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Syngenta Profits Soar On Fundamentals

By    |   Wednesday, 18 May 2011 02:56 PM

When it comes to perfecting closed-loop economics, Syngenta (SYT) is a world leader. As one of the world’s largest seed producers and the world’s largest agricultural chemicals producer wrapped into one, the only way for Syngenta to go out of business is if people stopped eating.

Corn prices are expected to soar this summer, topping wheat prices for the first time as global demand for both food and ethanol grow. That means more farmers will grow corn next season — in both hemispheres — which translates to more seed sales and more chemicals. A planet full of hungry people and fuel-hungry cars means happy shareholders.

In the company’s first quarter results, sales jumped 14 percent in what otherwise would still be viewed as a global economic crisis. Its chemicals business grew 20 percent in the Europe, Africa and Middle East region, impressive figures considering most of their seeds aren’t welcome where genetically modified organisms (GMOs) are banned. Seed sales grew 6 percent in North America and new crop protection products alone were up by over a third to $185 million.

Looking down the road, the Syngenta Foundation is trialing a crop insurance program in African countries such as Kenya, Malawi, and Nigeria that already has 12,000 Kenyan farmers enrolled with 50,000 wanting in. It has become the largest insurance program in Africa and is helping to strengthen small farmers in areas where getting good seed is tough, but the program is tied to Syngenta seed, which is bring the company a lot of flak from anti-GMO campaigners.

Adapting to change

As the world adapts to climate change, there are two key areas that farmers feeding a growing planet are worried about: drought and nitrogen. Drought-resistant corn is going to become even more important, and Syngenta along with its main competitors, Monsanto (MON), DuPont (DD), BASF (BASF), are trying to be first to market.

Monsanto is waiting for FDA approval on its GMO version of drought-resistant corn while Syngenta’s non-GMO version — which didn’t require any regulatory oversight — claims 15 percent yield increases under drought conditions, while competitor Pioneer Hi-Bred says it gets 5 percent. It is using these same techniques to boost yields where nitrogen is low, since nitrogen fertilizer has soared 130 percent in price since 2002, with good early results.

Syngenta is seen by analysts as a strong buy with a mean price target of $72.67 compared to recent trading of around $65.

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When it comes to perfecting closed-loop economics, Syngenta (SYT) is a world leader. As one of the world s largest seed producers and the world s largest agricultural chemicals producer wrapped into one, the only way for Syngenta to go out of business is if people stopped...
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2011-56-18
Wednesday, 18 May 2011 02:56 PM
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