2013 Half Year Results Analyst Presentation

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2013 Half Year Results Analyst Presentation

  1. 1. 2013 Half Year Results Basel: July 24, 2013
  2. 2. Safe harbor 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 U.S. 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 there for. 2
  3. 3. First half 2013 highlights ● Continuing business momentum ● Underlying integrated sales up 7 percent* - growth across all regions ● Emerging markets: rapid expansion - sales up 11 percent* ● Lower royalty income, higher seeds production costs ● Continued progress on integrated offers ● On track for market share gain Underlying: excludes $256 million corn rootworm trait royalty income in 2012 * At constant exchange rates 3
  4. 4. First half 2013: integrated business update by region North America: +4%* Europe, Africa & Middle East: +6% ● Corn plantings near record ● Dynamic growth in CIS, SE Europe levels ● Late season delayed applications ● Crop protection sales +9% ● France: expansion of leading herbicides ● EU North: cold wet weather delayed season, reduced disease pressure Latin America: +12% ● Low season ● Buoyant glyphosate market ● Grower sentiment remains strong * Excludes $256 million corn rootworm trait royalty income in 2012 Growth at constant exchange rates 4 Asia Pacific: +8% ● Sales momentum building ● Early monsoon in India ● Strong growth in Thailand, Indonesia, China
  5. 5. Addressing grower challenges Integrate Leveraging combined field force Innovate Integrated offers for yield, quality and convenience Outperform 5 Breakthrough innovation
  6. 6. John Ramsay Chief Financial Officer
  7. 7. Financial highlights ● Sales $8.4bn, up 2% ● Underlying integrated sales up 7%* - +4% volume, +3% price ● EBITDA 3% lower at $2.2bn; underlying up 9% - margin 26.0% (H1 2012: 24.9% underlying) ● Net income $1.4bn, 5% lower ● EPS**: 7% lower at $15.92; underlying up 9% Underlying: excludes $256 million corn rootworm trait royalty income in 2012 * At constant exchange rates ** Fully diluted basis, excluding restructuring and impairment All 2012 and 2011 data in this presentation reflect a change in pension accounting where applicable 7
  8. 8. Sales progression $m 9000 131 198 8500 (256) Volume 48 83 51 (63) (67) 8,390 8,265 8000 7500 7000 8 1st half 2012 Price Europe, Africa, Middle East Latin North America CRW Under- America royalty lying growth Asia Pacific Lawn Currency 1st half and 2013 Garden
  9. 9. Underlying operating income up 11 percent $m 2250 Seed production $100m Glyphosate 85* $70m Other (196) $26m 198 2000 1,942 (256) (65) 23.5% 130 100 (110) 1,875 22.3% 47 1750 1,686 21.1% 1500 1st half CRW Under- Volume, Price Savings COGS Cost Growth Cur2012 royalty lying mix inflation invest- rency ments Underlying: excludes $256 million corn rootworm trait royalty income in 2012 Excluding restructuring and impairment * Including $5m in respect of previous program 9 Other 1st half 2013
  10. 10. Regional performance: northern hemisphere Europe, Africa and Middle East 1st half, $bn 4 40.2% 3 40.8% ● High margin portfolio ● Weather constrained EU North 2 ● Profitable expansion in CIS, South East Europe 1 0 2012 2013 North America 1st half, $bn 3 39.3% 34.8% ● Lower royalty income 2 ● Higher seeds production costs 1 ● Operational efficiency savings 0 2012 2013 Sales Operating income Operating margin Excluding restructuring and impairment 10
  11. 11. Regional performance: Latin America, Asia Pacific Latin America 1st half, $bn 15.8% 16.5% 1 ● Low season ● Sugar cane and seed care expansion ● Strong demand for TOUCHDOWN 0 2012 2013 Asia Pacific 1st half, $bn 30.3% 27.8% 1 ● Higher GRAMOXONE sales ● Emerging market expansion ● Increasing growth investments 0 Sales 2012 2013 Operating income Operating margin Excluding restructuring and impairment 11
  12. 12. Lawn and Garden: streamlining improves profitability 1st half $m ● Comparable sales growth +4%* 500 13.2% 21.2% - impact of divestments: $(92)m - impact of acquisitions: $16m 250 ● Focus on elite genetics and high value chemistry 0 Sales 2012 EBITDA * At constant exchange rates 12 2013 EBITDA margin ● On track for full year 20% EBITDA margin by 2015
  13. 13. Crop protection portfolio: first half sales up 7 percent 1st half sales $bn 6 ● Selective herbicides +4%: corn and cereal herbicides USA, Europe CAGR +7% Selective herbicides ● Non-selective herbicides +26%: TOUCHDOWN volume and price ● Fungicides +4%: SEGURIS in Germany; AMISTAR in Brazil, Asia Pacific 4 Non-selective herbicides Fungicides ● Insecticides +1%: Americas up; Europe, Asia Pacific lower Insecticides ● Seed care +20%: CRUISER expansion Brazil, Asia Pacific; VIBRANCE launch 2 0 Growth at constant exchange rates Excludes ‘Other’ (2013: $50m) 13 Seed care
  14. 14. Crop protection portfolio: new products 1st half sales $m ● Sales more than doubled 300 ● : sales tripled USA, doubled Brazil ● : successful launch 200 in Germany 100 ● 0 2009 14 2010 2011 2012 2013 new launches in North America and Australasia: >$80 million sales
  15. 15. : seed care breakthrough Canola Rhizoctonia trial: plant stand counts Plants per 6m row ● : protects and triggers canola’s genetic capacity ● : stronger roots defend against soil diseases; insect control 80 60 40 20 0 Cruiser 5FS Helix Xtra Cereals trial in Saskatchewan Emergence counts per 6m row ● North America sales ~$80m in H1 200 100 ● Launch in all regions and across all major crops by 2016 0 Untreated Source: Syngenta trials 15 CruiserMaxx Cereals
  16. 16. : first launch based on Pasteuria technology Soybean cyst nematode damage ● Launch on US soybean for 2014 season: combination with and ● Breakthrough seed treatment nematicide Untreated Yield advantage in high soybean cyst environments* % Competitor insecticide/fungicide/ nematicide offer 6 3 0 -3 ● Multi-year field trials show immediate and season-long protection of root systems ● Rapid and cost effective in vitro production Control 2010 2011 2012 2010 2011 2012 ● Peak sales potential >$200m * Syngenta trials: >1000 SCN eggs/100cc soil. Control = fungicide + insecticide only 16
  17. 17. Seeds portfolio: first half sales 6 percent lower 1st half sales $bn 2 ● Underlying sales up 6% CAGR +8% Vegetables DFC ● Soybean: US RR2 transition 1 Corn and soybean 0 ● Corn: - North America: lower royalty income, reduced hybrid availability - growth in Asia Pacific, Latin America, Europe ● Sunflower: strong growth CIS, South East Europe ● Sugar beet: lower CIS acreage; sales doubled in China ● Vegetables: returning to growth Underlying: excludes $256 million corn rootworm trait royalty income in 2012 Growth at constant exchange rates 17
  18. 18. Sunflower growth demonstrates leading portfolio 1st half sunflower seed sales $m 400 300 CAGR +26% ● Focused portfolio of products ● Early anticipation of market trends: IMI integrated offer 200 ● Advanced go-to-market strategy 100 0 2001 2003 2005 2007 2009 2010 2011 2012 2013 Growth at constant exchange rates 18 ● Superior germplasm, blockbuster hybrids
  19. 19. Operational efficiency delivering savings $m 2011 2012 2013 460 2014 2015 575 650 COGS 300 Annualized savings 112 Annual cash outflows (88) SG&A (122) (103) (87) ● 2013 savings $460m, on track ● Cash cost of program unchanged at $400m ● Total restructuring including other programs: - charge before tax: 2013 ~$150m - cash outflow: 2013 ~$150m Excluding acquisition and divestment related restructuring and other impairments 19
  20. 20. Earnings per share $m 1st half 2013 1st half 2012 Operating income 1,875 1,942 Net financial expense (90) (84) Taxation (316) (294) Tax rate 18% 16% Restructuring* (64) (79) Net income 1,409 1,487 Earnings per share $15.92 $17.03 Excluding restructuring and impairment, EPS on a fully diluted basis * Net of tax ** Excludes $256 million corn rootworm trait royalty income in 2012 20 ● 2012 EPS restated for adoption of revisions to IAS19: - H1 impact: $(0.14) - FY impact: $(0.27) ● Underlying EPS growth +9%**
  21. 21. Free cash flow $m 2500 2,179 (1,870) 2000 1500 1000 500 (274) (49) (40) (305) (359) Financing, tax, other Free cash flow 0 -500 EBITDA Working capital Capex* * Investment in fixed tangible and intangible assets 21 Restructuring Acquisitions and disposals
  22. 22. Evolution of working capital 1st half % sales ● Inventory build in advance of Latin America season 50 40 ● Shortened northern hemisphere season 30 ● Channel inventory discipline 20 2001 2003 2005 2007 2009 2011 2013 Total average trade working capital Period end inventories 22 ● Strong global risk management - higher collection ratios in southern Europe, CIS, Argentina
  23. 23. Historical operational leverage % of sales CER 45 40 Sales $bn 16 Expenses 14 12 35 10 30 ● Ongoing expense reduction ● Cumulative currency headwinds ~400bps 8 ● Top line expansion 6 25 EBITDA 20 15 As reported, excluding restructuring and impairment 23 4 2 0 ● Sales +8% CAGR
  24. 24. 2013 second half outlook 2nd half EBITDA contribution % ● Second half contribution to earnings increasing 40 ● Latin America fundamentals positive ● Expanding leadership in Asia Pacific 20 ● Acceleration of underlying sales growth ● Growth in underlying earnings 0 2008 As reported 24 2009 2010 2011 2012 ● Substantial free cash flow
  25. 25. Mike Mack Chief Executive Officer
  26. 26. Three level approach to integrated strategy Leveraging combined field force Integrated offers for yield, quality and convenience Breakthrough innovation ● Latin America corn & ● Canada: soybean seeds ● Hybrid barley: ● APAC: corn seed ● Chile: wheat offer ● ● Vietnam: corn, coffee, watermelon ● US water optimization ● SE Europe, CIS: seeds & CP driving market leadership ● Hungary: 26 planting systems ● : three models
  27. 27. : a cross-crop opportunity in Canada Canola ● Strong channel support Year 1 Pulse Cereals ● Leading CRM database: deep insight into grower behavior ● Entry into canola seed market Year 3 Year 2 Total Syngenta incremental value: 2020 Seed value Seed care and crop protection Total Canola ~$50m ~$20m ~$70m Cereals & Pulse <$1m ~$35m ~$35m Crop Source: Stratus Agri-marketing inc. 2012, Syngenta 27 - seed is growers’ first decision - sales uplift for seed care and crop protection
  28. 28. : launch of integrated wheat offer in Chile ● From single products to integrated offer Weed resistance management Disease resistance management Agricultural Innovation Center : technology transfer platform for field crops 28 Integrated wheat demo trials with major growers Commercial launch of integrated Syngenta wheat solution ● From farm-saved seed to Syngenta varieties: ● Shifting grower perception: optimizing seed use
  29. 29. Integrated offer across crops in Vietnam rice portfolio ● Strong market base ● #1 in both crop protection and seeds Watermelon grafting Market leader 25% share ● Integration driving market share gain ● Strong partnership with local distributors 45 day corn solution Integrated coffee offer 29 ● Stakeholder engagement to increase productivity
  30. 30. Components Core offer : multi-crop, multi-component offer in Hungary Syngenta genetics and crop protection programs Intensification pack: soil, tillage, agronomic advice Fertilizers and nutrients Machinery Profit-based farm IS system Financial services Ecotech know-how 30 ● Creative team: leveraging existing range ● Building on grower receptivity - highest level of corn investment in Europe ● Bringing agronomic knowledge and expertise ● Sustainability combined with productivity
  31. 31. Acquisition of Maize Research Institute (MRI) in Zambia ● Diverse white corn germplasm portfolio ● >1000ha of production fields ● Creation of corn seed hub to serve East Africa ● Further opportunity in wheat and soybean ● Leading distributor of crop chemicals and seeds ● Supports commitment to build $1bn business in Africa by 2022 31
  32. 32. Long term drivers: current yield growth rates inadequate Production Mt/year Yield % 1800 1600 ● Need to double global food production by 2050 3 Required yield - population, diet, biofuels 1400 1200 2 2x 1000 800 600 1.6% 1.3% Current yield 0.9% 1 1.0% 400 200 0 ● Historical rates of yield growth would mean significant shortfalls 0 Soybean Wheat Rice Corn Required yield gain per year on existing acreage Weighted average yield change per year Mean yield change per year (1961 – 2008) 2050 production requirement 2050 projected production Source: University of Minnesota, PLOS ONE, Syngenta analysis 32 ● Four crops produce nearly two thirds of global calories ● Support for crop prices ● Need for more technology
  33. 33. On track for 2020 target Sales* $bn $25bn ● Sales growth at 8 percent CAGR Specialty Rice ● Global offers tailored to local needs DFC Cereals $13.4bn ● New business models and collaborations Corn Sugar cane ● Expanding the available market Soybean ● Continued margin expansion Vegetables 2012 2020 * Excluding Lawn and Garden Source: Syngenta estimates 33
  34. 34. 34

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