- Sales 1 percent lower CER(1)at $5.2 billion
- Crop Protection sales unchanged(1) at $3.9 billion
- New product sales up 22 percent(1) to $646 million; AXIAL® and AVICTA® launches
- Development pipeline accelerating: Crop Protection, Seeds biotech traits
- Earnings per share(2) up 9 percent to $10.44
- $889 million cash returned to shareholders
Financial Highlights (unaudited)
Excluding Restructuring As reported
& Impairment under IFRS
1st Half 1st Half 1st Half 1st Half
2006 2005 Actual CER(1) 2006 2005
$m $m % % $m $m
Sales 5201 5386 - 3 - 1 5201 5386
Net Income(3) 1056 976 + 8 961 912
Earnings per Share $10.44 $9.54 + 9 $9.51 $8.92
(1) Growth at constant exchange rates, see Appendix A.
(2) EPS on a fully-diluted basis, excluding restructuring and impairment.
(3) Net income attributable to shareholders of Syngenta AG.
Michael Pragnell, Chief Executive Officer, said:
"In the first half of 2006
Syngenta performed well. Crop Protection outperformed in
challenging northern hemisphere markets where fungicide
demand was lower. New products maintained their outstanding
record of growth, augmented by the successful launches of
AXIAL® and AVICTA®. Professional Products growth accelerated
with strong performances in all three businesses. In Seeds,
growth was achieved in all businesses with the exception of
NAFTA corn due to production-related issues in the first
quarter. We also made significant strategic progress: two
acquisitions in Lawn & Garden and Vegetables Seeds
respectively, a product technology exchange in Crop
Protection and a marketing and technology agreement with
Pioneer in US corn and soybean seeds. Continued cost
discipline enabled us to offset the impact of higher
oil-related costs while targeting expenditure to drive
future growth, maintaining key performance ratios and
increasing earnings."
Highlights for 2006
Sales at constant
exchange rates (CER) were one percent lower. Crop Protection
sales* were unchanged; Seeds sales were four percent lower.
EBITDA was unchanged
(CER) at $1.54 billion as operational efficiency savings
offset the impact of higher oil-related costs ($82 million)
and funded increased marketing and development expenditure
in fast-growing areas of the business.
Earnings per share,
excluding restructuring and impairment, were up nine percent
to $10.44, benefiting from higher operating income and a
reduction in net financial expense helped by currency
exchange gains. After charges for restructuring and
impairment, earnings per share were $9.51 (2005: $8.92).
Currency: Sales were
negatively impacted by two percent due to the relative
strength of the US dollar, notably against the Euro. The net
impact on EBITDA was one percent.
Crop Protection:
Sales in NAFTA were slightly lower mainly as a consequence
of lower fungicide sales for soybean rust and reduced corn
acres. Double-digit growth was again achieved in Eastern
Europe which partially offset a decline in western Europe
due to reduced fungicide consumption in cereals and the
ongoing impact of subsidy reform. Broad-based sales growth
in Asia Pacific was mainly driven by a strong performance in
south east Asia. In Latin America, sales increased as a
result of effectively combining risk management with
successful marketing programs. Sales of new products,
notably the CALLISTO® family and ACTARA® again delivered
strong growth. AXIAL® was launched successfully in Europe
and North America; its strong market reception resulted in
an increased peak sales target of over $200 million. EBITDA
was unchanged (CER) at $1.32 billion.
Professional Products:
Sales increased 18 percent as all three businesses: Seed
Care, Lawn & Garden and Home Care made important
contributions. The main driver was Seed Care where the
insecticide CRUISER®, once again, delivered strong US
growth; in addition, AVICTA® was launched successfully on
cotton in the USA. Performance was also strong in Lawn &
Garden, notably Ornamentals; this business was augmented in
July by the acquisition of Conrad Fafard, Inc., a leading
North American growing media company.
Seeds: Sales
increased in all regions with the exception of NAFTA where
production-related issues in US corn in the first quarter
resulted in lower sales. An important strategic alliance was
agreed with Pioneer to create the joint venture, GreenLeaf
Genetics, broadening the germplasm and traits offer to
independent seeds companies in the USA. In Vegetables,
demand for fresh produce continued to grow and the
acquisition of Emergent Genetics Vegetable A/S was
completed, further expanding the product offer. Sales in
Flowers rose slightly. Diverse Field Crops maintained growth
momentum driven primarily by demand for oil crops in Eastern
Europe. EBITDA was four percent lower (CER) at $275 million.
R & D Pipeline: In
Crop Protection, good progress was made in the development
pipeline including the in-licensing of the novel insecticide
Rynaxypyr(TM) from DuPont. With peak sales potential of more
than $200 million, this product is targeted for launch in
2008. In addition, two fungicides 520 and 524, passed
important milestones and were advanced into late
development. In Seeds, the development of a complete range
of stacked input traits in corn is on track for 2008. In
addition, from 2008 the company aims to launch a number of
second generation traits including: corn amylase for
enhanced bioethanol production; Optimum(TM) GAT(TM)
herbicide-resistant trait in soybean, licensed from Pioneer;
lepidoptera insect control in corn; and drought tolerant
corn.
Operational efficiency:
Total restructuring and impairment charges during the period
were $130 million (cash: $70 million; non-cash: $60 million)
largely relating to the program to streamline global
operations, announced in February 2004. Savings in the first
half were $106 million and peak savings of $425 million are
expected by the end of 2008. Restructuring costs are
expected to be around $850 million between 2004 and 2008
including non-cash charges of $350 million.
Cash flow and balance
sheet: The ratio of average trade working capital as a
percentage of sales was higher at 42 percent (2005: 39
percent) due to an increase in inventories. Fixed capital
expenditure of $81 million was below depreciation of $109
million.
Taxation: The
underlying tax rate for the period was 22 percent (2005: 24
percent). The tax rate is expected to remain in the low
twenties over the medium term.
Cash return to
shareholders: The company continued its share repurchase
program in the first half of 2006, repurchasing 3.3 million
shares through the put option structure announced in
February; a total dividend of $260 million was paid on 11
July in the form of a nominal value reduction. The total
returned to shareholders to date in 2006 is $889 million;
since May 2004 total cash returned is $1.6 billion. The 2.3
million shares repurchased in 2005 were cancelled on 6 July.
Outlook
Michael Pragnell, Chief
Executive Officer, said:
"Looking ahead, we see
numerous opportunities to capture growth across all our
businesses. Continuing market share gains and the exciting
potential of the pipeline in Crop Protection, the increasing
promise of our biotechnology traits in US corn seeds and the
further expansion of Professional Products, coupled with
continued cost discipline, reinforce our confidence in
targeting double digit growth in earnings per share* through
2008."
* Crop Protection sales
include $36 million of inter-segment sales.
Syngenta is a
world-leading agribusiness committed to sustainable
agriculture through innovative research and technology. The
company is a leader in crop protection, and ranks third in
the high-value commercial seeds market. Sales in 2005 were
approximately $8.1 billion. Syngenta employs some 19,000
people in over 90 countries. Syngenta is listed on the Swiss
stock exchange (SYNN) and in New York (NYSE:
SYT -
News).
Further information is available at
http://www.syngenta.com.
