Thursday, 15 October 2015

Syngenta - unimpressive results and so the pressures on management (and quite rightly so)

I had hoped that after the misguided turning down of Monsanto's sensible offer Syngenta would get all radical and start generating shareholder value in a very overt fashion.  Ok - as I noted here - they keep on talking about shareholder value and have announced a couple of limited disposals and a buyback...but I remain disappointed by the post-Monsanto efforts.

Also disappointing were today's Q3 (sales only) numbers which despite talking about 'robust free cash flow' and 'on track to deliver targeted operational leverage savings' also included a 'mid single digit decline in reported ebitda' and blamed exchange rates for the helping contribute to this.
What was also notable was a lack of pricing but on the conference call this was confirmed to be only happening in Brazil where the economy is clearly very difficult...
...and the pricing of glyphosate pricing was notably poor in the country: 

However it was not all bad.  There were some pockets of strength in seeds...

...and in crop protection too: 

In short the numbers are not falling off a cliff but with numbers mentioned during the conference call of US$0.75bn free cash flow and US$2.6bn of ebitda implying a c. 3% free cash flow yield and a greater than x10 EV/ebitda ratio much work needs to be done.  The flow through from better FX translation provides part of this, as will lapping easy comps in areas such as Latam / some of the positive structural positives around agricultural investment but ultimately Syngenta simply need to help themselves too - and it is this latter point I have creeping concerns on. 

It is interesting to note that the share have caught a touch of support today despite these patchy numbers indicating there is value (as I noted for Monsanto too - see here).  This means you don't sell the shares but hold on awaiting the positives and potential above.  I just wonder if this includes an activist trying to evolve the now slightly tainted management team. 

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