RNS Number:1172O
Syngenta AG
30 July 2003
Media Release - Communique aux Medias - Medienmitteilung
Half Year Results 2003
Basel, Switzerland, 30 July 2003
'Strong cash flow generation and earnings per share growth'
* Free cash flow(1) $707 million: gearing reduced to 22 percent
* Earnings per share(2) up 17 percent to $5.18: lower financing and tax
rate
* Sales $4.1 billion, up 5 percent: 3 percent lower at constant exchange
rates (CER)
* EBITDA $1165 million: improved product mix, cost synergies, favorable
currency effect
Financial Highlights (unaudited)
1st Half 2003 1st Half 2002 Actual CER(3)
$m $m % %
Sales 4105 3902 + 5 - 3
Excluding Special Items(2)
EBITDA 1165 1099 +6 -
Profit before Tax 841 751 +12 +4
Net Income 527 448 +18
Earnings per Share(5) $5.18 $4.41 +17
Including Special Items(4)
Profit before Tax 760 594
Net Income 468 328
Earnings per Share(5) $4.60 $3.23
Growth rates in the following narrative are at CER(3).
Michael Pragnell, Chief Executive Officer, said:
"Syngenta has sustained progress in the first half of 2003 against a background
of challenging conditions. We have reinforced the quality of our business
through focused price management, tight financial control and continued
modernization of the product portfolio; new products, particularly CALLISTO(R)
and ACTARA(R)/CRUISER(R), have maintained their encouraging growth. Seeds built
on the performance achieved in the first quarter. We continue to meet cost
synergy targets; cash generation and earnings per share growth remain strong."
(1) For a definition of free cash flow, see Note 10b, page 19.
(2) Excluding special items of $81 million (2002: $157 million) being a net
charge in respect of merger restructuring costs, see Note 8, page 17.
See Footnote 4, page 9 for a description of EBITDA.
(3) Growth rates are at constant exchange rates, see Note 4, page 13.
(4) In accordance with International Financial Reporting Standards
(5) Diluted EPS calculated on 101,730,032 shares.
Highlights for 1st Half 2003
Sales during the first half of 2003 were up five percent; excluding a $320
million currency benefit, sales were three percent lower. At constant exchange
rates Crop Protection sales were four percent lower; excluding the impact of
product range rationalization ($70 million) sales were two percent lower (CER).
In Seeds sales (CER) were up three percent.
EBITDA, at constant exchange rates, was unchanged; the reported margin was 28.4
percent (2002: 28.2 percent); the margin at CER was up 0.8 percent.
Earnings per share excluding special items were up 17 percent to $5.18. Special
items reduced earnings per share by $0.58 to $4.60.
Currency: the continued weakness of the US dollar resulted in an eight percent
positive impact on sales; the strength of the Euro, combined with a positive
contribution from other currencies and hedging benefits, contributed $67 million
to EBITDA.
Crop Protection: the business has focused on price management and portfolio
modernization in conditions where demand during the first half of the year has
been slow in many areas and remains below external forecasts; unusually dry
conditions in Europe have reduced grower demand, particularly in fungicides.
Demand in a number of Asian markets has been weak.
The focus on price has succeeded in arresting the recent trend of price erosion,
against continuing pressure particularly in US herbicides, albeit at the expense
of TOUCHDOWN(R) IQ(R) volumes.
Growth of new products amounted to $121 million (CER), to bring total new
product sales for the period to $338 million with particularly strong
performances from CALLISTO(R) and ACTARA(R)/CRUISER(R). Range rationalization
resulted in sales being reduced by $70 million (CER) during the period (2002:
$96 million). This program is expected to be completed by the end of 2004.
With lower sales, albeit an improving product mix, EBITDA at $1060 million was
two percent lower (CER).
Seeds: Sales increased across the portfolio: notable growth was achieved in
Europe in vegetables, flowers and sunflowers; in the USA growth was driven by
field crops, notably corn which benefited from a change in US distributor
arrangements, and flowers. EBITDA at $180 million was up five percent (CER).
Plant Science: Plans are progressing for the launch of microbial phytase in
2004 and VIP (new insect control technology) in 2004/2005 subject to US
regulatory approval.
Synergies: Synergies totaling $84 million were realized in the first half of the
year bringing cumulative savings since merger to $446 million. The program
remains on track to deliver the full year target of $138 million.
Special Items: Special charges of $81 million before tax relate to
restructuring costs associated with implementation of the merger synergy program
and a gain of $39 million from the receipt of shares and warrants from the
Diversa research agreement completed earlier this year.
Cash Flow and Balance Sheet: Free cash flow of $707 million (2002: $398
million) was particularly strong due to a further reduction in average trade
working capital associated largely with the early collection of receivables
combined with lower tax and interest payments. The ratio of trade working
capital as a percentage of sales at period end improved to 44 percent (2002 half
year: 51 percent). Fixed capital expenditure of $112 million was below
depreciation of $133 million.
At period end, net debt (see Note 10a, page 19) reduced to $1.1 billion (30 June
2002: $1.8 billion) representing a gearing ratio of 22 percent (30 June 2002: 40
percent).
Outlook
Michael Pragnell, Chief Executive Officer, said:
"Sales in the second half are expected to benefit from robust progress in Latin
America which is likely to be offset by continued weakness in Europe and Asia.
For the full year 2003, our continuing focus on pricing and cost management is
expected to deliver an increase in EBITDA and significant growth in earnings per
share, even though at current exchange rates, most of the currency benefit on
EBITDA seen in the first half is expected to unwind.
"We remain committed to sustaining a cost-competitive organization focused on
value creation; Syngenta is well-positioned to handle the changing agricultural
environment through its broad and innovative product range and marketing
strengths."
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
2002 were approximately $6.2 billion. Syngenta employs some 20,000 people in
over 90 countries. Syngenta is listed on the Swiss stock exchange (SYNN), and
in London (SYA), New York (SYT) and Stockholm (SYN). Further information is
available at www.syngenta.com.
Analyst/Investor Enquiries: Jonathan Seabrook (Switzerland) +41 61 323 7502
Jennifer Gough (Switzerland) +41 61 323 5059
Rhonda Chiger (USA) + 1 (917) 322 2569
Media Enquiries: O'Patrick Wilson (Switzerland) +41 61 323 2323
Judith Auchard (UK) +44 (0)1483 260184
Lori Captain (USA) + 1 (302) 425 2121
Share Registry Enquiries Urs-Andreas Meier +41 61 323 2095
Crop Protection
Except where stated, all narrative in this section refers to the half year.
Percentage growth rates are at CER, see Note 4, page 13. See Note 5, page 14,
for a definition of range rationalization (Ex RR CER).
Half Year Growth 2nd Quarter Growth
Product line 2003 2002 Actual CER Ex RR 2003 2002 Actual CER Ex RR
$m $m % % (CER) $m $m % % (CER)
% %
Selective herbicides 1187 1125 +5 - 1 - 622 591 +5 - 1 -
Non-selective herbicides 364 381 - 4 - 9 - 9 218 230 - 5 - 9 - 9
Fungicides 898 871 +3 - 8 - 6 474 473 - - 9 - 8
Insecticides 506 480 +5 - 2 +3 288 286 +1 - 5 +1
Professional products 328 304 +8 +3 +4 159 154 +3 - 2 -
Others 87 95 - 8 -21 -11 39 50 -20 -27 -12
Total 3370 3256 +4 - 4 - 2 1800 1784 +1 - 6 - 3
Selective Herbicides: major brands BICEP(R) MAGNUM, CALLISTO(R)/LUMAXTM, DUAL(R)
MAGNUM, FUSILADE(R)MAX, TOPIK(R)
Excluding the impact of range rationalization, selective herbicide sales were
unchanged. In corn herbicides sales of the CALLISTO(R) range grew strongly to
$193 million driven by the successful US launch of a new combination product,
LUMAXTM, for broad-spectrum weed control essential to high-yielding corn. The
US corn herbicide market continued to be adversely affected by significant
pricing pressure and increased penetration of herbicide-tolerant corn which
resulted in reduced sales of DUAL(R)/BICEP(R) MAGNUM. In cereals, sales of the
grass herbicide TOPIK(R) increased strongly as a result of broad-based growth,
particularly in Canada.
Non-selective Herbicides: major brands GRAMOXONE(R), TOUCHDOWN(R)
Sales of the premium priced TOUCHDOWN(R) IQ(R) were lower due to an increasingly
competitive US glyphosate market with significant generic pressure and price
reductions. The launch of TOUCHDOWN(R) CF(R), currently underway for use in the
lower-priced chemfallow market, is the first in a sequence of new introductions
that will equip Syngenta to compete in all glyphosate segments. Sales of
GRAMOXONE(R) were also lower: channel de-stocking and competitor pressure in
China and delayed sales in Mexico more than offset strong performances in
Australia, Brazil and smaller Asian markets.
Fungicides: major brands ACANTO(R), AMISTAR(R), BRAVO(R), RIDOMIL GOLD(R), SCORE
(R), TILT(R), UNIX(R)
Excluding the impact of range rationalization, fungicides sales were down six
percent. This decline was a consequence of dry weather in the north European
market, notably France and Germany, which resulted in significantly lower usage
on cereals, particularly a reduction in the important first application. The
roll-out of two competitor strobilurins impacted Syngenta's particularly high
share in this sector. As a result of these factors, sales of ACANTO(R) and
AMISTAR(R) were lower in Europe although AMISTAR(R) continued to grow in the USA
and Brazil. Growth of SCORE(R) in western Europe and RIDOMIL(R) in the USA,
largely offset lower sales of TILT(R) and other smaller products.
Insecticides: major brands ACTARA(R), FORCE(R), KARATE(R), PROCLAIM(R), VERTIMEC
(R)
Excluding the impact of range rationalization, insecticides sales were up three
percent. ACTARA(R) continued to grow strongly across most markets, achieving
sales of $61 million. FORCE(R) sales increased in the USA due to high corn
rootworm infestation and PROCLAIM(R) continued to progress in the Japanese
vegetable market. KARATE(R) sales were slightly down, with growth in NAFTA
offset by reductions in Asia.
Professional Products: major brands CRUISER(R), DIVIDEND(R), HERITAGE(R), ICON
(R), MAXIM(R)
Excluding the impact of range rationalization, professional products sales were
up four percent. Seed Treatment sales continued to grow strongly driven by
growth of CRUISER(R) (sales totaling $51 million) particularly in North America.
Sales of Turf and Ornamentals were lower largely due to reduced early season
demand in the USA although sales in Japan showed encouraging growth. First
sales of IMPASSE TM, the innovative termite barrier, were made in the USA.
Half Year Growth 2nd Quarter Growth
Regional 2003 2002 Actual CER Ex RR 2003 2002 Actual CER Ex RR
$m $m % % (CER) $m $m % % (CER)
% %
Europe, Africa & Middle East 1335 1218 +10 - 8 - 4 665 609 +9 - 7 - 3
NAFTA 1345 1378 - 2 - 3 - 2 783 831 - 6 - 6 - 6
Latin America 243 210 +16 +16 +17 133 114 +17 +17 +18
Asia Pacific 447 450 - 1 - 8 - 4 219 230 - 5 -10 - 5
Total 3370 3256 +4 - 4 - 2 1800 1784 +1 - 6 - 3
Sales in Europe, Africa and the Middle East were eight percent lower; ex range
rationalization four percent lower. Broad-based growth was achieved in southern
Europe, notably in Spain and Italy, capitalizing on strong early demand; this
was insufficient to offset a decline in northern Europe largely due to dry
conditions and new competitor strobilurins. Eastern European sales made
encouraging progress in the second quarter.
In NAFTA sales were up strongly in Canada, more than offsetting delays in Mexico
following price increases implemented earlier in the year. Resistance to
following competitor discounting in two product areas led to reduced sales in
the USA in the second quarter: TOUCHDOWN(R) IQ(R) maintained premium pricing in
the glyphosate market, while DUAL(R)/BICEP(R) MAGNUM was affected in the highly
competitive corn selective herbicide market. This was partly offset by growth
in CALLISTO(R)/LUMAX TM, FORCE(R) and seed treatments.
Sales in Latin America recovered strongly. Brazil benefited from the program to
align sales with consumption and reduce distributor stocks to a sustainable
level. Business quality improved markedly through rigorous pricing and credit
management; this strategy has resulted in market share gains with a positive
outlook for further growth. Argentina has continued to build on its new
business model, with sales more than doubling while remaining on secure terms.
In Asia Pacific sales were lower largely due to market decline in Korea combined
with channel de-stocking and competitor pressure in China. Sales in Japan were
broadly flat; in Australia growth was achieved following some rainfall after
prolonged drought.
Seeds
Except where stated, all narrative in this section refers to the half year.
Percentage growth rates are at CER, see Note 4, page 13.
Half Year Growth 2nd Quarter Growth
Product line 2003 2002 Actual CER Ex RR 2003 2002 Actual CER Ex RR
$m $m % % (CER) $m $m % % (CER)
% %
Field Crops 430 381 +13 +2 +2 156 141 +11 +3 +3
Vegetables & Flowers 305 265 +15 +3 +3 150 133 +12 +1 +1
Total 735 646 +14 +3 +3 306 274 +11 +2 +2
Field Crops: major brands NK(R) corn, NK(R) oilseeds, HILLESHOG(R) sugar beet
Sales of NK(R) corn in the USA increased strongly following the launch of 14
premium priced new hybrids and benefited from changes to distributor
arrangements. Oilseeds sales were up strongly primarily due to high growth in
sunflowers in Europe, with anticipated market share gains. Sales of HILLESHOG
(R) sugar beet were lower in NAFTA and Europe in declining markets.
Sales of GM product accounted for 18 percent of total Seeds sales.
Vegetables and Flowers: major brands S&G(R) vegetables, ROGERS(R) vegetables, S&
G(R) flowers
Sales of S&G(R) vegetables continued to grow with particularly strong results
from tomatoes in Europe; growth was offset by lower sales in the USA and Korea.
The development of New Produce Network in the USA has continued with roll-out in
900 outlets; this will further enhance business focus on the fresh produce
sector.
New product introductions underpinned sales of S&G(R) flowers in Europe and the
USA.
Half Year Growth 2nd Quarter Growth
Regional 2003 2002 Actual CER Ex RR 2003 2002 Actual CER Ex RR
$m $m % % (CER) $m $m % % (CER)
% %
Europe, Africa & Middle East 394 316 +25 +4 +4 150 119 +26 +5 +5
NAFTA 286 270 +6 +6 +6 115 113 +2 +1 +1
Latin America 25 33 -24 -25 -25 23 27 -13 -14 -14
Asia Pacific 30 27 +8 +1 +1 18 15 +12 +7 +7
Total 735 646 +14 +3 +3 306 274 +11 +2 +2
Sales in Europe, Africa and the Middle East increased due to strong performances
in vegetables, flowers and sunflowers.
In NAFTA increased sales of corn and flowers more than offset declines in sugar
beet and vegetables.
Sales reductions in Latin America reflect implementation of a risk management
strategy, with sales aligned closer to planting.
In Asia Pacific sales were up slightly with encouraging results in India and
Australia.
Synergy and Cost Reduction Programs
During the first half of 2003 cost savings of $84 million were delivered;
cumulative savings of $446 million at a cumulative cash cost of $817 million
have been achieved.
During the period some $48 million has been realized in Cost of Goods; $12
million from Selling, General and Administrative; and $24 million from Research
and Development. Since merger, the total number of employees has been reduced
by some 3,000.
Currency
For the full year, the impact of currency movements on EBITDA at current
exchange rates, is expected to be broadly neutral. In the second half reduced
benefit from the stronger Euro and from hedging will largely offset the positive
currency effect registered in the first half.
Taxation
Ongoing restructuring has resulted in a further reduction in the tax rate, for
the ongoing business, to 37 percent (December 2002: 39 percent).
Unaudited Half Year Segmental Results (1)
Total Syngenta 1st Half 2003 1st Half 2002 CER (2)
$m $m %
Sales 4105 3902 - 3
Gross profit 2185 2055 - 1
Marketing and distribution (602) (549) -
Research and development (355) (336) + 5
General and administrative (318) (323) + 4
Operating income 910 847 + 2
EBITDA 1165 1099 -
EBITDA (%) 28.4 28.2
Crop Protection 1st Half 2003 1st Half 2002 CER (2)
$m $m %
Sales 3370 3256 - 4
Gross profit 1799 1716 - 1
Marketing and distribution (470) (433) -
Research and development (224) (206) + 4
General and administrative (274) (277) + 3
Operating income 831 800 -
EBITDA 1060 1028 - 2
EBITDA (%) 31.4 31.6
Seeds 1st Half 2003 1st Half 2002 CER (2)
$m $m %
Sales 735 646 + 3
Gross profit 386 339 + 1
Marketing and distribution (132) (116) - 3
Research and development (62) (57) + 2
General and administrative (35) (37) + 13
Operating income 157 129 + 5
EBITDA 180 148 + 5
EBITDA (%) 24.5 22.9
Plant Science 1st Half 2003 1st Half 2002 CER (2)
$m $m %
Sales - - -
Gross profit - - -
Marketing and distribution - - -
Research and development (69) (73) + 11
General and administrative (9) (9) + 2
Operating loss (78) (82) + 10
EBITDA (75) (77) + 8
EBITDA (%) n/a n/a
(1) Excluding special items.
(2) Growth at constant exchange rates, see Note 4.
Unaudited Interim Financial Information
The following unaudited interim condensed consolidated financial statements have
been prepared in accordance with International Financial Reporting Standards
(IFRS). A reconciliation to US GAAP has been prepared for US investors.
Unaudited Interim Condensed Consolidated Income Statement
Including Special Items Special Items Excluding Special Items
(1)
For the six months to 30 June 2003 2002 2003 2002 2003 2002 CER(2)
$m $m $m $m $m $m
%
Sales 4105 3902 - - 4105 3902 - 3
Cost of goods sold (1920) (1847) - - (1920) (1847) + 6
Gross profit 2185 2055 - - 2185 2055 - 1
Marketing and distribution (602) (549) - - (602) (549) -
Research and development (355) (336) - - (355) (336) + 5
General and administrative (318) (323) - - (318) (323) + 4
Merger and restructuring costs (81) (157) (81) (157) - - -
Operating income 829 690 (81) (157) 910 847 + 2
Associates and joint ventures (1) (3) - - (1) (3) + 67
Financial expense, net (68) (93) - - (68) (93) + 21
Income before taxes and 760 594 (81) (157) 841 751 + 4
minority interests
Income tax expense (289) (264) 22 37 (311) (301) n/a
Income before minority interests 471 330 (59) (120) 530 450 n/a
Minority interests (3) (2) - - (3) (2) n/a
Net income 468 328 (59) (120) 527 448 n/a
Earnings per share(3) $4.61 $3.23 $(0.58) $(1.19) $5.19 $4.42
- basic
- diluted $4.60 $3.23 $(0.58) $(1.18) $5.18 $4.41
EBITDA(4) 1087 989 (78) (110) 1165 1099 -
(1) The condensed consolidated income statement including special items is
prepared in accordance with IFRS.
(2) Growth rates are at constant exchange rates, see Note 4.
(3) The weighted average number of ordinary shares in issue used to
calculate the earnings per share were as follows: for 2003 basic EPS 101.5
million and diluted EPS 101.7 million; 2002 basic EPS 101.4 million and diluted
EPS 101.6 million.
(4) EBITDA is defined as earnings before interest, tax, minority interests,
depreciation, amortization and impairment. Information concerning EBITDA has
been included as it is used by investors as one measure of an issuer's ability
to service or incur indebtedness. EBITDA is not a measure of cash liquidity or
financial performance under generally accepted accounting principles and the
EBITDA measures used by Syngenta may not be comparable to other similarly titled
measures of other companies. EBITDA should not be construed as an alternative
to operating income or cash flow as determined in accordance with generally
accepted accounting principles.
Unaudited Interim Condensed Consolidated Balance Sheet
30 June 30 June 31 December
2003 2002 2002
$m $m $m
Assets
Current assets
Cash and cash equivalents 283 260 232
Trade accounts receivable 2303 2589 1602
Other accounts receivable 333 292 243
Other current assets 674 494 516
Inventories 1633 1631 1704
Total current assets 5226 5266 4297
Non-current assets
Property, plant and equipment 2307 2352 2310
Intangible assets 2708 2943 2813
Investments in associates and joint ventures 98 97 95
Deferred tax assets 701 714 666
Other financial assets 404 271 345
Total non-current assets 6218 6377 6229
Total assets 11444 11643 10526
Liabilities and Equity
Current liabilities
Trade accounts payable (1094) (1079) (725)
Current financial debts (776) (1034) (1207)
Income taxes payable (430) (312) (210)
Other current liabilities (929) (899) (794)
Provisions (218) (239) (222)
Total current liabilities (3447) (3563) (3158)
Non-current liabilities
Non-current financial debts (952) (1238) (925)
Deferred tax liabilities (1158) (1283) (1098)
Provisions (923) (894) (915)
Total non-current liabilities (3033) (3415) (2938)
Total liabilities (6480) (6978) (6096)
Minority interests (62) (78) (80)
Total shareholders' equity (4902) (4587) (4350)
Total liabilities and equity (11444) (11643) (10526)
Unaudited Interim Condensed Consolidated Cash Flow Statement
For the six months to 30 June 2003 2002
$m $m
Operating income 829 690
Reversal of non-cash items;
Depreciation, amortization and impairment on:
Property, plant and equipment 136 176
Intangible assets 123 127
Loss/(Gain) on disposal of fixed assets (46) (27)
Charges in respect of provisions 216 188
Cash (paid)/received in respect of;
Interest and other financial receipts 38 40
Interest and other financial payments (119) (189)
Taxation (23) (148)
Merger and restructuring costs (104) (107)
Other provisions (74) (53)
Cash flow before working capital changes 976 697
Change in net current assets and other operating cash flows (154) (148)
Cash flow from operating activities 822 549
Additions to property, plant and equipment (88) (65)
Proceeds from disposals of property, plant and equipment 10 34
Purchase of intangibles, investments in associates and other financial assets (24) (138)
Proceeds from disposals of intangible and financial assets 5 3
Proceeds from business divestments (1) 10
Acquisition of minorities (29) -
Cash flow (used for)/from investing activities (127) (156)
Increases in third party interest-bearing debt - 168
Repayment of third party interest-bearing debt (587) (543)
Dividends paid to group shareholders (65) (48)
Dividends paid to minorities (4) (3)
Cash flow used for financing activities (656) (426)
Net effect of currency translation on cash and cash equivalents 12 5
Net change in cash and cash equivalents 51 (28)
Cash and cash equivalents at the beginning of the period 232 288
Cash and cash equivalents at the end of the period 283 260
Unaudited Interim Condensed Consolidated Statement of Changes in Equity
Total equity
$m
31 December 2001 4086
Net income 328
Unrealized holding gains/(losses) on available for sale financial assets (21)
Unrealized gains/(losses) on derivatives designated as cash flow hedges 34
Income tax (charged)/credited to equity (4)
Dividends paid to group shareholders (48)
Foreign currency translation effects 212
30 June 2002 4587
31 December 2002 4350
Net income 468
Unrealized holding gains/(losses) on available for sale financial assets 14
Unrealized gains/(losses) on derivatives designated as cash flow hedges 14
Income tax (charged)/credited to equity 16
Acquisition of minority interests (5)
Dividends paid to group shareholders (65)
Foreign currency translation effects 110
30 June 2003 4902
Notes to the Unaudited Interim Financial Information
Note 1: Basis of Preparation
Nature of operations: Syngenta AG ('Syngenta') is a world leading crop
protection and seeds business that is engaged in the discovery, development,
manufacture and marketing of a range of agricultural products designed to
improve crop yields and food quality.
Basis of presentation and accounting policies: The condensed consolidated
financial statements for the six months ended 30 June 2003 are prepared in
accordance with International Financial Reporting Standards (IFRS), which
comprise standards and interpretations approved by the International Accounting
Standards Board (IASB), and International Accounting Standards and Standing
Interpretations Committee interpretations approved by the International
Accounting Standards Committee (IASC) that remain in effect. The condensed
consolidated financial statements have been prepared in accordance with our
policies as set out in the 2002 Financial Report, applied consistently. These
principles differ in certain significant respects from generally accepted
accounting principles in the United States ('US GAAP'). Application of US GAAP
would have affected shareholders' net income and equity for the six months ended
30 June 2002 and 2003 as detailed in Note 11.
The consolidated financial statements are presented in United States dollars
('$') as this is the major trading currency of the company.
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimated.
Note 2: New Accounting Standards - IFRS
No new IFRS accounting pronouncements were adopted in the six months ended 30
June 2003. The effect of adoption of new US GAAP accounting pronouncements is
described in Note 12 below.
Note 3: Changes in the Scope of Consolidation
On 28 January 2003 additional shares were acquired in Syngenta India Limited
increasing Syngenta's shareholding to 84% from 51%. The acquisition was
accounted for under the purchase method at a cost of $29 million. Goodwill of
$6 million was recognized on this transaction and will be amortized over a
period of 10 years. Goodwill amortization is included in general and
administrative expenses on the consolidated income statement.
Note 4: Constant Exchange Rates
In this report results from one period to another period are compared using
constant exchange rates (CER) where appropriate. To present that information,
current period results for entities reporting in currencies other than US
dollars are converted into US dollars at the prior period's exchange rates,
rather than at the exchange rates for the current year. The CER presentation
indicates the underlying business performance before taking into account
currency exchange fluctuations. See Note 6 for information on average exchange
rates in 2003 and 2002.
Note 5: Sales Excluding Range Rationalization (Ex RR)
Following the formation of Syngenta, Crop Protection has set out to improve
business quality and create value through the rationalization and modernization
of the product portfolio. From 121 active ingredients (AIs) at the time of the
merger, plans are in place to reduce the portfolio to 76 AIs and the range had
been reduced to 89 AIs by the end of 2002. In addition, various third party
products previously formulated and distributed by Syngenta but generating lower
levels of profitability have been exited. Sales growth rates excluding
rationalization impact has been calculated by excluding the sales decline
between current year and prior period caused by these phase-out products, at
constant exchange rates.
Note 6: Principal Currency Translation Rates
As an international business selling in over 100 countries, with major
manufacturing and R&D facilities in Switzerland, the UK and the USA, movements
in currencies impact business performance. The principal currencies and adopted
exchange rates against the US dollar used in preparing the financial statements
contained in this communication were as follows:
Average Average Period end Period end
1st Half 2003 1st Half 2002 30 June 2003 30 June 2002
Swiss franc. CHF 1.35 1.66 1.36 1.48
Pound sterling. GBP 0.62 0.70 0.61 0.65
Yen. JPY 118.77 130.47 119.94 118.92
Euro. EUR 0.91 1.13 0.88 1.01
Brazilian real. BRL 3.31 2.39 2.88 2.82
The above average rates are an average of the monthly rates used to prepare the
condensed consolidated income and cash flow statements. The period end rates
were used for the preparation of the condensed consolidated balance sheets.
Note 7a: Unaudited Half Year Product Line and Regional Sales
Syngenta 1st Half 2003 1st Half 2002 Actual CER(1) Ex RR(2)
$m $m %
% %
Crop Protection 3370 3256 + 4 - 4 - 2
Seeds 735 646 + 14 + 3 + 3
Total 4105 3902 + 5 - 3 - 1
Crop Protection
Product line
Selective herbicides 1187 1125 + 5 - 1 -
Non-selective herbicides 364 381 - 4 - 9 - 9
Fungicides 898 871 + 3 - 8 - 6
Insecticides 506 480 + 5 - 2 + 3
Professional products 328 304 + 8 + 3 + 4
Others 87 95 - 8 - 21 - 11
Total 3370 3256 + 4 - 4 - 2
Regional
Europe, Africa and Middle East 1335 1218 + 10 - 8 - 4
NAFTA 1345 1378 - 2 - 3 - 2
Latin America 243 210 + 16 + 16 + 17
Asia Pacific 447 450 - 1 - 8 - 4
Total 3370 3256 + 4 - 4 - 2
Seeds
Product line
Field Crops 430 381 + 13 + 2 + 2
Vegetables and Flowers 305 265 + 15 + 3 + 3
Total 735 646 + 14 + 3 + 3
Regional
Europe, Africa and Middle East 394 316 + 25 + 4 + 4
NAFTA 286 270 + 6 + 6 + 6
Latin America 25 33 - 24 - 25 - 25
Asia Pacific 30 27 + 8 + 1 + 1
Total 735 646 + 14 + 3 + 3
(1) Growth at constant exchange rates, see Note 4,
(2) Growth at constant exchange rates excluding the effects of range
rationalization, see Note 5.
Note 7b: Unaudited Second Quarter Product Line and Regional Sales
Syngenta 2nd Quarter 2003 2nd Quarter 2002 Actual CER(1) Ex RR(2)
$m $m % %
%
Crop Protection 1800 1784 + 1 - 6 - 3
Seeds 306 274 + 11 + 2 + 2
Total 2106 2058 + 2 - 5 - 3
Crop Protection
Product line
Selective herbicides 622 591 + 5 - 1 -
Non-selective herbicides 218 230 - 5 - 9 - 9
Fungicides 474 473 - - 9 - 8
Insecticides 288 286 + 1 - 5 + 1
Professional products 159 154 + 3 - 2 -
Others 39 50 - 20 - 27 - 12
Total 1800 1784 + 1 - 6 - 3
Regional
Europe, Africa and Middle East 665 609 + 9 - 7 - 3
NAFTA 783 831 - 6 - 6 - 6
Latin America 133 114 + 17 + 17 + 18
Asia Pacific 219 230 - 5 - 10 - 5
Total 1800 1784 + 1 - 6 - 3
Seeds
Product line
Field Crops 156 141 + 11 + 3 + 3
Vegetables and Flowers 150 133 + 12 + 1 + 1
Total 306 274 + 11 + 2 + 2
Regional
Europe, Africa and Middle East 150 119 + 26 + 5 + 5
NAFTA 115 113 + 2 + 1 + 1
Latin America 23 27 - 13 - 14 - 14
Asia Pacific 18 15 + 12 + 7 + 7
Total 306 274 + 11 + 2 + 2
(1) Growth at constant exchange rates, see Note 4
(2) Growth at constant exchange rates excluding the effects of range
rationalization, see Note 5.
Note 8: Impact of Special Items, net
1st Half 2003 1st Half 2002
$m $m $m $m
Income statement charge
Merger integration costs (8) (10)
Restructuring costs:
Write-off or impairment of property, plant & equipment (3) (47)
Non-cash pension restructuring charges - (12)
Cash costs (111) (90)
Total (114) (149)
Gains from mandated product disposals 2 2
Gain on sale of technology & intellectual property license 39 -
Total special items, net (81) (157)
Special items are material items that management regards as requiring separate
disclosure to provide a more thorough understanding of business performance.
Merger integration costs are the costs associated with establishing the
operations of Syngenta, which was formed from the merger of Novartis
agribusiness and Zeneca agrochemicals business in November 2000.
Restructuring costs are the costs of implementing the synergy programs following
the formation of Syngenta.
In 2003 Syngenta signed a research agreement with Diversa Corporation
("Diversa"), under which Diversa acquired an exclusive, royalty-free perpetual
license for technology and intellectual property in the pharmaceutical field in
exchange for stock and warrants in Diversa. Following completion of this
transaction Syngenta closed the Torrey Mesa Research Institute, Syngenta's
facility in La Jolla, California. Costs relating to the closure are included in
restructuring costs.
The non-cash pension restructuring charges represent those direct effects of
restructuring initiatives on defined benefit pension plans, for which there is
no corresponding identifiable cash payment. Where identifiable cash payments to
pension funds are required to provide incremental pension benefits for employees
leaving service as a result of restructuring, the amounts involved have been
included within cash costs.
The post-tax impact of special items reduced diluted earnings per share by $0.58
to $4.60 during 2003 (by $1.18 to $3.23 in 2002).
Note 9a: Reconciliation of EBITDA to Net Income
1st Half 2003 1st Half 2002
Including Special Excluding Including Special Excluding
Special Items Special Special Items Special
Items $m Items Items $m Items
$m $m $m $m
Net Income 468 (59) 527 328 (120) 448
Minority interests 3 - 3 2 - 2
Income tax expense 289 (22) 311 264 (37) 301
Financial expense, net 68 - 68 93 - 93
Depreciation, amortization and impairment 259 3 256 302 47 255
EBITDA 1087 (78) 1165 989 (110) 1099
Note 9b: Reconciliation of Segment EBITDA to Segment Operating Income
1st Half 2003 1st Half 2002
Crop Protection Including Special Excluding Including Special Excluding
Special Items Special Special Items Special
Items $m Items Items $m Items
$m $m $m $m
Operating income 750 (81) 831 643 (157) 800
Loss from associates (2) - (2) (3) - (3)
Depreciation, amortization and impairment 234 3 231 278 47 231
EBITDA 982 (78) 1060 918 (110) 1028
Seeds
Operating Income 157 - 157 129 - 129
Income from associates 1 - 1 - - -
Depreciation, amortization and impairment 22 - 22 19 - 19
EBITDA 180 - 180 148 - 148
Plant Science
Operating Loss (78) - (78) (82) - (82)
Loss from associates - - - - - -
Depreciation, amortization and impairment 3 - 3 5 - 5
EBITDA (75) - (75) (77) - (77)
Note 10a: Net Debt Reconciliation
Net debt comprises total debt net of related hedging derivatives and cash and
cash equivalents. Net debt is not a measure of financial position under
generally accepted accounting principles and the net debt measure used by
Syngenta may not be comparable to the similarly titled measure of other
companies. Net debt has been included as it is used by many investors as a
useful measure of financial position and risk. The following table provides a
reconciliation of movements in net debt during the period:
2003 2002
$m $m
Opening balance at 1 January 1671 2219
Acquisitions and disposals - -
Other non-cash items (44) (22)
Foreign exchange effect on debt 74 (12)
Sale of Treasury Stock - -
Dividends paid to group shareholders 65 48
Dividends paid to minorities 4 3
Free cash flow (707) (398)
Closing balance as at 30 June 1063 1838
Constituents of closing balance;
Cash and cash equivalents (283) (260)
Current financial debts 776 1034
Non-current financial debts 952 1238
Financing-related derivatives (1) (382) (174)
Closing balance at 30 June 1063 1838
(1) Included within other current assets.
Note 10b: Free Cash Flow
Free cash flow comprises cash flow after operating activities, investing
activities, taxes and operational financing activities, but prior to capital
financing activities such as drawdown or repayment of debt, dividends paid to
Syngenta Group shareholders, share buyback and other equity movements. Free
cash flow is not a measure of financial performance under generally accepted
accounting principles and the free cash flow measure used by Syngenta may not be
comparable to similarly titled measures of other companies. Free cash flow has
been included as it is used by many investors as a useful supplementary measure
of cash generation.
1st Half 1st Half
2003 2002
$m $m
Cash flow from operating activities 822 549
Cash flow (used for)/from investing activities (127) (156)
Free cash flow, pre-foreign exchange effect 695 393
Foreign exchange effect on cash and cash equivalents 12 5
Free cash flow 707 398
Note 11: Reconciliation to US GAAP from the Interim Condensed Consolidated
Financial Statements
The condensed consolidated financial statements have been prepared in accordance
with IFRS which, as applied by Syngenta, differs in certain significant respects
from US GAAP. The effects of the application of US GAAP to net income and
equity are set out in the tables below:
Net income (for the six months ended 30 June) 2003 2002
$m $m
Net income/(loss) under IFRS 468 328
US GAAP adjustments:
Purchase accounting:
Zeneca agrochemicals 21 25
Other acquisitions (33) (47)
Impairment losses - -
Restructuring charges 45 -
Pension provisions (including post-retirement benefits) - (4)
Stock-based compensation 1 -
Deferred taxes on unrealized profit in inventory (13) (25)
Capitalized costs, less disposals and depreciation 3 -
Deferred tax effect on US GAAP adjustments (4) 7
Net income under US GAAP 488 284
Weighted average number of ordinary shares in issue - basic 101.5 101.4
Weighted average number of ordinary shares in issue - diluted 101.7 101.6
Earnings per Share under US GAAP (basic) $4.81 $2.80
Earnings per Share under US GAAP (diluted) $4.80 $2.80
Equity (as at 30 June) 2003 2002
$m $m
Equity under IFRS 4902 4587
US GAAP adjustments:
Purchase accounting:
Zeneca agrochemicals (461) (485)
Other acquisitions 898 1051
Impairment losses 23 -
Restructuring charges 36 -
Pension provisions (including post-retirement benefits) (95) (6)
Stock-based compensation - -
Deferred taxes on unrealized profit in inventory (58) (52)
Capitalized costs, less disposals and depreciation 29 29
Deferred tax effect on US GAAP adjustments (177) (243)
Equity under US GAAP 5097 4881
For the six months ended 30 June 2003, the net income under IFRS was $468
million, compared to a net income of $488 million under US GAAP.
The differences for purchase accounting result from the application of different
purchase accounting requirements under IFRS and US GAAP to business combinations
completed in prior periods, and the different subsequent accounting for
goodwill. The different IFRS and US GAAP purchase accounting requirements which
applied when previous business combinations were completed, resulted in
different balance sheet values for goodwill and intangible assets related to
those acquisitions. For intangible assets, this has led to different
amortization charges in each subsequent accounting period, including 2002 and
2003. Also, as Syngenta adopted SFAS No. 142 'Goodwill and Intangible Assets',
as of 1 January 2002, it ceased to record goodwill amortization for US GAAP from
that date. The difference of $21 million arising in pre-tax income in respect
of purchase accounting for Zeneca agrochemicals principally represents the
goodwill amortization expense recorded under IFRS. The difference of $(33)
million in pre-tax income in respect of other acquisitions mainly arises because
the Sandoz and Ciba-Geigy merger was accounted for as a uniting of interests
under IFRS. For US GAAP the merger was accounted for as a purchase, including
recognition and subsequent amortization of purchased product rights.
The difference of $45 million in pre-tax income in respect of restructuring
provisions mainly represents employee termination costs which have been recorded
under IFRS, but have not been recognized for US GAAP because the employees
affected will continue to work beyond the minimum retention period stipulated by
SFAS No.146. These costs will be recognized for US GAAP in future periods as
the employees complete their remaining service.
The difference arising in shareholders' equity for pension provisions at 30 June
2003 includes $94 million which was directly charged to US GAAP shareholders'
equity in 2002, due to the recent decline in value of pension assets. US GAAP,
unlike IFRS, requires provisions to be at least equal to the unfunded pension
liability for each pension plan on an accumulated benefit basis. This
adjustment did not affect cash or earnings.
Note 12: New US GAAP Accounting Pronouncements
SFAS No. 143, 'Accounting for Asset Retirement Obligations', was adopted by
Syngenta with effect from 1 January 2003 and did not have a material effect on
the financial statements.
SFAS No. 146, 'Accounting for Costs Associated with Exit and Disposal
Activities', was adopted by Syngenta with effect from 1 January 2003 and applies
to exit and disposal activities initiated after 31 December 2002. Therefore it
had no effect on the opening balance of consolidated retained earnings at 1
January 2003. SFAS No. 146 superseded EITF 94-3. Restructuring costs of $38
million, which would have been recognized in net income for the six months ended
30 June 2003 had EITF 94-3 still been in force, will be recognized in later
periods in accordance with SFAS No. 146.
The initial recognition and initial measurement provisions of FASB
Interpretation No. 45, 'Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others', was
adopted by Syngenta with effect from 1 January 2003, and did not have a material
effect on the financial statements.
FASB Interpretation No. 46, 'Consolidation of Variable Interest Entities', was
adopted by Syngenta with effect from 1 January 2003 and had no effect on the
scope of consolidation or on the financial statements.
Announcements and Meetings
Third quarter trading statement 2003 22 October 2003
Announcement of full year results 2003 11 February 2004
AGM and first quarter trading statement 2004 27 April 2004
Announcement of half year results 2004 29 July 2004
Glossary and Trademarks
All product or brand names included in this results statement are trademarks of,
or licensed to, a Syngenta group company. For simplicity, sales are reported
under the lead brand names, shown below, whereas some compounds are sold under
several brand names to address separate market niches.
Selective Herbicides
APIRO(R) novel grass weed herbicide for rice
BICEP(R) MAGNUM broad spectrum pre-emergence herbicide for corn and sorghum
CALLISTO(R) novel herbicide for flexible use on broad-leaved weeds for corn
DUAL(R) MAGNUM grass weed killer for corn and soybeans
ENVOKE(R) novel low-dose herbicide for cotton and sugar cane
FLEX(R) broad spectrum broad-leaf weed herbicide for soybeans
FUSILADE(R) grass weed killer for broad-leaf crops
LUMAXTM Unique season-long grass and broad leaf weed control
TOPIK(R) post-emergence grass weed killer for wheat
Non-selective Herbicides
GRAMOXONE(R) rapid, non-systemic burn-down of vegetation
TOUCHDOWN(R) systemic total vegetation control
TOUCHDOWN(R) IQ(R) improved TOUCHDOWN(R)
Fungicides
ACANTO(R) second-generation strobilurin with particular advantages in early cereal
applications
AMISTAR(R) broad spectrum strobilurin for use on multiple crops
BRAVO(R) broad spectrum fungicide for use on multiple crops
RIDOMIL GOLD(R) systemic fungicide for use in vines, potatoes and vegetables
SCORE(R) triazole fungicide for use in vegetables, fruits and rice
TILT(R) broad spectrum triazole for use in cereals, bananas and peanuts
UNIX(R) cereal and vine fungicide with unique mode of action
Insecticides
ACTARA(R) second-generation neonicotinoid for controlling foliar and soil pests in multiple
crops
FORCE(R) unique pyrethroid controlling soil pests in corn
KARATE(R) foliar pyrethroid offering broad spectrum insect control
PROCLAIM(R) novel, low-dose insecticide for controlling lepidoptera in vegetables and cotton
VERTIMEC(R) acaricide for use in fruits, vegetables and cotton
Professional Products
AVID(R) acaricide for ornamentals
BARRICADE(R) pre-emergence crabgrass herbicide for turf
CRUISER(R) novel broad spectrum seed treatment - neonicotinoid insecticide
DIVIDEND(R) triazole seed treatment fungicide
HERITAGE(R) strobilurin turf fungicide
ICON(R) public health insecticide
IMPASSETM termite barrier
MAXIM(R) broad spectrum seed treatment fungicide
Field Crops
NK(R) global brand for corn, oilseeds and other field crops
HILLESHOG(R) global brand for sugar beet
Vegetables and Flowers
S&G(R) vegetables leading brand in Europe, Africa and Asia
S&G(R) flowers global brand for seeds and young plants
ROGERS(R) vegetables leading brand throughout the Americas
Addresses for Correspondence
Swiss Depositary UK Registrar for non-CREST Depositary for ADRs Swedish Securities
account holders Register Center
SEGA Aktienregister AG Lloyds TSB Registrars The Bank of New York VPC AB
P.O.Box The Causeway Shareholder Relations Box 7822
CH-4601 Olten Worthing PO Box 11258 S-103 97 Stockholm
West Sussex Church Street Station Sweden
BN99 6DA New York, NY 10286
Tel: +41 (0)62 205 3695 Tel: +44 (0)1903 502541 Tel: +1 (212) 815 6917 Tel: +46 (0)8 402 9000
Registered Office
Syngenta AG
Schwarzwaldallee 215
4058 Basel
Switzerland
Tel: +41 (0)61 323 1111
Cautionary Statement Regarding Forward-Looking Statements
This document contains forward-looking statements, which can be identified by
terminology such as 'expect', 'would', 'will', 'potential', 'plans', '
prospects', 'estimated', 'aiming', 'on track' and similar expressions. Such
statements may be subject to risks and uncertainties that could cause the actual
results to differ materially from these statements. We refer you to Syngenta's
publicly available filings with the US Securities and Exchange Commission for
information about these and other risks and uncertainties. Syngenta assumes no
obligation to update forward-looking statements to reflect actual results,
changed assumptions or other factors. This document does not constitute, or
form part of, any offer or invitation to sell or issue, or any solicitation of
any offer, to purchase or subscribe for any ordinary shares in Syngenta AG, or
Syngenta ADSs, nor shall it form the basis of, or be relied on in connection
with, any contract therefore.
This information is provided by RNS
The company news service from the London Stock Exchange
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