Syngenta beats forecasts as price hikes cushion forex hit

Syngenta, the world's largest maker of crop chemicals, has reported an unexpected rise in operating earnings and raised its dividend, as price increases partly offset the effect of declines in the Russian and Ukrainian currencies.

The Swiss company’s shares jumped 3 per cent in early trade on Wednesday after its results provided a positive surprise, after it warned in November that a shift in crops from corn to soybean in North America would hurt its profit margin, in addition to currency effects.

Its 2014 margin on core earnings or ebitda narrowed only slightly to 19.3 per cent from 19.7 per cent, as the group managed to offset about half of the loss from the sharp depreciation of the Russian rouble and Ukrainian hryvnia with price increases.

That reduced the hit to earnings from foreign exchange fluctuations to $90 million and helped its 2014 ebitda rise 1 per cent to $2.93 billion, exceeding an average analyst forecast for a 1.1 per cent decline to $2.86 billion in a Reuters poll.

Finance chief John Ramsay said the company hoped to push through further price increases this year, keeping ebitda flat from a year earlier.

“In Ukraine it’s much easier (to raise prices) because the vast majority of the grain is exported, so growers are accessing hard currency,” Mr Ramsay said in an interview. “In Russia, only about 30 per cent of the grain is exported, so it’s much more domesticised.”

In addition, lower oil prices will mean lower raw material costs, resulting in a positive impact of about $50 million for Syngenta this year and $150 million next year, Mr Ramsay said.

The recent appreciation of the Swiss franc, following a central bank decision to abandon a cap on the currency, should have a limited impact this year thanks to hedging and would be offset by lower raw material costs next year, he said.

Syngenta also said it would pay shareholders a dividend of 11 francs per share, 10 per cent more than a year earlier.

Reuters