(Rewrites, adds detail.)
By Julia Mengewein
Of DOW JONES NEWSWIRES
ZURICH -(Dow Jones)- Agrochemicals company Syngenta AG (SYT) Friday saw its shares rise despite third-quarter sales missing expectations, as the company said it's cautiously optimistic on 2010 and confirmed its 2009 target to reach earnings per share close to the record level of 2008.
Sales for the period under review dropped 12% to $2 billion, missing the $2.05 billion forecast by the eight analysts polled by Dow Jones. The company blamed the drop on lower prices for some of its herbicides, credit constraints in Eastern Europe and fewer pests due to a cold winter in Europe and North America.
"The company grew sales in seeds in local currencies, so the miss on the top line due to a 60%-slump in prices for glyphosate-based herbicides doesn't worry investors too much," said DZ Bank analyst Heinz Mueller, who rates the stock at buy.
"Statements that Syngenta is cautiously optimistic for 2010 has led investors to gain trust in the company's performance beyond 2009, and the confirmed ambitious 2009 guidance justifies the positive share price reaction today," Mueller added.
At 0845 GMT, Syngenta shares were trading up 10.25 Swiss francs ($10.23), or 4.1%, at CHF261, outperforming a 0.6% rise in the Swiss blue-chip market SMI.
Syngenta Chief Executive Mike Mack said in a telephone interview with Dow Jones Newswires he is cautiously optimistic for 2010, as some negative effects seen this year should ease in the coming quarters.
"Raw materials are set to fall further and the credit situation for farmers has improved from one year ago," he said.
Chief Financial Officer John Ramsay said raw material costs were down in the third quarter, although he declined to give a percentage figure. He added that negative currency impacts will also continue to ease as the year progresses, which makes the company confident of reaching its 2009 EPS goal.
He confirmed earlier statements that Syngenta sales for the full year will fall, but not as much as the 9% in the first half of 2009.
Syngenta said its sales prices fell 2% in the third quarter, which was mainly due to a 60% slump in prices for herbicides based on glyphosate and that currency fluctuations had a 4% negative impact on sales in the period.
Sales for Syngenta's crop protection division fell 14% to $1.61 billion, compared with a 12% drop predicted by analysts.
Syngenta, based in Basel, Switzerland, however said it saw a good start into the planting season in its important Latin American market as farmers reserved a bigger part of their planting areas for soy beans, while the Asia Pacific region benefited from new product launches.
Credit Suisse analyst Rhian Tucker welcomes the strong start in Latin America and expects this to bode well for the fourth quarter. "We believe margins should remain strong," said the analyst, who rates Syngenta at outperform.
Seeds sales fell 3% in U.S.-dollars to $406 million, but actually rose 3% in the third quarter when stripping out currency fluctuations. Analysts had called for sales of $419 million.
In May, Syngenta's U.S.-based rival Monsanto Co. (MON) warned that it won't reach its third-quarter earnings per share guidance due to hefty pricing competition from Chinese rivals for glyphosate products, which contribute more than one third to Monsanto's sales.
Syngenta shares, have gained 29% year-to-date, bang in line with the European Chemicals sector (Stoxx 600), which rose 29% over the period.
The company trades at 10.8 times enterprise value of its 2010 Ebitda, according UniCredit estimates. That makes it more expensive than most of its European peers which trade on an average of 8.1x.
-By Julia Mengewein, Dow Jones Newswires; +41 43 443 8048; djnews.frankfurt@dowjones.com