2013 Full Year Results - Analyst Presentation

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2013 Full Year Results - Analyst Presentation

  1. 1. 2013 Full Year Results Basel: February 5, 2014
  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. 2013 Syngenta highlights ● Integrated sales up 6%*: 2010-2013 CAGR 9% ● Emerging markets maintaining double digit growth* ● Commercial integration benefits across territories ● Lower royalty income, non-recurring Seeds costs ● Earnings per share** 12% lower ● Continued focus on cost and capital efficiency ● New EBITDA margin target: 24-26% by 2018 * At constant exchange rates ** Fully diluted basis, excluding restructuring and impairment 3
  4. 4. Integrated strategy: first three years ● Field force integration in all territories ● Global crop teams established ● Launch of integrated offers; scope increasing ● Sustained sales growth through period of implementation ● Operating cost efficiency; investments in growth and R&D ● 2020 sales target by crop raised from >$22bn to $25bn Foundation for profitable growth 4
  5. 5. On track for 2020 target Sales* $bn $25bn Vegetables Rice DFC Corn $14bn Specialty Cereals Sugar cane Soybean 2013 2020 * Excluding Lawn and Garden Source: Syngenta estimates 5 ● Crop targets based on business projections and pipelines ● Expanding seeds business: opportunities for further crop protection growth ● Global offers, new business models and collaborations
  6. 6. John Ramsay Chief Financial Officer
  7. 7. 2013 financial highlights ● Sales $14.7bn, up 3% - integrated sales up 6%*; +4% volume, +2% price ● EBITDA $2.9bn, down 7%; margin 19.7% ● Net income $1.6bn, 11% lower ● EPS $19.30**, down 12% ● Dividend up 5% to CHF 10.00 per share ● Free cash flow: $0.4bn ● CFROI above target at 13% * At constant exchange rates ** Fully diluted basis, excluding restructuring and impairment 7
  8. 8. Sales progression $m 194 15000 Volume 177 (54) (238) 219 (256) 14,688 125 319 14500 14,202 14000 13500 13000 8 2012 Price Europe, Africa, Middle East Latin North America CRW Under- America royalty lying growth Asia Pacific Lawn Currency and Garden 2013
  9. 9. Operating income $m Seed production 3000 $175m Inventory write-down $170m 170* (385) Other $40m 2750 167 2,521 2500 (256) 220 (150) 17.7% 2,265 2250 (230) 153 2,265 15.4% 16.2% 55 2000 2012 CRW 2012 Volume, Price Savings COGS Cost Growth Curroyalty under- mix inflation invest- rency lying ments Underlying: excludes $256 million corn rootworm trait royalty income in 2012 Excluding restructuring and impairment * Including $10 million from previous program 9 Other 2013
  10. 10. Lawn and Garden: streamlining improves profitability $m 1000 ● Comparable sales growth +5%* 13.4% 22.2% - impact of divestments: $(108)m - impact of acquisitions: $29m 500 ● Focus on elite genetics and high value chemistry 0 Sales 2012 EBITDA * At constant exchange rates 10 2013 EBITDA margin ● 2015 EBITDA margin target exceeded - on track for sustainable margin target delivery
  11. 11. Earnings per share $m 2013 2012 Operating income 2,265 2,521 Net financial expense (200) (147) Taxation (323) (349) ● NFE: increased hedge volume, emerging market currency volatility Tax rate 15% 15% ● Tax rate unchanged Restructuring* (141) (182) Net income 1,644 1,847 Earnings per share $19.30 $22.03 Excluding restructuring and impairment, EPS on a fully diluted basis * Net of tax 11
  12. 12. Emerging market currency weakness End quarter % change vs. dollar indexed to December 31, 2007 $164m -$343m $3m -$52m -$235m ● 2013 currency impact on EBITDA: +$53m $53m 40 CHF 20 Oil* 0 EUR Emerging Markets** BRL -20 -40 -60 2008 2009 2010 2011 2012 Year on year EBITDA currency impact * Price movement ** Sales-weighted basket of currencies 12 2013 ● Emerging market currency environment increasingly adverse ● 2014 full year currency headwind: ~$(50)m
  13. 13. Free cash flow $m 2000 (727) 2012 38% 33% 23% 22% Accounts payable (1,021) 2013 Accounts receivable 2,895 Year end % of sales Inventories 3000 26% 24% Trade working capital 35% 32% (99) (140) (523) 1000 385 0 EBITDA Working capital Capex* * Investment in fixed tangible and intangible assets 13 Restructuring Acquisitions and disposals Financing, tax, other Free cash flow
  14. 14. Increasing cash return to shareholders Dividend per share $ Earnings per share* $ 12 CAGR +16% 20 10 8 ● Proposed dividend increase: +5% in CHF, +11% in USD** ● Commitment to ongoing increases 6 10 4 CAGR +4% 2 0 0 2008 2009 2010 2011 2012 2013 * Fully diluted basis, excluding restructuring and impairment ** 2013 converted at end January exchange rates All years restated to reflect pension accounting adjustments 14 ● Net debt to equity: 24% ● Flexibility for acquisitions ● Tactical share buybacks
  15. 15. John Atkin Chief Operating Officer
  16. 16. Global crop offers 2013 sales: $14bn* +6% Rice +16% Soybean +11% Sugar cane +15% Vegetables +4% Cereals +12% Diverse field crops +11% Corn** 0% Specialty crops -1% ● Soybean: leading weed, insect control, seed care; fungicide transition; Brazil seeds platform ● Sugar cane: original concept delayed; launch of , ; expanding CP market ● Cereals: sales >$400m; new SDHIs; hybrid barley success in 8 countries ● Specialty: >40 crops; lower cotton acres in 2013; value chain relationships * Excluding Lawn and Garden ** +7% excluding $256 million corn rootworm trait royalty income in 2012 Growth at constant exchange rates 16
  17. 17. 2013 integrated business performance by region Europe, Africa and Middle East: sales +7% Latin America: sales +10% ● Good volume growth in high margin products ● Price increases offset currency depreciation ● Focused price action in CIS, SE Europe ● Strong growth in TOUCHDOWN: low margin ● Italy and Iberia: share gain ● Fungicides sales below target $bn 5 4 3 2 1 0 32.8% 34.3% $bn 27.1% 25.6% 2012 2013 4 3 2 1 0 2012 2013 Sales Operating income Operating margin Sales growth at constant exchange rates. Operating income and margin exclude restructuring and impairment. 17
  18. 18. Latin America: positioned for outperformance ● History of share gain Sales $bn 4 CAGR +19% ● 2013 growth below market: Fungicides transition, risk management 3 ● registration in Brazil expected Q1 2014 2 CAGR +10% 1 0 ● Leading corn traits, new soybean seed platform established in Brazil 2008 2009 2010 2011 2012 2013 Seeds Crop protection Growth at constant exchange rates 18 ● New sugar cane model developing ● Targeting double digit annual growth through 2020
  19. 19. Iberia: consistent share gain Crop protection market share % Sales CAGR +2% 16.0 16.5 16.4 17.2 ● Incentives shifted from volume to market share ● Sales force capability: distributor/ grower facing, campaign expert 2010 2011 2012 2013 Market CAGR 0% Seeds market share % Sales CAGR +4% 17.9 18.4 19.2 ● Vegetables: demand creation through entire value chain - Integrated Crop Management 15.8 ● Cereals: focus on selective herbicides and fungicides 2010 2011 2012 Market CAGR 0% Sales CAGR at constant exchange rates Source: Syngenta 19 2013 - platform for launch
  20. 20. CIS and South East Europe: customer and crop focus ● F2F approach for agro-holdings and large farms Thousands Sales $bn 1.5 ● Technology adaptation directly on the farm 1 CAGR +23% ● Full IMI offer in sunflower ● Early plant solution for corn 0.5 CAGR +19% 0 2010 2011 2012 Seeds Crop protection Growth at constant exchange rates 20 ● Breakthrough innovation: 2013 - Gro’N’Tec vegetable crop stress management programs - offer to address grower pain points
  21. 21. Crop protection sales up 8 percent Sales $bn 10 ● Selective herbicides +5%: corn and cereal herbicides Europe, USA CAGR +6% Selective herbicides 8 Non-selective herbicides 6 Fungicides 4 Insecticides 2 Seed care 0 2008 2009 2010 2011 2012 2013 Growth at constant exchange rates Excludes ‘Other’ (2013: $152 million) 21 ● Non-selective herbicides +26%: TOUCHDOWN growth led by Brazil ● Fungicides +1%: SEGURIS in EAME, AMISTAR technology adoption in Asia; lower sales in Brazil ● Insecticides +7%: Brazil pest pressure drives DURIVO demand ● Seed care +12%: VIBRANCE successful launch North America; CRUISER expansion Brazil, China
  22. 22. Crop protection: new products $m ● Sales up 85% 600 ● 500 : up >60% in Brazil, almost tripled in USA ● 400 : successful launch in Germany 300 ● 200 : new launches in North America, Australasia, Central Europe; sales >$120m 100 ● Combined peak sales potential: >$850m 0 2009 2010 2011 Growth at constant exchange rates 22 2012 2013
  23. 23. Crop protection potential and pipeline: key launches Launch year Peak ● Peak sales potential: >$2bn sales ● : step change in control of >$500m soybean rust 2014 / Solatenol™ >$400m ● >$200m ● >$250m / cyantraniliprole ● Bicyclopyrone: expanding corn herbicide leadership 2015 bicyclopyrone 2016 oxathiapiprolin >$100m : early season insect control : breakthrough biological soybean cyst nematode control ● Oxathiapiprolin: fungicide tailored for Specialty crop use 2018 New fungicide >$300m 23 ● New fungicide: fourth broad spectrum SDHI
  24. 24. Davor Pisk Chief Operating Officer
  25. 25. Global crop offers 2013 sales: $14bn* +6% Rice +16% Soybean +11% Sugar cane +15% Vegetables +4% Cereals +12% Diverse field crops +11% Corn** 0% Specialty crops -1% ● Corn: herbicide leadership; rapid emerging market seeds growth; , advances ● DFC: sunflower strength, new integrated solutions ● Vegetables: expanding opportunity for integration ● Rice: protocols, Devgen integration, * Excluding Lawn and Garden ** +7% excluding $256 million corn rootworm trait royalty income in 2012 Growth at constant exchange rates 25
  26. 26. 2013 integrated business performance by region North America: sales -2% Asia Pacific: sales +11% ● Lower trait royalty income: underlying growth +5% ● Sales growth acceleration: double digit in emerging markets ● Strong selective herbicide demand: glyphosate resistance ● Rice protocols and corn seed expansion ● Seeds production costs/inventory write-down ● Strong performance in high margin ASEAN countries $bn 34.8% 27.9% 4 3 2 1 0 $bn 27.6% 27.9% 2012 2013 2 1 0 2012 2013 Sales Operating income Operating margin Underlying: excludes $256 million corn rootworm trait royalty income in 2012 Sales growth at constant exchange rates. Operating income and margin exclude restructuring and impairment. 26
  27. 27. Canada: cross-crop expansion Sales $m ● Leading herbicide offer, best-inclass seed care CAGR +9% 600 400 ● Strong CRM and in depth grower knowledge 200 0 ● New entry into cereal and canola seeds; rotation opportunity 2010 2011 2012 2013 Crop protection Seeds Incremental value: 2020 Seed value Seed care and crop protection Total Canola ~$50m ~$20m ~$70m Cereals & pulse <$1m ~$35m ~$35m Crop Growth at constant exchange rates 27 ● Cereal growers purchasing Syngenta seed increase crop protection investment by >150%
  28. 28. ASEAN: demand creation focus ASEAN 2013 sales Herbicides Seeds Rice Vegetables Corn Fungicides ● Sales growth 12%* CAGR 2010-2013 ● Crop-driven strategy aligned with government agenda Seed care Insecticides ● Rice focus: driving technology adoption ● Strong partnerships with local distributors ● Capability building programs ● Scaling up seeds creating new opportunities * At constant exchange rates 28
  29. 29. Seeds sales up 1 percent; underlying sales up 9 percent Thousands Sales $bn ● Corn: underlying sales growth in all regions; US supply challenge CAGR +10% 3 Vegetables 2 1 DFC Corn and soybean ● Soybean: North America lower offset by sharp increase in Brazil ● DFC: leading sunflower hybrids in CIS, SE Europe; lower sugar beet acreage ● Vegetables: developed markets gradually returning to growth 0 2008 2009 2010 2011 2012 2013 Underlying: excludes $256 million corn rootworm trait royalty income in 2012 Growth at constant exchange rates 29
  30. 30. US Corn traits: leading insect control offer ● ● Insect Control Scale: - = no effect; + = some; ++ = good; +++ =very good; ++++ = excellent : three year track record of superior broad lep control : vital innovation to beat corn rootworm resistance ● 2014 campaigns ongoing : commercial chassis CRW root damage rating ● Need for alignment of international regulatory processes 2.25 1.5 0.75 0 Check Source: Syngenta 30 Agrisure 3000GT Viptera 3111 Viptera 5222
  31. 31. Brazil Soybean seeds: unique integrated approach Brazil Soybean seed sales $m ● Fastest breeding cycle for genetic gain 150 CAGR +55% 100 ● Leveraging leading crop protection portfolio 50 0 2010 Accelerate genetic gain 2011 2012 Leverage crop protection New market approaches Growth at constant exchange rates 31 Integrate technologies 2013 ● Seeds at core of high-yielding offers including adjacencies ● New business model: switching licensing business to Syngenta brand
  32. 32. High margin growth across sunflower portfolio Syngenta sunflower sales $m 600 CAGR +20% ● Strong presence in modernizing markets: CIS 400 ● Creating awareness of crop protection through GTM strategy 200 0 2001 2003 2005 2007 2009 2010 2011 2012 2013 Crop protection Seed care Seeds 32 ● Seeds: blockbuster hybrids, superior germplasm ● Developing integrated offers: IMI, broomrape
  33. 33. John Ramsay Chief Financial Officer
  34. 34. Continuing track record of operating expense leverage % of sales CER 45 40 Sales $bn 16 Expenses ● Ongoing expense reduction 14 - 2013: 70bps at CER 12 35 10 30 8 6 25 EBITDA 20 15 As reported, excluding restructuring and impairment 34 ● Growth investments to drive top-line expansion 4 2 0 ● Cumulative currency headwinds: >300bps adverse EBITDA margin impact
  35. 35. Proven track record in delivering operating efficiencies Merger Extracting efficiency Shaping the future Integration Operational efficiency 1 Operational efficiency 2 Integrated efficiency program 2000 - 2002 2004 - 2006 2008 - 2010 2011 - 2015 Target savings $625m $425m $290m $650m Delivered savings $650m $430m $300m $460m* Cash cost $1,000m $500m $550m $400m * To 2013 35
  36. 36. Accelerating operational leverage $m 2015 2016 2017 2018 EBITDA ~1% margin contribution ~3% ~4% ~5% ~1,000 ~730 EBITDA contribution ~265* ● Working capital release ● Cost: ~$900m 200 200 200 200 50 250 425 600 * Includes existing program savings: 2015 $75 million 36 - ~5% EBITDA margin improvement - efficiency gains based on long term sales plan ~475 Annual cash outflows Working capital release ● Program contributes ~$1bn to EBITDA margin by 2018 ● Three core components
  37. 37. Accelerating operational leverage: three core components 2018 EBITDA % contribution and equivalent $m savings ~5% Production savings and efficiency gains ~$400m Customer facing operations ~$400m R&D efficiency 37 ● Seeds production and planning ● Expand global sourcing ● Syngenta Business Services Working capital release: $600m ~$200m ● Drive efficiencies in integrated sales force ● Integrated demand and production management ● Pricing excellence in integrated offers ● Simplified management processes, crop focused synergies ● Integrated technology platform ● Lean operating principles
  38. 38. Outlook 2014 ● Integrated sales growth similar rate to 2013 despite lower crop prices ● Gross margin improvement: ~$240 million in Seeds cost reduction ● R&D expense at upper end of 9-10% of sales target ● Free cash flow before acquisitions ~$1.5 billion 2015 ● EBITDA margin: lower end of 22-24% range Longer term ● EBITDA margin target: 24-26% by 2018 ● CFROI: >12% ongoing 38
  39. 39. Mike Mack Chief Executive Officer
  40. 40. Strategy success factors  Broad portfolio covering multiple crops Integrate Level 1: Leveraging combined field force Innovate Level 2: Integrated offers for yield, quality and convenience Level 3: Breakthrough innovation  Superior sales force capability  Needs-based grower segmentation Outperform  Strong channel partnerships  Leveraging Level 1 success to drive Levels 2 and 3 40
  41. 41. Taking the strategy forward 2010 - 2013 Growth ● Field force integration ● Global crop teams 2014 - 2017 ● Transfer commercial success factors 2018 - 2020 ● Distinctive offers at scale ● Breakthrough innovation ● Integrated offers ● Accelerate most promising projects ● Sustained sales growth ● Share gain ● Share gain ● Gross margin expansion - production and supply savings - price realization ● Sustained higher profitability ● 2020: $25bn crop sales ● 2020 crop sales target Profitability ● Operating cost efficiency 41 ● Investments in growth, R&D ● Continued operating cost efficiency ● EBITDA margin 24-26% by 2018
  42. 42. 42

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