Syngenta Warns Currency Troubles Will Erode 2015 Earnings

October 15, 2015 06:46 AM
Syngenta Warns Currency Troubles Will Erode 2015 Earnings

Syngenta AG, which rebuffed a takeover approach from Monsanto Co., warned a slowdown in Latin America and the stronger dollar will erode 2015 earnings after third-quarter sales dropped. The shares fell.

Revenue for the latest three-month period fell 12 percent to $2.6 billion due to currency weaknesses compared with the dollar, Basel-based Syngenta said in a statement Thursday. Sales were hurt by low commodity prices in Brazil and tight credit in Argentina.

The world’s largest maker of agrochemicals now joins the ranks of Monsanto, FMC Corp and DuPont Co. in predicting a slump in agricultural markets and waning demand for crop chemicals from farmers will hit earnings this year. A devaluation in the Brazilian real means Latin America, which accounts for around 45 percent of second-half sales, is unlikely to meet Syngenta’s original expectations for 2015, Chief Executive Officer Mike Mack said in the statement.

The shares fell as much as 3.3 percent to the lowest level in almost 10 months and were trading down 2.7 percent to 290.10 Swiss francs as of 12:24 p.m. in Zurich.

“Syngenta reported slightly disappointing revenue numbers,” analysts at J. Safra Sarasin said in a note.

Syngenta is selling its vegetable seeds business as part of a move to shore up investor support after rebuffing a $47 billion takeover approach from Monsanto. The firm is also selling its flower-seeds unit and plans to buy back more than $2 billion of shares.

The flower and vegetable seed businesses have already attracted more than 10 interested parties and preliminary bids will be sought in the first quarter, Chief Financial Officer John Ramsay said in an interview Thursday. The vegetable seed unit could fetch more than $2.5 billion, analysts at Bernstein have estimated.

“This divestment may trigger capital return hopes,” said the analysts at J. Safra Sarasin.

The benefits of a cost-cutting program, higher prices in Russia and a corn-trait licensing pact should see profit increase by at least 10 percent this year at constant currencies, the company said. This compares with a previous forecast that it would be unchanged.

Earnings before interest, taxes, depreciation and amortization that aren’t stripped of currency fluctuations will likely show a “mid-single digit decline,” compared to a previous prediction for it to remain at the 2014 level, Syngenta said.


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