Syngenta Results Beat Forecasts as Monsanto Intensifies Takeover Pressure
24 Jul 2015 --- Syngenta AG used an upbeat earnings report to bolster its case against a $45 billion takeover bid from Monsanto, saying the numbers prove it can stand alone with a product pipeline stretching to the end of the decade.
Chief Executive Mike Mack rolled out his most definitive rejection of Monsanto’s $45-billion takeover calls, saying a tie-up was too risky, the offer on the table inadequate, and his company’s recent performance shows it is better off going it alone.
He said that a deal was “inadequate on so many perspectives” and too vulnerable to objections from antitrust regulators. “All you have to do is look at the results and look at the potential of the business,” he said in an interview after the Swiss pesticide and seed maker released earnings that beat forecasts Thursday. “The industry is having a downturn, but we are turning in a big set of results.”
Syngenta has previously said it thinks a combination would lead to lengthy reviews by antitrust regulators, who could then reject the deal. Monsanto’s proposal involves combining its seeds and biotechnology business with most of Syngenta’s crop chemicals operations, creating a powerhouse in both businesses.
Syngenta reported that their strong business performance leads to significant increase in profitability, with sales of $7.6 billion: up 3 percent at constant exchange rates. Second quarter sales were up 7 percent, with growth in all regions. Excluding glyphosate sales were up 6 percent. Reported sales were down 10 percent, with most currencies depreciating against the US dollar.
Mike Mack, Chief Executive Officer, said: “In 2015 our industry has experienced continuing softness in crop prices and low farm incomes. Despite these challenges, and our decision to reduce sales of glyphosate, we achieved sales growth at constant exchange rates of three percent in the first half. We have been able to largely offset currency depreciation in emerging markets through determined price increases and this, together with our hedging program, has mitigated the impact of currencies on EBITDA. The realization of the first savings from our Accelerating Operational Leverage program has contributed to substantial margin improvement, demonstrating that we are on track to deliver a sustainable improvement in profitability.”
“In the first half we saw continuing momentum from our new fungicide ELATUS™ and the successful launch in the USA of the new corn herbicide ACURON. The excellent grower reception for both products reinforces our confidence in the innovation upturn that is now underway, with total peak sales potential for recently launched products of over $2.7 billion. In addition, to illustrate the longer term returns that we expect from our industry leading R&D, we have today announced an expanded pipeline with peak sales potential of over $3.6 billion."
