Syngenta Upbeat for H2 As Crop Prices Soar

27.07.2012 -

Syngenta, the world's largest agrochemicals company, posted forecast-beating results in the first half and was optimistic for the remainder of the year, betting on Latin America planting more to reap benefit from a U.S. drought.

The worst drought in more than 50 years in the Midwest grain belt has sparked a month-long grains price rally in which U.S. corn and soybean prices hit record highs on Friday, raising concern about global food prices.

"At 16.70 dollars per bushel, soybean prices in Latin America are very attractive for growers and they have all incentives to use Syngenta products," Chief Executive Mike Mack told Reuters in an interview on Thursday.

Even though it was still early days for the Latin American planting season, Mack said that he was "very positive" for the second half.

The Basel-based group, which makes products to kill weeds and bugs as well as genetically modified seeds, confirmed it expects operating margin and sales to rise in 2012.

"Increasingly severe weather conditions are pushing demand for more resistant field crops," analysts at Notenstein private bank said in a note.

Additionally, rising meat consumption in many developing countries as well as the loss of acreage are likely to drive sales of the crop protection and fertilizers that Syngenta makes, the analysts said.

Despite currency impacts, the group's first-half net profit rose 5% to $1.5 billion, beating an average analyst forecast in a Reuters poll for $1.408 billion.

Sales rose by 7% to $8.265 billion compared with an average forecast for sales of $8.224 billion, chiefly due to a steep rise in North American sales.

Chief Executive Mack said the sharp increase in crop prices due to extreme weather conditions in Europe and North America had highlighted the volatility confronting growers.

Syngenta peer Monsanto last month reported strong third-quarter results and upped its guidance.