(Extract from the Quarterly Report for Auriga Industries A/S for the period January 1, 2006 - September 30, 2006)
In the third quarter of 2006, Cheminova generated revenue of DKK 987 million (DKK 1,078 million), which is less than expected. For the first three quarters of the year, revenue was DKK 3,072 million (DKK 3,042 million).
The difficult conditions which characterised the first six months of 2006 have deteriorated in the third quarter. In 2006, revenue has been affected by a late spring in Europe and North America and a hot early summer with a lack of rain. Australia is stricken by drought again this year. To this should be added difficult market conditions in Brazil. Virtually everywhere, this has reduced the demand for plant protection products. For the agrochemical industry and Cheminova, conditions in 2006 have been quite different from the 2004 record year, when Cheminova experienced growth in all areas.
Despite the general decline in demand for plant protection products, Cheminova’s revenue in the first three quarters was in line with revenue in 2005. Contributing factors were the new sales companies in Colombia and Australia, which were both acquired at the end of 2005, as well as the two newly established companies in Poland and Bulgaria.
In Europe, both the Spanish and the Russian company saw growth in revenue, while the other European markets, especially France, did not live up to expectations.
As regards the NAFTA countries, Mexico experienced a higher growth than expected, while the USA was characterised by lack of rain in the Mid West and Texas. This has led to a considerable decline in deliveries for the boll weevil eradication programme in Texas relative to 2005, a larger decline than expected at the beginning of the year.
Developments in Brazil have been disappointing. In addition to unfavourable climatic conditions, Brazilian farmers are affected by the Brazilian real’s strength against the USD. A large share of Brazil’s agricultural produce is sold in the international market and is settled in USD. This means that translated into local currency, the farmer receives less money for his crops than previously. Especially the market for soya is affected, and there is much less incentive to protect the soya crops against especially the Asian rust fungal disease than in previous years. The decline in earnings has resulted in liquidity problems for many farmers. Cheminova has chosen not to increase its receivables in Brazil, which means that Cheminova is cautious about further sales.
India was characterised by a poor monsoon, and revenue in the Indian company was lower than expected. The same is the case for the newly acquired company in Australia. Australia is stricken by a devastating drought again this year.
Sales of most of Cheminova’s products did not live up to expectations. One exception is glyphosate, but the market for glyphosate continues to be characterised by strong price competition. Sales of third-party products were satisfactory, particularly due to the new sales companies, but earnings from these products were lower than earnings from Cheminova’s own products.
The season is now over in the Northern hemisphere, for which reason the results for the fourth quarter will largely depend on developments in Brazil.
For 2006 as a whole, Cheminova is expecting revenue of DKK 4.1 billion against DKK 4.2 billion after the first six months, and a profit before tax of DKK 60-110 million against DKK 260 million after the first six months.
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The total Interim Financial Report can be found on Auriga's website www.auriga-industries.com.
November 8, 2006
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