www.czu.cz ; www.raupp.info
Konrad Mrusek spoke to the Board Chairman of the Swiss agribusiness group
Syngenta about recent developments concerning the company, December 2004 by
Michael Pragnell reacts with British humour when he is asked about the
steep rise of the Syngenta share price. ?People have already mentioned that
to me ?, he says. With a price gain of nearly fifty per cent this year, the
Basel group?s share is the front runner of the Swiss standard stock market
index (SMI) this year and one of the ten best-performing European shares in
2004. The Syngenta Group Chairman is of course well aware of this. To that
extent, the understatement is simply the typical reaction of an Oxford
graduate who wishes to hide his pleasure in an intelligent manner. After
all, the stock market success must be a source of great satisfaction to this
57 year old manager who has had a tough job in the past four years: he
implemented the merger of the agrichemical divisions of Novartis and the
Anglo-Swedish Astra Zeneca group; it was his task to gradually build
confidence in a business whose synthetic name Syngenta still sounds unusual.
"The stock market has now come to appreciate", Pragnell says, "all that we
have done and our great future potential." Syngenta is one of the few
transnational mergers that has not left the impression after the event that
the managers had bitten off more than they can chew to make a merger
palatable to the shareholders. The target cost savings have been exceeded by
one-sixth at 625 million dollars (500 million euros). The assortment of
plant protection agents (in which Syngenta is the world number one) has been
rationalized, as has the product range in the seeds business. The number of
production facilities has been cut from 51 to 33.
Following the completion of the merger process, the Syngenta boss has now
benefited from a stroke of good luck: the market for agricultural chemicals
which had been shrinking for years has suddenly taken off again with
two-figure growth because farmers, especially in Latin America but also in
Eastern Europe and Asia, are growing more crops and therefore ordering more
herbicides and seed materials. ?It was no bad thing that we had to implement
our merger in tough years. Now the work has been done and we are all looking
to the future. We can all derive benefits from the strong recovery of the
market.? Despite the steep price rise recorded recently, many analysts
continue to recommend the Syngenta share as a buy opportunity. Is the stock
market pinning excessive hopes on the Group? Pragnell is not prepared to
state a view because as a matter of course he does not comment on analysts?
forecasts. He simply points out that the group has never promised too much
up to now.
As a result of the ongoing improvement of the agricultural market in the
past year, a higher profit growth of 60 per cent is now expected for 2004.
However, for the years 2005 and 2006, Pragnell is not prepared to depart
from his previous forecasts (15 to 20 per cent profit growth). He could
probably achieve this even if the agricultural market weakens again because
over 800 million dollars are earmarked for dividends and share buybacks
between now and 2006; the reduction in the number of shares will
automatically bring higher yields per share. The high inflow of cash will
also facilitate further acquisitions. ?We do not just have seed businesses
in mind,? Pragnell comments. However, he does rule out one thing: further
takeovers in the crop protection business, because in that case Syngenta
would soon come into conflict with the antitrust authorities with its
existing market share of more than 21 per cent.
Pragnell has no intention of neglecting the traditional business areas:
herbicides, insecticides, fungicides and seeds will continue to account for
some 80 per cent of total sales. But he sees bigger opportunities and higher
growth from products that are driven more strongly by private consumption.
These include such products as modern plant protection agents for golf
courses, flower nurseries and new varieties of vegetables such as a very
small and unusually sweet water melon grown by conventional methods in
America; this new melon variety has now been launched commercially. Products
such as this are aimed more at consumers than at farmers; Pragnell expects
them to achieve an annual growth rate of 5 per cent. Future prospects are
particularly good for research-driven business (plant science) in which
Syngenta plans to use genetic engineering methods to keep bananas yellow for
longer or develop new animal feed enzymes. Pragnell is particularly
enthusiastic about the long-term prospects for biopharmaceuticals. He sees
this as a market which might achieve very attractive volumes in the long
term. In this sector, genetically modified plants are used to assist with
the production of biological active substances for pharmaceuticals. ?In four
or five years? time, we will know whether this technology is a competitor
for the conventional fermentation of active substances. We will not be using
the technology and substances ourselves but will grant licences to the
pharmaceutical industry.? According to Pragnell, plant biotechnology shows
that the earlier life science concept was not so far wrong after all.
The manager is, however, happy that he is no longer part of a wider group ?
like his competitor Bayer Crop Science ? but focuses entirely on
agribusiness and can therefore reach decisions on new technology without
having to consider the views of colleagues in the pharmaceutical sector.
?The focus is a great advantage for management and shareholders alike.?
Syngenta has not placed such emphasis on genetic engineering as its US
competitor Monsanto, but the situation is similar: in Western Europe, there
is no opportunity whatever for the time being, because the aversion to
genetically modified food products remains very high.
Will attitudes in Europe ever change? ?I am an optimist by nature,? Pragnell
says. ?Yes, things will change.? He believes that resistance is particularly
strong in Germany. The genetic engineering act of Parliament recently
adopted by the red-green coalition is ?incredibly short-sighted? in his
view. It will result in the large scale migration of researchers to America.
?Scientists in Europe are bound to feel depressed if they have the
impression of being unwanted or that obstacles are constantly being placed
in their way.?
Syngenta?s research in biotechnology is conducted mainly in America.
Pragnell accuses the genetic engineering opponents in Europe of introversion
because they have no regard for the interests of underprivileged people:
?Green is all very well if you are rich and have the luxury of ample food
supplies.? What might change the critical attitude of the Europeans to green
genetic engineering? ?If we could show our customers the benefits of genetic
engineering through new products,? Pragnell says. He has in mind for example
bananas whose skin takes longer to turn black, a variety of rice which
prevents blindness in infants or the cultivation of a tomato with a higher
leucopenic content which might lessen the risk of prostate cancer. ?Building
bridges of this kind with customers is the great challenge and I hope we may
achieve results from the year 2010 onwards.?
Relaxed and witty
If you have not seen Michael Pragnell for some time you will be surprised:
the Englishman has not been so ready with his repartee, so witty and relaxed
for a long time. This in itself suggests just how demanding the Syngenta
merger turned out to be because ? unlike the situation at Novartis ?
companies from three different countries (Switzerland, Sweden and Great
Britain) were joined up. 57 year old Pragnell was well-prepared for this
job. During his time with the UK textiles group Courtaulds and then with
Astra Zeneca he held senior positions with responsibility for big
transactions involving the divestment of some business areas and new
combinations of others. Although Pragnell has worked in industry for decades
he is not unknown for breaking with the usual ?manager speak? and enjoys an
intellectual game of words or concepts. You notice at once that he studied
languages and not business at Oxford University. But he does have an MBA
too, from Insead in Fontainebleau.
?The stock market has recognized our achievements and future potential.?
?The genetic engineering act of Parliament of the red-green coalition in
Germany is incredibly short-sighted?
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