actual CER
$m $m % %
119 106 +13 +11
113 123 - 9 - 9
27 31 -14 -13
15 17 -10 - 9
274 277 - 1 - 2
Sales in Europe, Africa and the Middle East increased due to strong performance
in vegetables, flowers, corn and sunflowers.
In NAFTA declines in corn and soybean sales more than offset growth in vegetables and flowers.
The sales decline in Latin America reflects the strategy of risk reduction
highlighted on page two of this report.
In Asia Pacific, increased sales of field crops, particularly in India, were
more than offset by a decline in vegetable sales in South Korea and Japan.
Synergy and Cost Reduction Programs
By the end of 2002, half way through the original synergy program, cost savings
of some $340 million are expected to have been delivered. This represents two
thirds of the $525 million target.
Synergy delivery in the first half of 2002 was $105 million. Some $50 million
has been realized in Cost of Goods; $35 million from Selling, General and
Administrative; and $20 million from Research and Development. Since merger, the
total number of employees has been reduced by 2,150.
A further $100 million of cost savings have been identified with $50 million
targeted for delivery in both 2004 and 2005. There will be an additional cash
cost of $100 million to deliver these savings.
Currency
Syngenta is subject to a material currency exposure which arises from two main
factors: 29 percent of its cost base is in Swiss franc and sterling whilst some
19 percent of sales are made in emerging markets leading to an exposure to more
volatile currencies.
Most Euro-denominated sales occur in the first half while costs are spread more
evenly throughout the year; results are therefore affected by the timing of
currency changes.
Compared with the same period in 2001, the first half of 2002 showed, on
average, a combination of a slightly weaker Euro and a stronger Swiss franc,
which resulted in a negative impact of one percent and two percent respectively
on sales and EBITDA.
The strengthening of the European currencies observed at mid-year will adversely
affect EBITDA, although hedges in place are expected to limit the second half
currency impact somewhat.
Borrowings and Interest
Net debt was $1.8 billion at the end of June (2001 first half: $2.4 billion)
with gearing standing at 40 percent (2001 first half: 54 percent). The gearing
ratio benefited from weakness in the dollar at the end of the period.
Free cash flow of $398 million, after a $120 million intellectual property
payment to Bayer, reflects balance sheet management initiatives commenced in
2001. Last year's first half free cash flow of $278 million included $191
million from mandated divestments.
Net financial expense benefited from lower interest rates and an improved
financing structure.
Cash flow in the second half of 2001 and the first half of 2002 benefited from
working capital initiatives commenced during that period; 2002 second half cash
flow is expected to be negative. On the basis of current exchange rates the
gearing ratio at the end of 2002 is expected to be around 45 percent (December
2001: 54 percent).
Taxation
Progress has been made through tax restructuring to achieve a further reduction
in the gross tax rate to 40 percent (December 2001: 42 percent).
Dividends
A 2001 dividend of CHF0.80 was paid on 26 April 2002. Dividends are expected to
be paid annually following shareholder approval at the AGM. The next AGM will be
held on 29 April 2003.
Auditors
At the AGM on 23 April 2002, Ernst & Young were appointed as Group Auditors for
2002.
Unaudited Segmental Results(1)
Total Syngenta 1st Half 2002 1st Half 2001 CER
$m $m %
Sales 3902 4031 -2
Gross profit 2055 2064 +1
Marketing and distribution (549) (578) +5
Research and development (336) (358) +6
General and administrative (323) (310) -4
Operating income 847 818 +7
EBITDA 1099 1059 +6
EBITDA (%) 28.2 26.3
Crop Protection
1st Half 2002 1st Half 2001 CER
$m $m %
Sales 3256 3367 -2
Gross profit 1716 1719 +1
Marketing and distribution (433) (463) +6
Research and development (206) (229) +10
General and administrative (277) (260) -7
Operating income 800 767 +7
EBITDA 1028 986 +6
EBITDA (%) 31.6 29.3
Seeds
1st Half 2002 1st Half 2001 CER
$m $m %
Sales 646 664 -1
Gross profit 339 345 --
Marketing and distribution (116) (115) -2
Research and development (57) (57) -1
General and administrative (37) (41) +11
Operating income 129 132 +1
EBITDA 148 149 +2
EBITDA (%) 22.9 22.4
New Technology
1st Half 2002 1st Half 2001 CER
$m $m %
Sales -- -- --
Gross profit -- -- --
Marketing and distribution -- -- --
Research and development (73) (72) -2
General and administrative (9) (9) +14
Operating income (82) (81) -1
EBITDA (77) (76) -2
EBITDA (%) n/a n/a
(1) Excluding special items.
Unaudited Interim Condensed Consolidated Financial Statements
The following unaudited interim condensed consolidated financial statements and
notes thereto have been prepared on a statutory accounting basis in accordance
with International Accounting Standards (IAS). A reconciliation to US GAAP has
been prepared for US investors.
Unaudited Interim Condensed Consolidated Income Statement
Including Special Items Special Items
For the six months to 30 June 1st Half 1st Half 1st Half
2002$m 2001$m 2002$m
Sales 3902 4031 --
Cost of goods sold (1847) (1967) --
Gross profit 2055 2064 --
Marketing and distribution (549) (578) --
Research and development (336) (358) --
General and administrative (323) (310) --
Merger and restructuring costs,
net of divestment gains (157) (35) (157)
Operating income 690 783 (157)
Income from associates (3) -- --
Financial expense, net (93) (102) --
Income before taxes and
minority interests 594 681 (157)
Income tax expense (264) (298) 37
Income before minority interests 330 383 (120)
Minority interests (2) (6) --
Net income 328 377 (120)
Earnings per share(2)
- basic $3.23 $3.72 $(1.19)
- diluted $3.23 $3.72 $(1.18)
EBITDA(3) 989 1024 (110)
Special Items Excluding
Special Items
1st Half 1st Half 1st Half +ve/-ve Movement
2001$m 2002$m 2001$m CER(1) %
-- 3902 4031 -2
-- (1847) (1967) +6
-- 2055 2064 +1
-- (549) (578) +5
-- (336) (358) +6
-- (323) (310) -4
(35) -- -- n/a
(35) 847 818 +7
-- (3) -- n/a
-- (93) (102) +4
(35) 751 716 +8
12 (301) (310) n/a
(23) 450 406 n/a
-- (2) (6) n/a
(23) 448 400 n/a
$(0.23) $(0.23) $4.42
$4.41 $3.95 $3.95
(35) 1099 1059 +6
(1) Growth rates are at constant exchange rates (CER).
(2) The weighted average number of ordinary shares in issue used to
calculate the earnings per share were as follows: for 2002 basic EPS,
101.4 million; 2002 diluted EPS, 101.6 million; 2001 basic and diluted
EPS, 101.3 million.
(3) EBITDA is defined as earnings before interest, tax, minority
interests, depreciation, amortization and impairment. Information
concerning EBITDA has been included as it is used by investors as one
measure of an issuer's ability to service or incur indebtedness.
EBITDA is not a measure of cash liquidity or financial performance
under generally accepted accounting principles and Syngenta's EBITDA
measures may not be comparable to other similarly titled measures of
other companies. EBITDA should not be construed as an alternative to
operating income or cash flow as determined in accordance with
generally accepted accounting principles.
Unaudited Interim Condensed Consolidated Balance Sheet
30 30 31
June June December
2002 2001 2001
$m $m $m
Assets
Current assets
Cash and cash equivalents 260 595 288
Trade accounts receivable 2589 2791 1860
Other accounts receivable 292 277 242
Other current assets 494 139 214
Inventories 1631 1584 1716
Total current assets 5266 5386 4320
Non-current assets
Property, plant and equipment 2352 2474 2348
Intangible assets 2943 2831 3004
Investments in associates
and joint ventures 97 110 103
Deferred tax assets 714 585 666
Other financial assets 271 259 268
Total non-current assets 6377 6259 6389
Total assets 11643 11645 10709
Liabilities and Equity
Current liabilities
Trade accounts payable (1079) (889) (687)
Current financial debts (1034) (2840) (1420)
Income tax and other
taxes payable (312) (382) (220)
Other current liabilities (899) (793) (882)
Provisions (239) (249) (231)
Total current liabilities (3563) (5153) (3440)
Non-current liabilities
Non-current financial debts (1238) (107) (1116)
Deferred tax liabilities (1283) (1237) (1159)
Provisions (894) (704) (835)
Total non-current liabilities (3415) (2048) 3110
Total liabilities (6978) (7201) (6550)
Minority interests (78) (99) (73)
Total equity (4587) (4345) (4086)
Total liabilities and equity (11643) (11645) (10709)
In order to achieve consistent presentation of working capital balances across
the Syngenta group and for all periods presented, reclassifications have been
made to comparative 30 June 2001 figures for trade accounts receivable, other
accounts receivable and trade accounts payable. These reclassifications had no
effect on the comparative consolidated net assets, net current assets, free cash
flow or net debt figures presented.
Unaudited Interim Condensed Consolidated Cash Flow Statement
For the six months to 30 June 2002 2001
$m $m(1)
Operating Income 690 783
Adjustment for non-cash items;
Depreciation, amortization and impairment
on Property, plant and equipment 176 140
Intangible assets 127 105
Gain on disposal of fixed assets (27) (71)
Charges in respect of provisions 188 192
Cash (paid)/received in respect of;
Interest paid (net) (149) (109)
Taxation (148) (181)
Merger and restructuring costs (107) (183)
Other provisions (53) (35)
Cash flow before working capital changes 697 641
Change in net current assets and other
operating cash flows (148) (378)
Cash flow from operating activities 549 263
Additions to property, plant and equipment (65) (116)
Proceeds from disposals of property, plant
and equipment 34 6
Purchase of intangibles, investments in associates
and other financial assets (138) (21)
Proceeds from disposals of intangible and
financial assets 3 3
Proceeds from divested assets 10 191
Business acquisitions and divestments (net
of liquidity acquired) - -
Acquisition of minorities - (6)
Cash flow from/(used for) investing activities (156) 57
Net change in Novartis interest-bearing debt - (140)
Increases in other third party interest-bearing debt 2317 1809
Repayment of third party interest-bearing debt (2692) (2108)
Cash flow from/(used for) financing activities (375) (439)
Dividends paid to group shareholders (48) -
Dividends paid to minorities (3) -
Net effect of currency translation on cash
and cash equivalents 5 (42)
Net change in cash and cash equivalents (28) (161)
Cash and cash equivalents at the beginning
of the period 288 756
Cash and cash equivalents at the end of the period 260 595
(1) Comparative 2001 data has been aligned with the new format of the
Consolidated Cash Flow Statement.
Unaudited Interim Condensed Consolidated Statement of Changes in Equity
Total
equity
$m
31 December 2000 4210
Net income 377
Unrealized holding loss on available for sale financial assets (4)
Unrealized gains/(losses) on derivatives designated
as cash flow hedges (13)
Foreign currency translation adjustment (225)
30 June 2001 4345
31 December 2001 4086
Net income 328
Unrealized holding loss on available for sale financial assets (21)
Income tax (charged)/credited to equity (4)
Dividends paid to group shareholders (48)
Unrealized gains/(losses) on derivatives designated
as cash flow hedges 34
Foreign currency translation adjustment 212
30 June 2002 4587
The issued share capital consists of 112,564,584 registered shares with a
nominal value of CHF10 each. The additional paid-in capital is, to the extent of
20 percent of the share capital of $667 million, not available for distribution.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
Note 1: Basis of Preparation
Nature of operations: Syngenta AG ("Syngenta") is a world leading crop
protection and seeds business that is engaged in the discovery, development,
manufacture and marketing of a range of agricultural products designed to
improve crop yields and food quality.
Basis of presentation and accounting policies: Syngenta's unaudited interim
condensed consolidated financial statements for the six months ended 30 June
2002 are prepared in accordance with the International Accounting Standards
(IAS) adopted by the International Accounting Standards Board (IASB) and the
Interpretations issued by the Standing Interpretations Committee of the IASB.
Except for the changes described below in Note 2, our accounting policies are
those set out in the 2001 Financial Report. The unaudited interim condensed
consolidated financial statements have been prepared in accordance with our
policies, which are applied consistently, and International Accounting Standard
("IAS") No.34 - "Interim Financial Reporting". These principles differ in
certain significant respects from generally accepted accounting principles in
the United States ("US GAAP"). Application of US GAAP would have affected
shareholders' net income and equity for the six months ended 30 June 2002 and
2001 as detailed in Note 8 to the interim condensed consolidated financial
statements.
These interim financial statements should be read in conjunction with the
consolidated financial statements for the year ended 31 December 2001, as they
provide an update of previously reported information.
The consolidated financial statements are presented in United States dollars
("$") as this is the major trading currency of the company.
The preparation of interim financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimated.
Note 2: New Accounting Standards - IAS
With effect from 1 January 2002 Syngenta has complied with IAS 19 (Revised 2002)
"Employee Benefits"; SIC-28 "Business Combinations - Date of Exchange and Fair
Value of Equity Instruments"; SIC-30 "Reporting Currency - Translation from
Measurement Currency to Presentation Currency"; SIC-32 "Intangible Assets - Web
Site Costs"; and SIC-33 "Consolidation and Equity Method - Potential Voting
Rights and Allocations of Ownership Interests". These new standards and
interpretations did not have a material impact on the interim condensed
consolidated financial statements of Syngenta.
The effect of new US GAAP accounting standards is described in Note 9 below.
Note 3: Changes in the Scope of Consolidation
There were no significant acquisitions or divestments during the first six
months of 2002 and 2001.
Note 4a: Unaudited First Half Product Line and Regional Sales
1st 1st Ac-
Half Half tual(1) CER(1)
2002 2001 (1)
Syngenta $m $m % %
Crop Protection 3256 3367 - 3 - 2
Seeds 646 664 - 3 - 1
Total 3902 4031 - 3 - 2
Crop Protection
Product line
Selective herbicides 1125 1224 - 8 - 7
Non-selective herbicides 381 412 - 4 - 4
Fungicides 871 887 - 2 - 1
Insecticides 480 507 - 3 - 2
Professional products 304 270 + 7 + 8
Others 95 67 + 20 + 19
Total 3256 3367 - 3 - 2
Regional
Europe, Africa and Middle East 1218 1211 + 1 + 2
NAFTA 1378 1433 - 4 - 4
Latin America 210 235 - 11 - 10
Asia Pacific 450 488 - 8 - 5
Total 3256 3367 - 3 - 2
Seeds
Product line
Field Crops 381 407 - 7 - 5
Vegetables and Flowers 265 257 + 3 + 4
Total 646 664 - 3 - 1
Regional
Europe, Africa and Middle East 316 299 + 6 + 8
NAFTA 270 292 - 8 - 8
Latin America 33 43 - 23 - 23
Asia Pacific 27 30 - 9 - 6
Total 646 664 - 3 - 1
(1) Product line variances take into account minor reclassifications made in
2002.
Note 4b: Unaudited Second Quarter Product Line and Regional Sales
2nd 2nd Ac-
Quarter Quarter tual CER(1)
Syngenta 2002 2001 (1)
$m $m % %
Crop Protection 1784 1849 - 3 - 5
Seeds 274 277 - 1 - 2
Total 2058 2126 - 3 - 4
Crop Protection
Product line
Selective herbicides 591 659 - 10 - 11
Non-selective herbicides 230 245 - 4 - 5
Fungicides 473 475 - 1 - 2
Insecticides 286 295 - - 1
Professional products 154 141 + 2 -
Others 50 34 + 32 + 24
Total 1784 1849 - 3 - 5
Regional
Europe, Africa and Middle East 609 583 + 4 + 1
NAFTA 831 882 - 6 - 6
Latin America 114 140 - 19 - 18
Asia Pacific 230 244 - 5 - 7
Total 1784 1849 - 3 - 5
Seeds
Product line
Field Crops 141 146 - 4 - 4
Vegetables and Flowers 133 131 + 1 -
Total 274 277 - 1 - 2
Regional
Europe, Africa and Middle East 119 106 + 13 + 11
NAFTA 113 123 - 9 - 9
Latin America 27 31 - 14 - 13
Asia Pacific 15 17 - 10 - 9
Total 274 277 - 1 - 2
(1) Product line variances take into account minor reclassifications made in
2002.
Note 5: Principal Currency Translation Rates
As an international business selling in over 100 countries, with major
manufacturing and R & D facilities in Switzerland, the UK and the USA,
business performance is impacted by movements in currencies. The
principal currencies and their exchange rates against the dollar, for the
half year 2002 and 2001, used to prepare the financial statements
contained in this interim report were as follows:
Average Average Period end Period end
1st Half 1st Half 1st Half 1st Half
2002 2001 2002 2001
Swiss Franc. CHF 1.66 1.70 1.48 1.79
Pound sterling. 0.70 0.69 0.65 0.71
GBP
Yen. JPY 130.47 119.15 118.92 124.29
Euro. EUR 1.13 1.11 1.01 1.18
The above average rates are an average of the monthly rates used to
prepare the condensed consolidated income and cash flow statements. The
period end rates were used for the preparation of the condensed
consolidated balance sheet.
Note 6: Impact of Special Items, net
1st Half 1st Half
2002 2001
$m $m $m $m
Income Statement charge
Merger and integration costs (10) (70)
Restructuring costs
Asset write-offs (47) (10)
Cash costs (102) (26)
Total (149) (36)
Gains from mandated product disposals 2 71
Total special items, net (157) (35)
During the first half of 2002 the post-tax impact of special items
reduced basic earnings per share (EPS) by $1.19 to $3.23, and diluted EPS
by $1.18 to $3.23. In 2001 basic and diluted EPS were reduced by $0.23 to
$3.72.
Note 7a: Net Debt Reconciliation
The following table provides a reconciliation of movements in net debt
during the period:
2002 2001
$m $m
Opening balance at 1 January 2219 2429
Acquisitions and disposals - -
Other non-cash items (22) 280
Foreign exchange effect on debt (12) (79)
Sale of Treasury Stock - -
Dividends paid to group shareholders 48 -
Dividends paid to minorities 3 -
Free cash flow (398) (278)
Closing balance as at 30 June 1838 2352
Constituents of closing balance;
Cash and cash equivalents (260) (595)
Current financial debts 1034 2840
Non-current financial debts .1238 107
Financing-related derivatives (174) -
Closing balance at 30 June 1838 2352
Note 7b: Free Cash Flow
Free cash flow comprises cash flow after operating activities, investing
activities, taxes and operational financing activities, but prior to
capital financing activities such as drawdown or repayment of debt,
dividends paid to Syngenta Group shareholders, share buyback and other
equity movements. Free cash flow is not a measure of financial
performance under generally accepted accounting principles and Syngenta's
free cash flow measure may not be comparable to similarly titled measures
of other companies.
2002 2001
$m $m
Cash flow from operating activities 549 263
Cash flow used for investing activities (156) 57
Free cash flow, pre-foreign exchange effect 393 320
Foreign exchange effect on cash and cash equivalents 5 (42)
Free cash flow 398 278
The free cash flow for the comparative period has been revised in
accordance with the treatment in the 2001 full year audited Consolidated
Financial Statements.
Note 8: Reconciliation to US GAAP from the Interim Condensed Consolidated
Financial Statements
Syngenta's interim condensed consolidated financial statements have been
prepared in accordance with IAS which, as applied by Syngenta, differs in
certain significant respects from US GAAP. The effects of the
application of US GAAP to net income and equity are set out in the tables
below:
2002 2001
Net income (for six months ended 30 June)
$m $m
Net income under IAS 328 377
US GAAP adjustments:
Purchase accounting:
Zeneca agrochemicals 25 23
Other acquisitions (47) (45)
Pension provisions (including post-retirement benefits) (4) -
Stock based compensation - -
Deferred taxes on unrealized profit in inventory (25) (12)
Capitalized costs, less disposals and depreciation - 7
Deferred tax effect on US GAAP adjustments 7 7
Net income under US GAAP (note 9) 284 357
Weighted average number of ordinary shares
in issue - basic 101.4 101.3
Weighted average number of ordinary shares
in issue - diluted 101.6 101.3
Earnings per Share under US GAAP (basic
and diluted) (note 9) $2.80 $3.52
2002 2001
Equity (as at 30 June)
$m $m
Equity under IAS 4587 4345
US GAAP adjustments:
Purchase accounting:
Zeneca agrochemicals (485) (222)
Other acquisitions 1051 1194
Pension provisions (including post-retirement benefits) (6) (5)
Stock based compensation - -
Deferred taxes on unrealized profit in inventory (52) (49)
Capitalized costs, less disposals and depreciation 29 27
Deferred tax effect on US GAAP adjustments (243) (356)
Equity under US GAAP 4881 4934
For the six months ended 30 June 2002, net income under IAS was $328
million, compared to net income of $284 million under US GAAP. The main
reasons for the difference were in the application and incidence of
purchase accounting under IAS and US GAAP, which caused differences to
arise on both the purchase accounting for Zeneca agrochemicals business,
and on other acquisitions. These differences also reflect compliance for
US GAAP purposes with effect from 1 January 2002 with the cessation of
goodwill amortization under SFAS 142, 'Goodwill and Intangible Assets'.
The implementation status of goodwill impairment testing under SFAS 142
is described in Note 9 below.
Differences arise between the IAS and US GAAP treatments of the purchase
accounting for Zeneca agrochemicals business such as different levels of
amortization associated with the different treatment of intangibles.
The net difference in pre-tax income arising between the IAS and US GAAP
treatments for other acquisitions was $47 million. This difference mainly
arises because the Sandoz and Ciba-Geigy merger was accounted for as a
uniting of interests under IAS. For US GAAP the merger was accounted for
as a purchase, including recognition and subsequent amortization of
purchased product rights.
For a further description of the difference between IAS and US GAAP, see
Note 33 of Syngenta's consolidated financial statements of 2001 included
in Form 20-F as filed with the US Securities and Exchange Commission on
10 April 2002.
Note 9: New accounting standards - US GAAP
Syngenta has complied with SFAS 141 'Business Combinations' in relation
to all business combinations initiated after 1 July 2001, and has
complied with SFAS 142 'Goodwill and Intangible Assets' with effect from
1 January 2002.
As a consequence of the adoption of SFAS 142 from 1 January 2002,
goodwill amortization under US GAAP ceased from that date. Whereas SFAS
142 changes the accounting measurement for goodwill from an amortization
method to an impairment only method, under IAS, goodwill is still
required to be amortized.
As a result of the first step of a transitional impairment test under
SFAS 142, Syngenta has identified certain reporting units in the Crop
Protection and Seeds segments whose goodwill may be impaired. The total
US GAAP carrying amount of goodwill allocated to these reporting units at
1 January 1 2002 is approximately $150 million. The second step of the
transitional test, which will determine the actual impairment amount, if
any, will be completed by the end of 2002. Any potential impairment
charge arising will be treated as the cumulative effect of an accounting
change. The amortization charge for goodwill under IAS was $27 million
for the first six months of 2002. Any impairment charge would have no
effect on Syngenta's liquidity or cash flow.
Under IAS, the carrying amount of goodwill, the criteria for allocating
goodwill to reporting units, and the process and method of measuring
impairment are all different from their US GAAP equivalents. Because of
these differences, any impairment charge recognized for US GAAP will not
necessarily be recognized for IAS, and any impairment charge recognized
for IAS will not necessarily be recognized for US GAAP. Also, in the
event that impairment charges are recognized under both GAAPs with
respect to the same assets, the amounts of those charges may be
different.
SFAS 142 does not require prior periods to be restated. The following
table sets forth on a post-tax pro forma basis what Syngenta's
consolidated US GAAP net income and earnings per share would have been if
the provisions of SFAS 142 had been applied in the first six months of
2001. This pro forma information does not include the results of the
transitional impairment test discussed above.
2002 2001
Six months ended 30 June $m $m
Reported net income under US GAAP (Note 8) 284 357
Goodwill amortization expense charged to reported net income - 15
Adjusted pro forma net income under US GAAP 284 372
Reported earnings per share under US GAAP
(basic and diluted) (Note 8) 2.80 3.52
Goodwill amortization expense - 0.15
Adjusted pro forma earnings per share under US
GAAP (basic and diluted) 2.80 3.67
Syngenta has complied with SFAS 144 'Impairment or disposal of long-lived
assets' with effect from 1 January 2002. Adoption of SFAS 144 has not had
a material effect on the interim consolidated financial statements.
Announcements and Meetings
Third quarter trading statement 25 October 2002
Announcement of full year results 2002 20 February 2003
AGM and first quarter trading statement 2003 29 April 2003
Announcement of half year results 30 July 2003
Glossary and Trademarks
All product or brand names included in this Interim Statement are
trademarks of, or licensed to, a Syngenta group company. For simplicity,
sales are reported under the lead brand names, shown below, whereas some
compounds are sold under several brand names to address separate market
niches.
Selective Herbicides
APIRO(R) novel grass weed herbicide for rice
BICEP(R) MAGNUM broad spectrum pre-emergence herbicide for corn and
sorghum
CALLISTO(R) novel herbicide for flexible use on broad-leaved
weeds for corn
DUAL(R) MAGNUM grass weed killer for corn and soybeans
ENVOKE(R) novel low-dose herbicide for cotton and sugar cane
FLEX(R) broad spectrum broad-leaf weed herbicide for soybeans
FUSILADE(R) grass weed killer for broad-leaf crops
TOPIK(R) post-emergence grass weed killer for wheat
Non-selective Herbicides
GRAMOXONE(R) rapid, non-systemic burn-down of vegetation
TOUCHDOWN(R) systemic total vegetation control
TOUCHDOWN(R)IQ(TM) improved TOUCHDOWN(R)
Fungicides
ACANTO(R) second-generation strobilurin with particular
advantages in early cereal applications
AMISTAR(R) broad spectrum strobilurin for use on multiple crops
BRAVO(R) broad spectrum fungicide for use on multiple crops
RIDOMIL GOLD(R) systemic fungicide for use in vines, potatoes
and vegetables
SCORE(R) triazole fungicide for use in vegetables, fruits and
rice
TILT(R) broad spectrum triazole for use in cereals, bananas
and peanuts
UNIX(R) cereal and vine fungicide with unique mode of
action
Insecticides
ACTARA(R) second-generation neonicotinoid for controlling
foliar and soil pests in multiple crops
FORCE(R) unique pyrethroid controlling soil pests in corn
KARATE(R) foliar pyrethroid offering broad spectrum in
sect control
PROCLAIM(R) novel, low-dose insecticide for controlling
lepidoptera in vegetables and cotton
VERTIMEC(R) acaricide for use in fruits, vegetables and cotton
Professional Products
AVID(R) acaricide for ornamentals
BARRICADE(R) pre-emergence crabgrass herbicide for turf
CRUISER(R) novel broad spectrum seed treatment - neoni
cotinoid insecticide
DIVIDEND(R) triazole seed treatment fungicide
HERITAGE(R) strobilurin turf fungicide
ICON(R) public health insecticide
MAXIM(R) broad spectrum seed treatment fungicide
Field Crops
NK(R) global brand for corn, oilseeds and other field crops
HILLESHOG(R) global brand for sugar beet
Vegetables and Flowers
S&G(R) vegetables leading brand in Europe, Africa and Asia
S&G(R) flowers global brand for seeds and young plants
ROGERS(R) vegetables leading brand throughout the Americas
