Interim report, 3rd quarter 2009
| | | |  | Despite a declining market, we have achieved organic growth of more than 10% for our crop protection products excluding glyphosate. The successful introduction of new products is crucial to meeting the long-term targets of doubling our market share in 2015. We are pleased with the overall development, as it confirms our business plan “Five-in-Fifteen”, although we have seen disappointing results from glyphosate this year. – Kurt Pedersen Kaalund, President & CEO
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Growth from new products despite declining market, but glyphosate continues to disappoint
(Figures in brackets are figures for 2008)
The market conditions for Cheminova’s largest product, glyphosate, have deteriorated considerably during 2009. Developments in Q3 were, in particular, characterised by substantial price erosion, which negatively impacted sales and resulted in unsatisfactory earnings. Auriga’s revenue fell by 5% in the first three quarters of the year, when measured at unchanged exchange rates. Measured in Danish kroner, revenue was down 7% at DKK 4,190 million. Except for glyphosate, organic growth of more than 10% was achieved for Cheminova’s other crop protection products despite a declining market. This confirms the long-term targets set out in the business plan “Five-in-Fifteen”.
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Long-term development trends remain postive. After growth of about 20% in 2008, the market has been declining in 2009. The long-term development trends for the agrochemical market remain positive, but for 2009, market players are reporting falling revenue as a result of climatic conditions, the credit crunch, distributors reducing inventories and the decline in glyphosate prices.
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Earnings under pressure due to negative development for glyphosat. Auriga posted revenue of DKK 4,190 million for the first three quarters of 2009 (DKK 4,511 million) and an operating profit before depreciation and amortisation of DKK 201 million (DKK 652 million), corresponding to an EBITDA margin of 5% (14%). A loss before tax of DKK -22 million (DKK 416 million) was generated. The downturn in earnings is attributable to considerably lower prices on glyphosate in several important markets, including in particular North America.
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Region Europe recorded 7% growth, but revenue down in other sales regions. Cheminova’s sales regions are all affected by the negative developments for glyphosate. Region Europe saw growth in revenue of 7% after full consolidation of Stähler, which contributed additional revenue of DKK 222 million. Cheminova’s other sales regions have seen a decline in revenue in 2009.
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Growth from new products. A central element in Cheminova’s business plan “Five-in-Fifteen” is the innovation and expansion of Cheminova’s product programme. Consequently, it is satisfactory that new products developed and introduced since 2000 have seen sound growth in the first three quarters of the year; acquired products, including products from Stähler, have also seen satisfactory growth.
Outlook 2009
The market conditions for Cheminova’s largest product, glyphosate, are not expected to improve in Q4 2009, but growth is expected in sales of Cheminova’s other products. In Brazil, the planted acreage is on a par with last year, and consequently, a satisfactory demand for crop protection products is expected. Cheminova is therefore maintaining the outlook announced on October 26, 2009 of revenue of approx. DKK 5,500 million and an operating profit of approx. DKK 10-50 million as well as a positive cash flow from operating activities.
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