Syngenta Says Profit, Pipeline Show Company Can Remain Independent

July 23, 2015 06:53 AM
Syngenta Says Profit, Pipeline Show Company Can Remain Independent

Swiss agrochemical maker Syngenta AG used an upbeat earnings report to bolster its case against a $45 billion takeover bid from U.S. rival Monsanto Co., saying the numbers prove it can stand alone with a product pipeline stretching to the end of the decade.

“A lot of the new products are starting to pay off,” Chief Executive Officer Mike Mack said in a phone interview on Thursday, adding that the increase in profit and sales in the first half is the best answer to Monsanto’s unsolicited offer. “And the pipeline in 2016 and beyond is going to steer this company to the end of the decade.”

St. Louis-based Monsanto, the world’s largest seed company, has approached Syngenta, the biggest pesticide maker, about a deal three times since 2011. Its most recent proposal, a cash-and-stock bid, was made in April. Syngenta has argued that Monsanto’s proposal is simplistic, may be blocked by regulators and is too low considering a strong pipeline of innovative crop-protection offerings.

Syngenta’s earnings before interest, tax, depreciation and amortization reached $2 billion in the first half of the year. Analysts had predicted $1.91 billion. The earnings dropped 5 percent on a reported basis, hurt by currency swings such as the stronger dollar, but gained 21 percent at constant exchange rates.

‘Standing Proud’

The stock was down 1.6 percent as of 11:00 a.m. in Swiss trading, valuing the company at 37.1 billion Swiss francs ($40.8 billion). Before today, shares of Syngenta, which also competes with Bayer AG, BASF SE and Dow Chemical Co., gained 26 percent this year.

“The pressure on Syngenta management to accept the offer from Monsanto is now less,” said Bernd Pomrehn, an analyst at MainFirst Schweiz AG who rates the stock outperform. “The improvement in margins strengthens their position in negotiations with Monsanto. The trend is positive. Management has delivered.”

Monsanto CEO Hugh Grant said today he’s remains ready to discuss a combination with the Swiss rival, adding that “Syngenta’s earnings announcement confirms it still does not have a long-term vision or plan that would create the same value as Monsanto’s very attractive 449 francs a share proposal.”

At constant exchange rates, sales in Europe, the Middle East and Africa rose by 13 percent, while climbing 1 percent in Latin America, declining 7 percent in North America and dropping 1 percent in the Asia Pacific region.

Shareholder Meetings

“I think in these six months we can stand proud,” Chief Financial Officer John Ramsay said in a telephone interview. “We can see the results that we’ve been talking about for the last two years start to come through. That determination has started to deliver.”

Monsanto’s Grant this month said that there’s increasing impatience among Syngenta shareholders about the refusal of the Swiss company to engage in takeover negotiation, after he had traveled to Europe to meet with about 75 investors to promote his unsolicited bid.

Syngenta’s Ramsay said shareholders should be encouraged by today’s results.

“These are very difficult market conditions, the worst we’ve experienced for years and we’ve been saying for some time to our shareholders that they need to give us time to come through with our strategy, come through with our operational leverage program,” the CFO said.

The company today confirmed its full-year forecast for sales excluding currency swings and Ebitda including currency moves to be broadly unchanged.

Syngenta said Thursday that its expanded pipeline of new products has a sales potential of more than $3.6 billion. A new herbicide called Acuron that the Swiss company introduced in April could reach revenue of as much as $500 million, double what the company had budgeted for.

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