Syngenta Expands in Africa

Zacks

Seed and pesticide manufacturer, Syngenta AG (SYT) plans to expand its foothold in the African corn seed business. Recently, the company announced its plans to acquire Zambia-based privately-held MRI Seed Zambia Ltd and MRI Agro Ltd, for an undisclosed amount. The transaction is expected to consummate by the end of 2013. MRI is a prominent name among the white corn seed producers in Zambia.

This acquisition, subject to regulatory approvals, will enable Syngenta to benefit from the growth potential of white corn in the region. Syngenta’s long-term objective is to generate $1 billion business from Africa by 2022. Initiatives like this will help the company to achieve its goal.

Syngenta intends to help approximately five million farmers to produce 50% or more than their present production volume, while preserving the quality of land for the future. For this purpose, Syngenta plans to invest roughly $500 million in training around 700 employees.

The Europe, Africa and Middle East segment of Syngenta is a major contributor to the company’s revenues, contributing roughly 30% of 2012 revenues. Syngenta has been endeavoring to increase its crop and seed portfolio over the past few quarters. In the first quarter of 2013, sales in Crop Protection went up 9.0% year over year to $3.1 billion with a 16.0% rise in the Latin American region. Seeds grew by 5.0% year over year to $1.3 billion on the back of a 20.0% increase in the Asia Pacific region.

In addition to organic growth Syngenta is also expanding inorganically via acquisitions. In 2012, the company completed several major acquisitions, such as, Devgen N.V., DuPont’s insecticide business, Pasteuria Bioscience Inc. and Sunfield Seeds Inc. We believe that all these acquisitions will contribute significantly to revenues, going ahead.

Despite its growth strategies, we cannot overlook the high costs Syngenta has to incur with respect to various environmental and health safety issues. Due to this, Syngenta currently carries a Zacks Rank #4 (Sell). Some other companies in the sector which are performing well and carry a favorable Zacks Rank include Limoneira Company (LMNR), Gevo, Inc. (GEVO) and FMC Corp. (FMC), each carrying a Zacks Rank #2 (Buy).

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