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Basel, Switzerland
July 24, 2009

First half resilience: higher prices, successful risk management

• Sales $6.7 billion: up 2 percent CER⁽¹⁾, 9 percent lower as reported

• Crop Protection sales up 1 percent⁽¹⁾ at $5.0 billion

• Seeds sales up 7 percent⁽¹⁾ to $1.7 billion

• EBITDA $2.0 billion, up 4 percent CER

• Earnings per share⁽²⁾ $15.18, 8 percent lower

• Earnings per share $14.78 after restructuring and impairment
   

Mike Mack, Chief Executive Officer, said:
“In the first half of 2009 Syngenta achieved further underlying sales growth following an exceptional year in 2008.  This performance, in the context of rigorous credit management in emerging markets and generally adverse weather conditions in the second quarter, attests to the strength of our portfolio and our leading market positions.  Price increases offset lower volumes and higher raw material costs, although significant currency movements impacted reported earnings.  In Crop Protection, the achievement of our target for price increases across the business clearly demonstrates the value which our products offer to growers.  In Seeds, we saw growth across all product lines led by Corn & Soybean, where the investments of recent years are increasingly apparent in the quality of our technology.  Seeds profitability improved noticeably in the first half and we are firmly on track to meet our target of a 15 percent EBITDA margin for this business in 2011.
“We continue to make significant investments in order to secure the long term growth of our business.  We have expanded our R&D network and are engaging in a number of collaborations and cross-licensing agreements which will enable us to leverage our unique technology platforms.  Our capacity expansion program for key Crop Protection compounds is well underway and will reinforce our competitive strength in high margin segments.  Our investments are underpinned by a strong balance sheet, sustained by the prudent management of our business in this year’s uncertain economic environment.”
 
(1)   Growth at constant exchange rates, see Appendix A.
(2)   EPS on a fully-diluted basis, excluding restructuring and impairment.
(3)   Net income to shareholders of Syngenta AG.Financial Performance 1^st Half 2009

Sales $6.7 billion

Sales at constant exchange rates (CER) increased by two percent driven by higher pricing across all product lines.  Crop Protection sales* rose by one percent (CER) and Seeds sales by seven percent (CER).  Reported sales in US dollars were nine percent lower owing to currency movements.

EBITDA margin 30.5 percent

EBITDA was $2.0 billion, an increase of four percent (CER).  Profitability improved in Seeds, while in Crop Protection price increases more than offset higher raw material costs related to the oil price escalation in 2008.  Operational efficiency savings were supplemented by strong cost control enabling further investment in R&D.  The underlying improvement in profitability was masked by the appreciation of the dollar, which had a negative impact on EBITDA of $349 million.

Earnings per share $15.18

Price increases across the business offset the impact of lower volume and higher raw material costs.  An eight percent decline in earnings per share excluding restructuring and impairment was due to currency movements.  After charges for restructuring and impairment, earnings per share were $14.78 (2008: $15.93).

Business Highlights

Crop Protection

In the first half of 2009, Syngenta continued to demonstrate price leadership, achieving an overall increase of seven percent, ahead of target.  Excluding glyphosate, prices were up by eight percent.  Sales volume was affected by a late start to the season caused by unfavorable weather.  In a number of emerging markets, we deliberately reduced volume to take account of higher levels of risk.

These risk management measures had a marked impact in Eastern Europe, Africa and the Middle East.  Sales in Western Europe were slightly up with a strong performance in France following new product registrations.  NAFTA showed robust sales following an exceptional performance in 2008, with price realization augmented by strong volume growth in Canada.  Sales in Latin America, where the main season takes place in the second half, were lower due to drought in Argentina and southern Brazil, and to risk management.  In Asia-Pacific, the farm economy has proved resilient to the global economic crisis and sales continued to grow strongly across the region.

Product line growth was led by Selective Herbicides, with strong growth in cereal herbicides and a resurgence in demand for soybean herbicides in the USA as a consequence of increased acreage and weed resistance.  Non-selective Herbicides also performed well, with positive contributions from both REGLONE^® and TOUCHDOWN^®.  Accounting for seven percent of Crop Protection sales, TOUCHDOWN^® showed modest growth in both volume and price, with pressures in the US glyphosate market apparent only towards the end of the period.  Both Fungicides and Insecticides were particularly affected by the risk management measures taken in Latin America.  In the Northern hemisphere, fungicide usage was reduced owing to lower cereals acreage and adverse weather.  Seed Care sales continued to grow strongly driven by CRUISER^®.

In the non-agricultural Professional Products businesses, the effects of the economic downturn were clearly apparent in the golf course and professional horticulture segments, where customers purchased more cautiously.

*   Crop Protection sales include $26 million of inter-segment sales.

New products: Sales of new products (defined as those launched since 2006) increased by 28 percent (CER) to $241 million.  AXIAL^® continued to grow strongly particularly in Canada.  The roll-out of REVUS^® and DURIVO^® in new markets augmented underlying growth.

R&D pipeline: The combined peak sales potential of our Crop Protection pipeline is in excess of $2 billion.  We have several new products in late development including INVINSA™, a unique product for crop stress protection in field crops; isopyrazam (520), a broad spectrum cereal fungicide; sedaxane (524), a seed treatment fungicide; and bicyclopyrone (449), a new herbicide for corn and sugar cane.

EBITDA increased by one percent (CER) to $1.7 billion with a margin (CER) of 36.6 percent (2008: 36.3 percent).

Seeds

Seeds growth was driven by price increases of 11 percent, which reflected ongoing increases in the value of the portfolio and more than offset the impact of higher grower costs.

Performance was led by Corn & Soybean, with growth in both NAFTA and Asia more than offsetting the impact of risk management and lower corn acreage in Eastern Europe and Latin America.  In the USA, although the market was characterized by delayed planting decisions and acreage uncertainty, sales of our triple stack corn seed AGRISURE^® 3000 GT showed a significant advance.  Further advances in portfolio quality will be achieved through stepping up combination of our proprietary traits with elite germplasm. 

Diverse Field Crops showed solid growth across the business.  Our risk management measures in Eastern Europe resulted in improved collections, allowing the expansion of sunflower sales in the second quarter in a market moving towards higher quality hybrids.  In the USA sales of glyphosate-tolerant sugar beet continued to increase following its successful launch last year.

Vegetables & Flowers:  Growth in Vegetables reflected the ongoing expansion of high value products such as peppers where the portfolio has been enhanced both through acquisitions and through in-house marker assisted breeding success.  Flowers growth was due to the consolidation of Goldsmith Seeds Inc. and Yoder, with the underlying business affected by the downturn in consumer purchasing.

R&D pipeline: In February Syngenta received EPA approval for two insecticidal trait stacks containing its Agrisure Viptera™ trait.  Agrisure Viptera™ controls a broad spectrum of lepidopteran corn pests and is awaiting USDA approval which would allow an initial launch by the end of the year.

In April, Syngenta and Dow AgroSciences announced an agreement to cross-license their respective corn traits for commercialization within their branded seed businesses.  The agreement will allow Syngenta, from 2011, to offer its US customers multiple modes of action targeting refuge reduction and improved efficacy.

Syngenta’s corn and soybean pipelines contain a number of other products including input, output and agronomic traits, with a combined peak sales potential of around $2 billion.

EBITDA of $314 million, up 31 percent (CER), was driven by portfolio transformation and the leverage of R&D and marketing expenditure.  The EBITDA margin (CER) improved to 19.2 percent (2008: 15.6 percent) and is on track to reach the full year target of 15 percent in 2011.

Net financial expense

Net financial expense at $46 million was slightly higher compared with the first half of 2008 ($37 million).

Taxation

The underlying tax rate for the period was 19 percent, in line with the rate for the full year 2008.  A similar rate is expected for the full year 2009.  The expected tax rate over the medium term is in the low to mid-twenties.

Cash flow

Free cash flow was $79 million (2008: $240 million).  Fixed capital expenditure of $283 million (2008: $168 million) reflected spending under the capacity expansion program for key active ingredients announced in 2008.  Average trade working capital as a percentage of sales was 40 percent (2008: 36 percent) as inventories increased compared with an exceptionally low level in 2008.  Ongoing strong receivables management and business seasonality are expected to lead to significant free cash flow in the second half.

Cash return to shareholders

A dividend of CHF 6.00 per share (2008: CHF 4.80) was paid in the second quarter, representing a total payout of $491 million.

Outlook

Mike Mack, Chief Executive Officer, said:

“I am pleased with the resilience of the company’s first half performance in the face of currency and raw material headwinds and the second quarter impact of a late spring.  We maintained our focus on rigorous risk management throughout the period in order to preserve balance sheet quality.  For the full year, achieving earnings growth has become more challenging.  However, in the second half currency and raw material trends are more favorable and, assuming current supportive conditions in Latin America continue, we are targeting full year earnings per share* close to the record level achieved in 2008.

“We look ahead with confidence.  The fundamental drivers for our industry are unchanged, and we expect the need for increased global food production to result in ongoing demand growth, which our broad portfolio is uniquely placed to capture.”
 

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