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Description:

The Basel, Switzerland based company, Syngenta, was formed, in 2000 when Novartis spun-off its crop-protection and seed businesses and AstraZeneca, its agrochemical business. Since then, Syngenta has become a leading manufacturer of crop-protection products, herbicides, insecticides, and fungicides. The company operates on a worldwide basis, but has particularly high exposure in emerging markets.  

The company responds extremely well to a range of mega, secular growth trends driven by higher global population and rising wealth availability in EM, these include rising demand for quality food, rising demand for meat, and lower availability of arable land. Furthermore, the company has engaged in an extensive educational campaign to gain understanding and acceptance for the use of genetically modified seeds. It is expected that by 2050, the demand for seeds will have increased by more than 50%; Syngenta is one of the few companies able to face that challenge. 

Syngenta is constantly introducing innovative products. Given the company’s historic background, it approaches the research, development, and commercialization of its products the same way a pharmaceutical company would. Many of its crop-protection products are more specialized than those of its peers, giving the company plenty of scope for future developments. In the seed segment, the company has made some major developments in recent years, and as a result it can be assumed that the seed division has more potential for growth than the crop chemical division.

The firm is one of the six top players in the crop and seed business; together these companies have around 80% of the market share. For smaller companies and new comers, the barriers to join the leaders are high due to regulatory and capital requirements, as well as technology necessities. 

Over the last eight years, Syngenta has achieved top quartile rankings in the European chemical sector in almost every quarter. It has a strong, if not exceptional, industry position. This, combined with its track record and management approach should ensure further good performance. 

Historically, the company has achieved EBIT margins of 17.5%, EV/EBITA levels of 10.6%, and sales growth of 7%. These ratios should remain more or less the same in the coming years.