Better market conditions, acquisition of Stähler and a good start to the year in most of the world have led to better than expected results for Cheminova. In Q1, revenue increased by 33 per cent to DKK 1,427 million, while the EBIT margin improved to 9 per cent, corresponding to an operating profit of DKK 125 million for the quarter.
| DKKm |
Q1 2008 |
Q1 2007 |
|
Revenue
Operating profit before depreciation,
amortisation and write-downs (EBITDA)
Operating profit (EBIT)
Net financials |
1,427
172
125
(20) |
1,075
83
40
(14) |
| Profit/loss before tax |
105 |
26 |
|
Balance sheet total
Non-current assets
Equity
Net interest-bearing debt |
4,779
1,235
1,565
1,708 |
4,317
1,054
1,588
1,473 |
|
Cash flow from ordinary activities
Cash flow from operating activities
Cash flow from investing activities |
(194)
(218)
(304) |
(284)
(291)
(33) |
| Available cash flow |
(522) |
(324) |
|
Investments in property, plant and
equipment
Depreciation and amortisation |
29
47 |
33
43 |
|
Profit margin (EBITDA)
Profit margin (EBIT) |
12%
9% |
8%
4% |
Sales and distribution
The favourable economic conditions for the agricultural sector with record-low stocks of the most important crops and high prices are leading to a growing market for plant protection products. For some products, including glyphosate, this has resulted in shortages in most markets and significantly increasing prices, while the distribution channel has reacted by ordering products earlier than normally. As the season also has started early in several countries, there was a stronger-than-normal growth in demand in Q1.
For Cheminova, these developments contributed to the growth seen in Q1, while the introduction of new generic products and growth in products launched earlier, including the pyrethroids gamma-cyhalothrin and acrinathrin, also contributed to growth. In recent months, glyphosate has been sold at considerably higher prices leading to improved margins despite increasing raw material prices affecting revenue from glyphosate manufactured at the factory in Denmark. However, shortages mean that in some markets it is not possible to buy the expected volumes.
Revenue was up in all regions. Australia has seen strong growth as Q1 was not, unlike last year, affected by drought, while North America saw strong growth in local currency. Latin America saw satisfactory growth in sales, but margins remain low. Europe saw very strong growth thanks to Stähler, but growth was also seen in the underlying business in all markets. Growth in International is, among other things, attributable to continued growth in the CIS countries (Russia, The Ukraine etc.), while revenue from other activities decreased slightly.
Stähler, which as from 2008 is pro rata-consolidated at 50 per cent, also had a good start to the year. Introduction in Europe of new herbicides for use in cereals and maize has contributed, while an early start to the season also has brought forward some sales. The results of Stähler live up to expectations.
Production and logistics
Operations at the production plants in Denmark and India were satisfactory. Shortages and increasing prices are seen for a number of raw materials, which is affecting margins for most products. Production of the new generic fungicide fluazinam has commenced in Denmark. A number of initiatives are being implemented to improve operations at the factory in Denmark, and the first results have been seen.
Development and registration
The planned introduction of new generic products this season is going according to plan, e.g. fluazinam has been introduced in the UK market. The first registration for the fungicide, epoxiconazole, has been obtained in Denmark, which means that the product can be introduced during the coming season.
Results
With growth in revenue of 33 per cent to DKK 1,427 million (DKK 1,075 million), Cheminova has gained market shares. Despite increasing raw material costs, the average margin has increased and operating profit before depreciation and amortisation reached DKK 172 million, corresponding to an EBIT margin of 12 per cent. With an operating profit of DKK 125 million (DKK 40 million), corresponding to an EBIT margin of 8.7 per cent, and financial expenses of DKK 20 million (DKK 14 million), a profit before tax of DKK 105 million (DKK 26 million) was realised in Q1 2008.
With increasing sales, working capital has increased, primarily due to an increase in receivables, and cash flows from operating activities were negative at DKK -218 million. The acquisition of Stähler is the largest single investment made in the period, but investments in a plant for production of fungicides at the factory in Denmark also continued during the period. Available cash flow was negative at DKK -522 million after total investments of DKK 304 million.
Outlook 2008
The favourable economic conditions for the agricultural sector and for the plant protection industry are expected to continue. Nevertheless, the growth rate is not expected to be maintained for the year as a whole, but expected revenue is being adjusted upward from just over DKK 5 billion to just over DKK 5.2 billion with an EBIT margin of 7-8 per cent against an earlier expectation of 6-7 per cent. Profit before tax is now expected to reach DKK 250-300 million against an earlier forecast of DKK 200-250 million. Considerable uncertainty still attaches to the market prices for glyphosate and the availability and prices of raw materials.
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The entire quarterly report of Auriga Industries A/S for the first quarter of 2008 can be found at Auriga's website www.auriga-industries.com.
April 22, 2008
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