As
filed with the
Securities and Exchange Commission on March 7, 2007
UNITED
STATES
SECURITIES
AND
EXCHANGE COMMISSION
WASHINGTON,
D.C.
20549
FORM
20-F
o
REGISTRATION
STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES
EXCHANGE
ACT OF 1934
OR
x
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE
ACT OF 1934
For
the fiscal year
ended: December 31, 2006
OR
o
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE
ACT OF 1934
OR
o
SHELL COMPANY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE
ACT OF 1934
Commission
file
number: 1-15152
SYNGENTA
AG
(Exact
name of
Registrant as specified in its charter)
SWITZERLAND
(Jurisdiction
of
incorporation or organization)
Schwarzwaldallee
215, 4058 Basel, Switzerland
(Address
of
principal executive offices)
Securities
registered or to be registered pursuant to Section 12(b) of the
Act:
Title
of each
class:
|
Name
of each
exchange on which registered:
|
American
Depositary Shares, each representing
one-fifth
of a common share of Syngenta AG,
nominal
value CHF 2.30
|
New
York Stock Exchange
|
Securities
registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities
for which
there is a reporting obligation pursuant to Section 15(d) of the Act:
None
Indicate
the number
of outstanding shares of each of the issuer’s classes of capital or common stock
as of the close of the period covered by the annual report.
104,043,560
Common shares, nominal value CHF 2.30 each
Indicate
by check
mark if the registrant is a well-known seasoned issuer, as defined in Rule
405
of the Securities Act.
x Yes
o No
If
this report is an
annual or transition report, indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
o Yes
x No
Indicate
by check
mark whether the registrant (1) has filed all reports required to be filed
by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past
90 days.
x Yes
o
No
Indicate
by check
mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of “accelerated filer and large
accelerated filer” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer x
|
Accelerated
filer o
|
Non-accelerated
filer o
|
Indicate
by check
mark which financial statement item the registrant has elected to
follow:
o
Item
17 x
Item
18
If
this is an annual
report, indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
o Yes
x No
Introduction
NATURE
OF
OPERATIONS
Syngenta
AG
(“Syngenta”, the “Company”, “we” or “us”) is a world-leading agribusiness that
is involved in the discovery, development, manufacture and marketing of a range
of products designed to improve crop yields and food quality. In addition,
Syngenta is a leader in “Professional Products”, through the development of
products for markets such as Seed Care, Lawn and Garden, Professional Pest
Management, Vector Control and Public Health. Syngenta is headquartered in
Basel, Switzerland and was formed by Novartis AG (“Novartis”) and AstraZeneca
PLC (“AstraZeneca”) in November 2000 through an agreement to spin off and merge
the Novartis crop protection and seeds businesses with the Zeneca agrochemicals
business to create a dedicated agribusiness company whose shares were then
the
subject of a global offering (the “Transactions”).
The
Transactions
were completed on November 13, 2000 (the “Transaction Date”). In this annual
report, for periods prior to November 13, 2000, we refer to the businesses
contributed to Syngenta by Novartis as the “Novartis agribusiness” and we refer
to the businesses contributed to Syngenta by AstraZeneca as the “Zeneca
agrochemicals business”.
FORWARD-LOOKING
STATEMENTS
The
statements
contained in this annual report that are not historical facts, including,
without limitation, statements regarding management’s expectations, targets or
intentions, including for sales, earnings and earnings per share, constitute
forward-looking statements within the meaning of the safe harbor provisions
of
the Private Securities Litigation Reform Act of 1995, and are based on the
current expectations and estimates of Syngenta’s management. Investors are
cautioned that such forward-looking statements involve risks and uncertainties,
and that actual results may differ materially.
We
identify the
forward-looking statements in this annual report by using the words “will” or
“would”, or “anticipates”, “believes”, “expects”, “intends” or similar
expressions, or the negative of these expressions. We cannot guarantee that
any
of the events or trends anticipated by the forward-looking statements will
actually occur. Important factors that could cause actual results to differ
materially from the results anticipated in the forward-looking statements
include, among other things:
|
·
|
the
risk that
research and development will not yield new products that achieve
commercial success;
|
|
·
|
the
risks
associated with increasing competition in the industry, especially
during
downturns in the agricultural
economy;
|
|
·
|
the
risk that
we will not be able to obtain or maintain the necessary regulatory
approvals for our business;
|
|
·
|
the
risks
associated with potential changes in policies of governments and
international organizations;
|
|
·
|
the
risks
associated with exposure to liabilities resulting from environmental
and
health and safety laws;
|
|
·
|
the
risk that
important patents and other intellectual property rights may be
challenged;
|
|
·
|
the
risk of
substantial product liability
claims;
|
|
·
|
the
risk that
consumer resistance to genetically modified crops and organisms may
negatively impact sales;
|
|
·
|
the
risk that
our crop protection business may be adversely affected by increased
use of
products derived from
biotechnology;
|
|
·
|
the
risks
associated with climatic
variations;
|
|
·
|
the
risk that
customers will be unable to pay their debts to us due to local economic
conditions;
|
|
·
|
the
risks
associated with exposure to fluctuations in foreign currency exchange
rates;
|
|
·
|
the
risks
associated with entering into single-source supply
arrangements;
|
|
·
|
the
risks
associated with conducting operations in certain territories that
have
been identified by the US government as state sponsors of
terrorism;
|
|
·
|
other
risks
and uncertainties that are difficult to
predict.
|
Some
of these
factors are discussed in more detail herein, including under Item 3 “Key
Information”, Item 4 “Information on the Company”, and Item 5 “Operating and
Financial Review and Prospects”. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated or expected. Syngenta does not intend or assume any
obligation to update these forward-looking statements.
TABLE
OF
CONTENTS
|
|
|
|
Introduction
|
ii
|
Nature
of
Operations
|
ii
|
Forward-Looking
Statements
|
ii
|
|
|
PART
I
|
2
|
Item
1 —
Identity of Directors, Senior Management and Advisers
|
2
|
Item
2 —
Offer Statistics and Expected Timetable
|
2
|
Item
3 — Key
Information
|
2
|
Item
4 —
Information on the Company
|
7
|
Item
5 —
Operating and Financial Review and Prospects
|
32
|
Item
6 —
Directors, Senior Management and Employees
|
63
|
Item
7 —
Major Shareholders and Related Party Transactions
|
74
|
Item
8 —
Financial Information
|
75
|
Item
9 — The
Offer and Listing
|
79
|
Item
10 —
Additional Information
|
81
|
Item
11 —
Quantitative and Qualitative Disclosures About Market Risk
|
90
|
Item
12 —
Description of Securities Other Than Equity Securities
|
93
|
|
|
PART
II
|
94
|
Item
13 —
Defaults, Dividend Arrearages and Delinquencies
|
94
|
Item
14 —
Material Modifications to the Rights of Security Holders and Use
of
Proceeds
|
94
|
Item
15 —
Controls and Procedures
|
94
|
Item
16 —
[Reserved]
|
94
|
Item
16A —
Audit Committee Financial Expert
|
94
|
Item
16B —
Code of Ethics
|
94
|
Item
16C —
Principal Accountant Fees and Services
|
95
|
Item
16D —
Exemptions from the Listing Standards for Audit Committees
|
95
|
Item
16E —
Purchases of Equity Securities by the Issuer and Affiliated
Purchasers
|
96
|
|
|
PART
III
|
97
|
Item
17 —
Financial Statements
|
97
|
Item
18 —
Financial Statements
|
97
|
Item
19 —
Exhibits
|
98
|
PART
I
ITEM
1 —
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not
applicable.
ITEM
2 —
OFFER STATISTICS AND EXPECTED TIMETABLE
Not
applicable.
ITEM
3 —
KEY INFORMATION
Financial
Highlights
Syngenta
has
prepared the consolidated financial statements in US dollars and in accordance
with International Financial Reporting Standards (IFRS), together with a
reconciliation of net income and equity to US Generally Accepted Accounting
Principles (US GAAP). The basis of preparation of the consolidated financial
statements and the key accounting policies are discussed in Notes 1 and 2,
respectively, of the consolidated financial statements. For a discussion of
the
significant differences between IFRS and US GAAP, see Note 34 to the
consolidated financial statements.
The
selected
financial information set out overleaf has been extracted from the consolidated
financial statements of Syngenta. Investors should read the whole document
and
not rely on the summarized information. The information includes the results
of
operations and the net assets of Golden Harvest from July 31, 2004, Garst from
September 1, 2004, Emergent Genetics Vegetable A/S (EGV) from June 1, 2006
and
Conrad Fafard, Inc. from August 1, 2006. For further information about these
and
other acquisitions, see Note 3 to the consolidated financial
statements.
SELECTED
FINANCIAL DATA
|
|
|
|
|
|
|
|
|
|
Year
ended December 31,
|
|
(US$
million except where stated)
|
|
2006
|
|
2005
(reclassified)
|
|
2004
(reclassified)
|
|
2003
(reclassified)
|
|
2002
(reclassified)
|
|
Amounts
in accordance with IFRS(1)
|
|
|
|
|
|
|
|
|
|
|
|
Income
statement data
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
8,046
|
|
|
8,104
|
|
|
7,269
|
|
|
6,525
|
|
|
6,163
|
|
Cost
of goods
sold
|
|
|
(3,982
|
)
|
|
(3,950
|
)
|
|
(3,532
|
)
|
|
(3,248
|
)
|
|
(3,088
|
)
|
Gross
profit
|
|
|
4,064
|
|
|
4,154
|
|
|
3,737
|
|
|
3,277
|
|
|
3,075
|
|
Operating
expenses
|
|
|
(3,235
|
)
|
|
(3,294
|
)
|
|
(3,196
|
)
|
|
(2,759
|
)
|
|
(2,918
|
)
|
Operating
income
|
|
|
829
|
|
|
860
|
|
|
541
|
|
|
518
|
|
|
157
|
|
Income/(loss)
before taxes
|
|
|
798
|
|
|
766
|
|
|
466
|
|
|
379
|
|
|
(68
|
)
|
Income/(loss)
from continuing operations
|
|
|
637
|
|
|
626
|
|
|
536
|
|
|
246
|
|
|
(112
|
)
|
Net
income/(loss) attributable to Syngenta AG
shareholders
|
|
|
634
|
|
|
622
|
|
|
460
|
|
|
248
|
|
|
(109
|
)
|
Number
of
shares -
basic
|
|
|
98,165,298
|
|
|
100,017,271
|
|
|
105,208,929
|
|
|
101,682,672
|
|
|
101,541,119
|
|
- diluted
|
|
|
99,876,180
|
|
|
101,464,222
|
|
|
106,015,369
|
|
|
101,799,899
|
|
|
101,586,435
|
|
Basic
earnings/(loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From
continuing operations
|
|
|
6.46
|
|
|
6.22
|
|
|
5.16
|
|
|
2.39
|
|
|
(1.14
|
)
|
From
discontinued operations
|
|
|
-
|
|
|
-
|
|
|
(0.79
|
)
|
|
0.05
|
|
|
0.07
|
|
Total
|
|
|
6.46
|
|
|
6.22
|
|
|
4.37
|
|
|
2.44
|
|
|
(1.07
|
)
|
Diluted
earnings/(loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From
continuing operations
|
|
|
6.35
|
|
|
6.13
|
|
|
5.12
|
|
|
2.38
|
|
|
(1.14
|
)
|
From
discontinued operations
|
|
|
-
|
|
|
-
|
|
|
(0.78
|
)
|
|
0.05
|
|
|
0.07
|
|
Total
|
|
|
6.35
|
|
|
6.13
|
|
|
4.34
|
|
|
2.43
|
|
|
(1.07
|
)
|
Cash
dividends
declared -
CHF per
share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
0.85
|
|
|
0.80
|
|
-
US$ per share equivalent
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
0.64
|
|
|
0.48
|
|
Par
value
reduction
-
CHF per share
|
|
|
3.30
|
|
|
2.70
|
|
|
1.70
|
|
|
-
|
|
|
-
|
|
- US$ per share equivalent
|
|
|
2.68
|
|
|
2.10
|
|
|
1.35
|
|
|
-
|
|
|
-
|
|
Cash
flow data from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flow from
operating activities
|
|
|
928
|
|
|
497
|
|
|
1,309
|
|
|
791
|
|
|
769
|
|
Cash
flow used
for investing activities
|
|
|
(411
|
)
|
|
(144
|
)
|
|
(686
|
)
|
|
(232
|
)
|
|
(254
|
)
|
Cash
flow used
for financing activities
|
|
|
(541
|
)
|
|
(74
|
)
|
|
(679
|
)
|
|
(630
|
)
|
|
(602
|
)
|
Capital
expenditure on tangible fixed assets
|
|
|
(217
|
)
|
|
(174
|
)
|
|
(166
|
)
|
|
(211
|
)
|
|
(157
|
)
|
Balance
sheet data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
less current liabilities
|
|
|
2,578
|
|
|
1,747
|
|
|
2,185
|
|
|
1,816
|
|
|
1,139
|
|
Total
assets
|
|
|
11,852
|
|
|
11,404
|
|
|
11,786
|
|
|
10,740
|
|
|
10,243
|
|
Total
non-current liabilities
|
|
|
(3,190
|
)
|
|
(2,508
|
)
|
|
(2,884
|
)
|
|
(2,705
|
)
|
|
(2,655
|
)
|
Total
liabilities
|
|
|
(6,158
|
)
|
|
(5,973
|
)
|
|
(6,108
|
)
|
|
(5,617
|
)
|
|
(5,813
|
)
|
Share
capital
|
|
|
142
|
|
|
353
|
|
|
525
|
|
|
667
|
|
|
667
|
|
Total
shareholders’ equity
|
|
|
5,666
|
|
|
5,403
|
|
|
5,658
|
|
|
5,056
|
|
|
4,350
|
|
Other
supplementary income data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings/(loss) per share from continuing operations, excluding
restructuring and impairment(2)
|
|
|
8.73
|
|
|
7.67
|
|
|
7.19
|
|
|
3.34
|
|
|
2.17
|
|
Amounts
in accordance with US GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
(unaudited)
|
|
|
8,044
|
|
|
8,104
|
|
|
7,269
|
|
|
6,525
|
|
|
6,163
|
|
Net
income/(loss) from continuing operations
|
|
|
507
|
|
|
560
|
|
|
429
|
|
|
247
|
|
|
(201
|
)
|
Net
income/(loss) attributable to Syngenta AG shareholders
|
|
|
504
|
|
|
556
|
|
|
352
|
|
|
250
|
|
|
(198
|
)
|
Total
assets
(unaudited)
|
|
|
11,427
|
|
|
11,527
|
|
|
12,070
|
|
|
11,183
|
|
|
10,737
|
|
Total
non-current liabilities (unaudited)
|
|
|
(3,266
|
)
|
|
(2,640
|
)
|
|
(3,184
|
)
|
|
(2,926
|
)
|
|
(2,960
|
)
|
Total
equity
|
|
|
5,046
|
|
|
5,417
|
|
|
5,648
|
|
|
5,202
|
|
|
4,536
|
|
Basic
earnings/(loss) per share(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From
continuing operations
|
|
|
5.13
|
|
|
5.56
|
|
|
4.14
|
|
|
2.42
|
|
|
(2.01
|
)
|
From
discontinued operations
|
|
|
-
|
|
|
-
|
|
|
(0.79
|
)
|
|
0.04
|
|
|
0.06
|
|
Diluted
earnings/(loss) per share(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From
continuing operations
|
|
|
5.07
|
|
|
5.49
|
|
|
4.10
|
|
|
2.41
|
|
|
(2.01
|
)
|
From
discontinued operations
|
|
|
-
|
|
|
-
|
|
|
(0.78
|
)
|
|
0.04
|
|
|
0.06
|
|
|
(1)
|
Syngenta
has
prepared the consolidated financial statements in US dollars and
in
accordance with International Financial Reporting Standards (IFRS),
together with a reconciliation of net income and equity to US Generally
Accepted Accounting Principles (US GAAP).
|
|
The
basis of
preparation of the consolidated financial statements and the key
accounting policies are discussed in Notes 1 and
2,
|
|
respectively,
to the consolidated financial statements. For a discussion of the
significant differences between IFRS and US GAAP, see Note 34 to the
consolidated financial statements. |
|
Balance
sheet
data for 2005, 2004, 2003 and 2002 has been reclassified to reflect
the
netting of deferred tax assets and deferred tax liabilities, which
have
been netted against each other within the same taxable entity. Previously,
they were netted only where they related to the same balance sheet
item.
This adjustment has reduced the amounts of deferred tax assets and
deferred tax liabilities disclosed in the consolidated balance sheet,
and
total assets and total liabilities, by US$204 million, US$222 million,
US$228 million, and US$283 million as at December 31, 2005, 2004,
2003 and
2002 respectively.
|
(2)
|
Restructuring
represents the effect on reported performance of initiating business
changes which are considered major and which, in the opinion of
management, will have a material effect on the nature and focus of
Syngenta’s operations, and therefore require separate disclosure to
provide a more thorough understanding of business performance.
Restructuring includes the effects of completing and integrating
significant business combinations and divestments. Restructuring
and
impairment includes the impairment costs associated with major
restructuring and also impairment losses and reversals of impairment
losses resulting from major changes in the markets in which a reported
segment operates. The incidence of these business changes may be
periodic
and the effect on reported performance of initiating them will vary
from
period to period. Because each such business change is different
in nature
and scope, there will be limited continuity in the detailed composition
and size of the reported amounts which affect performance in successive
periods. Separate disclosure of these amounts facilitates the
understanding of underlying
performance.
|
Restructuring
and
impairment charges for 2006, 2005 and 2004 are analyzed in Note 7 to the
consolidated financial statements. Restructuring and impairment for 2003 and
2002 represents the costs of integrating the separate Novartis agribusiness
and
Zeneca agrochemicals business legacy organizations and the closure of certain
manufacturing and research and development sites and refocusing of other
continuing sites. A detailed reconciliation of net income and earnings per
share
before restructuring and impairment to net income and earnings per share
according to IFRS is given in Appendix A at the end of Item 5.
(3)
|
The
number of
shares used to calculate US GAAP basic earnings per share is the
same as
that used under IFRS. The number of shares used to calculate US GAAP
diluted earnings per share is adjusted from that used under IFRS
due to
accounting for hypothetical share issuance proceeds, namely the excess
tax
benefit, and in 2006, also due to the different accounting treatment
of
the shareholder put option grant, which made that option antidilutive
for
US GAAP. This adjustment is explained in Note 34 of the consolidated
financial statements.
|
Risk
Factors
Syngenta’s
business, financial condition or results of operations could suffer material
adverse effects due to any of the following risks. We have described below
the
risks that we consider material. Additional risks not known to us or that we
now
consider immaterial may also impair our business operations.
The
Resources Syngenta Devotes to Research and Development May Not Result in
Commercially Viable Products
Syngenta’s
success
depends in part on its ability to develop new products. Research and development
in the agribusiness industry is expensive and prolonged, and entails
considerable uncertainty. The process of developing a novel crop protection
product, plant variety or trait typically takes about six to ten years from
discovery through testing and registration to initial product launch, but this
period varies considerably from product to product and country to country.
Because of the complexities and uncertainties associated with chemical and
biotechnological research, compounds or biotechnological products currently
under development may neither survive the development process nor ultimately
receive the requisite regulatory approvals needed to market such products.
Even
when such approvals are obtained, there can be no assurance that a new product
will be commercially successful. In addition, research undertaken by competitors
may lead to the launch of competing or improved products which may affect sales
of Syngenta’s new products.
Syngenta
Faces Increasing Competition in Its Industry, Especially During Downturns in
the
Agricultural Economy
Syngenta
currently
faces significant competition in the markets in which it operates. In most
segments of the market, the number of products available to the grower is
steadily increasing as new products are introduced, although this trend can
be
partly offset by the withdrawal of some products because they are not
re-registered or are subject to voluntary range reduction programmes to reduce
the range of products offered. At the same time, an increasing number of
products are coming off patent and are thus available to generic manufacturers
for production. As a result, Syngenta anticipates that it will continue to
face
significant competitive challenges.
Declines
in
commodity crop prices can indirectly affect Syngenta’s results. They can result
not only in reduced sales, but also in competitive price pressure in certain
of
our markets. These fluctuations may negatively impact Syngenta’s business or
results of operations in the future.
Syngenta
May Not Be Able to Obtain or Maintain the Necessary Regulatory Approvals for
Some of Its Products, and This Would Restrict Its Ability to Sell Those Products
in Some Markets
Syngenta’s
products
must receive regulatory approval before they can be marketed, but Syngenta
may
not be able to obtain such approvals. In most markets, including the United
States and the EU, crop protection products must be registered after being
tested for safety, efficacy and environmental impact. In most of Syngenta’s
principal markets, after a period of time, Syngenta must also re-register its
crop protection products and show that they meet all current standards, which
may have
become
more
stringent since the prior registration. For seeds products, in the EU, a new
plant variety will be registered only after it has been shown that it is
distinct, uniform, stable, and better than existing varieties.
Regulatory
standards and trial procedures are continuously changing. Responding to these
changes and meeting existing and new requirements may be costly and burdensome.
In addition, changing regulatory standards may affect Syngenta’s ability to
maintain its products on the market.
Changes
in
the Agricultural Policies of Governments and International Organizations May
Prove Unfavorable
In
subsidized
markets such as the United States, EU and Japan, reduction of subsidies to
growers may inhibit the growth of crop protection and seeds markets. In each
of
these areas there are various pressures to reduce subsidies. However, it is
difficult to predict accurately whether and when such changes will occur. We
expect that the policies of governments and international organizations will
continue to affect the income available to growers to purchase crop protection
and seeds products and accordingly the operating results of the agribusiness
industry.
Syngenta
Is
Subject to Stringent Environmental, and Health and Safety Laws, Regulations
and
Standards Which Can Result in Compliance Costs and Remediation Efforts That
May
Adversely Affect Its Operational and Financial Position
Syngenta
is subject
to a broad range of increasingly stringent laws, regulations and standards
in
all of its operational jurisdictions. This results in significant compliance
costs and can expose it to legal liability. These requirements are comprehensive
and cover many activities including: air emissions, waste water discharges,
the
use and handling of hazardous materials, waste disposal practices, the clean-up
of existing environmental contamination and the use of chemicals by
growers.
Environmental
and
health and safety laws, regulations and standards expose Syngenta to the risk
of
substantial costs and liabilities, including liabilities associated with assets
that have been sold and activities that have been discontinued. In addition,
many of our manufacturing sites have a long history of industrial use. As is
typical for businesses like Syngenta’s, soil and groundwater contamination has
occurred in the past at some sites, and may be identified at other sites in
the
future. Disposal of waste from our business at off-site locations also exposes
Syngenta to potential remediation costs. Consistent with past practice Syngenta
is continuing to investigate and remediate, or monitor soil and groundwater
contamination at a number of these sites. Despite our efforts to comply with
environmental laws, Syngenta may face remediation liabilities and legal
proceedings concerning environmental matters.
Based
on
information presently available, Syngenta has budgeted expenditures for
environmental improvement projects and has established provisions for known
environmental remediation liabilities that are probable and capable of
estimation. However, it cannot predict environmental matters with certainty,
and
the budgeted amounts and established provisions may not be adequate for all
purposes. In addition, the development or discovery of new facts, events,
circumstances, changes in law or conditions, including future decisions to
close
plants which may trigger remediation liabilities, could result in increased
costs and liabilities or prevent or restrict some of Syngenta’s
operations.
Third
Parties May Challenge Some of Syngenta’s Intellectual Property Rights or Assert
That Syngenta Has Infringed Theirs
Scientific
and
technological innovation is critical to the long-term success of our businesses.
However, third parties may challenge the measures that Syngenta takes to protect
processes, compounds, organisms and methods of use through patents and other
intellectual property rights and, as a result, our products may not always
have
the full benefit of intellectual property rights.
Third
parties may
also assert that Syngenta’s products violate their intellectual property rights.
As the number of biotechnological products used in agriculture increases and
the
functionality of these products further overlap, Syngenta believes that it
may
continue to be subject to infringement claims. Even claims without merit are
time-consuming and expensive to defend. As a result of these claims, Syngenta
could be required to enter into license arrangements, develop non-infringing
products or engage in litigation that could be costly.
Syngenta
May Be Required to Pay Substantial Damages as a Result of Product Liability
Claims for Which Insurance Coverage
is Not
Available
Product
liability
claims are a commercial risk for Syngenta, particularly as we are involved
in
the supply of chemical products which can be harmful to humans and the
environment. Courts have levied substantial damages in the United States and
elsewhere against a number of crop protection and seeds companies in past years
based upon claims for injuries allegedly caused by the use of their products.
While we have a global insurance program in place, a substantial product
liability claim that is not covered by insurance could have a material adverse
effect on Syngenta’s operating results or financial condition.
Consumer
and Government Resistance to Genetically Modified Organisms May Negatively
Affect Syngenta’s Public Image and Reduce Sales
Syngenta
is active
in the field of genetically modified organisms in the seeds area and in
biotechnology research and development in seeds and crop protection, with a
current focus on North and South America. However, the high public profile
of
biotechnology and lack of consumer acceptance of products to which Syngenta
has
devoted substantial resources could negatively affect its public image and
results. The current resistance from consumer groups, particularly in Europe,
to
products based on genetically modified organisms because of concerns over their
effects on food safety and the environment, may spread to and influence the
acceptance of products developed through biotechnology in other regions of
the
world, which could limit the commercial opportunities to exploit biotechnology.
In addition, some government authorities have enacted and others in the future
might enact regulations regarding genetically modified organisms which may
delay
and limit or even prohibit the development and sale of such
products.
Syngenta’s
Crop Protection Business May Be Adversely Affected by Increased Use of Products
Derived Through Biotechnology
The
adoption of the
products derived through biotechnology could have a negative impact on areas
of
Syngenta’s traditional crop protection business. This may not be offset, in
whole or in part, by the opportunities presented to our seeds and plant science
businesses, which are more actively pursuing products and traits developed
through biotechnology. Crop protection accounted for 78% of sales in 2006,
whereas seeds accounted for 22% of sales. The area of Syngenta’s crop protection
business which is most affected by genetically modified seeds is that of
selective herbicides for use on oilseed crops, corn and cotton.
Syngenta’s
Results May Be Affected by Climatic Variations
The
agribusiness
industry is subject to seasonal and weather factors, which make its operations
relatively unpredictable. The weather can affect the presence of disease and
pests in the short term on a regional basis, and accordingly can affect the
demand for crop protection products and the mix of products used (positively
or
negatively).
Syngenta’s
Customers May Be Unable to Pay Their Debts to Syngenta Due to Local Economic
Conditions
Normally
Syngenta
delivers its products against future payment. Syngenta’s credit terms vary
according to local market practice, but for Europe and NAFTA our credit terms
usually range from 30 to 180 days. However, Syngenta’s customers, particularly
in developing economies such as Latin America, may be exposed to downturns
which
may impact their ability to pay their debts, which could adversely affect our
results.
Currency
Fluctuations May Have a Harmful Impact on Syngenta’s Financial Results or May
Increase Its Liabilities
Syngenta
reports
its results in US dollars; however a substantial portion of our sales and
product costs are denominated in currencies other than the US dollar.
Fluctuations in the values of these currencies, especially in the US dollar
against the Swiss franc, British pound and Euro, can have a material impact
on
our financial results.
Syngenta
Maintains a Single Supplier for Some Raw Materials, Which May Affect Its Ability
to Obtain Sufficient Amounts of Those Materials
While
Syngenta
generally maintains multiple sources of supply and obtains supplies of raw
materials from a number of countries, there are a limited number of instances
where Syngenta has entered into single-source supply contracts or where Syngenta
routinely makes spot purchases from a single supplier in respect of active
ingredients, intermediates or raw materials for certain important products
where
there is no viable alternative source or where there is sufficient commercial
benefit and security of supply can be assured. Such single supplier arrangements
account for approximately 20% of our purchases of active ingredients,
intermediates and raw materials, as determined by cost. Syngenta’s ability to
obtain sufficient amounts of those materials may be adversely affected by the
unforeseen loss of a supplier.
Syngenta
Conducts Business in Most Countries of the World, Including in Certain
Territories that Have Been Identified by the US
Government as State Sponsors of Terrorism
Syngenta
conducts
business in most countries of the world, and thus it has minor operations in
high risk territories, including Cuba, Iran, Syria and the Sudan, some of which
have been identified by the US government as state sponsors of terrorism.
Syngenta’s operations in these countries are quantitatively immaterial, and it
is Syngenta’s belief that supporting agriculture in these countries is
beneficial to their wider population, for whom food is often in short supply.
However, certain investors may choose not to hold investments in companies
that
have operations of any size in these countries and several US states have
enacted, and others may in the future enact, legislation requiring public
entities with investments in companies with operations in these countries to
disclose this fact or in some cases to divest these investments. Any such
divestment is not currently expected to have a material impact on the value
of
Syngenta shares.
Syngenta’s
Share Price May Be Volatile and Subject to Sudden and Significant
Drops
The
trading price
of Syngenta shares and ADSs has been, and could in the future continue to be,
subject to significant fluctuations in response to variations in Syngenta’s
financial performance, regulatory and business conditions in its industry,
general economic trends and other factors, some of which are unrelated to the
operating performance of Syngenta.
If
You Hold
Syngenta ADSs
It May
Be More Difficult for You to Exercise Your Rights
The
rights of
holders of Syngenta ADSs are governed by the deposit agreement between Syngenta
and The Bank of New York. These rights are different to those of holders of
Syngenta shares in several respects, including the receipt of information,
the
receipt of dividends or other distributions, the exercise of voting rights
and
attendance at shareholders’ meetings. As a result, it may be more difficult for
you to exercise those rights.
ITEM
4 —
INFORMATION ON THE COMPANY
History
and
Development of the Company
The
Company
Syngenta
AG was
formed on November 12, 1999 under the laws of Switzerland and became a publicly
listed company on November 13, 2000. Syngenta is domiciled in and governed
by
the laws of Switzerland. It has its registered office and principal business
office at Schwarzwaldallee 215, 4058 Basel, Switzerland. The telephone number
of
Syngenta is 41-61-323-1111. Syngenta’s registered agent for service of process
in the United States is CT Corporation System. CT Corporation System’s address
is 111 Eighth Avenue, New York, New York 10011, United States.
Syngenta
was
created by Novartis AG and AstraZeneca PLC in November 2000 through an agreement
to spin off and merge the Novartis agribusiness and the Zeneca agrochemicals
business to create a dedicated agribusiness company whose shares were then
the
subject of a global offering.
As
at December 31,
2006, the company is listed on the Swiss Stock Exchange (SWX) under the symbol
SYNN and the New York Stock Exchange under the symbol SYT. Syngenta de-listed
its shares from the London Stock Exchange and the Stockholm Stock Exchange
as of
December 30, 2003 due to the low level of trading on these exchanges. The shares
were listed on these two stock exchanges at the time of Syngenta’s floatation to
reflect the shareholder base of the two legacy companies.
Prior
to the
creation of Syngenta, Novartis agribusiness was a leading supplier of crop
protection products and seeds. Novartis agribusiness operated in more than
120
countries worldwide and employed approximately 15,500 permanent employees at
the
time of the merger. Novartis agribusiness had US$4,678 million in sales in
1999,
making it the world’s second largest agribusiness company. Its parent company,
Novartis AG, was created by the merger of Sandoz AG (“Sandoz”) and Ciba-Geigy AG
(“Ciba-Geigy”) in December 1996. Through this merger, Sandoz’s and Ciba-Geigy’s
seed and crop protection businesses, which had existed since the 1930’s, became
Novartis agribusiness. Novartis agribusiness subsequently enlarged its portfolio
and geographic reach through acquisitions.
Zeneca
agrochemicals business was one of the world’s leading suppliers of crop
protection products in terms of sales prior to the merger. Its sales in 1999
totaled US$2,657 million. Zeneca agrochemicals business operated in more than
120 countries worldwide and employed approximately 8,300 people at December
31,
1999. Zeneca agrochemicals business was demerged from ICI PLC in 1993, together
with the pharmaceuticals and specialty chemicals businesses. ICI had originally
entered the agrochemicals market in the 1930’s.
Investments
and
Divestments
Investments
On
June 1, 2006,
Syngenta purchased 100% of the shares of Emergent Genetics Vegetable A/S
(“EGV”). On August 1, 2006, Conrad Fafard Inc., (“Fafard”) merged with a
Syngenta subsidiary so that Syngenta acquired control of Fafard and its
subsidiaries in exchange for cash paid to or for the account of Fafard’s former
shareholders and settlement of certain liabilities of Fafard. On November 16,
2006, Syngenta acquired the remaining 50% of the shares of Longreach Plant
Breeders Pty Ltd (LRPB) that it did not already own. The cost of these
acquisitions, net of cash acquired, amounted to US$146 million.
In
March 2006,
Syngenta acquired from DuPont an exclusive worldwide licence to develop DuPont’s
new insecticide RynaxypyrTM
in
mixtures with
its own insect control products. At the same time, Syngenta sold to DuPont
worldwide rights to Syngenta’s strobilurin fungicide pycoxystrobin, sold as
ACANTO®.
On
October 14,
2005, Syngenta acquired an additional membership interest in Dulcinea Farms,
LLC, increasing its interest from 51% to 100%. On September 16, 2005, Syngenta
purchased the Dutch bee breeding business of Bunting Brinkman Bees B.V. It
previously held a 49% shareholding in that entity. In February 2005, Syngenta
purchased additional shares in Syngenta Nantong Crop Protection Ltd., increasing
its shareholding from 98% to 100%. The aggregate purchase price of these
acquisitions was US$10 million, paid in cash.
In
2004, Syngenta
made a number of investments to strengthen its Seeds Field Crops business in
the
North American corn and soybean markets. These investments included corn
germplasm, breeding materials and inbreds from the US based company CHS Research
LLC, acquisition of a 90% stake in the Golden Harvest®
“family”
of
companies for US$154 million net of cash in the acquired companies, the
acquisition of 90% of the North American corn, soybean and wheat business of
Advanta BV for US$327 million net of cash in the acquired companies, and
purchase of glyphosate tolerance technology for corn (GA21) from Bayer
CropScience. Syngenta also purchased the remaining 67% of the outstanding shares
of Dia-Engei, a Japanese flower seed company.
Divestments
On
February 2,
2007, Syngenta signed an agreement to dispose of the part of the Rosental site
in Basel that is seen as in excess of Syngenta’s medium term needs. Proceeds
from this transaction are expected to be approximately US$139 million (subject
to completion).
On
September 30,
2004, Syngenta sold its 75% interest in its sulphur and chlorine-based chemical
intermediates business, SF-Chem AG, to a private equity buyer for US$46 million.
This business was previously shown as part of the Crop Protection segment,
and
is now presented as a discontinued operation in the consolidated income
statement and segmental results. This transaction is further described in Note
3
to the consolidated financial statements.
There
were no major
business or product divestments in 2005 or 2006 other than the
ACANTO®
transaction
noted
above.
Syngenta’s
Strategy
Syngenta’s
goal is
to create value for its shareholders by being the leading provider of innovative
products and solutions to growers and the food and feed chain.
There
are five main
objectives underlying this strategy:
Outperform
markets
Syngenta
continues
to build leadership positions in the markets in which it operates, capitalizing
on its broad range of strong, profitable products and global marketing reach.
A
key element of
Syngenta’s strategy is to ensure its employees have a full understanding of the
diverse needs and expectations of its customers, which vary by region and crop.
Growers need products that will help them meet increasing demands for more
affordable, healthier and higher quality foods and feeds. Syngenta responds
with
value-adding solutions tailored to local customer needs. Syngenta aims to gain
market share through continuous innovation accompanied by outstanding customer
support.
Grow
new products
A
key component of
Syngenta’s success in driving share gain is an ability to innovate and grow new
products.
Syngenta
aims to
discover and bring to market new products with improved efficacy and safety
profiles which contribute to the development of sustainable
agriculture.
In
the past decade
there has been a paradigm shift in methodology for the generation of leads
for
new chemical products. The integration of genomics to identify targets and
establish modes of action, together with fast high-throughput automated screens
to detect leads, has provided a powerful engine for lead discovery and
optimization. Techniques such as toxicogenomics and environmental profiling
are
minimizing the attrition rate in the development process.
Syngenta
focuses on
improved ways to direct its research towards areas of health and environmental
safety. An example of the success delivered by the process is
CALLISTO®,
which showed a
favorable environmental profile and became the leading selective herbicide
for
corn in the United States within three years.
Life
cycle management
Syngenta
aims to
harness the full potential of its established products and technologies,
including the extension of their life cycles through research and development
activities.
Syngenta
believes
that it possesses one of the broadest ranges of chemical crop protection
products and technologies in the industry. Syngenta plans to refresh and improve
this range through the use of individual compounds and innovative mixtures.
The
company employs some of the best scientists in chemistry, physiology,
bioperformance enhancement and formulation to achieve this objective. Attractive
opportunities exist for combinations of products to provide tailored crop
solutions for the specific requirements of growers. Syngenta believes that
the
integration of chemical and gene-based solutions offers a particularly
attractive opportunity for the future.
Invest
in Seeds
Syngenta
continues
to build strong germplasm in target seeds segments which will both improve
its
seed offer from traditional breeding and provide a delivery vehicle for new
technologies.
Advances
in
biotechnology have revolutionized processes and delivered crop improvements.
For
example, marker-assisted breeding is a powerful tool for trait selection for
new
varieties and also for significantly accelerating the breeding process.
Integration of genomics tools, biochemical analysis and consumer mapping will
be
a crucial step in meeting the ever increasing demands for quality and nutrition,
especially in our vegetable crops.
Syngenta
believes
it is one of very few global agribusiness companies that is well positioned
to
develop products based on biotechnology because of its multi-disciplinary
understanding of the fundamental science involved and global capability. It
is
Syngenta’s intention to devote an appropriate, sustained and competitive level
of resources to pursue the opportunities it believes biotechnology can
deliver.
Syngenta’s
assembly
of an industry-leading elite corn germplasm base, resulting from its ongoing
research efforts and targeted acquisitions, has enabled the launch of a
foundation seed business which is fuelling growth in Syngenta’s share of the
corn germplasm and trait markets.
Create
new businesses
Innovations
based
upon biochemical processes can enjoy broad utility outside the scope of a
conventional agribusiness. Syngenta is active in furthering new businesses
and
business models to adapt to fast changing market dynamics. This includes the
on-going expansion of professional products, encompassing a strong Seed Care
business as well as an expanding presence in the Lawn & Garden and Home Care
markets.
Investment
in
technology and development capabilities is a critical enabler of Syngenta’s
future growth. Syngenta believes that investments in these areas will continue
to add value to the crop protection and seeds businesses in the form of new
products and will also lead to new business opportunities.
Drive
performance
In
2004 Syngenta
announced an Operational Efficiency cost saving program. The program covers
the
relocation of production to lower cost regions, a further reduction of the
asset
base, an increase in the globalization of purchasing, further consolidation
of
research and development sites and the outsourcing of some administrative
processes. The total cash cost of the program was forecast to be around US$500
million over the five years beginning in 2004 and non-cash charges, principally
writing-down the value of fixed assets at that time, to be around US$350 million
over the same period. Cash spent under the program up to the end of 2006 totals
US$227 million. Cost savings under the program have been partly offset by the
impact of higher oil prices, which is estimated to be in excess of US$200
million since the beginning of 2004. This program is expected to be completed
one year ahead of schedule in 2007, with cash costs in line with the initial
estimate of US$500 million and non cash charges of US$320 million.
A
further
operational efficiency restructuring program was approved by the Syngenta Board
on February 7, 2007, to drive cost savings which will be partly used to offset
increased expenditure in research and technology, marketing and product
development in the growth areas of Seeds and Professional Products. Savings
are
targeted in both cost of goods sold and other operating expenses. The cost
of
the new program is estimated at US$700 million in cash and US$250 million in
non-cash charges in the period up to 2011.
Business
Overview
Industry
Overview
Syngenta
is a world
leading agribusiness operating in the Crop Protection and Seeds businesses.
Crop
Protection chemicals include herbicides, insecticides and fungicides to control
weeds, insect pests and diseases in crops, and are essential inputs enabling
growers around the world to improve agricultural productivity and food quality.
Many of these products also have application in the professional products sector
in areas such as public health, seed treatment and turf and ornamental markets.
The Seeds business operates in two high value commercial sectors: seeds for
field crops including corn, oilseeds, cereals and sugar beet; and vegetable
and
flower seeds. Through its Plant Science research, Syngenta is applying
biotechnology to areas including improving growers’ yield and food quality.
Syngenta aims to be the partner of choice for grower customers with its
unparalleled product offer and innovative marketing, creating value for
customers and shareholders.
Syngenta’s
Business
Syngenta’s
business
is divided into three segments: crop protection, seeds and plant science. These
segments are described in greater detail below.
Crop
Protection
Products
Syngenta
is active
in herbicides, especially for corn, cereals, soybean and rice; fungicides mainly
for cereals, fruits, grapes, rice, soybean and vegetables; insecticides for
fruits, vegetables and field crops; and professional products, such as seed
treatments, products for public health and products for turf and ornamentals.
Herbicides are products that prevent or reduce weeds that compete with the
crop
for nutrients, light and water. Herbicides can be subdivided into (i)
non-selective herbicides, which reduce or halt the growth of all vegetation
with
which they come in contact and (ii) selective herbicides, which are
crop-specific and control weeds without harming the crop. Fungicides are
products that prevent and cure fungal plant diseases that affect crop yield
and
quality. Insecticides are products that control chewing pests such as
caterpillars and sucking pests such as aphids, which reduce crop yields and
quality. Professional products are herbicides, insecticides and fungicides
used
in markets beyond commercial agriculture, together with seed treatments where
insecticides and fungicides protect growth during the early stages. Since the
addition of Fafard, Professional Products now includes a broad range of premium
growing media mixes for professional flower growers.
Syngenta
has a
broad product range, making Syngenta number one or two in all of its target
segments, underpinned by strong worldwide market coverage. Syngenta focuses
on
all major crops, in particular corn, cereals, soybean, fruits and vegetables,
and applies its technologies to other crops, such as oilseeds, sugar beets,
rice
and cotton, and to turf and ornamentals.
The
following table
sets out 2006, 2005 and 2004 crop protection sales:
|
|
Syngenta
Sales
|
|
Products
|
|
2006
(US$
million)
|
|
(%)
|
|
2005
(US$
million)
|
|
(%)
|
|
2004
(US$
million)
|
|
(%)
|
|
Selective
herbicides
|
|
|
1,813
|
|
|
29
|
|
|
1,889
|
|
|
30
|
|
|
1,867
|
|
|
31
|
|
Non-selective
herbicides
|
|
|
725
|
|
|
11
|
|
|
688
|
|
|
11
|
|
|
645
|
|
|
11
|
|
Fungicides
|
|
|
1,716
|
|
|
27
|
|
|
1,779
|
|
|
28
|
|
|
1,702
|
|
|
28
|
|
Insecticides
|
|
|
1,093
|
|
|
17
|
|
|
1,100
|
|
|
17
|
|
|
1,049
|
|
|
17
|
|
Professional
products
|
|
|
958
|
|
|
15
|
|
|
807
|
|
|
13
|
|
|
720
|
|
|
12
|
|
Others
|
|
|
73
|
|
|
1
|
|
|
67
|
|
|
1
|
|
|
59
|
|
|
1
|
|
Total
|
|
|
6,378
|
|
|
100
|
|
|
6,330
|
|
|
100
|
|
|
6,042
|
|
|
100
|
|
The
tables below
show Syngenta’s principal products: (1) currently in late stage development; (2)
recently launched; and (3) key marketed. Products in development are those
we
are currently planning to bring to market. Recently launched products are those
that we have introduced in the past five years.
|
Products
in Late Stage Development
|
Active
Substance
|
Crop
Use
|
Status
|
Herbicide
|
|
|
449
|
Corn
and
sugar cane
|
In
development
|
Fungicide
|
|
|
mandipropamid
(REVUSTM
-
446)
|
Fruits
and
vegetables
|
Launch
Phase
(2007)
|
520
|
Cereals
|
In
development
|
524
|
Seed
treatment
|
In
development
|
|
|
|
Insecticide
|
|
|
RynaxypyrTM
mixtures
|
Multicrop
|
In
development
|
|
|
|
|
Recently
Launched Products (last 5 years)
|
Active
Substance
|
Selected
Brand Names(1)
|
Crop
Use
|
Targets
|
Selective
Herbicides
|
|
|
|
Pyriftalid
|
APIRO®
|
Rice
|
Annual
grasses in transplanted rice
|
Mesotrione(2)
|
CALLISTO®/LUMAX®/
LEXAR®/CAMIX®
|
Corn
|
Broad-leaved
weeds / full spectrum
|
Trifloxysulfuron
|
ENVOKE®,
KRISMAT®,
MONUMENT®
|
Cotton,
sugarcane, turf
|
Post-emergence
selective herbicide against broad-leaved weeds, sedges and
grasses
|
Pinoxaden
|
AXIAL®
|
Cereals
|
Premium
wheat
and barley post-emergent grass herbicide
|
|
|
|
|
Insecticides
|
|
|
|
Thiamethoxam
|
ACTARA®/CRUISER®
|
Broad
range
of crops including seed treatment
|
Foliar
sucking pests and soil dwelling
insects
|
|
(1) |
Products
may
have different brand names depending on the market in which they
are
sold.
|
(2) |
In
connection
with the divestiture of its acetochlor business, Syngenta has granted
to
Dow AgroSciences LLC the right to formulate, market and sell in
North
America a mixture product of mesotrione and
acetochlor.
|
|
Key
Marketed Products
|
Active
Substance
|
Selected
Brand Names(1)
|
Crop
Use
|
Targets
|
Selective
Herbicides
|
|
|
Atrazine
|
AATREX®/GESAPRIM®(2)
|
Corn,
sorghum, sugarcane
|
Annual
grasses and some broad-leaved weeds
|
Clodinafop
|
TOPIK®/HORIZON®/
CELIO®/
DISCOVER®
|
Wheat,
rye,
triticale
|
Annual
grasses
|
Dicamba
|
BANVEL®
|
Cereals,
corn, turf, sugarcane
|
Annual
and
perennial broad-leaved weeds
|
Dimethachlor
|
COLZOR
TRIO®
|
Oilseed
rape
|
Broad
spectrum
|
Fluazifop-P-Butyl
|
FUSILADE®
|
Soybeans,
cotton, oilseed rape, fruit and vegetables
|
Grass
weeds
|
Fomesafen
|
FLEX®/REFLEX®
|
Soybeans
|
Broad-leaved
weeds
|
Molinate
|
ORDRAM®(3)
|
Rice
|
Annual
grasses
|
Nicosulfuron
|
MILAGRO®(4)
|
Corn
|
Grass
weeds
|
Pretilachlor
|
RIFIT®/SOFIT®
|
Rice
|
Grasses,
sedges and some broadleaved weeds
|
S-metolachlor
|
DUAL
MAGNUM®/DUAL GOLD®/BICEP
MAGNUM®
|
Corn,
soybeans, peanuts, sugar beet, sunflowers
|
Annual
grasses and some broad-leaved weeds
|
Tralkoxydim
|
ACHIEVE®/GRASP®
|
Wheat,
barley
|
Grass
weeds
|
|
Key
Marketed Products
|
Active
Substance
|
Selected
Brand Names(1)
|
Crop
Use
|
Targets
|
Triasulfuron
|
LOGRAN®/AMBER®
|
Cereals,
transplanted rice
|
Annual
broad-leaved weeds and some grasses
|
|
|
|
Non-Selective
Herbicides
|
|
|
Diamonium
Glyphosate
|
TOUCHDOWN®/ZAPP®/
OURAGAN®
|
Cotton,
all
field crops, fruits and vegetables
|
Broad
spectrum weed control
|
Diquat
|
REGLONE®
|
Wheat,
sunflower, oilseed rape, potatoes
|
Broad
spectrum weed control; desiccation
|
Paraquat
|
GRAMOXONE®
|
Cereals,
rice, soybeans, corn, fruit and vegetables
|
Broad
spectrum weed control
|
Fungicides
|
|
|
|
Azoxystrobin
|
AMISTAR®/QUADRIS®/
AMISTAR OPTI®/
HERITAGE®/ABOUND®
|
Wheat,
barley, fruit and vegetables, rice, turf
|
Broad
spectrum disease control
|
Chlorothalonil
|
BRAVO®/DACONIL®
|
Fruit
and
vegetables, wheat, turf
|
Broad
spectrum disease control
|
Cyproconazole
|
ALTO®(5)
|
Cereals,
coffee, peanuts, rice, soybean
|
Powdery
mildew, rust, leaf spots
|
Cyprodinil
|
UNIX®/STEREO®(6)
/SWITCH® CHORUS®
|
Pome
fruits,
stone fruits, cereals, grapes, vegetables
|
Scab,
powdery
mildew, eyespot, rynchosporium, Botrytis
|
Difenoconazole
|
SCORE®/DIVIDEND®
|
Vegetables,
rice, field crops, plantation crops and seed treatment
|
Broad
spectrum disease control
|
Fluazinam(7)
|
SHIRLAN®
|
Potatoes
|
Potato
late
blight, flower bulb and onion diseases
|
Fludioxonil
|
CELEST®/MAXIM®/
GEOXE®/MEDALLION®
|
Seed
treatment, grapes, turf, vegetables
|
Bunt,
snow
mold seedling blights, scurf, Botrytis, dollar spot
|
MEFENOXAM™(9)
|
RIDOMIL
GOLD®/FOLIO GOLD™/APRON®XL/
SUBDUE®
|
Broad
range,
including potatoes, grapes, vegetables, seed treatment and turf
and
ornamentals
|
Late
blight,
downy mildew and damping off diseases
|
Propiconazole
|
TILT®(8)/BANNER®
|
Cereals,
bananas, rice and turf
|
Broad
spectrum disease control
|
Trinexapac-ethyl
|
MODDUS®/PRIMO®
|
Sugarcane,
cereals, turf
|
Increases
sugar content, antilodging, reduces grass growth
|
|
|
|
|
Insecticides
|
|
|
|
Abamectin
|
VERTIMEC®/AGRIMEC®/
AGRIMEK®
|
Citrus
fruits, vegetables, pome fruits, ornamentals
|
Mites,
leafminers and some caterpillars
|
Emamectin
Benzoate
|
PROCLAIM®/AFFIRM®
|
Vegetables,
cotton
|
Caterpillars
|
|
|
|
|
Lambda-cyhalothrin
|
KARATE®/ICON®
|
Cotton,
corn,
fruit and vegetables, soybeans, public health
|
Broad
spectrum insect control
|
Lufenuron
|
MATCH®
|
Corn,
potatoes, citrus, vegetables, cotton
|
Caterpillars,
leafminers, western flower thrips
|
|
|
|
|
Pymetrozine
|
CHESS®/PLENUM®
|
Vegetables,
fruits, potatoes
|
Aphids,
white
flies and leaf hoppers
|
Profenofos
|
CURACRON®
|
Cotton,
potatoes, soybeans and vegetables
|
Caterpillars,
sucking insects, mites
|
Tefluthrin
|
FORCE®
|
Corn
|
Corn
rootworm
|
Thiamethoxam
|
ACTARA®/CRUISER®
|
Broad
range
of crops including seed treatment
|
Foliar
sucking pests and soil dwelling
insects
|
(1)
|
Products
may
have different brand names depending on the market in which they
are
sold.
|
(2)
|
Pursuant
to
the commitments given to the European Commission, Syngenta has agreed
to
stop commercializing atrazine directly (including the trade mark
GESAPRIM®)
in France.
In the US, the EPA granted atrazine a favorable registration decision.
However, atrazine and its sister herbicides simazine were not granted
re-registration in the European
Union.
|
(3)
|
Pursuant
to
the commitments given to the European Commission, Syngenta has agreed
to
divest to a third party by way of an exclusive license to manufacture
and
sell, or an exclusive right to distribute, the molinate-based formulation
of ORDRAM®
SOPRA in
France for use on rice until 2008. In the US, Syngenta has announced
its
intention to phase out molinate and to cancel its US registrations
by the
end of June 2008.
|
(4)
|
Product
distributed on behalf of Isihara Sangyo Kaisha Ltd.
(ISK).
|
(5)
|
Pursuant
to
commitments given to the European Commission upon the formation of
Syngenta, Syngenta granted an exclusive license to manufacture, use
and
sell cyproconazole directly in the EEA to Bayer, under Bayer’s own trade
name. Since 2005, Syngenta has been allowed to recommence sales of
cyproconazole directly, under the ALTO®
(or other)
name.
|
(6)
|
Pursuant
to
the commitments given to the European Commission, Syngenta granted
an
exclusive right to Makhteshim Agan Industries Ltd. to use and sell
STEREO®
formulation
for use on cereals for the duration of its registration in Denmark,
Finland and Sweden.
|
(7)
|
Product
that
is distributed, but not manufactured, by
Syngenta.
|
(8)
|
Pursuant
to
the commitments given to the European Commission, Syngenta granted
an
exclusive right to Makhteshim Agan Industries Ltd. to use and sell
TILT®
250EC and
TILT®
6.25GL
formulations for use on cereals in Denmark, Finland and Sweden for
the
duration of their registrations.
|
(9)
|
In
the United
States Mefenoxam is a generic expression whereas in other countries
MEFENOXAM™ is a trademark of Syngenta Participations AG to denominate the
active ingredient Metalaxyl-M (ISO
name).
|
Selective
Herbicides
Syngenta
has a
broad range of selective herbicides that control grasses and broad-leaved weeds
and are applicable to most crops with a special emphasis on corn and
cereals.
Product
In
Development
|
·
|
449,
A
new broad-spectrum selective herbicide for use in corn and sugar
cane
which complements our existing product
range
|
Recently
Launched
Products
|
·
|
APIRO®
was
successfully launched in South Korea (2002) and Japan (2003). This
family
of products contains pyriftalid in combination with proprietary
pretilachlor and other rice
herbicides.
|
|
·
|
CALLISTO®
was
successfully launched in the United States, Germany, France, Italy,
Spain,
Austria, Holland and other countries (2001-2002). It has received
registration in the United States under the reduced risk scheme reflecting
its favorable environmental and toxicological profile and was recognized
as the most successful product launch in the market the year it was
introduced by the American Agricultural Marketing Association. This
is a
post-emergent herbicide with a very broad spectrum against key
broad-leaved weeds in corn.
|
|
·
|
LUMAX®,
LEXAR®
and
CAMIX®
are
combination products from the Callisto family containing mesotrione,
S-metolachlor and atrazine (LUMAX®
LEXAR®)
or
mesotrione and S-metolachlor (CAMIX®).
They are
pre-emergence products for use in corn and provide broad spectrum
weed
control. LUMAX®
and
CAMIX®
received
registrations in the United States and were successfully launched
in the
2003 season and LEXAR®
received
registration in the United States in 2004 with full launch in the 2005
season.
|
|
·
|
ENVOKE®
and
KRISMAT®
have
been launched in Brazil as new broad-spectrum herbicides in cotton
and
sugarcane against grasses, dicots and sedges. Syngenta has already
received registrations for use on sugarcane in Colombia and in several
Central American countries (KRISMAT®)
as well
as for use on cotton in Brazil, Argentina and Australia
(ENVOKE®).
Registration in the United States was obtained in the third quarter
of
2003 for use on cotton, sugarcane and tomatoes and launched in the
2004
season.
|
|
·
|
AXIAL®
was
successfully launched in a number of countries (2006). It is an innovative
post-emergent selective grassweed herbicide, for use in both wheat
and
barley. Employing our new active ingredient pinoxaden, it offers
the
grower efficacy, selectivity and
flexibility.
|
Key
Marketed
Products
|
·
|
AATREX®
and
GESAPRIM®
act
mainly against annual grasses and broad-leaved weeds. Although the
active
substance, atrazine, was introduced in 1957, and has been off patent
for a
number of years, it
|
|
|
remains
an important product for broad-leaved weed control in corn. It is
currently going through a re-registration process in major markets
and has
received favorable evaluation in the United States by the EPA’s Scientific
Advisory Panel. In the European Union atrazine was not granted
re-registration. In European markets Syngenta will extend the use
of
terbuthylazine which has already been safely used in Germany and
Italy for
several years.
|
|
·
|
DUAL
GOLD®
and DUAL
MAGNUM®
are
replacing our top-selling metolachlor products of the
DUAL®
family.
These products contain S-metolachlor, which is used at a 35% to 40%
lower
rate than metolachlor. This not only reduces the amount of product
sprayed
on fields, thus responding to the pesticide reduction goals established
by
many countries, but decreases the energy required to produce, transport
and store the product, as well as decreasing total packaging material.
S-metolachlor is well tolerated and can be safely used on more than
70
different crops. It may also be used effectively in combination with
triazine herbicides such as in BICEP MAGNUM®,
GARDO®
GOLD®
or
PRIMAGRAM®
GOLD®.
|
|
·
|
MILAGRO®
is
distributed on behalf of Isihara Sangyo Kaisha Ltd. and used
post-emergence in corn against grass weeds. It completes the spectrum
of
our newly launched CALLISTO®.
|
|
·
|
TOPIK®,
HORIZON®,
CELIO®
and
DISCOVER®
are
grass herbicides. They provide the broadest spectrum of annual grass
control currently available for wheat. To further increase crop safety
in
cereals the active substance clodinafop is mixed with the safener
cloquintocet, which selectively enhances the degradation of clodinafop
in
wheat but not in the grass
weeds.
|
|
·
|
BANVEL®
is a
herbicide that controls broad-leaved weeds in corn and small grain
cereals
and that is used also in turf and ornamentals, pastures and non-crop
land.
Dicamba has an excellent toxicological and environmental profile.
Rights
to sell the active substance dicamba in the United States and Canada
were
sold to BASF in 1996 pursuant to an FTC decision. Syngenta continued
to
sell products containing the active substance dicamba and established
products outside the United States and Canada. As of 2007 Syngenta
will
also resume the distribution of dicamba in NAFTA, in the form of
both
straight products as well as mixtures combining dicamba with other
active
substances.
|
|
·
|
LOGRAN®
or
AMBER®
is a
post-emergence herbicide for use in small grain cereals that also
can be
used in transplanted rice. It controls major annual broad-leaved
weeds and
some grasses. Triasulfuron is absorbed by leaves and roots. It is
rapidly
transported within the plant and acts by inhibiting biosynthesis
of
essential amino acids, hence stopping cell division and plant
growth.
|
|
·
|
FUSILADE®
is one
of the leading products for post-emergence control of grass weed.
It is
registered for use in over 60 crops with major outlets in cotton
and
soybeans in the United States and sugar beet and oilseed rape in
Europe.
The selective action of FUSILADE®
allows
growers to target applications when grass weeds appear, allowing
cost-effective weed control.
|
|
·
|
FLEX®
is a
post-emergence selective herbicide for control of broad-leaved weeds
in
soybeans and drybeans, complementary to FUSILADE®.
|
|
·
|
ACHIEVE®
is a
post-emergence selective herbicide which controls grass weeds in
wheat and
barley.
|
|
·
|
RIFIT®
is a
pre-emergence grass killer for use in transplanted rice. In its safened
form, under the trademark SOFIT®,
it can
also be used on wet sown rice.
|
|
·
|
COLZOR
TRIO®
is a
broad-spectrum herbicide for use in oilseed
rape.
|
Non-Selective
Herbicides
Key
Marketed
Products
|
·
|
GRAMOXONE®
is our
principal brand name for paraquat, a non-selective contact herbicide
first
introduced in 1962. Paraquat is one of the world’s largest selling
herbicides. It has been a vital product in the development of minimum
tillage cropping systems, the adoption of which continues to increase
because of benefits such as the reduction of soil erosion.
GRAMOXONE®
is
registered in over 120 countries around the world. In 2003, Paraquat
was
included in Annex I allowing for continued registration of Paraquat
products in EU countries, while re-registration in Malaysia was granted,
albeit with a limited
|
|
|
use
label,
in
2006. In 2005, Syngenta registered a new formulation,
GRAMOXONE®
INTEON™,
where
the new herbicide also contains new features to further improve
user
safety and handling.
|
|
·
|
TOUCHDOWN®,
a
non-selective herbicide with systemic activity, is a premium product
in
the market for glyphosate-based products. The product has been
enhanced by
the launch of the IQ®
technology which positions the product at the top end of glyphosate
performance. Differentiated from other herbicides of its class
by its
speed of action and tolerance of heavy rain, TOUCHDOWN®
is now
registered in over 90 countries, including for use on herbicide
tolerant
soybeans in the United States. New and improved formulations of
Touchdown
have been registered in the US including Touchdown IQ®,
Touchdown®
CF and
Touchdown Total™.
|
|
·
|
REGLONE®,
a
non-selective contact herbicide is mainly used as a desiccant to
allow
easier harvesting and reduce drying
costs.
|
Fungicides
Product
In
Development
|
·
|
REVUSTM,
(446)
is a new fungicide for fruit and vegetables to combat late blight
and
downy mildew, which complements our existing product range.
REVUSTM
is
already registered in Australia and South Korea. Further registrations
in
other markets are expected in time for the 2007
season.
|
|
·
|
520,
a
new broad-spectrum cereal fungicide which complements the existing
range
and provides additional resistance management
opportunities.
|
Key
Marketed
Products
|
·
|
AMISTAR®,
a
strobilurin fungicide introduced in 1997 and launched widely in
1998 and
1999, is the world’s best selling proprietary fungicide and our largest
selling fungicide. It is registered for use in over 60 countries
and for
over 60 crops. In Brazil, it is successfully being used to control
Asian
rust in soybeans in a mixture with ALTO®
branded
as PRIORI XTRA™. In the USA, it is successfully being used to control
Asian rust in soybeans in a mixture with TILT®,
branded
as QUILT®.
|
|
·
|
BRAVO®,
acquired in 1998, is a world-leading fungicide in terms of sales.
With its
multi-site mode of action, it is a good partner for
AMISTAR®
and is
being increasingly integrated into disease control programs which
use both
products. AMISTAR OPTI®
was
successfully launched in the UK in the 2004 season to combat Septoria
resistance. Registration for BRAVO®
was
received in Germany in 2004.
|
|
·
|
TILT®,
originally licensed from Janssen, was introduced in 1980 and has
developed
into our most successful foliar fungicide for broad spectrum disease
control in cereals, bananas, rice, corn, peanuts, sugar beet, turf
and
other food and non-food crops. Propiconazole, its active substance,
is
systemic and provides a strong curative and protective activity
against a
wide range of plant pathogens including powdery mildews, rusts
and other
leaf spot pathogens of cereals, bananas, rice, corn, peanuts, sugar
beet,
and turf. Pursuant to the commitments given to the European Commission,
Syngenta has agreed to grant an exclusive right to Makhteshim Agan
Industries Ltd. to use and sell its TILT®
250EC
and TILT®
6.25GL
formulations for use on cereals in Denmark, Finland and Sweden
for the
duration of their
registrations.
|
|
·
|
SCORE®,
based
on difenoconazole, is a systemic triazole fungicide with broad-spectrum
activity against plant diseases, particularly leaf spots of pome
fruit,
vegetables, field crops and plantation crops. Long-lasting protective
and
strong curative activity make it well suited for threshold based
plant
disease management whereby the plant is treated only when the development
of the disease has passed a certain point. Target crop pathosystems
include Cercospora, Alternaria, Septoria and other leaf spots,
powdery
mildews and scabs in wheat, bananas, sugar beets, peanuts, potatoes,
pome
fruits, grapes, rice and vegetables.
|
|
|
RIDOMIL
GOLD®
is based on
MEFENOXAM™(1 ),
and acts
against late blight and downy mildew diseases. It is applied to
foliage or
soil and is effective on potatoes, grapes, tobacco, vegetables,
citrus,
|
(1)
|
In
the United
States Mefenoxam is a generic expression whereas in other countries
MEFENOXAM™
is a
trademark of Syngenta Participations AG to denominate the active
ingredient Metalaxyl-M (ISO name).
|
|
|
soybeans,
turf and ornamentals. It has been introduced in major markets and
will
continue to be introduced in additional
countries.
|
|
·
|
UNIX®
is based
on cyprodinil and is a powerful fungicide for use on cereals. It
is used
to control eyespot, powdery mildew and leaf spot diseases. Because
it has
a specific mode of action, it is a particularly effective solution
where
resistance to other fungicides has developed. CHORUS®
and
SWITCH®
are
cyprodinil-based formulations which are used on pome fruit (such
as apples
and pears) or on grapes and vegetables,
respectively.
|
|
·
|
ALTO®
contains
the systemic fungicide cyproconazole with broad-spectrum activity,
especially against rust and leaf spot in cereals, soybean, sugar
beet and
coffee. Pursuant to the commitments given to the European Commission
upon
the formation of Syngenta, Syngenta granted an exclusive license
to
manufacture, use and sell cyproconazole directly in the European
Economic
Area to Bayer, under Bayer’s own trade name. Since 2005, Syngenta has been
permitted to re-commence sales of cyproconazole directly, under the
ALTO®
(or
other) brand name.
|
|
·
|
MODDUS®
is based
on trinexapac-ethyl, a plant growth regulator. In cereals it reduces
growth so that treated plants stay shorter and have stronger stems,
enhancing their ability to withstand storms and remain upright until
harvest. In sugarcane it is a yield enhancer and harvest management
tool.
|
|
·
|
SHIRLAN®
is a
fungicide for control of potato
blight.
|
Insecticides
Product
in
Development
|
·
|
Syngenta
is actively involved in development projects in bisamide chemistry.
Following completion of the acquisition from DuPont of exclusive
rights to
RYNAXYPYR™ in mixtures with Syngenta insect control products, announced on
February 23, 2006, these projects were integrated with the RYNAXYPYR™
program. Initital launches of RYNAXYPYR™ mixtures are targeted for
2008.
|
Recently
Launched
Products
|
·
|
ACTARA®
is
highly active at low use rates against a broad spectrum of soil and
sucking insects. It is highly systemic and well suited for application
as
a foliar spray, drench or drip irrigation. It is fast acting, works
equally well under dry and wet conditions and has a favorable safety
and
environmental profile. Its mode of action differs from that of older
products, which makes it effective against insect strains that have
developed resistance to those products. It is being developed on
a broad
range of crops, including vegetables, potatoes, cotton, soybeans,
rice,
pome fruits, stone fruits (such as peaches or plums) and tobacco.
|
Key
Marketed
Products
|
·
|
KARATE®,
the
world’s leading agricultural pyrethroid brand, is one of our largest
selling insecticides. A novel product branded KARATE®
with
ZEON®
technology was launched in the United States in 1998 offering performance
benefits and enhanced user and environmental
safety.
|
|
·
|
PROCLAIM®
or
AFFIRM®
provides
control of caterpillars on vegetables, cotton and fruits, combining
a
unique mode of action with extremely low use rates and is compatible
with
integrated pest management. It has been launched in major markets
such as
Japan, Korea, the United States, Mexico, Australia and India and
is under
registration in many other
countries.
|
|
·
|
VERTIMEC®
or
AGRIMEC®/AGRIMEK®
contains
abamectin, which is produced by fermentation. This potent insecticide
and
acaricide is used at very low dose rates against mites, leafminers
and
some other insects in fruits, vegetables, cotton and ornamentals.
Abamectin rapidly penetrates the plants, and is a useful product
for
integrated pest management.
|
|
·
|
CURACRON®
offers
good control of caterpillars. It is a broad-spectrum product, and
because
of its good penetration, sucking insects like mites and thrips are
also
well controlled. The main field of application is in cotton, but
it is
also used in vegetables, soybeans and
potatoes.
|
|
·
|
MATCH®
is an
insect growth regulator that controls caterpillars in corn, potatoes,
cotton, vegetables and fruits. It is a leading insecticide in terms
of
sales in its chemical class.
|
|
·
|
FORCE®
is the
market leader in the corn soil insecticide sector. As the only stand-alone
granular pyrethroid launched in this sector, it offers growers both
highly
effective control of a wide range of pests and an alternative to
the older
products available in this
sector.
|
Professional
Products
Through
professional products, Syngenta expands the use of its crop protection products
into additional areas, such as Seed Care, Lawn & Garden and Home
Care.
Product
In
Development
|
·
|
524,
a
new fungicide seed treatment which complements our existing product
range
|
Recently
Launched
Products
|
·
|
AVICTA®,
a new
seed treatment for the control of nematodes in cotton, was launched
in the
USA in January 2006.
|
Key
Marketed
Products
Seed
Care
The
use of seed
treatment products is an effective, efficient, and targeted method to protect
the seedling and the young plant against diseases and pests during the period
when they are most vulnerable. Our broad range of fungicides and insecticides
allows us to provide a modern portfolio of safe and highly effective products.
As seeds increase in value, seed protection becomes more important. The
following are our key marketed products:
|
·
|
DIVIDEND®
is
active against a broad range of diseases including bunts, smut and
damping
off on cereals, cotton, soybeans and oilseed rape. This product is
highly
systemic and provides a long lasting, high-level effect. It is safe
for
the seed and the seedling and provides for a faster germination than
other
products in the market.
|
|
·
|
APRON®
XL is a
MEFENOXAM™(1 )
based
product used for the control of seed and soil-borne diseases caused
by
fungi such as Pythium, Phytophtora and downy mildews. It is used
worldwide
on a wide variety of crops, including field, vegetable, oil and fiber
crops. MEFENOXAM™ is also used as a mixing partner for seed protection at
low use rates.
|
|
·
|
MAXIM®
or
CELEST®
is a
contact fungicide with residual activity. Derived from a natural
compound,
the active substance fludioxonil combines crop tolerance with low
use
rates. Its spectrum of targets includes seed and soil-borne diseases
like
damping off, bunt, smut and leaf stripe on cereals. Used alone or
in
mixtures with other active substances, it is also effective on corn,
rice,
cotton, potatoes and peas.
|
|
·
|
CRUISER®
is a
seed treatment brand for the insecticide thiamethoxam. It has systemic
activity in a wide range of crops including cereals, cotton, soybeans,
canola, sugar beet, corn, sunflower and rice. Its properties are
such that
it provides a consistent performance under a wide range of growing
conditions. Thiamethoxam acts against a wide range of early season
sucking
and chewing, leaf feeding and soil-dwelling insects like aphids,
thrips,
jassids, wireworms, flea beetles and
leafminers.
|
Lawn
and
Garden
We
offer a range of
specialized products for use in turf (golf courses and sports fields),
ornamentals (cut flowers, bedding plants and nurseries), vegetation management
(roads, railroads and rights-of-way) and for home and garden use. The following
are our major products:
|
·
|
BARRICADE®
is a
leading pre-emergence grass and broad-leaved weed herbicide in
turf.
|
(1)
|
In
the United
States Mefenoxam is a generic expression whereas in other countries
MEFENOXAM™
is a
trademark of Syngenta Participations AG to denominate the active
ingredient Metalaxyl-M (ISO name).
|
|
·
|
PRIMO
MAXX®
is a
plant growth regulator for turf that increases stress tolerance and
decreases clippings.
|
|
·
|
AVID®
is a
leading acaricide in ornamentals against
mites.
|
|
·
|
HERITAGE®
provides
broad-spectrum disease control in turf. The major outlet is golf
courses.
|
|
·
|
DACONIL®
is used
on turf in the United States, often on golf courses, where it complements
HERITAGE®.
|
|
·
|
FAFARD®
is a
premium brand in the USA growing media market specializing in custom
mixes
for producers of ornamental
plants.
|
Home
Care
We
offer a range of
products for use in controlling mold and insect pests.
|
·
|
ICON®
is used
in public health outlets for control of malaria and other tropical
diseases and nuisance pests, such as house flies and cockroaches.
It was
the first pyrethroid to be approved for malaria control by the World
Health Organization. In addition to being sprayed, it can be incorporated
into bednets to offer added
protection.
|
|
·
|
ACTELLIC®
a
versatile vector management product, and strong resistance management
tool, approved for use as a lavacide, a residual surface spray and
space
spray.
|
|
·
|
OPTIGARD®
is a new
range of products for professional pest managers for the control
of
general insect pests such as cockroaches and ants. The range includes
highly effective bait products that will be launched in selected
countries
from 2007 onwards.
|
|
·
|
DEMAND® is
the
flagship capsule suspension formulation (Demand CS with iCap Technology)
for long residual control of a wide range of general insect pests
which
has recently been expanded to include a new granular formulation
- Demand
G with Active Release Technology. Demand G is approved to control
28 pests
as a perimeter treatment or in lawn or landscape
situations.
|
|
·
|
IMPASSE®
is a
recognised US termite range. DEMON®
is an
optimised formulation containing cypermethrin that provides a lasting
soil
treatment to prevent termites attacking homes and other
structures.
|
Principal
Markets
The
following table
sets out sales for the years ended December 31, 2006, 2005 and 2004 of our
crop
protection products by region:
|
|
Syngenta
Sales
|
|
Products
|
|
2006
(US$
million)
|
|
(%)
|
|
2005
(US$
million)
|
|
(%)
|
|
2004
(US$
million)
|
|
(%)
|
|
Europe,
Africa & Middle East
|
|
|
2,242
|
|
|
35
|
|
|
2,283
|
|
|
36
|
|
|
2,256
|
|
|
37
|
|
NAFTA
|
|
|
2,119
|
|
|
34
|
|
|
2,081
|
|
|
33
|
|
|
1,873
|
|
|
31
|
|
Latin
America
|
|
|
1,036
|
|
|
16
|
|
|
1,027
|
|
|
16
|
|
|
1,020
|
|
|
17
|
|
Asia
Pacific
|
|
|
981
|
|
|
15
|
|
|
939
|
|
|
15
|
|
|
893
|
|
|
15
|
|
Total
|
|
|
6,378
|
|
|
100
|
|
|
6,330
|
|
|
100
|
|
|
6,042
|
|
|
100
|
|
Syngenta
sells its
products in over 120 countries and has a strong presence in all
regions.
Production
The
manufacture of
crop protection products can be divided into three phases:
|
·
|
manufacture
of the active substance
|
|
·
|
formulation
of products from these active substances into a form which optimizes
the
efficacy and safety of the product in the
field
|
|
·
|
packaging
of the products to closely align them with local customer
needs
|
Syngenta’s
major
production sites for active ingredients are located in Switzerland, the United
States, United Kingdom, China and India. While individual active substances
are
normally produced at one manufacturing site, formulations are produced and
packaged at several different strategically located plants, close to the
principal markets in which those products are sold. Syngenta operates major
formulation and packing plants in Belgium, Brazil, China, France, India, South
Korea, Switzerland, the United Kingdom and the United States.
Syngenta
manages
its supply chain globally and on a product-by-product basis, from raw materials
through to delivery to the customer, in order to maximize both cost and capital
efficiency and responsiveness. We outsource the manufacture of a wide range
of
raw materials, from commodities through fine chemicals to dedicated
intermediates and active ingredients. Sourcing decisions are based on a
combination of logistical, geographical and commercial factors. Syngenta has
a
strategy of maintaining, when available, multiple sources of supply. Most of
our
supply chain materials purchasing spend is directly or indirectly influenced
by
commodity price volatility, due to price dependence on gas and oil. Our total
raw material spend is approximately 30% of sales.
Significant
cost
savings have been realized in global manufacturing and supply following the
merger of the Novartis agribusiness and the Zeneca agrochemicals business due
to
optimizing production capacity and closing redundant facilities. From 48 sites
at the time of the merger in 2001, Syngenta now operates on 30 sites and as
a
result of closures, announced in 2004/2005, will operate 27 sites in
2008.
Marketing
and Distribution
We
have marketing
organizations in all our major markets with dedicated sales forces that provide
customer and technical service, product promotion and market support. Products
are sold to the end user through independent distributors and dealers, most
of
whom also handle other manufacturers’ products. Our products are normally sold
through a two-step or three-step distribution chain. In the two-step chain
we
sell our products to cooperatives or independent distributors, which then sell
to the grower as the end user. In the three-step system, we sell to distributors
or cooperative unions who act as wholesalers and sell the product to independent
dealers or primary cooperatives before on-selling to growers. We also sell
directly to large growers in some countries. Our marketing network enables
us to
launch our products quickly and effectively and to exploit our range of existing
products. We focus on key crop opportunities in each territory. In those
countries where we do not have our own marketing organization, we market and
distribute through other distribution channels. Generally, the marketing and
distribution system in a country does not vary by product.
Our
marketing
activities are directed towards the distributors, agricultural consultants
and
growers. They consist of a broad range of advertising and promotional tools,
such as meetings with growers and distributors, field demonstrations,
advertisements in specialized publications, direct marketing activities, or
information via the Internet. We also are in constant contact with the food
and
feed chain to evaluate current and future needs and expectations.
A
key element of
our marketing is grower support and education. This is particularly important
with respect to small growers in developing countries. For many years, we have
held numerous courses around the world for growers as a result of which tens
of
thousands of people have been trained in the safe and sustainable use of crop
protection products. We also train agricultural extension workers and
distributors so that they can further disseminate good practice and reach an
even wider audience.
Research
and Development
Syngenta
has major
crop protection research centers in Basel/Stein, Switzerland; Jealott’s Hill,
United Kingdom; and Goa, India. The total spent on research and development
in
crop protection was US$490 million in 2006, US$509 million in 2005 and US$499
million in 2004.
We
are continuously
improving the research process, building on well-established platforms in
chemistry, biology and biotechnology. Syngenta’s investment in genomics
underpins all of the product outputs, and the increasing emphasis on integrated
crop solutions is leading to converging research goals and programs across
chemicals, seeds and traits. Novel tools, methods and information services
allow
us to evaluate a greater range of diverse chemicals more quickly and efficiently
than
ever
before. We use
high throughput screening to test over two hundred thousand compounds each
year
using in-vivo test systems. Combinatorial chemistry and high-speed synthesis
have been advanced in order to prepare a sufficient number of compounds for
these tests. A crucial feature is library design, a structured approach to
combinatorial chemistry which ensures that the chemical entities possess
properties which relate to the desired product profile. Compounds showing
promising activity are further characterized in screening systems consisting
of
a series of project-specific, customized greenhouse and growth-chamber tests,
including indicator tests for environmental parameters (e.g., soil persistence,
leach-ability) and tests to provide early indications of safety issues for
humans. Those compounds showing advantages in efficacy and safety over the
best
commercial standards are broadly evaluated in the field.
Once
we select a
compound for development, we test it worldwide on the most important crops
under
different climatic conditions and in varying soils. In parallel, an industrial
scale manufacturing process is identified and optimized, and appropriate
formulations and packages are developed. The use of multidisciplinary research
teams to refresh the existing product range is key to continued success in
the
face of competition, even after patent expiry.
We
perform an
extensive investigation of all safety aspects involving many tests to ensure
the
safety of our products. The human safety assessments address potential risks
to
both the users of the product and the consumers of food and feed, while in
environmental safety we seek assurance that the product will not adversely
affect soil, water, air, flora and fauna.
In
addition to our
own research and development efforts, we have strengthened our business platform
through targeted acquisitions. We have also entered into a number of research
and development agreements around the world for combinatorial chemical
libraries, high throughput screening and follow-up of leads.
Environment
We
designed our
environmental management program with the aim of ensuring that our products
and
their manufacture pose minimal risks to the environment and humans. The crop
protection industry is subject to environmental risks in three main areas:
manufacturing, distribution and use of product. We aim to minimize or eliminate
environmental risks by using appropriate equipment, adopting best industry
practice and providing grower training and education.
The
entire chain of
business activities, from research and development to end use, operates
according to the principles of product stewardship. We are strongly committed
to
the responsible and ethical management of our products from invention through
ultimate use. We employ environmental scientists around the world who study
all
aspects of a product’s environmental behaviour.
Specially
designed
transportation and storage containers are used for the distribution of hazardous
products and efficient inventory control procedures minimize the creation of
obsolete stocks.
We
have developed a
rigorous screening and development process in order to mitigate risks relating
to the use of our products. All active substances and products must meet both
our internal standards and regulatory requirements.
We
provide support
to growers on a local level such as training in application techniques and
assistance in calibrating spray equipment in order to promote safe handling
of
our products. We extend product stewardship long after sales in several ways,
for example, by collecting and safely destroying outdated products, and
providing returnable containers to reduce waste.
Crop
protection
products are subject to rigorous registration procedures, which are aimed at
ensuring safe product usage in the field. In addition to complying with these
regulatory requirements, we have adopted our own Health, Safety and Environment
(“HSE”) management system. This provides a clear framework of management
processes applicable at all sites, whatever the regulatory requirements in
the
country in which the site is situated.
We
maintain a
register of sites to identify manufacturing and distribution sites and locations
that may have been contaminated in the past. The register is the basis for
the
allocation of appropriate provisions and action programs regarding measures
to
be taken. A risk portfolio is prepared for each site and reviewed annually.
The
risk portfolio is also applied to third-party manufacturers in order
to identify
and exclude
poorly performing companies.
See
Note 30 to
Syngenta’s consolidated financial statements for a further discussion of
environmental matters.
Intellectual
Property
We
protect our
investment in research and development, manufacturing and marketing through
patents, design rights and trademarks. In addition to patent protection for
a
specific active substance, patent protection may be obtained for processes
of
manufacture, formulations, assays, mixtures, and intermediates. These patent
applications may be filed to cover continuing research throughout the life
of a
product and may remain in force after the expiry of a product’s per se patents
in order to
provide
ongoing
protection. The territorial coverage of patent filings and the scope of
protection obtained vary depending on the circumstances and the country
concerned.
Patents
relating to
gene-based crop protection and enhancement may cover transgenic plants and
seeds
gene effects, genetic constructs and individual components thereof and enabling
technology for producing transgenic plants and seeds.
Trademark
protection may be obtained to cover a trademark for a specific active substance
and there may be more than one trademark covering the same active substance.
Other trademarks may cover formulations, mixtures, intermediates and a variety
of ancillary services. The trademarks may remain in force after the expiry
of a
product’s patents in order to provide ongoing protection. The territorial cover
of trademark filings and the scope of protection obtained vary depending on
the
circumstances and the country concerned.
Registration
and
re-registration procedures apply in all major markets.
Products
must
obtain governmental regulatory approval prior to marketing. The regulatory
framework for crop protection products is designed to ensure the protection
of
the consumer, the grower and the environment.
Most
of our
principal markets have regular re-registration procedures for crop protection
products. Within certain time periods a product’s technical dossier is reviewed
with the goal of ensuring that it adheres to all standards, which may have
changed or been added to since the product was initially registered. The
standards and requested trial protocols change over time. Re-registration of
a
product or compound may not be granted if the registration package fails to
meet
the then-current requirements.
We
enforce our
intellectual property rights, including through litigation if
necessary.
Competitive
Environment
The
leading
companies in the crop protection industry are mainly dedicated agribusinesses
or
large chemical companies based in Western Europe and North America. Companies
compete on the basis of strength and breadth of product range, product
development and differentiation, geographical coverage, price and customer
service. Market pressures and the need to achieve a high level of research
and
development capability, particularly with the advent of biotechnology, have
led
to consolidation in the industry. The top six such companies account for more
than 75% of the worldwide market. Syngenta’s key competitors include BASF,
Bayer, Dow, DuPont and Monsanto. In many countries, generic producers of
off-patent compounds are additional competitors to the research-based companies
in the commodity segment of the market.
Seeds
Products
We
develop, produce
and market seeds and plants that have been developed using advanced genetics
and
related technologies. We sell our products in all major markets.
Our
seed portfolio
is one of the broadest in the industry, offering over 100 product lines and
5000
varieties of our own proprietary genetics. We have a leading market share in
vegetables, flowers, corn, cereals, sugar beet and oilseeds combined based
on
sales. Seed products are derived from a germplasm pool and trait portfolio
and
developed further utilizing sophisticated plant-breeding methods. We divide
our
products into field crops such as corn, oilseeds and sugar beet, and
horticultural crops, which consist of flowers and vegetables. In 2006, we
launched over 500 varieties. Syngenta undertook several initiatives to integrate
and capitalize on investments made in 2004 to strengthen its Seeds Field Crops
business in the North American corn and soybean markets. These investments
included corn germplasm, breeding materials and inbreds from the US based
company CHS Research LLC, acquisition of a 90% stake in the Golden
Harvest®“family”
of
companies, acquisition of 90% of the North American corn and soybean business
of
Advanta BV, which trades as Garst®,
and purchase of
glyphosate tolerance technology for corn (GA21) from Bayer CropScience. In
addition to increasing Syngenta’s range of high-quality germplasm, these
transactions enabled Syngenta to offer a complete range of biotechnology input
traits in both corn and soya. In the vegetables segment, Syngenta acquired
Emergent Genetics Vegetable A/S (Brands: Daehnfeldt™, Ohlsens Enke™ and Hurst™)
in June 2006. This acquisition further strengthens the germplasm pool in
particular on cucumber and spinach and supports our leadership role in vegetable
seeds. Below are tables showing examples of products in development and recently
launched products. Products in development are those that we are planning to
bring to market. Recently launched products are those that we have introduced
in
the past two years. These lists are not comprehensive, but provide an indication
of the large number of products in our range.
|
Products
in Development
|
Crop
Species
|
Targets
|
Field
Crops
|
|
Corn
|
High
yield,
stress tolerance and improved agronomic characteristics
|
|
Combined
glyphosate tolerance, European corn borer, corn rootworm and broad
lepidopteron control
|
|
High
ethanol
yield
|
|
Late
maturity
hybrids for heat stress areas. Early maturity hybrids with good feed
value
and adapted to biogas production
|
Soybean
|
High
yield,
herbicide tolerance, cyst nematode resistance, root rot, aphid resistance
and disease resistance
|
|
High
oil and
high protein
|
Sunflowers
|
High
yield,
drought tolerance, unsaturated fatty acids (high oleic)
|
|
Broomrape
resistance, disease resistance, herbicide tolerance
|
Winter
Oilseed Rape
|
High
yield
hybrids with improved disease resistance, high oleic
content
|
Wheat
|
Fusarium
tolerance
|
|
High
yield,
improved and novel quality
|
|
“White”
Wholemeal flour
|
|
New
disease
resistance and drought tolerance
|
Barley
|
High
brewing
yield
|
|
Next
generation malting barley with improved enzyme
characteristics
|
Sugar
beet
|
Broad
spectrum disease and virus resistance, new products for
ethanol
|
Rice
|
High
nutrition rice
|
|
|
Vegetables
and Flowers
|
|
Tomatoes,
lettuce, melons and peppers
|
Virus
and
fungal disease resistance
|
Dulcinea®
Sunnygold®
Golden
Honeydew
|
Fruit
quality
|
Callibrachoa,
Petunia and Verbena
|
Fungal
disease resistance
|
Viola
and
Pansies
|
Short
day,
winter performance
|
|
Recently
Launched Products
|
Product
|
Crop
Use
|
Targets
|
Market
|
Field
Crops
|
|
|
|
NK®
brand
NX2855
|
Corn
Hybrid
|
High
yielding
91 day corn for the northern corn belt which carries resistance to
the
corn borer insect and Liberty herbicide.
|
United
States
|
Garst®
brand EX
68329CB/LL
|
Corn
Hybrid
|
High
yielding
107 day corn for the central corn belt with excellent stalk strength
and
which carries resistance to the corn borer insect and Liberty
herbicide.
|
United
States
|
Golden
Harvest®
brand
NG469CB/LL
|
Corn
Hybrid
|
High
yielding
112 day corn for the south-central corn belt with the excellent stalk
strength and which carries resistance to the corn borer and Liberty
herbicide.
|
United
States
|
NK®
Ravello,
NK®
Magitop,
NK®
Bull
|
Corn
Hybrid
|
Silage
in
North of Europe, biogas production
|
Europe
|
NK®
Arma,
NK®
Factor,
NK®
Atria
|
Corn
Hybrid
|
South
Europe,
grain and silage
|
Europe
|
NK®
brand
S21-N6
|
Soybean
variety
|
Product
with
phenomenal top end yield performance coupled with good stress tolerance
and standability to maintain top yield in stress conditions. Product
also
has race 1k Phytophora Resistance.
|
United
States
|
NK®
brand
S27-L4
|
Soybean
variety
|
High
yielding
product. Good disease protection package to maintain top
yield.
|
United
States
|
Bronx
|
Hybrid
Barley
|
High
yield
Six-row, impressive disease resistance with good straw length, early
maturity
|
United
Kingdom
|
Inedit,
Preference
|
Winter
Wheat
|
High
bread
making quality and disease resistance
|
France
|
Emerald
|
Winter
Wheat
|
High
bread
making quality, strong disease resistance - top yielding second
wheat
|
France
|
Fannin
|
Winter
Wheat
|
Good
end-use
quality with excellent leaf health and yield potential, resistant
to Soil
Borne Mosaic Virus
|
Southern
Plains, United States
|
Tam
111
|
Winter
Wheat
|
Excellent
yield potential with good drought tolerance, stripe rust
resistant
|
Southern
Plains, United States
|
Neosho
|
Winter
Wheat
|
Excellent
yield with excellent mill and bake qualities, excellent straw
strength
|
Southern
and
Central Plains, United States
|
Palladin
|
Winter
Wheat
|
Quality
end-use Hard Red Winter
|
Pacific
North
West, United States
|
OPTA
|
Sugar
beet
|
High
sugar
content variety
|
United
Kingdom
|
Ruveta
|
Sugar
beet
|
High
sugar
content, Rhizomania tolerance, Cercospora resistance
|
Germany,
France, Belgium
|
Bethanol®
|
Sugar
beet
|
High
ethanol
production
|
Germany,
France
|
Protecta
|
Sugar
beet
|
High
sugar
content and Rhizoctonia resistance
|
Slovakia,
Hungary, Czech Republic
|
Energ’HillTM
|
Sugar
beet
|
Germination
enhancing technology
|
Worldwide
|
NK®
Countri
|
Sunflower
|
High
yield
|
France,
Eastern Europe
|
NK®
Ferti
|
Sunflower
|
High
yield
|
France,
Spain, Eastern Europe
|
NK®
Oleko
|
Sunflower
|
High
yield
|
Spain
|
NK®
Meldini
|
Sunflower
|
IMI-herbicide
tolerance
|
Eastern
Europe
|
|
Recently
Launched Products
|
Product
|
Crop
Use
|
Targets
|
Market
|
Field
Crops
|
|
|
|
NK®
Armoni
|
Sunflower
|
IMI-herbicide
tolerance
|
France,
Eastern Europe
|
NK®
Nemax
|
Oilseed
rape
|
High
yield
|
Germany
|
NK®
Grace
|
Oilseed
rape
|
High
yield
|
United
Kingdom
|
NK®
Petrol
|
Oilseed
rape
|
High
yield
|
Germany,
United Kingdom
|
Vegetables
and Flowers
|
|
|
|
Rosso
Bruno™
|
Tomato
|
Sweet
tasting
tomato with a dark colored skin
|
United
States
|
Toscanella™
|
Tomato
|
Small
sweet
tomato
|
Switzerland,
Australia, Netherlands
|
Gwanipa®
|
Melon
|
Refreshing,
sweet tasting melon
|
Europe
|
Solinda™
|
Watermelon
|
Full
flavour,
super-sweet, juicy fruit
|
Europe,
Brazil
|
Fidelity
™
series
|
Geranium
cuttings
|
Consistent
early large flowered quality
|
United
States, Europe
|
Plush™
series
|
Petunia
|
Early
blooming trailing type from Seeds
|
United
States, Europe
|
Endurio
™ series
|
Viola
|
Unique
creeping winterflowered small flowered Viola
|
United
States,
Europe
|
Products
in
Development
We
seek to produce
improved hybrid and varietal seeds to meet the varying circumstances and demands
of our customers. We work towards further improvement of traits advantageous
to
the grower, i.e., input traits, such as resistance to diseases and insects,
and
greater yield. We are also concentrating on developing products that are
advantageous to the food and feed industry and to the consumer, i.e., output
traits such as improved digestibility and net protein utilization for crops
used
for animal feed, oilseeds that produce higher quantities or healthier oils.
In
Vegetable Seeds, Syngenta develops new products to provide consumers with
consistent high quality, improved appearance, taste and texture. Powerful
analytical science has been expanding knowledge of taste, flavor and nutrition.
Combined with advanced breeding technology, this is accelerating the
introduction of novel varieties.
The
following
describes some of the development work currently in progress:
|
·
|
Syngenta
filed for registration of new Sugar Beet Roundup Ready®
1
varieties in all US sugar beet growing areas with the intention of
launching the varieties for commercial use in 2008. This will assist
beet
producing farmers in reducing
costs.
|
|
·
|
Syngenta
is working with two partners in the United Kingdom in a pilot project
to
turn oilseed rape into electricity, using an NK®
brand
oilseed rape hybrid and Syngenta Crop Protection products. This is
the
first such commercial project in
Europe.
|
|
·
|
Our
US
Wheat program has generated innovative White Wheat varieties, for
example
Platte, which allow flour to be produced with higher fiber and nutritional
content for the baking
industry.
|
1
Roundup Ready
is a registered trademark of Monsanto Technology LLC
Recently
Launched Products
The
following
recently launched products illustrate our capability as a technology integrator
and our commitment to the food chain:
|
·
|
Dulcinea
Farms LLC, (100% owned subsidiary) aims at growing, distributing
and
promoting an assortment of premium branded fresh produce. In 2006,
sales
volumes grew by 30% further strengthening the brand Dulcinea Farms™ and
Pureheart®
within
the fresh produce category of major retailers in the United States.
A
recently launched product is Rosso Bruno™ (sweet tasting tomato with
a
|
|
|
dark
colored skin) which further strengthens the product portfolio. We
continue
with test marketing of new consumer-attractive products in the United
States, Europe and other parts of the
world.
|
|
·
|
2006
saw
the introduction of Agrisure™ GT - Syngenta’s proprietary glyphosate
tolerance corn trait stacked with European corn borer protection,
and the
formation of GreenLeaf Genetics™ 50:50 joint venture with Pioneer Hybrids,
Inc. to jointly out license traits and germ-plasm to build on our
existing
out licensing business.
|
|
·
|
2006
saw
the launching of a number of corn varieties covering the specific
requirements of Eastern Europe climatic conditions: ie NK®
Thermo
and late maturity hybrids adapted to heat stress conditions
(NK®
Atria).
In addition, we were the first seed company to introduce Cruiser-treated
seed in a number of EU
markets.
|
Key
Marketed
Products
Field
Crops
|
·
|
Corn.
We
offer NK®,
Garst®
and
Golden Harvest®,
brand
corn hybrids via established distribution channels covering a full
range
of maturities. In addition, hybrids and inbred lines are licensed
to other
seed companies via the GreenLeaf Genetics™ 50:50 joint venture with
Pioneer Hybrids, Inc. Syngenta hybrids are characterized by their
high
yield potential, stability of performance, uniformity and vigor.
In
addition to a large range of conventional corn hybrids, we offer
genetically enhanced Bt corn products, known as NK®
brand
YIELDGARD®
hybrids
which have built-in insect protection, and Agrisure™ GT products with
tolerance to glyphosate herbicide. (YIELDGARD®
is a
registered trademark of Monsanto Company, Agrisure™ is a trademark of a
Syngenta Group Company).
|
|
·
|
Sugar
beet. HILLESHÖG®
brand
sugar beet seeds are bred to develop high yielding varieties with
good
disease tolerance, high sugar content, low soil tare and improved
juice
purity.
|
|
·
|
Oilseeds.
We offer NK®
brand
sunflowers, soybeans and oilseed rape. Our sunflower seed varieties
are
bred for high yield as well as disease resistance, herbicide tolerance
and
oil quality. Syngenta’s soybean varieties combine high yield and genetic
superiority and, in some cases, herbicide tolerance, which gives
growers
flexibility in their weed control. The company’s oilseed rape varieties
offer good oil production and plant
health.
|
|
·
|
Cereals.
NK®,
NFC New
Farm Crops®,
AgriPro®
-
Coker®
and C.C.
Benoist®
Wheat
and Barley varieties combine high yield, superior disease resistance
and
agronomic characteristics coupled with excellent grain quality for
the
malting and milling industry.
|
Vegetables
and
Flowers
|
·
|
Vegetables.
Under the S&G®
and
ROGERS®
brand
names, Syngenta offers a full range of vegetable seeds, including
tomatoes, peppers, melons, watermelons, squash, cauliflower, cabbage,
lettuce, spinach, sweet corn, beans, peas, cucumbers and oriental
radish.
We breed varieties with high-yield potential that can resist and
tolerate
pests and diseases. We develop genetics that address the needs of
consumers as well as processors and commercial growers. During 2006,
we
launched approximately 150 new varieties in the high value markets
around
the globe. In addition, we further strengthened our premium fresh
produce
activity, Dulcinea®
Farms,
in the United States.
|
|
·
|
Flowers.
Under the S&G®
brand
name, we offer a full range of flower seeds, plugs and vegetative
multiplication material (cuttings) which we sell to professional
growers
of horticultural crops. We focus on breeding a full range of innovative
flower varieties, including popular bedding plants such as begonia
and
petunia; pot plants, such as cyclamen; cuttings for, amongst others,
the
growing market of hanging baskets, such as impatiens and verbena;
and a
wide range of attractive
perennials.
|
Principal
Markets
The
following table
sets out 2006, 2005 and 2004 sales of our seed products by region:
|
|
Syngenta
Sales
|
|
Products
|
|
2006
(US$
million)
|
|
(%)
|
|
2005
(US$
million)
|
|
(%)
|
|
2004
(US$
million)
|
|
(%)
|
|
Europe,
Africa & Middle East
|
|
|
690
|
|
|
40
|
|
|
699
|
|
|
39
|
|
|
641
|
|
|
52
|
|
NAFTA
|
|
|
838
|
|
|
48
|
|
|
903
|
|
|
50
|
|
|
437
|
|
|
35
|
|
Latin
America
|
|
|
107
|
|
|
6
|
|
|
107
|
|
|
6
|
|
|
86
|
|
|
7
|
|
Asia
Pacific
|
|
|
108
|
|
|
6
|
|
|
88
|
|
|
5
|
|
|
75
|
|
|
6
|
|
Total
|
|
|
1,743
|
|
|
100
|
|
|
1,797
|
|
|
100
|
|
|
1,239
|
|
|
100
|
|
Production
Independent
contract growers tend and harvest our seed near Syngenta facilities throughout
the world. After the harvest, the raw seed is sent to our processing facilities,
where it is cleaned, calibrated, treated and packaged. The largest facilities
are located in Argentina, Brazil, France, Hungary, India, Morocco, the
Netherlands, Spain, Sweden, Thailand and the United States. For large seed
products, seed production tends to occur as close to the intended markets as
possible, in order to achieve cost effectiveness and match the seeds with the
growing conditions that are optimal for the variety. This also eases logistics
for seed products that require secure storage and timely delivery for the use
season.
Due
to our global
presence, we can engage in seed production year-round and reduce the
weather-related seed production risk. In addition, because our facilities are
located in both the Northern and Southern hemispheres, we can shorten the time
from breeder seed to commercial production so that we can produce marketable
quantities more quickly than if we were dependent on only one growing
season.
Marketing
and Distribution
Our
products are
marketed throughout the world through well-known brands, some of which have
been
established for over 100 years. Our flagship brands are NK®,
GOLDEN
HARVEST®,
GARST®,
HILLESHÖG®,
S&G®
and
ROGERS®.
The
NK®
brand is used for
corn, soybean, sunflowers and oilseed rape, and several other specialty crops.
GOLDEN HARVEST®
and
GARST®
are predominantly
used in North America in corn, soybeans, alfalfa and sorghum. Corn and Soybean
germ-plasm and traits are marketed via the GreenLeaf Genetics™ 50:50 joint
venture with Pioneer Hybrids, Inc. Proprietary corn traits are marketed under
the Agrisure™ trademark. The HILLESHÖG®
brand is used in
sugar beets and appears in every major market in Europe, Japan and the United
States. The S&G®
brand is a leading
brand for vegetables in Europe, the Middle East, Africa and Asia, and is also
known throughout the world for flower seeds, cuttings and young plants. The
ROGERS®
brand is well
known in the Americas to growers and the food-processing industry for vegetable
seeds. Our sales force markets the majority of our brands, to customers
directly, in partnership with distributors, or through a network of
dealers.
Seed
and crop
protection products have traditionally been marketed separately. However, to
provide integrated crop solutions and services, especially those tailored to
local customer needs, our seeds business is increasingly working together with
our crop protection business to develop joint marketing approaches and
initiatives. The objective has been to combine and capitalize on the strength
of
each segment to maximize their competitive advantages. This strategy is
primarily focused on corn, soybeans, vegetables and cereals. Where beneficial,
crop protection and seed sales forces coordinate customer approaches and jointly
promote products offering crop solutions that include broad product combinations
and services.
Research
and Development
We
operate around
70 breeding and germplasm enhancement centers, which focus on advancing the
performance, stability and quality of seed varieties for more than 16 food
and
feed crops. Because our customers need locally adapted crop varieties, and
in
order to satisfy local concerns, our centers are strategically located around
the world. At these centers, over one thousand permanent employees leverage
our
global germplasm, trait, biotech and knowledge resources to focus our research
efforts on creating new varieties with greater productivity, tolerance to pests
and other environmental stresses, and better quality characteristics such as
nutritional composition, safety, consumer appeal and shelf life.
We
operate
biotechnology and seed technology research technology sites in Brazil, France,
Germany, Great Britain, the Netherlands, Spain, Sweden, Thailand and the United
States. At these sites, we apply advanced marker-assisted breeding, and seed
processing, pelleting, coating and upgrading technologies to seed products.
Total research and development spending in Seeds was US$232 million in 2006,
US$213 million in 2005 and US$186 million in 2004.
We
expect that end
users such as livestock feeders, grain processors, food processors and other
partners in the food chain will continue to demand specific qualities in the
crops they use as inputs. We have entered into a number of targeted alliances
with other enterprises in order to broaden further our germplasm and trait
base
that enables us to create more valuable products. None of these alliances are
currently material to our business, and it is difficult to predict which of
these alliances is most likely to produce a successful product in the future.
In
most cases, royalties are payable upon commercial exploitation. The list below
is a sample of the alliances in which we are currently engaged:
|
·
|
Secobra
Recherche SA, a minority shareholding in a malting barley research
consortium with major malting and brewing
interests.
|
|
·
|
Maisadour
Semences SA, a minority shareholding in a corn and sunflower seed
company
in France.
|
|
·
|
Koipesol
Semillas SA, a majority shareholding in a sunflower seeds company,
the
other party to which is SOS, a leading Spanish company in the edible
oil
and food industry.
|
|
·
|
Pioneer
Hi-Bred International, Inc. - collaboration on the development of
GM
(Genetically Modified) traits for our branded businesses and GreenLeaf
Genetics™.
|
|
·
|
Performance
Plants, Inc. - collaboration on the development of GM drought tolerance
in
corn and soybean.
|
|
·
|
In
addition, we have entered into a number of research and development
agreements with companies and academic institutions around the
world.
|
Competitive
Environment
The
main
competitive factor in the seeds industry remains the quality of genetics and
traits. Historically, competition in the seeds industry has been fragmented,
with small producers competing in local markets. More recently, however,
technological advances requiring higher research and development spending have
forced new alliances and created greater competition in product development,
marketing and pricing. This environment favors the companies that have a
biotechnological platform and a broad genetic range. At present, Syngenta’s main
competitors in the seeds business are: Ball, Bayer, Dow (Mycogen), KWS,
Limagrain, Monsanto/Seminis, Pioneer/DuPont, Sakata, and Takii.
Intellectual
Property
We
maintain the
ownership of, and control the use of, our inbreds and varieties by means of
intellectual property rights, including, but not limited to, the use of patents,
trademarks, limited licenses, trade secrets, plant variety protection
certificates and contractual language placed on packaging. The level of
protection varies from country to country according to local laws and
international agreements. We do not expect that the expiration of patents in
the
near future will have a material impact on our sales.
In
the United
States, conventional seed is not subject to regulation. Genetically modified
crops are regulated by the United States Department of Agriculture, the Food
and
Drug Administration, and under some circumstances the Environmental Protection
Agency.
In
the EU, new
varieties of vegetable and agricultural (field crop) species, whether transgenic
or not, must be registered on an Official List before they may be
commercialized. Such varieties are subjected to field tests at an official
examining institute and must be distinct from other known varieties, as well
as
be sufficiently uniform and stable. New agricultural plan varieties are
additionally subjected to tests for agronomic or agricultural value. The
agronomic value of the new variety must be better than that of the existing
varieties.
With
respect to
genetically modified crops, the EU has adopted legislation specific to
genetically modified organisms, including Directive 2001/18/EEC on the
deliberate release of genetically modified organisms, and Regulation (EC) No.
258/97, which addresses food safety.
The
International
Seed Testing Association has established standards for seed purity, which are
required to be met by all seed certified for trade between countries of the
Organisation for Economic Cooperation and Development (OECD). There are
different categories of seed (basic seed, certified seed, standard seed), which
have their own minimum standards. In addition, there are minimum national
standards.
Plant
Science
From
improved food,
to more efficient fiber and pollution-reducing animal feed, biotechnology holds
enormous promise for humanity. While they have had a significant impact on
agriculture, the biotechnology products introduced to date only hint at the
benefits that are possible for growers and consumers alike. With its strong
research capabilities, intellectual property and leadership across multiple
areas of agribusiness, Syngenta believes it is well positioned to realize the
potential of this science.
The
Plant Science
business is built around a core of independent business teams with
responsibilities for specific market segments. The mission of Plant Science
is
to capitalize upon the company’s considerable strengths and marshal the
resources needed to take Syngenta to the forefront of commercial
biotechnology.
Plant
Science
directs early stage research and technology expenditure as well as expenditure
for development and marketing activities to create new business opportunities.
This sharp focus will allow Syngenta to identify the best new ideas in
biotechnology and let both strong science and good business judgment drive
its
investment choices.
Production
Plant
Science
manufactures and sells one product, QUANTUM®
Phytase, a
microbial produced animal feed supplement, which is commercially available
in
Mexico, Brazil and Canada. There are two stages to the microbial phytase
manufacturing process, production of the active enzyme by fermentation and
formulation. Both processes are currently carried out under toll manufacture
arrangements.
Products
in Development
Plant
Science
generates some income through product sales of QUANTUM®
Phytase in Mexico,
Brazil and Canada with registration in the United States awaited, and through
outlicensing of technology. Syngenta expects future income to arise from new
product development, licensing and other arrangements. To drive near term
success, Plant Science has put emphasis on the commercialization of
close-to-market projects that are aligned with the strengths of the Syngenta
Crop Protection and Seeds businesses.
Up
until 2005 work
had been carried out on pharmaceutical compounds. In light of the extended
time
lines and associated costs of full commercialization, in 2006 Syngenta
discontinued work on these compounds.
Enzymes
for
biofuels represent an opportunity for Syngenta. Work continued in 2006 on a
corn
produced alpha amylase enzyme with full scale testing scheduled for 2007. A
ten
year research and development agreement was signed with Diversa Corporation
focusing on the discovery and development of a range of novel enzymes to convert
pre-treated cellulosic biomass economically to mixed sugars.
Some
of the Plant
Science projects described here are expected to be commercially available within
five years.
Sectors
|
Targets
|
Cotton
|
VipCot®
for improved
resistance to insects
|
|
|
Animal
Feed
|
QUANTUM®
Phytase
providing reduced pollution and improved production
economics
|
Biofuels
|
Amylase
corn
for use in the production of ethanol
|
Rice
|
Humanitarian
Golden Rice - working in public-private partnership to increase levels
of
beta carotene in rice as one potential solution to Vitamin A deficiency
for the developing world
|
Research
and Development
Syngenta
maintains
its primary center for biotechnology research at Syngenta Biotechnology, Inc.
(SBI) in Research Triangle Park in the United States. This site is dedicated
to
research in agricultural genomics and biotechnology. In-house work is
complemented and strengthened through numerous alliances and collaborations.
Effective
31
December 2006, Syngenta and Diversa Corporation, in which Syngenta holds a
minority interest, signed a research agreement which replaces an agreement
previously entered into in 2003. This new agreement focuses on plant based
production of enzymes in the areas of biofuels and animal feed.
In
addition to
Diversa, other Syngenta external alliances include a licensing agreement with
Delta and Pine Land Company for insect control in cotton. The announcement
in
2006 of Monsanto’s proposed acquisition of Delta and Pine Land may impact this
arrangement.
The
licencing agreement provides that if Monsanto acquires Delta and Pine Land,
the
sum of $50 million is to be paid to Syngenta, Delta and Pine Land’s licences to
Syngenta’s cotton insect traits become non-exclusive and Monsanto will have the
right to terminate the agreement.
The
following are
key capabilities in developing transgenic crops:
|
·
|
Ability
to find useful genes: Syngenta is capitalizing on its pioneering
work in
mapping the rice genome and also accessing external sources through
its
collaborations with various university laboratories around the world
and
through its Diversa strategic
alliance.
|
|
·
|
Plant
transformation: This is the process of introducing new genes into
the
existing genetic constitution of plants. Pioneering work in this
area is
done in Syngenta’s research center at
SBI.
|
|
·
|
Use
of
marker genes: There has been significant public and regulatory debate
over
the use of microbial antibiotic resistance as a marker technology.
Syngenta has developed and patented an alternative sugar based system
trademarked “Positech™” that is widely used by
researchers.
|
|
·
|
Trait
expression: This is the process of regulating genes to achieve various
levels of expression in different tissues. This is achieved through
specialized promoter DNA sequences. Syngenta’s work with the rice genome
has resulted in the discovery and patenting of a wide range of
promoters.
|
All
biotechnology
products are subject to intense regulatory scrutiny. An extensive Syngenta
network of regulatory specialists around the world ensures continued dialogue
and compliance with the authorities regarding regulatory dossier submissions,
insect resistance management programs and participation in further development
of the biotech regulatory framework.
Total
research and
development spending for Plant Science was US$74 million in 2006, US$100 million
in 2005 and US$124 million in 2004.
Principal
Markets
The
market
environment for products enhanced through biotechnology is complex. In the
Americas, Australia and Asia, benefits such as better protection from pests
and
improved farming efficiency have been realized and the technology widely
accepted. Although there has been progress recently in the European market,
consumer opinion is mixed and the regulatory framework remains
stalled.
Competition
The
major investors
in biotechnology are the main crop protection and seed companies: Monsanto,
DuPont/Pioneer, Syngenta, Bayer and Dow. The majority of the transgenic products
commercialized to date are traits that improve performance and farming
efficiency in major world crops such as corn, soya, cotton and canola (input
traits). As a result, access to germplasm as a platform for trait
commercialization is a key competitive advantage. In the future, we expect
that
increased emphasis will be placed on developing products that provide benefits
to food and feed processors, fuel production, retail trade and consumers (output
traits). One future competitive advantage is expected to be the ability to
develop partnerships to allow delivery of biotechnology traits to the target
market sectors. In the future, Syngenta’s move into new markets may result in
other companies becoming competitors. In the animal feed market, for example,
major companies include DSM, Novozymes, Danisco and BASF.
Intellectual
Property
Intellectual
property laws protect products developed through biotechnology in the countries
in which they are made and marketed. Syngenta takes advantage of the full
spectrum of intellectual property laws, including utility patents, plant variety
protection certificates, plant breeders’ rights, plant patents, trade secrets,
and trademarks. The level and type of protection varies from country to country
according to local laws and international agreements. Syngenta has one of the
broadest patent and trademark portfolios in the industry. In addition to income
from development and commercialization of transgenic products, income is
generated from licensing arrangements. Syngenta respects the intellectual
property rights of others and will defend its intellectual property rights
as
necessary.
Government
Regulation
The
field-testing,
production, import, marketing and use of our products are subject to extensive
regulation and numerous government approvals.
Registration
and
re-registration procedures apply in all major markets.
Products
must
obtain governmental regulatory approval prior to marketing. The regulatory
framework for such products is designed to ensure the protection of the
consumer, the grower and the environment. Examples of the regulatory bodies
governing the science include the US Environmental Protection Agency and the
US
Food and Drug Administration.
Regulatory
bodies
can require ongoing review of products derived from biotechnology based upon
many factors including the need for insect resistance management. Even after
approval, products can be reviewed with the goal of ensuring that they continue
to adhere to all standards, which may have changed or been added to since the
product was initially approved. This type of ongoing review applies in most
major markets.
Government
regulations, regulatory systems, and the politics that influence them vary
widely among jurisdictions. Obtaining necessary regulatory approval is time
consuming and costly, and there can be no guarantee of the timing or success
in
obtaining approvals.
Organizational
Structure
Please
refer to
Note 33 to the consolidated financial statements for a description of the
significant legal entities comprising the Syngenta group.
Property,
Plants and Equipment
Our
principal
executive offices are located in Basel, Switzerland. Our businesses operate
through a number of offices, research facilities and production
sites.
The
following is a
summary of our principal properties (production sites are crop protection unless
otherwise stated):
Locations
|
Freehold/Leasehold
|
Approximate
area
(square
feet)
|
Principal
Use
|
Rosental,
Basel, Switzerland
|
Freehold
|
838,400
|
Headquarters,
research(1)
|
Dielsdorf,
Switzerland
|
Freehold
|
2,306,000
|
Administration,
marketing. Manufacturing ceased at the end of 2002.
|
Greensboro,
North Carolina, USA
|
Freehold
|
2,970,000
|
United
States
Headquarters, research
|
St.
Gabriel,
Louisiana, USA
|
Freehold
|
54,663,400
|
Production
|
Jealott’s
Hill, Berkshire, UK
|
Freehold
|
26,910,000
|
Research
center
|
Monthey,
Switzerland
|
Freehold
|
10,515,160
|
Production
|
Huddersfield,
West Yorkshire, UK
|
Freehold
|
10,756,200
|
Production
|
Cold
Creek,
Alabama, USA
|
Freehold
|
9,539,900
|
Production
until 2007
|
Goa,
India
|
Freehold
|
8,668,000
|
Production
|
Grangemouth,
Falkirk, UK
|
Freehold
|
1,000,000
|
Production
|
Landskrona,
Sweden
|
Freehold
|
8,072,900
|
Research,
production and marketing(2)
|
Greens
Bayou,
Texas, USA
|
Freehold
|
5,898,800
|
Production
|
Enkhuizen,
The Netherlands
|
Freehold
|
3,536,700
|
Administration,
research and marketing(2)
|
Stein,
Switzerland
|
Freehold
|
1,948,700
|
Research
center
|
Research
Triangle Park, North Carolina, USA
|
Freehold
|
1,176,120
|
Research
center
|
Aigues-Vives,
France
|
Freehold
|
1,538,680(3)
|
Production
|
Nérac,
France
|
Freehold
|
586,870
|
Production(2)
|
Saint-Sauveur,
France
|
Freehold
|
1,395,650
|
Administration,
research(2)
|
Nantong,
China
|
Leasehold
|
1,496,000
|
Production
|
Münchwilen,
Switzerland
|
Freehold
|
610,300
|
Production
|
Grimsby,
UK
|
Freehold
|
181,300
|
Formerly
production. Plant closed at the end of 2003.
|
Kaisten,
Switzerland
|
Freehold
|
124,808(4)
|
Production
|
Bayport,
Texas, USA
|
Leasehold
|
3,758,750
|
Production
until 2007(5)
|
(1)
|
Used
for crop
protection and seed business. In January 2007 Syngenta announced
a partial
sale of this property with the transaction expected to complete in
the
first half of 2007. Following this sale, the size of the property
retained
will amount to 254,000 square feet.
|
(2)
|
Used
for seed
business.
|
(3)
|
Only
875,850
square feet are currently used and
developed.
|
(4)
|
Surface
area
of building/factory which is owned; land itself (143,000 square feet)
is
owned by third party.
|
(5)
|
Closure
of
production site announced.
|
Please
also see
Item 4 “Information on the Company—Business Overview” for a description of the
products produced at the various properties listed above.
ITEM
5 —
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Introduction
The
following
discussion includes forward-looking statements subject to risks and uncertainty.
See “cautionary statement concerning forward-looking statements” at the end of
this document. This discussion also includes non-GAAP financial data in addition
to GAAP results. See Appendix A to Operating and Financial Review and Note
2 to
the financial highlights for a reconciliation of this data and explanation
of
the reasons for presenting such data.
Constant
Exchange Rates
Approximately
64%
of Syngenta’s sales and 67% of Syngenta’s costs in 2006 were denominated in
currencies other than US dollars. Therefore Syngenta’s results for the period
covered by the review were significantly impacted by the movements in exchange
rates. Sales in 2006 were 1% lower than 2005 on a reported basis, but were
flat
year on year when calculated at constant rates of exchange. The Company
therefore provides analysis of results calculated at constant exchange rates
(CER) and also actual results to allow an assessment of performance before
and
after taking account of currency fluctuations. To present CER information,
current period results for entities reporting in currencies other than US
dollars are converted into US dollars at the prior period’s exchange rates,
rather than the exchange rates for this year. An example of this calculation
is
included in Appendix A of this section.
Overview
Syngenta
is a world
leading agribusiness operating in the Crop Protection and Seeds businesses.
Crop
Protection chemicals include herbicides, insecticides and fungicides to control
weeds, insect pests and diseases in crops, and are essential inputs enabling
growers around the world to improve agricultural productivity and food quality.
Many of these products also have application in the professional products sector
in areas such as public health, seed treatment and turf and ornamental markets.
The Seeds business operates in high value commercial sectors: seeds for field
crops including corn, soybean, other oilseeds and sugar beet; and vegetable
and
flower seeds. Syngenta is also developing a Plant Science business. Syngenta
aims to be the partner of choice for Syngenta’s grower customers with its
unparalleled product offer and innovative marketing, creating value for
customers and shareholders.
Syngenta’s
results
are affected, both positively and negatively, by, among other factors: general
economic conditions; weather conditions (which can influence the demand for
certain products over the course of a season); commodity crop prices and
exchange rate fluctuations. Government measures, such as subsidies or rules
regulating the areas allowed to be planted with certain crops, also can have
an
impact on Syngenta’s industry. Syngenta’s results are also affected by the
growing importance of biotechnology to agriculture and the use of genetically
modified crops.
Syngenta
operates
globally to capitalize on its technology and marketing base. Syngenta’s largest
markets are Europe, Africa and the Middle East (EAME), and NAFTA1 ,
which both
represent approximately 36% of consolidated sales in 2006 (2005: 37% and 37%;
2004: 40% and 32%). Both sales and operating profit are seasonal and are
weighted towards the first half of the calendar year, which largely reflects
the
northern hemisphere planting and growing cycle.
Manufacturing
and
research and development are largely based in Switzerland, the United Kingdom
and the United States of America.
In
this document
there are references to market share estimates. These estimates utilize, where
possible, information published by major competitors and are supplemented by
Syngenta marketing staff estimates.
The
consolidated
financial statements are presented in US dollars, as this is the major currency
in which revenues are denominated. However, significant, but differing
proportions of Syngenta’s revenues, costs, assets and liabilities are
denominated in currencies other than US dollars. Approximately 22% of sales
in
2006 were denominated in Euros, while a significant proportion of costs for
research and development, administration, general overhead and manufacturing
were denominated in Swiss francs and British pounds sterling (30% in total).
Sales in Swiss francs and British pounds sterling together make up 3% of total
sales. Marketing and distribution costs are more closely linked to the currency
split of the sales. As a result, operating profit in US dollars can be
significantly affected by movements in exchange rates, in particular movements
of the Swiss franc, British pound sterling and the Euro relative to the US
dollar, and the relative impact on operating profit may differ to that on sales.
The effects of currency fluctuations have been reduced by risk management
strategies such as hedging. For further information please refer to Note 32
of
the consolidated financial statements.
The
consolidated
financial statements are based upon Syngenta’s accounting policies and, where
necessary, the results of management estimations. Syngenta believes that the
critical accounting policies and estimations underpinning the
financial
1
|
NAFTA
- North
American Free Trade Association comprising the USA, Canada and
Mexico
|
statements
are (i)
adjustments for doubtful receivables, (ii) environmental provisions, (iii)
impairment, (iv) defined benefit pensions and (v) uncertain tax positions.
These
policies are described in more detail later in this report.
Summary
of
Results
The
Crop Protection
market was difficult in 2006, with lower corn acreage in the USA, the impact
of
the strong Brazilian real on the competitiveness of the agricultural export
sector in Brazil and adverse weather conditions in several countries, including
a prolonged winter in Western Europe and drought in the Southern USA. Syngenta
estimates that the total crop protection market has declined. In this context,
Syngenta Crop Protection performed strongly and estimates to have gained market
share overall. Professional Products sales grew strongly, with further
development of the Seed Treatment market and the acquisition of Conrad Fafard,
Inc. in the ornamentals market. In the Europe, Africa and Middle East (EAME)
region, growth in Eastern Europe and in Africa and the Middle East offset lower
sales in Western Europe. Sales growth was achieved in a number of markets in
Asia Pacific and moderate growth was experienced in Latin America. In Seeds,
growth in Diverse Field Crops and Vegetables largely offset the decline in
Corn
& Soybean due to first quarter production-related issues in corn. Gross
profit margin was lower in 2006 despite strong delivery of production cost
savings, largely due to the impact of the higher oil price on raw material
costs
and lower local currency sales prices in Crop Protection. Excluding
restructuring and impairment, total expenses in 2006 were lower than 2005,
despite increased costs in marketing and development in the Seeds business.
Restructuring and impairment charges were higher following the announcement
of
further restructuring in research and development, which included the closure
of
a development facility in the UK. Financial expense, net, was lower than in
2005
due to the realisation of an exchange gain on a group funding position and
the
inclusion in 2005 of premium costs on the partial repurchase of an outstanding
Eurobond. Together, these factors contributed to an increase in net income
attributable to Syngenta AG shareholders of 2% and growth in diluted earnings
per share of 4%.
Results
in 2005
relative to 2004 benefited significantly from the acquisitions in the Seeds
business in 2004. Syngenta estimates that Crop Protection markets slowed in
2005. In addition, after strong sales growth in 2004, the strength of the
Brazilian real in 2005 had an adverse impact on the competitiveness of the
agricultural export sector in Brazil and reduced underlying demand for Crop
Protection products. These factors were offset by strong demand for the recently
launched CALLISTO®
family of products
in the USA and significant growth in KARATE®
and
AMISTAR®,
leading Crop
Protection sales in the critical US market to grow by more than the estimated
market growth. This was the key driver for top line growth in the segment.
In
addition to the acquisitions, underlying demand in Corn & Soybean seeds was
strong. Sales of sunflowers and sugar beet seeds were also strong in Europe.
Gross margins benefited from cost savings in the Crop Protection business,
but
these were offset by increased costs resulting from high oil and gas prices.
Expenses in 2005 reflected the acquisitions, completed in the second half of
2004, increased patent and other litigation costs and also the costs associated
with the impact of unintended release of Bt10 corn into commercial sale,
offsetting lower restructuring and impairment charges and the impact of ceasing
goodwill amortization after adoption of IFRS 3. Sales volume growth offset
the
increase in expenses and impact of the high oil price and despite the unusually
low tax rate in 2004, Syngenta reported a 20% increase in diluted earnings
per
share from continuing operations in 2005 compared to 2004.
Acquisitions
On
June 1, 2006,
Syngenta purchased 100% of the shares of Emergent Genetics Vegetable A/S
(“EGV”). On August 1, 2006, Conrad Fafard Inc., (“Fafard”) merged with a
Syngenta subsidiary so that Syngenta acquired control of Fafard and its
subsidiaries in exchange for cash paid to or for the account of Fafard’s former
shareholders and settlement of certain liabilities of Fafard. On November 16,
2006, Syngenta acquired the remaining 50% of the shares of Longreach Plant
Breeders Pty Ltd (LRPB) that it did not already own. The cost of these
acquisitions, net of cash acquired, amounted to US$146 million.
In
March 2006,
Syngenta acquired from DuPont an exclusive worldwide license to develop DuPont’s
new insecticide RynaxypyrTM
in mixtures with
its own insect control products. At the same time, Syngenta sold to DuPont
worldwide rights to Syngenta’s strobilurin fungicide pycoxystrobin, sold as
ACANTO®.
On
September 1,
2004, after Fox Paine & Co acquired a 10% interest in the Advanta corn,
soybean and wheat seed business in North America, Syngenta acquired 100% of
the
shares of Advanta B.V. On September 8, 2004, Syngenta sold Advanta B.V’s
European, Asian and Latin American subsidiaries and other parts of its North
America business to Fox Paine & Co. The net cash cost of acquisition, after
deducting proceeds of assets purchased exclusively for resale and cash in the
acquired companies was US$327 million. Syngenta retains a 90% interest in
Advanta’s former corn, soybean and wheat seed business in North America, which
trades as Garst.
On
July 31, 2004,
in a single transaction, Syngenta acquired a 90% voting interest in each of
the
following entities which are collectively referred to as “Golden Harvest”:
Garwood Seed Co.; Golden Seed Co. LLC; Golden Seed Co. Inc.; J C Robinson Seeds
Inc.; Sommer Bros Seed Co.; Thorp Seed Co.; and Golden Harvest Seeds Inc. The
cost of the acquisition, net of cash acquired, was US$154 million.
Except
for the
Rynaxypyr™ and ACANTO®
product
acquisition and divestments, these transactions are described in Note 3 to
the
consolidated financial statements. Since completion of the 2004 transactions
occurred after the end of the main selling season, their contribution to sales
was largely in 2005 rather than 2004.
Operational
Efficiency Programs
On
February 11,
2004, Syngenta announced an Operational Efficiency cost saving program. The
program was initiated to realize further cost savings after completion of the
integration of the former Novartis and Zeneca businesses and in response to
low
underlying growth in the Crop Protection markets. Cash costs of the program
were
estimated at around US$500 million, expected to be largely spent over the period
2004 to 2008 and non-cash charges were estimated at approximately US$350 million
over a similar period. Cash spent under the program from 2004 to the end of
2006
totals US$227 million. Cost savings under the program have been partly offset
by
the impact of higher oil prices, which are estimated to be in excess of US$200
million since the beginning of 2004. This program is expected to be completed
one year ahead of schedule in 2007, with cash costs in line with the initial
estimate of US$500 million and non cash charges of US$320 million.
A
further
Operational Efficiency restructuring program was approved by the Syngenta Board
on February 7, 2007, to drive cost savings which will be partly used to offset
increased expenditure in research and technology, marketing and product
development in the growth areas of Seeds and Professional Products. Savings
are
targeted in both cost of goods sold and other operating expenses. The cost
of
the new program is estimated at US$700 million in cash and US$250 million in
non-cash charges in the period up to 2011.
Results
of
Operations
2006
Compared to 2005
Sales
commentary
Total
Syngenta
consolidated sales for 2006 were US$8,046 million, compared to US$8,104 million
in 2005. Reported sales in US dollars were one percent lower, but sales were
unchanged at constant exchange rates. The analysis by segment is as
follows:
|
|
|
|
|
|
|
|
Full
Year
|
|
Growth
|
|
(US$
million, except growth %)
|
|
2006
|
|
2005
|
|
Actual
%
|
|
CER
%
|
|
Crop
Protection
|
|
|
6,378
|
|
|
6,330
|
|
|
1
|
|
|
1
|
|
Seeds
|
|
|
1,743
|
|
|
1,797
|
|
|
(3
|
)
|
|
(2
|
)
|
Plant
Science
|
|
|
2
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Inter-segment
elimination
|
|
|
(77
|
)
|
|
(23
|
)
|
|
-
|
|
|
-
|
|
Total
|
|
|
8,046
|
|
|
8,104
|
|
|
(1
|
)
|
|
-
|
|
Sales
by region
were as follows:
|
|
|
|
|
|
|
|
Full
Year
|
|
Growth
|
|
(US$
million, except growth %)
|
|
2006
|
|
2005
|
|
Actual
%
|
|
CER
%
|
|
Europe,
Africa and Middle East
|
|
|
2,917
|
|
|
2,973
|
|
|
(2
|
)
|
|
1
|
|
NAFTA
|
|
|
2,900
|
|
|
2,972
|
|
|
(2
|
)
|
|
(3
|
)
|
Latin
America
|
|
|
1,141
|
|
|
1,133
|
|
|
1
|
|
|
1
|
|
Asia
Pacific
|
|
|
1,088
|
|
|
1,026
|
|
|
6
|
|
|
7
|
|
Total
|
|
|
8,046
|
|
|
8,104
|
|
|
(1
|
)
|
|
-
|
|
Crop
Protection
Sales
in 2006 were
1% higher than in 2005 at actual and constant exchange rates. Volumes were
2%
higher in 2006 than 2005, offset by a 1% decline in local currency prices.
Sales
are estimated to have outperformed a declining market. Sales of products
launched since 2000 continued to expand, up 23%, 25% at constant exchange rates,
driven by the successful launches of AXIAL®
and
AVICTA®
and by continuing
growth in CALLISTO®
and
ACTARA®/CRUISER®.
Sales
were higher
in NAFTA due to a strong performance in Professional Products. In EAME, growth
in Eastern Europe and in Africa and Middle East offset lower sales in Western
Europe. In Latin America, growth was achieved despite reduced soybean acreage
in
Brazil following estimated further gains in market share. Asia Pacific increased
sales in a number of markets, notably India, China and South East Asia. Sales
of
Professional Products were up 18%, with strong growth in Seed Care, including
increased usage with Syngenta Seeds, supplemented by a good performance in
Lawn
and Garden. In August the ornamentals business was augmented by the acquisition
of Conrad Fafard Inc., which contributed 3% to the growth in Professional
Products.
Sales
by Product
line are set out below.
|
|
|
|
|
|
|
|
Full
Year
|
|
Growth
|
|
Product
line
|
|
2006
US$
million
|
|
2005
US$
million
|
|
Actual
%
|
|
CER
%
|
|
Selective
herbicides
|
|
|
1,813
|
|
|
1,889
|
|
|
(4
|
)
|
|
(3
|
)
|
Non-selective
herbicides
|
|
|
725
|
|
|
688
|
|
|
5
|
|
|
5
|
|
Fungicides
|
|
|
1,716
|
|
|
1,779
|
|
|
(3
|
)
|
|
(2
|
)
|
Insecticides
|
|
|
1,093
|
|
|
1,100
|
|
|
(1
|
)
|
|
-
|
|
Professional
products
|
|
|
958
|
|
|
807
|
|
|
18
|
|
|
18
|
|
Others
|
|
|
73
|
|
|
67
|
|
|
8
|
|
|
8
|
|
Total
|
|
|
6,378
|
|
|
6,330
|
|
|
1
|
|
|
1
|
|
Herbicides
are
products that prevent or reduce weeds that compete with the crop for nutrients
and water. Selective herbicides are crop-specific and capable of controlling
weeds without harming the crop. Non-selective herbicides reduce or halt the
growth of all vegetation with which they come into contact.
Fungicides
are
products that prevent and cure fungal plant diseases that can drastically affect
crop yield and quality.
Insecticides
are
products that control chewing pests such as caterpillars and sucking pests
such
as aphids, which reduce crop yields and quality.
Professional
products are herbicides, insecticides and fungicides used in markets beyond
commercial agriculture such as seed treatment, public health, and turf and
ornamentals.
Selective
Herbicides:
major brands
AXIAL®,
CALLISTO®
family,
DUAL®/
BICEP®
MAGNUM,
ENVOKE®,
FUSILADE®
MAX,
TOPIK®
Sales
of selective
herbicides were 4% lower, 3% at constant exchange rates, with volumes down
2%
and local currency prices down 1%. The CALLISTO®
range for corn
continued to expand in both the Americas and in Europe augmented by the roll-out
of combination products of CALLISTO®
with other active
ingredients. In the USA sales of selective herbicides overall were lower due
primarily to a reduction in corn acreage. In cereal herbicides,
AXIAL®
was successfully
launched in a number of major markets. Sales of TOPIK®
were lower
reflecting unfavourable weather conditions in Europe and the USA.
Non-selective
Herbicides:
major brands
GRAMOXONE®,
TOUCHDOWN®
Non-selective
herbicide sales were up 5%, largely due to higher volumes. Both
GRAMOXONE®
and
TOUCHDOWN®
demonstrated good
growth. TOUCHDOWN®
grew strongly in
the USA, driven by the expanded product range and the further penetration of
glyphosate-tolerant technology in corn. GRAMOXONE®
achieved growth in
Latin America and broad-based growth in Asia, augmented by the successful launch
of the INTEON®
formulation in
South Korea.
Fungicides:
major brands
AMISTAR®,
BRAVO®,
RIDOMIL
GOLD®,
SCORE®,
TILT®,
UNIX®
Fungicides
sales
were 3% lower, 2% at constant exchange rates, due to reduced volumes partly
as a
result of the divestment of ACANTO®
to DuPont in 2006.
Sales of AMISTAR®
increased in Asia
and in Latin America, despite difficult market conditions in Brazil; they were
lower in Europe due to the severe winter and in the USA partly due to drought
in
the south. SCORE®
showed good
growth, notably in Asia.
Insecticides:
major brands
ACTARA®,
FORCE®,
KARATE®,
PROCLAIM®,
VERTIMEC®
Insecticide
sales
were down 1%, flat at constant exchange rates, with volume growth of 2% offset
by lower local currency sales prices. Sales of KARATE®
were lower in the
USA in comparison with the previous year which benefited from an exceptional
outbreak of soybean aphids. This was offset by ACTARA®
which delivered
strong growth in all regions, notably in Latin America. Sales of
FORCE®
grew strongly in
Eastern Europe and the product is estimated to have gained market share in
the
USA. PROCLAIM®
benefited from
strong demand from vegetables.
Professional
Products:
major brands
AVICTA®,
CRUISER®,
DIVIDEND®,
HERITAGE®,
MAXIM®
Seed
Care, Lawn
& Garden and Home Care all achieved double digit growth with sales overall
18% higher, following volume growth of 21% partly offset by 3% lower local
currency prices. Approximately 3% of the volume growth was due to the Fafard
acquisition in the second half of the year and volume growth also included
increased usage with Syngenta Seeds. In Seed Care, CRUISER®
grew strongly in
all regions with new launches and is estimated to have increased market share.
AVICTA®
was successfully
launched on cotton in the USA and is expanding into the vegetables market.
In
Lawn & Garden the acquisition of Fafard strengthened the company’s presence
in ornamentals and added to solid underlying growth.
Commentary
on regional performance
|
|
|
|
|
|
|
|
Full
Year
|
|
Growth
|
|
Region
|
|
2006
US$
million
|
|
2005
US$
million
|
|
Actual
%
|
|
CER
%
|
|
Europe,
Africa and Middle East
|
|
|
2,242
|
|
|
2,283
|
|
|
(2
|
)
|
|
-
|
|
NAFTA
|
|
|
2,119
|
|
|
2,081
|
|
|
2
|
|
|
1
|
|
Latin
America
|
|
|
1,036
|
|
|
1,027
|
|
|
1
|
|
|
1
|
|
Asia
Pacific
|
|
|
981
|
|
|
939
|
|
|
4
|
|
|
5
|
|
Total
|
|
|
6,378
|
|
|
6,330
|
|
|
1
|
|
|
1
|
|
Sales
in
Europe,
Africa and the Middle East
were 2% lower,
unchanged at constant exchange rates, with 1% volume growth offset by lower
local currency prices. Growth in Eastern Europe, Africa and the Middle East
offset lower sales in Western Europe due to a prolonged winter and ongoing
subsidy structural reform. Syngenta estimates to have gained market share in
several
key
European
markets including Germany, Italy and the UK. A good performance in Selective
Herbicides, helped by the launch of AXIAL®,
and in
Professional Products more than offset a decline in fungicide sales.
Sales
in
NAFTA
were 2% higher, 1%
at constant exchange rates with local currency prices lower, but volume up
2%
despite a difficult season in the USA due to a weaker farm economy and lower
corn acreage and drought in the south. As a result, sales of selective
herbicides and fungicides were lower; insecticides were also lower following
exceptionally high 2005 growth. Non-selective herbicides, notably
TOUCHDOWN®,
benefited from
further penetration of biotechnology and delivered good growth. New products
performed well driven by CALLISTO®,
ACTARA®
and the launch of
AXIAL®
in cereals.
Professional Products performed strongly, notably Seed Treatment driven by
CRUISER®
and the launch of
AVICTA®.
Growth in
ornamentals was augmented by the acquisition of Fafard in Lawn &
Garden.
Sales
in
Latin
America
grew 1%, with 5%
volume growth offset by 4% lower US dollar sales prices, despite difficult
market conditions in Brazil. The breadth of the product portfolio and effective
credit risk management are estimated to have led to further market share gains.
ACTARA®
/
CRUISER®
delivered a
particularly strong performance. Sales were higher in Argentina driven by
herbicides and insecticides.
Asia
Pacific
sales grew 4%, 5%
at constant exchange rates, with volumes 6% higher, but local currency prices
1%
down. Growth of more than 10% was achieved in a number of markets including
China, Vietnam, Thailand and Indonesia. GRAMOXONE®,
SCORE®,
PROCLAIM®
and
CRUISER®
all delivered
particularly strong growth.
Seeds
Sales
were 3%
lower, 2% at constant exchange rates, with volumes and local currency prices
each 1% down. Strong growth in Diverse Field Crops and Vegetables largely offset
a decline in Corn and Soybean due to first quarter production related issues
in
corn. Diverse Field Crops performed strongly, capitalizing on the increased
demand for biofuels. In Vegetables, demand for fresh produce continues to expand
and sales showed growth across all regions, with a particularly strong
performance in the developing markets of Latin America and Asia. The input
trait
pipeline for corn progressed well, with the launch of the glyphosate
tolerance/corn borer double stack and the granting of EPA approval in October
for AgrisureTM
RW, a proprietary
trait for corn rootworm control, and Agrisure™ CB/RW double-stack in January
2007.
|
|
|
|
|
|
|
|
Full
Year
|
|
Growth
|
|
Product
line
|
|
2006
US$
million
|
|
2005
US$
million
|
|
Actual
%
|
|
CER
%
|
|
Corn
&
Soybean
|
|
|
785
|
|
|
880
|
|
|
(11
|
)
|
|
(10
|
)
|
Diverse
Field
Crops
|
|
|
309
|
|
|
301
|
|
|
3
|
|
|
7
|
|
Vegetables
|
|
|
421
|
|
|
384
|
|
|
9
|
|
|
10
|
|
Flowers
|
|
|
228
|
|
|
232
|
|
|
(2
|
)
|
|
-
|
|
Total
|
|
|
1,743
|
|
|
1,797
|
|
|
(3
|
)
|
|
(2
|
)
|
Field
Crops
(Corn & Soybean and Diverse Field Crops):
major brands
NK®,
GARST®,
GOLDEN
HARVEST®
corn and oilseeds,
HILLESHÖG®
sugar
beet
Corn
&
Soybean
sales were 11% lower, 10% at constant exchange rates, with volumes 8% lower
and
local currency prices down 2%. Sales were affected by first quarter production
related issues in corn, which reduced product availability.
Diverse
Field Crop
sales were 3% higher, 7% at constant exchange rates, with volumes 5% higher
and
local currency prices 2%. Sales included strong growth in sunflower in Eastern
Europe, and oilseed rape in Germany and the UK, driven by demand for biodiesel.
Sugar beet sales were lower in Western Europe due to the reform of sugar
subsidies; this was largely offset by growth in Eastern Europe, notably
Russia.
Vegetables
and Flowers:
major brands
S&G®
vegetables,
ROGERS®
vegetables,
S&G®
flowers
Growth
in
vegetables accelerated in the second half to reach 9%, 10% at constant exchange
rates, with 2% from higher local currency sales prices and 8% from volume,
including a positive contribution from the acquisition of EGV in Denmark. Sales
in the emerging markets of Latin America and Asia Pacific continued to expand
rapidly. Sales of branded fresh produce rose by 31% with an expansion of the
retail network in the USA.
Sales
of
S&G®
flowers were 2%
lower, unchanged at constant exchange rates, despite unfavourable spring weather
in Europe and the impact of drought in Australia.
Commentary
on regional performance
|
|
|
|
|
|
|
|
Full
Year
|
|
Growth
|
|
Regional
|
|
2006
US$
million
|
|
2005
US$
million
|
|
Actual
%
|
|
CER
%
|
|
Europe,
Africa and Middle East
|
|
|
690
|
|
|
699
|
|
|
(1
|
)
|
|
3
|
|
NAFTA
|
|
|
838
|
|
|
903
|
|
|
(7
|
)
|
|
(7
|
)
|
Latin
America
|
|
|
107
|
|
|
107
|
|
|
-
|
|
|
(1
|
)
|
Asia
Pacific
|
|
|
108
|
|
|
88
|
|
|
23
|
|
|
22
|
|
Total
|
|
|
1,743
|
|
|
1,797
|
|
|
(3
|
)
|
|
(2
|
)
|
Sales
in
Europe,
Africa and the Middle East
were 1% lower, but
increased 3% at constant exchange rates, with volumes 2% higher and local
currency prices 1% higher. Sales were driven by higher volumes in Diverse Field
Crops and Vegetables, which grew strongly, most notably in Eastern Europe.
In
NAFTA
sales were down 7%
at actual exchange rates and at constant exchange rates due to first quarter
production related issues in corn with volumes 6% lower and local currency
prices down 1%. This was partially offset by growth in Vegetables and Fresh
Produce sales.
In
Asia
Pacific,
sales increased
by 23%, 22% at constant exchange rates, with 18% volume growth and a 4% increase
in local currency prices. Corn & Soybean sales were strong in India.
Vegetables sales also grew strongly due to favorable sales of sweet corn.
Operating
Income
Variances
in the
tables below reflect the profit impact of changes year on year. For example,
an
increase of sales or a decrease in costs is a positive variance and a fall
in
sales or increase in costs is a negative variance.
|
|
|
|
|
|
|
|
Full
Year
|
|
Growth
|
|
Operating
Income
|
|
2006
US$
million
|
|
2005
US$
million
|
|
Actual
%
|
|
Crop
Protection
|
|
|
901
|
|
|
996
|
|
|
(10
|
)
|
Seeds
|
|
|
44
|
|
|
17
|
|
|
159
|
|
Plant
Science
|
|
|
(79
|
)
|
|
(153
|
)
|
|
48
|
|
Inter-segment
profit elimination
|
|
|
(37
|
)
|
|
-
|
|
|
-
|
|
Total
|
|
|
829
|
|
|
860
|
|
|
(4
|
)
|
Operating
income
decreased by 4% to US$829 million, largely due to increased charges for
restructuring and impairment in Crop Protection. Sales were 1% lower, flat
at
constant exchange rates. Gross profit margin declined by 0.8%, with lower
margins in the Crop Protection business, where production cost savings were
more
than offset by the impact of the higher oil price and reduced capacity
utilization. Marketing and distribution costs decreased by 3%, with increased
marketing spend in Seeds and from the Fafard acquisition more than offset by
cost savings and lower charges for doubtful debt provisions in Latin America.
Research and development costs were 3% lower, with increased development spend
in Seeds offset by stopping the work on plant-produced pharmaceuticals and
the
benefits of the Operational Efficiency Program. General and administrative
costs
were 10% lower, 11% at constant exchange rates, with cost savings from the
Operational Efficiency Program, the favourable impact of a pension rule change
in the UK and compared to 2005 which included the costs arising from the
unintended release of Bt10 corn into commercial sale. Restructuring and
impairment costs increased from US$212 million in 2005 to US$301 million in
2006, with the continuation of the Operational Efficiency Program initiated
in
February 2004. These costs are described in more detail below.
The
US$31 million
decline in operating income was more than accounted for by the US$89 million
increase in charges for restructuring and impairment. Movements in exchange
rates between 2005 and 2006 and particularly the weaker Euro in the main first
half selling season, together with an adverse movement in the net EBITDA
(earnings before interest, tax, depreciation and amortization) hedging result,
reduced operating profit by an estimated US$31 million. The EBITDA hedging
program is designed to protect anticipated transactions from adverse movements
in exchange rates, using options and forward contracts to reduce volatility
in
EBITDA. The net hedging result under the EBITDA hedging program, which is
reported within general and administrative costs, was a loss of US$14 million
in
2006 compared to a gain of US$5 million in 2005. Gains on disposal of
non-current assets in 2006 were US$31 million, compared to US$15 million in
2005.
Crop
Protection Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Restructuring
and
impairment
|
|
Before
Restructuring
and
impairment
|
|
|
|
|
|
(US$
million, except growth %)
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
%
Growth Actual
|
|
%
Growth CER
|
|
Sales
|
|
|
6,378
|
|
|
6,330
|
|
|
-
|
|
|
-
|
|
|
6,378
|
|
|
6,330
|
|
|
1
|
|
|
1
|
|
Cost
of goods
sold
|
|
|
(3,126
|
)
|
|
(3,033
|
)
|
|
(8
|
)
|
|
-
|
|
|
(3,118
|
)
|
|
(3,033
|
)
|
|
(3
|
)
|
|
(4
|
)
|
Gross
profit
|
|
|
3,252
|
|
|
3,297
|
|
|
(8
|
)
|
|
-
|
|
|
3,260
|
|
|
3,297
|
|
|
(1
|
)
|
|
(1
|
)
|
as
a
percentage of sales
|
|
|
51
|
%
|
|
52
|
%
|
|
|
|
|
|
|
|
51
|
%
|
|
52
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing
and
distribution
|
|
|
(1,037
|
)
|
|
(1,106
|
)
|
|
-
|
|
|
-
|
|
|
(1,037
|
)
|
|
(1,106
|
)
|
|
6
|
|
|
6
|
|
Research
and
development
|
|
|
(490
|
)
|
|
(509
|
)
|
|
-
|
|
|
-
|
|
|
(490
|
)
|
|
(509
|
)
|
|
4
|
|
|
3
|
|
General
and
administrative
|
|
|
(549
|
)
|
|
(557
|
)
|
|
-
|
|
|
-
|
|
|
(549
|
)
|
|
(557
|
)
|
|
1
|
|
|
3
|
|
Restructuring
and impairment
|
|
|
(275
|
)
|
|
(129
|
)
|
|
(275
|
)
|
|
(129
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Operating
income
|
|
|
901
|
|
|
996
|
|
|
(283
|
)
|
|
(129
|
)
|
|
1,184
|
|
|
1,125
|
|
|
5
|
|
|
7
|
|
as
a
percentage of sales
|
|
|
14
|
%
|
|
16
|
%
|
|
|
|
|
|
|
|
19
|
%
|
|
18
|
%
|
|
|
|
|
|
|
Despite
strong
delivery of production cost savings related to the Operational Efficiency
Program, gross profit margins were lower in 2006 than 2005 due to the impact
of
the higher oil price, reduced capacity utilisation and local currency sales
prices being 1% lower. Marketing and distribution costs were 6% lower with
the
impact of the Fafard acquisition more than offset by cost saving initiatives
and
the lower charge for provisions for doubtful receivables in Latin America.
Research and development costs reduced by 4%, 3% at constant exchange rates,
with continuing benefits from the Operational Efficiency Program and savings
in
development in advance of the restructuring program initiated in the second
half
of 2006. General and administrative costs were 1% lower, 3% lower at constant
exchange rates, with cost savings and the favorable impact of the change in
the
UK pension fund partly offset by some increase in liability provisions.
Restructuring
and
impairment is defined in Note 7 to the consolidated financial statements. In
2006 and 2005, these costs largely relate to the Operational Efficiency Program
initiated in February 2004. Restructuring and impairment within costs of goods
sold in 2006 includes the reversal of the purchase accounting inventory step-up
relating to the Fafard acquisition. Restructuring and impairment is discussed
in
more detail later in this section.
Operating
income
was US$95 million lower at US$901 million due to the US$146 million increase
in
charges for restructuring and impairment. Excluding restructuring and
impairment, operating expense cost savings more than offset the impact of the
lower gross profit.
With
the US dollar
stronger against the core currencies of Euro, Swiss franc and British pound
sterling in the key first half selling season and then weaker in the second
half, the net effect of the US dollar movements was to reduce operating income
by approximately US$17 million.
Seeds
Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Restructuring
and
impairment
|
|
Before
Restructuring
and
impairment
|
|
|
|
|
|
(US$
million, except growth %)
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
%
Growth Actual
|
|
%
Growth CER
|
|
Sales
|
|
|
1,743
|
|
|
1,797
|
|
|
-
|
|
|
-
|
|
|
1,743
|
|
|
1,797
|
|
|
(3
|
)
|
|
(2
|
)
|
Cost
of goods
sold
|
|
|
(894
|
)
|
|
(940
|
)
|
|
(17
|
)
|
|
(24
|
)
|
|
(877
|
)
|
|
(916
|
)
|
|
4
|
|
|
3
|
|
Gross
profit
|
|
|
849
|
|
|
857
|
|
|
(17
|
)
|
|
(24
|
)
|
|
866
|
|
|
881
|
|
|
(2
|
)
|
|
-
|
|
as
a
percentage of sales
|
|
|
49
|
%
|
|
48
|
%
|
|
|
|
|
|
|
|
50
|
%
|
|
49
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing
and
distribution
|
|
|
(429
|
)
|
|
(408
|
)
|
|
-
|
|
|
-
|
|
|
(429
|
)
|
|
(408
|
)
|
|
(5
|
)
|
|
(5
|
)
|
Research
and
development
|
|
|
(232
|
)
|
|
(213
|
)
|
|
-
|
|
|
-
|
|
|
(232
|
)
|
|
(213
|
)
|
|
(9
|
)
|
|
(8
|
)
|
General
and
administrative
|
|
|
(106
|
)
|
|
(169
|
)
|
|
-
|
|
|
-
|
|
|
(106
|
)
|
|
(169
|
)
|
|
37
|
|
|
35
|
|
Restructuring
and impairment
|
|
|
(38
|
)
|
|
(50
|
)
|
|
(38
|
)
|
|
(50
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Operating
income
|
|
|
44
|
|
|
17
|
|
|
(55
|
)
|
|
(74
|
)
|
|
99
|
|
|
91
|
|
|
9
|
|
|
26
|
|
as
a
percentage of sales
|
|
|
3
|
%
|
|
1
|
%
|
|
|
|
|
|
|
|
6
|
%
|
|
5
|
%
|
|
|
|
|
|
|
Sales
for 2006 were
down 3%, 2% at constant exchange rates, mainly due to the production related
issues in corn in the first half of the year. Gross profit margin increased
in
2006 over 2005 with higher margins in Diverse Field Crops and the lower
weighting of Corn & Soybean in the sales mix. Marketing and distribution
costs were 5% higher, with higher marketing and distribution spend in Corn
&
Soybean in NAFTA. Research and development spend increased 9%, 8% at constant
exchange rates, with higher spend on traits development. General and
administrative costs were significantly lower, including higher profit on
disposal of non-current assets and the inclusion in 2005 of costs arising from
the unintended release of Bt10 corn into commercial sale. Restructuring and
impairment in 2006 includes US$32 million of costs relating to the integration
of the 2004 acquisitions and eliminating duplicate administration, plant and
facilities. Restructuring and impairment within cost of goods sold includes
the
final reversal of the purchase accounting inventory step-up for the 2004
acquisitions and the write-off of inventories related to exiting unprofitable
crops and markets.
The
strength of the
US dollar against the Euro, in the key first half selling season reduced
reported sales and largely contributed to an overall US$15 million adverse
impact on Seeds operating income in 2006 relative to 2005.
Plant
Science Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Restructuring
and
impairment
|
|
Before
Restructuring
and
impairment
|
|
|
|
|
|
(US$
million, except growth %)
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
%
Growth Actual
|
|
%
Growth CER
|
|
Sales
|
|
|
2
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Cost
of goods
sold
|
|
|
(2
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
Gross
profit
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
as
a
percentage of sales
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing
and
distribution
|
|
|
(4
|
)
|
|
(4
|
)
|
|
-
|
|
|
-
|
|
|
(4
|
)
|
|
(4
|
)
|
|
-
|
|
|
(7
|
)
|
Research
and
development
|
|
|
(74
|
)
|
|
(100
|
)
|
|
-
|
|
|
-
|
|
|
(74
|
)
|
|
(100
|
)
|
|
26
|
|
|
25
|
|
General
and
administrative
|
|
|
(13
|
)
|
|
(16
|
)
|
|
-
|
|
|
-
|
|
|
(13
|
)
|
|
(16
|
)
|
|
19
|
|
|
19
|
|
Restructuring
and impairment
|
|
|
12
|
|
|
(33
|
)
|
|
12
|
|
|
(33
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Operating
income/(loss)
|
|
|
(79
|
)
|
|
(153
|
)
|
|
12
|
|
|
(33
|
)
|
|
(91
|
)
|
|
(120
|
)
|
|
|
|
|
|
|
as
a
percentage of sales
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Research
and
technology spending was reduced as Syngenta discontinued work on pharmaceutical
compounds, as reported in the 2005 operating and financial review.
The
restructuring
and impairment net gain in 2006 represented the reversal of an onerous contract
provision following the renegotiation of the contract on more favorable terms
than anticipated at the end of 2005.
Defined
Benefit Pensions
Defined
benefit
pension costs decreased from US$125 million in 2005 (including US$20 million
of
restructuring costs) to US$110 million in 2006 (including US$50 million of
restructuring costs, and a US$45 million gain to reflect the change to
Syngenta’s UK pension fund rules that increased the proportion of benefits which
employees can take in the form of a tax free lump sum on retirement). The
restructuring costs in 2006 included the social plan costs associated with
restructuring in Syngenta’s French Crop Protection business and the Crop
Protection product development function in the UK.
During
2006, the
overall pension scheme funded status - the market value of plan assets divided
by the benefit obligation valued using the projected unit credit actuarial
method - improved from 89% to 93%. Bond yields increased compared to December
31, 2005, which reduced the valuation of pension liabilities. Asset returns
for
the three largest funds, which are in the UK, Switzerland and the USA, exceeded
the long-term expected return assumption and contributed to the improved funded
status. These positive developments were partly offset by the change to the
mortality assumptions used to value the UK and Swiss pension liabilities, which
reflect recently available data showing increased longevity. Employer
contributions to defined benefit plans, excluding contributions related to
restructuring and the US$350 million special lump sum contributions to
Syngenta’s UK and US pension funds at the end of 2005, were US$150 million
compared to US$137 million in 2005. The additional US$350 million contributions
have been invested in order to manage plan assets in a manner more closely
related to changes in plan liabilities (“asset liability management”). This
involves the use of interest rate derivatives by pension plans to manage their
exposure to changes in interest rates. Excluding restructuring costs and the
impact of the UK pension fund rule change, defined benefit pension expense
in
2007 is expected to be approximately US$15 million lower than in
2006.
Restructuring
and Impairment
The
following table
analyzes restructuring and impairment charges for each of the periods
indicated:
|
|
2006
|
|
2005
|
|
For
the year to 31 December
|
|
US$
million
|
|
US$
million
|
|
US$
million
|
|
US$
million
|
|
US$
million
|
|
US$
million
|
|
Reversal
of
inventory step-up (in cost of goods sold)
|
|
|
|
|
|
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
(24
|
)
|
Restructuring
costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Write-off
or
impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- property,
plant and equipment
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
- intangible
assets
|
|
|
(46
|
)
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
- other
assets
|
|
|
-
|
|
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
Non-cash
pension restructuring charges
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
Total
non-cash
restructuring charges
|
|
|
|
|
|
(75
|
)
|
|
|
|
|
|
|
|
(30
|
)
|
|
|
|
Cash
costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- operational
efficiency programs
|
|
|
(199
|
)
|
|
|
|
|
|
|
|
(125
|
)
|
|
|
|
|
|
|
- seeds
integration
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
(38
|
)
|
|
|
|
|
|
|
- merger
synergy
program and other cash costs
|
|
|
3
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(232
|
)
|
|
|
|
|
|
|
|
(163
|
)
|
|
|
|
Impairment
of
financial assets
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
(19
|
)
|
|
|
|
Gains
from
product disposals
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(301
|
)
|
|
|
|
|
|
|
|
(212
|
)
|
Total
restructuring and impairment charge
|
|
|
|
|
|
|
|
|
(326
|
)
|
|
|
|
|
|
|
|
(236
|
)
|
Restructuring
represents the effect on reported performance of initiating business changes
which are considered major and which, in the opinion of management, will have
a
material effect on the nature and focus of Syngenta’s operations, and therefore
requires separate disclosure to provide a more thorough understanding of
business performance. Restructuring includes the effects of completing and
integrating significant business combinations and divestments.
Restructuring
and
impairment includes the impairment costs associated with major restructuring
and
also impairment losses and reversals of impairment losses resulting from major
changes in the markets in which a reported segment operates.
Gains
on minor
product divestments associated with range rationalization have been reported
within this category.
In
2006, the
operational efficiency program announced in 2004 continued with the announcement
of a restructuring of the Crop Protection development function, including the
closure of one Crop Protection development site in the UK, partial closure
and
consolidation of development activity at another site and closure or downsizing
of several Field Stations around the world. The announcement gave rise to cash
costs of US$78 million and accelerated amortization charges of US$5 million.
Further cash costs of US$60 million were recorded following the announcements
on
the consolidation and partial closure of activities in two manufacturing sites
in France and Belgium and reductions of sales, marketing and administrative
resources in France.
Continuing
activity
related to restructuring announced prior to 2006 gave rise to cash costs of
US$61 million in Crop Protection operational efficiency programs, and US$36
million in Seeds, mainly for the ongoing integration of the Seeds NAFTA Corn
& Soybean business. Impairments of US$26 million on property, plant and
equipment included accelerated depreciation charges
of
US$22 million
for two sites in NAFTA Crop Protection as well as various other smaller charges.
In addition to the accelerated amortization noted above, intangible asset
impairments relate to a contract termination and the impairment of a supply
agreement.
Restructuring
and
impairment recorded in cost of goods sold in 2006 included the final reversal
of
inventory step-up on the Garst and Golden Harvest acquisitions and the reversal
of the inventory step-up on the Fafard and EGV acquisitions.
In
2005 the
operational efficiency program progressed with the announcement of closure
of
two Crop Protection production sites and the partial closure of another. The
program gave rise to cash costs of US$125 million and asset impairments of
US$25
million in the year. Most of this cost related to the Crop Protection segment,
with US$3 million in Seeds and US$14 million in Plant Science. The integration
of the Garst and Golden Harvest businesses, purchased in 2004, gave rise to
cash
costs of US$38 million in the year. Cost of goods sold was increased by US$24
million due to the reversal of inventory step-up recorded as part of the
acquisition accounting on the purchase of the Garst and Golden Harvest
businesses. The inventory acquired with these businesses was valued at its
fair
value less costs to sell, which was higher than its production cost, hence
the
reversal of this adjustment on the sale of the inventory increased cost of
goods
sold.
The
US$19 million
financial asset impairment in 2005 largely reflects the significant fall in
the
share price of Diversa Corporation, which at that time fell below the original
cost of the shareholding. Subsequent increases in the Diversa share price have
been reported as unrealized gains within shareholders’ equity.
Financial
Expense, net
Net
interest
expense decreased from US$66 million in 2005 to US$53 million in 2006 mainly
due
to a net premium paid in 2005 for the repurchase of a bond liability. Foreign
exchange gains are US$51 million in 2006, compared to a loss of US$14 million
in
2005 largely due to a one-off impact from the restructuring of an over
capitalised British pound sterling balance sheet. There was also a decrease
in
the amortization of option premia.
Taxes
The
overall tax
rate in 2006 was 20%, compared to a rate of 18% in 2005. The tax rate on net
restructuring and impairment costs at 27% was lower than the 33% of 2005. Future
rates will vary depending on the size and nature of restructuring charges and
may vary significantly. Syngenta’s tax rate in 2006 and 2005 was less than the
Swiss statutory tax rate of 25% due in part to income taxed at different rates
and to changes in prior year estimates.
Net
Income
and Other Supplementary Income Data
Net
income in 2006
was US$637 million, with US$634 million attributable to shareholders of Syngenta
AG, compared to US$626 million in 2005, with US$622 million attributable to
shareholders of Syngenta AG. Operating income was lower in 2006 because of
the
higher charges for restructuring and impairment, but this was more than offset
by lower net financial expense, with net income 2% higher than in 2005.
After
related
taxation, restructuring and impairment charges in 2006 were US$238 million
compared to US$157 million in 2005.
Results
of
Operations
2005
Compared to 2004
Sales
commentary
Total
Syngenta
consolidated sales for 2005 were US$8,104 million, compared to US$7,269 million
in 2004, with growth of 11% in US dollars and 9% at constant exchange rates.
Growth of 6% in total sales came from the 2004 Seeds acquisitions which
contributed to sales for the first time in 2005 and 3% from other sales volumes
increases. The analysis by segment is as follows:
(US$
million, except growth %)
|
|
Full
Year
|
|
Growth
|
|
Segment
|
|
2005
|
|
2004
|
|
Actual
%
|
|
CER
%
|
|
Crop
Protection
|
|
|
6,330
|
|
|
6,042
|
|
|
5
|
|
|
3
|
|
Seeds
|
|
|
1,797
|
|
|
1,239
|
|
|
45
|
|
|
42
|
|
Plant
Science
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Inter-segment
elimination
|
|
|
(23
|
)
|
|
(12
|
)
|
|
-
|
|
|
-
|
|
Total
|
|
|
8,104
|
|
|
7,269
|
|
|
11
|
|
|
9
|
|
Sales
by region
were as follows:
(US$
million, except growth %)
|
|
Full
Year
|
|
Growth
|
|
Region
|
|
2005
|
|
2004
|
|
Actual
%
|
|
CER
%
|
|
Europe,
Africa and Middle East
|
|
|
2,973
|
|
|
2,892
|
|
|
3
|
|
|
(1
|
)
|
NAFTA
|
|
|
2,972
|
|
|
2,306
|
|
|
29
|
|
|
28
|
|
Latin
America
|
|
|
1,133
|
|
|
1,103
|
|
|
3
|
|
|
3
|
|
Asia
Pacific
|
|
|
1,026
|
|
|
968
|
|
|
6
|
|
|
5
|
|
Total
|
|
|
8,104
|
|
|
7,269
|
|
|
11
|
|
|
9
|
|
Crop
Protection
Sales
in 2005 were
5% higher than in 2004. The weakness of the US dollar contributed to reported
sales growth despite the US dollar appreciation from June 2005 and, at constant
exchange rates, sales were 3% higher in 2005 than 2004. Sales volumes were
3%
higher in 2005, with local currency prices flat overall. Indications are that
crop protection markets slowed through the course of 2005, particularly in
Latin
America where grower earnings from export crops were impacted by the stronger
Brazilian real. Demand was also reduced in Europe by a cold early season
followed by drought in Southern Europe. In this context, Syngenta’s sales
performances in Latin America and Europe, Africa and Middle East were positive.
Total sales of products launched since 2000 grew by 25%, 23% at constant
exchange rates, with continuing growth in the CALLISTO®
range (US$388
million) and in ACTARA®/CRUISER®
(US$359
million).
Sales
by product
line are set out below.
|
|
Full
Year
|
|
Growth(1 )
|
|
Product
line
|
|
2005
US$
million
|
|
2004
US$
million
|
|
Actual
%
|
|
CER
%
|
|
Selective
herbicides
|
|
|
1,889
|
|
|
1,867
|
|
|
1
|
|
|
(1
|
)
|
Non-selective
herbicides
|
|
|
688
|
|
|
645
|
|
|
7
|
|
|
6
|
|
Fungicides
|
|
|
1,779
|
|
|
1,702
|
|
|
4
|
|
|
2
|
|
Insecticides
|
|
|
1,100
|
|
|
1,049
|
|
|
6
|
|
|
5
|
|
Professional
products
|
|
|
807
|
|
|
720
|
|
|
10
|
|
|
9
|
|
Others
|
|
|
67
|
|
|
59
|
|
|
13
|
|
|
12
|
|
Total
|
|
|
6,330
|
|
|
6,042
|
|
|
5
|
|
|
3
|
|
Selective
Herbicides:
major brands
CALLISTO®
family,
DUAL®/BICEP®
MAGNUM,
ENVOKE®
FUSILADE®
MAX,
TOPIK®
Sales
of selective
herbicides increased by 1%, but were 1% lower at constant exchange rates due
to
lower volumes. The CALLISTO®
range, with
further successful launches in Europe, grew over 30% in the USA, despite an
increase in the acres where genetically modified herbicide tolerant seed was
planted, which reduced the selective herbicide market. CALLISTO®
growth was offset
by a decline in sales of older products such as DUAL®/BICEP®
MAGNUM and
atrazine. Sales of the cereal herbicide TOPIK®
were lower due to
weakness in Western Europe, but continued to grow in Eastern Europe.
Non-selective
Herbicides:
major brands
GRAMOXONE®,
TOUCHDOWN®
Sales
grew by 7%,
6% at constant exchange rates, largely due to higher volumes.
TOUCHDOWN®
sales volumes grew
strongly in the USA, Argentina and Eastern Europe, driven by the launch of
new
brands and marketing programs. GRAMOXONE®
sales were lower
in Southern Europe and in Brazil owing to drought conditions in the first half.
Fungicides:
major brands
ACANTO®,
AMISTAR®,
BRAVO®,
RIDOMIL
GOLD®,
SCORE®,
TILT®,
UNIX®
Fungicide
sales
grew strongly in North America, Eastern Europe and Asia and were 4% higher,
2%
at constant exchange rates, driven by higher volumes. In the USA, the spread
of
the soybean rust fungal disease was less than earlier expectations and the
market proved to be small in 2005, but AMISTAR®,
Syngenta’s
largest fungicide product by sales, showed higher sales from stronger demand
on
nuts, vines, wheat and potatoes. Sales of the cereal fungicide
ACANTO®
grew strongly in
France and SCORE®
sales continued to
expand in the emerging markets in Asia, notably China and Vietnam.
(1) Product
line
variances take into account minor reclassifications made in
2005.
Insecticides:
major brands
ACTARA®,
FORCE®,
KARATE®,
PROCLAIM®,
VERTIMEC®
Insecticide
sales
were 6% higher in 2005, 5% at constant exchange rates, with 4% due to volume
growth and 1% higher local currency prices. Sales growth was driven by strong
performances in the USA and Brazil. In the USA sales of KARATE®
grew significantly
due to an exceptional outbreak of soybean aphids. Sales of FORCE®
were higher from
increased acres treated for corn rootworm. ACTARA®
sales continued to
grow strongly in Brazil and Japan.
Professional
Products:
major brands
CRUISER®,
DIVIDEND®,
HERITAGE®,
ICON®,
MAXIM®
Professional
Product sales were 10% higher in 2005, 9% at constant exchange rates, largely
due to volume growth. Sales growth was driven by Seed Care, with
CRUISER®
growth continuing
above 10%, with particular success on soybeans in the USA. Sales growth was
also
significant in Lawn & Garden markets, particularly on turf, where
HERITAGE®
sales were higher
in the USA and Japan and growth rates were also strong in the developing Home
Care sector.
Commentary
on regional performance
|
|
Full
Year
|
|
Growth
|
|
Regional
|
|
2005
US$
million
|
|
2004
US$
million
|
|
Actual
%
|
|
CER
%
|
|
Europe,
Africa and Middle East
|
|
|
2,283
|
|
|
2,256
|
|
|
1
|
|
|
(2
|
)
|
NAFTA
|
|
|
2,081
|
|
|
1,873
|
|
|
11
|
|
|
10
|
|
Latin
America
|
|
|
1,027
|
|
|
1,020
|
|
|
1
|
|
|
1
|
|
Asia
Pacific
|
|
|
939
|
|
|
893
|
|
|
5
|
|
|
4
|
|
Total
|
|
|
6,330
|
|
|
6,042
|
|
|
5
|
|
|
3
|
|
Sales
in
Europe,
Africa and the Middle East
increased by 1%
due to the weakness of the US dollar and, at constant exchange rates, were
2%
lower due to reduced volumes, though with improvement in the fourth quarter.
Sales in Europe were higher, with continuing growth above 10% in Eastern Europe
offsetting weakness in Western Europe which was partly due to drought in the
early part of the year. The decline in constant currency sales for the region
overall reflected reduced tender sales in Africa and the Middle East due to
increased generic competition.
In
NAFTA,
sales grew 11%,
10% at constant exchange rates, with 8% volume growth and 2% higher local
currency prices. Sales of the CALLISTO®
range again
registered strong growth, with notable impact from the combination product
LEXAR®.
Insecticide sales
also grew strongly, driven by KARATE®
as noted above.
Indications are that Syngenta gained market share in the USA, the world’s
largest agricultural market.
In
Latin
America,
sales grew 1% in
2005 after very strong growth in 2004. Volumes were 2% higher but this was
offset by a 1% US dollar price decline. The market in Brazil was impacted by
the
strength of the real, which reduced commodity crop competitiveness in the key
export sector, and Syngenta’s sales for the year were marginally lower despite a
strong second half performance in insecticides and fungicides.
ACTARA®
market penetration
continued, with sales growth over 30%. Sales in Argentina grew strongly, driven
by TOUCHDOWN®.
Sales
in
Asia
Pacific
grew by 5%, partly
due to the weakness of the US dollar against the South Korean Won. At constant
exchange rates sales were 4% higher with 6% volume growth offset by a 2% decline
in local currency prices. Growth across a number of markets, notably Japan,
India, South Korea, Vietnam and China, more than offset weakness in Australia,
where both volumes and prices were depressed.
Seeds
Sales
were 45%
higher, due in part to the weakness of the US dollar, and at constant exchange
rates sales were up 42%, with volume growth of 33% from the 2004 acquisitions
of
Golden Harvest and Garst, 7% from other volume growth and 2% from local currency
prices.
|
|
Full
Year
|
|
Growth
|
|
Product
line
|
|
2005
US$
million
|
|
2004
US$
million
|
|
Actual
%
|
|
CER
%
|
|
Corn
&
Soybean
|
|
|
880
|
|
|
401
|
|
|
120
|
|
|
117
|
|
Diverse
Field
Crops
|
|
|
301
|
|
|
247
|
|
|
22
|
|
|
16
|
|
Vegetables
|
|
|
384
|
|
|
356
|
|
|
8
|
|
|
6
|
|
Flowers
|
|
|
232
|
|
|
235
|
|
|
(2
|
)
|
|
(4
|
)
|
Total
|
|
|
1,797
|
|
|
1,239
|
|
|
45
|
|
|
42
|
|
Field
Crops
(Corn & Soybean and Diverse Field Crops):
major brands
NK®,
GARST®
and GOLDEN
HARVEST®
corn, and
oilseeds, HILLESHÖG®
sugar
beet.
Corn
&
Soybean
sales more than doubled from the successful integration of the 2004
acquisitions. Sales overall were 120% higher, 117% at constant exchange rates,
with volume growth from the acquisitions approximately 97%, other volumes 18%
higher and local currency prices 2% higher. GOLDEN HARVEST®
and
GARST®
were successfully
integrated and indications are that market share was maintained in the critical
US market. Reported sales were further helped by the holding back of fourth
quarter 2004 deliveries in the USA to align sales closer to grower consumption
for the 2005 season.
In
Diverse Field
Crops, sales were 22% higher, 16% at constant exchange rates, with 5% volume
growth from acquisitions, other volumes up 7% and local currency prices 4%
higher. NK®
sunflower sales
were up strongly due to volume gains in Eastern Europe benefiting from increased
demand for biodiesel. Sugarbeet sales also increased in Europe.
Vegetables
and Flowers:
major brands
S&G®
vegetables,
ROGERS®
vegetables,
S&G®
flowers.
Vegetable
sales for
the year were 8% higher, 6% at constant exchange rates, with volumes 5% higher
and average local currency prices 1% higher. After a slow start to the year
due
to poor weather in Europe, vegetables sales recovered strongly in the second
half. Sales in the emerging markets of Latin America and Asia Pacific continued
to expand rapidly. In fresh produce, sales of watermelon and cantaloupe again
showed strong growth in the USA and initial launches took place in
Europe.
Sales
of
S&G®
flowers were 2%
lower, 4% down at constant exchange rates, with local currency prices up 1%
but
volumes 5% lower in a weak market, though with some recovery in the second
half
of the year.
Commentary
on regional performance
|
|
Full
Year
|
|
Growth
|
|
Regional
|
|
2005
US$
million
|
|
2004
US$
million
|
|
Actual
%
|
|
CER
%
|
|
Europe,
Africa and Middle East
|
|
|
699
|
|
|
641
|
|
|
9
|
|
|
4
|
|
NAFTA
|
|
|
903
|
|
|
437
|
|
|
107
|
|
|
106
|
|
Latin
America
|
|
|
107
|
|
|
86
|
|
|
24
|
|
|
24
|
|
Asia
Pacific
|
|
|
88
|
|
|
75
|
|
|
17
|
|
|
15
|
|
Total
|
|
|
1,797
|
|
|
1,239
|
|
|
45
|
|
|
42
|
|
Sales
in
Europe,
Africa and the Middle East
increased by 9%,
helped by the weakness of the US dollar against the Euro in the first half,
and
at constant exchange rates were 4% higher, with both volumes and local currency
prices up 2%. Sales growth was driven by Diverse Field Crops in Eastern Europe,
which more than offset drought related weakness in Spain.
NAFTA
sales growth of
107%, 106% at constant exchange rates, includes 89% volume growth from the
2004
acquisitions and 17% other volume growth. Local currency prices overall were
flat. The other volume growth included strong sales performances in Corn &
Soybean and in watermelon and cantaloupe sales within Vegetables.
Latin
America
sales were 24%
higher in 2004, with volumes 15% higher and 9% higher US dollar sales prices.
Growth was driven by strong performances in corn and vegetables.
In
Asia
Pacific,
sales increased
by 17%, 15% at constant exchange rates, with 13% from volume and 2% from local
currency prices. Sales were strong in corn and vegetables, particularly in
the
emerging markets of India and Thailand.
Operating
Income
Variances
in the
tables below reflect the profit impact of changes year on year. For example,
an
increase in sales or a decrease in costs is a positive variance and a fall
in
sales or increase in costs is a negative variance.
|
|
Full
Year
|
|
Growth
|
|
Operating
Income by Segment
|
|
2005
US$
million
|
|
2004
US$
million
|
|
Actual
%
|
|
Crop
Protection
|
|
|
996
|
|
|
713
|
|
|
40
|
|
Seeds
|
|
|
17
|
|
|
(20
|
)
|
|
n/a
|
|
Plant
Science
|
|
|
(153
|
)
|
|
(152
|
)
|
|
(1
|
)
|
Inter-segment
profit elimination
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Total
|
|
|
860
|
|
|
541
|
|
|
59
|
|
Operating
income
increased by 59% to US$860 million. Sales increased by 11%, including 2% from
movements in exchange rates and 6% from the 2004 acquisitions. Gross profit
margin reduced by 0.1% with higher margins in the Crop Protection business
offset by lower margins in Seeds, largely due to the purchase accounting
inventory step-up relating to the 2004 acquisitions
and
the higher weighting of lower margin Corn & Soybean following the 2004
acquisitions. Marketing and distribution costs increased by 10%, 9% when
expressed at constant exchange rates, and included the full year impact of
the
acquisitions, which were completed in the second half of 2004. Research and
development costs increased by 2%, but were only 1% higher at constant exchange
rates. Increased research and development costs in Seeds due to the acquisitions
and increased resource in trait development were offset by reduced research
spend in Plant Science benefiting from the restructuring announced in 2004.
General and administrative costs were 14% higher, with 6% from exchange rate
movements largely due to US$36 million lower hedging gains under the EBITDA
(earnings before interest, tax, depreciation and amortization) hedging program
which are reported within this cost category. At constant exchange rates,
general and administrative costs were 8% higher. Ceasing amortization of
goodwill after adoption of IFRS 3 reduced these costs by 9%, but this was offset
by some increase in patent and other litigation expenses and also the costs
of
pro-actively managing the effects of the unintended release of Bt10 corn into
commercial sale, including testing of corn export shipments from the USA.
Restructuring and impairment costs excluding US$24 million charged within Seeds
cost of goods sold, reduced by US$142 million to US$212 million in 2005. These
costs are described in more detail below.
Of
the US$319
million (59%) increase in operating income, lower restructuring and impairment
costs accounted for US$118 million including the Seeds inventory purchase
accounting adjustment. Excluding these costs, operating income increased by
23%.
Ceasing goodwill amortization, noted above, increased reported operating income
by approximately US$56 million. The weaker US dollar in the first half main
selling season, combined with US dollar recovery in the second half reducing
Swiss franc and British pound sterling based costs, increased operating income
by approximately US$48 million despite including lower hedging income from
the
EBITDA hedging program at US$5 million, compared to US$41 million in 2004.
The
EBITDA hedging program is designed to protect anticipated transactions from
adverse movements in exchange rates, using options and forward contracts to
reduce volatility in EBITDA. Operating income in 2005 included US$15 million
gains on disposal of non-current assets (2004: nil) and a non-recurring escrow
refund of US$11 million relating to a 1998 acquisition. These were offset by
increased patent and other litigation expenses and, in addition, the costs
relating to Bt10 corn noted above. Further analysis of operating income is
provided below in the review of segmental performance.
Crop
Protection Operating Income
|
|
Total
|
|
Restructuring
and
impairment
|
|
Before
Restructuring
and
impairment
|
|
|
|
|
|
(US$
million, except growth %)
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|
%
Growth
Actual
|
|
%
Growth
CER
|
|
Sales
|
|
|
6,330
|
|
|
6,042
|
|
|
-
|
|
|
-
|
|
|
6,330
|
|
|
6,042
|
|
|
5
|
|
|
3
|
|
Cost
of goods
sold
|
|
|
(3,033
|
)
|
|
(2,934
|
)
|
|
-
|
|
|
-
|
|
|
(3,033
|
)
|
|
(2,934
|
)
|
|
(3
|
)
|
|
(2
|
)
|
Gross
profit
|
|
|
3,297
|
|
|
3,108
|
|
|
-
|
|
|
-
|
|
|
3,297
|
|
|
3,108
|
|
|
6
|
|
|
4
|
|
as
a
percentage of sales
|
|
|
52
|
%
|
|
51
|
%
|
|
|
|
|
|
|
|
52
|
%
|
|
51
|
%
|
|
|
|
|
|
|
Marketing
and
distribution
|
|
|
(1,106
|
)
|
|
(1,040
|
)
|
|
-
|
|
|
-
|
|
|
(1,106
|
)
|
|
(1,040
|
)
|
|
(6
|
)
|
|
(5
|
)
|
Research
and
development
|
|
|
(509
|
)
|
|
(499
|
)
|
|
-
|
|
|
-
|
|
|
(509
|
)
|
|
(499
|
)
|
|
(2
|
)
|
|
(1
|
)
|
General
and
administrative
|
|
|
(557
|
)
|
|
(539
|
)
|
|
-
|
|
|
-
|
|
|
(557
|
)
|
|
(539
|
)
|
|
(3
|
)
|
|
3
|
|
Restructuring
and impairment
|
|
|
(129
|
)
|
|
(317
|
)
|
|
(129
|
)
|
|
(317
|
)
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Operating
income
|
|
|
996
|
|
|
713
|
|
|
(129
|
)
|
|
(317
|
)
|
|
1,125
|
|
|
1,030
|
|
|
9
|
|
|
6
|
|
as
a
percentage of sales
|
|
|
16
|
%
|
|
12
|
%
|
|
|
|
|
|
|
|
18
|
%
|
|
17
|
%
|
|
|
|
|
|
|
Average
local
currency sales prices were flat in 2005, but volumes increased by 3%. Cost
of
goods sold were 3% higher, but only 2% higher at constant exchange rates despite
being adversely impacted by an estimated US$96 million due to the impact of
higher oil and gas prices. Site and plant closures in the Operational Efficiency
Program, and non-oil savings in raw material and intermediate purchase costs
offset the impact of the higher oil prices. With higher volumes and improved
capacity utilization, gross profit margins improved by around 0.6%, 0.3% at
constant exchange rates.
Marketing
and
distribution costs were reported 6% higher, 5% at constant exchange rates.
Higher volumes increased distribution costs and the stronger Brazilian real
increased costs in Latin America and, by making export crops less competitive,
also triggered some increased provision for doubtful receivables. Research
and
development costs increased by 2% but at constant exchange rates were 1% higher,
with research costs marginally lower following the site rationalization
announced in 2004 and some increase in development spend on growth opportunities
in Professional Products and to accelerate new active ingredients to market.
General and administrative costs were 3% higher, but 3% down at constant
exchange rates when the lower EBITDA hedging income is excluded. Ceasing
goodwill amortization reduced these costs by around 9%, but this was partly
offset by the impact of the stronger real on costs in Latin America and some
increase in litigation costs.
Restructuring
and
impairment is defined in Note 7 to the consolidated financial statements. In
2005 and 2004 these costs largely relate to the Operational Efficiency Program
initiated in February 2004. These costs are described in more detail below.
Operating
income
was 40% higher at US$996 million, with US$188 million from lower restructuring
and impairment charges. Excluding the lower restructuring and impairment,
operating income was 9% higher.
The
US dollar was
weak in the important first half sales season, increasing reported sales and
was
stronger in the second half, reducing reported costs from the Swiss franc and
British pound sterling cost base, so despite lower hedging income, the net
effect of exchange rate movements increased operating income by an estimated
US$32 million.
Seeds
Operating Income
|
|
Total
|
|
Restructuring
and impairment
|
|
Before
Restructuring
and
impairment
|
|
|
|
|
|
(US$
million, except growth %)
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|
%
Growth
Actual
|
|
%
Growth
CER
|
|
Sales
|
|
|
1,797
|
|
|
1,239
|
|
|
-
|
|
|
-
|
|
|
1,797
|
|
|
1,239
|
|
|
45
|
|
|
42
|
|
Cost
of goods
sold
|
|
|
(940
|
)
|
|
(610
|
)
|
|
(24
|
)
|
|
-
|
|
|
(916
|
)
|
|
(610
|
)
|
|
(50
|
)
|
|
(48
|
)
|
Gross
profit
|
|
|
857
|
|
|
629
|
|
|
(24
|
)
|
|
-
|
|
|
881
|
|
|
629
|
|
|
40
|
|
|
37
|
|
as
a
percentage of sales
|
|
|
48
|
%
|
|
51
|
%
|
|
|
|
|
|
|
|
49
|
%
|
|
51
|
%
|
|
|
|
|
|
|
Marketing
and
distribution
|
|
|
(408
|
)
|
|
(339
|
)
|
|
-
|
|
|
-
|
|
|
(408
|
)
|
|
(339
|
)
|
|
(20
|
)
|
|
(19
|
)
|
Research
and
development
|
|
|
(213
|
)
|
|
(186
|
)
|
|
-
|
|
|
-
|
|
|
(213
|
)
|
|
(186
|
)
|
|
(15
|
)
|
|
(14
|
)
|
General
and
administrative
|
|
|
(169
|
)
|
|
(99
|
)
|
|
-
|
|
|
-
|
|
|
(169
|
)
|
|
(99
|
)
|
|
(71
|
)
|
|
(67
|
)
|
Restructuring
and impairment
|
|
|
(50
|
)
|
|
(25
|
)
|
|
(50
|
)
|
|
(25
|
)
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Operating
income
|
|
|
17
|
|
|
(20
|
)
|
|
(74
|
)
|
|
(25
|
)
|
|
91
|
|
|
5
|
|
|
n/a
|
|
|
n/a
|
|
as
a
percentage of sales
|
|
|
1
|
%
|
|
(2
|
%)
|
|
|
|
|
|
|
|
5
|
%
|
|
-
|
|
|
|
|
|
|
|
Sales
were
significantly increased by the acquisitions of Golden Harvest and Garst
completed in 2004, which had their first significant impact on sales in 2005.
Local currency prices were overall 2% higher but margins declined by
approximately 3% due to the US$24 million reversal of the purchase accounting
inventory step-up and higher weighting of lower margin Corn & Soybean
following the 2004 acquisitions and some price pressure in fresh produce in
the
USA. Marketing and distribution costs were reported 20% higher, 19% higher
at
constant exchange rates, largely due to the acquisitions which were completed
in
the second half of 2004. Research and development costs increased by 15%, 14%
at
constant exchange rates, again largely due to the acquisitions but also with
some increased spend on new trait development. General and administrative costs
were 71% higher, 67% when expressed at constant exchange rates, with
approximately 16% due to the costs in the acquired companies but including,
in
addition, increased litigation costs, largely related to patents, and also
the
costs arising from the unintended release of Bt10 corn into commercial sale,
which Syngenta managed pro-actively. Syngenta introduced testing of export
corn
shipments from the US for the period when Bt10 contaminated corn may be in
the
corn supply channels. Restructuring and impairment in addition to the purchase
accounting adjustment noted above, included US$38 million costs of integrating
the 2004 acquisitions and eliminating duplicated administration and facilities.
Restructuring and impairment also included costs from the Operational Efficiency
Program from the outsourcing of certain back-office activities and the write-off
of inventories related to exiting unprofitable crops and markets.
Weakness
in the US
dollar in the first half contributed an additional US$15 million to Seeds
operating income in 2005 relative to 2004.
Plant
Science Operating Income
|
|
Total
|
|
Restructuring
and
impairment
|
|
Before
Restructuring
and
impairment
|
|
|
|
|
|
(US$
million, except growth %)
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|
%
Growth
Actual
|
|
%
Growth
CER
|
|
Sales
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Cost
of goods
sold
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
as
a
percentage of sales
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Marketing
and
distribution
|
|
|
(4
|
)
|
|
(3
|
)
|
|
-
|
|
|
-
|
|
|
(4
|
)
|
|
(3
|
)
|
|
(33
|
)
|
|
(33
|
)
|
Research
and
development
|
|
|
(100
|
)
|
|
(124
|
)
|
|
-
|
|
|
-
|
|
|
(100
|
)
|
|
(124
|
)
|
|
19
|
|
|
20
|
|
General
and
administrative
|
|
|
(16
|
)
|
|
(13
|
)
|
|
-
|
|
|
-
|
|
|
(16
|
)
|
|
(13
|
)
|
|
(23
|
)
|
|
(34
|
)
|
Restructuring
and impairment
|
|
|
(33
|
)
|
|
(12
|
)
|
|
(33
|
)
|
|
(12
|
)
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Operating
income/(loss)
|
|
|
(153
|
)
|
|
(152
|
)
|
|
(33
|
)
|
|
(12
|
)
|
|
(120
|
)
|
|
(140
|
)
|
|
14
|
|
|
14
|
|
as
a
percentage of sales
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Small
sales of the
QUANTUM®
enzyme were made
in Mexico, with registration pending in the USA. Research and technology
spending was 19% lower, 20% at constant exchange rates, following the
restructuring of the research sites initiated in 2004, which included focusing
biotechnology activities at the Research Triangle Park facility in North
Carolina. Higher general and administrative costs largely related to the costs
of increased scouting for acquisition targets.
Work
on
plant-produced pharmaceutical compounds progressed in 2005 to the stage of
clinical trials. However, in view of the extended time lines and associated
costs of full commercialization, Syngenta decided at the end of 2005 to seek
third parties to take these projects through development to commercial launch.
Restructuring and impairment costs included charges for this exit. In addition,
the market value of shares held in Diversa Corporation fell significantly below
cost and an impairment of approximately US$17 million was recognized. In 2004
the restructuring charge of US$12 million related to the rationalization of
the
research sites under which biotechnology research was concentrated in the USA,
as noted above.
Defined
Benefit Pensions
Defined
benefit
pension costs decreased from US$221 million in 2004 (including US$95 million
of
restructuring costs) to US$125 million in 2005 (including US$20 million of
restructuring costs). The restructuring costs in 2004 included the one-off
transition costs of moving to a new scheme in Switzerland that, whilst
continuing to be accounted for as a defined benefit scheme, has several of
the
characteristics of a defined contribution scheme, which in particular reduces
the costs associated with early retirement. Excluding the costs associated
with
restructuring, defined benefit costs reduced by US$21 million in 2005 compared
to 2004. This was mainly due to a favorable currency translation effect of
US$10
million on costs of plans outside the USA due to the stronger US dollar, and
to
a non-recurring gain of US$10 million caused by the change in the rules of
Syngenta’s Dutch pension plan. The underlying level of defined benefit cost
remained similar to that in 2004.
During
2005, as in
2004, actual investment returns exceeded the long-term assumed rate of return.
Employer contributions to defined benefit schemes, excluding contributions
related to restructuring, increased from US$144 million in 2004 to US$487
million in 2005. This included US$350 million of special lump sum contributions
in respect of Syngenta’s UK and US pension funds, which were in addition to the
recurring contributions (US$85 million for these two funds) also made in 2005.
These special contributions were voluntary and Syngenta decided to make the
special contributions in 2005 in order to improve the funded status of these
two
funds.
Restructuring
and Impairment
The
following table
analyzes restructuring and impairment charges for each of the periods
indicated:
|
|
2005
|
|
2004
|
|
For
the year to 31 December
|
|
US$
million
|
|
US$
million
|
|
US$
million
|
|
US$
million
|
|
Reversal
of
inventory step-up (in cost of goods sold)
|
|
|
|
|
|
(24
|
)
|
|
|
|
|
|
|
Restructuring
costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Write-off
or
impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
property,
plant and equipment
|
|
|
(22
|
)
|
|
|
|
|
(132
|
)
|
|
|
|
-
intangible
assets
|
|
|
-
|
|
|
|
|
|
(1
|
)
|
|
|
|
-
other
assets
|
|
|
(8
|
)
|
|
|
|
|
(1
|
)
|
|
|
|
Non-cash
pension restructuring charges
|
|
|
-
|
|
|
|
|
|
(50
|
)
|
|
|
|
Total
non-cash restructuring charges
|
|
|
|
|
|
(30
|
)
|
|
|
|
|
(184
|
)
|
Cash
costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
operation
efficiency
|
|
|
(125
|
)
|
|
|
|
|
(136
|
)
|
|
|
|
-
seeds
integration
|
|
|
(38
|
)
|
|
|
|
|
(16
|
)
|
|
|
|
-
merger
synergy program and other cash costs
|
|
|
-
|
|
|
|
|
|
(19
|
)
|
|
|
|
Impairment
of
financial assets
|
|
|
|
|
|
(19
|
)
|
|
|
|
|
-
|
|
Gains
from
product disposals
|
|
|
|
|
|
-
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
restructuring and impairment charge
|
|
|
|
|
|
(236
|
)
|
|
|
|
|
(354
|
)
|
In
2005, as part of
the Operational Efficiency Program, the closure of two Crop Protection
production sites and partial closure of another were announced. In total, cash
costs of US$125 million, inventory write-offs of US$3 million and impairments
of
property, plant and equipment of US$22 million have been triggered by
operational efficiency initiatives in 2005. The Seeds
NAFTA
Corn and
Soybean business continued its restructuring program to integrate the Golden
Harvest and Garst acquisitions, recording cash costs of US$38 million in 2005.
Purchase
accounting
rules require the book value of acquired finished goods inventories to be
stepped up to fair value less costs to sell, with a corresponding reduction
in
goodwill. The stepped-up amount is expensed as the acquired inventories are
sold. This adjustment does not affect cash flows, and inventories produced
after
the acquisition date are valued at their production
cost.
US$24 million of the US$31 million inventory step-up arising from the Golden
Harvest and Garst acquisition accounting was charged to cost of goods sold
in
2005.
The
US$19 million
financial asset impairment largely reflected the significant fall in the share
price of Diversa Corporation, which as at December 31, 2005, was below the
original cost of the shareholding.
In
2004,
restructuring and impairment related mainly to the Operational Efficiency
program announced in that year. The closure of three Crop Protection production
sites were announced together with the rationalization of two further sites.
A
further focusing of research activities, including the closure of one site,
was
also announced.
The
Seeds NAFTA
Corn & Soybean business, within Field Crops, initiated a restructuring
program to integrate the Garst and Golden Harvest acquisitions. In addition,
the
final costs of the merger and integration program announced at the formation
of
Syngenta in November 2000, largely associated with the closure of two crop
protection production sites, were also charged in 2004.
Cash
costs of
US$171 million and asset impairments of US$134 million were recorded in 2004
for
these restructuring initiatives. In addition, as part of the Operational
Efficiency Program, the rules of Syngenta’s Swiss pension fund were amended in
April 2004, so that whilst it continues to be accounted for as a defined benefit
plan, there is increased sharing of risks with the employee members against
a
one-time non-cash transition charge of US$60 million. This change will reduce
the expense related to early retirement in future years and reduces Syngenta’s
exposure to pension fund investment returns. This charge was partially offset
by
a US$10 million favorable non-cash impact of pension fund curtailments
associated with restructuring.
Financial
Expense, net
Interest
expense
net of interest income increased from US$42 million in 2004 to US$66 million
in
2005 largely due to premium costs incurred in the partial tender to repurchase
Syngenta’s €800 million 2006 Eurobond in April 2005. The additional premium
paid, offset by gains on the termination of associated hedges, was US$16
million. Average working capital levels were higher in 2005 than 2004 due to
selective increases in trade credit and this, combined with rising short term
interest rates, also increased net interest expense. Net currency hedging costs
were US$4 million higher than 2004 due in part to the timing of amortization
of
option premia for the EBITDA hedging program. The net result of currency gains
and losses from balance sheet exposures and related hedging program was a small
gain at a similar level to 2004.
Taxes
The
overall tax
rate in 2005 was 18% compared to negative 15%, with profits after tax higher
than profit before tax, in 2004. The tax rate on net restructuring and
impairment costs of 33% was lower than the 38% of 2004, and future rates will
be
very dependent on the nature of restructuring charges and may vary
significantly. The tax charge in 2004 included a tax credit of US$139 million
from the recognition of relief on tax losses following corporate restructuring.
Whilst Syngenta continues efforts to utilize tax losses carried forward to
reduce the tax charge, including US$12 million in 2005 as shown in Note 8 to
the
consolidated financial statements, the recognition in 2004 was unusually large.
Net
Income
and Other Supplementary Income Data
Net
income in 2005
was US$626 million, with US$622 million attributable to shareholders of Syngenta
AG, compared to US$428 million in 2004, with US$460 million attributable to
shareholders of Syngenta AG. Syngenta adopted IFRS 3 in 2005 and ceased the
amortization of goodwill. Goodwill amortization charged in 2004 was US$56
million. In addition, 2004 net income attributable to Syngenta AG included
a
loss on discontinued activities of US$83 million related to the disposal of
Syngenta’s 75% interest in SF Chem AG. Restructuring and impairment costs were
higher in 2004 at US$354 million compared to US$212 million in 2005 as described
above. After related taxation, restructuring and impairment costs were US$157
million in 2005 compared to US$219 million in 2004. As noted above, tax costs
in
2004 were net of approximately US$139 million recognition of relief on tax
losses after corporate restructuring.
Foreign
Operations and Foreign Currency Transactions
Syngenta’s
subsidiaries use their local currency as their functional currency for
accounting purposes except where the use of a different currency more fairly
reflects their actual circumstances.
The
Argentine peso
is the functional currency of Syngenta’s subsidiaries in Argentina. In February
2002, the government in Argentina announced several reforms intended to
stabilize the economic environment. These included redenominating all
outstanding
receivables denominated in US dollars into Argentine pesos. This affected
Syngenta’s currency exposure profile. In response, Syngenta applied additional
credit restrictions and altered local financing arrangements to reduce further
its exposure to peso currency risk. Future exchange rates for the peso and
future government actions remain uncertain and Syngenta is not able to estimate
their effects.
The
Brazilian real
is the functional currency of Syngenta’s subsidiaries in Brazil. During 2002 the
Brazilian real devalued significantly against the US dollar whereas between
2003
and 2006 it significantly appreciated in value. To reduce its exposure to risks
associated with the real, Syngenta has altered local financing arrangements,
applied credit restrictions to customers, implemented programs to protect the
US
dollar value of trade receivables from customers and has fully hedged its
balance sheet exposure using currency derivatives. Sales to customers in Brazil
must be invoiced in Brazilian real to meet local legal requirements. The extent
to which sales prices in Brazilian real can be increased to offset the effect
of
any future devaluation remains uncertain. Appreciation of the Brazilian real
results in customers who sell their produce in US dollars receiving lower
amounts of Brazilian reals, which may adversely impact Syngenta’s discounts and
allowances or its ability to collect receivables in full. Syngenta is not able
to estimate the effect of any future depreciation or appreciation of the
Brazilian real on operating income in future periods.
Liquidity
and Capital Resources
Syngenta’s
principal sources of liquidity consist of cash generated from operations. In
the
period 2004 to 2006, this has been more than sufficient to cover cash used
for
investment activities and, except for any significant business acquisitions,
this is also expected to be the case in 2007. Working capital fluctuations
are
supported by short term funding available through Commercial Paper and credit
facilities. Longer term capital resources include unsecured non current bonds
issued under the Euro Medium Term Note (EMTN) program and unsecured non current
Notes issued under a Note Purchase Agreement in the US Private Placement market.
Syngenta reported cash and cash equivalents on December 31, 2006, 2005 and
2004
of US$445 million, US$458 million and US$227 million respectively. At December
31, 2006, 2005 and 2004, Syngenta had current financial debts of US$143 million,
US$514 million and US$423 million respectively, and non-current financial debts
of US$1,569 million, US$847 million and US$1,117 million, respectively.
Capital
markets and credit facilities
Funds
for
Syngenta’s working capital needs were available during the year from its
US$2,500 million Global Commercial Paper program supported by a US$1,200 million
committed, revolving, multi-currency, syndicated credit facility. Syngenta
entered into its Global Commercial Paper program on December 15, 2000 and as
at
December 31, 2006, Syngenta had no Commercial Paper in issue. The US$1,200
million syndicated credit facility (the “Credit Facility”) was signed in July
2006 and will mature in July 2013. This Credit Facility replaces the US$1,500
million Credit Facility signed in August 2004. During 2006, no amounts were
drawn and as of December 31, 2006 Syngenta had no borrowings under the Credit
Facility. There are no material restrictions on dividends from subsidiaries
under this facility.
On
April 22, 2005
Syngenta executed a public tender offer for its outstanding €800 million 5 year
Eurobonds maturing in 2006. €581 million of the outstanding bonds were
repurchased. The remaining nominal value outstanding of €219 million was repaid
on July 10, 2006. On September 21, 2006, Syngenta issued a new €500 million
Eurobond with a maturity of September 21, 2011 and a coupon rate of 4.125%.
At
issue these liabilities had a value of US$636 million. At the same time a new
designated hedging portfolio was set up.
The
table below
summarizes Syngenta’s unsecured notes in issuance at December 31,
2006.
|
|
Fair
Value
US$
million
|
|
Carrying
amount
US$
million
|
|
Value
at issue
US$
million
|
|
4.125%
Eurobond 2011
|
|
|
651
|
|
|
657
|
|
|
636
|
|
4.125%
Eurobond 2015
|
|
|
640
|
|
|
646
|
|
|
641
|
|
5.110%
US
private placement 2020
|
|
|
71
|
|
|
78
|
|
|
75
|
|
5.350%
US
private placement 2025
|
|
|
71
|
|
|
75
|
|
|
75
|
|
5.590%
US
private placement 2035
|
|
|
96
|
|
|
100
|
|
|
100
|
|
Total
|
|
|
1,529
|
|
|
1,556
|
|
|
1,527
|
|
The
two Eurobonds
that are currently outstanding have been issued under Syngenta’s US$2 billion
Euro Medium Term Note (EMTN) program, first signed in June 2003. The program
was
updated on August 18, 2006 and is listed on the London Stock Exchange and the
SWX Swiss Exchange.
The
company’s
policy is to maintain flexibility in its funding by accessing the capital
markets and by maintaining a committed bank facility, local bank facilities
and
Commercial Paper program. The cost of borrowing from these facilities is related
to the cost of borrowing on the London and European inter-bank markets, and
Syngenta’s credit rating.
Management
is of
the opinion that the funding available to it from these sources will be
sufficient to satisfy its working capital, capital expenditure and debt service
requirements for the foreseeable future, including cash expenditure relating
to
restructuring programs.
Commitments
for
capital expenditure at December 31, 2006 were US$23 million.
Financial
Results
The
following table
sets out certain information about cash flow for each of the periods
indicated:
|
|
Year
ended December 31,
|
|
|
|
2006
US$
million
|
|
2005
US$
million
|
|
2004
US$
million
|
|
Cash
flow
from operating activities
|
|
|
928
|
|
|
497
|
|
|
1,309
|
|
Cash
flow
used for investing activities
|
|
|
(411
|
)
|
|
(144
|
)
|
|
(686
|
)
|
Cash
flow
used for financing activities
|
|
|
(541
|
)
|
|
(74
|
)
|
|
(679
|
)
|
Cash
Flow
from Operating Activities
2006
compared to 2005
Cash
flow from
operating activities increased from US$497 million in 2005 to US$928 million
in
2006 due mainly to lower contributions to pension funds, following the US$350
million additional injection in 2005. Other favorable movements included: higher
interest and other financial receipts and lower working capital outflow. Cash
inflows from realized gains on hedges of internal funding within interest and
other financial receipts, were greater in 2006 than in 2005. Cash outflows
for
working capital decreased in 2006 due to lower build up of inventory and trade
receivables, partially offset by a reduction in trade payables.
2005
compared to 2004
Cash
flow from
operating activities in 2005 was US$812 million lower than in 2004. Income
before taxes was US$300 million higher in 2005, but this includes lower non-cash
items than 2004, particularly charges in respect of restructuring provisions
and
restructuring related impairments of property, plant and equipment. In December
2005 Syngenta paid additional pension contributions of US$350 million, bringing
total contributions excluding restructuring in 2005 to US$487 million compared
to US$144 million in 2004. In 2005, change in net current assets was an outflow
of US$210 million, compared to an inflow in 2004 of US$255 million. In 2004,
significant customer advance payments were received for the first time in part
of the Seeds business, reducing net current assets. The repeat of this advance
payment program in 2005 only maintains current assets. In addition, Crop
Protection inventory levels were increased in 2005 to meet possible demand
relating to soybean rust in the USA and to minimize supply disruption from
the
re-siting of manufacture of certain products related to site closures. Net
financial expense outflows were higher in 2005 than in 2004, largely due to
the
higher income statement charge noted above and also the realization in 2004
of
hedging gains on the balance sheet hedging program offsetting unrealized losses
on internal funding, which were not as significant in 2005.
Cash
Flow
used for Investing Activities
2006
compared to 2005
In
total, cash
flows used for investing activities increased by US$267 million from 2005 to
2006. Additions to property, plant and equipment in 2006 were higher than 2005
by US$43 million, but continued to be less than depreciation. Investment of
US$100 million was made during 2006 in a portfolio of marketable securities,
including commercial paper and bond instruments. Spend on business acquisitions
in 2006 was a total of US$148 million. No material business acquisitions were
completed in 2005 for cash. Cash flow used for investing activities in 2007
is
currently expected to include expenditure on property, plant and equipment
at
close to depreciation. Proceeds from disposals will include the sale of part
of
Syngenta’s Rosental site in Basel as noted below in Future
Prospects.
2005
compared to 2004
The
cash used for
investing activities in 2005 was US$542 million lower than in 2004. Business
acquisitions in 2004, largely comprising the acquisitions of the Golden Harvest
and Garst Seeds businesses, totalled US$479 million. Additions to property,
plant and equipment were at a similar level in 2005 to 2004 and remained
significantly below the level of depreciation. Purchase of intangibles,
investments in associates and financial fixed assets in 2005 included US$16
million for the purchase of software, whilst 2004 included the acquisition
of
germplasm and glyphosate tolerance technology for the corn seed business
totalling US$60 million.
Cash
Flow
used for Financing Activities
2006
compared to 2005
In
July 2006 the
remaining €219 million of the €800 million 5.5% 2006 Eurobond, matured and was
repaid. In September 2006, a new €500 million 4.125% 2011 Eurobond was issued.
Distributions to shareholders through par value reduction increased a further
US$53 million in 2006 to US$260 million. Syngenta repurchased 3.3 million shares
as a result of the put options granted to shareholders in February 2006. Total
cash outflow for share repurchases in 2006, net of treasury share sales to
meet
exercises of share options granted in employee share schemes, were greater
than
2005 by US$374 million.
2005
compared to 2004
In
April 2005, €581
million of the €800 million 5.5% 2006 Eurobond were repurchased via a tender
offer and cancelled. In April, Syngenta also issued a €500 million 4.125% 10
year bond and in December 2005 raised US$250 million through US private
placements with maturities of 15, 20 and 30 years. Dividends per share, paid
by
way of a par value reduction, were increased by nearly 60% in Swiss francs
compared to 2004 and dividends paid increased by US$65 million to US$207
million. The share repurchase program started in 2004 was continued and 2.3
million shares were repurchased at a cost of approximately US$251 million,
which
was then partly offset by the sale of treasury shares to meet exercises of
share
options granted in employee share schemes.
Research
and Development (R&D)
Syngenta
has major
research centers in Basel and Stein, Switzerland; Jealott’s Hill, England; and
Research Triangle Park, North Carolina, USA.
There
are two
principal elements to Syngenta research and development. The first is to develop
new products and technologies. The second is to support existing products:
extending their uses, improving their performance and monitoring their long-term
environmental profile and safety.
To
enable the
development of safe and effective solutions which enhance sustainable farming
systems, Syngenta organizes its R&D activities around five core technology
programs: Crop Protection Research; Crop Protection Development; Crop Genetics
Research; Plant Science Development; and Health Assessment and Environmental
Safety. These are closely integrated to increase the overall capacity, to
discover new active ingredients and provide practical routes to novel crop
varieties.
Syngenta
development scientists work to establish the biological potential of lead
research compounds, obtain product registrations and bring plant varieties
to
the market that meet the needs of farmers, as well as their customers in the
food supply chain.
Development
involves extensive field tests as part of the health and environmental safety
evaluation to ensure that products meet rigorous standards around the world.
Development activities also include the improvement of production processes
for
new active ingredients and formulations.
In
Seeds, new
varieties and hybrids are developed using a number of advanced breeding methods,
including marker-assisted breeding, together with conventional skills that
improve the success rate of breeding programs.
This
year has seen
a continuation of the program of streamlining and restructuring across the
various R&D sites announced in 2004. Construction is underway at the Stein
site, which will expand to include chemistry as well as biology, and a Seed
Care
Institute. On completion of this work, anticipated in late 2007, the Basel
chemistry facility will close. In November 2006, the new chemistry centre in
Goa, India was opened, which will focus on cost efficient synthesis at
laboratory and field scale.
In
2006, a further
restructuring announcement was made in the Crop Protection Development area
including the closure of one Crop Protection Development site, downsizing and
consolidation of product safety activity at Jealott’s Hill , UK, and closure or
downsizing of several Field Stations around the world.
The
total spent on
research and development was US$796 million in 2006, US$822 million in 2005
and
US$809 million in 2004. Attribution of research and development costs for 2006
was US$490 million for Crop Protection, US$232 million for Seeds and US$74
million in Plant Science. In 2005 the attribution was US$509 million for Crop
Protection, US$213 million for Seeds and US$100 million for Plant Science.
In
2004 the attribution was US$499 million for Crop Protection, US$186 million
for
Seeds and US$124 million for Plant Science.
In
addition to
Syngenta’s own research and development efforts, Syngenta has also entered into
a number of alliances and research and development agreements.
There
are no
off-balance sheet financing transactions associated with research and
development activity.
Contractual
Obligations, Commitments and Contingent Liabilities
At
December 31,
2006 Syngenta had the following contractual obligations to make future payments
in the following periods:
|
|
|
|
Payments
due by period
|
|
US$
million
|
|
Notes
to the financial statements reference
|
|
Total
|
|
Less
than
1
year
|
|
1
-
3
years
|
|
3
-
5
years
|
|
5
-
10
years
|
|
10
-
20
years
|
|
20
-
30
years
|
|
Financial
debt
|
|
|
19,21
|
|
|
1,712
|
|
|
143
|
|
|
4
|
|
|
657
|
|
|
655
|
|
|
153
|
|
|
100
|
|
Interest
on
financial debt
|
|
|
|
|
|
673
|
|
|
68
|
|
|
136
|
|
|
136
|
|
|
176
|
|
|
107
|
|
|
50
|
|
Payments
under onerous contracts included within restructuring
provisions
|
|
|
23
|
|
|
8
|
|
|
8
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Operating
lease payments
|
|
|
30
|
|
|
83
|
|
|
19
|
|
|
37
|
|
|
7
|
|
|
20
|
|
|
-
|
|
|
-
|
|
Unconditional
purchase obligations
|
|
|
30
|
|
|
496
|
|
|
222
|
|
|
210
|
|
|
17
|
|
|
47
|
|
|
-
|
|
|
-
|
|
Long-term
research agreements
|
|
|
30
|
|
|
40
|
|
|
38
|
|
|
2
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Other
long-term commitments
|
|
|
30
|
|
|
27
|
|
|
24
|
|
|
2
|
|
|
1
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
3,039
|
|
|
522
|
|
|
391
|
|
|
818
|
|
|
898
|
|
|
260
|
|
|
150
|
|
Of
the total
financial debt, floating rate financial debt is US$156 million (mainly local
bank loans and overdraft facilities), US$143 million of which is due within
one
year. No interest obligation in respect of this debt is included in the table
above. There is no contractual obligation to renew this debt. The debt amount,
and the interest payments associated with it, will vary over time according
to
Syngenta’s funding requirements and future interest rates.
Fixed
rate debt of
US$1,556 million is comprised primarily of the outstanding Eurobonds and US
private placement notes. Fixed rate interest payments of US$673 million on
these
are included above. At December 31, 2006, US$393 million of this long-term
debt
is converted to floating rate debt through derivatives. The impact of these
derivatives on the interest cash flows has not been included in the above table
as they can result in cash payments or receipts depending on the market position
at any given time.
Except
for the
provision for payments under onerous contracts described above, US$1,175 million
of provisions for long-term liabilities shown in Syngenta’s consolidated balance
sheet have not been included in the above table because the timing of their
payment is not contractually fixed and cannot be estimated with sufficient
certainty within the context of the time periods in the table. This applies
particularly to those amounts which are not expected to be paid during 2007.
Note 22 to the consolidated financial statements indicates Syngenta’s estimate
that US$282 million of long-term provisions are expected to be paid during
2007,
including US$8 million of onerous contract provisions which are included in
the
above table.
The
supply
agreements for materials which give rise to the unconditional purchase
obligations are entered into by Syngenta to ensure availability of materials
which meet the specifications required by Syngenta. Where suppliers have made
significant capital investment, these agreements generally provide for Syngenta
to pay penalties in the event that it were to terminate the agreements before
their expiry dates.
The
rules of
Syngenta’s main Swiss defined benefit pension fund commit Syngenta to
contributing a fixed percentage of employees’ pensionable pay to the fund. Under
the regulations which apply to Syngenta’s main UK defined benefit pension fund,
Syngenta must commit to pay contributions according to a schedule which it
agrees in advance with the Trustees. The existing schedule requires payment
based on a percentage of pensionable pay, plus a fixed amount over a fixed
number of years to eliminate the deficit in the fund. The expected contributions
payable by Syngenta in 2007 to meet its commitments under the above arrangements
are included in the amount of US$190 million given in the disclosures for
employee benefit plans in Note 27 to the consolidated financial statements.
As
expected contributions payable in 2007 and later years are subject to greater
uncertainty, future contributions have not been included in the above
table.
Off-balance
Sheet Arrangements
Syngenta
had no
off-balance sheet arrangements as at December 31, 2006, other than the above
contractual obligations, commitments and contingent liabilities, and the
off-balance sheet financing described in Note 32 to the financial statements.
Syngenta has no unconsolidated special purpose entities that are likely to
create material contingent obligations.
Variable
Interest Entities (VIEs)
Syngenta
had no
significant variable interests in any VIEs as at December 31, 2006, other than
as disclosed in Note 34 to the financial statements.
US
GAAP
Syngenta’s
financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS), which differ in certain significant
respects from US GAAP. Note 34 of the consolidated financial statements
describes in detail the amount and nature of these differences.
Certain
sales which
have been recognized on product delivery for IFRS have been treated as “de
facto” consignment sales for US GAAP. The effect on 2006 net income was to
reduce US GAAP net income by US$1 million compared to IFRS. Further details
are
given in Note 34 to the consolidated financial statements.
For
the year ended
December 31, 2006, net income attributable to Syngenta AG shareholders was
US$634 million in accordance with IFRS, and US$504 million in accordance with
US
GAAP. The major reconciling items were:
—
|
US
GAAP net
income was US$30 million higher compared to IFRS in respect of Zeneca
agrochemicals purchase accounting (2005: US$7 million lower; 2004:
US$62
million higher). The 2004 adjustment included US$38 million reversal
of
IFRS amortization expense. There is no equivalent to this for 2005
and
2006 because goodwill is no longer amortized for IFRS with effect
from
January 1, 2005. The 2004 adjustment also included a US$19 million
adjustment to impairment losses because US GAAP property, plant and
equipment book values for assets impaired by restructuring plans
were
lower than the corresponding IFRS amounts. The US GAAP impairment
loss was
therefore also lower by this amount. The 2005 adjustment included
the
reversal of the US$12 million ISK escrow refund received in 2005
which is
included in IFRS net income but is considered part of Zeneca agrochemicals
purchase accounting for US GAAP. The 2006 adjustment includes the
reversal
of the US$24 million IFRS net book value of the ACANTO®
product
rights which were not recognized under US GAAP purchase accounting
rules,
so that there is no corresponding US GAAP charge to write off this
amount
on their disposal.
|
—
|
US
GAAP net
income was US$85 million lower compared to IFRS (2005: US$85 million;
2004: US$88 million) in respect of Ciba-Geigy purchase accounting,
due to
the amortization of Ciba-Geigy intangible assets, which were recorded
at
fair value for US GAAP under purchase accounting, but not recorded
for
IFRS under uniting of interests
accounting.
|
—
|
2006
US GAAP
net income was US$13 million lower compared to IFRS in respect of
inventories. In accordance with IAS 2, valuation allowances for inventory
are reversed by crediting the IFRS income statement when, in a subsequent
period, the estimated net realizable value of the inventory has increased
because of favourable changes in market conditions since the allowances
were recorded. US GAAP does not permit the reversal of inventory
valuation
allowances to income until the related inventories have been
sold.
|
—
|
US
GAAP net
income was US$26 million higher compared to IFRS (2005: US$33 million
lower; 2004: US$61 million lower) due to the use of different tax
rates to
measure the deferred tax effect of unrealized profit eliminated from
inventories. The tax effect for IFRS is based on the tax rates of
the
countries where the inventories are currently held, whereas for US
GAAP it
is based on the tax rates of the countries where the unrealized profit
was
originally recorded. During 2005, the amount of unrealized profit
in
inventories increased significantly, leading to additional US GAAP
adjustments to net income for the tax rate differential, whereas
in 2006
the unrealized profit in inventory
reduced.
|
—
|
US
GAAP net
income was US$9 million lower compared to IFRS in respect of restructuring
costs (2005: US$9 million lower; 2004: US$47 million higher). SFAS
No. 146
requires that where redundant employees are retained for longer than
a
minimum period, termination costs and provisions are recognized rateably
over the employees’ remaining service, whereas for IFRS they are
recognized as soon as the affected employees have a valid expectation
of
receiving termination payments. In 2004, costs recognized for IFRS
were
greater than those recognized for US GAAP. In 2005 and 2006, this
situation reversed, as more of the costs met the US GAAP recognition
criteria. Costs of US$51 million as at December 31, 2006 have already
been
recognized for IFRS but will reduce US GAAP net income in future
periods.
|
—
|
US
GAAP net
income was US$48 million lower (2005: US$15 million lower; 2004:
US$43
million higher) in respect of pensions. The differences mainly represent
the amendments to Syngenta’s UK, Dutch and Swiss pension plans in 2006,
2005 and 2004 respectively. The effects of these amendments are recognized
over average remaining employee service for US GAAP, but were recognized
immediately for IFRS.
|
—
|
US
GAAP net
income was US$27 million lower in 2006 (2005 and 2004: nil) compared
to
IFRS because certain environmental remediation costs were capitalized
as
part of the cost of the related land for IFRS, but have been expensed
for
US GAAP.
|
—
|
In
2006, US
GAAP net income was US$60 million lower compared to IFRS in respect
of
Syngenta’s 2006 put option grant to shareholders. For IFRS, the change in
value of the put option while it was outstanding has been accounted
for
totally
within shareholders’ equity, with no effect on net income. For US GAAP,
the increase in the fair value of the put option between its grant
in
February 2006 and its exercise in May 2006 has been accounted for
as an
expense.
|
—
|
During
2006,
Syngenta adopted the new US GAAP requirements in SFAS 158 for accounting
for pensions and post-retirement benefit plans. As a result, Syngenta
records in its balance sheet the full surplus or deficit of its plans
as
they arise, without any deferral of gains and losses resulting from
changes to or variances from actuarial assumptions, and without any
deferral of past service gains and costs caused by amendments to
plan
rules. For IFRS, Syngenta has continued to use the corridor method
of
accounting for actuarial gains and losses, which defers their recognition
on the balance sheet. Adoption of SFAS 158 reduced Syngenta’s US GAAP
shareholders’ equity by US$706 million, before related tax of US$223
million. Syngenta has applied FAS 158 prospectively, and prior year
US
GAAP comparative figures remain as reported under the accounting
rules
which were in force before SFAS 158. These rules required that pension
provisions be at least equal to any funded deficit of a pension plan
calculated on an accumulated benefit (ABO) basis, which assumes that
pensionable pay and pensions in payment remain at their levels at
the
reporting date. For the year ended December 31, 2004, Syngenta recorded
a
US$54 million decrease in shareholders’ equity in respect of the
additional minimum pension liability required to increase pension
provisions to the ABO. In 2005, Syngenta recorded a US$217 million
increase in shareholders’ equity because special lump sum pension
contributions totalling US$350 million into Syngenta’s UK and US pension
plans made them fully funded on an ABO basis at December 31, causing
the
additional minimum pension liability recorded in prior years to be
reversed.
|
—
|
In
2004 US
GAAP net income was US$34 million lower compared to IFRS due to not
recording a deferred tax asset for US GAAP where a Syngenta entity
has a
recent history of tax losses due to restructuring, and the forecast
future
benefits of the restructuring are expected to enable the tax losses
to be
utilized. IFRS allows a deferred tax asset to be recorded in these
circumstances, whereas US GAAP does not. In 2005, due to changes
in the
estimated amount and likelihood of recovery of these tax losses,
US$26
million of this adjustment was reversed, increasing US GAAP net income
compared to IFRS. In 2006, the additional US GAAP valuation allowances
remained at the same level as in
2005.
|
—
|
US
GAAP net
income was US$1 million higher (2005: US$1 million higher; 2004:
US$27
million lower) compared to IFRS due to additional US GAAP provisions
for
withholding tax on future internal dividend payments within the Syngenta
group. For IFRS, withholding tax is provided only if a dividend payment
is
expected, whereas US GAAP requires a provision for tax on all dividends
which could, in practice, be paid.
|
—
|
US
GAAP net
income was US$46 million higher (2005: US$27 million higher; 2004:
US$55
million lower) compared to IFRS in respect of other tax related items.
In
2004, this figure included a US$51 million reduction in estimated
tax
expense relating to the acquired Zeneca agrochemicals business for
periods
prior to acquisition. There was no similar item in 2005, while in
2006,
the equivalent reduction was US$7 million. These adjustments are
included
in net income for IFRS, which does not permit further purchase accounting
adjustments for these items. For US GAAP, these amounts have been
adjusted
against purchase accounting and not included in net
income.
|
Critical
Accounting Estimates
Note
2 of the
consolidated financial statements describes Syngenta’s accounting policies in
detail, including significant judgment made by management in applying Syngenta’s
accounting policies, and significant assumptions and estimation uncertainties.
The application of many of these policies necessarily requires judgment to
best
reflect the commercial substance of underlying transactions. Syngenta has
determined that five of its accounting policies can be considered “critical”, in
that significant management judgment is required to determine various
assumptions underpinning their application in the consolidated financial
statements, which, under different conditions, could lead to material
differences in these statements. A description of each of these policies
follows:
Adjustments
for doubtful receivables
Trade
and other
accounts receivable are reported net of adjustments for doubtful receivables,
often referred to as “bad debts”. Syngenta is a geographically diverse group,
serving a customer base in all significant agricultural areas across the world,
and with subsidiary companies in 50 countries. Credit terms offered to customers
often reflect the crop cycle; particularly where local bank financing may be
scarce, and full payment from customers can be dependent upon a good harvest
yield. Collection can also be affected by the level of inventory in the
distribution channel. Syngenta is therefore exposed to a broad range of
political and economic risks which can affect prompt and full recoverability
of
trade receivables. Considerable management effort is consequently spent in
actively managing and mitigating these risks.
Syngenta
determines
the level of doubtful receivables to be provided for by critically analyzing
the
receivables accounts on an individual basis, taking into account historical
levels of recovery and any changes in the economic and political environment
in
relevant countries.
Syngenta
has a
large number of individual trade receivable balances, and management judgment
is
often required to determine the appropriate provision. It is therefore difficult
to quantify the variability which results from applying the principle, and
the
sensitivity of Syngenta’s results of operations and statement of financial
position to specific changes in the estimate of doubtful debts, other than
by
hypothetically assuming arbitrary changes in the overall level of provision.
As
shown in Note 10 to the consolidated financial statements, the provision for
doubtful receivables at December 31, 2006 amounted to US$368 million, or 16%
(2005: US$359 million (16%); 2004: US$297 million (14%)) of total trade accounts
receivable of US$2,370 million (2005: US$2,224 million; 2004: US$2,184 million).
In the same note, the table analyzing the movements on the provisions gives
some
indication of the degree of accuracy of the Syngenta’s past
estimates.
Environmental
provisions
Syngenta
makes
provisions for environmental liabilities by assessing the likely non-recurring
remediation costs where there is an obligation to clean up contamination. For
a
provision to be recorded, it must be probable that an expense or remediation
work will be required and the costs can be estimated within a reasonable range
of possible outcomes. The costs are based on currently available facts,
technology expected to be available at the time of the clean up, laws and
regulations presently or virtually certain to be enacted and previous experience
in remediation of contaminated sites. Syngenta capitalizes environmental costs
if they increase future economic benefits flowing from the asset, or where
they
represent an asset retirement obligation. In all other cases, these costs are
recorded immediately in net income.
When
an obligation
is first identified to clean-up one of Syngenta’s manufacturing sites, the costs
are typically spread over an extended period into the future. The assumptions
that Syngenta uses in relation to the extent of the clean up required and the
method used to clean up the identified contamination may change significantly
during the clean-up period. The environmental provisions can therefore change
significantly, particularly where there is a major change in environmental
legislation in a country where Syngenta has significant manufacturing assets.
Currently Syngenta’s most significant manufacturing assets are located in
Switzerland, the UK, and the USA. As a consequence of the inherent uncertainties
in estimating future obligations, Syngenta will, as appropriate, supplement
internal expertise with external expertise to help determine what provisions
should be recorded in the consolidated financial statements.
Increases
in or
releases of environmental provisions may be necessary whenever new developments
occur or additional information becomes available after the financial statements
are published. The movements on environmental provisions during 2006 are set
out
in Note 22 to the consolidated financial statements. These movements include
a
US$27 million increase in a remediation liability at one manufacturing site
which is recoverable from the estimated resale value of the site after
completing remediation. Because of the uncertainties inherent in estimating
environmental provisions, Syngenta is not able to quantify the variability
which
results from applying the principle, and the sensitivity of Syngenta’s results
of operations and statement of financial position to specific changes in its
estimates.
Impairment
Syngenta
carries
out reviews of tangible and intangible assets on an annual basis to determine
whether events or changes in circumstances indicate that the carrying amount
of
the assets may not be recoverable. If any such indication exists, the
recoverable amount of the asset is estimated as either the higher of net selling
price or value in use; the resultant loss (the difference between the carrying
value and recoverable amount) is recorded as a charge in the consolidated income
statement. The value in use is calculated as the present value of estimated
future cash flows expected to result from the use of assets and their eventual
disposal proceeds. In order to calculate the present value of estimated future
cash flows Syngenta uses a discount rate based on the group’s estimated weighted
average cost of capital, together with any risk premium determined appropriate.
Estimated future cash flows used in the impairment calculations represent
management’s best view of likely future market conditions and current decisions
on the use of each asset or asset group. Actual future cash flows may differ
significantly from these estimates, due to the effect of changes in market
conditions or to subsequent decisions on the use of assets. These differences
may have a material impact on the asset values, impairment, depreciation and
amortization expense reported in future periods.
(i)
Intangible assets: Product rights
In
determining the
value in use of product rights it is necessary to make a series of assumptions
to estimate future cash flows. The main assumptions include future sales prices
and volumes, the future development expenditure required to maintain the
product’s marketability and registration in the relevant jurisdictions and the
product’s life. These assumptions are reviewed annually as part of management’s
budgeting and strategic planning cycles. The assumptions can be subject to
significant adjustment from such factors as changes in crop growing patterns
in
major markets (perhaps as a result of movements in crop prices), changes in
the
product registration, or as a result of pressure from competitor
products.
(ii)
Tangible assets: Property, plant and equipment
The
value in use of
Syngenta’s property, plant and equipment is determined by linking assets or a
group of assets to identifiable cash flows, which are then reviewed in a manner
similar to that described above for product rights. Major assumptions include
sales prices and volumes of products manufactured by the identified property,
plant and equipment, and its useful life. For impairments
of
property, plant and equipment which are to be abandoned, the calculation takes
account of cash flows from the remaining period of operations and
decommissioning costs.
Syngenta
carries
out detailed impairment tests on crop protection product related asset groups
or
crop related asset groups in its Seeds business if forecast sales within the
5
year forecast horizon for that product or crop are lower than the forecast
sales
in the previous year’s 5 year forecast cycle. The discount rates used in the
2006 impairment tests were 10% except for one cash generating unit with cash
flows subject to significantly higher risks, for which 25% was used (2005:
8 to
10%; 2004:10%). Impairment losses of US$3 million were recorded as a result
of
these tests for market related impairment in 2006. Syngenta also tests for
impairment when there are asset specific indicators such as product divestments
or site closure announcements. Higher discount rates are used to test for asset
specific impairment because of the higher risk associated with remaining future
cash flows in these situations. Impairments of US$72 million, US$22 million
and
US$133 million were recorded because of restructuring in 2006, 2005 and 2004
respectively. Also, in 2006, Syngenta recorded impairments of US$13 million
for
Property, plant and equipment and US$21 million for intangible assets as a
result of divesting its picoxystrobin fungicide product rights to DuPont in
exchange for a license to use DuPont’s insecticide RynaxypyrTM.
Defined
benefit pensions and other post-employment benefits
The
assumptions
used to measure the expense and liabilities related to Syngenta’s defined
benefit pension plans are reviewed annually by professionally qualified,
independent actuaries and by Syngenta management. The measurement of the expense
for a period requires judgement with respect to the following matters, among
others:
the
probable
long-term rate of increase in pensionable pay;
the
probable
average future service lives of employees;
the
probable life
expectancy of employees;
the
mix of
investments in funded pension plans in the period;
the
expected future
rate of return on the investments in funded pension plans, and how that rate
will compare with the market rates of return which were observed in past
economic cycles.
The
assumptions
used by Syngenta may differ materially from actual results, and these
differences may result in a significant impact on the amount of pension expense
recorded in future periods. As allowed by IAS 19, Syngenta amortizes actuarial
gains and losses which fall outside the 10% corridor over the average future
service lives of employees. Under this method, major changes in assumptions,
and
variances between assumptions and actual results, may affect reported earnings
over several future periods rather than one period, while more minor variances
and assumption changes may be offset by other changes and have no direct effect
on reported earnings. At December 31, 2006, unrecognized actuarial losses were
US$730 million for pensions and US$36 million for other post-retirement
benefits, and estimated amortization expense for 2007 is US$26 million (2005:
unrecognized actuarial losses of US$763 million and US$54 million, and actual
2006 amortization expense of US$40 million; 2004: unrecognized actuarial losses
of US$610 million and US$59 million, and actual 2005 amortization expense of
US$28 million). Amortization periods are calculated for each plan, and range
from 12 to 15 years.
In
December 2004,
the IASB amended IAS 19 to allow actuarial gains and losses to be recognized
immediately outside net income. The amendment prohibits the recycling of
actuarial gains and losses into net income subsequently; in common with most
European IFRS preparers, Syngenta has not adopted the amendment. In the opinion
of Syngenta, the use of the corridor method is appropriate in view of the
long-term nature of defined benefit pension provisions and the significant
degree of estimation required to measure pension expense. Syngenta will continue
to review its accounting policy periodically. The IASB recently initiated a
project to review comprehensively the accounting for pensions and post
retirement benefit plans. This IASB project may result in changes to Syngenta’s
accounting policy in the medium-term future. Detailed changes cannot be
predicted at this time.
The
following
information illustrates the sensitivity to a change in certain assumptions
for
the three major defined benefit pension plans shown in Note 27 to the financial
statements, as of December 31, 2006:
Change
in assumption (US$ million)
|
|
Increase/(reduction)
in
2007
Pre-Tax
Pension Expense
|
|
Increase/(reduction)
in
December 31, 2006
Projected
Benefit Obligation
|
|
25
basis
point decrease in real discount rate
|
|
|
19
|
|
|
198
|
|
25
basis
point increase in real discount rate
|
|
|
(15
|
)
|
|
(199
|
)
|
25
basis
point decrease in expected return on assets
|
|
|
10
|
|
|
-
|
|
25
basis
point increase in expected return on assets
|
|
|
(10
|
)
|
|
-
|
|
The
above
sensitivities reflect the total impact of changing the stated assumption as
shown for all of the three major plans, leaving all other assumptions constant.
It should be noted that economic factors and conditions often affect multiple
assumptions simultaneously and the effects of changes in key assumptions are
not
necessarily linear.
Syngenta’s
reported
pension liabilities increased in 2004 and 2005, as interest rates and bond
yields fell, but have reduced in 2006 as bond yields have risen. Syngenta uses
yields in AA rated corporate bonds to select the discount rate. Syngenta
increased the nominal discount rate for its UK pension fund by 30 basis points
to 5.1% (2005: 4.8%; 2004: 5.4%) based on the iBoxx Corporate bond index. As
limited price inflation indexation of pensions in payment and deferred pension
rights is required by UK pension regulations, Syngenta’s UK pension fund rules
require these to be increased by the lower of 5% or the actual price inflation
as measured by the UK Retail Price index (RPI). Therefore, the change in real
discount rates - the nominal discount rate less the expected long-term rate
of
price inflation - is a more relevant indictor than the nominal discount rate.
The real discount rate for the UK fund increased in 2006 by 10 basis points
to
2.3% (2005: 2.2%; 2004: 2.8%). For Syngenta’s Swiss and US pension funds,
nominal discount rate is a more relevant indicator, because inflation linked
increases to pensions are not legally required in either country, nor are they
required by the rules of the funds. The discount rate for the Swiss pension
liabilities increased in 2006 by 25 basis points to 3.0% (2005: 2.75%; 2004:
3.5%). The rate is based on the Bloomberg 15 year AA Swiss corporate bond index.
The discount rate for the US pension liabilities increased in 2006 by 25 basis
points to 5.75% (2005: 5.5%; 2004: 5.75%). The rate is based on Moody’s US AA
Corporate Bond indices.
Pension
liabilities
can also be significantly affected by the assumptions and actual experience
related to mortality. In recent years, longevity has increased in all countries
in which Syngenta operates defined benefit plans. Mortality assumptions for
the
2006 year end pension liability valuation have been updated in the UK, where
the
triennial statutory valuation was carried out in 2006, and in Switzerland,
to
take account of recently published statistics. This has increased the UK and
Swiss pension liabilities by approximately US$73 million and US$32 million
respectively. The UK mortality assumptions are based on the latest available
general life expectancy table, taking into account specific data for Syngenta
fund members as at the most recent UK statutory valuation date, March 31, 2006.
Younger members are assumed to live longer than older members, based on
extrapolation of the recent trend of increasing longevity. The assumptions
applied for the Swiss pension liabilities are based on published Swiss
government tables, because insufficient historical data is available to
calculate specific mortality rates for the Syngenta plan membership. Syngenta’s
US pension plan gives members lump sum or annuity benefit payment options.
When
valuing the US pension liabilities in these financial statements, Syngenta
has
assumed that all current active members will take the lump sum option at
retirement date as, in current conditions, this results in a higher liability
than the annuity option. Mortality after retirement is not relevant to the
lump
sum option. US mortality assumptions applied in valuing the liability for
pensioners in payment of annuities were last updated in 2005, with the result
that pension liabilities increased by approximately US$10 million in 2005 In
accordance with Syngenta’s IAS 19 accounting policy, the increases in pension
liability mentioned above have a deferred effect on Syngenta’s IFRS net income.
The changes are fully included in the benefit obligation figure reported for
each plan in Note 27 to the financial statements. In the opinion of Syngenta
management, the 2006 valuations of the benefit obligation for each plan reflect
the most likely outcome, based on the latest available evidence. As new evidence
becomes available in the future, further adjustments to the benefit obligation
may be required. Syngenta will continue to review its mortality assumptions
annually. The approximate increase in 2007 estimated pension expense compared
to
2006 as a result of all these mortality assumption changes is US$11 million.
This unfavorable change has been offset by the favorable effects of the
increased discount rates mentioned above, of stronger than expected asset
returns in 2006, and of restructuring.
In
2006, as in 2004
and 2005, the actual return on pension plan assets exceeded Syngenta’s long-term
expected rate of return assumptions for the UK and Swiss plans. This was also
true of the US plan for 2006 and 2004, although in 2005 the actual return was
lower than expected return. The expected return on assets assumed by Syngenta
in
measuring pension expense for funded pension plans takes account of the actual
mix of assets held in the plans, and is developed with input from Syngenta’s
actuaries based on their review of expected returns for each class of assets.
Comparisons to expected returns used by peer companies are also considered.
In
December 2005, Syngenta made special lump sum contributions to its UK and US
pension plans totalling US$350 million. During 2006, the pension plans used
these funds partly to invest in return seeking assets such as long/short equity
hedge funds and private equity funds and partly to support interest rate swaps
to reduce the effect of changes in interest rates on the assets and liabilities
of the fund. Market assumptions about the expected long-term return on equities
have increased because of continued strong equity markets, and assumptions
about
returns on fixed interest investments have increased in line with 2006 market
movements in bond yields. The expected long-term rate of return assumption
used
to calculate UK pension expense has been provisionally fixed at 5.8% for 2007
(2006: 5.5%). This 30 basis point increase would reduce 2007 pension expense
by
US$7 million compared to 2006. The expected return assumption for the Swiss
and
US plans for 2007 will be maintained at 4.75% and 7.25%, as in
2006.
As
a result of the
factors mentioned above, the funded ratio improved during 2006 for the UK plan
from 92% to 95%, for the main US plan from 93% to 100% and for the Swiss plan
from 92% to 98%. The overall funded ratio for the three plans improved from
92%
to 96%.
Uncertain
tax positions
Syngenta’s
Crop
Protection supply chain, and to a lesser extent its Seeds supply chain are
international, and intellectual property rights owned by Syngenta are used
internationally within the group. Transfer prices and charges for products
and
services by one Syngenta subsidiary to another may be subject to challenge
by
the national tax authorities in any of the
countries
in which
Syngenta operates. At any given year end, several prior years’ tax computations
are still open for review or audit for most Syngenta subsidiaries. Syngenta’s
policy is to comply fully with applicable tax regulations in all jurisdictions
in which Syngenta’s operations are subject to income taxes. However, Syngenta
and the relevant tax authorities may have different interpretations of how
the
regulations should be applied to actual transactions. Syngenta’s estimates of
income tax expense
and
liabilities at each year end include significant management judgments about
the
eventual outcome of the reviews and audits of all open years based on the latest
information available about the positions taken by each tax authority. In
Syngenta’s view, differences between Syngenta’s estimates and eventual outcomes
may materially affect results of operations for discrete future periods, but
are
unlikely to affect Syngenta’s financial position materially. It is not possible
to quantify the uncertainties in this area, because the future actions of
national tax authorities cannot be reliably predicted.
Effect
of
New Accounting Pronouncements
IFRS
are undergoing
a process of revision with a view to increasing harmonization of accounting
rules internationally. Proposals to issue new or revised standards, as yet
unpublished, on financial instruments, provisions, business combinations,
employee benefits, revenue recognition, and other topics may change existing
standards, and may therefore affect the accounting policies applied by Syngenta
in future periods. Transition rules for these potential future changes may
require Syngenta to apply them retrospectively to periods before the date of
adoption of the new standards. The effect of new accounting pronouncements
which
were adopted by Syngenta during 2006, or which have been issued but are not
yet
in force, is described in Notes 2 and 35 to the consolidated financial
statements.
Recent
Developments
Note
36 to the
consolidated financial statements provides details of events which occurred
between the balance sheet date and the date on which these consolidated
financial statements were approved by the Board of Directors (February 7, 2007)
that would require adjustment to or disclosure in the consolidated financial
statements.
Future
Prospects
Crop
Protection
markets are estimated overall to have declined in 2006, particularly in the
first half, with signs of stabilisation towards the end of the year. In this
challenging environment, initial indications are that Syngenta gained share
overall. Several countries were adversely impacted by weather in 2006, with
Western Europe impacted by a prolonged winter, and it is not possible to predict
weather patterns and impact in 2007. Syngenta Crop Protection sales will
continue to benefit from the recently launched AXIAL®
and
AVICTA®
and growth in
other new products. This may be offset by continued penetration of genetically
modified seeds in the US corn market, further reducing the market for selective
herbicides and insecticides.
Seeds
sales in 2006
were affected by the first quarter production-related issues in corn, reducing
sales in Corn and Soybean. Syngenta will progressively continue to launch new
genetically modified seeds with input traits in the period through 2008. The
stacked combination of corn rootworm trait and European corn borer trait,
marketed as AgrisureTM
CB/RW, will be
available in limited quantities for the 2007 growing season and the triple
stack, AgrisureTM
GT/CB/RW is
expected to be available for 2008.
Excluding
restructuring and impairment charges, costs in 2006 were reduced by a pension
cost reduction in the UK defined benefit scheme, not expected to recur in 2007.
It is also planned to continue to increase expenditure in marketing and research
and development in Seeds. However, with further operational efficiency benefits,
including initial benefits from a new restructuring program, Syngenta plans
overall cost growth in 2007 at constant exchange rates, excluding restructuring
and impairment, to be slower than sales growth.
Syngenta
has a
licensing agreement with Delta and Pine Land Company for insect control in
cotton. Monsanto Company announced in 2006 their intention to acquire Delta
and
Pine Land. The licensing agreement provides that, if Monsanto acquires Delta
and
Pine Land, the sum of US$50 million is to be paid to Syngenta. Completion of
this acquisition is uncertain at this time.
Net
income in 2007
will continue to be impacted by restructuring and impairment charges, related
both to the finalization of the operational efficiency program announced in
2004
and the additional program approved by the Syngenta Board on February 7, 2007.
The level of such charges will be dependent on the timing of irrevocable
restructuring commitments and is difficult to forecast accurately in any one
calendar year, but the total of cash and non-cash charges in 2007 in expected
currently to be broadly similar to that of 2006. In 2007, these charges are
expected to be partly offset by the gains on the disposal of the part of
Syngenta Rosental site in Basel that is seen as in excess of Syngenta’s medium
term needs. Subject to completion of the agreement signed on February 2, 2007,
proceeds from this transaction are estimated at approximately US$139 million
and
the profit after related taxation approximately US$70 million under IFRS.
Subject
to approval
by shareholders at the annual general meeting on May 2, 2007, the board is
recommending a further increase of the dividend to CHF 3.80 per share, of which
CHF 2.20 will be paid by par value reduction, increased from the CHF 3.30 all
paid by way of par value reduction in 2006. In addition, Syngenta proposes
to
set aside funds to repurchase a further quantity of its shares.
Appendix
A
Reconciliation
of Non-GAAP measures to equivalent GAAP measures
Syngenta
uses
non-GAAP measures in this report where they are regarded by management as
important for the investor to fully understand Syngenta’s performance. The
non-GAAP measures presented in this report are measures adjusted for exchange
rate movements and to exclude restructuring gains and losses and impairment
losses. The Company presents these measures because:
|
-
|
movements
in
exchange rates had a significant impact on sales and operating income
over
the period covered by the review; and
|
|
-
|
restructuring
and impairment items (a) were very significant in the period, (b)
had a
volatile impact on results and (c) were an important factor highlighted
for investors upon the formation of
Syngenta.
|
Since
Syngenta’s
formation in November 2000, the Company has implemented significant business
changes initially designed to integrate and extract synergies from the now
combined operations of the Zeneca agrochemicals business and the Novartis
agribusiness and subsequently to achieve further synergies and cost savings
in
response to low underlying growth in Crop Protection markets. The effect on
reported performance of initiating and implementing changes of this magnitude
is
significant and has had a material effect on the nature and focus of Syngenta's
operations through restructuring and impairment charges and therefore, in the
opinion of management, requires separate disclosure to provide a more thorough
understanding of business performance and to allow investors to assess
performance both including and excluding charges, as well as gains, incurred
in
connection with these business changes. These business changes may also lead
to
the impairment of tangible (e.g. property, plant and equipment) or intangible
assets. Impairment may also be triggered by a downturn in one of the businesses
or markets in which Syngenta operates. The incidence of these charges may be
periodic and the effect on reported performance will vary from period to period,
with limited continuity in the specific composition or size of such
charges.
For
improved
clarity, we are providing definitions of these non-GAAP measures and
reconciliations of non-GAAP measures to the appropriate GAAP measure
below.
Reconciliation
of Net income excluding Restructuring and Impairment (non-GAAP measure) to
total
net income (GAAP measure)
(US$
million)
|
|
Total
|
|
Restructuring,
Impairment
and
Discontinued
Operations
|
|
Before
Restructuring,
Impairment
and
Discontinued
Operations
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
829
|
|
|
(326
|
)
|
|
1,155
|
|
Income/(loss)
from associates and joint ventures
|
|
|
(11
|
)
|
|
-
|
|
|
(11
|
)
|
Financial
expense, net
|
|
|
(20
|
)
|
|
-
|
|
|
(20
|
)
|
Income
before taxes
|
|
|
798
|
|
|
(326
|
)
|
|
1,124
|
|
Income
tax
expense
|
|
|
(161
|
)
|
|
88
|
|
|
(249
|
)
|
Income/(loss)
from discontinued operations
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Net
income
|
|
|
637
|
|
|
(238
|
)
|
|
875
|
|
Attributable
to minority interests
|
|
|
3
|
|
|
-
|
|
|
3
|
|
Net
income
attributable to Syngenta AG shareholders
|
|
|
634
|
|
|
(238
|
)
|
|
872
|
|
Tax
rate
|
|
|
20
|
%
|
|
27
|
%
|
|
22
|
%
|
Number
of
shares - basic (millions)
|
|
|
98
|
|
|
|
|
|
98
|
|
Number
of
shares - diluted (millions)
|
|
|
100
|
|
|
|
|
|
100
|
|
Basic
earnings per share
|
|
|
6.46
|
|
|
|
|
|
8.88
|
|
Diluted
earnings per share
|
|
|
6.35
|
|
|
|
|
|
8.73
|
|
(US$
million)
|
|
Total
|
|
Restructuring,
Impairment
and
Discontinued
Operations
|
|
Before
Restructuring,
Impairment
and
Discontinued
Operations
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
860
|
|
|
(236
|
)
|
|
1,096
|
|
Income/(loss)
from associates and joint ventures
|
|
|
2
|
|
|
-
|
|
|
2
|
|
Financial
expense, net
|
|
|
(96
|
)
|
|
-
|
|
|
(96
|
)
|
Income
before taxes
|
|
|
766
|
|
|
(236
|
)
|
|
1,002
|
|
Income
tax
expense
|
|
|
(140
|
)
|
|
79
|
|
|
(219
|
)
|
Income/(loss)
from discontinued operations
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Net
income
|
|
|
626
|
|
|
(157
|
)
|
|
783
|
|
Attributable
to minority interests
|
|
|
4
|
|
|
-
|
|
|
4
|
|
Net
income
attributable to Syngenta AG shareholders
|
|
|
622
|
|
|
(157
|
)
|
|
779
|
|
Tax
rates
|
|
|
18
|
%
|
|
33
|
%
|
|
22
|
%
|
Number
of
shares - basic (millions)
|
|
|
100
|
|
|
|
|
|
100
|
|
Number
of
shares - diluted (millions)
|
|
|
101
|
|
|
|
|
|
101
|
|
Basic
earnings per share
|
|
|
6.22
|
|
|
|
|
|
7.78
|
|
Diluted
earnings per share
|
|
|
6.13
|
|
|
|
|
|
7.67
|
|
(US$
million)
|
|
Total
(adjusted)
|
|
Restructuring,
Impairment
and
Discontinued
Operations
|
|
Before
Restructuring,
Impairment
and
Discontinued
Operations
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
541
|
|
|
(354
|
)
|
|
895
|
|
Income/(loss)
from associates and joint ventures
|
|
|
(2
|
)
|
|
-
|
|
|
(2
|
)
|
Financial
expense, net
|
|
|
(73
|
)
|
|
-
|
|
|
(73
|
)
|
Income
before taxes
|
|
|
466
|
|
|
(354
|
)
|
|
820
|
|
Income
tax
expense
|
|
|
70
|
|
|
135
|
|
|
(65
|
)
|
Income/(loss)
from discontinued operations
|
|
|
(108
|
)
|
|
(108
|
)
|
|
-
|
|
Net
income
|
|
|
428
|
|
|
(327
|
)
|
|
755
|
|
Attributable
to minority interests
|
|
|
(32
|
)
|
|
(25
|
)
|
|
(7
|
)
|
Net
income
attributable to Syngenta AG shareholders
|
|
|
460
|
|
|
(302
|
)
|
|
762
|
|
Tax
rate
|
|
|
(15
|
)%
|
|
38
|
%
|
|
8
|
%
|
Number
of
shares - basic (millions)
|
|
|
105
|
|
|
|
|
|
105
|
|
Number
of
shares - diluted (millions)
|
|
|
106
|
|
|
|
|
|
106
|
|
Basic
earnings per share
|
|
|
4.37
|
|
|
|
|
|
7.24
|
|
Diluted
earnings per share
|
|
|
4.34
|
|
|
|
|
|
7.19
|
|
(US$
million)
|
|
Total
(adjusted)
|
|
Restructuring,
Impairment
and
Discontinued
Operations
|
|
Before
Restructuring,
Impairment
and
Discontinued
Operations
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
518
|
|
|
(166
|
)
|
|
684
|
|
Income/(loss)
from associates and joint ventures
|
|
|
(1
|
)
|
|
-
|
|
|
(1
|
)
|
Financial
expense, net
|
|
|
(138
|
)
|
|
-
|
|
|
(138
|
)
|
Income
before taxes
|
|
|
379
|
|
|
(166
|
)
|
|
545
|
|
Income
tax
expense
|
|
|
(133
|
)
|
|
69
|
|
|
(202
|
)
|
Income/(loss)
from discontinued operations
|
|
|
6
|
|
|
6
|
|
|
-
|
|
Net
income
|
|
|
252
|
|
|
(91
|
)
|
|
343
|
|
Attributable
to minority interests
|
|
|
4
|
|
|
1
|
|
|
3
|
|
Net
income
attributable to Syngenta AG shareholders
|
|
|
248
|
|
|
(92
|
)
|
|
340
|
|
Tax
rate
|
|
|
35
|
%
|
|
42
|
%
|
|
37
|
%
|
Number
of
shares - basic (millions)
|
|
|
102
|
|
|
|
|
|
102
|
|
Number
of
shares - diluted (millions)
|
|
|
102
|
|
|
|
|
|
102
|
|
Basic
earnings per share
|
|
|
2.44
|
|
|
|
|
|
3.35
|
|
Diluted
earnings per share
|
|
|
2.43
|
|
|
|
|
|
3.34
|
|
(US$
million)
|
|
Total
|
|
Restructuring,
Impairment
and
Discontinued
Operations
|
|
Before
Restructuring,
Impairment
and
Discontinued
Operations
|
|
2002
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
157
|
|
|
(449
|
)
|
|
606
|
|
Income/(loss)
from associates and joint ventures
|
|
|
(7
|
)
|
|
-
|
|
|
(7
|
)
|
Financial
expense, net
|
|
|
(218
|
)
|
|
-
|
|
|
(218
|
)
|
Income
before taxes
|
|
|
(68
|
)
|
|
(449
|
)
|
|
381
|
|
Income
tax
expense
|
|
|
(44
|
)
|
|
113
|
|
|
(157
|
)
|
Income/(loss)
from discontinued operations
|
|
|
9
|
|
|
9
|
|
|
-
|
|
Net
income
|
|
|
(103
|
)
|
|
(327
|
)
|
|
224
|
|
Attributable
to minority interests
|
|
|
6
|
|
|
2
|
|
|
4
|
|
Net
income
attributable to Syngenta AG shareholders
|
|
|
(109
|
)
|
|
(329
|
)
|
|
220
|
|
Tax
rate
|
|
|
65
|
%
|
|
25
|
%
|
|
41
|
%
|
Number
of
shares - basic (millions)
|
|
|
102
|
|
|
|
|
|
102
|
|
Number
of
shares - diluted (millions)
|
|
|
102
|
|
|
|
|
|
102
|
|
Basic
and diluted earnings/(loss) per share
|
|
|
(1.07
|
)
|
|
|
|
|
2.17
|
|
Constant
Exchange Rates
We
compare results
from one period to another period in this report using variances calculated
at
constant exchange rates (CER). To present that information, current period
results for entities reporting in currencies other than US dollars are converted
into US dollars at the prior period’s exchange rates, rather than the exchange
rates for this year. See Note 31 to the Consolidated Financial Statements for
information on average exchange rates in 2006, 2005 and 2004. For example,
if a
Japanese entity reporting in Japanese yen sold yen 100 million of products
in
2006 and 2005, our financial statements would report US$0.862 million of
revenues in 2006 (using 116.04 as the rate, which was the average exchange
rate
in 2006) and US$0.913 million in revenues in 2005 (using 109.47 as the rate,
which was the average exchange rate in 2005). The CER presentation would
translate the 2006 results using the 2005 exchange rates and indicate that
underlying revenues were flat. We present this CER variance information in
order
to assess how our underlying business performed before taking into account
currency exchange fluctuations. We also present our actual reported results
in
order to provide the most directly comparable data under GAAP.
ITEM
6 —
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
The
members of the
Board of Directors are as follows (as of March 7, 2007):
|
|
|
|
|
Name
|
Age
|
Position
|
Year
First Elected
|
Current
Term Expires
|
Martin
Taylor
(1)
|
54
|
Chairman,
Non-Executive Director
|
2000
|
2008
|
Michael
Pragnell (2)
|
60
|
Chief
Executive Officer, Executive Director
|
2000
|
2007
|
Rupert
Gasser
(3)
|
68
|
Vice
Chairman, Non-Executive Director
|
2002
|
2007
|
Peggy
Bruzelius (4)
|
57
|
Non-Executive
Director
|
2000
|
2009
|
Peter
Doyle
(5)
|
68
|
Non-Executive
Director
|
2000
|
2009
|
Pierre
Landolt
(6)
|
59
|
Non-Executive
Director
|
2000
|
2009
|
Peter
Thompson (7)
|
60
|
Non-Executive
Director
|
2000
|
2008
|
Jacques
Vincent (8)
|
60
|
Non-Executive
Director
|
2005
|
2007
|
Rolf
Watter
(9)
|
49
|
Non-Executive
Director
|
2000
|
2008
|
Felix
Weber
(10)
|
56
|
Non-Executive
Director
|
2000
|
2008
|
Jürg
Witmer
|
58
|
Non-Executive
Director
|
2006
|
2009
|
(1)
|
Chairman
of
the Chairman’s Committee and the Corporate Responsibility Committee and
member of the Compensation
Committee
|
(2)
|
Member
of the
Chairman’s Committee
|
(3)
|
Member
of the
Chairman’s Committee and the Compensation Committee
|
(4)
|
Chairman
of
the Audit Committee
|
(5)
|
Chairman
of
the Science and Technology Advisory
board
|
(6)
|
Member
of the
Audit Committee and the Corporate Responsibility
Committee
|
(7)
|
Member
of the
Audit Committee
|
(8)
|
Member
of the
Compensation Committee
|
(9)
|
Member
of the
Audit Committee
|
(10)
|
Chairman
of
the Compensation Committee; Member of the Chairman’s
Committee
|
Martin
Taylor
Chairman
of the
Board of Directors, the Chairman’s Committee and the Corporate Responsibility
Committee and member of the Compensation Committee. He is also Chairman of
the
Syngenta Foundation for Sustainable Agriculture. Martin Taylor is currently
Vice
Chairman of RTL Group SA. Previously he was an Advisor to Goldman Sachs
International (1999-2005), Chairman of WHSmith plc (1999-2003) and Chief
Executive Officer of Barclays plc (1993-1998) and Courtaulds Textiles
(1990-1993). Martin Taylor has a degree in oriental languages from Oxford
University.
Michael
Pragnell
Chief
Executive
Officer, Director and member of the Chairman’s Committee. Michael Pragnell was a
Director of AstraZeneca (1999-2000) and of Zeneca Group plc (1997-1999). He
joined Zeneca Agrochemicals as Chief Executive Officer in 1995. Prior to 1995
he
worked for Courtaulds plc in a number of senior positions (1975-1995), and
was
appointed to the Board in 1990; he was Chief Financial Officer (1992-1994)
and
Chief Executive Officer of Courtaulds Coatings (1986-1992). Michael Pragnell
has
a degree in modern languages from Oxford University and an MBA from
INSEAD.
Rupert
Gasser
Vice
Chairman of
the Board of Directors and member of the Chairman’s and the Compensation
Committee. Rupert Gasser is currently President of Nestec SA and a member of
the
Scientific Advisory Board of Alcon Laboratories Inc. Formerly he was a
non-executive Director of Lonza Group AG (1999-2004), Executive Vice President
of Nestlé SA (1997-2002), Head of Strategic Business Group I (Coffee and
Beverages, Milk and Food Services) and Head of Corporate Technical/Manufacturing
and R&D worldwide (1991-1996) and Senior Vice President at Nestec SA
(1990-1991). Rupert Gasser graduated from the Technical Academy for Chemical
Industry in Vienna with a degree in chemistry. In addition he participated
in
the Program for Senior Executive Development at the IMD, Lausanne.
Peggy
Bruzelius
Director
and
Chairman of the Audit Committee. Peggy Bruzelius is currently Chairman of
Lancelot Asset Management AB. In addition she serves as Vice Chairman of
Electrolux AB and as a Director of Scania AB, Ratos AB, Axfood AB, Axel Johnson
AB, Husqvana AB and as a Senior Advisor to Lehman Brothers Ltd. Peggy Bruzelius
is a member of the Royal Swedish Academy of Engineering Sciences, where she
formerly served as Vice Chairman (2003-2005). In addition she is a member of
the
Board of Trustees of the Stockholm School of Economics. Previously she was
Chairman of Grand Hotel Holdings (1998-2006), a Director
of
The Body Shop
International AB (1995-2006), AB Drott (1999-2004), Executive Vice President
of
SEB-bank (1997-1998), Chief Executive Officer of ABB Financial Services
(1991-1997) and a member of the Swedish Board of Government Bank Support
Authority (1991-1993). Peggy Bruzelius holds an MBA from the Stockholm School
of
Economics.
Peter
Doyle
Director
and
Chairman of the Science and Technology Advisory Board. Peter Doyle is currently
a Trustee of the Nuffield Foundation; he is a Past Master of the Salters’ Livery
Company and currently Chairman of the Board of the Salters’ Institute.
Previously he served as a Non-Executive Director of Avidex Ltd (2002-2006),
a
member of the Advisory Board of Vida Capital Partners (2003-2005), Non-Executive
Director of Oxagen (1999-2002), Non-Executive Director of Oxford Molecular
plc
(1997-2000), Director of Zeneca Group plc (1993-1999), Director of ICI
(1989-1993) and as Chairman of the Biotechnology and Bioscience Research Council
(1989-2003). Peter Doyle holds a BSc (Hons) degree in pure science and a PhD
in
chemistry from Glasgow University.
Pierre
Landolt
Director,
member of
the Audit Committee and the Corporate Responsibility Committee. He is also
a
member of the Foundation Board of the Syngenta Foundation for Sustainable
Agriculture. Pierre Landolt is currently Chairman of the Sandoz Family
Foundation and a Director of Novartis AG. He serves as Chairman of AxialPar
Ltda, Emasan AG, Moco Agropecuaria Ltda, Ecocarbon LLC, Vaucher Manufacture
Fleurier SA and as Vice Chairman of Parmigiani SA. Pierre Landolt is also a
Partner with unlimited liabilities of the Private Bank Landolt & Cie. He
serves as Vice Chairman of the Montreux Jazz Festival Foundation and is
President of the Instituto Jurema de Pesquisa in Brazil. Formerly he served
as
Chairman of the CITCO Group (1995-2005). Pierre Landolt graduated with a
Bachelor of Laws from the University of Paris Assas.
Peter
Thompson
Director
and member
of the Audit Committee. Peter Thompson is currently a Director of Sodexho
Alliance SA. Previously he was President and Chief Executive Officer of PepsiCo
Beverages International (1996-2004), President of PepsiCo Foods International’s
Europe, Middle East and Africa Division (1995-1996) and of Walkers Snack Foods
in the UK (1994-1995). Before joining PepsiCo he held various senior management
roles with Grand Metropolitan plc, including President and Chief Executive
Officer of GrandMet Foods Europe (1992-1994), Vice-Chairman of The Pillsbury
Company (1990-1992) and President and Chief Executive Officer of The Paddington
Corporation (1984-1990). Peter Thompson has a degree in modern languages from
Oxford University and an MBA from Columbia University.
Jacques
Vincent
Director
and member
of the Compensation Committee. Jacques Vincent has been Vice Chairman and Chief
Operating Officer of the Danone Group, Paris, since 1998. He began his career
with Danone in 1970 and has since held various financial and overall management
positions within this group. Jacques Vincent is a graduate engineer of the
Ecole
Centrale, Paris, holds a Bachelor in Economics from Paris University and a
Master of Science from Stanford University.
Rolf
Watter
Director
and member
of the Audit Committee. Rolf Watter has been a partner in the law firm Bär &
Karrer in Zurich since 1994 and a member of its executive board since 2000.
He
is a Non-Executive Chairman of Cablecom Holding AG and a Non-Executive Director
of Zurich Financial Services (and its subsidiary Zurich Insurance Company),
UBS
Alternative Portfolio AG and A.W. Faber-Castell (Holding) AG. He is also
non-executive Chairman of Almea Stiftung, the foundation presently holding
a
majority in Swiss International Airlines. In addition Rolf Watter is a part-time
professor at the Law School of the University of Zurich and a member of the
Swiss Stock Exchange Admission Board and of its Disclosure Commission of
Experts. Rolf Watter graduated from the University of Zurich with a doctorate
in
law and holds an LLM degree from Georgetown University; he is admitted to the
Bar of Zurich.
Felix
Weber
Director,
Chairman
of the Compensation Committee and member of the Chairman’s Committee. Felix
Weber is currently a Managing Director of Lehman Brothers Ltd., Vice Chairman
of
Publigroupe AG and a Director of Valora AG. Previously he was a Director of
Glacier Holdings GP SA and Glacier Holdings S.C.A (which are the former parent
entities of Cablecom GmbH) (2003-2005), a Director of Cablecom GmbH (2004-2005),
Executive Vice President and Chief Financial Officer of Adecco SA (1998-2004),
Principal of McKinsey & Company in Zurich (1989-1997) and Chief Executive
Officer of Alusuisse South Africa (1982-1984). Felix Weber graduated from the
University of St. Gallen, with an MBA in operations research and finance and
a
PhD in marketing.
Jürg
Witmer
Director.
Jürg
Witmer is currently Chairman of Givaudan SA and a Director of Bank Sal.
Oppenheim jr. & Cie. (Schweiz) AG as well as a member of the Supervisory
Board of Crucell NV, Leiden (NL). Previously he was CEO of Givaudan Group
(1999-2005) and held various General Management Positions within Roche,
including General Manager of Roche Austria (1994-1999), Head of Corporate
Communications and Public Affairs of Roche Headquarters Basel (1990-1994),
General Manager of Roche Far East (1988-1990), Regional Manager Roche Hong
Kong
Far East Pharma Division (1984-1988) and Assistant to the Chairman and CEO
of
the Roche Group (1982-1984). Jürg Witmer has a doctorate in law from the
University of Zurich, as well as a degree in International Studies from the
University of Geneva.
The
business address of all Directors is Syngenta AG, Schwarzwaldallee 215, 4058
Basel, Switzerland.
Executive
Committee
The
members of the
Executive Committee of Syngenta are as follows (as of March 7, 2007)1:
Name
|
Age
|
Position
|
Michael
Pragnell
|
60
|
Chief
Executive Officer
|
John
Atkin
|
53
|
Chief
Operating Officer - Crop Protection
|
Robert
Berendes
|
41
|
Head
of
Business Development (appointed 1 Jan 2007)
|
David
Lawrence
|
58
|
Head
of
Research & Technology
|
Michael
Mack
|
46
|
Chief
Operating Officer - Seeds
|
Christoph
Mäder
|
47
|
Head
of Legal
& Taxes
|
Mark
Peacock
|
45
|
Head
of
Global Operations (appointed 1 Jan 2007)
|
Domenico
Scala
|
41
|
Chief
Financial Officer
|
1)
As of Februrary
28, 2007 Bruce Bissell, previously Head of Global Operations and Human
Resources, and David Jones, previously Head of Business Development, retired
from Syngenta.
Michael
Pragnell
Chief
Executive
Officer, Director and member of the Chairman’s Committee. Michael Pragnell was a
Director of AstraZeneca (1999-2000) and Zeneca Group plc (1997-1999). He joined
Zeneca Agrochemicals as Chief Executive Officer in 1995. Prior to 1995 he worked
for Courtaulds plc in a number of senior positions (1975-1995), where he was
appointed to the Board in 1990; he was Chief Financial Officer (1992-1994)
and
Chief Executive Officer of Courtaulds Coatings (1986-1992). He has a degree
in
modern languages from Oxford University and an MBA from INSEAD.
John
Atkin
Chief
Operating
Officer of Syngenta Crop Protection. John Atkin was Chief Executive Officer
(1999-2000), Chief Operating Officer (1999), Head of Product Portfolio
Management (1998) and Head of Insecticides and Patron for Asia (1997-1998)
of
Novartis Crop Protection. Prior to 1998 he was General Manager of Sandoz Agro
France (1995-1997) and Head of Sandoz Agro Northern Europe (1993-1995). He
graduated from the University of Newcastle-upon-Tyne with a PhD and a BSc degree
in agricultural zoology.
Robert
Berendes
(appointed
to the Syngenta Executive Committee Jan 1, 2007)
Head
of Business
Development. Robert Berendes was previously Head of Diverse Field Crops
(2005-2006) and Head of Strategy, Planning and M&A (2002-2005) for Syngenta.
Prior to this he was a partner and co-leader of the European chemical practice
at McKinsey & Company. He graduated from the University of Cologne with a
Diploma in Chemistry and has a PhD in Biophysics from the Max-Planck-Institute
for Biochemistry/Technical University of Munich.
Bruce
Bissell (retired from Syngenta Feb 28, 2007)
Head
of Global
Operations and Human Resources. Bruce Bissell was Director of Supply Chain
for
Zeneca Agrochemicals (1997-2000) and Head of International Manufacturing for
the
pharmaceutical business of Zeneca Group plc (1992-1997). He graduated from
Strathclyde University with a degree in applied chemistry.
David
Jones
(retired from Syngenta Feb 28, 2007)
Head
of Business
Development. David Jones was Business Director for Zeneca Agrochemicals
(1997-2000), having been Regional Executive for Asia, Africa and Australia,
based in Hong Kong, since 1992 and previously head of Europe. He has a BSc
and a
PhD in science and economics from Stirling University in Scotland.
David
Lawrence
Head
of Research
& Technology. David Lawrence was Head of R&T Projects for Syngenta
(2000-2002). Prior to this he had been Head of International R&D Projects in
Zeneca Agrochemicals, having previously held several senior scientific roles.
He
graduated in chemistry from Oxford University with an MA and DPhil in chemical
pharmacology.
Michael
Mack
Chief
Operating
Officer of Syngenta Seeds. Michael Mack was Head of Crop Protection, NAFTA
Region (2002-2004). Prior to this, he was President of the Global Paper Division
of Imerys SA, a Paris-based mining and pigments concern, from the time of its
merger in 1999 with English China Clays Ltd. He had previously served there
as
Executive Vice President, Americas and Pacific Region, in addition to being
an
Executive Director of the Board. From 1987 to 1996 he held various roles with
Mead Corporation. He has a degree in economics from Kalamazoo College in
Michigan, studied at the University of Strasbourg, and has an MBA from Harvard
University.
Christoph
Mäder
Head
of Legal &
Taxes. Christoph Mäder was Head of Legal & Public Affairs of Novartis Crop
Protection (1999-2000) and Senior Corporate Counsel of Novartis International
AG
(1992-1998). Christoph Mäder is a member of the Supervisory Committees of the
Federation of Swiss Industrial Holding Companies and of the Swiss Employer
Association. He graduated from Basel University Law School, and is admitted
to
the Bar in Switzerland.
Mark
Peacock
(appointed
to the Syngenta Executive Committee Jan 1, 2007)
Head
of Global
Operations. Mark Peacock was previously head of Global Supply for Syngenta
(2003-2006) and Regional Supply Manager for Asia (2000-2003). Prior to this,
he
was a Product Manager in Zeneca Agrochemicals and General Manager of the
Electrophotography Business in Zeneca Specialties. He has a degree in chemical
engineering from Imperial College, London and a Masters in International
Management from McGill University in Montréal.
Domenico
Scala
Chief
Financial
Officer. Domenico Scala also serves as Non-Executive Director of Nobel Biocare
AG, a position he has held since May 2006. Previously he held various leading
positions in Finance with Roche AG (1995-2003), most recently as Group Treasurer
(2001-2003) and Head of Company Controlling (1999-2001). Prior to 1995, he
was
Finance Director of Panalpina Italy SpA (1993-1995) and Senior International
Auditor with Nestlé SA (1990-1993). He graduated from the University of Basel
with a degree in economics.
Compensation
Executive
Compensation Policy and Programs
Syngenta’s
executive compensation policy and programs are designed to attract, retain
and
motivate internationally oriented, successful executives. Its policies are
guided by the principle of rewarding and encouraging performance.
The
compensation of
the Chief Executive Officer and members of the Executive Committee consists
of a
base salary and performance related awards. These awards are based on financial
measures and on individual performance. Performance related awards include
short
and long term incentives and consist of cash, deferred shares, restricted share
units and stock options. The
incentive
awards generally represent a significant part of total compensation for these
executives. The
long-term
incentive programs are equity-based and encourage the members of the Executive
Committee to focus on the performance and the growth of the Company and to
align
with the interests of shareholders.
The
compensation of
non-executive Directors consists of an annual fee paid in cash or a combination
of cash and shares.
Compensation
programs
Annual
or
Short-Term Incentive (STI) awards and Deferred Share Plan (DSP)
The
annual
incentive plan (STI) for all employees, including executives, awards achievement
against individual performance objectives and pre-determined financial measures
for the Company or appropriate Group of companies. For nominated Senior
Executives the
STI is divided
into a cash portion and a portion allocated in deferred shares under the terms
of the Deferred Share Plan (or
deferred
American Depository Shares “ADS” for United States participants).
Syngenta
Deferred
Share Plan (DSP): A fixed portion of the STI is invested in the DSP on a
mandatory basis; each executive may invest an additional portion on a voluntary
basis. Shares invested in the DSP have a blocking period of three years. At
the
end of the blocking period the shares become freely tradable and the Company
matches (doubles) the number of shares; e.g. the number of shares invested
in
the DSP in 2003 was matched (doubled) in 2006 pursuant to the rules of the
program. Other than under exceptional circumstances as detailed in the DSP
plan
rules, no matching share will be granted if the employee leaves Syngenta before
the end of the blocking period.
The
grant value of
a deferred share equals the weighted average market price of the Syngenta
share
on five business days prior to the date of grant or
at the closing
share price at the SWX (the Swiss Exchange) at the date of grant, whichever
is
higher. (The same principles apply to the grant value of deferred
ADS).
Long
Term
Incentive (LTI)
The
long-term
incentive award is based on individual performance and is designed to provide
the executives with equity recognizing both past performance and provide an
incentive for future performance.
Fifty
percent (50%)
of the LTI award is granted in stock options and fifty percent (50%) in
Restricted Share Units (RSU), (options
on ADS and
restricted ADS units for United States participants).
Stock
Options: The
option value is determined by using the Black Scholes model, which is a commonly
accepted stock option valuation method. The options have a term of ten or eleven
years and can not be exercised during a vesting period of three years following
the date of grant. The
exercise price
of the options is equal to the weighted average share price of the Syngenta
share at the SWX of the five business days prior to the date of grant, or at
the
closing share price at the SWX at the grant date, whichever is
higher.
Restricted
Share
Unit: The RSU value equals the weighted average market price of the Syngenta
share on five business days prior to the date of grant, or
at the closing
share price at the SWX at the date of grant, whichever is higher.
After a
three-year vesting period, each RSU converts into one tradable Syngenta
share.
Further
information
on the Syngenta long-term incentive plan (LTI Plan) and the Deferred Share
Plan
(DSP) is provided in Note 28 to the consolidated financial
statements.
Employee
Share
Purchase Plan (Switzerland)
All
Syngenta
employees in Switzerland, including the Chief Executive Officer and members
of
the Executive Committee are eligible to participate in the Syngenta Employee
Share Purchase Plan. This plan entitles employees to subscribe once a year
to
shares at a discount rate of fifty percent (50%) from the closing share price
on
the date of grant. The maximum subscription per employee (executive) in one
year
is CHF 5,000. The shares are subject to a blocking period of three
years.
Share
Plan for
Non-Executive Directors
Members
of the
Board excluding the Chairman are eligible to opt for the payment of their annual
compensation in the form of shares. The Directors define the percentage of
their
annual fee for compensation in shares. In addition the Directors chose between
blocked shares or free shares. The Chairman receives a fixed part of his
compensation in the form of blocked shares. The value of an allocated share
equals
the weighted average market price of the Syngenta share on five business days
prior to the grant date.
Executive
Compensation
In
2006 the Chief
Executive Officer and the seven members of the Executive Committee
received:
Cash
compensation
|
CHF
|
USD
|
Salaries
and
allowances (cash)
|
6,926,653
|
5,508,711
|
Bonus
(cash
portions)
|
1,239,790
|
985,995
|
Total
|
8,166,443
|
6,494,796
|
In
addition, these
executives received shares and options as set out in the respective tables
below.
As
part of the
compensation in 2006 the following number of shares or ADS1
were allocated to
the Chief Executive Officer and the seven members of the Executive Committee.
In
addition, shares allocated and deferred in 2003 on a mandatory and voluntary
basis were matched one-for-one (doubled) at the time of their vesting in
2006.
Shares,
ADS1
allocated
pursuant
to the Deferred Share Plan (DSP)
|
Number
|
Value2
CHF
|
Value2
USD
|
Shares
allocated, invested in the DSP (STI 2005)3
|
19,840
|
3,670,400
|
2,919,039
|
Shares
invested in 2003 were matched in 2006 4
|
13,860
|
2,494,800
|
1,984,094
|
ADS1
invested in
2003 were matched in 2006 4
|
1,679
|
61,619
|
49,005
|
1)
Five ADSs
represent one Syngenta share
2)
Value at grant,
matching
3)
The
deferred
shares allocated in 2006 under the STI 2005 scheme, are valued at the
market value of CHF 185.00 as referred to above. In Note 28 to the consolidated
financial statements, the valuation of the shares for accounting purposes is
adjusted for the absence of a dividend entitlement during the deferral period,
in accordance with IFRS2.
4)
Matching shares
and ADS issued during 2006 as a result of the STI 2002 scheme are valued at
the
2006 issue date market value of CHF 180.00 (ADS: USD29.19). In Note 28 to the
consolidated financial statements, the shares are valued at the grant date
fair
value in accordance with IFRS2.
In
addition,
options on shares and restricted stock units RSU were granted to the Chief
Executive Officer and the seven members of the Executive Committee under the
Syngenta Long-Term Incentive Plan (LTI-Plan).
Options
and restricted share units allocated
pursuant
to the LTI Plan
|
Number
|
Value1
CHF
|
Value1
USD
|
Options
on
shares allocated (LTI 2005)
|
65,373
|
2,644,760
|
2,103,356
|
RSU
allocated, (LTI 2005)2
|
14,386
|
2,661,410
|
2,116,598
|
1)
Value at
grant
2)
The RSU allocated
in 2006 under the LTI 2005 scheme, are valued at the market value of CHF 185.00
as referred to above. In Note 28 to the consolidated financial statements,
the
valuation of the shares for accounting purposes is adjusted for the absence
of a
dividend entitlement during the deferral period, in accordance with
IFRS2.
The
short-term and
long-term incentives were granted on the basis of business and personal
performance in FY 2005.
The
options that
were allocated to the Chief Executive Officer and the seven members of the
Executive Committee have the following terms:
Grant
year
|
Instrument
|
Number
|
Term2
|
Exercise
period2
|
Option
- share ratio
|
Exercise
price
|
20061
|
Stock
option
(Share)
|
65,373
|
11
|
8
|
1:1
|
CHF
185.00
|
In
addition, these
executives held options from earlier grants as follows (as of December 31,
2006):
Grant
year
|
Instrument
|
Number
|
Term2
|
Exercise
Period2
|
Option
- share ratio
|
Exercise
price
|
2002
|
Stock
option
(Share)
|
11,576
|
11
|
8
|
1:1
|
CHF
98.00
|
2003
|
Stock
option
(Share)
|
34,618
|
11
|
8
|
1:1
|
CHF
59.70
|
2003
|
Stock
option (ADS)3
|
36,121
|
10
|
7
|
1:1
|
USD 8.59
|
20041
|
Stock
option
(Share)
|
150,069
|
11
|
8
|
1:1
|
CHF
89.30
|
20041
|
Stock
option (ADS)3
|
120,690
|
10
|
7
|
1:1
|
USD
14.53
|
20051
|
Stock
option
(Share)
|
74,927
|
11
|
8
|
1:1
|
CHF
127,38
|
20051
|
Stock
option (ADS)3
|
47,319
|
10
|
7
|
1:1
|
USD
21.30
|
1)
Unvested options
(shaded)
2)
Number of
years
3)
Five ADSs
represent one Syngenta share
In
2006, within the
scope of the Swiss Employee Share Purchase Plan (ESPP), the Chief Executive
Officer and members of the Executive Committee purchased shares at 50% of their
market value at the grant date.
Shares
purchased (ESPP)
|
Number
|
Value1
CHF
|
Value1
USD
|
Shares
purchased
|
161
|
34,293
|
27,273
|
1)
100% value at
purchase date
Provisions
for
pension and insurance required under local pension law were made for the Chief
Executive Officer and the members of the Executive Committee including
provisions to cover merger-related pension promises.
Pension
and insurance cost
|
CHF
|
USD
|
Total
|
4,582,249
|
3,644,225
|
The
total
compensation (salaries, STI awards, shares, options, RSU) that was conferred
in
2006 to the Chief Executive Officer and the members of the Executive Committee
(a total of eight Executives) amounted to CHF 17,158,933 (USD
13,646,360).
In
2006 the highest
total compensation was paid to the Chief Executive Officer (CEO), Michael P.
Pragnell, a member of the Executive Committee and an executive member of the
Board of Directors. Cash compensation consisted of salary and a short-term
incentive award. In common with other members of the Executive Committee the
CEO
used a portion of the short-term incentive award to defer shares pursuant to
the
Syngenta Deferred Share Plan. In addition, options on shares and RSU were
granted as LTI (long-term incentive). The short-term and long-term awards were
granted on the basis of financial and personal performance in 2005.
Further
he received
shares as a result of the matching of shares deferred in 2003 and vesting in
2006. Furthermore, the CEO purchased shares under the Swiss employee share
purchase plan ESPP. A pension accrual was made for the CEO and insurance
premiums were paid to meet contractual obligations, including provisions to
cover merger-related pension promises.
The
following table
sets out M. Pragnell’s compensation for 2006:
Compensation
|
CHF
|
USD
|
Total
cash
compensation
|
2,196,565
|
1,746,910
|
-
Shares
deferred in 2006, (based on STI 2005)
|
1,285,380
|
1,022,252
|
-
Options
on shares allocated in 2006 (LTI 2005)
|
945,013
|
751,561
|
-
RSU
allocated in 2006 (LTI 2005)
|
945,165
|
751,682
|
Total
equity
based awards
|
3,175,558
|
2,525,495
|
Total
compensation (cash + equity)
|
5,372,123
|
4,272,406
|
|
|
|
Shares
received in 2006 as a result of
matching
shares deferred in 2003
|
989,100
|
786,623
|
Pension
accruals and insurance cost
|
3,709,498
|
2,950,134
|
In
addition M.
Pragnell purchased 23 shares pursuant to the Swiss ESPP. The value of the
benefit is CHF 2,445 (USD 1,960)
Compensation
of Former Executives
In
2006 a former
member of the Executive Committee and a former executive Director of the Board
received the following cash payments as a result of contractual and statutory
obligations.
Cash
compensation
|
CHF
|
USD
|
Salaries,
allowances and bonus (cash)
|
4,426,151
|
3,520,082
|
Provisions
for
pension and insurance were made for these former Executives in the total amount
of CHF 159,691 (USD 127,001) to meet contractual obligations and statutory
requirements.
In
addition, the
number of shares invested in the DSP by the former member of the Executive
Committee and the former executive Director in 2003 was matched in 2006 on
a
one-for-one basis pursuant to the rules of the program. These former executives
received 6,903 shares at a market value at the day of grant of CHF 1,219,308
(USD 969,706).
Further
information
is provided in Note 28 to the consolidated financial statements.
Compensation
of Non-Executive Directors
Eleven
non-executive members of the Board including the Chairman received compensation
for 2006 in cash or a combination of cash and shares. This applies to all
non-executive directors whose mandate commenced or ended during 2006. All
non-executive directors were offered the opportunity to opt for the payment
of
their compensation in cash or a combination of cash and shares. If shares were
chosen a portion of their annual fee was allocated in free or blocked shares.
The Chairman received a fixed amount of the annual fee in restricted shares
on a
mandatory basis.
Non-Executive
Director
|
Compensation
in
cash (CHF)
|
Compensation
in
shares 1
(CHF)
|
Total
fee
CHF
|
Total
fee
USD
|
Martin
Taylor
|
1,606,027
|
383,973
|
1,990,000
|
1,592,000
|
Peggy
Bruzelius
|
240,000
|
-
|
240,000
|
192,000
|
Peter
Doyle
|
52,049
|
148,138
|
200,187
|
160,150
|
Rupert
Gasser
|
300,008
|
30,151
|
330,159
|
264,127
|
Pierre
Landolt
|
10,697
|
199,364
|
210,061
|
168,049
|
Pedro
Reiser 2
|
110,000
|
-
|
110,000
|
88,000
|
Peter
Thompson
|
180,000
|
30,151
|
210,151
|
168,121
|
Jacques
Vincent
|
50,046
|
150,138
|
200,184
|
160,147
|
Rolf
Watter
|
180,000
|
30,151
|
210,151
|
168,121
|
Felix
Weber
|
256,008
|
64,147
|
320,155
|
256,124
|
Jürg
Witmer
3
|
45,004
|
45,072
|
90,076
|
72,061
|
Total
|
3,029,839
|
1,081,284
|
4,111,123
|
3,288,900
|
1)
Value of share
portions at grant
2)
Pedro Reiser’s
term of office ended on April 19, 2006 (AGM), prorated fee
3)
Jürg Witmer was
elected to the board on April 19, 2006 (AGM), prorated fee
Corporate
Governance
Syngenta’s
Corporate Governance is aligned with international standards and practice.
The
Company complies with the “Swiss Code of Best Practice for Corporate Governance”
and meets the Corporate Governance rules of the New York Stock Exchange (NYSE),
as applicable for foreign companies. Syngenta is in compliance with the
applicable requirements of the US Sarbanes Oxley Act of 2002, including the
certification of Syngenta’s Annual Report on Form 20-F by the CEO and the CFO
and the Auditor’s Report on management’s assessment of Internal Control over
Financial Reporting.
Service
Contracts
Neither
the CEO nor
any other member of the Executive Committee has a service contract which
provides for benefits upon termination of employment due to change of control.
The Chairman has a contract which provides for twelve months compensation due
to
change of control; no other member of the Board has a service contract with
a
change of control clause.
Board
Syngenta
is led by
a strong and experienced Board. The Board includes representatives from five
nationalities, drawn from broad international business and scientific
backgrounds. Its members bring diversity in expertise and perspective to the
leadership of a complex, highly regulated, global business. The Board exercises
full and effective control of the Company as set out in the Swiss Code of
Obligations (<<Obligationenrecht>>) and in the Articles of
Incorporation(1 )
of Syngenta AG. It
holds the ultimate responsibility for the strategy and for the supervision
of
executive management.
During
the 2006
financial year the full Board held five formal one-day meetings. Furthermore,
Board members conducted discussions with Officers of the Company to review
relevant matters at hand, visited operating locations of the Company and
provided information to management as needed. The Chairman of the Board, after
consultation with the Chief Executive Officer, determines the agenda for the
Board meetings. Any member of the Board of Directors may request the convocation
of a meeting or the inclusion of items of business in the agenda.
Chairman
of
the Board
The
Chairman is
nominated by the Board members and shares responsibility for the strategic
direction of Syngenta with the Chief Executive Officer (CEO). He ensures close
liaison between the Board and its committees and the CEO. In consultation with
the CEO, the Chairman supervises implementation of resolutions of the Board
and
of its committees. The Chairman represents, jointly with the CEO, the interests
of the Company as a whole towards authorities and business associations, both
in
Switzerland and internationally.
Chairman’s
Committee
During
the 2006
financial year the Chairman’s Committee held six formal meetings. The Chairman’s
Committee consists of four members nominated by the Board: the Chairman and
Vice
Chairman of the Board, the Chief Executive Officer and one other Director.
It
prepares the meetings of the Board of Directors and comments on matters falling
within the Board’s authority before decisions are taken. It is also empowered to
make decisions on behalf of the Board where the latter has delegated such
authority. Furthermore the Chairman’s Committee assumes the role of a Nomination
Committee. It advises on the composition and succession planning of the Board
and its committees. It ensures the development of guidelines for selecting
candidates and assumes responsibility for reviewing and proposing to the full
Board candidates for election to the Board. Final decisions are taken by the
full Board, which then submits the election proposals to the Shareholders’
Meeting. Members of the Chairman’s Committee are Martin Taylor (Committee
Chairman), Rupert Gasser, Michael Pragnell and Felix Weber.
Compensation
Committee
During
the 2006
financial year the Compensation Committee held four formal meetings. The
Compensation Committee consists of four members appointed by the Board: the
Chairman and three other Directors. It regulates the compensation of the
Directors and the remuneration and terms of employment of the members of the
Executive Committee. Members of the Compensation Committee are Felix Weber
(Committee Chairman), Rupert Gasser, Martin Taylor and Jacques Vincent. Michael
Pragnell attends the meetings of the Compensation Committee as a permanent
guest.
Audit
Committee
During
the 2006
financial year the Audit Committee held three formal meetings. The Audit
Committee consists of four members appointed by the Board. All members are
independent, Non-Executive Directors. Its duties are to examine reports from
external and internal auditors and to submit findings to the Board. The Audit
Committee assesses the quality of the financial reporting and prepares Board
decisions in this area. Furthermore, it reviews critical accounting policies,
financial control mechanisms and
(1)
|
The
Articles
of Incorporation of Syngenta AG can be accessed on the Internet
(www.syngenta.com/en/investor/art_inc_index.aspx)
|
compliance
with
corresponding laws and regulations. The Audit Committee also monitors and
reports on the performance and independence of the auditors. Members of the
Audit Committee are Peggy Bruzelius (Committee Chairman), Pierre Landolt, Peter
Thompson and Rolf Watter.
Internal
Audit
Internal
Audit, as
an inspecting and monitoring body, carries out operational audits and system
audits. All organizational units, associated companies and foundations are
subject to audit. Duties are assigned by the Audit Committee and any suspected
irregularities are reported without delay. Internal Audit maintains a regular
dialogue with the external auditor to share reports and risk issues arising
from
their respective audits and to coordinate their activities. In connection with
the financial consolidation at year end, a letter of assurance process is in
place. The letters of assurance are cascaded down in the organization. The
returned letters are analyzed, evaluated and any arising issues and deficiencies
are reported to the Head of Internal Audit. Internal
Audit
thereafter makes a report of the combined issues arising from internal audits
and the letter of assurance process to the Audit Committee. The Audit Committee
reports to the full Board of Directors.
Executive
Committee
Under
the direction
of the Chief Executive Officer, the Executive Committee is responsible for
the
operational management of the Company. It consists of the Chief Executive
Officer (CEO), the Chief Operating Officers (COO) of the Crop Protection and
Seeds businesses, the Chief Financial Officer (CFO), the Head of Research &
Development, the Head of Global Operations, the Head of Business Development
and
the Head of Legal & Taxes.
Appointment
of Directors and Members of the Executive Committee
The
members of the
Board of Directors are elected individually by the shareholders at the Annual
General Meeting. The Articles of Incorporation of Syngenta provide that the
term
for which Directors are appointed must not exceed three years. A year for the
purpose of determining any term of office is the interval between two ordinary
General Meetings of Shareholders. Directors may be re-elected. The members
of
the Executive Committee are appointed and removed by the Board of
Directors.
Listing
Standards of the New York Stock Exchange (NYSE)
Syngenta
meets the
vast majority of NYSE’s Corporate Governance Standards. The few exceptions are
mainly due to the different legal system in Switzerland. In accordance with
NYSE’s listing standards, such differences are explained in detail on Syngenta’s
website at www.syngenta.com/en/investor/corpgov_nyse.aspx.
Employees
of Syngenta
Year
2006
Syngenta
had
approximately 19,500 permanent employees as of December 31, 2006. Approximately
24% of these were in NAFTA, 8% in Latin America, 17% in Asia Pacific and the
remaining 51% in Europe, Africa and Middle East.
The
functional
distribution of our employees for the year ending December 31, 2006 was
approximately as follows:
Production
|
36%
|
Research
and
development
|
20%
|
Marketing
and
distribution
|
32%
|
Administration
and general overhead
|
12%
|
In
several
countries, part of the workforce is unionized or represented by works councils.
Our relationships with our unions and other employee organisations are generally
good and there have been no significant industrial disputes over the past five
years at any Syngenta business.
Year
2005
Syngenta
had
approximately 19,300 permanent employees as of December 31, 2005. Approximately
24% of these were in NAFTA, 9% in Latin America, 17% in Asia Pacific and the
remaining 50% in Europe, Africa and Middle East.
The
functional
distribution of our employees for the year ending December 31, 2005 was
approximately as follows:
Production
|
36%
|
Research
and
development
|
20%
|
Marketing
and
distribution
|
32%
|
Administration
and general overhead
|
12% |
Year
2004
Syngenta
had
approximately 19,500 permanent employees as of December 31, 2004. Approximately
25% of these were in NAFTA, 8% in Latin America, 16% in Asia Pacific and the
remaining 51% in Europe, Africa and Middle East.
The
functional
distribution of our employees for the year ending December 31, 2004 was
approximately as follows:
Production
|
36%
|
Research
and
development
|
21%
|
Marketing
and
distribution
|
31%
|
Administration
and general overhead
|
12%
|
Management
Shareholders
The
aggregate
amount of Syngenta shares held by current Directors and the members of the
Executive Committee as of December 31, 2006, based on information available
to
the Company is 0.12% of all outstanding shares. None of Syngenta’s Directors or
the Executive Committee members individually owns more than 1% of the Company’s
outstanding shares.
ITEM
7 —
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
Major
Shareholders
On
February 14,
2006, FMR Corporation disclosed in a filing to the US Securities and Exchange
Commission (SEC) a holding of 5.819 percent of the share capital of Syngenta
AG.
On February 14, 2007, FMR Corporation disclosed in a filing to the SEC that
its
holding in the share capital of Syngenta AG has been reduced to 4.246
percent.
On
May 17, 2006,
the Company reported that Janus Capital Management LLC exceeded the 5 percent
threshold with a holding of 5.07 percent of the share capital. This disclosure
was published in the Swiss Commercial Gazette in accordance with the Swiss
Stock
Exchange Act.
As
of February 28,
2007 Syngenta AG itself held 7,256,450 shares in treasury corresponding to
7.0
percent of the share capital as at December 31, 2006. In accordance with Article
659a of the Swiss Code of Obligations, the Company, however, cannot exercise
the
voting rights relating to those shares. (On February 15, 2005, the Company
reported in a disclosure notification in the Swiss Commercial Gazette that
Syngenta AG itself exceeded the 10 percent threshold with a holding of 10.82
percent of the share capital. On August 10, 2005, the Company reported that
this
holding had fallen below the 10 percent threshold to 6.75 percent.)
As
of March 7,
2007, to our knowledge there is no other shareholder with a position of more
than 5 per cent of the share capital.
To
its knowledge,
the Company as of March 7, 2007 is not owned or controlled, directly or
indirectly, by another corporation, by any government or by any other natural
or
legal person, severally or jointly. As of January 31, 2007 42,159,420 ADSs
of
Syngenta AG corresponding to 8.10% of the share capital and 5,498,500 Ordinary
Shares of Syngenta AG corresponding to 5.3% of the share capital were held
by
2,753 registered holders domiciled in the United States.
Related
Party Transactions
There
were no
related party transactions other than those described in Note 29 to the
consolidated financial statements.
ITEM
8 —
FINANCIAL INFORMATION
Consolidated
Financial Statements
See
Item 18
“Financial Statements” for our consolidated financial statements.
Legal
Proceedings
In
addition to the
legal proceedings described below, Syngenta is involved from time to time in
a
number of legal proceedings incidental to the normal conduct of its business,
including proceedings involving product liability claims, commercial claims,
employment and wrongful discharge claims, patent infringement claims,
competition claims, tax assessment claims, waste disposal claims and tort claims
relating to the release of chemicals into the environment. Syngenta maintains
general liability insurance, including product liability insurance, covering
claims on a worldwide basis with coverage limits and retention amounts which
management believes to be adequate and appropriate in light of Syngenta’s
businesses and the risks to which it is subject.
Greens
Bayou In
February 2001,
the Port of Houston Authority (the “Port”) filed suit against GB Biosciences
Holdings, Inc., GB Biosciences Corporation, and certain other Syngenta entities
(including Syngenta Crop Protection, Inc.) in Texas State Court regarding
contamination that has allegedly migrated off the GB Biosciences Greens Bayou
site in Houston, Texas. The Greens Bayou site, which manufactures an
agricultural fungicide, was acquired in February 1998 from Ishihara Sangyo
Kaisha, Ltd. (“ISK”). The on site past use of certain chlorinated organic
compounds employed in the manufacture of certain pesticides has contributed
to
soil and groundwater contamination, some of which has been detected on and
under
the adjacent property owned by the Port and in sediments of the adjoining Greens
Bayou. The contamination at issue mainly involves certain chlorinated pesticides
generated before 1970 by the prior owner of the plant, also named as a
defendant. While this contamination is generally being addressed under the
site’s Resource Conservation and Recovery Act (“RCRA”) permit, the Port
nonetheless filed suit. On December 19, 2003, the Syngenta entity defendants,
along with co-defendants ISK and Occidental Chemical Company (“Occidental”) and
certain of their affiliates settled the Port’s lawsuit by agreeing to conduct
certain remediation activities expected to cost approximately US$45 million,
to
pay the Port US$35 million and to provide an indemnity having a maximum
liability of US$20 million. The Syngenta, ISK and Occidental defendants agreed
to share the costs of the settlement on an interim basis subject to
determination of their ultimate shares of liability in further proceedings.
Agreement to settle with Occidental was entered into on January 18, 2006. In
October 2002, the Syngenta defendants had filed suit against the ISK defendants
for indemnity against losses arising from the Port litigation. That litigation
had been stayed pursuant to the terms of an interim cost sharing agreement
between the Syngenta defendants and the ISK defendants. That stay has been
lifted and the litigation is ongoing with a current trial date of January 2008.
Discussions with ISK and their insurer, AIG, to test the possibility of a
negotiated solution of their contribution pursuant to the indemnities given
by
ISK in the 1998 acquisition agreement are continuing.
Bt
11
Patent Case In
July 2002,
Syngenta filed a lawsuit in federal court in Delaware in which Syngenta Seeds,
Inc. charges
that
Monsanto, DeKalb Genetics, Pioneer Hi-Bred, Dow AgroSciences and Mycogen Seeds
are infringing upon one or more of United States Patent No. 6,075,185, United
States Patent No. 6,320,100, and United States Patent No. 6,403,865. The
products accused of infringement include YieldGard®
MON810
Bt corn and
Herculex®
Bt corn. These
patents cover synthetic Bt genes with increased expression in corn and corn
plants resistant to insects such as the European corn borer that result from
expression of such Bt genes; the patent cover includes corn plants with such
genes either alone or stacked with other traits. In an agreement reached on
November 29, 2004, Syngenta Seeds, Inc. and Pioneer Hi-Bred International,
Inc.
settled the claims Syngenta had brought against Pioneer. Trial against
defendants Monsanto and Dow/Mycogen commenced November 29, 2004. Prior to
closing arguments, the Court granted defendants’ motion that the ‘100 and ‘185
were not infringed. A jury verdict was returned December 14, 2004 finding the
asserted claims of the ‘865 patent were infringed by YieldGard®,
Herculex
I®
and
TC6275 but that
those claims were invalid. Post trial motions filed by the parties were denied.
On May 30, 2006 Syngenta granted Dow AgroSciences a Covenant Not to Sue under
the patents-in-suit for Herculex®
corn. Syngenta has
appealed the decisions finding the ‘865 patent invalid and the ‘100 and ‘185
patents not infringed. Dow Agrosciences has cross-appealed the ’865 infringement
decision. A decision on the appeal is expected in quarter 2 or quarter 3
2007.
Shah
and
Lundquist Patent Cases
On May 12, 2004,
Monsanto Company and Monsanto Technology, LLC commenced an action against
Syngenta Seeds, Inc. and Syngenta Biotechnology, Inc. in the United States
District Court for the District of Delaware (the “Shah” Case). On July 27, 2004,
DeKalb Genetics Corp (a fully owned subsidiary of Monsanto Company) commenced
an
action against Syngenta Seeds, Inc. and Syngenta Biotechnology, Inc. in the
United States District Court for the Northern District of Illinois (the
“Lundquist” case). In its complaints, Monsanto sued Syngenta for infringement of
patents by making and using corn products exhibiting resistance to glyphosate
herbicide (GA21). Monsanto are seeking injunctions against the sale of GA21
corn
and compensatory and exemplary damages. On May 19, 2005 the US District Court
for the Northern District of Illinois transferred the Lundquist case to the
District of Delaware and on August 18, 2005 the parties agreed
to
consolidate the
two cases. The court entered a judgment on May 11, 2006 in Syngenta’s favor
ruling the Shah patent invalid and that the Lundquist patent had not been
infringed.
Monsanto
filed a
consolidated notice of appeal for the Shah and Lundquist cases on June 8, 2006.
A decision on appeal is expected quarter 2 or quarter 3 2007.
Lundquist
‘798 Patent Case
In a separate
filing on August 9 2006, DeKalb Genetics Corp. commenced an action against
Syngenta Seeds Inc, and certain of its affiliates in the United States District
Court for the Eastern District of Missouri alleging infringement of US Patent
No. 5,554,798 by making corn containing genes that confer resistance to the
herbicide glyphosate (GA21 corn). A First Amendment Complaint was filed August
11, 2006, and on October 20, 2006, Syngenta filed a motion to transfer the
case
to Delaware. The motion to transfer was heard November 17; and on December
29
the Court denied Syngenta’s motion. On January 19, 2007, Syngenta filed motions
in the Missouri case to sever and to dismiss claims against five affiliated
company defendants and to transfer the remaining claims to Delaware. On the
same
day, Syngenta filed a Declaratory Judgement complaint in Delaware seeking a
declaration that the ‘798 patent is not infringed or is invalid. Monsanto
responded by filing a motion to transfer the Delaware Declaratory Judgement
to
Missouri.
Missouri
Roundup Ready®
1
Soybean
Branding Case
On May 10, 2004,
Monsanto Company commenced an action against Syngenta Seeds, Inc. in Missouri
State court (St. Louis County). In its complaint, Monsanto seeks a declaration
that, pursuant to the express terms of its license agreement, Syngenta only
has
the right to develop, produce and sell Roundup Ready®
soybeans under the
NK®
Brand. Monsanto
sought a declaratory judgment and permanent injunction prohibiting the use
of
the Independence brand (or any other brand other than the NK®
brand) in the
production, marketing, advertising or sale of Monsanto’s Roundup
Ready®
soybean
technology. On February 8, 2006, the court found that the License Agreement
limits Syngenta to a single brand, NK®.
Syngenta has
appealed the verdict and a decision is expected on the appeal in quarter 1,
2007.
In
a second action
filed August 25, 2005, Syngenta Seeds Inc. is seeking a judgment declaring
that
Monsanto breached the 1993 Roundup Ready®
Soybean License
Agreement by failing to provide Syngenta with equal access to improved Roundup
Ready®
soybean genes
(“RR2Yield”). On October 19, 2006, the court ruled that the 1993 license
agreement is ambiguous. On November 18, 2006, the Court ordered mediation of
the
case before a special settlement master which was held December 1, 2006; despite
diligent efforts, no settlement was reached. The liability phase of the trial
has commenced and the damages phase is scheduled for April, 2007.
1
Roundup Ready is a
registered trademark of Monsanto Technology LLC
Delaware
Antritrust Case / Monsanto
On July 28, 2004,
Syngenta Seeds, Inc. filed an antitrust lawsuit against Monsanto Company and
Monsanto Technology LLC in the United States District Court for the District
of
Delaware. The complaint alleges that Monsanto has engaged in a pattern of
illegal and improper activities to exclude Syngenta and to monopolize key corn
trait markets and seed markets in violation of the antitrust laws, including:
entering into exclusive dealing contracts, bundling incentive programs, filing
baseless patent lawsuits, making misrepresentations, and coercing seed
companies. Monsanto’s conduct has and will harm competition in key corn trait
and seed markets causing consumers to continue to pay higher prices than they
would otherwise pay. Syngenta seeks injunctive relief and treble damages in
an
amount to be proven at trial. On July 14, 2005, Monsanto filed a motion to
amend
its answer and assert counterclaims against Syngenta. On August 23, 2006,
Monsanto filed a motion to stay the trial date pending a decision on the appeal
of the Shah and Lunquist patent cases. The Court granted Monsanto’s motion to
stay on November 8, 2006, and the case has been stayed.
GALECRON
GALECRON (active
ingredient chlordimeform) is an insecticide which was produced by Ciba-Geigy
from 1968 to 1976 and 1978 to 1988. Scientific studies have indicated an
increased incidence of bladder cancer among production workers exposed to 4-cot,
a metabolite of chlordimeform. In 1994 workers exposed to GALECRON at
manufacturing and formulation sites, as well as applicators of the product,
filed a class action in the United States which was settled the same year.
The
settlement required Ciba-Geigy (predecessor in interest to Novartis and
Syngenta) to expand its monitoring program to individuals occupationally exposed
to GALECRON and to compensate these individuals for certain covered conditions
and procedures. Individuals were permitted to bring separate lawsuits for
occupational exposure to GALECRON only if they opted out of the class action
settlement. The one remaining opt-out lawsuit that Syngenta Crop Protection,
Inc. was involved in has been settled. While there are currently no opt-out
cases pending against Syngenta, in late 2005, Syngenta accepted the tender
of
the Stringer matter (referenced below) in which the plaintiff alleges exposure
to GALECRON caused his bladder cancer. Syngenta is investigating whether its
insurers will pay for the costs associated with this litigation.
While
over 100
other individuals opted out of the class action, they have yet to file suit.
As
time passes, the applicable statutes of limitation will bar many of these
potential lawsuits. A substantial portion of the costs of the class action
settlement, as well as the opt-out litigation, are likely to be covered by
the
Syngenta’s insurers, subject to applicable deductibles.
McIntosh
Syngenta
Crop
Protection, Inc. has accepted tender from Novartis Corporation (and originally
from Ciba Specialty Chemicals Corporation) , under certain agreements associated
with the formations of Syngenta and Novartis which allocate environmental
liabilities in the US, of a series of lawsuits (in federal and State courts
in
Alabama and in State court in New Jersey) and pending claims which allege
contamination by DDT and other chemicals associated with historic agrochemical
manufacturing activities at the Ciba Specialty Chemicals Corporation site at
McIntosh, Alabama. The plaintiffs or claimants variously seek damages for
wrongful death, personal injury, decreased property value, and the establishment
of medical monitoring programs. Liability under lawsuits and pending claims
were
tendered by Ciba to Novartis and by Novartis to Syngenta under 1996 and 2000
Environmental Matters Agreements associated with formation of Novartis and
Syngenta. Current stage of proceedings in each case involves resolution of
threshold issues including class certification; jurisdictional forum; and
sufficiency of initial disclosure. Plaintiffs’ Motion for Class certification in
Fisher was denied by the Alabama federal court on July 14, 2006. Tender of
the
defense of seven personal injury cases (Weaver, Et-Awil, Ferrell, Lofton,
Witherspoon, Stringer and Johnson) were accepted in the fourth quarter of 2005.
Damages claimed in the lawsuits have not yet been quantified. Trials have been
scheduled in the Weaver case (May, 2007), the Et-Awil matter (September 2007)
and the Stringer matter (October 2007).
Holiday
Shores
The Holiday Shores
Sanitary District in Madison County, Illinois filed a class action complaint
against Syngenta Crop Protection, Inc. in July 2004 purportedly on behalf of
a
class consisting of all Illinois Public Water Districts, Water Service Districts
and Water Authorities who have, allegedly, suffered contamination of their
water
sources at any measurable level on account of the product Atrazine, a herbicide
manufactured since the late 1950s by Syngenta Crop Protection, Inc. and its
predecessors in interest, Novartis Crop Protection, Inc., Ciba-Geigy and Geigy
Chemical Corporation. The Holiday Shores Complaint alleges that the product
Atrazine and/or its degradent chemicals are harmful to humans as consumed
through dietary water, and that run-off from the soil where Atrazine has been
applied has damaged the water district’s property and contaminated its surface
waters, used as a source of drinking water for the district. It alleges claims
of trespass, nuisance, negligence, strict liability and violation of the
Illinois Environmental Protection Act and seeks monetary damages, including
the
cost of purchase, installation, maintenance and operation of charcoal filtration
systems, alleged diminution in property value and remediation, punitive damages
and attorneys’ fees. The complaint was served on Syngenta on August 27, 2004.
The company succeeded in having the lawsuit removed from state to federal court
but, on Plaintiffs Motion, the federal court on March 28, 2005, remanded the
lawsuit back to state court. Syngenta has filed a Motion to Dismiss which was
argued on October 25, 2005, but has yet to be decided by the court.
Agroatar
Agroatar S.A. on
May 24, 2000 sued Zeneca S.A.I.C. (now Syngenta Agro S.A.) in Buenos Aires,
Argentina for alleged wrongful termination of an agrochemicals supply contract.
The plaintiff seeks damages for goodwill and loss of profits of US$43 million
plus costs and interest. Agroatar has US$15 million debt outstanding to Syngenta
but claims to be owed US$7 million by Syngenta under the terminated contract.
On
December 27, 1999, Agroatar S.A. filed a separate suit against Advanta Semillas
S.A.I.C. which was amended on June 8, 2000 to include Zeneca S.A.I.C. (now
Syngenta Agro S.A.) as a co-defendant. Agroatar alleges that Advanta Semillas
S.A.I.C. breached its obligations under certain agreements which had originally
been entered into with Zeneca S.A.I.C. (but which were subsequently assigned
to
Advanta Semillas S.A.I.C.) pursuant to which Agroatar had the rights to produce
and sell sunflower, corn, and sorghum seed. Based on that alleged breach,
Agroatar terminated the agreements. Agroatar claims damages of US$58 million
plus costs and interest. Syngenta believes it had cause to terminate the
agrochemicals supply agreement and was wrongly joined to the lawsuit against
Advanta Semillas and intends to defend vigorously both lawsuits. The two
lawsuits were consolidated in June 2001 and both are in the “evidentiary stage”,
which is expected to be completed by mid 2007 and will be followed by filing
of
closing arguments by the parties. Judgment of the court of first instance in
both lawsuits is expected in late 2007.
Tax
litigation
Syngenta
is also
subject to certain tax claims pending before the judiciary. Significant cases
are described below.
In
1996, the
Brazilian Federal Tax Treasury drew Novartis’ Brazilian legal entity into
administrative proceedings, regarding the import tax classification of the
active ingredient Atrazine. The issue is whether, under applicable law, Atrazine
will qualify as a raw material (Syngenta’s position) or as intermediate
chemicals (the Federal Inspection’s position). So far there have been 17
administrative rulings against Syngenta. Currently, 16 cases are on appeal
before the judiciary. In aggregate, the maximum contingency in the event of
an
unfavorable outcome for Syngenta could amount to approximately Brazilian real
24.5 million, a sum corresponding to approximately US$11.4 million currently.
There are no decisions in the first level Court. Syngenta issued a letter of
guarantee for part of the amount involved (BRL 16 million).
Litigation
is
subject to many uncertainties, and the outcome of individual matters cannot
be
predicted with certainty. It is reasonably possible that the final resolution
of
some of these matters could require Syngenta to make expenditures, in excess
of
established reserves, over an extended period of time and in a range of amounts
that cannot be reasonably estimated. Although the final resolution of any such
matters could have a material effect on Syngenta’s consolidated operating
results and cash flows for a particular reporting period, Syngenta believes
that
it should not materially affect its consolidated financial position, although
there can be no assurances in this regard.
Dividends
and Dividend Policy
The
Board expects
to recommend the distribution of future returns to shareholders, the actual
level of which will depend on the financial performance of Syngenta and will
also depend on the need to fund capital expenditure, working capital and other
investments. The returns will be in the form of a dividend or par-value
reduction. However, all distributions to shareholders proposed by the Board
require the approval of the shareholders of the Company in a General Meeting
of
Shareholders. Holders of ADSs and CDIs receive their cash payments in relation
to the number of Syngenta shares represented by the ADSs or CDIs. The payments
to the holders of ADSs listed on the New York Stock Exchange are distributed
through the Bank of New York, which converts the CHF amount into US Dollars
for
distribution to such holders. The payments to holders of CDIs are distributed
through CREST, which converts the CHF amount into GBP for distribution to such
holders.
At
last year’s
Ordinary General Meeting of Shareholders on April 19, 2006, it was decided
to
reduce the par value of the Company’s shares from CHF 5.60 by CHF 3.30 to CHF
2.30 and to repay to the shareholders CHF 3.30 per share. At this year’s
Ordinary General Meeting of Shareholders on May 2, 2007, the Board will propose
a dividend payment of CHF 1.60 and to reduce the par-value of the Company’s
shares from CHF 2.30 by CHF 2.20 to CHF 0.10 per share and to repay to the
shareholder CHF 2.20 per share.
For
information on
Swiss law requirements regarding dividends, see Item 10 “Additional
Information—Dividends”. For information about deduction of withholding taxes,
see Item 10 “Additional Information—Taxation—Switzerland”. For information about
taxation of repayments from par-value reduction, see Item 10 “Additional
Information—Taxation”.
ITEM
9 —
THE OFFER AND LISTING
Markets
Trading
Markets and Price Ranges
Our
shares are
primarily listed on the Swiss Exchange and principally traded on the
London-based virt-x, a recognized investment exchange supervised by the
Financial Services Authority (FSA) in the United Kingdom, where all the Swiss
blue chips have been principally traded since June 25, 2001. Our shares are
also
listed and traded on the New York Stock Exchange (in the form of
ADSs).
Syngenta
de-listed
its shares from the London Stock Exchange and from the OM Stockholm Stock
Exchange as of December 30, 2003. There has been no trading on these exchanges
as of January 1, 2004. The information presented in the tables below represent,
for the periods indicated, the reported high and low closing sales prices quoted
in their respective currency.
Trading
Prices on Swiss Exchange
|
|
|
|
|
|
Price
per Share in CHF
|
|
|
High
|
|
|
Low
|
|
Annual
Highs and Lows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002
|
|
108.50
|
|
|
74.65
|
|
2003
|
|
86.60
|
|
|
57.10
|
|
2004
|
|
122.50
|
|
|
79.72
|
|
2005
|
|
163.50
|
|
|
115.48
|
|
2006
|
|
234.40
|
|
|
146.93
|
|
Quarterly
Highs and Lows
|
|
|
|
|
|
|
2005
|
|
|
|
|
|
|
First
Quarter
|
|
131.25
|
|
|
115.48
|
|
Second
Quarter
|
|
134.00
|
|
|
119.50
|
|
Third
Quarter
|
|
140.30
|
|
|
125.48
|
|
Fourth
Quarter
|
|
163.50
|
|
|
131.90
|
|
2006
|
|
|
|
|
|
|
First
Quarter
|
|
187.68
|
|
|
157.90
|
|
Second
Quarter
|
|
184.64
|
|
|
146.93
|
|
Third
Quarter
|
|
190.60
|
|
|
154.60
|
|
Fourth
Quarter
|
|
234.40
|
|
|
189.10
|
|
Monthly
Highs and Lows for most recent six months
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
September
|
|
190.60
|
|
|
176.10
|
|
October
|
|
201.80
|
|
|
189.10
|
|
November
|
|
217.00
|
|
|
200.00
|
|
December
|
|
234.40
|
|
|
209.90
|
|
2007
|
|
|
|
|
|
|
January
|
|
239.70
|
|
|
224.20
|
|
February
|
|
233.20
|
|
|
215.30
|
|
Trading
Prices on the New York Stock Exchange
|
|
|
|
|
|
Price
per ADS(1)
in
US$
|
|
|
|
High
|
|
|
Low
|
|
Annual
Highs and Lows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002
|
|
|
13.14
|
|
|
9.87
|
|
2003
|
|
|
13.51
|
|
|
8.60
|
|
2004
|
|
|
21.40
|
|
|
13.16
|
|
2005
|
|
|
24.91
|
|
|
19.28
|
|
2006
|
|
|
38.41
|
|
|
24.06
|
|
Quarterly
Highs and Lows
|
|
|
|
|
|
|
|
2005
|
|
|
|
|
|
|
|
First
Quarter
|
|
|
23.01
|
|
|
20.15
|
|
Second
Quarter
|
|
|
21.66
|
|
|
20.39
|
|
Third
Quarter
|
|
|
22.38
|
|
|
19.28
|
|
Fourth
Quarter
|
|
|
24.91
|
|
|
20.32
|
|
2006
|
|
|
|
|
|
|
|
First
Quarter
|
|
|
29.20
|
|
|
25.19
|
|
Second
Quarter
|
|
|
30.79
|
|
|
24.06
|
|
Third
Quarter
|
|
|
31.07
|
|
|
24.89
|
|
Fourth
Quarter
|
|
|
38.41
|
|
|
30.42
|
|
Monthly
Highs and Lows for most recent six months
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
September
|
|
|
31.07
|
|
|
28.34
|
|
October
|
|
|
32.24
|
|
|
30.42
|
|
November
|
|
|
35.26
|
|
|
31.97
|
|
December
|
|
|
38.41
|
|
|
35.22
|
|
2007
|
|
|
|
|
|
|
|
January
|
|
|
38.36
|
|
|
36.11
|
|
February
|
|
|
37.55
|
|
|
34.94
|
|
(1) |
One
ADS
represents one-fifth of one common share of the Company.
|
ITEM
10 —
ADDITIONAL INFORMATION
Articles
of
Incorporation
Set
out below is a
brief summary of certain provisions of the articles of incorporation of Syngenta
and of the Swiss Code of Obligations (Schweizerisches Obligationenrecht) as
it
relates to the Syngenta shares. This description does not purport to be complete
and is qualified in its entirety by reference to the Swiss Code of Obligations
and the articles of incorporation of Syngenta. Copies of the Syngenta articles
of incorporation are available at the offices of Syngenta AG, Schwarzwaldallee
215, 4058 Basel, Switzerland, and can be accessed on the Internet
(www.syngenta.com) in the section “Investor Relations”. An English translation
is included as an exhibit to this annual report.
Syngenta
AG is
registered in the commercial register of the Canton of Basel-Stadt under number
CH-170.3.023.349-3. The business purpose of Syngenta, according to section
2 of
its articles of incorporation, is to hold interests in enterprises, particularly
in the areas of agribusiness; under special circumstances, Syngenta may also
directly operate such businesses. Syngenta may acquire, mortgage, liquidate
or
sell real estate and intellectual property rights in Switzerland or
elsewhere.
Capital
Structure and Shares
The
nominal share
capital of Syngenta is CHF 239,300,188, divided into 104,043,560 registered
shares with a nominal value of CHF 2.30 each. All of the Syngenta shares have
been issued in registered form and are fully paid.
A
shareholder may
at any time request that Syngenta confirm the number of registered shares owned
by the shareholder recorded in Syngenta’s share register. Shareholders are not
entitled, however, to demand the printing and delivery of certificates
representing shares.
Voting
Rights
Each
Syngenta share
carries one vote at the shareholders’ meetings of Syngenta. With respect to both
domestic and foreign shareholders, voting rights may be exercised only after
a
shareholder has been registered in Syngenta’s share register (Aktienbuch) as a
shareholder with voting rights. Registration as a shareholder with voting rights
is subject to certain declarations on the ownership of Syngenta
shares.
Shareholders’
Meetings
Under
Swiss law, an
ordinary annual shareholders’ meeting must be held within six months after the
end of Syngenta’s financial year. Shareholders’ meetings may be convened by the
board of directors or, in exceptional circumstances, by the statutory auditors.
The board of directors is further required to convene an extraordinary
shareholders’ meeting if resolved by an ordinary shareholders’ meeting or if
requested by shareholders holding in the aggregate at least 10% of the share
capital of Syngenta. Shareholders holding Syngenta shares with a nominal value
of at least CHF 0.2 million (i.e. 86,957 shares) have the right to request
that
a specific proposal be put on the agenda and voted upon at the next
shareholders’ meeting. A shareholders’ meeting is convened by way of notice
appearing once in an official publication, as determined by Swiss law or
otherwise designated by the Board at least 20 days prior to such meeting.
Registered shareholders may also be informed by mail.
At
the
shareholders’ meeting, shareholders pass resolutions and make elections, if not
otherwise required by law, by a simple majority of the votes represented (i.e.,
abstentions from voting shares represented at the meeting having the effect
of
votes against the proposal). Under Swiss law and as per Syngenta’s articles of
incorporation a resolution passed at a shareholders’ meeting with a
supermajority of 662/3%
of the votes
represented and the absolute majority of the nominal value of the Syngenta
shares represented is required for:
|
·
|
changes
in Syngenta’s business
purpose;
|
|
·
|
the
creation of shares with privileged voting
rights;
|
|
·
|
restrictions
on the transferability of registered shares and the removal of such
restrictions;
|
|
·
|
an
authorized or conditional increase in Syngenta’s share
capital;
|
|
·
|
an
increase in Syngenta’s share capital by way of capitalization of reserves
(Kapitalerhöhung aus Eigenkapital), against contributions in kind
(Sacheinlage) or for the purpose of the acquisition of assets
(Sachübernahme), or the granting of special
privileges;
|
|
·
|
the
restriction or withdrawal of pre-emptive rights of
shareholders;
|
|
·
|
a
relocation of the registered office;
and
|
|
·
|
the
dissolution of Syngenta other than by liquidation (for example, by
way of
a merger).
|
In
addition, any
provision in the articles of incorporation providing for a stricter voting
requirement than the voting requirements prescribed by law or the existing
articles of incorporation must be adopted in accordance with such stricter
voting requirements. The articles of incorporation of Syngenta do not contain
provisions setting forth stricter voting requirements for shareholders’ meetings
than the voting requirements prescribed by law and described above.
At
the
shareholders’ meeting, shareholders also have the non-transferable power, by a
simple majority of the votes represented at the shareholders’ meeting, to ratify
any amendments to the articles of incorporation (other than those referred
to in
the preceding two paragraphs), to elect the Directors and the external auditors,
to approve the annual report and the financial statements, to set the annual
dividend, to grant the Directors and management discharge from liability for
matters disclosed at the shareholders’ meeting, and to order an independent
investigation into specific matters proposed at the shareholders’ meeting
(Sonderprüfung).
At
Syngenta’s
shareholders’ meetings, shareholders may only be represented by a legal
representative, by another shareholder entitled to vote based on a written
proxy, proxies designated in agreements with or regulations relating to
nominees, by an appointed representative of the corporate body of Syngenta
(Organvertreter), the independent proxy (unabh’ngiger Stimmrechtsvertreter) or
an assignee of proxy votes for deposited shares (Depotvertreter). Votes are
taken on a show of hands unless the shareholders’ resolve to have a ballot or
the chairman of the meeting orders such ballot.
Pre-Emptive
Rights
Under
Swiss law,
any share issue, whether for cash, non-cash consideration or no consideration,
is subject to prior approval at the shareholders’ meeting. As a rule, Syngenta
shareholders have pre-emptive rights for all new issues of securities. However,
these pre-emptive rights may be varied or excluded by a resolution of a
shareholders’ meeting on valid grounds. The resolution must be taken by a
majority of two-thirds of the votes represented at the meeting and the absolute
majority of the par value of the shares represented (unless provided otherwise
in the articles of incorporation). Valid grounds include, for instance, the
acquisition of all or part of the assets and liabilities or the acquisition
of
the shares of another company as well as the creation of employee participation
plans. The shareholders may not be treated unequally in connection with any
exclusion of pre-emptive rights. Moreover, it must be in the interest of the
Company to exclude such pre-emptive rights in any given case. In the event
of a
conditional or authorized share capital increase, the shareholders’ meeting may
delegate the decision as to whether pre-emptive rights should be excluded to
the
Board of Directors provided the fundamental principles upon which the decision
has to be made are determined pursuant the shareholders’ meeting.
Borrowing
Power
Neither
Swiss law
nor the articles of incorporation of Syngenta restrict in any way Syngenta’s
power to borrow and to raise funds. The decision to borrow funds is passed
by or
under the direction of Syngenta’s Board of Directors, with no shareholders’
resolution required.
Duration
and Liquidation
The
articles of
incorporation do not limit Syngenta’s duration. Syngenta may be dissolved at any
time by a shareholders’ resolution which must be passed by (1) an absolute
majority of the Syngenta shares represented at the meeting in the event Syngenta
is dissolved by way of liquidation, and (2) a super-majority of 662/3%
of the votes
represented and the absolute majority of the nominal value of the Syngenta
shares represented at the meeting in other events (for example in a merger
where
Syngenta is not the surviving entity).
Under
Swiss law,
any surplus arising out of liquidation (after the settlement of all claims
of
all creditors) is distributed to shareholders in proportion to the paid-up
nominal value of Syngenta shares held by them.
Directors
According
to
article 24 of the articles of incorporation, the Board of Directors can pass
resolutions with respect to all matters which are not reserved to the authority
of the shareholders’ at the shareholders’ meeting by law or by the articles of
incorporation. Exercise of this power does not require shareholder approval.
Neither Swiss law nor the articles restrict in any way the Company’s power to
borrow or otherwise raise funds.
The
terms of office
for each member of the Board of Directors shall not exceed three years (a year
within the meaning of this provision is the interval between two ordinary
shareholders’ meetings). The term of office shall be determined for each member
at the occasion of its election. The several terms of office shall be
coordinated so that in each year approximately one-third of all members of
the
Board of Directors shall be subject to re-election or election.
Article
21 of
Syngenta’s articles of incorporation confers general authority upon the Board of
Directors to determine the remuneration of its members. However, pursuant to
article 5 of the regulations governing the internal organization of Syngenta,
Directors are obliged to leave the meeting room when business is dealt with
that
impinges on such Directors’ own interests or those of a person or legal entity
close to such Directors. In addition, Swiss law requires Directors and members
of senior management to safeguard the interests of the Company and imposes
a
duty of care and a duty of loyalty on such persons. These duties are generally
interpreted to mean that Directors and members of senior management may not
participate in decisions that personally affect them. Directors and officers
are
personally liable to the Company for breach of these duties.
Syngenta’s
articles
of incorporation contain no specific provisions permitting or prohibiting
Directors from borrowing from the Company. However, Swiss law provides that
a
Director, or any other persons associated with a Director, must refund to the
Company any payments made to such Director or persons by the Company, other
than
payments made at arm’s length. The United States Sarbanes-Oxley Act, enacted in
July 2002, makes it unlawful for the Company directly or indirectly to extend
or
maintain credit, to arrange for an extension of credit or to renew a credit,
in
the form of a personal loan, to or for its executive officers or
Directors.
The
Directors shall
automatically retire after the lapse of the twelfth year of office or, if
earlier, after the expiry of the seventieth year of age, provided that the
retirement shall become effective on the date of the next ordinary shareholders’
meeting following such event.
Notices
Under
Swiss law,
notices to shareholders are validly made by publication in the Swiss Official
Commercial Gazette. The Board may designate additional means of communication
for publishing notices to shareholders.
Dividends
Swiss
law requires
that at least 5% of the annual net profits of the Company be retained by the
Company as general reserves for so long as these reserves amount to less than
20% of the Company’s nominal share capital. Under Swiss law, dividends are paid
out only if approved by the shareholders. In addition, the articles of
incorporation provide that the allocation of profit shown on the Company’s
balance sheet is determined by shareholders at the shareholders’ meeting. The
Board may propose that a dividend be paid out, but cannot itself set the
dividend. In practice, the dividend proposal of the Board is usually approved
at
the shareholders’ meeting. Dividends are usually due and payable immediately
after the shareholders’ resolution relating to the allocation of profits has
been passed. The Company only has one class of shares with a nominal value
of
CHF 2.30 each. Therefore, all shareholders are entitled to equal dividends.
Holders of CDIs and ADSs will receive dividends in proportion to the number
of
Syngenta shares represented by the CDIs or ADSs. According to section 4 of
the
Articles of Incorporation, dividends which have not been claimed within five
years after the due date revert to the Company and are allocated to the general
reserves.
Liquidation
According
to Swiss
Law, each shareholder is entitled to receive the part of the assets of a company
remaining after its liquidation which is proportional to its paid-in
shareholding.
Redemption
Provision
Swiss
law limits
the number of shares which the Company may hold or repurchase. The Company
and
its subsidiaries may repurchase shares only if (i) the Company has sufficient
free reserves to pay the purchase price and (ii) the aggregate nominal value
of
such shares does not exceed 10% of the nominal share capital of the Company.
Shares held by the Company and its subsidiaries do not have any voting rights.
Furthermore, the Company must create a reserve on its balance sheet in the
amount of the purchase price of the acquired shares. Long-term share buy-backs
by the Company may be subject to certain adverse tax consequences in
Switzerland.
Mandatory
Bid Rule
According
to Swiss
law, shareholders may pass a resolution to merge with another corporation at
any
time. In accordance with Swiss law, article 17 of Syngenta’s articles of
incorporation confers authority upon the shareholders to pass resolutions
concerning all matters which by law or the articles of incorporation are
reserved to the authority of the shareholders at the General Meeting. However,
article 18 of the articles of incorporation requires the approval of at least
two thirds of the votes represented at the General Meeting in order for the
shareholders to effect the dissolution of the Company without
liquidation.
Under
the Swiss
Stock Exchange Act, shareholders and groups of shareholders acting in concert
who acquire more than 331/3%
of the voting
rights of a company incorporated in Switzerland of which at least one class
of
equity securities is listed on the Swiss Exchange must submit a takeover bid
to
all remaining shareholders. A mandatory takeover bid must be made under certain
rules (including rules with respect to price and procedures) set forth in the
Swiss Stock Exchange Act.
Significant
Differences
Please
see the
references to Swiss law throughout this Item 10 “Additional Information”, which
highlight certain significant differences between Swiss law and United States
law.
Material
Contracts
The
following is a
summary of our material contracts. Because it is a summary, it may not contain
all of the information about such contracts that is important to you. The
summaries are qualified in their entirety by reference to the contracts, copies
of which have been filed with the SEC.
Debt
Instruments
Please
refer to
Note 19 to the consolidated financial statements for a description of material
contracts pertaining to Syngenta’s current financial debt.
The
Separation Agreements
Novartis,
AstraZeneca, Syngenta and various of their affiliates entered into a series
of
separation agreements, each of which became effective at the completion of
the
Transactions, the purpose and effect of which was:
|
·
|
to
achieve the separation of the historic, current and possible future
liabilities of Novartis agribusiness and Zeneca agrochemicals business
from the historic, current and possible future liabilities of the
remaining activities of Novartis and
AstraZeneca;
|
|
·
|
to
properly allocate amongst the parties liabilities that may arise
under
relevant securities laws as a result of any misstatements or omissions
contained in the various annual report documentation to be distributed
to
AstraZeneca and Novartis shareholders or as a result of the Transactions
themselves;
|
|
·
|
to
provide for the provision of various services between Novartis,
AstraZeneca and Syngenta on a transitional, and in certain instances
a
longer-term, basis; and
|
|
·
|
to
ensure
all affected parties have access to necessary relevant information
in the
future and that, where relevant, such information is subject to
appropriate confidentiality
provisions.
|
Below
we outline
the material separation agreements:
Indemnity
Matters Agreements
The
Indemnity
Matters Agreements between Novartis and Syngenta and AstraZeneca and Syngenta
specify the losses that each party has reciprocally covenanted to pay arising
from any damages that may arise relating to both existing and former operations
and divested divisions of the respective businesses. The parties are not
obligated to reimburse each other for amounts which are covered under an
insurance policy or otherwise from a third party. Generally, under these
agreements, AstraZeneca and Novartis respectively indemnify Syngenta for losses
in connection with: (1) AstraZeneca’s businesses, other than AstraZeneca’s
agrochemical business and in connection with AstraZeneca’s reorganization; and
(2) Novartis’s businesses, other than Novartis’s agribusiness, and in connection
with Novartis’s reorganization. Syngenta indemnifies AstraZeneca and Novartis,
respectively, for losses in connection with Syngenta’s
agribusinesses.
Environmental
Matters Agreements
The
Environmental
Matters Agreements between Novartis and Syngenta and AstraZeneca and Syngenta
specify the obligations of each party to indemnify each other in respect of
liabilities relating to environmental and health and safety matters (other
than
product liability claims) against respective group companies and affiliates
which arise through the historic, current and future operations of Syngenta.
The
purpose of the Environmental Matters Agreements is to address, in general terms,
the rights and obligations of Novartis, AstraZeneca and Syngenta for
environmental claims that have been or will be incurred and to identify special
arrangements for environmental matters related to specific affiliates of each
party. The parties are not obligated to reimburse each other for amounts which
are covered under an insurance policy or otherwise from a third
party.
Under
the
Environmental Matters Agreements, Syngenta and its subsidiaries indemnify
AstraZeneca and Novartis for matters arising from Syngenta’s sites and
agribusinesses, with exceptions for certain sites and circumstances. AstraZeneca
and Novartis are allocated liability and indemnify Syngenta for such matters
arising from their respective sites and businesses, including AstraZeneca’s
businesses (not including AstraZeneca’s agrochemical business) and sites and
Novartis’s businesses (not including the Novartis agribusiness) and sites, with
exceptions for certain specific sites and circumstances.
Tax
Deed
The
Tax Deed
between Novartis and Syngenta allocates between Novartis and Syngenta their
responsibilities for certain tax matters. Novartis retained all tax liabilities
arising out of or connected to the remaining Novartis businesses (excluding
Novartis agribusiness) and the reorganization of the Novartis group for the
purpose of separating Novartis agribusiness, except for certain events as
described in the Tax Deed. Syngenta has assumed and will be responsible for
all
tax liabilities arising out of or connected to the Novartis agribusiness or
a
Syngenta-related event as described in the Tax Deed. The Deed also provides
for
the management of tax affairs and dispute resolution.
The
Tax Deed
between AstraZeneca and Syngenta allocates AstraZeneca’s and Syngenta’s
responsibilities for certain tax matters. AstraZeneca retained all tax
liabilities arising out of or connected to the remaining AstraZeneca businesses
(excluding Zeneca agrochemicals) and the reorganization of the AstraZeneca
group
for the purpose of separating Zeneca agrochemicals, except for certain events
as
described in the Tax Deed. Syngenta has assumed and will be responsible for
all
tax liabilities arising out of or connected to Zeneca agrichemicals business
or
a Syngenta-related event as described in the Tax Deed. The Deed also provides
for the management of tax affairs and dispute resolution.
Intellectual
Property Agreements
Under
the
Intellectual Property Agreements, Syngenta acquired title to all relevant
intellectual property that is exclusive to or predominantly relates to its
business. Syngenta will license or will be granted licenses for relevant
intellectual property pertaining to the business of Syngenta that it shares
with
Novartis or AstraZeneca.
Licenses
(other
than the license of the Zeneca or Novartis house mark and domain names) are
worldwide, exclusive in the field, royalty-free and perpetual. The licenses
of
the Novartis house mark and domain names are exclusive in the agribusiness
field, royalty-free and expired three years after the date of the completion
of
the Transactions. The licenses of the Zeneca house mark and domain names are
exclusive in the agrochemicals field, royalty-free and expired on
January 4, 2005.
Exchange
Controls
There
are currently
no Swiss laws, decrees or regulations restricting the import or export of
capital or affecting the payment of dividends or other payments to holders
of
Syngenta shares or ADSs who are non-Swiss residents. There are no limitations
relating only to non-Swiss persons under Swiss law or the Articles of
Association of Syngenta on the right to be a holder of Syngenta shares or
ADSs.
Taxation
This
taxation
summary solely addresses the material Swiss and United States tax consequences
to shareholders in connection with the acquisition and disposition of Syngenta
shares or ADSs. This summary does not discuss every aspect of taxation that
may
be relevant to a particular taxpayer under special circumstances or who is
subject to special treatment under applicable law and is not intended to be
applicable in all respects to all categories of investors. This summary also
assumes that our business will be conducted in the manner outlined in this
annual report. Changes in our organizational structure or the manner in which
we
conduct our business may invalidate this summary. The laws upon which this
paragraph is based are subject to change, perhaps with retroactive effect.
A
change to these laws may invalidate the contents of this summary, which will
not
be updated to reflect changes in laws. Prospective investors should consult
their tax advisors regarding the particular personal tax consequences of their
acquiring, owning and disposing of shares or ADSs.
Switzerland
The
following is a
summary of certain material tax considerations relevant to the acquisition
and
disposition of the Syngenta shares under Swiss tax laws. The following summary
does not purport to address all tax consequences of the ownership of Syngenta
shares, and does not take into account the specific circumstances of any
particular investor. This summary is based on the tax laws of Switzerland as
in
effect on the date hereof, which are subject to change (or changes in
interpretation), possibly with retroactive effect.
Withholding
Tax on Dividends and Similar Distributions
Dividends
paid and
other similar cash or in kind taxable distributions made by Syngenta to a holder
of Syngenta shares (including dividends on liquidation proceeds and stock
dividends) are subject to a Swiss withholding tax at a rate of 35%. The
withholding tax will be withheld by Syngenta on the gross distributions and
will
be paid to the Swiss Federal Tax Administration. A reduction of the shares’
nominal value by means of a capital reduction does not represent a dividend
or
similar distribution for purposes of Swiss withholding tax.
Swiss
resident
recipients.
Swiss resident
individuals or legal entities are generally entitled to a full refund or tax
credit for the 35% withholding tax if they are the beneficial owners of such
distributions at the time the distribution is due and duly report the receipt
thereof in the relevant income tax return. The 35% withholding tax on
intercompany dividends paid from Syngenta to a Swiss “parent company” may be
only reported (instead of the withholding and refund procedure). This means
that
the dividend may be paid out gross. The reporting procedure, however only
applies if the parent company holds a minimum of 20% of the capital of
Syngenta and only in respect of cash dividends (not applicable for example
to
liquidation proceeds).
Non-resident
recipients. The
recipient of a
taxable distribution from Syngenta who is an individual or a legal entity not
resident in Switzerland for tax purposes may be entitled to a partial or even
a
full refund of the withholding tax if either the country in which such recipient
resides for tax purposes has entered into a bilateral treaty for the avoidance
of double taxation with Switzerland or the bilateral treaty between Switzerland
and the European Community regarding measures equivalent to the parent
subsidiary directive is applicable and the further conditions of the respective
treaty are met. Holders of Syngenta shares not resident in Switzerland should
be
aware that the procedures for claiming treaty benefits (and the time frame
required for obtaining a refund) may differ from country to country. Holders
of
Syngenta shares not resident in Switzerland should consult their own legal,
financial or tax advisors regarding receipt, ownership, purchase, sale or other
dispositions of Syngenta shares and the procedures for claiming a refund of
the
withholding tax. As of January 1, 2005 Swiss withholding tax on dividends may
be
reduced at source upon request for substantial shareholders (i.e., shareholdings
of at least 20% or 25% of the capital of Syngenta, depending on the applicable
double tax treaty or the bilateral treaty between Switzerland and the European
Community) if certain conditions are met.
As
of January 1,
2006, Switzerland had entered into bilateral treaties for the avoidance of
double taxation with respect to income taxes with the following
countries:
Argentina
|
Germany
|
Latvia
|
Russia
|
Albania
|
Greece
|
Lithuania
|
Singapore
|
Australia
|
Hungary
|
Luxembourg
|
Slovakia
|
Austria
|
Iceland
|
Macedonia
|
Slovenia
|
Belgium
|
India
|
Malaysia
|
South
Africa
|
Belarus
|
Indonesia
|
Mexico
|
Spain
|
Bulgaria
|
Iran
|
Moldavia
|
Sri
Lanka
|
Canada
|
Ireland
|
Mongolia
|
Sweden
|
China
|
Israel
|
Morocco
|
Thailand
|
Croatia
|
Italy
|
Netherlands
|
Trinidad
and
Tobago
|
Czech
Republic
|
Ivory
Coast
|
New
Zealand
|
Tunisia
|
Denmark
|
Jamaica
|
Norway
|
Ukraine
|
Ecuador
|
Japan
|
Pakistan
|
United
Kingdom
|
Egypt
|
Kazakhstan
|
Philippines
|
United
States
|
Estonia
|
Kirgistan
|
Poland
|
Uzbekistan
|
Finland
|
Kuwait
|
Portugal
|
Vietnam
|
France
|
Republic
of
Korea
|
Romania
|
Venezuela
|
|
|
|
|
In
addition,
Switzerland concluded a double tax treaty with Serbia and Montenegro that enters
into force as per January 1, 2007. Double tax treaties with Algeria, Armenia
and
Azerbaijan were concluded in 2006; however, these treaties are not yet ratified.
Furthermore a double tax treaty with Turkey is currently in the process of
being
negotiated.
Residents
of
the United States.
A non-resident
holder who is a resident of the United States for purposes of the United
States-Switzerland tax treaty, the “Treaty”, is eligible for a reduced rate of
tax on dividends equal to 15% of the dividend, provided that such holder (i)
qualifies for benefits under the Treaty, (ii) holds, directly and indirectly,
less than 10% of Syngenta voting stock and (iii) does not conduct business
through a permanent establishment or fixed base in Switzerland to which the
shares or ADSs are attributable. Such an eligible holder must apply for a refund
of the amount of the withholding tax in excess of the 15% Treaty rate. The
claim
for refund must be filed on Swiss Tax Form 82 (82C for corporations; 82I for
individuals; 82E for other entities), which may be obtained from any Swiss
Consulate General in the United States or from the Federal Tax Administration
of
Switzerland at the address below, together with an instruction form. The
original form and three copies of the form must be duly completed, signed before
a notary public of the United States, and sent to the Federal Tax Administration
of Switzerland, Eigerstrasse 65, CH-3003 Berne, Switzerland. The form must
be
accompanied by suitable evidence of deduction of Swiss tax withheld at source,
such as certificates of deduction, signed bank vouchers or credit slips. The
form may be filed on or after July 1 or January 1 following the date the
dividend was payable, but no later than December 31 of the third year following
the calendar year in which the dividend became payable.
Income
and Profit Tax on Dividends and Similar Distributions
Individuals.
An
individual who
is a Swiss resident for tax purposes, or is a non-Swiss resident holding
Syngenta shares as part of a Swiss business operation or Swiss permanent
establishment, is required to report the receipt of taxable distributions
received on the Syngenta shares in his relevant Swiss tax returns. A reduction
of the shares’ nominal value by means of a capital reduction does not represent
a taxable distribution received on the Syngenta shares to be reported in his
relevant tax return.
Legal
entities.
Legal
entities
resident in Switzerland or non-Swiss resident legal entities holding Syngenta
shares as part of a Swiss establishment are required to include taxable
distributions received on the Syngenta shares in their income subject to Swiss
corporate income taxes. Payments received under a share capital reduction of
Syngenta also qualify as taxable distributions received on the Syngenta shares,
as far as the capital reduction is not considered as a (partial) disinvestment
(reduction of the book value) in the statutory annual accounts of the legal
entity holding Syngenta shares. A Swiss corporation or co-operative or a
non-Swiss corporation or co-operative holding Syngenta shares as part of a
Swiss
permanent establishment may, under certain circumstances, benefit from a tax
reduction with respect to dividends and income on capital repayments (dividends
received deduction / Beteiligungsabzug).
Non-resident
recipients. Recipients
of
dividends and similar distributions on shares who are neither residents of
Switzerland for tax purposes nor hold Syngenta shares as part of a Swiss
business operation or a Swiss permanent establishment are not subject to Swiss
income taxes in respect of such distributions.
Tax
Treatment of Capital Gains Realized on Syngenta
Shares
Individuals.
Swiss
resident
individuals who hold Syngenta shares as part of their private property generally
are exempt from Swiss federal, cantonal and communal taxes with respect to
capital gains realized upon the sale or other disposal of Syngenta shares,
unless such individuals are qualified as security trading professionals for
income tax purposes. Gains realized upon a repurchase of Syngenta shares by
Syngenta for the purpose of the capital reduction are recharacterized as taxable
distributions. The same is true for gains realized upon a repurchase of Syngenta
shares if Syngenta were not to dispose of the repurchased shares within six
years after the repurchase. In principle, the taxable income would be the
difference between the repurchase price and the nominal value of the
shares.
Individuals
who are
Swiss residents for tax purposes and who hold the Syngenta shares as business
assets, or are non-Swiss residents holding Syngenta shares as part of a Swiss
business operation or Swiss permanent establishment, are required to include
capital gains realized upon the disposal of Syngenta shares in their income
subject to Swiss income tax.
Legal
entities.
Legal
entities
resident in Switzerland or non-Swiss resident legal entities holding Syngenta
shares as part of a Swiss permanent establishment are required to include
capital gains realized upon the disposal of Syngenta shares in their income
subject to Swiss corporate income tax. Under certain circumstances including
a
minimum holding of 20% and a holding period of at least 1 year of the Syngenta
shares, they benefit from relief from taxation with respect to gains realized
upon the disposal of shares (qualified participation)
(Beteiligungsabzug).
Non-resident
individuals and legal entities. Individuals
and
legal entities which are not resident in Switzerland for tax purposes and do
not
hold Syngenta shares as part of a Swiss business operation or a Swiss permanent
establishment are not subject to Swiss income taxes on gains realized upon
the
disposal of the shares.
Net
Worth and Capital Taxes
Individuals.
Individuals
who are
Swiss residents for tax purposes, or are non-Swiss residents holding Syngenta
shares as part of a Swiss business operation or Swiss permanent establishment
are required to include their Syngenta shares in their wealth which is subject
to cantonal and communal net worth tax.
Legal
entities.
Legal
entities
resident in Switzerland or non-Swiss resident legal entities holding Syngenta
shares as part of a Swiss permanent establishment are required to include their
Syngenta shares in their assets which are subject to cantonal and communal
capital tax.
Non-resident
individuals and legal entities. Individuals
and
legal entities which are not resident in Switzerland for tax purposes and do
not
hold Syngenta shares as part of a Swiss business operation or a Swiss permanent
establishment are not subject to Swiss cantonal and communal net worth and
capital taxes.
Gift
and Inheritance Tax
Transfers
of
Syngenta shares may be subject to cantonal and/or communal inheritance or gift
taxes if the deceased or the donor or the recipient were resident in a Canton
levying such taxes and, in international circumstances where residency
requirements are satisfied, if the applicable tax treaty were to allocate the
right to tax to Switzerland.
Stamp
Tax upon Transfer of Securities (Umsatzabgabe)
The
transfer of the
Syngenta shares, whether by a Swiss resident or non-resident holder, may be
subject to a Swiss securities transfer tax of 0.15% of the sales proceeds if
the
sale occurs through or with a Swiss bank or other professional securities dealer
as defined in the Swiss Federal Stamp Tax Act.
United
States
The
following
discussion is a summary of the material United States federal income tax
considerations relevant to the ownership by a United States holder of Syngenta
shares or Syngenta ADSs, but it does not purport to be a comprehensive
description of all of the tax considerations that may be relevant to a
particular investor’s decision to acquire such securities. For purposes of this
discussion, United States holders are beneficial owners of Syngenta shares
or
Syngenta ADSs that, for United States federal income tax purposes are (i)
individual United States citizens or residents, (ii) corporations, or other
entities taxable as corporations, organized in or under the laws of the United
States or any political subdivision thereof, or (iii) estates or trusts the
income of which is subject to United States federal income taxation regardless
of source. In general, if you are the beneficial owner of Syngenta ADSs, you
will be treated, for United States federal income tax purposes, as the
beneficial owner of the Syngenta Shares represented by those ADSs. Accordingly,
no gain or loss will be recognized if you exchange Syngenta ADSs for the
underlying shares represented by those ADSs.
The
United States
Treasury has expressed concerns that parties to whom depositary shares, such
as
the Syngenta ADSs, are pre-released may be taking actions that are inconsistent
with the claiming of foreign tax credits by United States holders. Such actions
would also be inconsistent with the claiming of the reduced rate of tax,
described below, applicable to dividends received by certain non-corporate
holders. Accordingly, the analysis of the creditability of Swiss withholding
taxes and the availability of the reduced tax rate for dividends received by
certain non-corporate holders, each described below, could be affected by
actions taken by parties to whom the ADSs are pre-released.
This
summary does
not address all of the United States federal income tax considerations that
may
be relevant to the particular circumstances of a United States holder of
Syngenta shares or Syngenta ADSs, and does not discuss any aspect of state,
local or non-United States tax law. Moreover, this summary deals only with
United States holders that will hold Syngenta shares or Syngenta ADSs as capital
assets for United States federal tax purposes (generally, property held for
investment), and it does not apply to United States holders that may be subject
to special tax rules, such as certain financial institutions, insurance
companies, dealers and traders in securities and foreign currencies, tax-exempt
organizations, investors liable for alternative minimum tax, persons that hold
Syngenta shares or Syngenta ADSs as part of a hedge or any similar transaction,
partnerships or other entities classified as partnerships for US federal income
tax purposes, persons owning, directly, indirectly or constructively, 10% or
more of the voting stock of Syngenta and persons whose “functional currency” is
not the US dollar. This summary is based on the United States Internal Revenue
Code of 1986, as amended (the “Code”), Treasury regulations promulgated
thereunder, and administrative and judicial interpretations thereof, all as
of
the date hereof, and all of which are subject to change, possibly with
retroactive effect. It is also based in part on representations by the
Depositary and assumes that each obligation under the Deposit Agreement and
any
related agreements will be performed in accordance with their terms. Syngenta
believes that it was not a Passive Foreign Investment Company (a
"PFIC") for United States federal income tax purposes for 2006 and does not
expect to be considered a PFIC in the foreseeable future. However, since PFIC
status depends on the composition of a company’s income and assets and the
market value of its assets from time to time, there can be no assurance that
Syngenta will not be considered a PFIC in any taxable year. Shareholders should
consult their own tax advisors as to the tax considerations relevant to the
ownership of Syngenta shares or ADSs in light of their particular circumstances,
including the effect of any state, local or non-United States laws and including
their eligibility for benefits under the Treaty.
Distributions
A
distribution
received by a United States holder in respect of Syngenta shares or Syngenta
ADSs (such as the put options distributed on February 22, 2006),
other than certain pro rata distributions of common shares, generally will
be
considered a taxable dividend to the extent paid out of Syngenta’s current or
accumulated earnings and profits (as determined for United States federal income
tax purposes).
The
holder must
include the gross amount of any taxable dividend (including any amount withheld
in respect of Swiss income taxes) in gross income. The amount of gross income
from any dividend of property other than cash will be the fair market value
of
that property on the date of distribution. The dividend will be subject to
United States federal income tax as ordinary foreign source dividend income.
Subject to certain limitations, and the discussion above regarding concerns
expressed by the US Treasury, dividends received by a non-corporate shareholder
are subject to tax at the reduced long term capital gain rate of 15 percent
in
taxable years beginning before January 1, 2011, provided that certain holding
period requirements are met. The holders should consult their own tax advisors
regarding the availability of the reduced rate of tax based upon on their
particular situation. Dividends will not be eligible for the dividends-received
deduction generally allowed to United States corporations under the Code. Such
dividends will constitute foreign source dividend income for foreign tax credit
purposes.
Taxable
dividends
paid in Swiss or other foreign currency will be included in a United States
holder’s gross income in a US dollar amount calculated by reference to the
exchange rate in effect on the date the dividend is received by the United
States holder, in the case of Syngenta shares, or by the depositary, in the
case
of Syngenta ADSs, regardless of whether the payment is in fact converted into
US
dollars. If the dividend is converted into US dollars on the date of receipt,
US
holders generally should not be required to recognize foreign currency gain
or
loss in respect of the dividend income. United States holders should consult
their own tax advisors concerning the possibility of foreign currency gain
or
loss if any such Swiss or other foreign currency is not converted into US
dollars on the date of receipt.
Subject
to certain
conditions and limitations under United States federal income tax law, and
subject to the discussion above regarding concerns expressed by the US Treasury,
a United States holder will be eligible to claim a foreign tax credit for Swiss
withholding taxes imposed at the rate provided by the Treaty on distributions
by
Syngenta in respect of its Syngenta shares or Syngenta ADSs. Swiss taxes
withheld in excess of a rate not exceeding the rate provided in the Treaty
will not be eligible for credit against a United States holder’s federal income
tax liability. The limitation on foreign taxes eligible for credit is calculated
separately with respect to specific classes of income. The United States federal
income tax rules relating to foreign tax credits are extremely complex. United
States holders should consult their own tax advisors concerning the availability
of foreign tax credits based upon their particular situations. Alternatively,
a
United States holder may choose to deduct such Swiss withholding taxes in
computing its United States federal taxable income (but only if such holder
does
not elect to claim a foreign tax credit in respect to any foreign income taxes
paid or incurred for the taxable year).
Dispositions
Upon
a sale or
other taxable disposition of Syngenta shares or Syngenta ADSs, a United States
holder will generally recognize gain or loss in an amount equal to the
difference between the amount realized on the disposition and the United States
holder’s tax basis in the Syngenta shares or Syngenta ADSs. Such gain or loss
will be capital gain or loss, and will be long-term capital gain or loss if
the
Syngenta shares or Syngenta ADSs were held for more than one year at the time
of
disposition. A long-term capital gain of a non-corporate US Holder is generally
taxed at a maximum rate of 15 percent. The deduction of capital losses is
subject to certain limitations under the Code. Any gain recognized by a United
States holder on a sale or other taxable disposition of Syngenta shares or
Syngenta ADSs generally will be treated as derived from United States sources
for United States foreign tax credit purposes.
Backup
Withholding and Information Reporting
Information
reporting requirements may apply to a United States holder with respect to
distributions by Syngenta, or to the proceeds of a sale or redemption of
Syngenta shares or Syngenta ADSs. Backup withholding may apply to these payments
if the United States holder fails to furnish its correct taxpayer identification
number and certify that such holder is not subject to backup withholding, or
to
otherwise comply with the applicable requirements of the backup withholding
rules. Any amounts withheld under the backup withholding rules generally may
be
claimed as a credit against such holder’s United States federal income tax
liability, and may entitle the holder to a refund, provided that the required
information is furnished to the Internal Revenue Service.
Where
You
Can Find More Information
We
are subject to
the informational reporting requirements of the Securities Exchange Act of
1934,
as amended. Accordingly, we will file reports and other information with the
Commission. Such reports and other information may be inspected without charge,
and copies thereof may be obtained at prescribed rates from, the public
reference facilities of the Commission’s principal office at 100 F Street, N.E.,
Washington, DC 20549, United States and at the Commission’s regional offices at
500 West Madison Street, Suite 1400, Chicago, Illinois 60661, United States
and
at 233 Broadway, New York, New York 10005, United States. The public may obtain
information on the operation of the Commission’s public reference facilities by
calling the Commission in the United States at 1-800-SEC-0330. In addition,
this
report and other information we file with the SEC are available on the website
maintained
by it at
http://www.sec.gov.
Copies of reports
and other information concerning us are also available for inspection at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005, United States.
ITEM
11 —
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Overview
The
global nature
of our business exposes Syngenta to a range of financial and operating risks.
The financial risks predominantly arise from changes in foreign exchange rates,
interest rates, equity and commodity prices (i.e. market risk). Thus a financial
risk management framework has been developed to mitigate, where appropriate,
any
negative impact this may have on the US dollar reported Group results. Since
formation Syngenta has adopted the US dollar as its reporting currency and
all
risk management activities are managed with reference to the US dollar. The
risk
framework comprises a Treasury policy, approved by the Board of Directors,
which
is binding on all affiliates where Syngenta has management control.
This
policy
provides guidance over all Treasury and finance related matters, is underpinned
by delegated authority guidelines and is additionally supported by detailed
procedures in place across the Group.
In
accordance with
the Treasury policy the Group actively monitors market risk minimising the
possible impact on the financial statements through use of a variety of
derivative and non derivative financial instruments. These instruments are
used
to economically hedge underlying risks arising from operational activity and
from funding and investment positioning. The main objective being to reduce
fluctuations in reported earnings and cash flows. Syngenta
does
not enter into any speculative derivative trades unrelated to business
activity.
The
Group Treasury
policy sets financial risk limits which take into account the maximum tolerable
loss for the Group and, as part of the risk management activity, the Group
enters into derivative financial instruments to ensure that the set limits
are
not breached.
Details
of the
Group’s derivative positions as at December 31, 2006 are set out in Note 32 of
the consolidated financial statements.
The
notional
amounts and fair values of open derivative instruments at December 31, 2006
were
as follows:
Instrument
types
|
|
|
Notional
amounts
US$
millions
|
|
|
Positive
fair
value
US$
millions
|
|
|
Negative
fair
value
US$
millions
|
|
Interest
rate
instruments
|
|
|
1,683
|
|
|
1
|
|
|
(26
|
)
|
Cross
currency swaps
|
|
|
1,277
|
|
|
38
|
|
|
-
|
|
Foreign
currency forward contracts
|
|
|
7,531
|
|
|
87
|
|
|
(67
|
)
|
Currency
option contracts
|
|
|
659
|
|
|
20
|
|
|
(1
|
)
|
Commodity
forward contracts
|
|
|
184
|
|
|
6
|
|
|
(2
|
)
|
Foreign
Exchange Risks - Explanation and Risk Sensitivity Analysis
Syngenta
uses US
dollars as its reporting currency and is therefore exposed to foreign exchange
movements in a wide range of currencies. Consequently, it enters into various
contracts, such as forward contracts and options, which represent agreements
to
exchange a defined amount in one currency for an amount in another currency
at a
defined exchange rate on a defined settlement date in the future. These
contracts change in value as foreign exchange rates change, to preserve the
value of assets, commitments and anticipated transactions.
To
cover existing
balance sheet exposures, and to hedge committed foreign currency transactions,
Syngenta uses forward contracts. To hedge anticipated foreign currency cash
flows Syngenta uses currency options and forward contracts.
The
following table
demonstrates the sales and operating cost foreign currency exposures. The
primary net foreign currency exposures against the US dollar
include the Swiss
franc, the British pound and the Euro.
The
split of sales
and operating costs by currency for the years 2006 and 2005 was as
follows:
|
|
Sales
in %
|
Operating
costs in %
|
Currency
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
US
dollar
|
|
|
36
|
|
|
37
|
|
|
33
|
|
|
33
|
|
Euro
|
|
|
22
|
|
|
24
|
|
|
19
|
|
|
20
|
|
Swiss
franc
|
|
|
1
|
|
|
1
|
|
|
19
|
|
|
17
|
|
British
pound
sterling
|
|
|
2
|
|
|
2
|
|
|
11
|
|
|
11
|
|
Other
|
|
|
39
|
|
|
36
|
|
|
18
|
|
|
19
|
|
Total
|
|
|
100
|
|
|
100
|
|
|
100
|
|
|
100
|
|
“Other”
includes
over 46 currencies. However, none accounts for more than 10% of total sales
or
total operating costs.
Financial
Risk Assessment
The
residual risk
exposure post hedging is assessed using a variety of “Value-at-Risk” (VaR)
methods. The exact method selected depends on the underlying risk itself. All
VaR approaches try to recognize that holding different assets/liabilities or
future cash flow exposures may actually reduce portfolio risk through the
de-correlation benefits of diversification. This benefit is captured within
the
calculation and thus aims to holistically present portfolio risk.
Syngenta
uses three
different approaches to measuring exposure to market risk, and operates within
pre-defined risk levels.
a) the
VaR variance-covariance method as introduced by RiskMetrics Group
b) the
Earnings-at-risk (EaR) Monte Carlo method - a variant of VaR
c) the
Earnings-at-risk (EaR) historical simulation method
The
particular
method selected is dependent on the data distribution characteristics for the
risk exposure being measured.
Syngenta
categorizes the management of currencies into transaction risk - uncommitted,
transaction risk - committed and translation risk.
Transaction
Risk - Uncommitted
Syngenta
collects
information about anticipated cash flows for major currencies at Group level
and
hedges material mismatches in currency flows for a 12 month benchmark horizon
using options and forward contracts to reduce operating income volatility.
The
approach is designed to hedge the year on year earnings transaction risk for
the
main currencies. The transactional flows
and
derivative
financial instruments required to operate the program are analyzed on an ongoing
basis. The remaining currency exposures are closely monitored and additional
protection can, with appropriate authorization, be purchased.
The
Earnings-at-Risk calculation is performed for anticipated net transactional
currency flows for 2007 taking into account related currency hedges. As of
December 31, 2006, the total potential adverse movement for 2007 net
transactional flows after hedges relative to year-end spot levels, at the 95%
confidence level, was US$26 million (December 31, 2005: US$45
million).
From
the
Earnings-at-Risk perspective the Swiss franc stands out as a major exposure.
This risk arises from having a significant cost base in Switzerland with no
material offsetting sales. This exposure is monitored continuously by the risk
management team and by senior finance management.
Transaction
Risk-committed
Committed
foreign
currency exposures are largely generated by the routing of products from central
manufacturing sites to outlying affiliates. They are normally fully covered
and
are in the majority of cases managed by the use of forward contracts. Net
committed transactional currency exposures are determined by identification
and
monthly reporting by business units.
The
Value-at-Risk
calculation was performed for net committed transactional currency flows
existing at December 31, 2006 taking into account related currency hedges.
As of
December 31, 2006, the total 30-day Value-at-risk, after hedges, at the 95%
confidence level was US$3 million (December 31, 2005: US$7 million).
The
largest
exposures arise in the Swiss franc and the British pound. These countries house
large research and manufacturing sites.
Translation
Risk
Translation
exposure arises from the consolidation of the foreign currency denominated
financial statements of the Group’s subsidiaries. This translation effect is
visible as currency translation movement in the consolidated equity of
Syngenta.
The
translation
exposure is hedged by the use of foreign denominated debt and in exceptional
circumstances, foreign exchange forward contracts. The latter focuses on risk
reduction for monetary items.
The
translation
risk can be significant, however Syngenta believes over the longer-term mean
reversion tendency of currencies reduces the risk to acceptable levels. The
Syngenta equity base is also deemed to be of sufficient magnitude to absorb
the
short to medium term impact of exchange rate movements.
As
of December 31,
2006 the total 30-day Value-at-risk, after hedges, at the 95% confidence level
was US$90 million (December 31, 2005: US$109 million).
The
majority of the
translation risk is again driven by the large investments and operations in
Switzerland and the UK.
Interest
Rate Risk
Syngenta
is exposed
to fluctuations in interest rates on its borrowings. While some of the long-term
debt raised in the capital markets is kept at fixed rate, a substantial part
of
Syngenta’s net borrowings, including the short-term commercial paper program and
local borrowings are subject to changes in short-term interest
rates.
Syngenta
monitors
its interest rate exposures and analyzes the potential impact of interest rate
movements on net interest expense through an interest Charge-at-Risk approach
as
applied by the RiskMetrics Group. The calculation is based on a
variance-covariance approach, using a 95% confidence interval and a 12 month
holding period in order to estimate its Interest Rate Risks for its forecasted
debt levels.
This
measure is
performed quarterly. Syngenta does not hold any interest rate instruments with
optionality, so this is not addressed in the model.
As
of December 31,
2006, the 12 month Interest Charge-at-Risk at the 95% confidence level was
US$8
million (December 31, 2005: US$6 million).
Other
Price
Risk
Commodity
price
fluctuations also affect parts of Syngenta’s business. The Group has exposure to
energy prices - namely oil and gas and also has direct exposure to soft
commodity prices. Operating in the agrochemical sector also exposes the Group
to
crop prices in general and these affect both reported operating results and
valuation.
Syngenta
uses both
fixed price contracts and also derivative hedging to minimise impact of year
on
year commodity price changes in the Income statement. Derivative instruments
traded are Over the Counter (OTC) vanilla oil and gas commodity options and
exchange traded swaps and OTC soft commodity option and exchange traded futures
contracts.
The
group has
historically entered into derivatives related to commodity exposures to a
limited extent. During 2005 Syngenta also entered into some oil option
derivatives to mitigate the impact of adverse price movements on Syngenta’s cost
base. This activity was extended in 2006 and now comprises oil and natural
gas
hedging in the UK and the USA, as well as soft commodity hedging for Corn and
Soybean purchases by the US Seeds business.
The
hard commodity
exposure is related to direct gas usage and a hedging program is in place,
which
reduces the Net EaR to US$7 million (December 31, 2005: US$10
million).
The
soft commodity
EaR is driven by the high volatility compared to other asset classes. The
hedging program however reduces overall 12 month EaR at December 2006 to US$29
million (December 31, 2005: US$24 million).
In
addition the
group has an indirect exposure to oil. The associated operating income
volatility is managed by an oil hedging program. The EaR for the outstanding
oil
hedges as at 31 December 2006 was US$9 million (December 31 2005: US$13
million).
Syngenta
has only
limited exposure to third party equities with available-for-sale securities
of
US$168 million at December 31, 2006.
Risk
Calculation Summary Table (Net Impact)
(US$
million)
|
|
|
Time
Horizon
(Months
|
)
|
|
31
December 2006
|
|
|
31
December 2005
|
|
Foreign
Exchange Risks:
|
|
|
|
|
|
|
|
|
|
|
Transaction
Risk uncommitted - Earnings-at-Risk
|
|
|
12
|
|
|
26
|
|
|
45
|
|
Transaction
Risk committed - Value-at-Risk
|
|
|
1
|
|
|
3
|
|
|
7
|
|
Translation
Risk - Value-at-Risk
|
|
|
1
|
|
|
90
|
|
|
109
|
|
Interest
Rate Risks - Interest Charge-at-Risk
|
|
|
12
|
|
|
8
|
|
|
6
|
|
Other
Price Risks - Earnings-at-Risk
|
|
|
12
|
|
|
36
|
|
|
34
|
|
For
further
information please see Note 32 to the consolidated financial
statements.
ITEM
12 —
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not
applicable.
PART
II
ITEM
13 —
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM
14 —
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS
None.
ITEM
15 —
CONTROLS AND PROCEDURES
|
a.
|
Syngenta’s
Chief Executive Officer and Chief Financial Officer, after evaluating
the
effectiveness of the design and operation of the Company’s disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and
15d-15(e)) as at December 31, 2006, have concluded that the Company’s
disclosure controls and procedures (i) were effective in recording,
processing, summarizing and reporting, on a timely basis, information
required to be disclosed by the Company in the reports that it files
or
submits under the Securities Exchange Act of 1934, as amended (the
“Exchange
Act”)
and (ii)
ensured that information required to be disclosed in the reports
that the
Company files or submits under the Exchange Act is accumulated and
communicated to management, including the chief executive officer
and
chief financial officer, to allow timely decisions regarding required
disclosure.
|
|
b.
|
Syngenta’s
Management is responsible for establishing and maintaining adequate
internal control over financial reporting. Management has assessed
the
effectiveness of the Group’s internal control over financial reporting as
of December 31, 2006. In making this assessment, it used the criteria
established in Internal
control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
Based on
this assessment Management has concluded that, as of December 31,
2006,
Syngenta’s internal control over financial reporting is effective based on
those criteria.
|
Syngenta’s
internal
control system was designed to provide reasonable assurance to Syngenta’s
Management and Board of Directors regarding the reliability of financial
reporting and the preparation and fair presentation of its published
consolidated financial statements. All internal control systems, no matter
how
well designed, have inherent limitations. Therefore, even those systems
determined to be effective may not prevent or detect misstatements and can
provide only reasonable assurance with respect to financial statement
preparation and presentation. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management’s
assessment of the effectiveness of internal control over financial reporting
as
of December 31, 2006 has been audited by Ernst & Young AG, Switzerland, an
independent registered public accounting firm, who also audited our consolidated
financial statements included in this annual report. Ernst & Young AG’s
attestation report on Management’s assessment of our internal controls over
financial reporting is included in this annual report.
|
c.
|
See
report of
Ernst &Young AG, an independent registered public accounting firm,
included under Item 18 on page F-1.
|
|
d.
|
There
have
been no changes in our internal controls over financial reporting
that
occurred during the period covered by this Form 20-F that have materially
affected, or are reasonably likely to materially affect, the company’s
internal control over financial
reporting.
|
ITEM
16 —
[RESERVED]
ITEM
16A —
AUDIT COMMITTEE FINANCIAL EXPERT
Syngenta’s
Audit
Committee consists of four directors: Peggy Bruzelius, Pierre Landolt, Peter
Thompson and Rolf Watter. Syngenta’s Board of Directors has carefully considered
the definition of “audit committee financial expert” adopted by the United
States Securities and Exchange Commission and has determined that, while each
of
the directors on the Audit Committee satisfy certain aspects of that definition,
none of such directors, individually, qualifies as an audit committee financial
expert. Syngenta’s Board believes that the collective experience of such members
enables them, as a group, to act as an effective Audit Committee and that the
Audit Committee has functioned, and can continue to function, effectively
without appointing an additional member that would qualify as an audit committee
financial expert.
ITEM
16B —
CODE OF ETHICS
Syngenta
has
adopted a Code of Ethics applicable to its Chairman, Chief Executive Officer,
Chief Financial Officer, Group Financial Controller, Head of Group Accounting,
Head of Internal Audit, Group Treasurer and all members of the Syngenta
Executive Committee. A copy of Syngenta’s Code of Ethics has been filed with the
Securities and Exchange Commission and
is
included as
Exhibit 11.1 to this annual report. During 2006, no amendments were made to
a
provision of the Code of Ethics that applies to any of the above-mentioned
officers and / or members of the Syngenta Executive Committee and no waivers
were explicitly or implicitly granted to any of them, in each case that would
be
required to be disclosed herein.
ITEM
16C —
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Fees
Paid
to the Independent Registered Public Accounting Firm
The
Board of
Directors engaged Ernst & Young AG (“EY”) to perform an annual audit of the
Company’s financial statements in 2005 and 2006. The following table presents
information concerning fees paid to EY in each of those years.
|
|
|
|
|
|
|
|
|
|
|
2005
(in
million US$)
|
|
|
2006
(in
million US$)
|
|
Audit
fees(1)
|
|
|
8
|
|
|
8
|
|
Audit-related
fees(2)
|
|
|
1
|
|
|
0
|
|
Tax
fees(3)
|
|
|
1
|
|
|
1
|
|
All
other
fees(4)
|
|
|
0
|
|
|
0
|
|
(1)
|
Audit
services
are defined as the audit work required to allow the independent accountant
to issue an opinion on the statutory and regulatory filings of the
Group
and its subsidiaries and to issue an opinion relating to management’s
assessment of internal controls over financial reporting and the
effectiveness of Syngenta’s internal controls over financial reporting.
This category also includes services that normally are provided by
the
Group auditor, such as comfort letters, statutory audits, attest
services,
consents and assistance with and review of documents filed with the
US
Securities and Exchange Commission.
|
(2)
|
Audit
related
services include assurance and related services provided by auditors
but
which are not necessarily provided by the Group auditor. These services
include audit of pension funds and employee benefit plans, internal
control reviews and consultation concerning financial accounting
and
reporting standards.
|
(3)
|
Tax
services
include all services performed by the Group auditor’s tax division except
those services related to the audit. It includes tax compliance,
tax
planning, and tax advice.
|
(4)
|
Other
services
includes all services received from the Group auditor except those
separately defined above.
|
Pre-Approval
of Services Provided by Ernst & Young
AG
The
Audit Committee
has adopted policies and procedures for pre-approving all audit and non-audit
work performed by EY. Specifically, the policies and procedures prohibit EY
from
performing any services for the Company or its subsidiaries without the prior
approval of the Audit Committee.
All
of the services
provided by EY in 2005 and 2006 were approved by the Audit Committee pursuant
to
the approval policies described above, and none of such services were approved
pursuant to the procedures described in Rule 2-01(c)(7)(i)(C) of Regulation
S-X,
which waives the general requirement for pre-approval in certain
circumstances.
ITEM
16D
—
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
In
accordance with
Section 303A.06 of the New York Stock Exchange Listed Company Manual, listed
companies must have an audit committee that satisfies the requirements of Rule
10A-3 under the Securities Exchange Act of 1934, as amended. Syngenta’s Audit
Committee complies with Rule 10A-3, with the exception that Swiss company law
requires that the external auditors be elected by the shareholders at the
Shareholder’s Meeting. Syngenta’s Audit Committee prepares proposals for the
appointment or removal of the external auditor for submission to the Board
of
Directors, which then nominates the external auditor for election by the
shareholders at the Shareholders’ Meeting. Syngenta therefore relies on the
exemption provided by Rule 10A-3(c)(3) for the appointment of the external
auditor pursuant to home country legal or listing provisions. Syngenta does
not
believe that such reliance materially adversely affects the ability of the
Audit
Committee to act independently and to satisfy the other requirements of Rule
10A-3.
ITEM
16E —
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
|
Total
Number of
Shares
Purchased(1)
|
|
|
Average
Price Paid
per
Share
(US$)(2)
|
|
|
Total
Number of Shares
Purchased
as Part of
Publicly
Announced
Plans
or Programs(3)
|
|
|
Maximum
Number of
Shares
That May Yet Be
Purchased
Under the
Plans
or Programs(4)
|
|
January-06
|
|
|
|
|
|
|
|
|
|
|
|
2,735,434
|
|
February-06
|
|
|
|
|
|
|
|
|
|
|
|
2,735,434
|
|
March-06
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
April-06
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
May-06
|
|
|
3,280,293
|
|
|
191.75
|
|
|
3,280,293
|
|
|
0
|
|
June-06
|
|
|
|
|
|
|
|
|
|
|
|
10,404,356
|
|
July-06
|
|
|
|
|
|
|
|
|
|
|
|
10,404,356
|
|
August-06
|
|
|
|
|
|
|
|
|
|
|
|
10,404,356
|
|
September-06
|
|
|
|
|
|
|
|
|
|
|
|
10,404,356
|
|
October-06
|
|
|
|
|
|
|
|
|
|
|
|
10,404,356
|
|
November-06
|
|
|
|
|
|
|
|
|
|
|
|
10,404,356
|
|
December-06
|
|
|
|
|
|
|
|
|
|
|
|
10,404,356
|
|
Total
|
|
|
3,280,293
|
|
|
191.75
|
|
|
3,280,293
|
|
|
10,404,356
|
|
(1)
|
Shares
were
purchased pursuant to publicly announced plans or
programs.
|
(2)
|
The
average
price paid per share in US$ is based on the CHF price of CHF234 converted
at the CHF/US$ spot exchange rate on the date of
acquisition.
|
(3)
|
On
February 9,
2006 Syngenta announced its intention to continue to pursue its
progressive cash return policy. The Company, on 22 February, granted
a
free put option per share with an initial intrinsic value of CHF
1.50. The
put option gave each shareholder the right to sell a fixed number
of
shares to the Company. Each put option had a maturity of three months
from
grant and was tradeable on the SWX Swiss exchange. On the exercise
date,
98,408,790 options (98.74%) were declared for exercise resulting
in
Syngenta repurchasing 3,280,293
shares.
|
|
Syngenta
intends to propose the 3,280,293 shares purchased under the program
in
2006 for cancellation at the 2007
AGM.
|
(4)
|
On
February
11, 2004 Syngenta announced a program to return over US$800 million
to
shareholders over the three year period expiring December 31, 2006,
through a combination of a share repurchase program and a progressive
dividend policy. In April 2004, at the Annual General Meeting (AGM)
of
shareholders, the shareholders authorized the purchase of up to 10
per
cent of Syngenta’s total share capital, allowing for the commencement of
the share repurchase program announced in February 2004. On February
10,
2005, Syngenta announced that the size of the program had been increased
to over US$1 billion over that same three year period. On February
9,
2006, in addition to announcing the put option, Syngenta closed its
second
trading line under the share repurchase program initiated in
2004.
|
|
In
April 2006,
the AGM of shareholders confirmed the continuation of the repurchase
program by approving repurchase of up to 10 per cent of Syngenta’s total
capital. A new second trading line for open market repurchases was
opened
post settlement of the put option on May 23, 2006.
|
PART
III
ITEM
17 —
FINANCIAL STATEMENTS
We
have responded
to Item 18 in lieu of responding to this item.
ITEM
18 —
FINANCIAL STATEMENTS
The
following
financial statements, together with the Reports of Independent Registered Public
Accounting Firm thereon of February 7, 2007, are filed as part of this annual
report:
|
Page
|
Report
of
Independent Registered Public Accounting Firm
|
F-1
|
Report
of
Independent Registered Public Accounting Firm
|
F-2
|
Consolidated
Income Statement
|
F-4
|
Consolidated
Balance Sheet
|
F-5
|
Consolidated
Cash Flow Statement
|
F-6
|
Consolidated
Statement of Changes in Shareholders’ Equity
|
F-8
|
Notes
to the
Consolidated Financial Statements
|
F-11
|
ITEM
19 —
EXHIBITS
The
following
documents are exhibits to this annual report:
Exhibit
Number
|
Description
of Document
|
1.1
|
English
Translation of the Articles of Incorporation (Satzung) of Syngenta
AG
|
2.1
|
Deposit
Agreement between The Bank of New York and Syngenta AG**
|
2.2
|
Deed
of Trust
dated August 18, 2006 among Syngenta Luxembourg Finance (#2) S.A.,
Syngenta AG and J.P. Morgan Trustee Depositary Company Limited, as
Trustee
|
4.1
|
Indemnity
Matters Agreement dated September 12, 2000 between AstraZeneca PLC
and
Syngenta AG*
|
4.2
|
Indemnity
Matters Agreement dated September 12, 2000 between Novartis AG and
Syngenta AG*
|
4.3
|
Environmental
Matters Agreement dated September 12, 2000 between Syngenta AG and
AstraZeneca PLC*
|
4.4
|
Environmental
Matters Agreement dated September 12, 2000 between Syngenta AG and
Novartis AG*
|
4.5
|
Environmental
Matters Agreement dated September 12, 2000 among Zeneca AG Products
Holdings Inc. and Zeneca Holdings Inc. and Stauffer Management
Company*
|
4.6
|
Environmental
Matters Agreement dated September 12, 2000 among Syngenta Crop Protection
Inc., Novartis Corporation and Novartis Agribusiness Holding,
Inc.*
|
4.7
|
Tax
Deed
dated September 12, 2000 between Novartis AG and Syngenta
AG*
|
4.8
|
Tax
Deed
dated September 12, 2000 between AstraZeneca PLC and Syngenta
AG*
|
4.9
|
Assignment
of
Intellectual Property Rights Excluding Rights in Software dated January
4,
2000 between Zeneca Limited and AstraZeneca UK Limited*
|
4.10
|
Assignment
of
Intellectual Property Rights in Software dated January 4, 2000 between
Zeneca Limited and AstraZeneca UK Limited*
|
4.11
|
License
of
Intellectual Property Rights Excluding Rights in Trade Marks and
Software
dated January 4, 2000 between AstraZeneca UK Limited and Zeneca
Limited*
|
4.12
|
License
of
Intellectual Property Rights Excluding Rights in Trade Marks and
Software
dated January 4, 2000 between Zeneca Limited and AstraZeneca UK
Limited*
|
4.13
|
Trade
Mark
License dated January 4, 2000 between AstraZeneca UK Limited and
Zeneca
Limited*
|
4.14
|
Software
License dated January 4, 2000 between AstraZeneca UK Limited and
Zeneca
Limited*
|
4.15
|
General
Principles for the Separation of Intellectual Property between Novartis
and Novartis Agribusiness (Syngenta)*
|
4.16
|
Pension
Transfer Agreement dated August 2, 2000 among Zeneca Pensions Trustee
Limited, AstraZeneca PLC, Zeneca Agrochemicals Pensions Trustee Limited
and Zeneca Limited*
|
4.17
|
Confidentiality
and Supply of Information Agreement dated September 12, 2000 among
Novartis AG, AstraZeneca PLC and Syngenta AG*
|
4.18
|
Master
Sharing Agreement dated September 12, 2000 between Novartis AG and
Syngenta AG*
|
4.19
|
Master
Sharing Agreement dated September 12, 2000 between AstraZeneca UK
Limited
and Zeneca Limited*
|
4.20
|
Revolving
Credit Agreement dated July 20, 2006 among Syngenta AG, the subsidiaries
of Syngenta AG set forth in Schedule 1 thereto, Banco Santander Central
Hispano S.A., Bank Austria Creditanstalt AG, Bank of America, N.A.,
Citibank NA, London, Credit Suisse, Deutsche Bank Luxembourg S.A.,
HSBC
Bank plc and UBS Limited as Mandated Lead Arrangers, and the financial
institutions set forth in Schedule 1 thereto
|
* Exhibits
incorporated by reference to the Registration Statement on Form S-4 filed
September 12, 2000 (File No. 333-125222)
** Exhibits
incorporated by reference to the Registration Statement on Form 424B3 filed
July 11, 2006 (File No. 333-9730)
Exhibit
Number
|
Description
of Document
|
4.21
|
Option
Agreement dated November 10, 2000 among Syngenta AG, Novartis Holding
AG,
Novartis Research Foundation, Novartis Employee Participation Foundation,
Credit Suisse First Boston (Europe) Limited, UBS AG, acting through
its
business group UBS Warburg, and the other Managers named
therein***
|
4.22
|
Syngenta
AG
Executive Stock Option Plan - 10****
|
4.23
|
Syngenta
Deferred Share Plan (Share Awards)****
|
4.24
|
Syngenta
Corporation Employee Stock Purchase Plan‡‡‡‡
|
4.25
|
Syngenta
Share Plan for Non-Executive Directors‡‡‡‡‡
|
8.1
|
Subsidiaries
of Syngenta AG‡
|
11.1
|
Syngenta
Code
of Ethics for Senior Executive Officers‡‡‡
|
12.1
|
Certification
by CEO pursuant to Section 302
|
12.2
|
Certification
by CFO pursuant to Section 302
|
13.1
|
Certification
by CEO and CFO pursuant to Section 906
|
15.1
|
Consent
of
Independent Registered Public Accounting
Firm
|
*** Exhibit
incorporated
by reference to Amendment No. 3 to the Registration Statement on Form F-1
filed
November 8, 2000 (File No. 333-12640)
**** Exhibit
incorporated by reference to Registration Statement on Form S-8 filed December
12, 2002 (File No. 333-101784)
‡
The
subsidiaries of Syngenta are set forth in Note 33 to the Consolidated Financial
Statements in this Annual Report
‡‡‡ Exhibit
incorporated by reference to the Annual Report on Form 20-F filed March
25, 2004
(File No. 333-15152)
‡‡‡‡ Exhibit
incorporated by reference to Registration Statement on Form S-8 filed May
12,
2005 (File No. 333-124836)
‡‡‡‡‡ Exhibit
incorporated by reference to Registration Statement on Form S-8 filed December
19, 2005 (File No. 333-130440)
SIGNATURES
The
registrant
hereby certifies that it meets all the requirements for filing on Form 20-F
and
that it has duly caused and authorized the undersigned to sign this annual
report on its behalf.
|
|
|
|
Syngenta
AG |
|
|
|
|
|
|
|
|
|
|
By: |
/s/ Michael
Pragnell |
|
By: |
/s/ Domenico
Scala |
|
|
|
|
|
|
Name: Michael
Pragnell
Title:
Chief
Executive Officer
|
|
|
Name: Domenico
Scala
Title:
Chief
Financial Officer
|
To
the Board
of Directors and Shareholders of
Syngenta
AG, Basel
|
|
|
|
Basel,
Switzerland, February 7, 2007
|
|
|
Report
of Independent Registered Public Accounting
Firm
|
We
have audited
management's assessment on Internal Control over Financial Reporting, included
in item 15, that Syngenta AG and subsidiaries (“Syngenta”) maintained effective
internal control over financial reporting as of December 31, 2006, based
on
criteria established in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (the COSO
criteria). Syngenta’s management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our responsibility
is to express an opinion on management's assessment and an opinion on the
effectiveness of the company's internal control over financial reporting
based
on our audit.
We
conducted our
audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control
over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing
such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A
company's
internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and
the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain
to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary
to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company
are
being made only in accordance with authorizations of management and directors
of
the company; and (3) provide reasonable assurance regarding prevention or
timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial
statements.
Because
of its
inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness
to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In
our opinion,
management's assessment that Syngenta maintained effective internal control
over
financial reporting as of December 31, 2006, is fairly stated, in all material
respects, based on the COSO criteria. Also, in our opinion, Syngenta maintained,
in all material respects, effective internal control over financial reporting
as
of December 31, 2006, based on the COSO criteria.
We
also have
audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of Syngenta
as
of December 31, 2006, 2005 and 2004, and the related consolidated income
statements, statements of changes in shareholders’ equity, and cash flow
statements for each of the three years in the period ended December 31, 2006
and
our report dated February 7, 2007 expressed an unqualified opinion thereon
and
included an explanatory paragraph regarding the Company’s adoption of new
accounting standards.
Ernst
&
Young AG
|
|
|
|
/s/
Eric
Ohlund
|
|
/s/
Jürg
Zürcher
|
Eric
Ohlund
|
|
Jürg
Zürcher
|
|
|
|
To
the Board
of Directors and Shareholders of |
|
Syngenta
AG, Basel
|
|
|
Basel,
Switzerland, February 7, 2007
|
|
|
Report
of Independent Registered Public Accounting
Firm
|
We
have audited the
accompanying consolidated balance sheets of Syngenta AG and subsidiaries
(“Syngenta”) as of December 31, 2006, 2005 and 2004, and the related
consolidated income statements, statements of changes in shareholders' equity,
and cash flow statements for each of the three years in the period ended
December 31, 2006. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We
conducted our
audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As
discussed in
Notes 34 and 35 to the consolidated financial statements, effective December
31,
2006, the Company changed its method of accounting for pension and
postretirement benefits to adopt Statement of Financial Accounting Standards
No.
158 “Employers’ Accounting for Defined Benefit Pension and Other Postretirement
Plans”. Also, as discussed in Note 34 to the consolidated financial statements,
effective December 31, 2006, the Company adopted the provisions of Securities
and Exchange Commission
Staff
Accounting Bulletin No. 108, “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatement in Current Year Financial
Statements”, pursuant to which the Company recorded a cumulative effect
adjustment to opening retained earnings.
We
also have
audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of Syngenta’s internal
control over financial reporting as of December 31, 2006, based on criteria
established in Internal Control-Integrated Framework issued by the Committee
of
Sponsoring Organizations of the Treadway Commission and our report dated
February 7, 2007 expressed an unqualified opinion thereon.
|
|
|
|
|
|
Ernst
&
Young AG |
|
|
|
|
|
/s/
Eric
Ohlund |
|
/s/
Jürg
Zürcher |
Eric
Ohlund |
|
Jürg
Zürcher
|
|
|
|
|
Consolidated
Income Statement
(for
the
years ended December 31, 2006, 2005 and 2004)
|
|
|
|
(US$
million except per share amounts)
|
|
Notes
|
|
2006
|
|
2005
|
|
2004
|
|
Continuing
operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
4,5,6
|
|
|
8,046
|
|
|
8,104
|
|
|
7,269
|
|
Cost
of goods
sold
|
|
|
|
|
|
(3,982
|
)
|
|
(3,950
|
)
|
|
(3,532
|
)
|
Gross
profit
|
|
|
|
|
|
4,064
|
|
|
4,154
|
|
|
3,737
|
|
Marketing
and
distribution
|
|
|
|
|
|
(1,470
|
)
|
|
(1,518
|
)
|
|
(1,382
|
)
|
Research
and
development
|
|
|
|
|
|
(796
|
)
|
|
(822
|
)
|
|
(809
|
)
|
General
and
administrative
|
|
|
|
|
|
(668
|
)
|
|
(742
|
)
|
|
(651
|
)
|
Restructuring
and impairment
|
|
|
7
|
|
|
(301
|
)
|
|
(212
|
)
|
|
(354
|
)
|
Operating
income
|
|
|
|
|
|
829
|
|
|
860
|
|
|
541
|
|
Income/(loss)
from associates and joint ventures
|
|
|
15
|
|
|
(11
|
)
|
|
2
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
|
|
|
88
|
|
|
104
|
|
|
76
|
|
Interest
expense
|
|
|
|
|
|
(141
|
)
|
|
(170
|
)
|
|
(118
|
)
|
Other
financial expense
|
|
|
|
|
|
(18
|
)
|
|
(16
|
)
|
|
(21
|
)
|
Currency
gains
(losses), net
|
|
|
|
|
|
51
|
|
|
(14
|
)
|
|
(10
|
)
|
Financial
expense, net
|
|
|
|
|
|
(20
|
)
|
|
(96
|
)
|
|
(73
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) before taxes
|
|
|
|
|
|
798
|
|
|
766
|
|
|
466
|
|
Income
tax
credit/(expense)
|
|
|
8
|
|
|
(161
|
)
|
|
(140
|
)
|
|
70
|
|
Income/(loss)
from continuing operations
|
|
|
9
|
|
|
637
|
|
|
626
|
|
|
536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss)
from discontinued operations
|
|
|
3,9
|
|
|
—
|
|
|
—
|
|
|
(108
|
)
|
Net
income/(loss)
|
|
|
|
|
|
637
|
|
|
626
|
|
|
428
|
|
Attributable
to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
AG shareholders
|
|
|
9
|
|
|
634
|
|
|
622
|
|
|
460
|
|
Minority
interests
|
|
|
|
|
|
3
|
|
|
4
|
|
|
(32
|
)
|
Net
income/(loss)
|
|
|
|
|
|
637
|
|
|
626
|
|
|
428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings/(loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From
continuing operations
|
|
|
9
|
|
|
6.46
|
|
|
6.22
|
|
|
5.16
|
|
From
discontinued operations
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
(0.79
|
)
|
Total
|
|
|
9
|
|
|
6.46
|
|
|
6.22
|
|
|
4.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings/(loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From
continuing operations
|
|
|
9
|
|
|
6.35
|
|
|
6.13
|
|
|
5.12
|
|
From
discontinued operations
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
(0.78
|
)
|
Total
|
|
|
9
|
|
|
6.35
|
|
|
6.13
|
|
|
4.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
98,165,298
|
|
|
100,017,271
|
|
|
105,208,929
|
|
Diluted
|
|
|
|
|
|
99,876,180
|
|
|
101,464,222
|
|
|
106,015,369
|
|
The
accompanying
notes form an integral part of the consolidated financial
statements.
|
|
|
|
Consolidated
Balance Sheet
(at
December
31, 2006, 2005 and 2004)
|
|
|
|
(US$
million)
|
|
Notes
|
|
2006
|
|
2005
(reclassified)
|
|
2004
(reclassified)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash
equivalents
|
|
|
|
|
|
445
|
|
|
458
|
|
|
227
|
|
Marketable
securities
|
|
|
11
|
|
|
81
|
|
|
4
|
|
|
1
|
|
Trade
receivables, net
|
|
|
10
|
|
|
2,002
|
|
|
1,865
|
|
|
1,887
|
|
Income
taxes
recoverable
|
|
|
|
|
|
89
|
|
|
48
|
|
|
64
|
|
Other
accounts
receivable
|
|
|
10
|
|
|
276
|
|
|
316
|
|
|
273
|
|
Other
current
assets
|
|
|
11
|
|
|
272
|
|
|
306
|
|
|
765
|
|
Inventories
|
|
|
12
|
|
|
2,381
|
|
|
2,215
|
|
|
2,192
|
|
Total
current assets
|
|
|
|
|
|
5,546
|
|
|
5,212
|
|
|
5,409
|
|
Non-current
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
paint and equipment
|
|
|
13
|
|
|
1,957
|
|
|
1,887
|
|
|
2,188
|
|
Intangible
assets
|
|
|
14
|
|
|
2,724
|
|
|
2,732
|
|
|
2,951
|
|
Investments
in
associates and joint ventures
|
|
|
15
|
|
|
89
|
|
|
93
|
|
|
114
|
|
Deferred
tax
assets
|
|
|
16
|
|
|
599
|
|
|
763
|
|
|
724
|
|
Other
financial assets
|
|
|
17
|
|
|
901
|
|
|
715
|
|
|
378
|
|
Total
non-current assets
|
|
|
|
|
|
6,270
|
|
|
6,190
|
|
|
6,355
|
|
Assets
held
for sale
|
|
|
25
|
|
|
36
|
|
|
2
|
|
|
22
|
|
Total
assets
|
|
|
|
|
|
11,852
|
|
|
11,404
|
|
|
11,786
|
|
Liabilities
and Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade
accounts
payable
|
|
|
18
|
|
|
(1,568
|
)
|
|
(1,619
|
)
|
|
(1,466
|
)
|
Current
financial debts
|
|
|
19
|
|
|
(143
|
)
|
|
(514
|
)
|
|
(423
|
)
|
Income
taxes
payable
|
|
|
|
|
|
(296
|
)
|
|
(323
|
)
|
|
(312
|
)
|
Other
current
liabilities
|
|
|
20
|
|
|
(679
|
)
|
|
(810
|
)
|
|
(765
|
)
|
Provisions
|
|
|
22
|
|
|
(282
|
)
|
|
(199
|
)
|
|
(258
|
)
|
Total
current liabilities
|
|
|
|
|
|
(2,968
|
)
|
|
(3,465
|
)
|
|
(3,224
|
)
|
Non-current
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current
financial debts
|
|
|
21
|
|
|
(1,569
|
)
|
|
(847
|
)
|
|
(1,117
|
)
|
Deferred
tax
liabilities
|
|
|
16
|
|
|
(728
|
)
|
|
(834
|
)
|
|
(897
|
)
|
Provisions
|
|
|
22
|
|
|
(893
|
)
|
|
(827
|
)
|
|
(870
|
)
|
Total
non-current liabilities
|
|
|
|
|
|
(3,190
|
)
|
|
(2,508
|
)
|
|
(2,884
|
)
|
Commitments
and contingencies
|
|
|
30
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
liabilities
|
|
|
|
|
|
(6,158
|
)
|
|
(5,973
|
)
|
|
(6,108
|
)
|
Shareholders’
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
share
capital: 104,043,560 ordinary shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2005:
106,368,247 ordinary shares;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004:
112,564,584 ordinary shares)
|
|
|
24
|
|
|
(142
|
)
|
|
(353
|
)
|
|
(525
|
)
|
Retained
earnings
|
|
|
|
|
|
(2,146
|
)
|
|
(1,543
|
)
|
|
(609
|
)
|
Reserves:
|
|
|
|
|
|
(4,162
|
)
|
|
(3,980
|
)
|
|
(4,853
|
)
|
Treasury
shares: 6,614,409 ordinary shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2005:
7,112,695 ordinary shares;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004:
7,481,421 ordinary shares)
|
|
|
24
|
|
|
784
|
|
|
473
|
|
|
329
|
|
Total
shareholders’ equity
|
|
|
|
|
|
(5,666
|
)
|
|
(5,403
|
)
|
|
(5,658
|
)
|
Minority
interests
|
|
|
|
|
|
(28
|
)
|
|
(28
|
)
|
|
(20
|
)
|
Total
equity
|
|
|
|
|
|
(5,694
|
)
|
|
(5,431
|
)
|
|
(5,678
|
)
|
Total
liabilities and equity
|
|
|
|
|
|
(11,852
|
)
|
|
(11,404
|
)
|
|
(11,786
|
)
|
The
accompanying
notes form an integral part of the consolidated financial
statements.
Consolidated
Cash Flow Statement
(for
the
years ended December 31, 2006, 2005 and 2004) |
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
Notes
|
|
2006
|
|
2005
|
|
2004
|
|
Income
before taxes
|
|
|
|
|
|
798
|
|
|
766
|
|
|
466
|
|
Reversal
of
non-cash items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation,
amortization and impairment of
Property,
plant and equipment
|
|
|
13
|
|
|
251
|
|
|
272
|
|
|
385
|
|
Intangible
assets
|
|
|
14
|
|
|
212
|
|
|
201
|
|
|
250
|
|
Financial
assets
|
|
|
|
|
|
-
|
|
|
19
|
|
|
-
|
|
Loss/(gain)
on disposal of non-current assets
|
|
|
|
|
|
(31
|
)
|
|
(15
|
)
|
|
-
|
|
Charge
in
respect of share based compensation
|
|
|
|
|
|
42
|
|
|
37
|
|
|
33
|
|
Charges
in
respect of provisions
|
|
|
22
|
|
|
354
|
|
|
297
|
|
|
420
|
|
Net
financial
expenses
|
|
|
|
|
|
20
|
|
|
96
|
|
|
73
|
|
Share
of net
loss/(gain) from associates
|
|
|
|
|
|
11
|
|
|
(2
|
)
|
|
2
|
|
Cash
(paid)/received in respect of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and
other financial receipts
|
|
|
|
|
|
214
|
|
|
131
|
|
|
221
|
|
Interest
and
other financial payments
|
|
|
|
|
|
(242
|
)
|
|
(256
|
)
|
|
(235
|
)
|
Taxation
|
|
|
|
|
|
(167
|
)
|
|
(133
|
)
|
|
(128
|
)
|
Restructuring
costs
|
|
|
22,
23
|
|
|
(173
|
)
|
|
(150
|
)
|
|
(185
|
)
|
Contributions
to pension schemes
|
|
|
22
|
|
|
(150
|
)
|
|
(487
|
)
|
|
(144
|
)
|
Other
provisions
|
|
|
23
|
|
|
(75
|
)
|
|
(69
|
)
|
|
(104
|
)
|
Cash
flow before working capital changes
|
|
|
|
|
|
1,064
|
|
|
707
|
|
|
1,054
|
|
Change
in net
current assets and other operating cash flows
|
|
|
26
|
|
|
(136
|
)
|
|
(210
|
)
|
|
255
|
|
Cash
flow from operating activities
|
|
|
|
|
|
928
|
|
|
497
|
|
|
1,309
|
|
Additions
to
property, plant and equipment
|
|
|
13
|
|
|
(217
|
)
|
|
(174
|
)
|
|
(166
|
)
|
Proceeds
from
business disposals of property, plant and equipment
|
|
|
|
|
|
62
|
|
|
33
|
|
|
49
|
|
Purchase
of
intangibles, investments in associates and other financial
assets
|
|
|
|
|
|
(78
|
)
|
|
(39
|
)
|
|
(104
|
)
|
Proceeds
from
disposal of financial assets
|
|
|
|
|
|
55
|
|
|
20
|
|
|
15
|
|
Purchase
of
marketable securities
|
|
|
|
|
|
(102
|
)
|
|
(3
|
)
|
|
-
|
|
Proceeds
from
disposals of marketable securities
|
|
|
|
|
|
5
|
|
|
-
|
|
|
4
|
|
Proceeds
from
disposals of non-current assets held for sale
|
|
|
|
|
|
7
|
|
|
25
|
|
|
-
|
|
Investments
in non-current assets held for sale
|
|
|
3
|
|
|
(1
|
)
|
|
-
|
|
|
-
|
|
Business
divestments
|
|
|
|
|
|
3
|
|
|
-
|
|
|
1
|
|
Business
acquisitions (net of cash acquired)
|
|
|
3
|
|
|
(145
|
)
|
|
-
|
|
|
(479
|
)
|
Acquisitions
of associates and minorities (net of cash acquired)
|
|
|
|
|
|
-
|
|
|
(6
|
)
|
|
(6
|
)
|
Cash
flow from/(used for) investing activities
|
|
|
|
|
|
(411
|
)
|
|
(144
|
)
|
|
(686
|
)
|
Increases
in
third party interest-bearing debt
|
|
|
|
|
|
656
|
|
|
1,195
|
|
|
202
|
|
Repayment
of
third party interest-bearing debt
|
|
|
|
|
|
(376
|
)
|
|
(878
|
)
|
|
(640
|
)
|
Sale
of
treasury shares and options over own shares
|
|
|
|
|
|
72
|
|
|
68
|
|
|
45
|
|
Purchase
of
treasury shares
|
|
|
|
|
|
(629
|
)
|
|
(251
|
)
|
|
(143
|
)
|
Distributions
paid to group shareholders
|
|
|
|
|
|
(260
|
)
|
|
(207
|
)
|
|
(142
|
)
|
Dividends
paid to minorities
|
|
|
|
|
|
(4
|
)
|
|
(1
|
)
|
|
(1
|
)
|
Cash
flow from/(used for) financing activities
|
|
|
|
|
|
(541
|
)
|
|
(74
|
)
|
|
(679
|
)
|
Net
cash flow (used for)/from discontinued operations
|
|
|
3
|
|
|
-
|
|
|
-
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
Notes
|
|
2006
|
|
2005
|
|
2004
|
|
Net
effect of
currency translation on cash and cash equivalents
|
|
|
|
|
|
11
|
|
|
(48
|
)
|
|
36
|
|
Net
change in cash and cash equivalents
|
|
|
|
|
|
(13
|
)
|
|
231
|
|
|
21
|
|
Cash
and cash equivalents at the beginning of the year
|
|
|
|
|
|
458
|
|
|
227
|
|
|
206
|
|
Cash
and cash equivalents at the end of the year
|
|
|
|
|
|
445
|
|
|
458
|
|
|
227
|
|
At
December 31,
2006 cash equivalents totalled US$213 million (2005: US$268 million; 2004:
US$56
million).
The
accompanying
notes form an integral part of the consolidated financial
statements.
Consolidated
Statement of Changes in Shareholders’ Equity
(for
the
years ended December 31, 2006, 2005 and 2004) |
|
|
|
|
|
|
|
|
(US$
million)
|
|
Par
value of ordinary shares (Note
24)
|
|
Additional
paid-in capital
|
|
Treasury
shares, at cost
|
|
Fair
Value reserves
|
|
Cumulative
Translation adjustment
|
|
Retained
Earnings
|
|
Total
Share-holders’ Equity
|
|
January
1, 2004
|
|
|
667
|
|
|
4,119
|
|
|
(504
|
)
|
|
70
|
|
|
345
|
|
|
359
|
|
|
5,056
|
|
Net
income
attributable to Syngenta AG shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
460
|
|
|
460
|
|
Purchases
and
Sales of treasury shares in exchange for own equity
instruments
|
|
|
|
|
|
|
|
|
280
|
|
|
|
|
|
|
|
|
(276
|
)
|
|
4
|
|
Issue
of
shares under employee share purchase plan
|
|
|
|
|
|
|
|
|
38
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
32
|
|
Share
based
compensation
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
33
|
|
|
33
|
|
Dividends
paid to group shareholders as par value reduction
|
|
|
(142
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(142
|
)
|
Share
repurchase scheme
|
|
|
|
|
|
|
|
|
(143
|
)
|
|
|
|
|
|
|
|
|
|
|
(143
|
)
|
Cash
impact
of options under share repurchase scheme
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
9
|
|
Gains
and losses recognized directly in equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
holding gains/(losses) on available-for-sale financial
assets
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
9
|
|
Unrealized
gains/(losses) on derivatives designated as cash flow
hedges
|
|
|
|
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
(9
|
)
|
Income
taxes
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
30
|
|
|
26
|
|
Translation
effects
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
323
|
|
|
|
|
|
323
|
|
December
31, 2004
|
|
|
525
|
|
|
4,119
|
|
|
(329
|
)
|
|
66
|
|
|
668
|
|
|
609
|
|
|
5,658
|
|
Net
Income
attributable to Syngenta AG shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
622
|
|
|
622
|
|
Negative
Minority Shareholders’ Equity(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
(6
|
)
|
Purchases
and
Sales of treasury shares in exchange for options over own
shares
|
|
|
|
|
|
|
|
|
(481
|
)
|
|
|
|
|
|
|
|
481
|
|
|
-
|
|
Issue
of
shares under employee share purchase plan
|
|
|
|
|
|
|
|
|
48
|
|
|
|
|
|
-
|
|
|
15
|
|
|
63
|
|
Share
based
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37
|
|
|
37
|
|
Distributions
paid to group shareholders as par value reduction
|
|
|
(170
|
)
|
|
11
|
|
|
|
|
|
|
|
|
(48
|
)
|
|
|
|
|
(207
|
)
|
Share
repurchase scheme
|
|
|
|
|
|
|
|
|
(251
|
)
|
|
|
|
|
|
|
|
|
|
|
(251
|
)
|
Cash
impact
of options under share repurchase scheme
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
5
|
|
Cancellation
of treasury shares
|
|
|
(2
|
)
|
|
(220
|
)
|
|
540
|
|
|
|
|
|
(68
|
)
|
|
(250
|
)
|
|
-
|
|
Gains
and losses recognized directly in equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
holding gains/(losses) on available-for-sale financial
assets
|
|
|
|
|
|
|
|
|
|
|
|
(13
|
)
|
|
|
|
|
3
|
|
|
(10
|
)
|
Unrealized
gains/(losses) on derivatives designated as cash flow hedges and
hedges of
net investments in foreign operations
|
|
|
|
|
|
|
|
|
|
|
|
(35
|
)
|
|
|
|
|
|
|
|
(35
|
)
|
Income
taxes
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
27
|
|
|
38
|
|
Translation
effects
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(511
|
)
|
|
|
|
|
(511
|
)
|
December
31, 2005
|
|
|
353
|
|
|
3,910
|
|
|
(473
|
)
|
|
29
|
|
|
41
|
|
|
1,543
|
|
|
5,403
|
|
The
accompanying
notes form an integral part of the consolidated financial
statements.
Consolidated
Statement of Changes in Shareholders’ Equity (continued)
(for
the
years ended December 31, 2006, 2005 and 2004) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(US$
million) |
|
Par
value of ordinary shares (Note 24)
|
|
Additional
paid-in capital
|
|
Treasury
shares, at cost
|
|
Fair
value reserves
|
|
Cumulative
translation adjustment
|
|
Retained
Earnings
|
|
Total
Share-holders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2005
|
|
|
353
|
|
|
3,910
|
|
|
(473
|
)
|
|
29
|
|
|
41
|
|
|
1,543
|
|
|
5,403
|
|
Net
Income
attributable to Syngenta AG shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
634
|
|
|
634
|
|
Issue
of
shares under employee share purchase plan
|
|
|
|
|
|
|
|
|
68
|
|
|
|
|
|
|
|
|
9
|
|
|
77
|
|
Share
based
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42
|
|
|
42
|
|
Distributions
paid to group shareholders as par value reduction
|
|
|
(203
|
)
|
|
9
|
|
|
|
|
|
|
|
|
(66
|
)
|
|
|
|
|
(260
|
)
|
Share
repurchase scheme
|
|
|
|
|
|
|
|
|
(629
|
)
|
|
|
|
|
|
|
|
(5
|
)
|
|
(634
|
)
|
Cancellation
of treasury shares
|
|
|
(8
|
)
|
|
(85
|
)
|
|
250
|
|
|
|
|
|
(42
|
)
|
|
(115
|
)
|
|
-
|
|
Gains
and losses recognized directly in equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
holding gains/(losses) on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
available-for-sale
financial assets
|
|
|
|
|
|
|
|
|
|
|
|
39
|
|
|
|
|
|
|
|
|
39
|
|
Unrealized
gains/(losses) on derivatives designated as cash flow hedges and
hedges of
net investments in foreign operations
|
|
|
|
|
|
|
|
|
|
|
|
(88
|
)
|
|
|
|
|
|
|
|
(88
|
)
|
Income
taxes
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
38
|
|
|
52
|
|
Translation
effects
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401
|
|
|
|
|
|
401
|
|
December
31, 2006
|
|
|
142
|
|
|
3,834
|
|
|
(784
|
)
|
|
(6
|
)
|
|
334
|
|
|
2,146
|
|
|
5,666
|
|
The
accompanying
notes form an integral part of the consolidated financial
statements.
Consolidated
Statement of Changes in Shareholders’ Equity (continued)
(for
the years
ended December 31, 2006, 2005 and 2004)
Total
recognized
gains and losses, representing the total of net income and gains and losses
recognized directly in shareholders’ equity, for the years ended December 31,
2006, 2005 and 2004, were US$1,038 million, US$98 million and US$809 million,
respectively. Gains or losses recognized directly in equity attributable to
minority interests are disclosed below.
The
amount
available for dividend distribution is based on Syngenta AG’s shareholders’
equity determined in accordance with the legal provisions of the Swiss Code
of
Obligations. US$28 million of the additional paid in capital is not available
for distribution.
On
July 11, 2006, a
distribution of Swiss francs (“CHF”) 3.30 per share was paid as a par value
reduction of share capital in respect of 2005, (2005: CHF 2.70 per share paid
in
July 2005; 2004: CHF 1.70 per share paid in July 2004).
In
addition, on
February 22, 2006, the Company granted one free put option per share.
Shareholders had a right to sell one share to Syngenta for every 30 options
granted for an exercise price of CHF 234, representing an initial intrinsic
value of CHF 1.50. On May 23, 2006, 98,408,790 options were exercised and the
Company repurchased 3,280,293 shares.
The
Board of
Directors recommends a payment of CHF 3.80 per share to be paid partially by
way
of a nominal par value reduction of CHF 2.20 per share and CHF 1.60 per share
from distributable equity subject to shareholder approval at the Annual General
Meeting (AGM) on May 2, 2007.
The
following
summarizes the movements on the cash flow hedge reserve:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
January
1
|
|
|
12
|
|
|
39
|
|
|
48
|
|
Gains/(losses)
recognized in equity during the period
|
|
|
(95
|
)
|
|
(44
|
)
|
|
39
|
|
(Gains)/losses
removed from equity and reported in net income during the
period
|
|
|
7
|
|
|
9
|
|
|
(48
|
)
|
Deferred
tax
|
|
|
18
|
|
|
8
|
|
|
-
|
|
December
31
|
|
|
(58
|
)
|
|
12
|
|
|
39
|
|
The
following
summarizes the movements on the fair value reserve for available-for-sale
financial instruments:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
January
1
|
|
|
17
|
|
|
27
|
|
|
22
|
|
Gains/(losses)
recognized in equity during the period
|
|
|
39
|
|
|
(3
|
)
|
|
9
|
|
(Gains)/losses
removed from equity and reported in net income during the
period
|
|
|
-
|
|
|
(10
|
)
|
|
-
|
|
Deferred
tax
|
|
|
(4
|
)
|
|
3
|
|
|
(4
|
)
|
December
31
|
|
|
52
|
|
|
17
|
|
|
27
|
|
The
following
summarizes the movements in minority interest:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
January
1
|
|
|
28
|
|
|
20
|
|
|
67
|
|
Share
of
result for the year
|
|
|
3
|
|
|
4
|
|
|
(32
|
)
|
Negative
Minority Shareholders’ Equity reallocated to Syngenta AG
shareholders
|
|
|
-
|
|
|
6
|
|
|
-
|
|
Business
combinations
|
|
|
-
|
|
|
(2
|
)
|
|
(13
|
)
|
Dividends
paid to minorities
|
|
|
(4
|
)
|
|
(1
|
)
|
|
(1
|
)
|
Currency
movements
|
|
|
1
|
|
|
1
|
|
|
(1
|
)
|
December
31
|
|
|
28
|
|
|
28
|
|
|
20
|
|
1.
Basis of
preparation of the consolidated financial statements
The
consolidated
financial statements of Syngenta have been prepared in accordance with
International Financial Reporting Standards (IFRS), which comprise standards
and
interpretations approved by the International Accounting Standards Board (IASB),
and International Accounting Standards and Standing Interpretations Committee
(SIC) interpretations approved by the International Accounting Standards
Committee (IASC) that remain in effect. The consolidated financial statements
have been prepared on an historical cost basis, except for the measurement
at
fair value of derivative financial instruments and available-for-sale financial
assets. These principles differ in certain significant respects from US
generally accepted accounting principles (“US GAAP”). Application of US GAAP
would have affected shareholders’ equity and net income for the years ended
December 31, 2006, 2005 and 2004 as detailed in Note 34 to the consolidated
financial statements. The accounting policies disclosed in Note 2 apply to
the
financial statements prepared under IFRS.
The
consolidated
financial statements are presented in United States dollars (“US$” or “US
dollars”) as this is the major currency in which revenues are
denominated.
The
preparation of
financial statements requires management to make estimates and assumptions
that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimated. Note 2 below includes further
discussion of certain critical accounting estimates.
2.
Accounting policies
Adoption
of new
Accounting Standards and changes in accounting policies
Syngenta
adopts new
Accounting Standards by following the transitional requirements of each new
standard or, if there are no transitional requirements specified, by using
the
full retrospective application method, as required by IAS 8. Other changes
in
accounting policies are also implemented using the full retrospective
application method. If full retrospective application of a change is
impracticable, it is applied from the earliest period which is practicable.
“Impracticable” means either that the retrospective effect of the change cannot
be calculated after making every reasonable effort, or that to calculate it
would require the use of hindsight to determine what management’s intentions or
estimates would have been in prior periods.
Retrospective
application requires that the results of comparative periods and the opening
balances of the earliest period shown be restated as if the new accounting
policy had always been applied. Prospective application requires that the new
accounting policy only be applied to the results of the current and future
periods and comparative periods are not restated.
Syngenta
has
adopted the following new or revised Accounting Standards in these consolidated
financial statements, with the following effect:
|
-
|
IAS
19
(revised 2004),”Employee Benefits”. Syngenta continues to use the 10%
corridor method of deferred recognition for actuarial gains and losses
for
post-employment benefits. The disclosures required by IAS 19 (revised
2004) are given in Note 27 below.
|
|
-
|
IFRIC
4,
“Determining whether an Arrangement contains a lease”. With effect from
January 1, 2006, certain contracts for the supply of goods or services
to
Syngenta which depend upon the use of a specific asset of the supplier
are
accounted for partly as a lease of that asset and partly as a supply
contract. Under Syngenta’s previous policy, these contracts would have
been accounted for purely as supply contracts, with all contractual
payments charged to Cost of Goods sold in the income statement as
the
related inventories were sold. Under the new policy, if the lease
embedded
in the contract is classified as a finance lease, Syngenta capitalized
the
supplier’s asset as Property, plant and equipment in its own consolidated
balance sheet, with a corresponding entry to Financial debt. Contractual
payments are allocated between Cost of Goods sold, interest expense
and
repayment of financial debt. In 2006, the new policy increased Property,
plant and equipment by US$9 million, Financial debt by US$6 million,
Deferred tax liabilities by US$1 million and Shareholders’ equity by US$2
million. In the income statement, Cost of Goods sold was reduced
by US$2
million, Net financial expense increased by US$1 million and Net
income
increased by US$1 million. There was no material effect on prior
periods.
|
|
-
|
IFRIC
5,
“Rights to Interests arising from Decommissioning, Restoration and
Environmental Rehabilitation funds”. Adoption of IFRIC 5 with effect from
January 1, 2006 had no effect on these consolidated financial
statements.
|
|
-
|
IFRS
7,
“Financial Instruments: Disclosures”. Syngenta has adopted IFRS 7 early
and has provided the required additional disclosures in Notes 10,
18, 19,
21 and 32 to these consolidated financial
statements.
|
|
-
|
IFRIC
8,
“Scope of IFRS 2” requires share based payment expense to be recorded when
equity instruments are granted at less than fair value in situations
where
the goods or services received in exchange for the grant cannot be
specifically identified. Syngenta has adopted IFRIC 8 early, with
effect
from January 1, 2006. Adoption had no effect on the consolidated
financial
statements.
|
|
-
|
IFRIC
9,
“Reassessment of Embedded Derivatives”. IAS 39 requires a derivative
embedded within a financial instrument to be accounted for separately
to
its host instrument if it is not closely related to the instrument.
IFRIC
9 clarified in what circumstances the accounting for such a hybrid
instrument should be re-assessed once it has been determined. Syngenta
has
adopted IFRIC 9 early, with effect from January 1, 2006. Adoption
had no
effect on these consolidated financial
statements.
|
|
-
|
IFRIC
10,
“Interim Financial Reporting and Impairment”. Under IFRIC 10, if an
impairment of goodwill, an available-for-sale equity instrument,
or a
financial asset measured at amortized cost is reported in interim
financial statements during a year, it may not be reversed in a later
interim period or in the annual financial statements at the year
end, even
if conditions at that later date would support an increased valuation
of
the asset. Syngenta has adopted IFRIC 10 early, with effect from
January
1, 2006. Because Syngenta’s previous accounting policy already complied
with IFRIC 10, adoption had no effect on the consolidated financial
statements.
|
|
-
|
IFRIC
11,
“IFRS 2 - Group and Treasury Share Transactions”. IFRIC 11 clarified that
share based payment transactions in which an entity receives services
as
consideration for its own equity instruments are accounted for as
equity-settled, regardless of whether the entity repurchases its
equity
instruments from a third party in order to settle the transaction.
IFRIC
11 also establishes how subsidiaries should account for grants of
parent
company equity instruments to their employees. Syngenta has adopted
IFRIC
11 early, with effect from January 1, 2006. Adoption had no effect
on the
consolidated financial statements.
|
|
-
|
On
the face
of the consolidated balance sheet, deferred tax assets and deferred
tax
liabilities have been netted against each other within the same taxable
entity. Previously, they were netted only where they related to the
same
balance sheet item. This adjustment has reduced the amounts of deferred
tax assets and deferred tax liabilities disclosed in the consolidated
balance sheet, and total assets and total liabilities, by US$269
million,
US$204 million and US$222 million as at December 31, 2006, 2005 and
2004
respectively, as shown in Note 16
below.
|
Scope
of
consolidation
The
consolidated
financial statements incorporate the financial statements of Syngenta AG, a
company domiciled and incorporated in Switzerland, and all of its subsidiaries
(together referred to as “Syngenta”) and Syngenta’s interest in associates and
joint ventures.
Principles
of
consolidation
Subsidiaries
Subsidiaries
are
those entities in which Syngenta has an interest of more than one half of the
voting rights or otherwise has power to exercise control. Control exists when
Syngenta has the power, indirectly or directly, to govern the financial and
operating policies of an enterprise so as to obtain benefits from its
activities. Companies acquired or disposed of during the period are included
in
the consolidated financial statements from the date of acquisition or up to
the
date of disposal.
Minority
interests
Where
a subsidiary
in which Syngenta has less than 100% ownership has accumulated losses, 100%
of
the losses are allocated to Syngenta AG shareholders unless the minority
shareholders have a binding commitment to make good their proportion of the
losses.
Associates
and joint ventures
Associates
are
those enterprises in which Syngenta has significant influence, but not control,
over the financial and operating policies and in which Syngenta generally has
an
equity investment of between 20% and 50%. Joint ventures are those enterprises
over whose activities Syngenta has joint control, established by contractual
agreement. Syngenta accounts for both Associated and Joint Ventures using the
equity method. Under this method, the consolidated financial statements show
Syngenta’s share of the total recognized gains and losses of associates and
joint ventures and of their net assets, on separate lines in the consolidated
income statement and balance sheet, from the date that significant influence
or
joint control commences until the date they cease. Any premium over net asset
value paid to acquire an interest in an associate is recognized as
goodwill.
Other
investments
Other
investments
held by Syngenta, including venture capital investment portfolios are classified
as being available-for-sale and are stated at fair value. The fair value of
quoted investments is based on the quoted price and is adjusted to take account
of any restrictions which do not apply to the investments traded in the market
-
for example, a lock-up period. Any resultant unrealized gain or loss resulting
from revaluing the investment to fair value is recognized in shareholders’
equity. On disposal of an investment, accumulated unrealized gains or losses
are
transferred from equity and recognized in the income statement, in the period
in
which the disposal occurs. In the event that an investment is considered to
be
impaired, accumulated unrealized losses are transferred from equity and
recognized in profit or loss, and any additional impairment losses are also
recognized in profit or loss, in the period in which the impairment is
identified.
Transactions
eliminated on consolidation
Intercompany
income
and expenses, including unrealized profits from internal Syngenta transactions,
and intercompany receivables and payables have been eliminated upon
consolidation. Profits on transactions between Syngenta and its Associates
and
Joint Ventures are eliminated in proportion to Syngenta’s ownership share in the
associate or Joint Venture.
Revenue
Revenue
from the
sale of goods is recognized in the income statement when the significant risks
and rewards of ownership have been transferred to the buyer, which is usually
on
delivery, at a fixed and determinable price, and when collectibility is
reasonably assured. Delivery is defined based on the terms of the sale contract.
Syngenta uses a variety of terms in its international business. Revenue is
reported net of sales taxes, returns, discounts and rebates. Rebates to
customers are provided for in the same period that the related sales are
recorded based on the contract terms. Provisions for estimated returns and
allowances are recorded at the time of the sale based on historical rates of
returns as a percentage of sales.
In
certain markets,
sales terms allow customers the option of a one time, non repeatable extension
of credit, for a defined additional period, in respect of a defined proportion
of purchases they have made during a defined period, if the customers still
have
the inventories on hand on expiry of the initial agreed credit period. Customers
have no right to return these inventories, and must pay unconditionally when
the
additional credit period expires. In accordance with IAS 18, revenue for these
sales is recognized on product delivery. The US GAAP accounting treatment of
these sales is described in Note 34 below.
Where
a right of
return exists and a reasonable estimate of returns can be made, revenue is
recorded on delivery and is reduced by an allowance for estimated returns.
If a
reasonable estimate of returns cannot be made at the time of delivery, revenue
is recognized when the right of return no longer exists.
Where
third parties
hold Syngenta inventories on a consignment basis, revenue is recognized in
the
period that inventories are withdrawn from consignment and delivered to
customers.
Syngenta
periodically enters into prepayment contracts with customers and receives
advance payments for product to be delivered in future periods. These advance
payments are recorded as liabilities and presented as part of trade accounts
payable. Revenue associated with advance payments is recognized as shipments
are
made and title, ownership, and risk of loss pass to the customer.
Royalty
income is
recognized in the consolidated income statement when earned. If the license
agreement contains performance obligations for Syngenta, the income is
considered earned when Syngenta has performed the obligations. Amounts received
in advance of performance are deferred in the consolidated balance sheet. If
the
license agreement provides for royalties based on sales made by the licensee,
income is considered earned in the period that the related sales
occur.
Revenue
in
multiple-deliverable arrangements is allocated to each deliverable which has
stand-alone value to the customer, based on the relative fair values of each
deliverable. Multiple-deliverable arrangements include joint supplies of crop
protection chemicals, seeds and technical services to customers.
Foreign
currencies
The
consolidated
financial statements are presented in US dollars.
With
certain
exceptions, each Syngenta subsidiary uses its local currency as its measurement
currency.
Monetary
assets and
liabilities denominated in foreign currencies are translated into the local
currency at the rate prevailing at the balance sheet date. Non-monetary assets
and liabilities denominated in foreign currencies, which are stated at
historical cost, are translated into local currency at the foreign exchange
rate
ruling at the date of the transaction. Foreign currency
transactions
are
translated to the relevant local currency at the exchange rate prevailing at
the
date of the transaction. With the exception of unrealized gains or losses
related to equity loans, and hedging arrangements for which reserve accounting
is permitted under IAS 39, all resulting foreign exchange transaction gains
and
losses are recognized in the local income statements. Equity loans are
intercompany monetary items which form part of Syngenta’s net investment in the
borrowing subsidiary.
Income,
expense and
cash flows of foreign operations included in the consolidated financial
statements whose measurement currency is that of a hyperinflationary economy
have been translated into US dollars using exchange rates prevailing at the
balance sheet date. Income, expense and cash flows of other foreign operations
included in the consolidated financial statements have been translated into
US
dollars using average exchange rates prevailing during the period. The assets
and liabilities of foreign operations are translated to US dollars at foreign
exchange rates prevailing at the balance sheet date. Foreign exchange
differences arising on these translations are recognized directly in
equity.
Syngenta
denominates goodwill and fair value adjustments arising on acquisitions in
the
functional currency(ies) of the acquired entity(ies).
Research
and development
Research
and
development expenses are charged to the income statement when incurred. Syngenta
considers that the regulatory and other uncertainties inherent in the
development of its key new products preclude it from capitalizing development
costs.
Costs
of purchasing
patent rights are capitalized as intangible assets. Costs of applying for
patents for internally developed products, costs of defending existing patents
and costs of challenging patents held by third parties where these are
considered invalid, are considered part of development expense and expensed
as
incurred.
Cash
and
cash equivalents
Cash
and cash
equivalents include highly liquid investments with original maturities of three
months or less, which are readily convertible to known amounts of
cash.
Trade
and
other accounts receivable
The
reported values
represent the invoiced amounts, less adjustments for doubtful receivables.
Adjustments for doubtful receivables are calculated by reviewing individual
receivable balances, taking into account whether receivables are past due based
on contractual terms, payment history and other available evidence of
collectibility. Receivable balances are written off only when there is no
realistic prospect of any further collections.
In
certain markets,
factoring is within the normal course of business. Where receivables are
factored without recourse to Syngenta, the relevant receivable is derecognized
and cash recorded. Where receivables are factored with full or partial recourse
to Syngenta, the receivable is not derecognized and a liability reflecting
the
obligation to the factor is recorded within financial debts until Syngenta’s
liability is discharged through the factor receiving payment from the
customer.
Inventories
Purchased
products
are valued at acquisition cost while own-manufactured products are valued at
manufacturing cost including related production expenses. In the balance sheet,
inventory is valued at historical cost determined on a first-in-first-out basis,
and this value is used for the cost of goods sold in the income statement.
Allowances have been made for inventories with a net realizable value less
than
cost, or which are slow moving. Unsaleable inventory has been fully written
off.
Inventories of biological assets, principally young plants and cuttings in
the
Seeds flowers business, are valued at fair value less estimated point of sale
costs.
Property,
plant and equipment
Property,
plant and
equipment have been valued at acquisition or production costs, less accumulated
depreciation and any impairment losses. Depreciation is charged on a
straight-line basis to the income statement, over the following estimated useful
lives:
Buildings
|
20
to
40
years
|
|
Machinery
and
equipment
|
10
to
20
years
|
|
Furniture
and
vehicles
|
5
to10
years
|
|
Computer
hardware
|
3
to
7
years
|
|
Land
is valued at
acquisition cost except if held under long-term lease arrangements, when it
is
amortized over the life of the lease. The land held under long-term lease
agreements relates to upfront payments to lease land on which certain of
Syngenta’s buildings are located. The buildings related to the long-term lease
agreements are depreciated over the lesser of the life of the lease and that
of
the related assets. Additional costs, which extend the useful life of the
property, plant and equipment, are capitalized and depreciated over the revised
remaining useful life of the asset. When components of an asset are replaced,
a
disposal of the replaced component is accounted for and the new component is
capitalized and depreciated over the shorter of its own useful life and that
of
the asset of which it is part. Financing costs associated with the construction
of property, plant and equipment are not capitalized. Property, plant and
equipment which are financed by leases giving rights to use the assets as if
owned are capitalized at their estimated cost (at the lower of fair value and
the present value of minimum lease payments) at the inception of the lease,
and
depreciated in the same manner as other property, plant and equipment over
the
lesser of the remaining lease term or estimated useful life. This accounting
treatment is also followed when a purchasing contract is deemed to contain
a
lease of the property, plant and equipment used by the supplier to fulfil its
agreement with Syngenta. A contract is deemed to contain a lease when the
supplier can fulfil it only by using a specific asset solely to supply Syngenta
and the contract price is neither fixed per unit of output nor does it represent
a market price.
The
operation of
Syngenta’s chemical manufacturing assets over an extended period may result in
contamination at the sites on which the assets are located. Where there is
an
obligation to remediate, Syngenta recognizes the costs of restoring the site
as
an addition to the cost of the asset and as a liability in the period in which
they are incurred or, if they cannot be reliably measured at that time, in
the
earliest period in which they can be reliably measured. These costs are
discounted where the time value of money is material.
Intangible
assets other than goodwill
Intangible
assets,
except for goodwill, are valued at cost less accumulated amortization and any
impairment losses. All intangible assets other than goodwill are assigned a
finite life.
Intangible
assets
are amortized on a straight-line basis over the following estimated useful
lives:
Product
rights and related supply agreements
|
5
to
20
years
|
|
Trademarks
and patents
|
10
to
20
years
|
|
Software
|
3
to
5
years
|
|
Customer
relationships
|
10
to15
years
|
|
In
process
Research and Development
|
10
to11
years
|
|
Others
|
3
to15
years
|
|
Useful
lives for
individual assets are determined based on the nature of the asset, its expected
use, the length of the legal agreement or patent and the period over which
the
asset is expected to generate economic benefits for Syngenta (“economic
life”).
Patents
and
trademarks are amortized on a straight-line basis over their estimated economic
or legal life, whichever is shorter. Useful lives assigned to acquired product
rights are based on the maturity of the product and the estimated economic
benefit that such product rights can provide.
Business
combinations give Syngenta access to the distribution channels and customer
relationships of the acquired business. These relationships continue to generate
economic benefit to Syngenta following the acquisition. The useful life of
customer relationships is determined from management estimates of customer
attrition rates.
Under
IFRS 3,
“In-Process Research & Development (IPR&D)”, is valued as part of the
process of allocating the purchase price in a business combination. IPR&D is
recorded separately from goodwill and is allocated to cash-generating units.
It
is assessed for impairment on an annual basis. Once a project included in
IPR&D has been successfully developed and is available for use, it is
amortized over its useful life. IPR&D on business combinations agreed before
March 31, 2004, to which IFRS 3 has not been applied, is included in goodwill
for IFRS purposes. As required by the transitional rules, IPR&D has already
been separately capitalized for IFRS purposes for all business combinations
after March 31, 2004.
Any
value
attributable to long-term supply agreements at preferential terms is amortized
as part of Cost of Goods sold over the period of the supply
agreement.
A
one year
reduction in the useful lives of all intangible assets other than software
would
increase amortization expense by US$31 million.
Goodwill
Goodwill
is the
excess of the purchase price over the fair value of identifiable net assets
acquired in a business combination. Goodwill is recognized as an asset and
presented within intangible assets. Goodwill is not amortized, but is tested
annually for impairment and reduced by any impairment losses. Goodwill related
to acquisitions between January 1, 1995 and March 31, 2004 was previously
amortized over estimated useful lives of up to 20 years, until December 31,
2004. This goodwill is now tested annually for impairment and is valued at
its
January 1, 2005 carrying amount less impairment losses. Goodwill relating to
acquisitions before January 1, 1995 has been and remains fully written off
against shareholders’ equity.
Non-current
assets held for sale
Non-current
assets,
and groups of assets, are reclassified as held for sale when a sale within
one
year is highly probable and the assets are available for immediate sale in
their
present condition. Property, plant and equipment and Intangible assets held
for
sale are remeasured at the lower of fair value less costs to sell or the
carrying amounts at the date they meet the held for sale criteria. Any resulting
impairment loss is recognized in the income statement.
Impairment
of non-current assets
Goodwill
is tested
annually for impairment. Other non-current assets which are not classified
as
held for sale, including recognized intangible assets, are reviewed at each
balance sheet date to determine whether events or changes in circumstances
indicate that the carrying amount of the asset may not be recoverable. If any
such indication exists, Syngenta estimates the asset’s recoverable amount as the
higher of net selling price or value-in-use and recognizes an impairment loss
in
the income statement for the amount by which the asset’s carrying value exceeds
its recoverable amount. Value-in-use is estimated as the present value of future
cash flows expected to result from the use of the asset and its eventual
disposal, to which an appropriate pre-tax discount rate is applied reflecting
current assessments of the time value of money and the risks specific to the
asset. For the purposes of assessing impairment, assets are grouped at the
lowest level for which there are identifiable cash flows. Future cash flows
are
based on forecasts approved by management. Considerable management judgement
is
necessary to estimate discounted future cash flows. Accordingly, actual results
could vary from such estimates. If value-in-use increases after impairment
losses have been recorded, the impairment loss is not reversed for goodwill,
but
is reversed for other non-current assets. The amount reversed is limited so
that
the increased asset carrying amount does not exceed the amount that would have
been recognized had no impairment been recorded.
Income
taxes
Income
taxes for
the year comprise current and deferred tax, using rates enacted or substantially
enacted at the balance sheet date.
Current
tax is the
expected tax payable on the taxable income for the year and any adjustments
to
tax payable in respect of previous years. Deferred tax is recognized based
on
the balance sheet liability method, calculated on temporary differences between
the tax bases of assets and liabilities and their carrying amounts in the
financial statements.
Deferred
tax is
provided on temporary differences arising on investments in subsidiaries,
associates and joint ventures, except where the timing of the reversal of the
temporary difference can be controlled and it is probable that the difference
will not reverse in the foreseeable future. Deferred tax assets are recognized
to the extent that it is probable that future taxable profit will be available
against which the asset can be utilized.
Deferred
tax on
share based compensation awards is based on the tax deduction, if any, which
would be obtained if the Syngenta AG share price at the period end was the
tax
base for the award. Deferred tax on unvested awards is recognized ratably over
the vesting period. Deferred tax on awards already vested is recognized
immediately. Any income tax benefit recorded in the income statement is limited
to the tax effect of the cumulative pre-tax compensation expense recorded.
The
tax benefit may exceed this amount in some circumstances. The excess tax benefit
is treated as the result of a transaction with shareholders rather than with
employees, and is recorded within shareholders’ equity.
Dividends
and capital distributions
Dividends
and
capital distributions payable to shareholders of Syngenta AG are recorded in
the
consolidated financial statements as liabilities and as a reduction in
shareholders’ equity in the period in which they are approved by the
shareholders of Syngenta AG.
Cash
dividends are
payable to holders of shares listed on the Swiss Stock Exchange and the New
York
Stock Exchange, and will be paid in Swiss francs and US dollars, respectively.
Treasury
shares
Share
capital
includes the par value of treasury shares held by the Syngenta Group which
have
not been cancelled. Treasury shares are shown as a separate component of equity
and stated at the amount paid to acquire them. Differences between this amount
and the amount received on the disposal of treasury shares are recorded as
a
movement in consolidated equity.
Derivative
instruments over Syngenta AG Shares
Purchased
and
written call options over Syngenta AG ordinary shares, other than those related
to share based compensation schemes, are accounted for as equity instruments
if
they involve the exchange of a fixed number of Syngenta ordinary shares for
a
fixed cash amount and gross physical settlement is required by the option
contract. Equity instruments are recognized in shareholders’ equity at fair
value at the date the instrument is issued or acquired, and are not subsequently
revalued. Any difference between the value recognized at issue or acquisition
and the value at settlement is recognized as an increase or decrease in equity.
For put options granted to shareholders which meet the above criteria, a
liability is recorded at the grant date equal to the amount payable on exercise,
discounted where the time value of money is material. Shareholders’ equity is
reduced by the same amount. On exercise of the put option, this liability is
eliminated through the repurchase of shares. Options which do not meet the
above
criteria are accounted for as derivative financial assets or liabilities, and
revalued to fair value, with gains and losses recognized in net
income.
Borrowings
Borrowings
are
recognized initially at cost, which is defined as the proceeds received, net
of
transaction costs incurred. In subsequent periods, borrowings are stated at
amortized cost using the effective yield method except where subject to a fair
value hedge relationship. Borrowing costs attributable to the construction
of
property, plant and equipment are charged to income as incurred.
Financial
instruments
Financial
assets
and liabilities are recognized when Syngenta becomes a party to the financial
instrument. Non-derivative financial liabilities other than borrowings are
stated at amortized cost. Derivative financial liabilities are restated to
fair
value at each reporting date. Available-for-sale financial assets and derivative
financial assets are stated initially at cost and subsequently restated to
fair
value at each reporting date. Unrealized gains and losses on available-for-sale
financial assets are recognized directly in shareholders’ equity until disposal
of the asset or until it is impaired. An impairment loss is recorded in the
income statement if there is a significant or prolonged decline in the fair
value of an available-for-sale financial asset below its original cost.
Impairment losses for equity securities available-for-sale are not reversed
if
fair value subsequently increases; the increase is recognized as an unrealized
gain in shareholders’ equity.
Derivatives
embedded in non-derivative contracts are accounted for separately only if they
are not closely related to the host contract. Otherwise, the contract is
accounted for as a whole, based on its nature.
Regular
way
purchases and sales of financial assets are accounted for at settlement
date.
Syngenta
uses
various derivative financial instruments to manage its foreign currency and
interest rate exposures, and certain exposures to commodity prices and to prices
of non-derivative financial assets. Syngenta has established policies and
procedures for risk assessment and approval, reporting and monitoring of
derivative financial instruments.
Syngenta
does not
enter into speculative or derivative transactions not related to the operating
business. Foreign exchange forward contracts which cover existing foreign
currency balance sheet exposure, are recorded at fair value, and related foreign
currency gains and losses thereon are included in “currency gains/(losses), net”
within the income statement.
Movements
in fair
value of financial instruments that hedge risks related to forecast transactions
are recognized in shareholders’ equity until such time as the corresponding
hedged transaction occurs. At this time, the cumulative movement in fair value
of the hedge is transferred to the income statement and classified either within
financial expense, net or within operating income, depending on whether a
financing or a trading exposure is being hedged. Subsequent movements in the
fair value of such hedges are recognized in net income. Realized and unrealized
gains and losses on foreign currency forward contracts designated as specific
hedges of anticipated purchases and sales in foreign currency are recognized
in
the same period that the related third party foreign currency transactions
or
flows are recognized in profit or loss. Realized and unrealized gains and losses
on forward starting interest rate swaps designated as hedges are recognized
over
the same period that the interest expense of the forecasted financing
transactions is recognized in the income statement and are classified within
financial expense, net. Gains and losses on commodity derivatives are classified
within cost of goods sold as they are recognized in the income
statement.
Movements
in the
fair value of financial instruments that hedge risks from net investments in
foreign operations are recognized in equity until disposal of the underlying
investment. Movements in financial instruments designated as hedges of the
fair
value of bond liabilities are included in the income statement where they offset
changes in the fair value of the underlying debt.
The
fair value of
publicly traded derivatives and available-for-sale securities is based on quoted
market prices of the specific instruments held at the balance sheet date. The
fair value of interest rate swaps is calculated as the present value of the
estimated future cash flows. The fair value of forward foreign exchange
contracts is determined using forward exchange market rates at the balance
sheet
date.
In
assessing the
fair value of non-traded derivatives and other financial instruments, the Group
uses a variety of methods and makes assumptions that are based on market
conditions existing at each balance sheet date. Other techniques, such as option
pricing models, are used to determine fair value for the remaining financial
instruments.
When
a hedging
instrument expires or is sold, or when a hedge no longer meets the criteria
for
cash flow hedge accounting, any cumulative unrealized gain or loss on the
hedging instrument at that time remains in shareholders’ equity. The gain or
loss is recognized in the income statement when the committed or forecasted
transaction is recognized in the income statement. However, if a committed
or
forecasted transaction is no longer expected to occur, the cumulative unrealized
gain or loss on the hedging instrument is immediately recorded in the income
statement.
Syngenta
documents
the relationship between a hedging instrument and the related hedged item,
as
well as risk management objectives and the strategy for undertaking each hedge
transaction, at the inception of the transactions. Hedge effectiveness is
assessed and reviewed both at the inception of the hedge and on an ongoing
basis
by determining whether the financial instruments used are highly effective
in
offsetting changes in fair value or cash flows of hedged items.
Provisions
A
provision is
recognized in the balance sheet when Syngenta has a legal or constructive
obligation to third parties as a result of a past event and it is probable
that
an outflow of economic benefits will be required to settle the obligation.
If
the effect of discounting is material, provisions are determined by discounting
the expected value of future cash flows at a pre-tax rate that reflects current
market assessments of the time value of money and, where appropriate, the risks
specific to the liability. Where some or all of the expenditure required to
settle a provision is expected to be reimbursed by another party, the
reimbursement is recognized only when reimbursement is virtually certain. The
amount to be reimbursed is recognized as a separate asset. Where Syngenta has
a
joint and several liability with one or more other parties, no provision is
recognized to the extent that those other parties are expected to settle part
or
all of the obligation.
Environmental
provisions
Syngenta
is exposed
to environmental liabilities relating to its past operations, principally in
respect of remediation costs. Provisions for non-recurring remediation costs
are
made when there is a present obligation, it is probable that expense on
remediation work will be required within ten years (or a longer period if
specified by a legal obligation) and the cost can be estimated within a
reasonable range of possible outcomes. The costs are based on currently
available facts; technology expected to be available at the time of the clean
up, laws and regulations presently or virtually certain to be enacted and prior
experience in remediation of contaminated sites. Environmental liabilities
are
recorded at the estimated amount at which the liability could be settled at
the
balance sheet date. Environmental costs are capitalized as part of property,
plant and equipment where they are expected to increase the economic benefits
flowing from the use or eventual disposal of the asset, or when they represent
an obligation to remediate at the end of the asset’s life and are recoverable
from future economic benefits of using the asset. In all other cases, they
are
expensed.
Additional
environmental remediation costs and provisions may be required were Syngenta
to
decide to close certain of its sites. Syngenta’s restructuring programs have
involved closure of several sites to date. Remediation liabilities are accounted
for as restructuring provisions and recognized when the site closure has been
announced. In the opinion of Syngenta, it is not possible to estimate reliably
the costs that would be incurred on eventual closure of its continuing sites,
where there is no present obligation to remediate, because it is neither
possible to determine a time limit beyond which the sites will no longer be
operated, nor what remediation costs may be required on their eventual
closure.
Restructuring
provisions
A
provision for
restructuring is recognized when Syngenta has approved a detailed and formal
restructuring plan and the restructuring has either commenced or been announced
publicly.
Provision
for
severance payments and related employment costs is made in full when employees
are given details of the termination benefits which will apply to individual
employees should their contracts be terminated as a direct result of
the
restructuring
plan.
Costs relating to ongoing activities, such as relocation, training and
information systems costs, are recognized only when incurred.
Pension
funds, post-retirement benefits, other long-term employee benefits and employee
share participation plans
(a)
Defined
benefit pension plans
The
liability in
respect of defined benefit pension plans represents the defined benefit
obligation calculated by independent actuaries using the projected unit credit
method. This method allocates the estimated total final cost of the pension,
including future estimated salary and pension increases, to past and future
service periods.
The
defined benefit
obligation is measured as the present value of the proportion of the estimated
final pension payments attributed to employee service rendered up to the balance
sheet date. The amount charged to the income statement, representing the
estimated cost of employee service during the period less employee
contributions, is included in the personnel expenses of the various functions
where the employees are located. Plan assets are measured at their fair values.
Significant gains or losses arising from experience effects and changes in
actuarial assumptions are charged or credited to income over the service lives
of the related employees to the extent to which they fall outside the 10%
corridor permitted under IAS 19 (revised 2004).
(b)
Post-retirement benefits other than pensions
Certain
operations
provide healthcare and insurance benefits for a portion of their retired
employees and their eligible dependents. The liability in respect of these
benefits represents the defined benefit obligation calculated annually by
independent actuaries using the projected unit credit method. The defined
benefit obligation is measured at the present value of the future cash flows.
The benefit expense is included in the personnel expenses of the various
functions. Significant gains or losses arising from experience effects and
changes in actuarial assumptions are charged or credited to income over the
service lives of the related employees to the extent to which they fall outside
the 10% corridor permitted under IAS 19 (revised 2004).
(c)
Other
long-term employee benefits
Other
long-term
employee benefits represent amounts due to employees under deferred compensation
arrangements mandated by certain jurisdictions in which Syngenta conducts its
operations. Benefit cost is recognized on an accrual basis in the personnel
expenses of the various functions where the employees are located. The related
obligation is presented within provisions in the consolidated balance
sheet.
(d)
Employee
share participation plans
The
fair value of
equity-settled share and share option grants awarded to employees is recognized
as compensation expense, and as a corresponding increase in equity, over the
period in which the shares or options vest. The fair value is measured at the
grant date, which is the date at which the share participation plan members
are
aware of the terms of the share award and the award has been approved by the
Compensation Committee. The fair value of grants of Syngenta AG ordinary shares
is measured as the market value of the shares on the grant date, less any cash
amount payable by the employee under the terms of the share participation plan.
The fair value of grants of share awards and unvested shares which do not carry
dividend rights until vesting is reduced by the present value of the expected
dividends to which the holder will not be entitled during the deferral or
vesting period. No discount is applied to grant-date market value to reflect
vesting conditions. The fair value of grants of options over Syngenta AG
ordinary shares is measured using a model based on the Black-Scholes-Merton
formula. The number of shares and options used to measure compensation expense
is Syngenta’s best estimate of the number of shares and options expected to
vest. Compensation expense is adjusted where actual forfeitures differ from
estimates, so that final expense is based on the number of shares and options
which actually vest. Grants with a cash or equity alternative for plan members
are accounted for as liabilities at their fair value until the members’ choice
is known. The terms of the relevant share plan with such an alternative are
such
that the fair value of members’ equity options is zero. A member’s choice to
receive equity instruments is accounted for by transferring the fair value
of
the liability to shareholders’ equity when the choice is made.
Application
of critical accounting policies
Impairment
For
the purposes of
assessing impairment, assets are grouped at the lowest level for which there
are
separately identifiable cash flows. This level is described as a cash generating
unit (CGU). Each CGU contains tangible assets such as plant and equipment as
well as intangible assets such as product and patent rights. The way in which
assets are grouped to form CGU’s and are related to cash flows may in certain
circumstances affect whether an impairment loss is recorded. Generally, the
higher
the
level at which
separate cash flows are identified, the less likely it is that an impairment
loss will be recorded, as reductions in one cash inflow are more likely to
be
offset by increases in other cash inflows within the same CGU.
In
the Crop
Protection segment, a CGU is generally defined by Syngenta at the product active
ingredient level. However, where one active ingredient is sold in mixture with
other active ingredients to a material extent, the active ingredients concerned
are grouped together into a single CGU because separate cash flows can be more
accurately identified at this higher level. Each CGU is generally defined on
a
global basis to reflect the international nature of the business. Goodwill
on
major acquisitions, principally Zeneca agrochemicals business goodwill of US$549
million, is held at segment level and tested for impairment by relating it
to
total segment cash flows. Goodwill on minor, local acquisitions which strengthen
distribution in a specific country is not tested in relation to local cash
flows
only, but to relevant global cash flows, because the international nature of
the
supply chain results in the benefits from stronger local sales being shared
with
supplying subsidiaries. Conrad Fafard, Inc., acquired during 2006, has been
treated as a separate CGU.
In
the Seeds
segment, a CGU is generally defined at the crop level. Each CGU is generally
defined on a global basis to reflect the fact that seed germplasm originating
in
one country can often be used in other countries. However, Syngenta’s corn and
soy business in NAFTA1
is regarded as a
separate CGU following the Advanta and Golden Harvest acquisitions because
of
its size relative to the Syngenta Seeds business as a whole.
Foreign
currency translation of intercompany funding
Syngenta
uses
several different forms of financing the operations of its subsidiaries,
depending on the requirements of each subsidiary and legal and fiscal
requirements in the countries of the lending and borrowing subsidiary. Where
loans are made between two subsidiaries with different functional currencies,
currency translation differences arise in one or both subsidiaries. In
accordance with IAS 21, in cases where these loans are considered part of
Syngenta’s net investment in the subsidiary, all currency translation
differences are recognized in shareholders’ equity. As market conditions and the
circumstances of the subsidiaries change over time, these loans may be repaid
in
part or in full, IAS 21 requires the currency translation differences to be
recycled from shareholders’ equity and included in net income when a loan is
repaid, and also if the subsidiary’s operations are abandoned or divested. Loans
made to finance working capital are not accounted for by Syngenta as part of
its
investment in a subsidiary, and all currency translation differences on such
loans are recognized in net income as they arise. Loans are only considered
part
of Syngenta’s net investment in the subsidiary where they are not expected to be
repaid in the foreseeable future. If a loan is partially repaid, but the
remaining loan balance is not expected to be repaid in the foreseeable future,
Syngenta recycles the cumulative currency translation difference in proportion
to the loan principal amount repaid, compared to the total amount outstanding
before the repayment. For the years ended December 31, 2006, 2005 and 2004,
the
amount of currency translation differences recycled into net income were gains
of US$44 million, losses of US$11 million and losses of US$10 million
respectively. Recycled amounts are presented within financial expense, net
in
the income statement.
Property,
plant and equipment asset lives
IAS
16 requires an
annual re-assessment of the useful lives of Property, plant and equipment.
Changes in the estimated useful lives of assets are accounted for prospectively,
so that only the depreciation expense to be charged in future periods is
affected. Syngenta’s strategy for locating manufacturing operations is
influenced by the relative cost efficiency of different locations. As a result,
the current use of certain existing assets may or may not change in future.
This
may affect depreciation expense of future periods. The depreciation period
chosen is never greater than the expected physical or economic lives of these
assets. If proposed asset lives as from January 1, 2007 had been applied during
2006, 2006 depreciation expense would have reduced by approximately US$8
million.
Post-employment
benefits
IAS
19, “Employee
Benefits”, (revised 2004) allows recognition of actuarial gains and losses
arising in defined benefit pension plans to be deferred, and requires them
to be
amortized over future employee service only to the extent that they exceed
10%
of the higher of the defined benefit pension obligation or the market value
of
pension plan assets. Immediate recognition, either within or outside the income
statement is also permitted. In common with the majority of European IFRS
preparers, Syngenta has chosen to apply the 10% corridor method. Under a policy
of immediate recognition within or outside income, the unrecognized losses
of
US$730 million for pensions and US$36 million for other post-retirement benefits
disclosed in Note 27 below would have been recognized in, and would have
reduced, previous years’ results of operations or retained earnings
respectively.
During
2006,
Syngenta and the Trustees of its UK Pension fund changed the rules of the fund
to allow members to take advantage of the increased tax-free lump sum benefits
which the UK Finance Act 2004 now allows to be taken when they start to receive
retirement benefits. Syngenta has valued its UK pension liabilities on the
assumption that most members will take the larger maximum lump sum which is
now
permitted, and will consequently receive a lower annual pension. Syngenta has
accounted for this change as a settlement of a proportion of its pension
obligation for IFRS. A settlement gain of US$45 million has been recorded in
2006 net income.
Segmental
reporting
Syngenta’s
Plant
Science reportable segment is an incubator of several development stage
activities which may meet the criteria to be reported as separate segments
in
the future. These activities include development of animal feed products,
technology based on research into enzymes, and traits with the potential to
enhance the agronomic, nutritional or biofuel properties of plants. Syngenta
has
not generated material revenues from these activities to date. The route to
market for certain of these technologies is not yet clear. Syngenta has judged
it appropriate to aggregate the financial information relating to these
activities into a single reportable segment. Syngenta will continue to review
its reportable segments on an annual basis to determine whether additional
segments should be separately identified and reported.
Critical
accounting estimates
Impairment
review
Goodwill
at
December 31, 2006 was US$1,138 million of which US$720 million is allocated
to
Crop Protection and US$418 million to Seeds. Other intangible assets, mainly
representing product rights, were US$1,586 million, of which US$1,481 million
is
allocated to Crop Protection, US$99 million to Seeds, and US$6 million to Plant
Science. The recoverable amount for goodwill has been determined based on value
in use, calculated from forecast cash flows, using pre-tax discount rates of
10%
except for one cash generating unit where 25% was used (2005: 8% to 10%; 2004:
10%). Product life cycles in the crop protection industry exceed five years.
Five year management cash flow forecasts have been extrapolated to ten years
including a terminal value where appropriate. Zero or declining growth rates
have been used for the extrapolated period.
Of
the Crop
Protection goodwill of US$720 million, US$549 million arose on acquisition
of
Zeneca agrochemicals business, and has been reviewed at the total Crop
Protection level, because this is the lowest level at which Syngenta monitors
this goodwill for internal management purposes. US$171 million of goodwill
which
arose on other acquisitions has been reviewed as part of various individual
cash
generating units. Of the Seeds goodwill, US$317 million arose on the acquisition
of Garst and Golden Harvest, and has been reviewed as part of the Seeds NAFTA
corn and soy cash generating unit.
In
the opinion of
management, reasonably possible changes to assumptions about future sales
performance would cause the recoverable amount of one cash generating unit
to
fall below that unit’s carrying amount by up to US$6 million. Recoverable amount
as estimated for that unit as at September 30, 2006 is approximately equal
to
its carrying amount of US$6 million. The effect of a 1% change in discount
rate
on the recoverable amount is not material.
The
cash flow
forecasts which support the US$317 million carrying amount of goodwill in the
Seeds NAFTA corn and soy business assume that new seed products obtain
registration and are successfully introduced to the market. The cash flows
included represent Syngenta’s best estimate of the outcome of the product
development and introduction. However, as with all investments, there can be
no
absolute guarantee of success. If there are significant delays in development
and launch of new products, that Syngenta was not able to offset by alternative
available products, a future impairment test of this goodwill may result in
impairment losses being recorded. Because of the number of variables and the
potential range of values for those variables, which are inputs for the cash
flow forecasts, Syngenta is unable to quantify accurately the amount of any
potential future impairment loss which might be recorded.
Restructuring
In
February 2004,
Syngenta announced a restructuring program known as “operational efficiency”. An
element of this program involves the rationalization of production sites,
including the relocation of certain manufacturing and development activities
from higher cost regions, such as Western Europe, to lower cost regions, such
as
certain countries in Asia Pacific. Syngenta has recorded impairment losses
or
accelerated depreciation charges for assets at sites affected by specific
restructuring or closure announcements which have already been made. Further
specific restructuring announcements are likely to be made, and consequently
further expense is likely to be recorded, in 2007 and future years. Because
the
exact timing and content of specific announcements has not yet been decided,
Syngenta is not able to quantify accurately the total amount of such expense
in
any future year. At December 31, 2006, Syngenta’s balance sheet included
property, plant and equipment with a net book value of US$1,957 million, as
disclosed in Note 13 below.
Deferred
Tax Assets
Tax
losses are
recognized as deferred tax assets when it becomes probable that they will be
utilized. Based on the taxable profit forecasts approved by management, Syngenta
considers it is now more likely than not that these tax losses will be
recovered. However, if forecast profits are reduced by adverse market conditions
in the future, or by future restructuring decisions, it may be necessary to
write off deferred tax assets. Syngenta is not able to quantify accurately
the
amount of any future potential deferred income tax expense which might be
recorded as a result. At December 31, 2006, Syngenta’s balance sheet included
deferred tax assets of US$65 million for net operating losses, as disclosed
in
Note 16 below.
IFRS
and US GAAP
require Syngenta to consider any tax planning opportunities available to it
when
determining whether deferred tax assets are recoverable from future taxable
profits. The recoverability of certain deferred tax assets recognized at
December 31, 2005 has been supported by tax planning actions taken by Syngenta
in 2006.
Uncertain
tax positions
Syngenta’s
policy
is to comply fully with applicable tax regulations in all jurisdictions in
which
Syngenta’s operations are subject to income taxes. However, Syngenta and the
relevant tax authorities may have different interpretations of how the
regulations should be applied to actual transactions.
Syngenta’s
estimates of current income tax expense and liabilities are calculated on the
assumption that all tax computations filed by Syngenta’s subsidiaries will be
subject to review or audit by the relevant tax authorities. Current income
tax
liabilities include Syngenta’s best estimate of the tax that will ultimately be
payable when the reviews or audits have been completed, including allowances
for
interest and penalties which Syngenta may be required to pay if the authorities
assess additional tax payments for prior years. Actual outcomes and settlements
may differ significantly from the estimates recorded in these consolidated
financial statements. This may affect current income tax expense, net income,
effective tax rates and earnings per share reported in future years’
consolidated income statements. Several prior years’ tax computations are
generally still open for review or audit for most Syngenta subsidiaries at
the
balance sheet date. Syngenta has insufficient historical data to quantify
accurately the amount of any future changes which may be required to the current
income tax liability as a result of any settlements with tax authorities which
may occur within the next financial year. At December 31, 2006, Syngenta’s
balance sheet included assets of US$89 million and liabilities of US$296
million, shown separately on the face of the balance sheet, for current income
taxes.
Post-employment
benefits
Post-employment
benefit expense for 2007 will be determined based on the same discount rate,
salary and pension increase, mortality, disability and employee turnover
assumptions as used in valuing the benefit obligation at December 31, 2006,
and
on the assumed long-term expected rate on pension plan assets. These key
assumptions are disclosed in Note 27 below, as are the experience variances
which arose in the past five years between actual outcomes and the assumptions
applied in each respective year. Assumptions used to value the benefit
obligation as at December 31 are reviewed annually, and updated based on actual
experience when appropriate. In this five year period, variances were caused
principally by external financial market movements in the corporate bond yields
used to benchmark the discount rate, and in asset prices which affected the
actual return on assets. These factors are outside Syngenta’s direct control,
and it is reasonably possible that future variances will be at least as great
as
past variances. Variances may also arise from higher or lower employee turnover
and from higher or lower mortality than currently estimated. Syngenta’s
mortality assumptions are set after considering the most recent statistics
available, and whether any trends apparent from these statistics are likely
to
continue into the future. UK citizens born between 1928 and 1945 currently
show
lower mortality than those born before or after this period. Syngenta has
assumed that the mortality of this section of its UK pension fund members will
continue to be lower than that of older members at the equivalent age until
2018. This is referred to as the ‘medium cohort effect’. Syngenta has also
assumed that the recent trend of increasing longevity will continue into the
future, so that the pension which will become payable to younger members on
their retirement will be paid for longer than older members’ pensions. Mortality
assumption changes made in 2006 have increased the projected benefit obligation
at December 31, 2006 by US$73 million. The mortality assumptions used to value
the Swiss pension liabilities were updated in 2006. This has increased the
projected benefit obligation at December 31, 2006 by US$32 million. These
changes for Switzerland and the UK will result in additional amortization
expense of US$6 million in 2007, assuming Syngenta continues to apply the
corridor method as well as additional service and interest cost of US$5 million.
This is offset by the favorable effect of asset performance in 2006 and changes
in discount rates.
Where
members have
a choice of when they start drawing retirement benefits or a choice between
receiving benefits in the form of a lump sum or as annual pension, Syngenta
has
valued its pension liabilities on the assumption that the choices made by
members who will retire in future will be consistent with choices made by
members who retired in 2006.
Syngenta
has
applied the corridor method, under which variances are spread prospectively
over
average remaining employee service. This limits the impact of variances on
the
reported net income and net assets of each individual accounting period. At
December 31, 2006, Syngenta’s balance sheet included assets of US$616 million
and liabilities of US$214 million and US$37 million for post-employment benefits
(Note 27 below).
3.
Changes
in the scope of consolidation
Syngenta
accounts
for acquisitions by measuring the fair value of the consideration given and
the
assets and liabilities acquired in accordance with IFRS 3, “Business
Combinations”. If the consideration exceeds the fair value of net assets
acquired, the excess is recognized as goodwill. If the fair value of net assets
acquired exceeds the consideration, the excess is recognized as an immediate
gain in the income statement. This accounting treatment is applied both to
combinations in which Syngenta
achieves
control of
the acquired company and to combinations in which Syngenta acquires minority
interests in entities which it already controls.
The
following
significant changes were made during 2006, 2005 and 2004.
Acquisitions
2006
On
June 1, 2006,
Syngenta purchased 100% of the shares of Emergent Genetics Vegetable A/S
(“EGV”), for cash. On August 1, 2006, Conrad Fafard, Inc., (“Fafard”) merged
with a Syngenta subsidiary so that Syngenta acquired control of Fafard and
its
subsidiaries, in exchange for cash paid to or for the account of Fafard’s former
shareholders. In addition, Syngenta settled US$14 million of financial debts
and
certain other liabilities of Fafard on August 2, 2006. Goodwill arising on
the
EGV acquisition was US$3 million. Goodwill arising on the Fafard acquisition
is
provisionally estimated to be US$36 million. Because of the timing of the
acquisition transaction in the second half of 2006 and of integration activities
the Fafard purchase price allocation will be finalized in 2007. On November
16,
2006, Syngenta acquired the remaining 50% of the shares of Longreach Plant
Breeders Pty Ltd (LRPB) that it did not already own. LRPB has been accounted
for
as an asset held for resale. The aggregate cash cost of these acquisitions
was
US$148 million including direct acquisition costs of US$3 million. The assets
and liabilities recognized in these business combinations were as
follows:
(US$
million) |
|
|
Pre-acquisition
carrying
amount
|
|
|
Adjustments
|
|
|
Fair
values
|
|
Cash
and cash
equivalents
|
|
|
2
|
|
|
-
|
|
|
2
|
|
Trade
receivables
|
|
|
16
|
|
|
-
|
|
|
16
|
|
Other
receivables
|
|
|
1
|
|
|
-
|
|
|
1
|
|
Other
current
assets
|
|
|
1
|
|
|
-
|
|
|
1
|
|
Inventories
|
|
|
23
|
|
|
11
|
|
|
34
|
|
Property,
plant and equipment
|
|
|
31
|
|
|
9
|
|
|
40
|
|
Intangible
assets
|
|
|
1
|
|
|
67
|
|
|
68
|
|
Deferred
tax
assets
|
|
|
2
|
|
|
8
|
|
|
10
|
|
Other
financial assets
|
|
|
1
|
|
|
-
|
|
|
1
|
|
Assets
held
for resale
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Trade
accounts payable
|
|
|
(6
|
)
|
|
-
|
|
|
(6
|
)
|
Financial
debts
|
|
|
(16
|
)
|
|
-
|
|
|
(16
|
)
|
Current
income taxes payable
|
|
|
1
|
|
|
-
|
|
|
1
|
|
Other
current
liabilities
|
|
|
(2
|
)
|
|
-
|
|
|
(2
|
)
|
Provisions
|
|
|
(4
|
)
|
|
-
|
|
|
(4
|
)
|
Deferred
tax
liabilities
|
|
|
(3
|
)
|
|
(36
|
)
|
|
(39
|
)
|
Net
assets
acquired
|
|
|
48
|
|
|
59
|
|
|
107
|
|
In
respect of
Fafard, the most important factors contributing to the recognition of goodwill
are the ability to combine Fafard’s peat products with Syngenta’s chemical
products to present an enhanced offer to customers via Syngenta’s distribution
network, and the barriers to entry into the peat extraction
business.
The
following
unaudited pro forma figures have been prepared as though the acquisition date
for the above acquisitions had been January 1, 2006:
|
|
|
|
(US$
million)
|
|
2006
|
|
Syngenta
consolidated pro forma sales (unaudited)
|
|
|
8,101
|
|
Syngenta
consolidated pro forma net income (unaudited)
|
|
|
635
|
|
Acquisitions
2005
On
October 14,
2005, Syngenta acquired an additional membership interest in Dulcinea Farms,
LLC, increasing its interest from 51% to 100%. On September 16, 2005, Syngenta
Bioline Ltd purchased the Dutch bee breeding business of Bunting
Brinkman
Bees
B.V. It
previously held a 49% shareholding in that entity. In February 2005, Syngenta
purchased additional shares in Syngenta Nantong Crop Protection Ltd., increasing
its shareholding from 98% to 100%. The aggregate purchase price of these
acquisitions was US$10 million, paid in cash. The fair value of net assets
acquired was US$6 million, principally represented by financial debt
extinguished.
Acquisitions
2004
On
July 31, 2004,
in a single transaction, Syngenta acquired a 90% voting interest in each of
the
following entities which are collectively referred to as “Golden Harvest”:
Garwood Seed Co.; Golden Seed Co. LLC; Golden Seed Co. Inc.; J C Robinson Seeds
Inc.; Sommer Bros Seed Co.; Thorp Seed Co.; and Golden Harvest Seeds Inc. The
cash purchase price was US$185 million, and direct acquisition costs were US$2
million.
On
September 1,
2004, after Fox Paine acquired a 10% interest in the Advanta corn, soybean
and
wheat seed business in North America, Syngenta acquired 100% of the shares
of
Advanta B.V. On September 8, 2004, Syngenta sold Advanta B.V’s European, Asian
and Latin American subsidiaries and other parts of its NAFTA business to Fox
Paine & Co. The net cash cost of acquisition, after deducting proceeds of
US$195 million from the disposal of assets purchased exclusively for resale,
was
US$387 million, including direct acquisition costs of US$18 million. After
the
asset disposals, Syngenta retained a 90% interest in Advanta’s former corn,
soybean and wheat seed business in NAFTA, known as Garst.
In
January 2004,
Syngenta acquired additional shares in Dia Engei K.K, increasing its
shareholding from 33.5% to 100%. In January 2004, Syngenta formed Dulcinea
Farms
LLC with a 51% holding. In June 2004, Syngenta purchased additional shares
in
Syngenta Suzhou Crop Protection Co. Ltd, increasing its holding from 95% to
100%. In May 2004, Syngenta purchased additional shares in Syngenta Nantong
Protection Co. Ltd, increasing its holding from 94% to 98%. The aggregate cash
cost of these acquisitions was US$6 million.
The
assets and
liabilities recognized in these business combinations in 2004 were as follows,
in US$ million:
|
|
Garst
Fair
value
Adjustments
|
|
Golden
Harvest
Fair
value
Adjustments
|
|
Other
acquisitions
Fair
value
|
|
TOTAL
Fair
value
|
|
2004
|
|
Carrying
amount
|
|
(final)
|
|
Fair
values
|
|
Carrying
amount
|
|
(final)
|
|
Fair
value
|
|
Carrying
amount
|
|
Adjust-ments
|
|
Fair
values
|
|
Carrying
amount
|
|
Adjust-ments
|
|
Fair
values
|
|
Cash
and cash
equivalents
|
|
|
60
|
|
|
-
|
|
|
60
|
|
|
33
|
|
|
-
|
|
|
33
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
93
|
|
|
-
|
|
|
93
|
|
Trade
receivables
|
|
|
73
|
|
|
-
|
|
|
73
|
|
|
49
|
|
|
-
|
|
|
49
|
|
|
1
|
|
|
-
|
|
|
1
|
|
|
123
|
|
|
-
|
|
|
123
|
|
Other
receivables
|
|
|
15
|
|
|
(4
|
)
|
|
11
|
|
|
1
|
|
|
-
|
|
|
1
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
16
|
|
|
(4
|
)
|
|
12
|
|
Other
current
assets
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
4
|
|
|
-
|
|
|
4
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
4
|
|
|
-
|
|
|
4
|
|
Inventories
|
|
|
44
|
|
|
18
|
|
|
62
|
|
|
48
|
|
|
5
|
|
|
53
|
|
|
1
|
|
|
-
|
|
|
1
|
|
|
93
|
|
|
23
|
|
|
116
|
|
Property,
plant & equipment
|
|
|
33
|
|
|
9
|
|
|
42
|
|
|
26
|
|
|
6
|
|
|
32
|
|
|
2
|
|
|
-
|
|
|
2
|
|
|
61
|
|
|
15
|
|
|
76
|
|
Intangible
assets
|
|
|
-
|
|
|
42
|
|
|
42
|
|
|
-
|
|
|
25
|
|
|
25
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
67
|
|
|
67
|
|
Associates
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1
|
)
|
|
-
|
|
|
(1
|
)
|
|
(1
|
)
|
|
-
|
|
|
(1
|
)
|
Deferred
tax
assets
|
|
|
13
|
|
|
-
|
|
|
13
|
|
|
8
|
|
|
1
|
|
|
9
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
21
|
|
|
1
|
|
|
22
|
|
Assets
held
for resale
|
|
|
195
|
|
|
-
|
|
|
195
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
195
|
|
|
-
|
|
|
195
|
|
Trade
accounts payable
|
|
|
(32
|
)
|
|
-
|
|
|
(32
|
)
|
|
(72
|
)
|
|
-
|
|
|
(72
|
)
|
|
(1
|
)
|
|
-
|
|
|
(1
|
)
|
|
(105
|
)
|
|
-
|
|
|
(105
|
)
|
Financial
debts
|
|
|
(72
|
)
|
|
-
|
|
|
(72
|
)
|
|
(24
|
)
|
|
-
|
|
|
(24
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(96
|
)
|
|
-
|
|
|
(96
|
)
|
Income
taxes
payable
|
|
|
(7
|
)
|
|
(2
|
)
|
|
(9
|
)
|
|
(1
|
)
|
|
-
|
|
|
(1
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(8
|
)
|
|
(2
|
)
|
|
(10
|
)
|
Other
current
liabilities
|
|
|
(4
|
)
|
|
(6
|
)
|
|
(10
|
)
|
|
(15
|
)
|
|
-
|
|
|
(15
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(19
|
)
|
|
(6
|
)
|
|
(25
|
)
|
Provisions
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2
|
)
|
|
(3
|
)
|
|
(5
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2
|
)
|
|
(3
|
)
|
|
(5
|
)
|
Other
liabilities
|
|
|
-
|
|
|
(11
|
)
|
|
(11
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(11
|
)
|
|
(11
|
)
|
Deferred
tax
liabilities
|
|
|
(7
|
)
|
|
(20
|
)
|
|
(27
|
)
|
|
(6
|
)
|
|
(13
|
)
|
|
(19
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(13
|
)
|
|
(33
|
)
|
|
(46
|
)
|
Net
assets
acquired
|
|
|
311
|
|
|
26
|
|
|
337
|
|
|
49
|
|
|
21
|
|
|
70
|
|
|
2
|
|
|
-
|
|
|
2
|
|
|
362
|
|
|
47
|
|
|
409
|
|
Minority
interest
|
|
|
(6
|
)
|
|
(2
|
)
|
|
(8
|
)
|
|
(5
|
)
|
|
(2
|
)
|
|
(7
|
)
|
|
1
|
|
|
-
|
|
|
1
|
|
|
(10
|
)
|
|
(4
|
)
|
|
(14
|
)
|
Syngenta
AG
shareholders’ interest
|
|
|
305
|
|
|
24
|
|
|
329
|
|
|
44
|
|
|
19
|
|
|
63
|
|
|
3
|
|
|
-
|
|
|
3
|
|
|
352
|
|
|
43
|
|
|
395
|
|
Purchase
price
|
|
|
|
|
|
|
|
|
582
|
|
|
|
|
|
|
|
|
187
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
775
|
|
Goodwill
|
|
|
|
|
|
|
|
|
253
|
|
|
|
|
|
|
|
|
124
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
380
|
|
2004
Post-acquisition profit/(loss) of acquiree
|
|
|
|
|
|
|
|
|
(29
|
)
|
|
|
|
|
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
(71
|
)
|
The
seeds business
is highly seasonal. The Garst and Golden Harvest acquisitions were made at
the
end of the 2004 selling season. 2004 post-acquisition losses result from this
seasonal effect and are not indicative of full year performance.
The
net cash
outflow on the acquisitions was as follows:
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
Advanta
|
|
Golden
Harvest
|
|
Other
|
|
Total
|
|
Purchase
price
|
|
|
(582
|
)
|
|
(187
|
)
|
|
(6
|
)
|
|
(775
|
)
|
Cash
acquired
|
|
|
60
|
|
|
33
|
|
|
-
|
|
|
93
|
|
Proceeds
from
assets purchased exclusively for resale
|
|
|
195
|
|
|
-
|
|
|
-
|
|
|
195
|
|
|
|
|
(327
|
)
|
|
(154
|
)
|
|
(6
|
)
|
|
(487
|
)
|
Pro
forma
disclosures for Post-combination Syngenta group:
The
following
unaudited pro forma figures have been prepared as though the acquisition date
for the above acquisitions had been January 1, 2004.
|
|
|
|
(US$
million)
|
|
2004
|
|
Syngenta
consolidated pro forma sales (unaudited)
|
|
|
7,530
|
|
Syngenta
consolidated pro forma net income (unaudited)
|
|
|
455
|
|
The
most important
factor contributing to the recognition of goodwill is Syngenta’s announced
intention to achieve annual operating cost reductions from integrating the
acquired Garst and Golden Harvest businesses with its existing NAFTA corn and
soy seeds business, and to achieve revenue benefits from planned introductions
of new products. It is also expected that Syngenta’s growth in this market will
provide direct benefit to the Crop Protection segment, to which US$60 million
of
the goodwill has been allocated.
Divestments
2004
On
September 30,
2004 Syngenta sold its 75% interest in its sulphur and chlorine-based chemical
intermediates business, SF-Chem AG, to a private equity buyer for US$46 million
in cash. This business was shown as part of the Crop Protection segment, and
has
been presented as a discontinued operation in the consolidated income statement.
The amount shown as discontinued operations is analyzed as follows:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
(until
disposal)
|
|
Sales
|
|
|
-
|
|
|
-
|
|
|
60
|
|
Cost
of goods
sold
|
|
|
-
|
|
|
-
|
|
|
(50
|
)
|
Gross
Profit
|
|
|
-
|
|
|
-
|
|
|
10
|
|
Marketing
and
distribution
|
|
|
-
|
|
|
-
|
|
|
(9
|
)
|
Research
and
development
|
|
|
-
|
|
|
-
|
|
|
(1
|
)
|
General
and
administrative
|
|
|
-
|
|
|
-
|
|
|
(1
|
)
|
Restructuring
and impairment
|
|
|
-
|
|
|
-
|
|
|
(50
|
)
|
Operating
income
|
|
|
-
|
|
|
-
|
|
|
(51
|
)
|
Financial
income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Income/(loss)
before tax from operations
|
|
|
-
|
|
|
-
|
|
|
(51
|
)
|
Income
tax
expense on income/(loss) from operations
|
|
|
-
|
|
|
-
|
|
|
1
|
|
Income/(loss)
after tax
|
|
|
-
|
|
|
-
|
|
|
(50
|
)
|
Loss
on
remeasurement to disposal value
|
|
|
-
|
|
|
-
|
|
|
(58
|
)
|
Income
tax
expense on disposal
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Net
income/(loss) from discontinued operations
|
|
|
-
|
|
|
-
|
|
|
(108
|
)
|
of
which:
|
|
|
|
|
|
|
|
|
|
|
Attributable
to Syngenta AG shareholders
|
|
|
-
|
|
|
-
|
|
|
(83
|
)
|
Attributable
to minority interests
|
|
|
-
|
|
|
-
|
|
|
(25
|
)
|
The
cash flows
attributable to SF-Chem AG were as follows:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
(until
disposal)
|
|
Cash
inflow
from operating activities
|
|
|
-
|
|
|
-
|
|
|
8
|
|
Cash
outflow
from investing activities
|
|
|
-
|
|
|
-
|
|
|
(7
|
)
|
Cash
inflow
from financing activities
|
|
|
-
|
|
|
-
|
|
|
11
|
|
Dividends
paid to minority shareholders
|
|
|
-
|
|
|
-
|
|
|
(17
|
)
|
Cash
flows
excluding disposal proceeds
|
|
|
|
|
|
|
|
|
(5
|
)
|
Disposal
proceeds received by Syngenta AG
|
|
|
-
|
|
|
-
|
|
|
46
|
|
Net
consolidated cash flows
|
|
|
-
|
|
|
-
|
|
|
41
|
|
After
elimination of:
|
|
|
-
|
|
|
-
|
|
|
|
|
Dividends
paid to Syngenta AG
|
|
|
-
|
|
|
-
|
|
|
(52
|
)
|
There
was no
significant balance of cash in SF Chem at the date of divestment. The balance
sheet of SF Chem as at September 30, 2004, is summarised below.
|
|
|
|
(US$
million)
|
|
2004
|
|
Long-term
assets
|
|
|
122
|
|
Current
assets
|
|
|
50
|
|
Long-term
liabilities
|
|
|
(37
|
)
|
Current
liabilities
|
|
|
(64
|
)
|
Equity
|
|
|
71
|
|
4.
Segmental breakdown of key figures 2006, 2005 and 2004
Syngenta
is
organized on a worldwide basis into three reporting segments.
Crop
Protection
The
Crop Protection
segment principally manufactures, distributes and sells herbicides, insecticides
and fungicides to both agricultural and non-agricultural customers. In the
opinion of Syngenta, very few of the required segmental disclosures can be
disaggregated accurately into separate agricultural and non-agricultural
segments at present, sales being the major exception. Several different industry
sectors are represented within Syngenta’s non-agricultural customer base for
professional products.
Seeds
The
Seeds segment
sells seeds for growing corn, sugarbeet, oilseeds, vegetables and flowers.
In
the opinion of Syngenta, these different seeds businesses have similar
characteristics. Syngenta has judged it appropriate to combine them into a
single reportable segment.
Plant
Science
Syngenta’s
Plant
Science reportable segment is an incubator of several development stage
activities which may meet the criteria to be reported as separate segments
in
the future. These activities include development of animal feed products,
technology based on research into enzymes, and traits with the potential to
enhance the agronomic, nutritional or biofuel properties of plants. Syngenta
has
not generated material revenues from these activities to date. The route to
market for certain of these technologies is not yet clear. Syngenta has judged
it appropriate to aggregate the financial information relating to these
activities into a single reportable segment.
General
Syngenta
manages
its three segments separately because their current or future sources of income
derive from distinct types of products or technologies which require different
manufacturing, distribution and marketing strategies.
Net
segment
operating assets consist primarily of property, plant and equipment, intangible
assets, inventories and receivables less operating liabilities. Unallocated
items are those which, according to IAS 14, do not meet the criteria for
inclusion under one of the three reporting segments. They consist of net debt
(financial debts less cash and cash equivalents), current assets and liabilities
directly associated with financing (mainly derivatives) and deferred and current
taxes.
The
accounting
policies of the segments described above are the same as those described in
the
summary of accounting policies.
Transactions
between segments are priced based on the third party selling prices achieved
by
the purchasing segment and an allowance for selling and distribution profit
margins for the purchasing segment.
4.
Segmental breakdown of key figures 2006, 2005 and 2004 (continued)
|
|
|
|
|
|
|
|
|
|
|
|
2006(US$
million)
|
|
Crop
Protection
|
|
Seeds
|
|
Plant
Science
|
|
Unallocated
|
|
Total
|
|
Total
segment
sales
|
|
|
6,378
|
|
|
1,743
|
|
|
2
|
|
|
-
|
|
|
8,123
|
|
Less
sales to
other segments
|
|
|
(77
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(77
|
)
|
Third
party segment sales
|
|
|
6,301
|
|
|
1,743
|
|
|
2
|
|
|
-
|
|
|
8,046
|
|
Cost
of goods
sold
|
|
|
(3,049
|
)
|
|
(894
|
)
|
|
(2
|
)
|
|
(37
|
)
|
|
(3,982
|
)
|
Gross
profit
|
|
|
3,252
|
|
|
849
|
|
|
-
|
|
|
(37(1
|
))
|
|
4,064
|
|
Marketing
and
distribution
|
|
|
(1,037
|
)
|
|
(429
|
)
|
|
(4
|
)
|
|
-
|
|
|
(1,470
|
)
|
Research
and
development
|
|
|
(490
|
)
|
|
(232
|
)
|
|
(74
|
)
|
|
-
|
|
|
(796
|
)
|
General
and
administrative
|
|
|
(549
|
)
|
|
(106
|
)
|
|
(13
|
)
|
|
-
|
|
|
(668
|
)
|
Restructuring
and impairment
|
|
|
(275
|
)
|
|
(38
|
)
|
|
12
|
|
|
-
|
|
|
(301
|
)
|
Operating
income/(loss) - continuing operations
|
|
|
901
|
|
|
44
|
|
|
(79
|
)
|
|
(37
|
)
|
|
829
|
|
Net
income/(loss) from discontinued operations
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Included
in
the above operating income from continuing operations are:
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
Personnel
costs
|
|
|
(1,334
|
)
|
|
(472
|
)
|
|
(23
|
)
|
|
-
|
|
|
(1,829
|
)
|
Depreciation
of property, plant and equipment
|
|
|
(188
|
)
|
|
(38
|
)
|
|
(3
|
)
|
|
-
|
|
|
(229
|
)
|
Impairment
of
property, plant and equipment
|
|
|
(22
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(22
|
)
|
Amortization
of intangible assets
|
|
|
(141
|
)
|
|
(22
|
)
|
|
(3
|
)
|
|
-
|
|
|
(166
|
)
|
Impairment
of
intangible assets
|
|
|
(43
|
)
|
|
-
|
|
|
(3
|
)
|
|
-
|
|
|
(46
|
)
|
Income/(loss)
from associates and joint ventures
|
|
|
(2
|
)
|
|
-
|
|
|
(9
|
)
|
|
-
|
|
|
(11
|
)
|
Other
non-cash items including charges in respect of
provisions
|
|
|
(368
|
)
|
|
(47
|
)
|
|
15
|
|
|
-
|
|
|
400
|
|
Total
assets
|
|
|
8,466
|
|
|
1,972
|
|
|
142
|
|
|
1,272
|
|
|
11,852
|
|
Liabilities
|
|
|
(2,589
|
)
|
|
(726
|
)
|
|
(7
|
)
|
|
(2,836
|
)
|
|
(6,158
|
)
|
Included
in
total assets are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
property, plant and equipment
|
|
|
1,638
|
|
|
294
|
|
|
25
|
|
|
-
|
|
|
1,957
|
|
Additions
to
property, plant and equipment
|
|
|
232
|
|
|
62
|
|
|
3
|
|
|
-
|
|
|
297
|
|
Additions
to
intangible assets
|
|
|
185
|
|
|
30
|
|
|
|
|
|
-
|
|
|
215
|
|
Total
investments in associates and joint ventures
|
|
|
68
|
|
|
20
|
|
|
1
|
|
|
-
|
|
|
89
|
|
Assets
and
liabilities unallocated at December 31, 2006 are:
|
|
|
|
(US$
million)
|
|
Unallocated
|
|
Cash
and cash
equivalents
|
|
|
445
|
|
Income
taxes
recoverable
|
|
|
89
|
|
Financial
derivatives (Note 11)
|
|
|
39
|
|
Deferred
tax
assets (Note 16)
|
|
|
599
|
|
Marketable
securities
|
|
|
100
|
|
Other
current
assets
|
|
|
-
|
|
Total
assets
|
|
|
1,272
|
|
Current
financial debt (Note 19)
|
|
|
(143
|
)
|
Income
taxes
payable
|
|
|
(296
|
)
|
Financial
derivatives (Note 20)
|
|
|
(26
|
)
|
Non
current
financial debts (Note 21)
|
|
|
(1,569
|
)
|
Deferred
tax
liabilities (Note 16)
|
|
|
(728
|
)
|
Other
current
liabilities
|
|
|
(74
|
)
|
Total
liabilities
|
|
|
(2,836
|
)
|
4.
Segmental breakdown of key figures 2006, 2005 and 2004 (continued)
|
|
|
|
|
|
|
|
|
|
|
|
2005
(US$
million)
|
|
Crop
Protection
|
|
Seeds
|
|
Plant
Science
|
|
Unallocated
|
|
Total
|
|
Total
segment
sales
|
|
|
6,330
|
|
|
1,797
|
|
|
-
|
|
|
-
|
|
|
8,127
|
|
Less
sales to
other segments
|
|
|
(23
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(23
|
)
|
Third
party segment sales
|
|
|
6,307
|
|
|
1,797
|
|
|
-
|
|
|
-
|
|
|
8,104
|
|
Cost
of goods
sold
|
|
|
(3,010
|
)
|
|
(940
|
)
|
|
-
|
|
|
-
|
|
|
(3,950
|
)
|
Gross
profit
|
|
|
3,297
|
|
|
857
|
|
|
-
|
|
|
-
|
|
|
4,154
|
|
Marketing
and
distribution
|
|
|
(1,106
|
)
|
|
(408
|
)
|
|
(4
|
)
|
|
-
|
|
|
(1,518
|
)
|
Research
and
development
|
|
|
(509
|
)
|
|
(213
|
)
|
|
(100
|
)
|
|
-
|
|
|
(822
|
)
|
General
and
administrative
|
|
|
(557
|
)
|
|
(169
|
)
|
|
(16
|
)
|
|
-
|
|
|
(742
|
)
|
Restructuring
and impairment
|
|
|
(129
|
)
|
|
(50
|
)
|
|
(33
|
)
|
|
-
|
|
|
(212
|
)
|
Operating
income/(loss) - continuing operations
|
|
|
996
|
|
|
17
|
|
|
(153
|
)
|
|
-
|
|
|
860
|
|
Net
income/(loss) from discontinued operations
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Included
in
the above operating income from continuing operations are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel
costs
|
|
|
(1,286
|
)
|
|
(415
|
)
|
|
(25
|
)
|
|
-
|
|
|
(1,726
|
)
|
Depreciation
of property, plant and equipment
|
|
|
(209
|
)
|
|
(40
|
)
|
|
(3
|
)
|
|
-
|
|
|
(252
|
)
|
Impairment
of
property, plant and equipment
|
|
|
(22
|
)
|
|
2
|
|
|
-
|
|
|
-
|
|
|
(20
|
)
|
Amortization
of intangible assets
|
|
|
(177
|
)
|
|
(19
|
)
|
|
(2
|
)
|
|
-
|
|
|
(198
|
)
|
Impairment
of
intangible assets
|
|
|
(3
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(3
|
)
|
Income/(loss)
from associates and joint ventures
|
|
|
-
|
|
|
1
|
|
|
1
|
|
|
-
|
|
|
2
|
|
Other
non-cash items including charges in respect of
provisions
|
|
|
(253
|
)
|
|
(49
|
)
|
|
(17
|
)
|
|
-
|
|
|
(319
|
)
|
Total
assets (reclassified)
|
|
|
8,135
|
|
|
1,820
|
|
|
101
|
|
|
1,348
|
|
|
11,404
|
|
Liabilities
(reclassified)
|
|
|
(2,571
|
)
|
|
(793
|
)
|
|
(25
|
)
|
|
(2,584
|
)
|
|
(5,973
|
)
|
Included
in
total assets are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
property, plant and equipment
|
|
|
1,584
|
|
|
264
|
|
|
39
|
|
|
-
|
|
|
1,887
|
|
Additions
to
property, plant and equipment
|
|
|
136
|
|
|
14
|
|
|
4
|
|
|
-
|
|
|
154
|
|
Additions
to
intangible assets
|
|
|
25
|
|
|
15
|
|
|
-
|
|
|
-
|
|
|
40
|
|
Total
investments in associates and joint ventures
|
|
|
68
|
|
|
21
|
|
|
4
|
|
|
-
|
|
|
93
|
|
Assets
and
liabilities unallocated at December 31, 2005 are:
|
|
|
|
(US$
million)
|
|
Unallocated
|
|
Cash
and cash
equivalents
|
|
|
458
|
|
Income
taxes
recoverable
|
|
|
48
|
|
Financial
derivatives (Note 11)
|
|
|
79
|
|
Deferred
tax
assets (Note 16) (reclassified)
|
|
|
763
|
|
Other
current
assets
|
|
|
-
|
|
Total
assets
(reclassified)
|
|
|
1,348
|
|
Current
financial debt (Note 19)
|
|
|
(514
|
)
|
Income
taxes
payable
|
|
|
(323
|
)
|
Financial
derivatives (Note 20)
|
|
|
(40
|
)
|
Non
current
financial debts (Note 21)
|
|
|
(847
|
)
|
Deferred
tax
liabilities (Note 16) (reclassified)
|
|
|
(834
|
)
|
Other
current
liabilities
|
|
|
(26
|
)
|
Total
liabilities
(reclassified)
|
|
|
(2,584
|
)
|
4.
Segmental breakdown of key figures 2006, 2005 and 2004 (continued)
|
|
|
|
|
|
|
|
|
|
|
|
2004
(US$
million)
|
|
Crop
Protection
|
|
Seeds
|
|
Plant
Science
|
|
Unallocated
|
|
Total
|
|
Total
segment
sales
|
|
|
6,042
|
|
|
1,239
|
|
|
-
|
|
|
-
|
|
|
7,281
|
|
Less
sales to
other segments
|
|
|
(12
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(12
|
)
|
Third
party segment sales
|
|
|
6,030
|
|
|
1,239
|
|
|
-
|
|
|
-
|
|
|
7,269
|
|
Cost
of goods
sold
|
|
|
(2,922
|
)
|
|
(610
|
)
|
|
-
|
|
|
-
|
|
|
(3,532
|
)
|
Gross
profit
|
|
|
3,108
|
|
|
629
|
|
|
-
|
|
|
-
|
|
|
3,737
|
|
Marketing
and
distribution
|
|
|
(1,040
|
)
|
|
(339
|
)
|
|
(3
|
)
|
|
-
|
|
|
(1,382
|
)
|
Research
and
development
|
|
|
(499
|
)
|
|
(186
|
)
|
|
(124
|
)
|
|
-
|
|
|
(809
|
)
|
General
and
administrative
|
|
|
(539
|
)
|
|
(99
|
)
|
|
(13
|
)
|
|
-
|
|
|
(651
|
)
|
Restructuring
and impairment
|
|
|
(317
|
)
|
|
(25
|
)
|
|
(12
|
)
|
|
-
|
|
|
(354
|
)
|
Operating
income/(loss) - continuing operations
|
|
|
713
|
|
|
(20
|
)
|
|
(152
|
)
|
|
-
|
|
|
541
|
|
Net
income/(loss) from discontinued operations
|
|
|
(108
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(108
|
)
|
Included
in
the above operating income from continuing operations are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel
costs
|
|
|
(1,290
|
)
|
|
(353
|
)
|
|
(62
|
)
|
|
-
|
|
|
(1,705
|
)
|
Depreciation
of property, plant and equipment
|
|
|
(208
|
)
|
|
(38
|
)
|
|
(4
|
)
|
|
-
|
|
|
(250
|
)
|
Impairment
of
property, plant and equipment
|
|
|
(122
|
)
|
|
(10
|
)
|
|
(3
|
)
|
|
-
|
|
|
(135
|
)
|
Amortization
of intangible assets
|
|
|
(229
|
)
|
|
(17
|
)
|
|
(2
|
)
|
|
-
|
|
|
(248
|
)
|
Impairment
of
intangible assets
|
|
|
-
|
|
|
(2
|
)
|
|
-
|
|
|
-
|
|
|
(2
|
)
|
Income/(loss)
from associates and joint ventures
|
|
|
(2
|
)
|
|
2
|
|
|
(2
|
)
|
|
-
|
|
|
(2
|
)
|
Other
non-cash items including charges in respect of
provisions
|
|
|
(398
|
)
|
|
(39
|
)
|
|
(16
|
)
|
|
-
|
|
|
(453
|
)
|
Total
assets (reclassified)
|
|
|
8,325
|
|
|
1,767
|
|
|
202
|
|
|
1492
|
|
|
11,786
|
|
Liabilities
(reclassified)
|
|
|
(2,537
|
)
|
|
(752
|
)
|
|
(18
|
)
|
|
(2,801
|
)
|
|
(6,108
|
)
|
Included
in
total assets are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
property, plant and equipment
|
|
|
1,810
|
|
|
291
|
|
|
87
|
|
|
-
|
|
|
2,188
|
|
Additions
to
property, plant and equipment
|
|
|
128
|
|
|
125
|
|
|
9
|
|
|
-
|
|
|
262
|
|
Additions
to
intangible assets
|
|
|
18
|
|
|
493
|
|
|
-
|
|
|
-
|
|
|
511
|
|
Total
investments in associates and joint ventures
|
|
|
81
|
|
|
20
|
|
|
13
|
|
|
-
|
|
|
114
|
|
Assets
and
liabilities unallocated at December 31, 2004 are:
|
|
|
|
(US$
million)
|
|
Unallocated
|
|
Cash
and cash
equivalents
|
|
|
227
|
|
Income
taxes
recoverable
|
|
|
64
|
|
Financial
derivatives (Note 11)
|
|
|
474
|
|
Deferred
tax
assets (Note 16) (reclassified)
|
|
|
724
|
|
Other
current
assets
|
|
|
3
|
|
Total
assets
(reclassified)
|
|
|
1,492
|
|
Current
financial debt (Note 19)
|
|
|
(423
|
)
|
Income
taxes
payable
|
|
|
(312
|
)
|
Financial
derivatives (Note 20)
|
|
|
(24
|
)
|
Non
current
financial debts (Note 21)
|
|
|
(1,117
|
)
|
Deferred
tax
liabilities (Note 16) (reclassified)
|
|
|
(897
|
)
|
Other
current
liabilities
|
|
|
(28
|
)
|
Total
liabilities
(reclassified)
|
|
|
(2,801
|
)
|
5.
Regional
breakdown of key figures 2006, 2005 and 2004
|
|
|
|
|
|
|
|
|
|
|
|
2006
(US$ million)
|
|
NAFTA
|
|
Europe
&
AME(2)
|
|
Latin
America
|
|
Asia
Pacific
|
|
Total
|
|
Sales(1)
|
|
|
2,900
|
|
|
2,917
|
|
|
1,141
|
|
|
1,088
|
|
|
8,046
|
|
Total
assets
|
|
|
3,228
|
|
|
6,494
|
|
|
1,181
|
|
|
949
|
|
|
11,852
|
|
Additions
to
property, plant and equipment
|
|
|
106
|
|
|
147
|
|
|
15
|
|
|
29
|
|
|
297
|
|
Additions
to
intangible assets
|
|
|
99
|
|
|
116
|
|
|
-
|
|
|
-
|
|
|
215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
(US$ million)
|
|
NAFTA
|
|
Europe
&
AME(2)
|
|
Latin
America
|
|
Asia
Pacific
|
|
Total
|
|
Sales(1)
|
|
|
2,972
|
|
|
2,973
|
|
|
1,133
|
|
|
1,026
|
|
|
8,104
|
|
Total
assets
(reclassified)
|
|
|
3,135
|
|
|
6,145
|
|
|
1,163
|
|
|
961
|
|
|
11,404
|
|
Additions
to
property, plant and equipment
|
|
|
29
|
|
|
87
|
|
|
15
|
|
|
23
|
|
|
154
|
|
Additions
to
intangible assets
|
|
|
17
|
|
|
19
|
|
|
-
|
|
|
4
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
(US$ million)
|
|
NAFTA
|
|
Europe
&
AME(2)
|
|
Latin
America
|
|
Asia
Pacific
|
|
Total
|
|
Sales(1)
|
|
|
2,306
|
|
|
2,892
|
|
|
1,103
|
|
|
968
|
|
|
7,269
|
|
Total
assets
(reclassified)
|
|
|
3,191
|
|
|
6,596
|
|
|
1,085
|
|
|
914
|
|
|
11,786
|
|
Additions
to
property, plant and equipment
|
|
|
129
|
|
|
101
|
|
|
12
|
|
|
20
|
|
|
262
|
|
Additions
to
intangible assets
|
|
|
433
|
|
|
75
|
|
|
-
|
|
|
3
|
|
|
511
|
|
The
following
countries accounted for more than 5% of the respective Syngenta totals as at,
or
for, the years ended December 31, 2006, 2005, and 2004:
|
|
|
|
|
|
(US$
million, except %)
|
|
Sales(1)
|
|
Total
assets
|
|
Country
|
|
2006
|
|
%
|
|
2005
|
|
%
|
|
2004
|
|
%
|
|
2006
|
|
%
|
|
2005
(reclassified)
|
|
%
|
|
2004
(reclassified)
|
|
% |
|
Switzerland
|
|
|
55
|
|
|
1
|
|
|
59
|
|
|
1
|
|
|
55
|
|
|
1
|
|
|
3,953
|
|
|
33
|
|
|
3,991
|
|
|
35
|
|
|
4,077
|
|
|
35
|
|
UK
|
|
|
156
|
|
|
2
|
|
|
175
|
|
|
2
|
|
|
177
|
|
|
2
|
|
|
975
|
|
|
8
|
|
|
877
|
|
|
8
|
|
|
902
|
|
|
8
|
|
USA
|
|
|
2,363
|
|
|
29
|
|
|
2,466
|
|
|
30
|
|
|
1,847
|
|
|
25
|
|
|
2,817
|
|
|
24
|
|
|
2,941
|
|
|
26
|
|
|
2,966
|
|
|
25
|
|
France
|
|
|
497
|
|
|
6
|
|
|
579
|
|
|
7
|
|
|
572
|
|
|
8
|
|
|
553
|
|
|
5
|
|
|
470
|
|
|
4
|
|
|
503
|
|
|
4
|
|
Brazil
|
|
|
738
|
|
|
9
|
|
|
745
|
|
|
9
|
|
|
751
|
|
|
10
|
|
|
984
|
|
|
8
|
|
|
1,082
|
|
|
9
|
|
|
904
|
|
|
7
|
|
Germany
|
|
|
407
|
|
|
5
|
|
|
434
|
|
|
5
|
|
|
392
|
|
|
5
|
|
|
117
|
|
|
1
|
|
|
101
|
|
|
1
|
|
|
110
|
|
|
1
|
|
Others
|
|
|
3,830
|
|
|
48
|
|
|
3,646
|
|
|
46
|
|
|
3,475
|
|
|
49
|
|
|
2,453
|
|
|
21
|
|
|
1,942
|
|
|
17
|
|
|
2,324
|
|
|
20
|
|
Total
|
|
|
8,046
|
|
|
100
|
|
|
8,104
|
|
|
100
|
|
|
7,269
|
|
|
100
|
|
|
11,852
|
|
|
100
|
|
|
11,404
|
|
|
100
|
|
|
11,786
|
|
|
100
|
|
|
|
|
|
|
|
(US$
million, except %)
|
|
Additions
to property, plant and equipment
|
|
Additions
to intangible assets
|
|
Country
|
|
2006
|
|
%
|
|
2005
|
|
%
|
|
2004
|
|
%
|
|
2006
|
|
%
|
|
2005
|
|
%
|
|
2004
|
|
% |
|
Switzerland
|
|
|
61
|
|
|
21
|
|
|
31
|
|
|
20
|
|
|
27
|
|
|
10
|
|
|
45
|
|
|
21
|
|
|
18
|
|
|
44
|
|
|
73
|
|
|
14
|
|
UK
|
|
|
47
|
|
|
16
|
|
|
25
|
|
|
16
|
|
|
37
|
|
|
14
|
|
|
60
|
|
|
28
|
|
|
-
|
|
|
1
|
|
|
-
|
|
|
-
|
|
USA
|
|
|
121
|
|
|
41
|
|
|
26
|
|
|
17
|
|
|
128
|
|
|
49
|
|
|
95
|
|
|
44
|
|
|
17
|
|
|
43
|
|
|
433
|
|
|
85
|
|
France
|
|
|
17
|
|
|
6
|
|
|
13
|
|
|
8
|
|
|
13
|
|
|
5
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Brazil
|
|
|
10
|
|
|
3
|
|
|
10
|
|
|
7
|
|
|
8
|
|
|
3
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Germany
|
|
|
1
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Others
|
|
|
40
|
|
|
13
|
|
|
49
|
|
|
32
|
|
|
48
|
|
|
19
|
|
|
15
|
|
|
7
|
|
|
5
|
|
|
12
|
|
|
5
|
|
|
1
|
|
Total
|
|
|
297
|
|
|
100
|
|
|
154
|
|
|
100
|
|
|
262
|
|
|
100
|
|
|
215
|
|
|
100
|
|
|
40
|
|
|
100
|
|
|
511
|
|
|
100
|
|
No
single customer
accounts for 10% or more of Syngenta’s total sales.
6.
Sales
Sales
are analyzed
by type of sale as follows:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Product
sales
|
|
|
7,983
|
|
|
7,975
|
|
|
7,223
|
|
Royalty
income
|
|
|
63
|
|
|
129
|
|
|
46
|
|
Total
|
|
|
8,046
|
|
|
8,104
|
|
|
7,269
|
|
7.
Restructuring
and impairment
Restructuring
and
impairment consists of the following:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Write
off or
impairment of:
|
|
|
|
|
|
|
|
|
|
|
– property,
plant and equipment
|
|
|
(26
|
)
|
|
(22
|
)
|
|
(132
|
)
|
–
intangible
assets
|
|
|
(46
|
)
|
|
-
|
|
|
(1
|
)
|
–
inventory
assets
|
|
|
-
|
|
|
(8
|
)
|
|
(1
|
)
|
Non-cash
pension restructuring costs
|
|
|
(3
|
)
|
|
-
|
|
|
(50
|
)
|
Total
non-cash restructuring costs
|
|
|
(75
|
)
|
|
(30
|
)
|
|
(184
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
costs:
|
|
|
|
|
|
|
|
|
|
|
Operational
efficiency
|
|
|
|
|
|
|
|
|
|
|
–
charges
to
provisions
|
|
|
(185
|
)
|
|
(85
|
)
|
|
(136
|
)
|
–
expensed
as
incurred
|
|
|
(14
|
)
|
|
(40
|
)
|
|
-
|
|
Seeds
integration
|
|
|
|
|
|
|
|
|
|
|
–
charges
to
provisions
|
|
|
(22
|
)
|
|
(29
|
)
|
|
(16
|
)
|
–
expensed
as
incurred
|
|
|
(14
|
)
|
|
(9
|
)
|
|
-
|
|
Programs
announced before 2004
|
|
|
|
|
|
|
|
|
|
|
–
charges
to
provisions
|
|
|
3
|
|
|
|
|
|
(19
|
)
|
–
expensed
as
incurred
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Total
cash restructuring costs
|
|
|
(232
|
)
|
|
(163
|
)
|
|
(171
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
restructuring costs
|
|
|
(307
|
)
|
|
(193
|
)
|
|
(355
|
)
|
Divestment
gains
|
|
|
6
|
|
|
-
|
|
|
1
|
|
Impairment
of
financial assets
|
|
|
-
|
|
|
(19
|
)
|
|
-
|
|
Restructuring
and impairment
|
|
|
(301
|
)
|
|
(212
|
)
|
|
(354
|
)
|
Reversal
of
inventory step-up (in cost of goods sold)
|
|
|
(25
|
)
|
|
(24
|
)
|
|
-
|
|
Total
restructuring and impairment
|
|
|
(326
|
)
|
|
(236
|
)
|
|
(354
|
)
|
Restructuring
represents the effect on reported performance of initiating business changes
which are considered major and which, in the opinion of management, will have
a
material effect on the nature and focus of Syngenta’s operations, and therefore
require separate disclosure to provide a more thorough understanding of business
performance. Restructuring includes the effects of completing and integrating
significant business combinations and divestments. Restructuring and impairment
includes the impairment costs associated with major restructuring and also
impairment losses and reversals of impairment losses resulting from major
changes in the markets in which a reported segment operates.
Charges
to
provisions reflect liabilities associated with restructuring recognized in
the
year as provisions. Costs expensed as incurred are mainly related to the
establishment of common IT systems and transactional processes across the merged
group and the relocation of staff and operations as part of the restructuring,
which may not be recognized until they are incurred under IAS 37. No such costs
were incurred in 2004.
Provisions
for
employee termination costs include severance, pension and other costs directly
related to these employees.
Provisions
for
other third party costs principally include payments for early termination
of
contracts with third parties related to redundant activities.
Reversal
of
inventory step up in 2006 included the final reversal of the inventory step
up
on the Garst and Golden Harvest acquisitions and the reversal of the step up
on
the Fafard and EGV acquisitions.
In
2006, the
Operational Efficiency Program announced in 2004 continued with the announcement
of a restructuring of the Crop Protection Development area, including the
closure of one Crop Protection Development site, consolidation of development
activity at another site and closure or downsizing of several Field Stations
around the world. The announcement gave rise to cash costs of US$78 million
and
accelerated amortization charges of US$5 million. Further cash costs of US$60
million were recorded in respect of other announcements of the consolidation
of
activities in two manufacturing sites in France and Belgium and reductions
of
sales, marketing and administrative resources in France.
Continuing
activity
related to restructuring announced prior to 2006 gave rise to cash costs of
US$61 million in Crop Protection operational efficiency programs and US$36
million in Seeds, mainly for the ongoing integration of the Seeds NAFTA corn
and
soy business. Impairments of US$26 million on property, plant and equipment
included accelerated depreciation charges of US$22 million for two sites in
NAFTA Crop Protection as well as various other smaller charges. In addition
to
the accelerated amortization note above, intangible asset impairments relate
to
a contract termination and the impairment of a supply agreement.
In
2005, the
Operational Efficiency Program announced in 2004 continued with the announcement
of closure of two Crop Protection production sites and the partial closure
of
another. The program gave rise to cash costs of US$125 million and asset
impairments of US$25 million in the year. Most of this cost related to the
Crop
Protection segment, with US$3 million in Seeds and US$14 million in Plant
Science. The integration of the Garst and Golden Harvest businesses, purchased
in 2004, gave rise to cash costs of US$38 million in the year, and cost of
goods
sold was increased by US$24 million due to the reversal of inventory step-up
recorded as part of the acquisition accounting on the purchase of the Garst
and
Golden Harvest businesses. The inventory acquired with these businesses was
valued at its fair value less cost to sell, which was higher than its production
cost, hence the reversal of this adjustment on the sale of the inventory
increased cost of goods sold.
In
addition to the
restructuring costs described above, an impairment charge of US$19 million
was
recorded in respect of investments whose book value had fallen below cost for
a
prolonged period. The majority of the impairment related to Syngenta’s interest
in Diversa Corporation.
In
2004, as part of
the Operational Efficiency Program, the closure of three production sites was
announced together with the rationalization of two further production sites.
A
further focusing of R&T activities, including the closure of one site, was
also announced. The Seeds NAFTA corn and soybean business announced a
restructuring program to integrate the Advanta and Golden Harvest acquisitions.
The final costs related to the merger restructuring program, associated with
the
closure of two production sites, were also charged in 2004. Cash costs of US$171
million and asset impairments totaling US$134 million were recorded in 2004
for
these restructuring initiatives. In addition, the rules of Syngenta’s Swiss
pension plan were amended in April 2004 so that, whilst it continues to be
accounted as a defined benefit plan, there is increased sharing of risks with
the employee members against a one-time non-cash transition charge of US$60
million. The change reduces the expense related to early retirement in 2005
and
future years, and reduces Syngenta’s exposure to pension fund investment
returns. This charge was partially offset by a US$10 million favourable non-cash
impact of pension fund curtailments associated with restructuring.
8.
Income
tax expense
Income/(loss)
before taxes from continuing operations consists of the following:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Switzerland
|
|
|
311
|
|
|
348
|
|
|
221
|
|
Foreign
|
|
|
487
|
|
|
418
|
|
|
245
|
|
Total
income/(loss) before taxes and minority interests
|
|
|
798
|
|
|
766
|
|
|
466
|
|
Income
tax expense
on income/(loss) from continuing operations consists of the
following:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Current
income tax expense
|
|
|
|
|
|
|
|
|
|
|
Switzerland
|
|
|
(31
|
)
|
|
(50
|
)
|
|
(22
|
)
|
Foreign
|
|
|
(63
|
)
|
|
(108
|
)
|
|
(103
|
)
|
Total
current income tax (expense)/benefit
|
|
|
(94
|
)
|
|
(158
|
)
|
|
(125
|
)
|
Deferred
income tax expense
|
|
|
|
|
|
|
|
|
|
|
Switzerland
|
|
|
8
|
|
|
(38
|
)
|
|
80
|
|
Foreign
|
|
|
(75
|
)
|
|
56
|
|
|
115
|
|
Total
deferred income tax (expense)/benefit
|
|
|
(67
|
)
|
|
18
|
|
|
195
|
|
Total
income
tax expense
|
|
|
|
|
|
|
|
|
|
|
Switzerland
|
|
|
(23
|
)
|
|
(88
|
)
|
|
58
|
|
Foreign
|
|
|
(138
|
)
|
|
(52
|
)
|
|
12
|
|
Total
income tax (expense)/benefit
|
|
|
(161
|
)
|
|
(140
|
)
|
|
70
|
|
The
components of
current income tax (expense)/benefit on income/(loss) from continuing operations
are:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Current
tax
(expense)/benefit relating to current years
|
|
|
(203
|
)
|
|
(170
|
)
|
|
(243
|
)
|
Adjustments
to current tax for prior periods
|
|
|
101
|
|
|
-
|
|
|
(7
|
)
|
Benefit
of
previously unrecognized tax losses
|
|
|
8
|
|
|
12
|
|
|
125
|
|
Total
current income tax (expense)/benefit
|
|
|
(94
|
)
|
|
(158
|
)
|
|
(125
|
)
|
The
tax litigation
with the Australian Tax Authorities (ATO) concluded in 2006. As previously
disclosed in its 2005 consolidated financial statements, Syngenta had filed
an
objection with the Federal Court of Australia against the ATO tax assessments
made in respect of Syngenta Crop Protection Pty Limited (formerly Ciba-Geigy
Australia Limited) for the periods 1991 to 1996. Shortly before the Federal
Court was scheduled to deal with the leave to appeal filed by Syngenta Crop
Protections Pty Limited, the ATO settled out of court agreeing the assessments
as originally filed, a more favorable result than originally anticipated. In
addition, the successful conclusion of audits in several countries and APAs
in
key territories in 2006 confirmed the increased acceptance of the Group Transfer
Pricing concept and policies in practice and has enabled the release of further
provisions held for uncertain tax positions.
The
components of
deferred income tax (expense)/benefit on income/(loss) from continuing
operations are:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Origination
and reversal of temporary differences
|
|
|
(51
|
)
|
|
61
|
|
|
177
|
|
Changes
in
tax rates or legislation
|
|
|
3
|
|
|
46
|
|
|
-
|
|
Benefit
of
previously unrecognized tax losses
|
|
|
(3
|
)
|
|
(28
|
)
|
|
22
|
|
Non
recognition of deferred tax assets
|
|
|
(16
|
)
|
|
(61
|
)
|
|
(4
|
)
|
Total
deferred income tax (expense)/benefit
|
|
|
(67
|
)
|
|
18
|
|
|
195
|
|
Discontinued
operations (tax impact all borne in Switzerland)
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Income
before
taxes
|
|
|
-
|
|
|
-
|
|
|
(109
|
)
|
Current
tax:
relating to current years
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Deferred
tax:
origination and reversal of temporary differences
|
|
|
-
|
|
|
-
|
|
|
1
|
|
Total
income tax (expense)/benefit on discontinued
operations
|
|
|
-
|
|
|
-
|
|
|
1
|
|
The
following tax
was (charged)/credited to shareholders’ equity:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Current
tax
|
|
|
16
|
|
|
-
|
|
|
-
|
|
Deferred
tax
|
|
|
36
|
|
|
38
|
|
|
26
|
|
Total
income tax (charged)/credited to shareholders’
equity
|
|
|
52
|
|
|
38
|
|
|
26
|
|
Analysis
of
tax rate
The
analysis of
Syngenta’s tax rate has been presented using the Swiss tax rate of 25% as the
statutory tax rate. Syngenta considers this more meaningful than using a
weighted average tax rate.
The
main elements
contributing to the difference between Syngenta's overall expected tax rate
and
the effective tax rate on income/(loss) from continuing operations
are:
|
|
|
|
|
|
|
|
|
|
2006
|
|
2005
|
|
2004
|
|
|
|
% |
|
% |
|
% |
|
Statutory
tax
rate
|
|
|
25
|
|
|
25
|
|
|
25
|
|
Effect
of
income taxed at different rates
|
|
|
(7
|
)
|
|
(9
|
)
|
|
(10
|
)
|
Goodwill
amortization not deductible for tax
|
|
|
-
|
|
|
-
|
|
|
1
|
|
Restructuring
costs
|
|
|
2
|
|
|
(2
|
)
|
|
(15
|
)
|
Effect
of
disallowed expenditures and income not subject to tax
|
|
|
1
|
|
|
(1
|
)
|
|
8
|
|
Effect
of
utilization of previously unrecognized deferred tax assets
|
|
|
(1
|
)
|
|
(2
|
)
|
|
(27
|
)
|
Effect
of
non-recognition of tax losses in current year
|
|
|
1
|
|
|
5
|
|
|
2
|
|
Changes
in
prior year estimates and other items
|
|
|
(3
|
)
|
|
(6
|
)
|
|
1
|
|
Effect
of non
recognition of other deferred tax assets
|
|
|
2
|
|
|
8
|
|
|
-
|
|
Effective
tax rate
|
|
|
20
|
|
|
18
|
|
|
(15
|
)
|
The
utilization of
tax loss carry forwards lowered the tax charge by US$8 million, US$12 million
and US$147 million in 2006, 2005 and 2004 respectively. US$139 million of the
2004 utilization was made possible by the changes to the legal entity structure
of the Syngenta group.
9.
Earnings
per share
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Basic
and diluted earnings:
|
|
|
|
|
|
|
|
Net
income/(loss) from continuing operations
|
|
|
637
|
|
|
626
|
|
|
536
|
|
of
which:
|
|
|
|
|
|
|
|
|
|
|
Attributable
to Syngenta AG shareholders
|
|
|
634
|
|
|
622
|
|
|
543
|
|
Net
income/(loss) from discontinued operations
|
|
|
-
|
|
|
-
|
|
|
(108
|
)
|
of
which:
|
|
|
|
|
|
|
|
|
|
|
Attributable
to Syngenta AG shareholders
|
|
|
-
|
|
|
-
|
|
|
(83
|
)
|
Net
income/(loss)
|
|
|
637
|
|
|
626
|
|
|
428
|
|
of
which:
|
|
|
|
|
|
|
|
|
|
|
Attributable
to Syngenta AG shareholders
|
|
|
634
|
|
|
622
|
|
|
460
|
|
Weighted
average number of shares
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares – basic
|
|
|
98,165,298
|
|
|
100,017,271
|
|
|
105,208,929
|
|
Adjustments
for dilutive potential ordinary shares:
|
|
|
|
|
|
|
|
|
|
|
Grant
of
options to Syngenta AG shareholders
|
|
|
192,581
|
|
|
-
|
|
|
-
|
|
Grants
of
options over Syngenta AG shares under employee share participation
plans
|
|
|
1,204,321
|
|
|
1,214,947
|
|
|
672,031
|
|
Grants
of
Syngenta AG shares under employee share participation
plans
|
|
|
313,980
|
|
|
232,004
|
|
|
134,409
|
|
Weighted
average number of shares – diluted
|
|
|
99,876,180
|
|
|
101,464,222
|
|
|
106,015,369
|
|
Basic
earnings per
share amounts are calculated by dividing net profit for the year attributable
to
ordinary shareholders of Syngenta AG by the weighted average number of ordinary
shares outstanding during the year.
Diluted
earnings
per share amounts are calculated by dividing the net profit attributable to
ordinary shareholders of Syngenta AG by the weighted average number of ordinary
shares outstanding during the year plus the weighted average number of ordinary
shares that would be issued on the conversion of all the dilutive potential
ordinary shares into ordinary shares.
Treasury
shares are
deducted from total shares in issue for the purposes of calculating earnings
per
share.
As
at December 31,
in each year, the following instruments existed that are or were potentially
dilutive of future earnings per share, but were not included in the calculation
of dilutive shares for that year, because the effect in that year would have
been antidilutive.
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Grants
of
options over Syngenta AG shares to employees
|
|
|
319,411
|
|
|
429,188
|
|
|
-
|
|
Grants
of
Syngenta AG shares to employees
|
|
|
-
|
|
|
101,250
|
|
|
-
|
|
Share
repurchase options
|
|
|
-
|
|
|
-
|
|
|
4,500,000
|
|
An
option over 4.5
million ordinary shares with an exercise price of CHF 138 per share was
outstanding as from February 10, 2004 until February 11, 2005. Although
outstanding as at December 31, 2004, it was excluded from the computation of
dilutive earnings per share as its effect would have been
antidilutive.
10.
Trade
and other accounts receivable
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Trade
accounts receivable, gross
|
|
|
2,370
|
|
|
2,224
|
|
|
2,184
|
|
Provision
for
doubtful receivables
|
|
|
(368
|
)
|
|
(359
|
)
|
|
(297
|
)
|
Total
trade receivables, net
|
|
|
2,002
|
|
|
1,865
|
|
|
1,887
|
|
Other
receivables - gross
|
|
|
285
|
|
|
322
|
|
|
276
|
|
Provision
for
doubtful receivables
|
|
|
(9
|
)
|
|
(6
|
)
|
|
(3
|
)
|
Total
other accounts receivable, net
|
|
|
276
|
|
|
316
|
|
|
273
|
|
Movements
on
provisions for doubtful receivables were as follows:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
January
1
|
|
|
(359
|
)
|
|
(297
|
)
|
|
(277
|
)
|
Additions
charged to income
|
|
|
(12
|
)
|
|
(72
|
)
|
|
(35
|
)
|
Amounts
written off
|
|
|
30
|
|
|
4
|
|
|
34
|
|
Other
movements
|
|
|
(6
|
)
|
|
5
|
|
|
(5
|
)
|
Translation
effects
|
|
|
(21
|
)
|
|
1
|
|
|
(14
|
)
|
December
31
|
|
|
(368
|
)
|
|
(359
|
)
|
|
(297
|
)
|
The
ages of trade
and other receivables that were past due as at December 31, 2006, but not
impaired were as follows:
|
|
|
|
|
|
|
|
|
|
2006
(US$ million)
|
|
Total
past due
|
|
0
- 90
days
|
|
90
-
180
days
|
|
More
than
180
days
|
|
Trade
accounts receivable, gross
|
|
|
443
|
|
|
130
|
|
|
55
|
|
|
258
|
|
Other
receivables
|
|
|
154
|
|
|
89
|
|
|
4
|
|
|
61
|
|
Provision
for
doubtful receivables
|
|
|
(329
|
)
|
|
(8
|
)
|
|
(11
|
)
|
|
(309
|
)
|
Total
|
|
|
268
|
|
|
211
|
|
|
48
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
2005
(US$ million)
|
|
Total
past due
|
|
0
- 90
days
|
|
90
-
180
days
|
|
More
than
180
days
|
|
Trade
accounts receivable, gross
|
|
|
396
|
|
|
117
|
|
|
65
|
|
|
214
|
|
Other
receivables
|
|
|
256
|
|
|
138
|
|
|
24
|
|
|
94
|
|
Provision
for
doubtful receivables
|
|
|
(275
|
)
|
|
(6
|
)
|
|
(9
|
)
|
|
(260
|
)
|
Total
|
|
|
377
|
|
|
249
|
|
|
80
|
|
|
48
|
|
The
major factors
affecting the credit quality of receivables which are neither overdue nor
impaired are as follows: receivables are due mainly from agricultural
distributors; Syngenta’s customers vary in size and are based throughout the
world; Syngenta’s products are consumed mainly by growers and the timing and
amount of cash inflows received by growers is dependent on crop yields and
prices which can vary from year to year.
11.
Other
current assets
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Prepaid
expenses – third
party
|
|
|
112
|
|
|
124
|
|
|
125
|
|
Derivative
assets – hedging
financing exposures
|
|
|
39
|
|
|
79
|
|
|
474
|
|
– hedging
trading exposures
|
|
|
113
|
|
|
88
|
|
|
162
|
|
Assets
held
for divestment
|
|
|
8
|
|
|
15
|
|
|
4
|
|
|
|
|
272
|
|
|
306
|
|
|
765
|
|
Marketable
securities
|
|
|
81
|
|
|
4
|
|
|
1
|
|
Total
|
|
|
353
|
|
|
310
|
|
|
766
|
|
12.
Inventories
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Raw
materials
and consumables
|
|
|
551
|
|
|
545
|
|
|
493
|
|
Biological
assets
|
|
|
4
|
|
|
2
|
|
|
2
|
|
Work
in
progress
|
|
|
800
|
|
|
797
|
|
|
805
|
|
Finished
products
|
|
|
1,026
|
|
|
871
|
|
|
892
|
|
Total
|
|
|
2,381
|
|
|
2,215
|
|
|
2,192
|
|
Inventories
recognized as an expense during the period
|
|
|
3,449
|
|
|
3,324
|
|
|
2,996
|
|
Cost
of
inventories against which provisions have been made
|
|
|
396
|
|
|
358
|
|
|
555
|
|
Movements
on
provisions for inventories were as follows:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
January
1
|
|
|
(229
|
)
|
|
(237
|
)
|
|
(188
|
)
|
Additions
charged to income
|
|
|
(114
|
)
|
|
(112
|
)
|
|
(58
|
)
|
Reversals
of
inventory provisions
|
|
|
15
|
|
|
-
|
|
|
-
|
|
Amounts
utilized on disposal of related inventories
|
|
|
123
|
|
|
102
|
|
|
22
|
|
Additions
due
to acquisitions of subsidiaries
|
|
|
(5
|
)
|
|
-
|
|
|
-
|
|
Translation
effects
|
|
|
(14
|
)
|
|
18
|
|
|
(13
|
)
|
December
31
|
|
|
(224
|
)
|
|
(229
|
)
|
|
(237
|
)
|
13.
Property, plant and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
(US$ million)
|
|
Land
|
|
Buildings
|
|
Machinery
and
equipment
|
|
Plant
and
other
equipment
under
construction
|
|
Total
2006
|
|
Total
2005
|
|
Total
2004
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
1
|
|
|
113
|
|
|
1,439
|
|
|
3,173
|
|
|
118
|
|
|
4,843
|
|
|
5,308
|
|
|
5,386
|
|
Additions
due
to business combinations*
|
|
|
9
|
|
|
5
|
|
|
25
|
|
|
1
|
|
|
40
|
|
|
(20
|
)
|
|
96
|
|
Asset
retirement obligations
|
|
|
27
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
27
|
|
|
-
|
|
|
-
|
|
Assets
leased
within supply contracts
|
|
|
-
|
|
|
-
|
|
|
13
|
|
|
-
|
|
|
13
|
|
|
-
|
|
|
-
|
|
Other
additions
|
|
|
-
|
|
|
21
|
|
|
70
|
|
|
126
|
|
|
217
|
|
|
174
|
|
|
166
|
|
Disposals
|
|
|
(11
|
)
|
|
(45
|
)
|
|
(119
|
)
|
|
-
|
|
|
(175
|
)
|
|
(111
|
)
|
|
(262
|
)
|
Assets
reclassified as held for sale
|
|
|
(5
|
)
|
|
(160
|
)
|
|
-
|
|
|
-
|
|
|
(165
|
)
|
|
(4
|
)
|
|
(48
|
)
|
Discontinued
operations
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(373
|
)
|
Transfers
between categories
|
|
|
-
|
|
|
32
|
|
|
84
|
|
|
(116
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
Translation
effects
|
|
|
5
|
|
|
112
|
|
|
290
|
|
|
10
|
|
|
417
|
|
|
(504
|
)
|
|
343
|
|
December
31
|
|
|
138
|
|
|
1,404
|
|
|
3,536
|
|
|
139
|
|
|
5,217
|
|
|
4,843
|
|
|
5,308
|
|
Accumulated
depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
1
|
|
|
(10
|
)
|
|
(793
|
)
|
|
(2,153
|
)
|
|
-
|
|
|
(2,956
|
)
|
|
(3,120
|
)
|
|
(3,012
|
)
|
Depreciation
charge
|
|
|
-
|
|
|
(50
|
)
|
|
(179
|
)
|
|
-
|
|
|
(229
|
)
|
|
(252
|
)
|
|
(250
|
)
|
Impairment
losses
|
|
|
-
|
|
|
(1
|
)
|
|
(21
|
)
|
|
-
|
|
|
(22
|
)
|
|
(20
|
)
|
|
(135
|
)
|
Losses
from
product divestments
|
|
|
-
|
|
|
(2
|
)
|
|
(16
|
)
|
|
-
|
|
|
(18
|
)
|
|
-
|
|
|
-
|
|
Depreciation
on disposals
|
|
|
8
|
|
|
26
|
|
|
100
|
|
|
-
|
|
|
134
|
|
|
90
|
|
|
212
|
|
Depreciation
on assets reclassified
as
held for
sale
|
|
|
-
|
|
|
130
|
|
|
-
|
|
|
-
|
|
|
130
|
|
|
4
|
|
|
26
|
|
Discontinued
operations
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
256
|
|
Translation
effects
|
|
|
-
|
|
|
(85
|
)
|
|
(214
|
)
|
|
-
|
|
|
(299
|
)
|
|
342
|
|
|
(217
|
)
|
December
31
|
|
|
(2
|
)
|
|
(775
|
)
|
|
(2,483
|
)
|
|
-
|
|
|
(3,260
|
)
|
|
(2,956
|
)
|
|
(3,120
|
)
|
Net
book value - December 31
|
|
|
136
|
|
|
629
|
|
|
1,053
|
|
|
139
|
|
|
1,957
|
|
|
1,887
|
|
|
2,188
|
|
Insured
value - December 31
|
|
|
|
|
|
2,407
|
|
|
5,601
|
|
|
105
|
|
|
8,113
|
|
|
7,265
|
|
|
7,923
|
|
*
Additions
due to
acquisition of EGV and Fafard.
Asset
impairments
were calculated as described in Note 2. Impairment losses related to
restructuring and impairment are disclosed in Note 7.
The
net book value
of Property, plant and equipment accounted for as finance lease assets at
December 31, 2006 was US$10 million.
13.
Property, plant
and equipment (continued)
|
|
|
|
|
|
|
|
|
|
|
|
2005
(US$ million)
|
|
Land
|
|
Buildings
|
|
Machinery
and
equipment
|
|
Plant
and
other
equipment
under
construction
|
|
Total
2005
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
1
|
|
|
125
|
|
|
1,656
|
|
|
3,419
|
|
|
108
|
|
|
5,308
|
|
Additions
due
to business combinations*
|
|
|
(2
|
)
|
|
(7
|
)
|
|
(11
|
)
|
|
-
|
|
|
(20
|
)
|
Other
additions
|
|
|
1
|
|
|
6
|
|
|
69
|
|
|
98
|
|
|
174
|
|
Disposals
|
|
|
(4
|
)
|
|
(58
|
)
|
|
(48
|
)
|
|
(1
|
)
|
|
(111
|
)
|
Assets
reclassified as held for sale
|
|
|
-
|
|
|
(3
|
)
|
|
(1
|
)
|
|
-
|
|
|
(4
|
)
|
Transfers
between categories
|
|
|
-
|
|
|
6
|
|
|
71
|
|
|
(77
|
)
|
|
-
|
|
Translation
effects
|
|
|
(7
|
)
|
|
(161
|
)
|
|
(326
|
)
|
|
(10
|
)
|
|
(504
|
)
|
December
31
|
|
|
113
|
|
|
1,439
|
|
|
3,173
|
|
|
118
|
|
|
4,843
|
|
Accumulated
depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
1
|
|
|
(10
|
)
|
|
(891
|
)
|
|
(2,219
|
)
|
|
-
|
|
|
(3,120
|
)
|
Depreciation
charge
|
|
|
-
|
|
|
(54
|
)
|
|
(198
|
)
|
|
-
|
|
|
(252
|
)
|
Impairment
losses
|
|
|
-
|
|
|
(2
|
)
|
|
(18
|
)
|
|
-
|
|
|
(20
|
)
|
Depreciation
on disposals
|
|
|
-
|
|
|
49
|
|
|
41
|
|
|
-
|
|
|
90
|
|
Depreciation
on assets reclassified
as
held for
sale
|
|
|
-
|
|
|
3
|
|
|
1
|
|
|
-
|
|
|
4
|
|
Translation
effects
|
|
|
-
|
|
|
102
|
|
|
240
|
|
|
-
|
|
|
342
|
|
December
31
|
|
|
(10
|
)
|
|
(793
|
)
|
|
(2,153
|
)
|
|
-
|
|
|
(2,956
|
)
|
Net
book value - December 31
|
|
|
103
|
|
|
646
|
|
|
1,020
|
|
|
118
|
|
|
1,887
|
|
Insured
value - December 31
|
|
|
-
|
|
|
2,265
|
|
|
4,948
|
|
|
52
|
|
|
7,265
|
|
*
2005
adjustments to
provisional Golden Harvest and Garst purchase accounting reported in
2004.
Asset
impairments
were calculated as described in Note 2. Impairment losses related to
restructuring and impairment are disclosed in Note 7.
13.
Property, plant
and equipment (continued)
|
|
|
|
|
|
|
|
|
|
|
|
2004
(US$ million)
|
|
Land
|
|
Buildings
|
|
Machinery
and
equipment
|
|
Plant
and
other
equipment
under
construction
|
|
Total
2004
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
1
|
|
|
122
|
|
|
1,655
|
|
|
3,477
|
|
|
132
|
|
|
5,386
|
|
Additions
due
to business combinations*
|
|
|
11
|
|
|
43
|
|
|
39
|
|
|
3
|
|
|
96
|
|
Other
additions
|
|
|
-
|
|
|
9
|
|
|
79
|
|
|
78
|
|
|
166
|
|
Disposals
|
|
|
(7
|
)
|
|
(60
|
)
|
|
(194
|
)
|
|
(1
|
)
|
|
(262
|
)
|
Assets
reclassified as held for sale
|
|
|
(2
|
)
|
|
(33
|
)
|
|
(13
|
)
|
|
-
|
|
|
(48
|
)
|
Discontinued
operations
|
|
|
(5
|
)
|
|
(82
|
)
|
|
(281
|
)
|
|
(5
|
)
|
|
(373
|
)
|
Transfers
between categories
|
|
|
(1
|
)
|
|
16
|
|
|
92
|
|
|
(107
|
)
|
|
-
|
|
Translation
effects
|
|
|
7
|
|
|
108
|
|
|
220
|
|
|
8
|
|
|
343
|
|
December
31
|
|
|
125
|
|
|
1,656
|
|
|
3,419
|
|
|
108
|
|
|
5,308
|
|
Accumulated
depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
1
|
|
|
(7
|
)
|
|
(864
|
)
|
|
(2,141
|
)
|
|
-
|
|
|
(3,012
|
)
|
Depreciation
charge
|
|
|
-
|
|
|
(54
|
)
|
|
(196
|
)
|
|
-
|
|
|
(250
|
)
|
Impairment
losses
|
|
|
(2
|
)
|
|
(9
|
)
|
|
(124
|
)
|
|
-
|
|
|
(135
|
)
|
Depreciation
on disposals
|
|
|
-
|
|
|
33
|
|
|
179
|
|
|
-
|
|
|
212
|
|
Depreciation
on assets reclassified
as
held for
sale
|
|
|
-
|
|
|
18
|
|
|
8
|
|
|
-
|
|
|
26
|
|
Discontinued
operations
|
|
|
-
|
|
|
49
|
|
|
207
|
|
|
-
|
|
|
256
|
|
Translation
effects
|
|
|
(1
|
)
|
|
(64
|
)
|
|
(152
|
)
|
|
-
|
|
|
(217
|
)
|
December
31
|
|
|
(10
|
)
|
|
(891
|
)
|
|
(2,219
|
)
|
|
-
|
|
|
(3,120
|
)
|
Net
book value - December 31
|
|
|
115
|
|
|
765
|
|
|
1,200
|
|
|
108
|
|
|
2,188
|
|
Insured
value - December 31
|
|
|
-
|
|
|
2,696
|
|
|
5,082
|
|
|
145
|
|
|
7,923
|
|
*
Additions
due to
acquisition of Golden Harvest, Garst
and Dia
Engei.
Asset
impairments
were calculated as described in Note 2. Impairment losses related to
restructuring and impairment are disclosed in Note 7.
14.
Intangible
assets
Asset
impairments
were calculated as described in Note 2. Impairment losses related to
restructuring and impairment are disclosed in Note 7.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
(US$ million)
|
|
Goodwill
|
|
Product
rights
|
|
Trademarks
|
|
Patents
|
|
Software
|
|
Other
Intangibles
|
|
Total
2006
|
|
Total
2005
|
|
Total
2004
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
1
|
|
|
1,405
|
|
|
2,451
|
|
|
34
|
|
|
31
|
|
|
123
|
|
|
249
|
|
|
4,293
|
|
|
4,400
|
|
|
3,804
|
|
Additions
from business combinations(1)
|
|
|
39
|
|
|
3
|
|
|
12
|
|
|
-
|
|
|
1
|
|
|
52
|
|
|
107
|
|
|
17
|
|
|
433
|
|
Other
additions, including non monetary exchanges
|
|
|
1
|
|
|
82
|
|
|
|
|
|
|
|
|
18
|
|
|
7
|
|
|
108
|
|
|
23
|
|
|
78
|
|
Disposals
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(12
|
)
|
|
(5
|
)
|
Translation
effects
|
|
|
15
|
|
|
52
|
|
|
1
|
|
|
1
|
|
|
5
|
|
|
14
|
|
|
88
|
|
|
(135
|
)
|
|
90
|
|
December
31
|
|
|
1,460
|
|
|
2,588
|
|
|
47
|
|
|
32
|
|
|
147
|
|
|
322
|
|
|
4,596
|
|
|
4,293
|
|
|
4,400
|
|
Accumulated
amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
1
|
|
|
(315
|
)
|
|
(1,023
|
)
|
|
(9
|
)
|
|
(11
|
)
|
|
(107
|
)
|
|
(96
|
)
|
|
(1,561
|
)
|
|
(1,449
|
)
|
|
(1,146
|
)
|
Amortization
charge
|
|
|
|
|
|
(130
|
)
|
|
(3
|
)
|
|
(6
|
)
|
|
(9
|
)
|
|
(18
|
)
|
|
(166
|
)
|
|
(198
|
)
|
|
(248
|
)
|
Impairment
losses
|
|
|
|
|
|
(41
|
)
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
(46
|
)
|
|
(3
|
)
|
|
(2
|
)
|
Losses
from
product divestments
|
|
|
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
(21
|
)
|
|
(47
|
)
|
|
-
|
|
|
-
|
|
Amortization
on disposals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
(4
|
)
|
Translation
effects
|
|
|
(7
|
)
|
|
(31
|
)
|
|
(1
|
)
|
|
-
|
|
|
(4
|
)
|
|
(9
|
)
|
|
(52
|
)
|
|
77
|
|
|
(49
|
)
|
December
31
|
|
|
(322
|
)
|
|
(1,251
|
)
|
|
(13
|
)
|
|
(17
|
)
|
|
(120
|
)
|
|
(149
|
)
|
|
(1,872
|
)
|
|
(1,561
|
)
|
|
(1,449
|
)
|
Net
book value, December
31
|
|
|
1,138
|
|
|
1,337
|
|
|
34
|
|
|
15
|
|
|
27
|
|
|
173
|
|
|
2,724
|
|
|
2,732
|
|
|
2,951
|
|
1
Additions due to
the acquisitions of EGV and Fafard.
In
2006, Syngenta
entered into a non-monetary exchange of intangible assets with a third party
chemicals manufacturer. This exchange has been reported at fair
value.
Amortization
is
included partly within cost of goods sold and partly within general and
administrative expenses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
(US$ million)
|
|
Goodwill
|
|
Product
rights
|
|
Trademarks
|
|
Patents
|
|
Software
|
|
Other
Intangibles
|
|
Total
2005
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
1
|
|
|
1,409
|
|
|
2,542
|
|
|
36
|
|
|
34
|
|
|
116
|
|
|
263
|
|
|
4,400
|
|
Additions
from business combinations(2)
|
|
|
15
|
|
|
-
|
|
|
(1
|
)
|
|
-
|
|
|
-
|
|
|
3
|
|
|
17
|
|
Other
additions
|
|
|
4
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
15
|
|
|
4
|
|
|
23
|
|
Disposals
|
|
|
(12
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(12
|
)
|
Translation
effects
|
|
|
(11
|
)
|
|
(91
|
)
|
|
(1
|
)
|
|
(3
|
)
|
|
(8
|
)
|
|
(21
|
)
|
|
(135
|
)
|
December
31
|
|
|
1,405
|
|
|
2,451
|
|
|
34
|
|
|
31
|
|
|
123
|
|
|
249
|
|
|
4,293
|
|
Accumulated
amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
1
|
|
|
(333
|
)
|
|
(923
|
)
|
|
(8
|
)
|
|
(6
|
)
|
|
(101
|
)
|
|
(78
|
)
|
|
(1,449
|
)
|
Amortization
charge
|
|
|
-
|
|
|
(153
|
)
|
|
(3
|
)
|
|
(5
|
)
|
|
(12
|
)
|
|
(25
|
)
|
|
(198
|
)
|
Impairment
losses
|
|
|
-
|
|
|
(3
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(3
|
)
|
Amortization
on disposals
|
|
|
12
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
12
|
|
Translation
effects
|
|
|
6
|
|
|
56
|
|
|
2
|
|
|
-
|
|
|
6
|
|
|
7
|
|
|
77
|
|
December
31
|
|
|
(315
|
)
|
|
(1,023
|
)
|
|
(9
|
)
|
|
(11
|
)
|
|
(107
|
)
|
|
(96
|
)
|
|
(1,561
|
)
|
Net
book value, December 31
|
|
|
1,090
|
|
|
1,428
|
|
|
25
|
|
|
20
|
|
|
16
|
|
|
153
|
|
|
2,732
|
|
22005
adjustments to provisional Golden Harvest and Garst purchase
accounting
reported in 2004.
|
14.
Intangible
assets (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
(US$ million)
|
|
Goodwill
|
|
Product
rights
|
|
Trademarks
|
|
Patents
|
|
Software
|
|
Other
Intangibles
|
|
Total
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
1
|
|
|
1,016
|
|
|
2,465
|
|
|
10
|
|
|
4
|
|
|
106
|
|
|
203
|
|
|
3,804
|
|
Additions
from business combinations
|
|
|
368
|
|
|
-
|
|
|
25
|
|
|
28
|
|
|
-
|
|
|
12
|
|
|
433
|
|
Other
additions
|
|
|
1
|
|
|
32
|
|
|
-
|
|
|
2
|
|
|
7
|
|
|
36
|
|
|
78
|
|
Disposals
|
|
|
(4
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1
|
)
|
|
-
|
|
|
(5
|
)
|
Translation
effects
|
|
|
28
|
|
|
45
|
|
|
1
|
|
|
-
|
|
|
4
|
|
|
12
|
|
|
90
|
|
December
31
|
|
|
1,409
|
|
|
2,542
|
|
|
36
|
|
|
34
|
|
|
116
|
|
|
263
|
|
|
4,400
|
|
Accumulated
amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
1
|
|
|
(257
|
)
|
|
(737
|
)
|
|
(5
|
)
|
|
(3
|
)
|
|
(85
|
)
|
|
(59
|
)
|
|
(1,146
|
)
|
Amortization
charge
|
|
|
(56
|
)
|
|
(158
|
)
|
|
(2
|
)
|
|
(2
|
)
|
|
(14
|
)
|
|
(16
|
)
|
|
(248
|
)
|
Impairment
losses
|
|
|
(2
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2
|
)
|
Amortization
on disposals
|
|
|
(5
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1
|
|
|
-
|
|
|
(4
|
)
|
Translation
effects
|
|
|
(13
|
)
|
|
(28
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
(3
|
)
|
|
(3
|
)
|
|
(49
|
)
|
December
31
|
|
|
(333
|
)
|
|
(923
|
)
|
|
(8
|
)
|
|
(6
|
)
|
|
(101
|
)
|
|
(78
|
)
|
|
(1,449
|
)
|
Net
book value, December 31
|
|
|
1,076
|
|
|
1,619
|
|
|
28
|
|
|
28
|
|
|
15
|
|
|
185
|
|
|
2,951
|
|
15.
Investments in associates and
joint
ventures
Syngenta
has the
following significant investments in associates and joint ventures, which are
accounted for using the equity method. None of these investments are publicly
quoted.
|
|
|
|
|
|
|
|
Balance
sheet value
|
|
Income
statement effect
|
|
(US$
million)
|
|
%
Ownership
|
|
2006
|
|
2005
|
|
2004
|
|
2006
|
|
2005
|
|
2004
|
|
CIMO
Compagnie Industrielle de Monthey SA, Switzerland
|
|
|
50
|
|
|
64
|
|
|
63
|
|
|
76
|
|
|
(1
|
)
|
|
(1
|
)
|
|
(2
|
)
|
Maïsadour
Semences SA, France
|
|
|
40
|
|
|
18
|
|
|
16
|
|
|
18
|
|
|
1
|
|
|
-
|
|
|
2
|
|
North
American Nutrition and Agribusiness Fund, USA
|
|
|
25
|
|
|
3
|
|
|
10
|
|
|
15
|
|
|
(9
|
)
|
|
3
|
|
|
(2
|
)
|
Others
|
|
|
|
|
|
4
|
|
|
4
|
|
|
5
|
|
|
(2
|
)
|
|
-
|
|
|
-
|
|
Total
|
|
|
|
|
|
89
|
|
|
93
|
|
|
114
|
|
|
(11
|
)
|
|
2
|
|
|
(2
|
)
|
Summarized
financial information for associates is as follows:
Syngenta’s
share
of:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Assets
|
|
|
38
|
|
|
45
|
|
|
68
|
|
Liabilities
|
|
|
(17
|
)
|
|
(19
|
)
|
|
(29
|
)
|
Revenues
|
|
|
47
|
|
|
45
|
|
|
64
|
|
Profit/(loss)
|
|
|
(9
|
)
|
|
3
|
|
|
-
|
|
Maïsadour
Semences
SA, France year-end is June 30.
Summarized
financial information for joint ventures is as follows:
Syngenta’s
share
of:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Current
assets
|
|
|
38
|
|
|
39
|
|
|
19
|
|
Non-current
assets
|
|
|
75
|
|
|
79
|
|
|
91
|
|
Current
liabilities
|
|
|
(18
|
|
|
(26
|
)
|
|
(5
|
)
|
Non-current
liabilities
|
|
|
(26
|
)
|
|
(25
|
)
|
|
(30
|
)
|
Income
|
|
|
72
|
|
|
90
|
|
|
69
|
|
Expenses
|
|
|
(74
|
)
|
|
(91
|
)
|
|
(71
|
)
|
Syngenta
does not
have any material contingent liabilities related to associates and joint
ventures.
The
following
transactions between Syngenta and its associates occurred in 2006.
-
Good and services
provided by Syngenta to its Associates US$32 million.
-
Good and services
provided by the Associates to Syngenta US$60 million.
16.
Deferred taxes
The
deferred tax
assets and liabilities are analyzed as follows:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
(reclassified)
|
|
2004
(reclassified)
|
|
Assets
associated with:
|
|
|
|
|
|
|
|
|
|
|
- inventories
|
|
|
299
|
|
|
358
|
|
|
264
|
|
- accounts
receivable
|
|
|
16
|
|
|
83
|
|
|
64
|
|
- property,
plant and equipment
|
|
|
15
|
|
|
10
|
|
|
15
|
|
- pension
and
employee costs
|
|
|
81
|
|
|
38
|
|
|
81
|
|
- provisions
|
|
|
309
|
|
|
260
|
|
|
284
|
|
- net
operating
losses
|
|
|
65
|
|
|
140
|
|
|
115
|
|
- financial
instruments, including derivatives
|
|
|
44
|
|
|
40
|
|
|
30
|
|
- other
|
|
|
39
|
|
|
38
|
|
|
93
|
|
Deferred
tax assets
|
|
|
868
|
|
|
967
|
|
|
946
|
|
Netting
adjustment
|
|
|
(269
|
)
|
|
(204
|
)
|
|
(222
|
)
|
Adjusted
deferred tax assets, net of valuation allowance
|
|
|
599
|
|
|
763
|
|
|
724
|
|
Liabilities
associated with:
|
|
|
|
|
|
|
|
|
|
|
- property,
plant and equipment depreciation
|
|
|
202
|
|
|
194
|
|
|
255
|
|
- intangible
assets
|
|
|
414
|
|
|
433
|
|
|
506
|
|
- pensions
and
employee costs
|
|
|
104
|
|
|
34
|
|
|
13
|
|
- inventories
|
|
|
50
|
|
|
55
|
|
|
43
|
|
- financial
instruments, including derivatives
|
|
|
50
|
|
|
55
|
|
|
59
|
|
- provisions
and accruals
|
|
|
27
|
|
|
98
|
|
|
71
|
|
- other
items
|
|
|
150
|
|
|
169
|
|
|
172
|
|
Deferred
tax liabilities
|
|
|
997
|
|
|
1,038
|
|
|
1,119
|
|
Netting
adjustment
|
|
|
(269
|
)
|
|
(204
|
)
|
|
(222
|
)
|
Adjusted
deferred tax liabilities
|
|
|
728
|
|
|
834
|
|
|
897
|
|
The
gross value of
net operating loss carry forwards which have not been recognized as deferred
tax
assets, with their expiry dates, is as follows, as of December 31 in each
year:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
one
year
|
|
|
10
|
|
|
26
|
|
|
38
|
|
two
years
|
|
|
13
|
|
|
16
|
|
|
16
|
|
three
years
|
|
|
3
|
|
|
11
|
|
|
27
|
|
four
years
|
|
|
8
|
|
|
9
|
|
|
31
|
|
five
years
|
|
|
13
|
|
|
7
|
|
|
21
|
|
more
than
five years
|
|
|
134
|
|
|
136
|
|
|
150
|
|
no
expiry
|
|
|
145
|
|
|
177
|
|
|
152
|
|
Total
|
|
|
326
|
|
|
382
|
|
|
435
|
|
The
movements in
deferred tax assets and liabilities during 2006 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
January
1
|
|
Recognized
in
net
income
|
|
Recognized
in
equity
|
|
Translation
effects
|
|
Acquisitions
|
|
Other
movements
|
|
December
31
|
|
Assets
associated with:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- inventories
|
|
|
358
|
|
|
(78
|
)
|
|
9
|
|
|
1
|
|
|
-
|
|
|
9
|
|
|
299
|
|
- accounts
receivable
|
|
|
83
|
|
|
(21
|
)
|
|
-
|
|
|
1
|
|
|
-
|
|
|
(47
|
)
|
|
16
|
|
- property,
plant and equipment
|
|
|
10
|
|
|
(1
|
)
|
|
-
|
|
|
1
|
|
|
5
|
|
|
-
|
|
|
15
|
|
- pensions
and
employee costs
|
|
|
38
|
|
|
(2
|
)
|
|
14
|
|
|
2
|
|
|
2
|
|
|
27
|
|
|
81
|
|
- provisions
|
|
|
260
|
|
|
74
|
|
|
-
|
|
|
7
|
|
|
-
|
|
|
(32
|
)
|
|
309
|
|
- net
operating
losses
|
|
|
140
|
|
|
(40
|
)
|
|
-
|
|
|
7
|
|
|
3
|
|
|
(45
|
)
|
|
65
|
|
- financial
instruments, including derivatives
|
|
|
40
|
|
|
(15
|
)
|
|
13
|
|
|
2
|
|
|
-
|
|
|
4
|
|
|
44
|
|
- other
|
|
|
38
|
|
|
4
|
|
|
-
|
|
|
1
|
|
|
-
|
|
|
(4
|
)
|
|
39
|
|
Deferred
tax assets
|
|
|
967
|
|
|
(79
|
)
|
|
36
|
|
|
22
|
|
|
10
|
|
|
(88
|
)
|
|
868
|
|
Liabilities
associated with:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- property,
plant and equipment
|
|
|
194
|
|
|
(15
|
)
|
|
-
|
|
|
13
|
|
|
9
|
|
|
1
|
|
|
202
|
|
- intangible
assets
|
|
|
433
|
|
|
(51
|
)
|
|
-
|
|
|
8
|
|
|
26
|
|
|
(2
|
)
|
|
414
|
|
- pensions
and
employee costs
|
|
|
34
|
|
|
36
|
|
|
-
|
|
|
5
|
|
|
-
|
|
|
29
|
|
|
104
|
|
- inventories
|
|
|
55
|
|
|
(23
|
)
|
|
-
|
|
|
4
|
|
|
4
|
|
|
10
|
|
|
50
|
|
- financial
instruments, including derivatives
|
|
|
55
|
|
|
(10
|
)
|
|
1
|
|
|
4
|
|
|
-
|
|
|
-
|
|
|
50
|
|
- other
provisions and accruals
|
|
|
98
|
|
|
1
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(72
|
)
|
|
27
|
|
- other
|
|
|
169
|
|
|
51
|
|
|
-
|
|
|
2
|
|
|
-
|
|
|
(72
|
)
|
|
150
|
|
Deferred
tax liabilities
|
|
|
1,038
|
|
|
(11
|
)
|
|
1
|
|
|
36
|
|
|
39
|
|
|
(106
|
)
|
|
997
|
|
Net
deferred tax asset/(liability)
|
|
|
(71
|
)
|
|
(68
|
)
|
|
35
|
|
|
(14
|
)
|
|
(29
|
)
|
|
18
|
|
|
(129
|
)
|
Deferred
tax
assets, other than net operating losses, are not subject to expiry.
A
deferred tax
asset or liability has not been recognized on the following items in accordance
with the accounting policy described in Note 2:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Temporary
differences for which no deferred tax assets have been
recognized
|
|
|
323
|
|
|
306
|
|
|
268
|
|
Temporary
differences associated with investments in subsidiaries for which
deferred
tax liabilities have not been recognized
|
|
|
564
|
|
|
527
|
|
|
547
|
|
17.
Other
financial assets
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Long-term
loans to associates
|
|
|
2
|
|
|
7
|
|
|
8
|
|
Equity
securities available-for-sale
|
|
|
168
|
|
|
116
|
|
|
144
|
|
Long-term
marketable securities
|
|
|
20
|
|
|
-
|
|
|
-
|
|
Other
non-current receivables
|
|
|
95
|
|
|
95
|
|
|
104
|
|
Prepaid
pension (Note 27)
|
|
|
616
|
|
|
497
|
|
|
122
|
|
Total
|
|
|
901
|
|
|
715
|
|
|
378
|
|
Changes
in equity
securities available-for-sale were as follows:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
January
1
|
|
|
116
|
|
|
144
|
|
|
133
|
|
Exchange
differences
|
|
|
4
|
|
|
(5
|
)
|
|
6
|
|
Changes
in
fair value (gains)
|
|
|
49
|
|
|
11
|
|
|
10
|
|
Changes
in
fair value (losses)
|
|
|
(14
|
)
|
|
(16
|
)
|
|
(7
|
)
|
Other
additions
|
|
|
16
|
|
|
1
|
|
|
2
|
|
Disposals
|
|
|
(3
|
)
|
|
(1
|
)
|
|
-
|
|
Impairments
|
|
|
-
|
|
|
(18
|
)
|
|
-
|
|
December
31
|
|
|
168
|
|
|
116
|
|
|
144
|
|
18.
Trade
accounts payable
The
contractual
maturities of trade accounts payable are as follows, at December
31:
|
|
|
|
|
|
|
|
|
|
2006
(US$ million)
|
|
Total
|
|
0
- 90
days
|
|
90
-
180
days
|
|
180
days -
1
year
|
|
Trade
accounts payable
|
|
|
1,568
|
|
|
863
|
|
|
241
|
|
|
464
|
|
|
|
|
|
|
|
|
|
|
|
2005
(US$ million)
|
|
Total
|
|
0
- 90
days
|
|
90
-
180
days
|
|
180
days -
1
year
|
|
Trade
accounts payable
|
|
|
1,619
|
|
|
854
|
|
|
230
|
|
|
535
|
|
19.
Current
financial debts
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Receivables
factored with recourse
|
|
|
35
|
|
|
46
|
|
|
50
|
|
Commercial
Paper
|
|
|
-
|
|
|
-
|
|
|
147
|
|
Bank
and
other financial debt
|
|
|
104
|
|
|
204
|
|
|
224
|
|
Current
portion of non-current financial debts (Note 21)
|
|
|
4
|
|
|
264
|
|
|
2
|
|
Total
|
|
|
143
|
|
|
514
|
|
|
423
|
|
The
above balance
sheet values of current financial debt approximate the estimated fair value
due
to the short-term nature of these instruments.
The
weighted
average interest rate on the current bank and other financial debts, including
the current portion of non-current financial debts, was 8.3% per annum, 11.6%
per annum, and 9.6% per annum, in 2006, 2005 and 2004 respectively. The weighted
average interest rate includes the cost of financing emerging market
borrowings.
Syngenta
has a
committed, revolving, multi-currency, syndicated credit facility of US$1,200
million (the “Credit Facility”), which matures in 2013. As of December 31, 2006
Syngenta has no borrowing under this facility. The Credit Facility provides
that
the interest rate is based on either LIBOR or EURIBOR, depending upon the
currency of the underlying borrowing, plus a margin and mandatory costs. In
addition to interest payments, Syngenta is obligated to pay certain variable
commitment fees based upon the long-term credit rating ranging from 0.03% to
0.06% of the unused amount throughout the term of the facilities.
At
December 31,
2006, Syngenta had no Commercial Paper in issue under its Global Commercial
Paper program.
The
contractual
maturities of current financial debts as at December 31 are as
follows:
|
|
|
|
|
|
|
|
|
|
2006
(US$ million)
|
|
Total
|
|
0
- 90
days
|
|
90
-
180
days
|
|
180
days -
1
year
|
|
Current
financial debts
|
|
|
143
|
|
|
78
|
|
|
27
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
2005
(US$ million)
|
|
Total
|
|
0
- 90
days
|
|
90
-
180
days
|
|
180
days -
1
year
|
|
Current
financial debts
|
|
|
514
|
|
|
155
|
|
|
37
|
|
|
322
|
|
20.
Other
current liabilities
Other
current
liabilities consist of the following:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Accrued
short-term employee benefits
|
|
|
210
|
|
|
196
|
|
|
214
|
|
Taxes
other
than income taxes
|
|
|
73
|
|
|
99
|
|
|
95
|
|
Liabilities
to associates and joint ventures
|
|
|
26
|
|
|
31
|
|
|
38
|
|
Accrued
interest payable
|
|
|
28
|
|
|
26
|
|
|
29
|
|
Accrued
utility costs
|
|
|
24
|
|
|
14
|
|
|
34
|
|
Other
accrued
expenses
|
|
|
93
|
|
|
175
|
|
|
119
|
|
Social
security and pension contributions
|
|
|
52
|
|
|
64
|
|
|
67
|
|
Derivative
liabilities - hedging
financing exposures
|
|
|
26
|
|
|
40
|
|
|
24
|
|
- hedging
trading exposures
|
|
|
70
|
|
|
101
|
|
|
60
|
|
Other
payables
|
|
|
77
|
|
|
64
|
|
|
85
|
|
Total
|
|
|
679
|
|
|
810
|
|
|
765
|
|
The
maturities of
other current liabilities are as follows. For liabilities without a contractual
maturity date, the analysis represents estimated timing of cash
outflow.
|
|
|
|
|
|
|
|
|
|
2006
(US$ million)
|
|
Total
|
|
0
- 90
days
|
|
90
-
180
days
|
|
180
days -
1
year
|
|
Derivative
liabilities
|
|
|
66
|
|
|
57
|
|
|
4
|
|
|
5
|
|
Other
current
liabilities
|
|
|
583
|
|
|
223
|
|
|
126
|
|
|
234
|
|
Total
|
|
|
649
|
|
|
280
|
|
|
130
|
|
|
239
|
|
|
|
|
|
|
|
|
|
|
|
2005
(US$ million)
|
|
Total
|
|
0
- 90
days
|
|
90
-
180
days
|
|
180
days -
1
year
|
|
Derivative
liabilities
|
|
|
96
|
|
|
83
|
|
|
6
|
|
|
7
|
|
Other
current
liabilities
|
|
|
669
|
|
|
408
|
|
|
87
|
|
|
174
|
|
Total
|
|
|
765
|
|
|
491
|
|
|
93
|
|
|
181
|
|
Derivative
liabilities include US$30 million (2005: US$45 million) with maturities more
than 12 months after the balance sheet date.
21.
Non-current financial debts
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Unsecured
bond
issues
|
|
|
1,556
|
|
|
1,098
|
|
|
1,105
|
|
Liabilities
to banks and other financial institutions
|
|
|
12
|
|
|
12
|
|
|
12
|
|
Finance
lease
obligations
|
|
|
5
|
|
|
1
|
|
|
2
|
|
Total
(including current portion of non-current financial debt)
|
|
|
1,573
|
|
|
1,111
|
|
|
1,119
|
|
Less:
current
portion of non-current financial debt (Note 19)
|
|
|
(4
|
)
|
|
(264
|
)
|
|
(2
|
)
|
Total
|
|
|
1,569
|
|
|
847
|
|
|
1,117
|
|
The
weighted
average interest rate on the non-current bank and other financial debts was
5.9%
per annum, 5.3% per annum, and 5.3% per annum, in 2006, 2005 and 2004,
respectively.
The
weighted
average interest rate on the combined current and non-current bank and other
financial debts was 6.8% per annum, 8.3% per annum and 7.2% per annum in 2006,
2005 and 2004, respectively. The weighted average interest rate includes the
cost of financing emerging market borrowings.
On
July 10, 2001,
Syngenta issued €800 million 5-year Eurobonds with a coupon rate of 5.5%. At
issue, these liabilities had a value of US$677 million. Cross-currency swaps
were implemented at the time of issue to hedge the exchange movement between
the
Euro and the US dollar. On April 22, 2005, Syngenta repurchased €581 million of
this Eurobond for €628 million including a premium of €22 million and accrued
interest of €25 million. The equivalent proportion of the designated hedging
portfolio was unwound. The fair value of the swaps is included in the derivative
assets and liabilities shown in Notes 11 and 20. The remaining outstanding
amount was repaid on July 10, 2006. The designated hedging portfolio expired
at
the same time.
On
April 22, 2005,
Syngenta issued a new Eurobond of €500 million with a maturity of April 22, 2015
and a coupon rate of 4.125%. At issue these liabilities had a value of US$641
million. At the same time a new designated hedging portfolio was set up.
On
December 8,
2005, Syngenta issued US$250 million unsecured non-current Notes under a Note
Purchase Agreement in the US Private Placement Market. The maturity and coupon
rates of the tranches are set out below.
On
September 21,
2006, Syngenta issued a new €500 million Eurobond with a maturity of September
21, 2011 and a coupon rate of 4.125%. At issue these liabilities had a value
of
US$636 million. At the same time a new designated hedging portfolio was set
up.
The
two Eurobonds
that are currently outstanding have been issued under Syngenta’s US$2 billion
Euro Medium Term Note (EMTN) program, first signed in June 2003. The program
was
last updated on August 18, 2006 and is listed on the London Stock Exchange
and
SWX Swiss Exchange.
As
at December 31,
2006, the original and current carrying amounts and fair values of the bonds
and
US capital market issuances were as follows:
|
|
|
|
|
|
|
|
(US$
million)
|
|
Fair
Value
|
|
Carrying
amount
|
|
Value
at issue
|
|
4.125
Eurobond 2011
|
|
|
651
|
|
|
657
|
|
|
636
|
|
4.125%
Eurobond 2015
|
|
|
640
|
|
|
646
|
|
|
641
|
|
5.110%
US
private placement 2020
|
|
|
71
|
|
|
78
|
|
|
75
|
|
5.350%
US
private placement 2025
|
|
|
71
|
|
|
75
|
|
|
75
|
|
5.590%
US
private placement 2035
|
|
|
96
|
|
|
100
|
|
|
100
|
|
Total
|
|
|
1,529
|
|
|
1,556
|
|
|
1,527
|
|
All
non-current
debt ranks equally.
Terms
and
debt repayment schedule, including current and non-current financial
debts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
Total
|
|
1
year or less
|
|
1
- 2
years
|
|
2
- 3
years
|
|
3
- 4
years
|
|
4
- 5
years
|
|
5
- 10
years
|
|
10
-
20
years
|
|
20
-
30
years
|
|
4.125%
Eurobond 2011
|
|
|
657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
657
|
|
|
|
|
|
|
|
|
|
|
4.125%
Eurobond 2015
|
|
|
646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
646
|
|
|
|
|
|
|
|
Private
placement notes
|
|
|
253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153
|
|
|
100
|
|
Amounts
owing
to banks under various loan and overdraft facilities, in various
currencies and at various interest rates
|
|
|
116
|
|
|
105
|
|
|
1
|
|
|
1
|
|
|
-
|
|
|
-
|
|
|
9
|
|
|
-
|
|
|
-
|
|
Finance
lease
obligations
|
|
|
5
|
|
|
3
|
|
|
2
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Receivables
factored with recourse
|
|
|
35
|
|
|
35
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Total
|
|
|
1,712
|
|
|
143
|
|
|
3
|
|
|
1
|
|
|
-
|
|
|
657
|
|
|
655
|
|
|
153
|
|
|
100
|
|
Interest
paid on
long-term financial debt was US$56 million, US$14 million and US$60 million
in
2006, 2005 and 2004 respectively.
22.
Provisions
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Restructuring
provisions (Note 23)
|
|
|
247
|
|
|
203
|
|
|
273
|
|
Employee
benefits - pensions (Note 27)
|
|
|
138
|
|
|
133
|
|
|
148
|
|
- other
post-retirement benefits (Note 27)
|
|
|
38
|
|
|
38
|
|
|
39
|
|
- other
long-term employee benefits
|
|
|
65
|
|
|
64
|
|
|
60
|
|
Environmental
provisions (Note 30)
|
|
|
412
|
|
|
386
|
|
|
421
|
|
Provisions
for legal and product liability settlements
|
|
|
193
|
|
|
122
|
|
|
99
|
|
Other
provisions
|
|
|
82
|
|
|
80
|
|
|
88
|
|
Total
|
|
|
1,175
|
|
|
1,026
|
|
|
1,128
|
|
Current
portion of:
|
|
|
|
|
|
|
|
|
|
|
- restructuring
provisions
|
|
|
165
|
|
|
94
|
|
|
156
|
|
- employee
benefits
|
|
|
21
|
|
|
26
|
|
|
24
|
|
- environmental
provisions
|
|
|
63
|
|
|
43
|
|
|
36
|
|
- provisions
for legal and product liability settlements
|
|
|
14
|
|
|
19
|
|
|
10
|
|
- other
provisions
|
|
|
19
|
|
|
17
|
|
|
32
|
|
Total
current
provisions
|
|
|
282
|
|
|
199
|
|
|
258
|
|
Total
non-current provisions
|
|
|
893
|
|
|
827
|
|
|
870
|
|
Total
|
|
|
1,175
|
|
|
1,026
|
|
|
1,128
|
|
The
timing of
payment in respect of non-current provisions is, with few exceptions, not
contractually fixed and cannot be estimated with certainty.
In
some cases
Syngenta will seek reimbursement, most commonly in relation to environmental
issues where contamination may have been caused when a manufacturing site was
under previous ownership. Where there is judged to be sufficient certainty
of
recovery Syngenta has recognized a receivable for the reimbursement. At December
31, 2006, Syngenta recognized US$8 million (2005: US$20 million, 2004: US$21
million) in other financial assets and US$2 million (2005: US$4 million, 2004:
US$4 million) in other accounts receivable in respect of expected
reimbursements.
The
following table
analyzes the movement in provisions during 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
Balance
at
December
31, 2005
|
|
Charged
to
income
|
|
Release
of provisions credited to income
|
|
Acquisitions
|
|
Dis-counting
expense
|
|
Payments
|
|
Reclass-ifications
|
|
Translation
effects
|
|
Balance
at
December
31,
2006
|
|
Restructuring
provisions (Note 23)
|
|
|
203
|
|
|
235
|
|
|
(28
|
)
|
|
8
|
|
|
-
|
|
|
(173
|
)
|
|
(13
|
)
|
|
15
|
|
|
247
|
|
Employee
benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- pensions
(Note 27)
|
|
|
133
|
|
|
62
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(150
|
)
|
|
79
|
|
|
14
|
|
|
138
|
|
- other
post-retirement benefits
(Note 27)
|
|
|
38
|
|
|
9
|
|
|
|
|
|
-
|
|
|
-
|
|
|
(10
|
)
|
|
-
|
|
|
1
|
|
|
38
|
|
- other
long-term employee benefits
|
|
|
64
|
|
|
7
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(8
|
)
|
|
2
|
|
|
-
|
|
|
65
|
|
Environmental
provisions (Note 30)
|
|
|
386
|
|
|
14
|
|
|
(1
|
)
|
|
-
|
|
|
-
|
|
|
(36
|
)
|
|
30
|
|
|
19
|
|
|
412
|
|
Provisions
for legal and product liability settlements
|
|
|
122
|
|
|
63
|
|
|
(17
|
)
|
|
-
|
|
|
-
|
|
|
(9
|
)
|
|
29
|
|
|
5
|
|
|
193
|
|
Other
provisions
|
|
|
80
|
|
|
18
|
|
|
(5
|
)
|
|
-
|
|
|
-
|
|
|
(12
|
)
|
|
-
|
|
|
1
|
|
|
82
|
|
Total
|
|
|
1,026
|
|
|
408
|
|
|
(51
|
)
|
|
8
|
|
|
-
|
|
|
(398
|
)
|
|
127
|
|
|
55
|
|
|
1,175
|
|
Other
provisions
mainly comprise provisions for long-term contractual obligations.
Charges
in respect
of provisions in the Consolidated Cash Flow Statement includes the release
of
US$3 million of provision on other non-current receivables (Note 17).
23.
Restructuring provisions
|
|
|
|
|
|
|
|
(US$
million)
|
|
Employee
termination
costs
|
|
Other
third
party
cost
|
|
Total
|
|
January
1, 2004
|
|
|
145
|
|
|
117
|
|
|
262
|
|
Cash
payments
|
|
|
(93
|
)
|
|
(92
|
)
|
|
(185
|
)
|
Additions
charged to income
|
|
|
169
|
|
|
80
|
|
|
249
|
|
Releases
credited to income
|
|
|
(18
|
)
|
|
(10
|
)
|
|
(28
|
)
|
Discounting
expense
|
|
|
-
|
|
|
2
|
|
|
2
|
|
Reclassifications
|
|
|
(46
|
)
|
|
(4
|
)
|
|
(50
|
)
|
Translation
(gains)/losses net
|
|
|
15
|
|
|
8
|
|
|
23
|
|
December
31, 2004
|
|
|
172
|
|
|
101
|
|
|
273
|
|
Cash
payments
|
|
|
(93
|
)
|
|
(57
|
)
|
|
(150
|
)
|
Additions
charged to income
|
|
|
67
|
|
|
70
|
|
|
137
|
|
Releases
credited to income
|
|
|
(16
|
)
|
|
(7
|
)
|
|
(23
|
)
|
Discounting
expense
|
|
|
-
|
|
|
1
|
|
|
1
|
|
Reclassifications
|
|
|
-
|
|
|
(10
|
)
|
|
(10
|
)
|
Translation
(gains)/losses net
|
|
|
(18
|
)
|
|
(7
|
)
|
|
(25
|
)
|
December
31, 2005
|
|
|
112
|
|
|
91
|
|
|
203
|
|
Cash
payments
|
|
|
(72
|
)
|
|
(101
|
)
|
|
(173
|
)
|
Additions
charged to income
|
|
|
153
|
|
|
82
|
|
|
235
|
|
Releases
credited to income
|
|
|
(8
|
)
|
|
(20
|
)
|
|
(28
|
)
|
Additions
due
to acquisitions
|
|
|
-
|
|
|
8
|
|
|
8
|
|
Reclassifications
|
|
|
(5
|
)
|
|
(8
|
)
|
|
(13
|
)
|
Translation
(gains)/losses net
|
|
|
10
|
|
|
5
|
|
|
15
|
|
December
31, 2006
|
|
|
190
|
|
|
57
|
|
|
247
|
|
Restructuring
provisions and costs relate to business changes, which, in the opinion of
management, will have a material effect on the nature and focus of Syngenta’s
operations. For 2004 they relate to the Operational Efficiency Program announced
in February 2004 and to the later stages of the Syngenta business integration.
For 2005 they relate mainly to the Operational Efficiency Program and to the
integration of the Seeds businesses purchased in 2004. For 2006 further details
are provided in Note 7.
24.
Share
capital
The
number of
ordinary shares of par value CHF 2.30 (2005: 5.60; 2004: CHF 8.30) authorized,
issued and outstanding, and movements during the period, were as
follows:
|
|
|
|
|
|
|
|
|
|
2006
|
|
2005
|
|
2004
|
|
(Millions
of shares)
|
|
Shares
in
issue
|
|
Treasury
shares
held
|
|
Shares
in
issue
|
|
Treasury
shares
held
|
|
Shares
in
issue
|
|
Treasury
shares
held
|
|
As
at January
1
|
|
|
106.4
|
|
|
(7.1
|
)
|
|
112.6
|
|
|
(7.5
|
)
|
|
112.6
|
|
|
(10.9
|
)
|
(Purchase)/Sale
of shares in exchange for own equity instruments
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(4.5
|
)
|
|
-
|
|
|
4.5
|
|
Put
options
|
|
|
-
|
|
|
(3.3
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Cancellation
of treasury shares
|
|
|
(2.3
|
)
|
|
2.3
|
|
|
(6.2
|
)
|
|
6.2
|
|
|
-
|
|
|
-
|
|
Share
repurchase scheme
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2.3
|
)
|
|
-
|
|
|
(1.7
|
)
|
Issue
of
ordinary shares under employee share purchase and option
plans
|
|
|
-
|
|
|
1.5
|
|
|
-
|
|
|
1.0
|
|
|
-
|
|
|
0.6
|
|
As
at
December 31
|
|
|
104.1
|
|
|
(6.6
|
)
|
|
106.4
|
|
|
(7.1
|
)
|
|
112.6
|
|
|
(7.5
|
)
|
On
February 22,
2006, Syngenta granted one put option to shareholders for every share held.
Shareholders had the right to sell one share to Syngenta on May 23, 2006 for
every 30 options granted, for an exercise price of CHF 234. No premium was
payable by shareholders. At exercise, Syngenta repurchased 3,280,293 shares.
Syngenta has accounted for the option grant as a decrease in shareholders equity
and an increase in liabilities equal to the settlement amount on
exercise.
As
at December 31,
2006, Syngenta had no open options accounted for as equity instruments.
In
2004, Syngenta
entered into an agreement whereupon 4.5 million treasury shares were exchanged
for a zero strike price call option at a forward rate of CHF 86.25. On February
11, 2005, Syngenta received 4.5 million treasury shares in exchange for this
option. On July 22, 2005, these shares were cancelled following approval by
the
Annual General Meeting of Syngenta AG in April 2005.
In
2004, a written
call option to sell 4.5 million shares at a strike price of CHF 138, was granted
at a forward rate of CHF 86.25. On January 21, 2005, Syngenta entered into
an
additional option which effectively raised the strike price to CHF 158. The
premium paid for this additional option was less than US$1 million. These
options expired unexercised on February 11, 2005.
25.
Assets
held for sale
Assets
held for
sale at December 31, 2006 consist of a subsidiary in Australia and land and
buildings in Basel, Switzerland (2005: property, plant and equipment in
Australia; 2004: property, plant and equipment in various countries). The fair
value less costs to sell, of these assets has been determined from recent
transactions (2005 and 2004: by independent valuation). The initial impairments
recognized on these assets amounted to US$ nil million (2005: US$ nil; 2004:
US$22 million).
26.
Cash
flows
arising from change in net current assets
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Change
in
inventories
|
|
|
(6
|
)
|
|
(191
|
)
|
|
(191
|
)
|
Change
in
trade and other accounts receivable and other net current
assets
|
|
|
81
|
|
|
(280
|
)
|
|
32
|
|
Change
in
trade and other accounts payable
|
|
|
(211
|
)
|
|
261
|
|
|
414
|
|
Total
|
|
|
(136
|
)
|
|
(210
|
)
|
|
255
|
|
27.
Post-employment benefits
Syngenta
has, apart
from the legally required social security schemes, numerous independent pension
plans. Many of these plans are “defined contribution” where the company
contribution and resulting benefit costs are a set percentage of employees’ pay.
However, the majority of employees are covered by “defined benefit” plans where
benefits are based on employees’ length of service and pensionable pay. All of
the major plans are funded through legally separate trustee administered funds.
The cash funding of the plans, which may from time to time involve special
payments, is designed, in consultation with independent qualified actuaries,
to
ensure that present and future contributions should be sufficient to meet future
liabilities.
The
defined benefit
obligations and related assets of all major plans are re-appraised yearly by
independent actuaries. Plan assets are recorded at fair values.
Syngenta’s
main
defined benefit pension plans are in the UK, Switzerland and the USA. The
defined benefit section of Syngenta’s UK pension fund was closed to new members
with effect from January 1, 2002, but the majority of members still have defined
benefit rights based on final pensionable pay. At retirement date, members
have
the right to take up to 25% of the value of their benefits as a lump sum. The
balance must be paid as an annuity. The Trustee is required by UK law and the
fund rules to increase pensions in payment and accrued deferred pension rights
by the lower of 5% and price inflation, as measured by the UK Retail Price
Index
(RPI). Employer contributions must be agreed between Syngenta and the Trustee
at
each statutory valuation date, which is at least every three years, and remain
binding until re-assessed in the following valuation. The solvency of the fund,
defined as its ability to pay benefits as they fall due, is guaranteed by the
sponsoring subsidiary, Syngenta Ltd., and is counter-guaranteed by Syngenta
AG.
As of April 6, 2006, UK pension legislation changed so as to give members of
pension funds the opportunity to take a greater proportion of their retirement
benefits in the form of a lump sum immediately on retiring, which is tax-free
for the employee. Syngenta has assumed that members retiring in future years
will take the lump sum option to the same extent as did members who have retired
in 2006. Under the actuarial assumptions used to value the Syngenta UK Pension
Fund, this reduces the benefit obligation by US$45 million. This has been
accounted for as a settlement gain in the 2006 consolidated income statement.
US$150 million of liabilities and plan assets were transferred to the plan
from
the AstraZeneca UK Pension fund during 2006, completing the separation of
Syngenta’s UK pension arrangements from AstraZeneca plc.
Syngenta’s
Swiss
pension plan was amended in April 2004 to a cash balance benefit formula. Whilst
it continues to be accounted for as a defined benefit plan, there is increased
sharing of risks with the employee members against a one-time transition charge
of US$60 million representing past service cost for which the benefit vested
immediately. This charge was recorded within restructuring and impairment in
the
2004 income statement. The plan change reduces the expense related to early
retirement, and reduces Syngenta’s exposure to future pension fund investment
returns. This created a past service gain of US$38 million, which will vest over
the estimated remaining future employee service period of approximately 12
years, and is being amortized to profit or loss by the straight-line method
over
this period. Employer contributions are defined in the pension
fund
rules in terms
of an age related sliding scale of percentages of pay. Under Swiss law, Syngenta
AG guarantees the vested benefit amount as confirmed annually to members.
Interest may be added to member balances at the Trustees’ discretion. At
retirement date, members have the right to take 25% of their retirement benefit
as a lump sum, with the balance converted to a fixed annuity at the rates
defined in the fund rules. The Trustees may increase the annuity at their
discretion. Syngenta has included an estimated rate of annuity increases into
its valuation of the benefit obligation.
Syngenta’s
main US
defined benefit pension plan offers members the choice of taking all their
retirement benefits, which are based on the average pay of the final ten years
service, as a lump sum or as a fixed annuity at retirement date. Employer
contributions are made, based on US pension funding regulations, in the form
of
lump sums. In these financial statements, the benefit obligation has been valued
assuming that current employees will take the lump sum option at normal
retirement or leaving date. Under current market conditions, this values the
benefit obligation at a higher amount than assuming the annuity option is
taken.
On
January 1, 2005,
Syngenta’s Dutch pension plan was amended from a final salary to a career
average salary benefit formula, which reduced the benefit obligation by US$11
million. Syngenta has accounted for this as a curtailment, recognizing the
US$11
million less proportional actuarial losses of US$1 million, as a US$10 million
reduction in 2005 benefit expense.
In
December 2005,
Syngenta made special lump sum contributions into its UK and US pension plans,
totalling US$350 million. This amount is included in the employer contributions
of US$520 million shown for 2005.
A
summary of the
status of the main independent defined benefit plans at December 31, 2006,
2005
and 2004 using actuarial assumptions determined in accordance with IAS 19
(revised 2004) is given below.
The
following
tables provide a reconciliation of benefit obligations, plan assets and funded
status of the defined benefit pension plans, and the other post-retirement
benefits.
|
|
|
|
|
|
|
|
Pension
|
|
Other
post-retirement benefits
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
2006
|
|
2005
|
|
2004
|
|
Benefit
obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
January
1
|
|
|
3,936
|
|
|
3,864
|
|
|
3,364
|
|
|
170
|
|
|
170
|
|
|
177
|
|
Current
Service cost
|
|
|
134
|
|
|
107
|
|
|
126
|
|
|
2
|
|
|
2
|
|
|
2
|
|
Interest
cost
|
|
|
185
|
|
|
166
|
|
|
176
|
|
|
9
|
|
|
10
|
|
|
10
|
|
Curtailments
and settlements
|
|
|
45
|
|
|
(17
|
)
|
|
14
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Plan
amendments
|
|
|
(45
|
)
|
|
-
|
|
|
25
|
|
|
(2
|
)
|
|
(2
|
)
|
|
(3
|
)
|
Actuarial
(gain)/loss
|
|
|
(17
|
)
|
|
368
|
|
|
230
|
|
|
(6
|
)
|
|
2
|
|
|
(7
|
)
|
Translation
effects
|
|
|
376
|
|
|
(392
|
)
|
|
254
|
|
|
1
|
|
|
(2
|
)
|
|
1
|
|
Benefit
payments
|
|
|
(217
|
)
|
|
(158
|
)
|
|
(191
|
)
|
|
(10
|
)
|
|
(10
|
)
|
|
(10
|
)
|
Acquired
in
business combinations
|
|
|
-
|
|
|
(1
|
)
|
|
10
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Disposals
of
subsidiaries
|
|
|
-
|
|
|
-
|
|
|
(163
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
Other
movements
|
|
|
151
|
|
|
(1
|
)
|
|
19
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Benefit
obligation at December 31
|
|
|
4,548
|
|
|
3,936
|
|
|
3,864
|
|
|
164
|
|
|
170
|
|
|
170
|
|
Of
which
arising from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded
plans
|
|
|
4,380
|
|
|
3,786
|
|
|
3,734
|
|
|
145
|
|
|
151
|
|
|
151
|
|
Wholly
Unfunded plans
|
|
|
168
|
|
|
150
|
|
|
130
|
|
|
19
|
|
|
19
|
|
|
19
|
|
|
|
|
|
|
|
|
|
Pension
|
|
Other
post-retirement benefits
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
2006
|
|
2005
|
|
2004
|
|
Plan
assets at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
January
1
|
|
|
3,507
|
|
|
3,184
|
|
|
2,840
|
|
|
95
|
|
|
91
|
|
|
50
|
|
Actual
return
on plan assets
|
|
|
264
|
|
|
310
|
|
|
247
|
|
|
9
|
|
|
4
|
|
|
5
|
|
Curtailments
and settlements
|
|
|
-
|
|
|
(29
|
)
|
|
(22
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
Translation
effects
|
|
|
334
|
|
|
(343
|
)
|
|
222
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Employer
contributions
|
|
|
181
|
|
|
520
|
|
|
187
|
|
|
11
|
|
|
10
|
|
|
46
|
|
Employee
contributions
|
|
|
26
|
|
|
24
|
|
|
25
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Benefit
payments
|
|
|
(217
|
)
|
|
(158
|
)
|
|
(191
|
)
|
|
(10
|
)
|
|
(10
|
)
|
|
(10
|
)
|
Acquired
in
business combinations
|
|
|
-
|
|
|
-
|
|
|
9
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Disposals
of
subsidiaries
|
|
|
-
|
|
|
-
|
|
|
(170
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
Other
movements
|
|
|
154
|
|
|
(1
|
)
|
|
37
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Plan
assets at fair value at December 31
|
|
|
4,249
|
|
|
3,507
|
|
|
3,184
|
|
|
105
|
|
|
95
|
|
|
91
|
|
|
|
|
|
|
|
|
|
Pension
|
|
Other
post-retirement benefits
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
2006
|
|
2005
|
|
2004
|
|
Funded
status
|
|
|
(299
|
)
|
|
(429
|
)
|
|
(680
|
)
|
|
(59
|
)
|
|
(75
|
)
|
|
(79
|
)
|
Unrecognized
actuarial (gain)/loss
|
|
|
730
|
|
|
763
|
|
|
610
|
|
|
36
|
|
|
54
|
|
|
59
|
|
Unrecognized
past service costs/(gain)
|
|
|
(29
|
)
|
|
(30
|
)
|
|
(40
|
)
|
|
(14
|
)
|
|
(17
|
)
|
|
(19
|
)
|
Limitation
on
recognition of surplus due to uncertainty of obtaining future
benefits
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Prepaid/(accrued)
benefit cost
|
|
|
402
|
|
|
304
|
|
|
(110
|
)
|
|
(37
|
)
|
|
(38
|
)
|
|
(39
|
)
|
Amounts
recognized in the balance sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid
benefit costs (Note 17)
|
|
|
616
|
|
|
497
|
|
|
122
|
|
|
|
|
|
-
|
|
|
-
|
|
Accrued
benefit liability
|
|
|
(214
|
)
|
|
(193
|
)
|
|
(232
|
)
|
|
(37
|
)
|
|
(38
|
)
|
|
(39
|
)
|
Net
amount recognized
|
|
|
402
|
|
|
304
|
|
|
(110
|
)
|
|
(37
|
)
|
|
(38
|
)
|
|
(39
|
)
|
Of
the accrued
benefit liability for pensions of US$214 million at December 31, 2006, US$138
million is included in Note 22 as pension provisions and US$76 million as
restructuring provisions (2005: US$133 million as pension and US$60 million
as
restructuring; 2004: US$148 million as pension and US$84 million as
restructuring).
Syngenta’s
best
estimate of the benefit payments to be made in the following future periods
is
given in the table below. Actual payments may differ from those shown, because
of future events, including members’ choice of benefit options as described
above.
|
|
|
|
|
|
|
|
(US$
million)
|
|
Pensions
|
|
Other
post-retirement
benefits
|
|
Total
|
|
2007
|
|
|
200
|
|
|
11
|
|
|
211
|
|
2008
|
|
|
198
|
|
|
12
|
|
|
210
|
|
2009
|
|
|
194
|
|
|
12
|
|
|
206
|
|
2010
|
|
|
208
|
|
|
12
|
|
|
220
|
|
2011
|
|
|
306
|
|
|
13
|
|
|
319
|
|
Years
2012 -
2016
|
|
|
1,249
|
|
|
67
|
|
|
1,316
|
|
Total
2007 - 2016
|
|
|
2,355
|
|
|
127
|
|
|
2,482
|
|
Syngenta
determines
the expected long-term rate of return on pension plan assets separately for
each
asset category held within each of the major defined benefit pension funds
which
it sponsors. The rate of return assumption for each fund is determined after
taking professional advice from independent actuaries or investment advisers,
taking into account the investment performance benchmarks set by the governing
body of the pension fund. Historical rates of return and the investment outlook
for the future are both considered.
Syngenta’s
best
estimate of employer contributions to be paid to defined benefit plans in 2007
is US$190 million, including US$50 million of contributions to enhance benefits
of employees leaving due to restructuring initiatives. Actual payments could
differ materially from the above estimate if any new funding regulations or
laws
are enacted or due to business and market conditions during 2007.
The
expected
long-term rates of return on the assets and the fair values of the assets and
liabilities of the major defined benefit pension schemes, together with
aggregated data for other defined benefit schemes in the Group, are as follows.
Expected rates of return at December 31, 2006, are provisional
estimates.
|
|
|
|
|
|
|
|
|
|
|
|
|
Switzerland
|
|
UK
|
|
USA
|
|
Other plans
|
|
Group
|
|
|
|
Expected
rate
of
return
|
|
Fair
value
|
|
Expected
rate
of
return
|
|
Fair
value
|
|
Expected
rate
of
return
|
|
Fair
value
|
|
Fair
value
|
|
Fair
value
|
|
|
|
At
December
31, 2006
|
|
% |
|
US$m
|
|
% |
|
US$m%
|
|
% |
|
US$m
|
|
US$m
|
|
US$m
|
|
%
|
|
Equities
|
|
|
7.5
|
|
|
312
|
|
|
7.0
|
|
|
825
|
|
|
8.5
|
|
|
187
|
|
|
55
|
|
|
1,379
|
|
|
32
|
|
Property
|
|
|
5.0
|
|
|
172
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
172
|
|
|
4
|
|
Bonds
|
|
|
3.6
|
|
|
551
|
|
|
4.7
|
|
|
863
|
|
|
6.0
|
|
|
278
|
|
|
114
|
|
|
1,806
|
|
|
43
|
|
Other
assets
|
|
|
3.7
|
|
|
183
|
|
|
6.0
|
|
|
512
|
|
|
8.5
|
|
|
71
|
|
|
11
|
|
|
777
|
|
|
18
|
|
Cash
and cash
equivalents
|
|
|
1.0
|
|
|
34
|
|
|
5.0
|
|
|
24
|
|
|
3.5
|
|
|
56
|
|
|
1
|
|
|
115
|
|
|
3
|
|
Fair
value of
assets
|
|
|
4.7
|
|
|
1,252
|
|
|
5.8
|
|
|
2,224
|
|
|
7.25
|
|
|
592
|
|
|
181
|
|
|
4,249
|
|
|
100
|
|
Benefit
obligation
|
|
|
|
|
|
(1,273
|
)
|
|
|
|
|
(2,338
|
)
|
|
|
|
|
(612
|
)
|
|
(325
|
)
|
|
(4,548
|
)
|
|
|
|
Funded
status
|
|
|
|
|
|
(21
|
)
|
|
|
|
|
(114
|
)
|
|
|
|
|
(20
|
)
|
|
(144
|
)
|
|
(299
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Switzerland
|
|
UK
|
|
USA
|
|
Other
plans
|
|
Group
|
|
|
|
Expected
rate
of
return
|
|
Fair
value
|
|
Expected
rate
of
return
|
|
Fair
value
|
|
Expected
rate
of
return
|
|
Fair
value
|
|
Fair
value
|
|
Fair
value
|
|
|
|
At
December
31, 2005
|
|
% |
|
US$m
|
|
% |
|
US$m
|
|
% |
|
US$m
|
|
US$m
|
|
US$m
|
|
% |
|
Equities
|
|
|
7.5
|
|
|
301
|
|
|
7.0
|
|
|
493
|
|
|
8.5
|
|
|
158
|
|
|
49
|
|
|
1,001
|
|
|
29
|
|
Property
|
|
|
5.0
|
|
|
156
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
156
|
|
|
4
|
|
Bonds
|
|
|
3.6
|
|
|
493
|
|
|
4.3
|
|
|
810
|
|
|
6.0
|
|
|
343
|
|
|
94
|
|
|
1,740
|
|
|
50
|
|
Other
assets
|
|
|
3.7
|
|
|
110
|
|
|
6.0
|
|
|
427
|
|
|
8.5
|
|
|
55
|
|
|
18
|
|
|
610
|
|
|
17
|
|
Fair
value of
assets
|
|
|
4.8
|
|
|
1,060
|
|
|
5.5
|
|
|
1,730
|
|
|
7.2
|
|
|
556
|
|
|
161
|
|
|
3,507
|
|
|
100
|
|
Benefit
obligation
|
|
|
|
|
|
(1,152
|
)
|
|
|
|
|
(1,875
|
)
|
|
|
|
|
(623
|
)
|
|
(286
|
)
|
|
(3,936
|
)
|
|
|
|
Funded
status
|
|
|
|
|
|
(92
|
)
|
|
|
|
|
(145
|
)
|
|
|
|
|
(67
|
)
|
|
(125
|
)
|
|
(429
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Switzerland
|
|
UK
|
|
USA
|
|
Other
plans
|
|
Group
|
|
|
|
Expected
rate
of
return
|
|
Fair
value
|
|
Expected
rate
of
return
|
|
Fair
value
|
|
Expected
rate
of
return
|
|
Fair
value
|
|
Fair
value
|
|
Fair
value
|
|
|
|
At
December
31, 2004
|
|
% |
|
US$m
|
|
% |
|
US$m
|
|
% |
|
US$m
|
|
US$m
|
|
US$m
|
|
% |
|
Equities
|
|
|
7.0
|
|
|
305
|
|
|
7.0
|
|
|
510
|
|
|
8.5
|
|
|
173
|
|
|
50
|
|
|
1,038
|
|
|
33
|
|
Property
|
|
|
4.5
|
|
|
136
|
|
|
-
|
|
|
-
|
|
|
8.0
|
|
|
-
|
|
|
-
|
|
|
136
|
|
|
4
|
|
Bonds
|
|
|
4.5
|
|
|
490
|
|
|
4.9
|
|
|
824
|
|
|
6.0
|
|
|
180
|
|
|
95
|
|
|
1,589
|
|
|
50
|
|
Other
assets
|
|
|
1.5
|
|
|
159
|
|
|
3.5
|
|
|
180
|
|
|
8.5
|
|
|
39
|
|
|
43
|
|
|
421
|
|
|
13
|
|
Fair
value of
assets
|
|
|
5.0
|
|
|
1,090
|
|
|
5.5
|
|
|
1,514
|
|
|
7.5
|
|
|
392
|
|
|
188
|
|
|
3,184
|
|
|
100
|
|
Benefit
obligation
|
|
|
|
|
|
(1,206
|
)
|
|
|
|
|
(1,759
|
)
|
|
|
|
|
(581
|
)
|
|
(318
|
)
|
|
(3,864
|
)
|
|
|
|
Funded
status
|
|
|
|
|
|
(116
|
)
|
|
|
|
|
(245
|
)
|
|
|
|
|
(189
|
)
|
|
(130
|
)
|
|
(680
|
)
|
|
|
|
There
are no
significant post-retirement healthcare plans in countries other than the USA.
The expected long-term rates of return and the fair value of the assets and
liabilities for post-retirement healthcare plans are as
follows:
|
|
|
|
|
|
|
|
|
|
2006
|
|
2005
|
|
2004
|
|
|
|
Expected
rate
of
return
|
|
Fair
value
|
|
Expected
rate
of
return
|
|
Fair
value
|
|
Expected
rate
of
return
|
|
Fair
value
|
|
At
December
31,
|
|
% |
|
US$m
|
|
% |
|
US$m
|
|
% |
|
US$m
|
|
Equities
|
|
|
8.0
|
|
|
60
|
|
|
8.0
|
|
|
52
|
|
|
8.0
|
|
|
45
|
|
Property
|
|
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
|
-
|
|
Bonds
|
|
|
5.75
|
|
|
45
|
|
|
5.75
|
|
|
43
|
|
|
5.75
|
|
|
41
|
|
Other
assets
|
|
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
3.0
|
|
|
5
|
|
Fair
value of
assets
|
|
|
6.25
|
|
|
105
|
|
|
6.75
|
|
|
95
|
|
|
6.75
|
|
|
91
|
|
Benefit
obligation
|
|
|
|
|
|
(164
|
)
|
|
|
|
|
(170
|
)
|
|
|
|
|
(170
|
)
|
Funded
status
|
|
|
|
|
|
(59
|
)
|
|
|
|
|
(75
|
)
|
|
|
|
|
(79
|
)
|
The
following table
provides an analysis of the benefit costs recorded in the consolidated income
statement for the defined benefit pension and other post-retirement benefit
plans.
|
|
|
|
|
|
|
|
Pension
|
|
Other
post-retirement benefits
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
2006
|
|
2005
|
|
2004
|
|
Benefit
cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
service cost
|
|
|
134
|
|
|
107
|
|
|
126
|
|
|
2
|
|
|
2
|
|
|
2
|
|
Interest
cost
|
|
|
185
|
|
|
166
|
|
|
176
|
|
|
9
|
|
|
10
|
|
|
10
|
|
Expected
return on plan assets
|
|
|
(215
|
)
|
|
(161
|
)
|
|
(172
|
)
|
|
(6
|
)
|
|
(6
|
)
|
|
(3
|
)
|
Employee
contributions
|
|
|
(26
|
)
|
|
(24
|
)
|
|
(25
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
Amortization
of actuarial loss
|
|
|
32
|
|
|
19
|
|
|
16
|
|
|
9
|
|
|
9
|
|
|
8
|
|
Effect
of
limitation on recognition of surplus
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Past
service
cost
|
|
|
(50
|
)
|
|
8
|
|
|
65
|
|
|
(5
|
)
|
|
(5
|
)
|
|
(3
|
)
|
Curtailments
and settlements
|
|
|
50
|
|
|
10
|
|
|
35
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Net
periodic benefit cost
|
|
|
110
|
|
|
125
|
|
|
221
|
|
|
9
|
|
|
10
|
|
|
14
|
|
The
defined benefit
obligation, plan assets, funded status and experience adjustments compared
to
the actuarial assumptions for the years 2002 to 2006 are as
follows:
Pension
|
|
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
2002
|
|
Benefit
obligation
|
|
|
(4,548
|
)
|
|
(3,936
|
)
|
|
(3,864
|
)
|
|
(3,364
|
)
|
|
(2,849
|
)
|
Plan
assets
|
|
|
4,249
|
|
|
3,507
|
|
|
3,184
|
|
|
2,840
|
|
|
2,287
|
|
Funded
surplus/(deficit)
|
|
|
(299
|
)
|
|
(429
|
)
|
|
(680
|
)
|
|
(524
|
)
|
|
(562
|
)
|
Experience
adjustments (Increasing)/reducing plan liabilities
|
|
|
17
|
|
|
(368
|
)
|
|
(230
|
)
|
|
(60
|
)
|
|
(142
|
)
|
Experience
adjustments on plan assets: actual returns greater(less) than
expected
|
|
|
49
|
|
|
149
|
|
|
75
|
|
|
149
|
|
|
(358
|
)
|
Total
of experience adjustments
|
|
|
66
|
|
|
(219
|
)
|
|
(155
|
)
|
|
89
|
|
|
(500
|
)
|
Post-retirement
medical benefits
|
|
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
2002
|
|
Benefit
obligation
|
|
|
(164
|
)
|
|
(170
|
)
|
|
(170
|
)
|
|
(177
|
)
|
|
(138
|
)
|
Plan
assets
|
|
|
105
|
|
|
95
|
|
|
91
|
|
|
50
|
|
|
-
|
|
Funded
surplus/(deficit)
|
|
|
(59
|
)
|
|
(75
|
)
|
|
(79
|
)
|
|
(127
|
)
|
|
(138
|
)
|
Experience
adjustments (Increasing)/reducing plan liabilities
|
|
|
6
|
|
|
(2
|
)
|
|
7
|
|
|
(35
|
)
|
|
(21
|
)
|
Experience
adjustments on plan assets: actual returns greater/(less) than
expected
|
|
|
3
|
|
|
(2
|
)
|
|
2
|
|
|
-
|
|
|
-
|
|
Total
of experience adjustments
|
|
|
9
|
|
|
(4
|
)
|
|
9
|
|
|
(35
|
)
|
|
(21
|
)
|
In
some Syngenta
operations, employees are covered by defined contribution plans for pensions.
Syngenta contributions to these plans were as follows:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Defined
contribution benefit cost
|
|
|
27
|
|
|
27
|
|
|
25
|
|
The
following
tables give the weighted-average assumptions used to calculate the benefit
cost
and benefit obligation for defined benefit plans:
|
|
|
|
|
|
|
|
Pension
|
|
Other
post-retirement benefits
|
|
Weighted-average
assumptions:
|
|
2006
|
|
2005
|
|
2004
|
|
2006
|
|
2005
|
|
2004
|
|
benefit
cost
for the year ended December 31%
|
|
% |
|
% |
|
% |
|
% |
|
% |
|
|
|
Discount
rate
|
|
|
4.2
|
|
|
4.8
|
|
|
5.0
|
|
|
5.5
|
|
|
5.75
|
|
|
6.2
|
|
Rate
of
compensation increase
|
|
|
3.0
|
|
|
3.0
|
|
|
3.0
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Expected
return on plan assets
|
|
|
5.6
|
|
|
5.5
|
|
|
5.7
|
|
|
6.75
|
|
|
6.75
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Pension
|
|
Other
post-retirement benefits
|
|
Weighted-average
assumptions:
|
|
2006
|
|
2005
|
|
2004
|
|
2006
|
|
2005
|
|
2004
|
|
benefit
obligation for the year ended December 31%
|
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
|
Discount
rate
|
|
|
4.5
|
|
|
4.2
|
|
|
4.8
|
|
|
5.75
|
|
|
5.5
|
|
|
5.7
|
|
Rate
of
compensation increase
|
|
|
3.0
|
|
|
3.0
|
|
|
3.0
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Mortality
assumptions are discussed in Note 2 above under “critical accounting
estimates”.
Other
post-retirement benefits
The
assumed
healthcare cost trend rate at December 31, 2006 was 8%, decreasing in each
successive year from 2007 onwards, to reach an ultimate rate of 5% in
2012.
The
assumed
healthcare cost trend rate at December 31, 2005 was 9% decreasing in each
successive year from 2006 onwards, to reach an ultimate rate of 5% in 2012.
The
assumed
healthcare cost trend rate at December 31, 2004 was 9%, decreasing in each
successive year from 2005 onwards, to reach an ultimate rate of 5% in
2012.
A
one-percentage-point change in the assumed healthcare cost trend rates compared
to those used for 2006 would have the following effects:
|
|
|
|
|
|
(US$
million)
|
|
1%
point
increase
|
|
1%
point
decrease
|
|
Effects
on
total of service and interest cost components
|
|
|
1
|
|
|
(1
|
)
|
Effect
on
post-retirement benefit obligations
|
|
|
14
|
|
|
(12
|
)
|
28.
Employee share participation plans
Employee
and
management share participation plans exist as follows. All plans are
equity-settled except where stated.
Syngenta
Long-Term Incentive Plan (Stock Options)
In
2000, the
Syngenta Long-Term Incentive Plan (Stock Options), in the past called the
Syngenta Executive Stock Option Plan, was introduced to provide selected
executives, key employees of Syngenta and members of the Board of Directors
(until 2005), with an opportunity to obtain the right to purchase shares of
Syngenta. The grant of options regarding Syngenta shares is at the discretion
of
the Compensation Committee, whose members are appointed by the Board of
Directors of Syngenta. The following table sets out share option activity under
this plan during 2006, 2005 and 2004, including the equivalent American
Depository Shares (ADS) that are offered to Syngenta employees in the USA,
and
summarizes information about share options outstanding at December 31, 2006,
2005 and 2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
price
CHF
|
|
Outstanding
at
January
1
|
|
Granted
|
|
Exercised
|
|
Forfeited
|
|
Outstanding
at
December
31
|
|
Exercisable
|
|
Remaining
contractual
life
(years)
|
|
Year
to
December
31,
2004
|
|
|
76.5
|
|
|
431,900
|
|
|
-
|
|
|
(197,700
|
)
|
|
-
|
|
|
234,200
|
|
|
234,200
|
|
|
6
|
|
|
|
|
83.7
|
|
|
341,400
|
|
|
-
|
|
|
(166,040
|
)
|
|
1,500
|
|
|
176,860
|
|
|
176,860
|
|
|
6.25
|
|
|
|
|
98.0
|
|
|
622,856
|
|
|
-
|
|
|
(55,447
|
)
|
|
(30,527
|
)
|
|
536,882
|
|
|
44,003
|
|
|
7.25
|
|
|
|
|
98.0
|
|
|
337,113
|
|
|
-
|
|
|
(6,523
|
)
|
|
(11,999
|
)
|
|
318,591
|
|
|
32,798
|
|
|
8.25
|
|
|
|
|
59.7
|
|
|
654,760
|
|
|
-
|
|
|
(37,855
|
)
|
|
(39,947
|
)
|
|
576,958
|
|
|
42,458
|
|
|
8.25
|
|
|
|
|
59.7
|
|
|
691,368
|
|
|
-
|
|
|
(18,767
|
)
|
|
(19,834
|
)
|
|
652,767
|
|
|
27,714
|
|
|
9.25
|
|
|
|
|
89.3
|
|
|
-
|
|
|
522,875
|
|
|
-
|
|
|
(11,886
|
)
|
|
510,989
|
|
|
18,935
|
|
|
9.25
|
|
|
|
|
89.3
|
|
|
-
|
|
|
539,768
|
|
|
(4,751
|
)
|
|
(2,402
|
)
|
|
532,615
|
|
|
2,402
|
|
|
10.25
|
|
Total
for year to
December
31, 2004
|
|
|
|
|
|
3,079,397
|
|
|
1,062,643
|
|
|
(487,083
|
)
|
|
(115,095
|
)
|
|
3,539,862
|
|
|
579,370
|
|
|
|
|
Year
to
December
31,
2005
|
|
|
76.5
|
|
|
234,200
|
|
|
-
|
|
|
(177,100
|
)
|
|
-
|
|
|
57,100
|
|
|
57,100
|
|
|
5
|
|
|
|
|
83.7
|
|
|
176,860
|
|
|
-
|
|
|
(105,485
|
)
|
|
-
|
|
|
71,375
|
|
|
71,375
|
|
|
5.25
|
|
|
|
|
98.0
|
|
|
536,882
|
|
|
-
|
|
|
(271,893
|
)
|
|
(3,142
|
)
|
|
261,847
|
|
|
261,847
|
|
|
6.25
|
|
|
|
|
98.0
|
|
|
318,591
|
|
|
-
|
|
|
(181,522
|
)
|
|
(7,979
|
)
|
|
129,090
|
|
|
129,090
|
|
|
7.25
|
|
|
|
|
59.7
|
|
|
576,958
|
|
|
-
|
|
|
(38,931
|
)
|
|
(19,536
|
)
|
|
518,491
|
|
|
26,359
|
|
|
7.25
|
|
|
|
|
59.7
|
|
|
652,767
|
|
|
-
|
|
|
(37,729
|
)
|
|
(32,514
|
)
|
|
582,524
|
|
|
17,027
|
|
|
8.25
|
|
|
|
|
89.3
|
|
|
510,989
|
|
|
-
|
|
|
(8,570
|
)
|
|
(16,611
|
)
|
|
485,808
|
|
|
18,783
|
|
|
8.25
|
|
|
|
|
89.3
|
|
|
532,615
|
|
|
-
|
|
|
(761
|
)
|
|
(21,550
|
)
|
|
510,304
|
|
|
6,196
|
|
|
9.25
|
|
|
|
|
127.4
|
|
|
-
|
|
|
435,762
|
|
|
(503
|
)
|
|
(6,071
|
)
|
|
429,188
|
|
|
8,383
|
|
|
10.25
|
|
Total
for year to
December
31, 2005
|
|
|
|
|
|
3,539,862
|
|
|
435,762
|
|
|
(822,494
|
)
|
|
(107,403
|
)
|
|
3,045,727
|
|
|
596,160
|
|
|
|
|
Year
to
December
31,
2006
|
|
|
76.5
|
|
|
57,100
|
|
|
-
|
|
|
(29,500
|
)
|
|
-
|
|
|
27,600
|
|
|
27,600
|
|
|
4
|
|
|
|
|
83.7
|
|
|
71,375
|
|
|
-
|
|
|
(51,075
|
)
|
|
-
|
|
|
20,300
|
|
|
20,300
|
|
|
4.25
|
|
|
|
|
98.0
|
|
|
261,847
|
|
|
-
|
|
|
(175,732
|
)
|
|
(7
|
)
|
|
86,108
|
|
|
86,108
|
|
|
5.25
|
|
|
|
|
98.0
|
|
|
129,090
|
|
|
-
|
|
|
(88,018
|
)
|
|
(537
|
)
|
|
40,535
|
|
|
40,535
|
|
|
6.25
|
|
|
|
|
59.7
|
|
|
518,491
|
|
|
-
|
|
|
(315,510
|
)
|
|
(5,490
|
)
|
|
197,491
|
|
|
197,491
|
|
|
6.25
|
|
|
|
|
59.7
|
|
|
582,524
|
|
|
-
|
|
|
(440,967
|
)
|
|
-
|
|
|
141,557
|
|
|
141,557
|
|
|
7.25
|
|
|
|
|
89.3
|
|
|
485,808
|
|
|
-
|
|
|
(30,550
|
)
|
|
(21,104
|
)
|
|
434,154
|
|
|
18,161
|
|
|
7.25
|
|
|
|
|
89.3
|
|
|
510,304
|
|
|
-
|
|
|
(23,669
|
)
|
|
(12,556
|
)
|
|
474,079
|
|
|
7,215
|
|
|
8.25
|
|
|
|
|
127.4
|
|
|
429,188
|
|
|
-
|
|
|
(12,735
|
)
|
|
(17,087
|
)
|
|
399,366
|
|
|
6,337
|
|
|
9.25
|
|
|
|
|
185.0
|
|
|
-
|
|
|
326,255
|
|
|
(4,040
|
)
|
|
(6,370
|
)
|
|
315,845
|
|
|
3,615
|
|
|
10.25
|
|
Total
for year to
December
31, 2006
|
|
|
|
|
|
3,045,727
|
|
|
326,255
|
|
|
(1,171,796
|
)
|
|
(63,151
|
)
|
|
2,137,035
|
|
|
548,919
|
|
|
|
|
Aggregate
intrinsic value of fully vested options as at December 31,
2006
|
|
69.1
|
|
US$
million
|
(all
fully vested
options are exercisable)
The
exercise prices
are equal to the weighted average share price on the Swiss Stock Exchange (SWX)
for the five business days preceding the grant date, or the share price on
the
SWX at the grant date, as determined by the Compensation Committee, and all
options were granted at an exercise price which was equal to or greater than
the
market price of the Syngenta shares at the grant date. Options over ADSs are
priced at one fifth of the exercise price of a Swiss option,
converted
to
US dollars at
the exchange rate at the grant date, which may vary from the exchange rate
at
the exercise date. Standard options vest in full and are exercisable after
three
years completion of service and terminate after 10 or 11 years from the grant
date. Vesting can occur after less than three years in particular circumstances
including redundancy and retirement. None of the options became exercisable
prior to November 14, 2003. None of the options vest on a pro rata basis during
the vesting period.
From
2005 the
Long-Term Incentive Plan grant has been made 50% in options, and 50% in
restricted share units (or equivalent restricted ADSs for relevant Syngenta
employees in the USA). Restricted share units (or equivalent restricted ADSs)
are subject to a three year vesting period. The following table sets out
Restricted Share Unit activity under this plan during 2005 and 2006, (including
the equivalent restricted ADS for relevant Syngenta employees in the USA),
and
summarises information about Restricted Share Units outstanding at December
31,
2006 and 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs
|
|
Grant
date FV
|
|
Outstanding
at
January 1
|
|
Granted
|
|
Distributed
|
|
Cancelled
|
|
Outstanding
at
December 31
|
|
Remaining
life
(years)
|
|
Year
to
December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
LTI
grant
|
|
|
116.3
|
|
|
102,035
|
|
|
-
|
|
|
(1,186
|
)
|
|
(6,482
|
)
|
|
94,367
|
|
|
1.25
|
|
2006
LTI
grant
|
|
|
174.8
|
|
|
-
|
|
|
75,432
|
|
|
-
|
|
|
(3,345
|
)
|
|
72,087
|
|
|
2.25
|
|
Total
for year to December
31,
2006
|
|
|
|
|
|
102,035
|
|
|
75,432
|
|
|
(1,186
|
)
|
|
(9,827
|
)
|
|
166,454
|
|
|
|
|
Aggregate
intrinsic value of fully vested shares as at December 31,
2006 |
|
|
|
|
|
|
|
|
|
|
|
-
|
|
US$
million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Deferred Share Plan
In
2002, the
Syngenta Deferred Share Plan was introduced to provide selected senior
executives with an opportunity to obtain shares of Syngenta. The plan entitles
participants to defer part of their annual short-term incentive awards in favor
of Syngenta shares and to receive matching shares according to the rules of
the
plan. The value of a deferred share and the corresponding additional share,
at
the time of grant, corresponds to the Syngenta share price at the time of grant
adjusted for the absence of dividend entitlement during the deferral period.
Shares are deferred for a period of three years starting on the grant date.
At
the end of the deferral period, Syngenta matches the deferred shares on a
one-for-one basis. For the incentive year 2002 participants could voluntarily
defer a part of the 2002 short-term incentive. From the incentive year 2003
the
Syngenta Deferred Share Plan became fully effective and a mandatory part of
the
short-term incentive is allocated as Deferred Shares. Additional voluntary
deferrals within the limits of the plan can be made at the discretion of the
participants.
The
following table
sets out activity under this plan during 2006, 2005 and 2004 including the
equivalent ADSs that are offered to Syngenta employees in the
USA.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at
January 1
|
|
Granted
|
|
Distributed
|
|
Cancelled
|
|
Outstanding
at
December 31
|
|
Remaining
life
(years)
|
|
Year
to
December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002
incentive year grant
|
|
|
41,462
|
|
|
-
|
|
|
(2,801
|
)
|
|
-
|
|
|
38,661
|
|
|
1.25
|
|
2003
incentive year grant
|
|
|
-
|
|
|
88,265
|
|
|
(4,515
|
)
|
|
-
|
|
|
83,750
|
|
|
2.25
|
|
Total
for year to December 31, 2004
|
|
|
41,462
|
|
|
88,265
|
|
|
(7,316
|
)
|
|
-
|
|
|
122,411
|
|
|
|
|
Year
to
December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002
incentive year grant
|
|
|
38,661
|
|
|
-
|
|
|
(2,318
|
)
|
|
-
|
|
|
36,343
|
|
|
0.25
|
|
2003
incentive year grant
|
|
|
83,750
|
|
|
-
|
|
|
(3,919
|
)
|
|
-
|
|
|
79,831
|
|
|
1.25
|
|
2004
incentive year grant
|
|
|
-
|
|
|
89,556
|
|
|
(3,476
|
)
|
|
-
|
|
|
86,080
|
|
|
2.25
|
|
Total
for year to December 31, 2005
|
|
|
122,411
|
|
|
89,556
|
|
|
(9,713
|
)
|
|
-
|
|
|
202,254
|
|
|
|
|
Year
to
December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002
incentive year grant
|
|
|
36,343
|
|
|
-
|
|
|
(36,343
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
2003
incentive year grant
|
|
|
79,831
|
|
|
-
|
|
|
(7,636
|
)
|
|
-
|
|
|
72,195
|
|
|
0.25
|
|
2004
incentive year grant
|
|
|
86,080
|
|
|
-
|
|
|
(4,112
|
)
|
|
-
|
|
|
81,968
|
|
|
1.25
|
|
2005
incentive year grant
|
|
|
-
|
|
|
51,090
|
|
|
(2,227
|
)
|
|
-
|
|
|
48,863
|
|
|
2.25
|
|
Total
for year to December 31, 2006
|
|
|
202,254
|
|
|
51,090
|
|
|
(50,318
|
)
|
|
-
|
|
|
203,026
|
|
|
|
|
Aggregate
intrinsic value of fully vested shares as at December 31,
2006
|
|
37.7
|
|
$
|
US
million
|
|
At
the end of the
deferral period, employees would be entitled to the following additional
shares:
|
|
|
|
|
|
|
|
Grant
date
fair
value CHF
|
|
Number
of
shares
|
|
2003
Syngenta
Deferred Share Grant
|
|
|
89.30
|
|
|
72,195
|
|
2004
Syngenta
Deferred Share Grant
|
|
|
116.30
|
|
|
81,968
|
|
2005
Syngenta
Deferred Share Grant
|
|
|
174.80
|
|
|
48,863
|
|
Total
|
|
|
|
|
|
203,026
|
|
None
of these shares are vested as at December 31,
2006
|
|
|
|
|
|
-
|
|
Employee
Share Purchase Plans
In
November 2001,
the Swiss Employee Share Purchase Plan was introduced for all employees of
Swiss
subsidiaries. This plan entitles employees to subscribe for shares at a discount
of 50% from the closing share price on the grant date. The maximum subscription
amount per employee, based on fair market value, is CHF 5,000. A total of 41,017
shares (2005: 63,137 shares; 2004: 70,982 shares) were subscribed and settled
through a release of treasury shares, at a market value of approximately CHF
213.00 per share (2005: CHF 142.20 per share; 2004: CHF 117.20 per share).
Shares purchased under this plan vest immediately, and are subject to a three
year blocking period.
In
November 2005, a
Share Purchase Savings Plan was introduced for all employees of certain US
subsidiaries. This plan entitles employees to subscribe for ADSs at a discount
of 33% from the closing ADS price on the grant date. The maximum subscription
amount per employee, based on fair market value, is US$4,500. A total of 143,881
ADS (2005: 182,923 ADS) were subscribed and settled through a release of
treasury shares, at a market value of approximately US$34.16 (2005: US$21.59)
per ADS. The ADSs purchased under this plan vest immediately, and are subject
to
a two-year blocking period.
During
2006,
Employee Share Purchase Plans were entered into in three additional countries.
All schemes entitle employees to subscribe for shares in Syngenta AG, at
discounts varying between 33% and 50%. Maximum subscription amounts vary but
are
comparable with the Swiss scheme. A total of 9,329 shares were subscribed and
settled through a release of treasury shares, at a weighted average market
value
of approximately CHF194.7. Shares issued under the plans vest immediately,
and
are subject to blocking periods between two and three years.
Employee
Share Option Savings Plan
In
November 2002, a
Share Option Savings Plan was introduced for all UK employees. Options are
granted at an exercise price which represents a 15% discount to the market
price
on the Swiss Stock Exchange (SWX) before the offer. Options are
exercisable
over a
six month period following either the third or the fifth anniversary of the
grant date, depending on the choice made by the employee on applying to join
the
scheme, but may be exercised earlier in particular circumstances including
redundancy and retirement. Vesting of options is conditional on employees
remaining in service for at least three years and making monthly payments into
the savings plan.
The
following table
sets out activity under this plan during 2006, 2005 and 2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
price
GBP
|
|
Outstanding
at
January
1
|
|
Granted
|
|
Exercised
|
|
Forfeited
|
|
Outstanding
at
December
31
|
|
Exercisable
|
|
Remaining
contractual life (years)
|
|
Year
to
December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.2
|
|
|
238,012
|
|
|
-
|
|
|
(2,925
|
)
|
|
(22,317
|
)
|
|
212,770
|
|
|
1,670
|
|
|
1.25
|
|
|
|
|
29.3
|
|
|
69,059
|
|
|
-
|
|
|
-
|
|
|
(4,787
|
)
|
|
64,272
|
|
|
-
|
|
|
2.25
|
|
Total
for year to December 31, 2004
|
|
|
|
|
|
307,071
|
|
|
-
|
|
|
(2,925
|
)
|
|
(27,104
|
)
|
|
277,042
|
|
|
-
|
|
|
|
|
Year
to
December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.2
|
|
|
212,770
|
|
|
-
|
|
|
(2,758
|
)
|
|
(8,331
|
)
|
|
201,681
|
|
|
108
|
|
|
0.25
|
|
|
|
|
29.3
|
|
|
64,272
|
|
|
-
|
|
|
(206
|
)
|
|
(1,892
|
)
|
|
62,174
|
|
|
-
|
|
|
1.25
|
|
Total
for year to December 31, 2005
|
|
|
|
|
|
277,042
|
|
|
-
|
|
|
(2,964
|
)
|
|
(10,223
|
)
|
|
263,855
|
|
|
-
|
|
|
|
|
Year
to
December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.2
|
|
|
201,681
|
|
|
-
|
|
|
(78,857
|
)
|
|
(7,027
|
)
|
|
115,797
|
|
|
-
|
|
|
-
|
|
|
|
|
29.3
|
|
|
62,174
|
|
|
-
|
|
|
(1,535
|
)
|
|
(3,240
|
)
|
|
57,399
|
|
|
-
|
|
|
0.25
|
|
Total
for year to December 31, 2006
|
|
|
|
|
|
263,855
|
|
|
-
|
|
|
(80,392
|
)
|
|
(10,267
|
)
|
|
173,196
|
|
|
|
|
|
|
|
Aggregate
intrinsic value of fully vested options as at December 31,
2006
|
|
|
|
|
|
|
|
-
|
|
$
|
US
million
|
|
(all
fully vested
options are exercisable)
UK
Share
Incentive Plan (SIP)
In
May 2005, the
Employee Share Option Savings Plan was replaced by a Share Incentive Purchase
Plan approved by the UK tax authorities. This is available to all UK employees.
Under the plan rules, employees may subscribe to purchase Syngenta shares at
the
fair market value on a monthly basis. One additional matching share is granted
for every three shares purchased (representing a 25% discount to market value)
after three years completion of service. The original purchased shares are
not
subject to a blocking period. The maximum subscription amount per employee
is
£1,500 per year. A total of 10,698 shares (2005: 8,160 shares) were subscribed
and settled through a release of treasury shares at a weighted average purchase
price of CHF 178.87 (2005: CHF 132.17).
Compensation
expense
The
compensation
expense charge in the income statement is measured indirectly by reference
to
the fair value of the equity instruments granted as follows:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Long-Term
Incentive Plan (stock options)
|
|
|
19
|
|
|
17
|
|
|
16
|
|
Deferred
Share Plan
|
|
|
16
|
|
|
16
|
|
|
11
|
|
Employee
Share Purchase Plans
|
|
|
6
|
|
|
3
|
|
|
5
|
|
Employee
Share Option Savings Plan/Employee Share Incentive Plan
|
|
|
1
|
|
|
1
|
|
|
1
|
|
Total
|
|
|
42
|
|
|
37
|
|
|
33
|
|
As
of December 31,
2006 there was US$25 million of total unrecognized compensation cost related
to
non-vested share based compensation arrangements granted under the plans. This
cost is expected to be recognized over a weighted-average period of 1.4
years.
Other
information
required to be disclosed about the plans is as follows:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Weighted
average fair value of options granted in year (CHF per
option)
|
|
|
39.7
|
|
|
26.8
|
|
|
22.0
|
|
Weighted
average share price at exercise date for options exercised during
year
(CHF
per
option)
|
|
|
173.5
|
|
|
132.5
|
|
|
106.0
|
|
Intrinsic
value of options exercised in year (US$ million)
|
|
|
92.2
|
|
|
29.8
|
|
|
9.6
|
|
Fair
value of
shares vesting during year (US$ million)
|
|
|
18.4
|
|
|
7.0
|
|
|
5.0
|
|
Fair
value of
shares granted in year
|
|
|
|
|
|
|
|
|
|
|
Deferred
Share Plan (CHF) - combined value of basic and matching share
award
|
|
|
349.6
|
|
|
232.6
|
|
|
178.6
|
|
Employee
Share Purchase Plans (CHF per share)
|
|
|
103.0
|
|
|
71.1
|
|
|
58.6
|
|
Employee
Share Purchase Plan (US$ per ADS)
|
|
|
11.4
|
|
|
7.2
|
|
|
-
|
|
Cash
received
(US$ million)
|
|
|
|
|
|
|
|
|
|
|
from
exercise
of options
|
|
|
68
|
|
|
57
|
|
|
29
|
|
from
subscription for shares
|
|
|
9
|
|
|
7
|
|
|
3
|
|
Total
|
|
|
77
|
|
|
64
|
|
|
32
|
|
Syngenta
has a
policy of utilizing treasury shares to satisfy share option exercises and to
meet share subscriptions and entitlements because Syngenta still holds
sufficient treasury shares. Syngenta does not expect to make purchases of its
own shares on the open market in the next year as a consequence of the existence
of these share based payment schemes.
Share
option valuation assumptions
The
fair value of
options granted were measured using the Black-Scholes-Merton method. The effect
of early exercise has been incorporated into the model by using an estimate
of
the option’s expected life rather than its contractual life. The measurement of
fair value was not adjusted for any other feature of the option grant and no
option grant was subject to a market condition.
The
weighted
average assumptions used in determining fair value of options granted were
as
follows:
|
|
|
|
(US$
million)
|
2006
|
2005
|
2004
|
Dividend
yield
|
2.3%
|
2.3%
|
2.0%
|
Volatility
|
22.8%
|
24.8%
|
25.0%
|
Risk-free
interest rate
|
|
|
|
-
Long-Term
Incentive Plan
|
2.1%
|
2.1%
|
2.6%
|
-
Employee
share option Savings Plan
|
-
|
-
|
-
|
Expected
life
|
|
|
|
-
Long-Term
Incentive Plan
|
7
years
|
7
years
|
7
years
|
-
Employee
Share Option Savings Plan
|
-
|
-
|
-
|
Exercise
Price
|
|
|
|
-
Long-Term
Incentive Plan - CHF
|
185.0
|
127.4
|
89.3
|
-
Employee
Share Option Savings Plan - British pounds sterling
(“GBP”)
|
-
|
-
|
-
|
The
dividend yield
and volatility are management estimates for the life of the option, as no
warrants or options over Syngenta shares for this period are widely traded.
Both
actual dividend yield and volatility may vary from the assumptions used above.
The estimate of volatility takes into account the historical volatility of
the
Syngenta share price, and the implied volatilities of such longer dated warrants
that have been traded in the market. The volatility assumption for 2006 was
based on the 60 month historical volatility of Syngenta AG shares on the Swiss
Exchange.
29.
Transactions and agreements with related parties
Key
management personnel compensation
Key
management
personnel are defined as the members of the Syngenta Executive Committee and
the
Board of Directors. Their compensation was as follows:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Fees,
salaries and other short-term benefits
|
|
|
12.4
|
|
|
14.7
|
|
|
11.2
|
|
Post-employment
benefits
|
|
|
3.8
|
|
|
4.3
|
|
|
3.8
|
|
Other
long-term benefits
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Termination
benefits
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Share
based
compensation
|
|
|
16.1
|
|
|
13.8
|
|
|
7.1
|
|
Total
|
|
|
32.3
|
|
|
32.8
|
|
|
22.1
|
|
The
amount
disclosed for share based compensation is the expense for the period calculated
in accordance with IFRS 2, “Share Based Payment” and as described in Note 2,
relating to key management personnel. The cost of a share based compensation
award is spread over the vesting period of the award. Therefore the charge
for
each year comprises parts of that year’s awards and those of preceding years
that had not already vested at the start of the year.
Members
of the
Board, excluding the Chairman, are eligible for the share plan for non-executive
Directors. The Directors define a percentage of their annual fee for
compensation in shares, in addition the Directors choose between blocked shares
or free shares. The Chairman receives a fixed part of his compensation in the
form of blocked shares. The grant value of a share equals the weighted average
market price of the Syngenta share on the five business days prior to the grant.
Under these schemes, members of the Board of Directors were allocated a total
of
6,597 shares in lieu of fees. These shares vest immediately and had a combined
fair value at grant of US$0.9 million (2005: US$ 0.1 million).
Transactions
and balances with employee post-retirement benefit plans
Employer
contributions payable to pension plans are disclosed in Note 27. Syngenta’s
accounting balances for defined benefit employee post-retirement benefit plans
are as follows:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Prepaid
benefit costs (Note 17)
|
|
|
616
|
|
|
497
|
|
|
122
|
|
Accrued
benefit liability (Note 27)
|
|
|
(214
|
)
|
|
(193
|
)
|
|
(232
|
)
|
Total
|
|
|
402
|
|
|
304
|
|
|
(110
|
)
|
These
amounts do
not represent cash payable to or receivable from the plans. US$5 million cash
was payable to pension plans at December 31, 2006.
Other
related party transactions
There
were no other
related party transactions.
30.
Commitments and contingencies
Commitments
arising
from fixed-term non-cancellable operating leases in effect at December 31,
2006
are as follows:
|
|
|
|
|
|
(US$
million)
|
|
Minimum
lease payments payable
|
|
Minimum
rentals receivable
|
|
2007
|
|
|
19
|
|
|
12
|
|
2008
|
|
|
16
|
|
|
8
|
|
2009
|
|
|
12
|
|
|
6
|
|
2010
|
|
|
9
|
|
|
3
|
|
2011
|
|
|
7
|
|
|
2
|
|
Thereafter
|
|
|
20
|
|
|
7
|
|
Total
|
|
|
83
|
|
|
38
|
|
Rentals
receivable
relate to leases of freehold buildings. Operating lease payments relate to
leases of buildings and office equipment. Operating lease expense was as
follows:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Operating
lease expense
|
|
|
33
|
|
|
28
|
|
|
26
|
|
Commitments
for the
purchase of property, plant and equipment at December 31, 2006 were US$23
million.
As
of December 31,
2006, Syngenta had entered into the following long-term commitments to purchase
minimum quantities of certain raw materials, long-term research agreements
with
various institutions to fund various research projects, and other commitments.
The approximate payments committed are payable as follows:
|
|
|
|
|
|
|
|
(US$
million)
|
|
Materials
purchases
|
|
Research
|
|
Other
|
|
2007
|
|
|
222
|
|
|
38
|
|
|
24
|
|
2008
|
|
|
113
|
|
|
1
|
|
|
2
|
|
2009
|
|
|
68
|
|
|
1
|
|
|
1
|
|
2010
|
|
|
29
|
|
|
-
|
|
|
-
|
|
2011
|
|
|
17
|
|
|
-
|
|
|
-
|
|
Thereafter
|
|
|
47
|
|
|
-
|
|
|
-
|
|
Total
|
|
|
496
|
|
|
40
|
|
|
27
|
|
Materials
purchases
in 2006 according to these commitments were US$268 million (2005: US$271
million).
The
present value
of finance lease payments recognized as financial debt amounted to US$11 million
at December 31, 2006. Minimum lease payments were US$9 million including
interest expense of US$1 million for periods after the balance sheet date.
This
is payable as follows:
|
|
|
|
(US$
million)
|
|
|
|
2007
|
|
|
4
|
|
2008
|
|
|
5
|
|
2009
|
|
|
-
|
|
2010
|
|
|
-
|
|
Total
|
|
|
9
|
|
Syngenta
has agreed
to indemnify other parties for various losses or expenses in certain
circumstances. For example, contracts for the sale or purchase of a business
or
product line may include warranties given by Syngenta to the purchaser relating
to events that arose before the sale. Syngenta’s sales are also made subject to
normal warranties, which cover the product technical specification and, in
some
cases, product performance effect on grower crop yields.
Syngenta
has
licensed the rights to sell certain products, or products containing certain
technology, under agreements which require Syngenta to pay royalties based
on
its future sales of those products or that technology. Under certain agreements,
a minimum royalty is payable if Syngenta’s future sales of the licensed
technology fall below a fixed proportion of Syngenta’s total sales of products
with similar technology in a given future period. In the opinion of Syngenta,
because of the number of variables which affect the amount involved, it is
not
possible to quantify the royalty amount which may be payable.
Contingencies
In
addition to the
legal proceedings described below, Syngenta is involved from time to time in
a
number of legal proceedings incidental to the normal conduct of its business,
including proceedings involving product liability claims, commercial claims,
employment and wrongful discharge claims, patent infringement claims,
competition claims, tax assessment claims, waste disposal claims and tort claims
relating to the release of chemicals into the environment. Syngenta maintains
general liability insurance, including product liability insurance, covering
claims on a worldwide basis with coverage limits and retention amounts which
management believes to be adequate and appropriate in light of Syngenta’s
businesses and the risks to which it is subject.
Greens
Bayou
In February 2001,
the Port of Houston Authority (the “Port”) filed suit against GB Biosciences
Holdings, Inc., GB Biosciences Corporation, and certain other Syngenta entities
(including Syngenta Crop Protection, Inc.) in Texas State Court regarding
contamination that has allegedly migrated off the GB Biosciences Greens Bayou
site in Houston, Texas. The Greens Bayou site, which manufactures an
agricultural fungicide, was acquired in February 1998 from Ishihara Sangyo
Kaisha, Ltd. (“ISK”). The on site past use of certain chlorinated organic
compounds employed in the manufacture of certain pesticides has contributed
to
soil and groundwater contamination, some of which has been detected on and
under
the adjacent property owned by the Port and in sediments of the adjoining Greens
Bayou. The contamination at issue mainly involves certain chlorinated pesticides
generated before 1970 by the prior owner of the plant, also named as a
defendant. While this contamination is generally being addressed under the
site’s Resource Conservation and Recovery Act (“RCRA”) permit, the Port
nonetheless filed suit. On December 19, 2003, the Syngenta entity defendants,
along with co-defendants ISK and Occidental Chemical Company (“Occidental”) and
certain of their affiliates settled the Port’s lawsuit by agreeing to conduct
certain remediation activities expected to cost approximately US$45 million,
to
pay the Port US$35 million and to provide an indemnity having a maximum
liability of US$20 million. The Syngenta, ISK and Occidental defendants agreed
to share the costs of the settlement on an interim basis subject to
determination of their ultimate shares of liability in further proceedings.
Agreement to settle with Occidental was entered into on January 18, 2006. In
October 2002, the Syngenta defendants had filed suit against the ISK defendants
for indemnity against losses arising from the Port litigation. That litigation
had been stayed pursuant to the terms of an interim cost sharing agreement
between the Syngenta defendants and the ISK defendants. That stay has been
lifted and the litigation is ongoing with a current trial date of January 2008.
Discussions with ISK and their insurer, AIG, to test the possibility of a
negotiated solution of their contribution pursuant to the indemnities given
by
ISK in the 1998 acquisition agreement are continuing.
Bt
11
Patent Case
In July 2002
Syngenta filed a lawsuit in federal court in Delaware in which Syngenta Seeds,
Inc. charges that Monsanto, DeKalb Genetics, Pioneer Hi-Bred, Dow AgroSciences
and Mycogen Seeds are infringing upon one or more of United States Patent No.
6,075,185, United States Patent No. 6,320,100, and United States Patent No.
6,403,865. The products accused of infringement include YieldGard® MON810 Bt
corn and Herculex® Bt corn. These patents cover synthetic Bt genes with
increased expression in corn and corn plants resistant to insects such as the
European corn borer that result from expression of such Bt genes; the patent
cover includes corn plants with such genes either alone or stacked with other
traits. In an agreement reached on November 29, 2004, Syngenta Seeds, Inc.
and
Pioneer Hi-Bred International, Inc. settled the claims Syngenta had brought
against Pioneer. Trial against defendants Monsanto and Dow/Mycogen commenced
November 29, 2004. Prior to closing arguments, the Court granted defendants’
motion that the ‘100 and ‘185 were not infringed. A jury verdict was returned
December 14, 2004 finding the asserted claims of the ‘865 patent were infringed
by YieldGard®, Herculex I® and TC6275 but that those claims were invalid. Post
trial motions filed by the parties were denied. On May 30, 2006 Syngenta granted
Dow AgroSciences a Covenant Not to Sue under the patents-in-suit for Herculex®
corn. Syngenta has appealed the decisions finding the ‘865 patent invalid and
the ‘100 and ‘185 patents not infringed. Dow Agrosciences cross-appealed the
’865 infringement decision. Oral argument is scheduled for February 5, 2007
with
a decision on the appeal expected in quarter 2 or quarter 3 2007.
Shah
and
Lundquist Patent Cases
On May 12, 2004,
Monsanto Company and Monsanto Technology, LLC commenced an action against
Syngenta Seeds, Inc. and Syngenta Biotechnology, Inc. in the United States
District Court for the District of Delaware (the “Shah” Case). On July 27, 2004,
DeKalb Genetics Corp (a fully owned subsidiary of Monsanto Company) commenced
an
action against Syngenta Seeds, Inc. and Syngenta Biotechnology, Inc. in the
United States District Court for the Northern District of Illinois (the
“Lundquist” case). In its complaints, Monsanto sued Syngenta for infringement of
patents by making and using corn products exhibiting resistance to glyphosate
herbicide (GA21). Monsanto are seeking injunctions against the sale of GA21
corn
and compensatory and exemplary damages. On May 19, 2005 the US District Court
for the Northern District of Illinois transferred the Lundquist case to the
District of Delaware and on August 18, 2005 the parties agreed to consolidate
the two cases. The court entered a judgment on May 11, 2006 in Syngenta’s favor
ruling the Shah patent invalid and that the Lundquist patent had not been
infringed.
Monsanto
filed a
consolidated notice of appeal for the Shah and Lundquist cases on June 8, 2006.
Oral argument is scheduled for February 7, 2007 with a decision on appeal
expected quarter 2 or quarter 3 2007.
Lundquist
‘798 Patent Case
In a separate
filing on August 9, 2006, DeKalb Genetics Corp. commenced an action against
Syngenta Seeds Inc, and certain of its affiliates in the United States District
Court for the Eastern District of Missouri alleging infringement of US Patent
No. 5,554,798 by making corn containing genes that confer resistance to the
herbicide glyphosate (GA21 corn). A First Amendment Complaint was filed August
11, 2006, and on October 20, 2006, Syngenta filed a motion to transfer the
case
to Delaware. The motion to transfer was heard November 17; and on December
29
the Court denied Syngenta’s motion. On January 19, 2007, Syngenta filed motions
in the Missouri case to sever and to dismiss claims against five affiliated
company defendants and to transfer the remaining claims to Delaware. On the
same
day, Syngenta filed a Declaratory Judgment complaint in Delaware seeking a
declaration that the ‘798 patent is not infringed or is invalid. Monsanto
responded by filing a motion to transfer the Delaware Declaratory Judgement
to
Missouri.
Missouri
Roundup Ready Soybean Branding Case
On May 10, 2004,
Monsanto Company commenced an action against Syngenta Seeds, Inc. in Missouri
State court (St. Louis County). In its complaint, Monsanto seeks a declaration
that, pursuant to the express terms of its license agreement, Syngenta only
has
the right to develop, produce and sell Roundup Ready® soybeans under the NK®
Brand. Monsanto sought a declaratory judgment and permanent injunction
prohibiting the use of the Independence brand (or any other brand other than
the
NK® brand) in the production, marketing, advertising or sale of Monsanto’s
Roundup Ready® soybean technology. On February 8, 2006, the court found that the
License Agreement limits Syngenta to a single brand, NK®. Syngenta has appealed
the verdict and a decision is expected on the appeal in quarter 1,
2007.
In
a second action
filed August 25, 2005, Syngenta Seeds Inc. is seeking a judgment declaring
that
Monsanto breached the 1993 Roundup Ready® Soybean License Agreement by failing
to provide Syngenta with equal access to improved Roundup Ready® soybean genes
(“RR2Yield”). On October 19, 2006, the court ruled that the 1993 license
agreement is ambiguous. On November 18, 2006, the Court ordered mediation of
the
case before a special settlement master which was held December 1, 2006; despite
diligent efforts, no settlement was reached, though discussions continue. The
liability phase of the trial is scheduled for February 5, 2007 and the damages
phase is scheduled for April, 2007.
Delaware
Antritrust Case/Monsanto
On July 28, 2004,
Syngenta Seeds, Inc. filed an antitrust lawsuit against Monsanto Company and
Monsanto Technology LLC in the United States District Court for the District
of
Delaware. The complaint alleges that Monsanto has engaged in a pattern of
illegal and improper activities to exclude Syngenta and to monopolize key corn
trait markets and seed markets in violation of the antitrust laws, including:
entering into exclusive dealing contracts, bundling incentive programs, filing
baseless patent lawsuits, making misrepresentations, and coercing seed
companies. Monsanto’s conduct has and will harm competition in key corn trait
and seed markets causing consumers to continue to pay higher prices than they
would otherwise pay. Syngenta seeks injunctive relief and treble damages in
an
amount to be proven at trial. On July 14, 2005, Monsanto filed a motion to
amend
its answer and assert counterclaims against Syngenta. On August 23, 2006,
Monsanto filed a motion to stay the trial date pending a decision on the appeal
of the Shah and Lunquist patent cases. The Court granted Monsanto’s motion to
stay on November 8, 2006, and the case has been stayed.
GALECRON
GALECRON (active
ingredient chlordimeform) is an insecticide which was produced by Ciba-Geigy
from 1968 to 1976 and 1978 to 1988. Scientific studies have indicated an
increased incidence of bladder cancer among production workers exposed to 4-cot,
a metabolite of chlordimeform. In 1994 workers exposed to GALECRON at
manufacturing and formulation sites, as well as applicators of the product,
filed a class action in the United States which was settled the same year.
The
settlement required Ciba-Geigy (predecessor in interest to Novartis and
Syngenta) to expand its monitoring program to individuals occupationally exposed
to GALECRON and to compensate these individuals for certain covered conditions
and procedures. Individuals were permitted to bring separate lawsuits for
occupational exposure to GALECRON only if they opted out of the class action
settlement. The one remaining opt-out lawsuit that Syngenta Crop Protection,
Inc. was involved in has been settled. While there are currently no opt-out
cases pending against Syngenta, in late 2005, Syngenta accepted the tender
of
the Stringer matter (referenced below) in which the plaintiff alleges exposure
to GALECRON caused his bladder cancer. Syngenta is investigating whether its
insurers will pay for the costs associated with this litigation.
While
over 100
other individuals opted out of the class action, they have yet to file suit.
As
time passes, the applicable statutes of limitation will bar many of these
potential lawsuits. A substantial portion of the costs of the class action
settlement, as well as the opt-out litigation, are likely to be covered by
the
Syngenta’s insurers, subject to applicable deductibles.
McIntosh
Syngenta Crop
Protection, Inc. has accepted tender from Novartis Corporation (and originally
from Ciba Specialty Chemicals Corporation) , under certain agreements associated
with the formations of Syngenta and Novartis which allocate environmental
liabilities in the US, of a series of lawsuits (in federal and State courts
in
Alabama and in State court in New Jersey) and pending claims which allege
contamination by DDT and other chemicals associated with historic agrochemical
manufacturing activities at the Ciba Specialty Chemicals Corporation site at
McIntosh, Alabama. The plaintiffs or claimants variously seek damages for
wrongful death, personal injury, decreased property value, and the establishment
of medical monitoring programs. Liability under lawsuits and pending claims
were
tendered by Ciba to Novartis and by Novartis to Syngenta under 1996 and 2000
Environmental Matters Agreements associated with formation of Novartis and
Syngenta. Current stage of proceedings in each case involves resolution of
threshold issues including class certification; jurisdictional forum; and
sufficiency of initial disclosure. Plaintiffs’ Motion for Class certification in
Fisher was denied by the Alabama federal court on July 14, 2006. Tender of
the
defense of seven personal injury cases (Weaver, Et-Awil, Ferrell, Lofton,
Witherspoon, Stringer and Johnson) were accepted in the fourth quarter of 2005.
Damages claimed in the lawsuits have not yet been quantified. Trials have been
scheduled in the Weaver case (May, 2007), the Et-Awil matter (September 2007)
and the Stringer matter (October 2007).
Holiday
Shores
The Holiday Shores
Sanitary District in Madison County, Illinois filed a class action complaint
against Syngenta Crop Protection, Inc. in July 2004 purportedly on behalf of
a
class consisting of all Illinois Public Water Districts, Water Service Districts
and Water Authorities who have, allegedly, suffered contamination of their
water
sources at any measurable level on account of the product Atrazine, a herbicide
manufactured since the late 1950s by Syngenta Crop Protection, Inc. and
its
predecessors
in
interest, Novartis Crop Protection, Inc., Ciba-Geigy and Geigy Chemical
Corporation. The Holiday Shores Complaint alleges that the product Atrazine
and/or its degradent chemicals are harmful to humans as consumed through dietary
water, and that run-off from the soil where Atrazine has been applied has
damaged the water district’s property and contaminated its surface waters, used
as a source of drinking water for the district. It alleges claims of trespass,
nuisance, negligence, strict liability and violation of the Illinois
Environmental Protection Act and seeks monetary damages, including the cost
of
purchase, installation, maintenance and operation of charcoal filtration
systems, alleged diminution in property value and remediation, punitive damages
and attorneys’ fees. The complaint was served on Syngenta on August 27, 2004.
The company succeeded in having the lawsuit removed from state to federal court
but, on Plaintiffs Motion, the federal court on March 28, 2005, remanded the
lawsuit back to state court. Syngenta has filed a Motion to Dismiss which was
argued on October 25, 2005, but has yet to be decided by the court.
Agroatar
Agroatar S.A. on
May 24, 2000 sued Zeneca S.A.I.C. (now Syngenta Agro S.A.) in Buenos Aires,
Argentina for alleged wrongful termination of an agrochemicals supply contract.
The plaintiff seeks damages for goodwill and loss of profits of US$43 million
plus costs and interest. Agroatar has US$15 million debt outstanding to Syngenta
but claims to be owed US$7 million by Syngenta under the terminated contract.
On
December 27, 1999, Agroatar S.A. filed a separate suit against Advanta Semillas
S.A.I.C. which was amended on June 8, 2000 to include Zeneca S.A.I.C. (now
Syngenta Agro S.A.) as a co-defendant. Agroatar alleges that Advanta Semillas
S.A.I.C. breached its obligations under certain agreements which had originally
been entered into with Zeneca S.A.I.C. (but which were subsequently assigned
to
Advanta Semillas S.A.I.C.) pursuant to which Agroatar had the rights to produce
and sell sunflower, corn, and sorghum seed. Based on that alleged breach,
Agroatar terminated the agreements. Agroatar claims damages of US$58 million
plus costs and interest. Syngenta believes it had cause to terminate the
agrochemicals supply agreement and was wrongly joined to the lawsuit against
Advanta Semillas and intends to defend vigorously both lawsuits. The two
lawsuits were consolidated in June 2001 and both are in the “evidentiary stage”,
which is expected to be completed by mid 2007 and will be followed by filing
of
closing arguments by the parties. Judgment of the court of first instance in
both lawsuits is expected in late 2007.
Tax
litigation
Syngenta
is also
subject to certain tax claims pending before the judiciary. Significant cases
are described below.
In
1996, the
Brazilian Federal Tax Treasury drew Novartis’ Brazilian legal entity into
administrative proceedings, regarding the import tax classification of the
active ingredient Atrazine. The issue is whether, under applicable law, Atrazine
will qualify as a raw material (Syngenta’s position) or as intermediate
chemicals (the Federal Inspection’s position). So far there have been 17
administrative rulings against Syngenta. Currently, 16 cases are on appeal
before the judiciary. In aggregate, the maximum contingency in the event of
an
unfavorable outcome for Syngenta could amount to approximately Brazilian real
24.5 million, a sum corresponding to approximately US$11.4 million currently.
There are no decisions in the first level Court. Syngenta issued a letter of
guarantee for part of the amount involved (BRL 16 million).
Litigation
is
subject to many uncertainties, and the outcome of individual matters cannot
be
predicted with certainty. It is reasonably possible that the final resolution
of
some of these matters could require Syngenta to make expenditures, in excess
of
established reserves, over an extended period of time and in a range of amounts
that cannot be reasonably estimated. Although the final resolution of any such
matters could have a material effect on Syngenta’s consolidated operating
results and cash flows for a particular reporting period, Syngenta believes
that
it should not materially affect its consolidated financial position, although
there can be no assurances in this regard.
Environmental
Matters
Syngenta
has
environmental liabilities at some currently or formerly owned, leased and third
party sites throughout the world.
In
the USA,
Syngenta, or its indemnities, has been named under federal legislation (the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as
amended) as a potentially responsible party (“PRP”) in respect of several sites.
Syngenta expects to be indemnified against a proportion of the liabilities
associated with a number of these sites by the seller of the businesses
associated with such sites and, where appropriate, actively participates in
or
monitors the clean-up activities at the sites in respect of which it is a
PRP.
Syngenta
has
provisions in respect of environmental remediation costs in accordance with
the
accounting policy described in Note 2 and as shown in Note 22, Provisions.
The
environmental provision is principally related to potential liabilities at
various locations. The estimated provision takes into consideration the number
of other PRPs at each site and the identity and financial positions of such
parties in light of the joint and several nature of the liability.
The
requirement in
the future for Syngenta ultimately to take action to correct the effects on
the
environment of prior disposal or release of chemical substances by Syngenta
or
other parties, and its costs, pursuant to environment laws and regulations,
is
inherently difficult to estimate. The material components of the environmental
provisions consist of a risk assessment based on
investigation
of
the various sites. Syngenta’s future remediation expenses are affected by a
number of uncertainties which include, but are not limited to, the method and
extent of remediation, the percentage of material attributable to Syngenta
at
the remediation sites relative to that attributable to other parties, and the
financial capabilities of the other potentially responsible parties. It is
often
not possible to estimate the amounts expected to be recovered via reimbursement,
indemnification or insurance due to the uncertainty inherent in this
area.
Syngenta
believes
that its provisions are adequate based upon currently available information.
However, given the inherent difficulties in estimating liabilities in this
area,
it cannot be guaranteed that additional costs will not be incurred beyond the
amounts accrued. The effect of resolution of environmental matters on results
of
operations cannot be predicted due to uncertainty concerning both the amount
and
the timing of future expenditures and the results of future operations.
Management believes that such additional amounts, if any, would not be material
to Syngenta’s financial condition but could be material to Syngenta’s results of
operations in a given period.
31.
Principal currency translation rates
|
|
|
|
|
|
|
|
|
|
2006
per
US$
|
|
2005
per
US$
|
|
2004
per
US$
|
|
Year
end rates
used for the consolidated balance sheets, to translate the following
currencies into US$, are:
|
|
|
|
|
|
|
|
|
|
|
-
Swiss
franc
|
|
|
1.22
|
|
|
1.32
|
|
|
1.13
|
|
-
British
pound sterling
|
|
|
0.51
|
|
|
0.58
|
|
|
0.52
|
|
-
Japanese
yen
|
|
|
118.97
|
|
|
117.41
|
|
|
102.60
|
|
-
Euro
|
|
|
0.76
|
|
|
0.85
|
|
|
0.73
|
|
-
Brazilian
real
|
|
|
2.14
|
|
|
2.32
|
|
|
2.66
|
|
Average
rates
of the year used for the consolidated income and cash flow statements,
to
translate the following currencies into US$, are:
|
|
|
|
|
|
|
|
|
|
|
-
Swiss
franc
|
|
|
1.26
|
|
|
1.24
|
|
|
1.25
|
|
-
British
pound sterling
|
|
|
0.55
|
|
|
0.55
|
|
|
0.55
|
|
-
Japanese
yen
|
|
|
116.04
|
|
|
109.47
|
|
|
108.06
|
|
-
Euro
|
|
|
0.80
|
|
|
0.80
|
|
|
0.81
|
|
-
Brazilian
real
|
|
|
2.19
|
|
|
2.44
|
|
|
2.94
|
|
32.
Financial instruments
Risk
Management and Financial Derivatives
The
global nature
of our business exposes Syngenta to a range of financial and operating risks.
The financial risks predominantly arise from changes in foreign exchange rates,
interest rates, equity and commodity prices (i.e. market risk).
A
financial risk
management framework has been developed to mitigate, where appropriate, any
negative impact this may have on the US dollar reported consolidated financial
statements. Since formation Syngenta has adopted the US dollar as its reporting
currency and all risk management activities are managed with reference to the
US
dollar.
The
risk framework
comprises a Treasury policy, approved by the Board of Directors, which is
binding on all affiliates where Syngenta has management control.
This
policy
provides guidance over all Treasury and finance related matters, is underpinned
by delegated authority guidelines and is additionally supported by detailed
procedures in place across the Group.
The
policy
covers:
|
a)
|
general
financing considerations (external debt and equity financing, cash
and
liquidity management and customer financing),
|
|
b)
|
financial
market risk comprising foreign exchange (FX) risk (transaction,
translation and economic), interest rate risk (from an interest
Charge-at-Risk and asset-liability duration perspective), commodity
risk
and equity price risk,
|
|
c)
|
credit
risk
comprising both counterparty (customers and financial institutions)
and
sovereign concentration risk,
|
|
d)
|
infrastructural
risk covering Treasury back, middle and front office activities and
the
associated internal control and
reporting.
|
In
accordance with
the Treasury policy the Group actively monitors market risk minimising the
possible impact on the consolidated financial statements through use of a
variety of derivative and non derivative financial instruments.
These
instruments
are used to economically hedge underlying risks arising from operational
activity and from funding and investment positioning. The main objective being
to reduce fluctuations in reported earnings and cash flows. Syngenta does not
enter into any speculative derivative trades unrelated to business
activity.
The
Group Treasury
policy sets financial risk limits which take into account the maximum tolerable
loss for the Group and, as part of the risk management activity, the Group
enters into derivative financial instruments to ensure that the set limits
are
not breached.
The
instruments
available for use are detailed in the Treasury policy and selected according
to
the nature of the underlying risk.
Syngenta
operates a
centralised dealing platform and all derivative contracts where practically
or
legally possible are traded externally by the central Group Treasury dealing
team. Any dealing activities from other locations have to have prior Group
Treasury approval.
Risk
Management Principles
Syngenta
is exposed
to market risk, primarily due to changes in foreign exchange, interest rates
and
commodity prices. Syngenta is also indirectly exposed to market risk on assets
held by defined benefit pension plans.
Foreign
Exchange Risk
Operating
worldwide
in over 80 countries exposes the Group to foreign exchange risk - transaction,
translation and economic at both Group and affiliate level.
Foreign
Exchange Transaction Risk
The
individual
Group affiliates predominately transact their operational activities in their
respective functional currencies. However, the global nature of the business
leads to affiliates bearing significant transactional balance sheet risk. This
arises because the amount of local currency received or paid for transactions
denominated in foreign currency varies due to a change in foreign exchange
rates.
Transactional
committed risk for which Syngenta has a contractual obligation which is recorded
on the balance sheet, is primarily locally managed (but centrally transacted
externally through Group Treasury) through use of foreign exchange forward
contracts and occasionally option based structures. Where possible the committed
exposures are fully covered unless otherwise approved by Group
Treasury.
When
deemed
appropriate, foreign exchange financing risk arising from financial liabilities
denominated in foreign currency is also hedged. Cross currency swaps and foreign
exchange forwards are used to convert financial obligations to US
dollars.
Syngenta
also
manages the transactional risk by protecting future uncommitted cash flows
with
foreign exchange forward and currency option contracts. Uncommitted cash flows
are highly probable future cash flows for which Syngenta does not yet have
a
contractual right or obligation. This is achieved through identifying and
designating intercompany cash flows as hedged items and is designed to minimize
the impact of foreign exchange rates on the year on year US dollar reported
operating income. Syngenta has only options, or combinations of options where
a
net premium was paid.
Foreign
Exchange Translation Risk
Translation
exposure arises from consolidation of foreign currency denominated financial
statements of the Group’s subsidiaries.
The
risk arising
from translation of foreign subsidiary balance sheets - the effect of which
is a
currency impact in consolidated Group equity - is partially hedged. The Group
has employed both the raising of foreign currency debt and also “Net Investment”
derivative hedging to manage this exposure. The latter being specific action
to
protect the value of temporary excess foreign currency denominated liquid cash
positions.
Foreign
Exchange
Economic Risk
The
Group policy is
not to hedge long-term foreign exchange risk.
Interest
Rate Risk
Syngenta
is exposed
to fluctuations in interest rates on its borrowings. While some of the long-term
debt raised in the capital markets is kept at fixed rate, a substantial part
of
Syngenta’s net borrowings, including the short-term commercial paper program and
local borrowings are subject to changes in short-term interest
rates.
Syngenta
monitors
its interest rate exposures and analyzes the potential impact of interest rate
movements on net interest expense through an interest Charge-at-Risk approach.
Syngenta may enter into derivative transactions to manage the Group’s
sensitivity to interest rate movements arising from its financial assets and
liabilities in line with a predefined zero net duration benchmark (sensitivity
of net income/expense resulting from interest rate movements on all financial
assets and liabilities).
Other
Price
Risk
Commodity
price
fluctuations also affect parts of Syngenta’s business. A commodity is a physical
substance, such as food, grains, and oil, which is interchangeable with another
product of the same type, and which investors buy or sell usually through
futures contracts. The price of the commodity is subject to supply and demand
and is traded on a commodity exchange. The Group has exposure to energy prices
-
namely oil and gas and also has direct exposure to soft commodity prices.
Operating in the agrochemical sector also exposes the Group to crop prices
in
general and these affect both reported operating results and valuation.
Syngenta
uses both
fixed price contracts and also derivative hedging to minimise impact of year
on
year commodity price changes in the income statement. Derivative instruments
traded are Over the Counter (OTC) vanilla oil and gas commodity options and
exchange traded swaps and OTC soft commodity option and exchange traded futures
contracts.
Financial
Risk Assessment
The
residual risk
exposure post hedging is assessed using a variety of “Value-at-Risk” (VaR)
methods. The exact method selected depends on the underlying risk itself. All
VaR approaches try to recognize that holding different assets/liabilities or
future cash flow exposures may actually reduce portfolio risk through the
de-correlation benefits of diversification. This benefit is captured within
the
calculation and thus aims to holistically present portfolio risk.
Syngenta
uses three
different approaches to measuring exposure to market risk, and operates within
pre-defined risk levels.
|
a)
|
the
VaR
variance-covariance method as introduced by RiskMetrics
Group
|
|
b)
|
the
Earnings-at-Risk (EaR) Monte Carlo method - a variant of
VaR
|
|
c)
|
the
Earnings-at-Risk (EaR) historical simulation
method
|
The
particular
method selected is dependent on the data distribution characteristics for the
risk exposure being measured.
VaR
-
Variance-Covariance (or Parametric) Approach
This
method
measures within what ranges the value of respective assets or liabilities may
fluctuate with a certain probability over a certain time period (holding
period).
Transaction
Risk -
Committed
Syngenta
uses a 95%
confidence interval (i.e. there is a 5% probability that the impact from market
fluctuations exceeds the level calculated) over a 30 day holding period. This
is
applied to the committed foreign currency balance sheet exposure. The holding
period reflects the monthly review period and use of the variance/covariance
approach is suited to the linear nature of instrument protection.
The
statistical
measure takes 252 days of past price data and implicitly assumes that the value
changes in the recent past are indicative of value changes in the future. The
measure is performed monthly and a 30 day maximum risk limit is in place. Thus
there is a 5% probability of market fluctuations affecting the Group Income
Statement by more than the calculated net VaR in the 30 days following
measurement.
Interest
Charge-at-Risk
Syngenta
calculates
an Interest Charge-at-Risk as applied by the RiskMetrics Group based on a
variance-covariance approach, using a 95% confidence interval and a 12 month
holding period in order to estimate its Interest Rate Risks for its forecasted
debt levels. Syngenta uses a 12 month time horizon given the seasonality of
cash
flows and duration of cash forecasts. This measure is performed quarterly.
Syngenta does not hold any interest rate instruments with optionality, so this
is not addressed in the model.
EaR
- Monte
Carlo Approach
Syngenta
also uses
an Earnings-at-risk (EaR) approach which is a similar methodology to VaR but
rather than measuring ranges within which the value of assets/liabilities may
fluctuate it measures the potential changes to profits/losses from a series
of
future exposures over a certain time period and with a certain
probability.
Again
a 95%
confidence interval is used but with a 1 year holding period in order to
estimate the foreign exchange risk on forecast operating income
exposure.
The
Monte Carlo
simulation computation uses parameters estimated from historical data and
applies a randomiser to generate possible future exchange rate paths. Syngenta
considers this a good method of assessing operating income risk when non linear
derivative instruments have been traded.
The
measure is
performed monthly and a risk limit is in place over a 12 month holding period.
Thus
there is a 5%
chance that the impact to reported operating income as a result of foreign
exchange rate fluctuations within a year following the measurement date will
be
more than the calculated net EaR.
Commodity
EaR - historical simulation
Syngenta
has
adopted the historical simulation method as a basis for assessing commodity
risk
EaR. Again this is measuring the potential changes to profits/losses from a
series of future exposures over a certain time period and with a certain
probability.
One
year of
historical prices are used to calculate the daily return. From this the process
generates 252 scenarios for future price movements. These movements are then
used to value the portfolio of underlying transactions and hedges and by
selecting the twelfth of 252 portfolio value changes the 95% EaR is
produced.
This
measure is
performed monthly and a risk limit for both hard commodities (oil and gas)
and
soft commodities (agricultural produce) over a 12 month holding period is in
place.
Risk
Calculation Summary Table (Net Impact)
|
|
|
|
|
|
|
|
(US$
million)
|
|
Time
Horizon (Months)
|
|
31
December
2006
|
|
31
December
2005
|
|
Foreign
Exchange Risks:
|
|
|
|
|
|
|
|
|
|
|
Transaction
Risk uncommitted - Earnings-at-Risk
|
|
|
12
|
|
|
26
|
|
|
45
|
|
Transaction
Risk committed - Value-at-Risk
|
|
|
1
|
|
|
3
|
|
|
7
|
|
Translation
Risk - Value-at-Risk
|
|
|
1
|
|
|
90
|
|
|
109
|
|
Interest
Rate
Risks - Interest Charge-at-Risk
|
|
|
12
|
|
|
8
|
|
|
6
|
|
Other
Price
Risks - Earnings-at-Risk
|
|
|
12
|
|
|
36
|
|
|
34
|
|
Foreign
Exchange Risks - Explanation and Risk Sensitivity Analysis
Syngenta
uses US
dollars as its reporting currency and is therefore exposed to foreign exchange
movements in a wide range of currencies. Consequently, it enters into various
contracts, such as forward contracts and options, which represent agreements
to
exchange a defined amount in one currency for an amount in another currency
at a
defined exchange rate on a defined settlement date in the future. These
contracts change in value as foreign exchange rates change, to preserve the
value of assets, commitments and anticipated transactions.
To
cover existing
balance sheet exposures, and to hedge committed foreign currency transactions,
Syngenta uses forward contracts.
To
hedge
anticipated foreign currency cash flows Syngenta uses currency options and
forward contracts. In a forward contract, Syngenta and its counterparty must
exchange these amounts on the settlement date. In its option contracts, Syngenta
normally pays its counterparty a premium amount at the start of the contract
in
exchange for the right to make the exchange on the
settlement
date if
it is beneficial to do so at that date (a “purchased” option). In certain
circumstances, Syngenta may receive a premium amount from its counterparty
in
exchange for giving the counterparty the right to make a similar exchange (a
“written” option). Syngenta has only options, or combinations of options, where
a net premium was paid (a “net purchased” option).
The
following table
demonstrates the sales and operating cost foreign currency exposures. The
primary net foreign currency exposures against the US dollar include the Swiss
franc, the British pound and the Euro.
The
split of sales
and operating costs by currency for the years 2006 and 2005 was as
follows:
|
|
|
|
|
|
|
|
Sales
in %
|
|
Operating
costs in %
|
|
Currency
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
US
dollar
|
|
|
36
|
|
|
37
|
|
|
33
|
|
|
33
|
|
Euro
|
|
|
22
|
|
|
24
|
|
|
19
|
|
|
20
|
|
Swiss
franc
|
|
|
1
|
|
|
1
|
|
|
19
|
|
|
17
|
|
British
pound
sterling
|
|
|
2
|
|
|
2
|
|
|
11
|
|
|
11
|
|
Other
|
|
|
39
|
|
|
36
|
|
|
18
|
|
|
19
|
|
Total
|
|
|
100
|
|
|
100
|
|
|
100
|
|
|
100
|
|
“Other”
includes
over 46 currencies. However, none accounts for more than 10% of total sales
or
total operating costs.
Transaction
Risk - Uncommitted
Syngenta
collects
information about anticipated cash flows for major currencies at Group level
and
hedges material mismatches in currency flows for a 12 month benchmark horizon
using options and forward contracts to reduce operating income volatility.
The
approach is designed to hedge the year on year earnings transaction risk for
the
main currencies. The transactional flows and derivative financial instruments
required to operate the program are analyzed on an ongoing basis. The remaining
currency exposures are closely monitored and additional protection can, with
appropriate authorization, be purchased.
The
remaining
currency risk occurs across numerous emerging markets, and the diversification
offers protection - however, these unhedged currencies are also strictly
monitored and managed against clearly defined risk limits.
|
|
|
|
|
|
(US$
million)
|
|
December
31, 2006
Earnings-at-Risk
|
|
December
31, 2005
Earnings-at-Risk
|
|
Income
Currency (12 month holding period)
|
|
Gross
Impact
|
|
Net
Impact
|
|
Risk
Reduction
|
|
Gross
Impact
|
|
Net
Impact
|
|
Risk
Reduction
|
|
Swiss
franc
|
|
|
87
|
|
|
11
|
|
|
87
|
%
|
|
65
|
|
|
50
|
|
|
23
|
%
|
Euro
|
|
|
34
|
|
|
25
|
|
|
26
|
%
|
|
25
|
|
|
24
|
|
|
4
|
%
|
British
pound
|
|
|
31
|
|
|
11
|
|
|
65
|
%
|
|
25
|
|
|
21
|
|
|
16
|
%
|
Other
Core
Currencies
|
|
|
27
|
|
|
11
|
|
|
59
|
%
|
|
30
|
|
|
25
|
|
|
17
|
%
|
Rest
of
World
|
|
|
58
|
|
|
58
|
|
|
-
|
%
|
|
54
|
|
|
54
|
|
|
-
|
%
|
Total
undiversified
|
|
|
237
|
|
|
116
|
|
|
51
|
%
|
|
199
|
|
|
174
|
|
|
13
|
%
|
Diversification
|
|
|
(183
|
)
|
|
(90
|
)
|
|
51
|
%
|
|
(139
|
)
|
|
(129
|
)
|
|
7
|
%
|
Net
EaR
|
|
|
54
|
|
|
26
|
|
|
52
|
%
|
|
60
|
|
|
45
|
|
|
25
|
%
|
The
Earnings-at-Risk calculation is performed for anticipated net transactional
currency flows for 2007 taking into account related currency hedges. As of
December 31, 2006, the total potential adverse movement for 2007 net
transactional flows after hedges relative to year-end spot levels, at the 95%
confidence level, was US$26 million (December 31, 2005: US$45
million).
From
the
Earnings-at-Risk table above the Swiss franc stands out as a major exposure.
This risk arises from having a significant cost base in Switzerland with no
material offsetting sales. This exposure is monitored continuously by the risk
management team and by senior finance management.
The
actual movement
on transaction flows due to currency movements in 2006 was adverse. This arose
due to weak European currencies in the first half of the year - a period when
the majority of European sales are made. It has been compounded by a weak US
dollar in the second half and the impact of that on the Swiss franc cost
base.
Transaction
Risk -
Balance Sheet
Committed
foreign
currency exposures are largely generated by the routing of products from central
manufacturing sites to foreign affiliates. They are normally fully covered
and
are in the majority of cases managed by the use of forward contracts. There
are
a number of currencies for which either no forward market exists or where the
cost of hedging that currency is deemed too costly. These instances thus give
rise to VaR. These net committed transactional currency exposures are determined
by identification and monthly reporting by business units. The Value-at-Risk
calculations for committed exposures relate to the revaluation of exposures
relative to spot rates over a monthly period. The impact of interest
differentials and other factors is not included in these
calculations.
|
|
|
|
|
|
(US$
million)
|
|
December
31, 2006
Value-at-Risk
|
|
December
31, 2005
Value-at-Risk
|
|
Income
Currency (1 month holding
period)
|
|
Gross
Impact
|
|
Net
Impact
|
|
Risk
Reduction
|
|
Gross
Impact
|
|
Net
Impact
|
|
Risk
Reduction
|
|
Swiss
franc
|
|
|
7
|
|
|
-
|
|
|
100
|
%
|
|
48
|
|
|
-
|
|
|
100
|
%
|
Euro
|
|
|
1
|
|
|
1
|
|
|
-
|
%
|
|
13
|
|
|
-
|
|
|
100
|
%
|
British
pound
|
|
|
33
|
|
|
2
|
|
|
94
|
%
|
|
60
|
|
|
7
|
|
|
88
|
%
|
Other
Core
Currencies
|
|
|
3
|
|
|
1
|
|
|
67
|
%
|
|
8
|
|
|
1
|
|
|
88
|
%
|
Rest
of
World
|
|
|
23
|
|
|
6
|
|
|
74
|
%
|
|
21
|
|
|
6
|
|
|
71
|
%
|
Total
undiversified
|
|
|
67
|
|
|
10
|
|
|
85
|
%
|
|
150
|
|
|
14
|
|
|
91
|
%
|
Diversification
|
|
|
(34
|
)
|
|
(7
|
)
|
|
79
|
%
|
|
(42
|
)
|
|
(7
|
)
|
|
83
|
%
|
Net
VaR
|
|
|
33
|
|
|
3
|
|
|
91
|
%
|
|
108
|
|
|
7
|
|
|
94
|
%
|
The
Value-at-Risk
calculation was performed for net committed transactional currency flows
existing at December 31, 2006 taking into account related currency hedges.
As of
December 31, 2006, the total 30-day Value-at-Risk, after hedges, at the 95%
confidence level was US$3 million (December 31, 2005: US$7 million). Maximum
and
minimum levels of risk through the year were US$8 million and US$2
million.
The
largest
exposures arise in the Swiss franc and the British pound. These countries house
large research and manufacturing sites.
Translation
Risk - Balance Sheet
Translation
exposure arises from the consolidation of the foreign currency denominated
financial statements of the Group’s subsidiaries. This translation effect is
visible as currency translation movement in the consolidated equity of Syngenta.
The table below demonstrates the 1 month translation Value-at-Risk:
|
|
|
|
|
|
(US$
million)
|
|
December
31, 2006
Value-at-Risk
|
|
December
31, 2005
Value-at-Risk
|
|
Income
Currency (1 month holding period)
|
|
Gross
Impact
|
|
Net
Impact
|
|
Risk
Reduction
|
|
Gross
Impact
|
|
Net
Impact
|
|
Risk
Reduction
|
|
Swiss
franc
|
|
|
24
|
|
|
24
|
|
|
-
|
%
|
|
46
|
|
|
46
|
|
|
-
|
%
|
Euro
|
|
|
18
|
|
|
10
|
|
|
44
|
%
|
|
23
|
|
|
15
|
|
|
35
|
%
|
British
pound
|
|
|
56
|
|
|
29
|
|
|
48
|
%
|
|
57
|
|
|
30
|
|
|
47
|
%
|
Other
Core
Currencies
|
|
|
10
|
|
|
10
|
|
|
-
|
%
|
|
10
|
|
|
10
|
|
|
-
|
%
|
Rest
of
World
|
|
|
69
|
|
|
69
|
|
|
-
|
%
|
|
53
|
|
|
53
|
|
|
-
|
%
|
Total
undiversified
|
|
|
177
|
|
|
142
|
|
|
20
|
%
|
|
189
|
|
|
154
|
|
|
19
|
%
|
Diversification
|
|
|
(57
|
)
|
|
(52
|
)
|
|
9
|
%
|
|
(49
|
)
|
|
(45
|
)
|
|
8
|
%
|
Net
VaR
|
|
|
120
|
|
|
90
|
|
|
25
|
%
|
|
140
|
|
|
109
|
|
|
22
|
%
|
Balance
sheet
translational exposures in subsidiaries are, where appropriate, hedged by the
use of foreign denominated debt and in exceptional circumstances, foreign
exchange forward contracts. The latter focuses on risk reduction for monetary
items.
The
translation
risk can be significant, however, Syngenta believes over the longer-term mean
reversion tendency of currencies reduces the risk to acceptable levels. The
Syngenta equity base is also deemed to be of sufficient magnitude to absorb
the
short to medium term impact of exchange rate movements.
The
large
investments and operations in Switzerland and the UK lead to the most
significant risk.
Interest
Rate
Risks
As
mentioned above,
Syngenta is exposed to fluctuations in interest rates on its borrowings.
Syngenta
monitors
its interest rate exposures and analyzes the potential impact of interest rate
movements on net interest expense through an Interest Charge-at-Risk
approach.
As
of December 31,
2006, the 12 month Interest Charge-at-Risk at the 95% confidence level was
US$8
million (December 31, 2005: US$6 million).
Syngenta
may enter
into derivative transactions to manage the Group’s sensitivity to interest rate
movements arising from its financial assets and liabilities in line with a
predefined zero net duration benchmark (sensitivity of net income/expense
resulting from interest rate movements on all financial assets and liabilities).
Interest rate swaps are contractual agreements to exchange an amount of
interest, calculated at a defined rate on a defined notional principal amount,
for another amount of interest, calculated at a different rate but on the same
notional amount, on a defined settlement date in the future. Most interest
rate
swaps involve paying or receiving the difference between fixed and floating
rate
interest payments on a given amount over a given period.
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
|
|
Net
carrying amount Including derivatives
|
|
Duration
(years)
|
|
Net
carrying amount Including derivatives
|
|
Duration
(years)
|
|
Financial
liabilities
|
|
|
|
|
|
|
|
|
|
Amounts
owing
to banks under various loan and overdraft facilities, in various
currencies and at various interest rates
|
|
|
156.3
|
|
|
0.25
|
|
|
263.8
|
|
|
0.25
|
|
Eurobond
2006
- at floating rate (USD)
|
|
|
-
|
|
|
-
|
|
|
182.8
|
|
|
0.25
|
|
Eurobond
2011
- at fixed rate (USD)
|
|
|
550.1
|
|
|
4.16
|
|
|
-
|
|
|
-
|
|
Eurobond
2011
- at floating rate (USD)
|
|
|
100.0
|
|
|
0.25
|
|
|
-
|
|
|
-
|
|
Eurobond
2015
- at fixed rate (USD)
|
|
|
428.4
|
|
|
6.63
|
|
|
416.4
|
|
|
7.39
|
|
Eurobond
2015
- at floating rate (USD)
|
|
|
214.2
|
|
|
0.25
|
|
|
208.2
|
|
|
0.25
|
|
US
private
placement 2020 - at fixed rate (USD)
|
|
|
-
|
|
|
-
|
|
|
75.0
|
|
|
9.90
|
|
US
private
placement 2020 - at floating rate (USD)
|
|
|
75.0
|
|
|
0.25
|
|
|
-
|
|
|
-
|
|
US
private
placement 2025 - at fixed rate (USD)
|
|
|
75.0
|
|
|
11.09
|
|
|
75.0
|
|
|
11.47
|
|
US
private
placement 2035 - at fixed rate (USD)
|
|
|
100.0
|
|
|
13.18
|
|
|
100.0
|
|
|
13.57
|
|
Total
Liabilities and weighted duration
|
|
|
1,699.0
|
|
|
4.35
|
|
|
1,321.2
|
|
|
4.69
|
|
Financial
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash
equivalents
|
|
|
444.9
|
|
|
0.25
|
|
|
457.5
|
|
|
0.25
|
|
Marketable
securities
|
|
|
81.3
|
|
|
0.24
|
|
|
3.8
|
|
|
0.25
|
|
Long-term
Marketable securities
|
|
|
20.0
|
|
|
1.04
|
|
|
-
|
|
|
-
|
|
Total
Assets and weighted duration
|
|
|
546.2
|
|
|
0.28
|
|
|
461.3
|
|
|
0.25
|
|
Other
Price
Risks
Syngenta
has
historically entered into derivatives related to commodity exposures to a
limited extent. During 2005 Syngenta also entered into some oil option
derivatives to mitigate the impact of adverse price movements on Syngenta’s cost
base. This activity was extended in 2006 and now comprises oil and natural
gas
hedging in the UK and the US, as well as soft commodity hedging for Corn and
Soybean purchases by the Seeds business in the US.
The
oil exposure is
mainly indirect through the impact of oil prices on the cost of both raw
materials and distribution. Gas exposure occurs in the primary manufacturing
sites but it is only in the USA and UK that liquid derivative hedging products
are readily available.
The
hedging
programs in place aim to mitigate the impact of price volatility on the
year-on-year income statement.
Soft
commodity
price risks arise in Syngenta’s US Seeds business and the hedging activity here
is again aimed at providing stability in the year-on-year Income statement.
Syngenta contracts to purchase various seed crops from growers and hedges the
cost of the crops using either exchange traded futures or OTC options.
The
table below
assume a 12 month holding period.
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
|
December
31, 2006
Earnings
at-Risk
|
|
December
31, 2005
Earnings-at-Risk
|
|
|
|
Hard
Commodities
|
|
Gross
Impact
|
|
Net
Impact
|
|
Risk
Reduction
|
|
Gross
Impact
|
|
Net
Impact
|
|
Risk
Reduction
|
|
Total
Undiversified
|
|
|
|
|
|
10
|
|
|
8
|
|
|
20
|
%
|
|
15
|
|
|
11
|
|
|
27
|
%
|
Diversification
|
|
|
|
|
|
(1
|
)
|
|
(1
|
)
|
|
-
|
%
|
|
(1
|
)
|
|
(1
|
)
|
|
-
|
%
|
Net
EaR
|
|
|
|
|
|
9
|
|
|
7
|
|
|
22
|
%
|
|
14
|
|
|
10
|
|
|
29
|
%
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
|
December
31, 2006
Earnings
at-Risk
|
|
December
31, 2005
Earnings-at-Risk
|
|
|
|
Soft
Commodities
|
|
Gross
Impact
|
|
Net
Impact
|
|
Risk
Reduction
|
|
Gross
Impact
|
|
Net
Impact
|
|
Risk
Reduction
|
|
Total
Undiversified
|
|
|
|
|
|
34
|
|
|
29
|
|
|
15
|
%
|
|
31
|
|
|
26
|
|
|
16
|
%
|
Diversification
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
%
|
|
(2
|
)
|
|
(2
|
)
|
|
-
|
%
|
Net
EaR
|
|
|
|
|
|
34
|
|
|
29
|
|
|
15
|
%
|
|
29
|
|
|
24
|
|
|
17
|
%
|
The
hard commodity
exposure is related to direct gas usage and a hedging program is in place,
which
reduces the Net EaR to US$7 million (December 31, 2005: US$10
million)
The
soft commodity
EaR is driven by the high volatility compared to other asset classes. The
hedging program however reduces overall 12 month EaR at December 2006 to US$29
million.
In
addition the
group has an indirect exposure to oil. The associated operating income
volatility is managed by an oil hedging program.
As
at 31 December
2006 there was a two million barrel of hedge protection in place for 2007.
The
EaR for the outstanding oil hedges as at 31 December 2006 was US$9 million
(December 31 2005: US$13 million).
Credit
Risk
Syngenta
has
policies and operating guidelines in place to ensure that financial instruments
are limited to transactions with high credit quality banks and financial
institutions. These include limits in respect of counterparties to ensure there
is no significant concentration of credit risk. Any excess cash is invested
in
liquid investment grade instruments and split across major banks, financial
and
other institutions to minimize the credit risk. As of December 31, 2006,
Syngenta had no treasury or derivative transactions that represented a
significant concentration of credit risk. No credit losses have been incurred
from the investments described above.
Syngenta
sells a
broad range of agricultural products to a diverse group of customers throughout
the world. Credit ratings are reviewed regularly and defined country credit
limits are set and monitored on an ongoing basis.
The
maximum
exposure to credit risk is represented by the going concern values of the
originated loans and receivables that are carried in the balance sheet,
including derivatives with positive market values. At the reporting date there
were no significant financial guarantees for third party obligations that
increase this risk. Syngenta signs netting agreements under an ISDA
(International Swaps and Derivatives Association) master agreement with the
respective counter-parties, which minimizes the exposure on derivative
positions.
Liquidity
Risk
Syngenta
liquidity
risk policy is to maintain at all times sufficient liquidity reserves both
at
Group and affiliate level in order to meet payment obligations as they fall
due
and also to maintain an adequate liquidity margin. The planning and supervision
of liquidity is the responsibility of the affiliates and Group Treasury.
Liquidity requirements are forecast on a weekly basis. The Group operates
regional or country cash pools to allow efficient use of its liquidity reserves.
As
of December 31,
2006, Syngenta has a committed credit facility of US$1.2 billion with high
credit quality banks expiring in August 2013. The following table shows
Syngenta’s contractually agreed (undiscounted) interest payments and repayments
on non-derivative financial liabilities and the related interest rate
derivatives held at December 31, 2006.
|
|
|
|
|
|
|
|
2006
(US$ million)
|
|
|
|
Less
than 1 Year
|
|
1-3
Years
|
|
|
|
Net
carrying amount
Dec
31, 2006
|
|
Fixed
Interest rate
|
|
Variable
interest rate
|
|
Repayment
|
|
Fixed
interest
rate
|
|
Variable
interest
rate
|
|
Repayment
|
|
Non-Derivative
financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Unsecured
Bonds, liabilities to Banks and other financial
institutions
|
|
|
1,556
|
|
|
68
|
|
|
-
|
|
|
-
|
|
|
136
|
|
|
-
|
|
|
-
|
|
Derivative
financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Interest
Rate Swaps
|
|
|
26
|
|
|
-
|
|
|
2
|
|
|
-
|
|
|
4
|
|
|
3
|
|
|
-
|
|
2006
(US$ million)
|
|
3-5
years
|
|
5-10
years
|
|
|
|
Fixed
Interest rate
|
|
Variable
interest rate
|
|
Repayment
|
|
Fixed
interest
rate
|
|
Variable
interest
rate
|
|
Repayment
|
|
Non-Derivative
financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Unsecured
Bonds, liabilities to Banks and other financial
institutions
|
|
|
136
|
|
|
-
|
|
|
657
|
|
|
176
|
|
|
-
|
|
|
646
|
|
Derivative
financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Interest
Rate Swaps
|
|
|
11
|
|
|
3
|
|
|
-
|
|
|
-
|
|
|
7
|
|
|
-
|
|
|
|
|
|
|
|
2006
(US$ million)
|
|
10-20
years
|
|
20-30
years
|
|
|
|
Fixed
Interest rate
|
|
Variable
interest rate
|
|
Repayment
|
|
Fixed
interest
rate
|
|
Variable
interest
rate
|
|
Repayment
|
|
Non-Derivative
financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Unsecured
Bonds, liabilities to Banks and other financial
institutions
|
|
|
107
|
|
|
-
|
|
|
153
|
|
|
50
|
|
|
-
|
|
|
100
|
|
Derivative
financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Interest
Rate Swaps
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
2005
(US$ million)
|
|
|
|
Less
than 1 Year
|
|
1-3
Years
|
|
|
|
Net
carrying amount
Dec
31, 2005
|
|
Fixed
Interest rate
|
|
Variable
interest rate
|
|
Repayment
|
|
Fixed
interest
rate
|
|
Variable
interest
rate
|
|
Repayment
|
|
Non-Derivative
financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Unsecured
Bonds, liabilities to Banks and other financial
institutions
|
|
|
1,101
|
|
|
52
|
|
|
-
|
|
|
259
|
|
|
76
|
|
|
-
|
|
|
-
|
|
Derivative
financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Interest
Rate Swaps
|
|
|
9
|
|
|
-
|
|
|
1
|
|
|
-
|
|
|
-
|
|
|
3
|
|
|
-
|
|
-
Cross
Currency Swaps
|
|
|
30
|
|
|
10
|
|
|
-
|
|
|
-
|
|
|
20
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
2005
(US$ million)
|
|
3-5
years
|
|
5-10
years
|
|
|
|
Fixed
Interest rate
|
|
Variable
Interest
rate
|
|
Repayment
|
|
Fixed
interest
rate
|
|
Variable
interest
rate
|
|
Repayment
|
|
Non-Derivative
financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Unsecured
Bonds, liabilities to Banks and other financial
institutions
|
|
|
76
|
|
|
-
|
|
|
-
|
|
|
189
|
|
|
-
|
|
|
592
|
|
Derivative
financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Interest
Rate Swaps
|
|
|
-
|
|
|
2
|
|
|
-
|
|
|
-
|
|
|
6
|
|
|
-
|
|
-
Cross
Currency Swaps
|
|
|
20
|
|
|
-
|
|
|
-
|
|
|
33
|
|
|
-
|
|
|
50
|
|
|
|
|
|
|
|
|
|
2005
(US$ million)
|
|
|
|
10-20
years
|
|
20-30
years
|
|
|
|
Fixed
Interest rate
|
|
Variable
interest rate
|
|
Repayment
|
|
Fixed
interest
rate
|
|
Variable
interest
rate
|
|
Repayment
|
|
Non-Derivative
financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Unsecured
Bonds, liabilities to Banks and other financial
institutions
|
|
|
115
|
|
|
-
|
|
|
150
|
|
|
56
|
|
|
-
|
|
|
100
|
|
Derivative
financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Interest
Rate Swaps
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
-
Cross
Currency Swaps
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Forecast
data for
liabilities which may be incurred in the future is not included in the table
above. Amounts in foreign currency were translated at the closing rate at
the
reporting date. The variable payments arising from the financial instruments
were calculated based on the forward interest rate yield curve at December
31,
2006 and 2005. Interest on interest rate swaps includes the paid and received
amounts as interest is settled on a net basis. Financial liabilities that
can be
repaid at any time have been assigned to the earliest possible time
period.
Derivative
Financial Instruments
The
following table
shows Syngenta’s notional amount and maturities of derivative financial
instruments held at December 31, 2006, 2005 and 2004 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
Total
|
|
30
days
or
less
|
|
60
days
or
less
|
|
90
days
or
less
|
|
180
days or less
|
|
180
days – 1
year
|
|
1–5
years
|
|
More
than 5 years
|
|
Interest
Rate
Swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
1,683
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,394
|
|
|
289
|
|
2005
|
|
|
399
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
185
|
|
|
-
|
|
|
214
|
|
2004
|
|
|
1,491
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,491
|
|
|
-
|
|
Cross
Currency Swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
1,277
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
636
|
|
|
641
|
|
2005
|
|
|
826
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
185
|
|
|
-
|
|
|
641
|
|
2004
|
|
|
677
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
677
|
|
|
-
|
|
Foreign
Exchange Forward Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swiss
franc
|
|
|
1,729
|
|
|
276
|
|
|
652
|
|
|
112
|
|
|
301
|
|
|
337
|
|
|
51
|
|
|
-
|
|
British
pound
sterling
|
|
|
1,465
|
|
|
160
|
|
|
1,025
|
|
|
49
|
|
|
199
|
|
|
32
|
|
|
-
|
|
|
-
|
|
Other
European currencies
|
|
|
553
|
|
|
79
|
|
|
458
|
|
|
2
|
|
|
13
|
|
|
1
|
|
|
-
|
|
|
-
|
|
US
dollar
|
|
|
3,293
|
|
|
227
|
|
|
1,684
|
|
|
62
|
|
|
75
|
|
|
1,014
|
|
|
231
|
|
|
-
|
|
Others
|
|
|
491
|
|
|
2
|
|
|
261
|
|
|
13
|
|
|
16
|
|
|
44
|
|
|
155
|
|
|
-
|
|
Total
2006
|
|
|
7,531
|
|
|
744
|
|
|
4,080
|
|
|
238
|
|
|
604
|
|
|
1,428
|
|
|
437
|
|
|
-
|
|
Total
2005
|
|
|
6,413
|
|
|
619
|
|
|
3,616
|
|
|
1,258
|
|
|
426
|
|
|
494
|
|
|
-
|
|
|
-
|
|
Total
2004
|
|
|
6,480
|
|
|
1,300
|
|
|
4,221
|
|
|
235
|
|
|
447
|
|
|
277
|
|
|
-
|
|
|
-
|
|
Currency
Option Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swiss
franc
|
|
|
290
|
|
|
-
|
|
|
65
|
|
|
22
|
|
|
101
|
|
|
102
|
|
|
-
|
|
|
-
|
|
British
pound
sterling
|
|
|
264
|
|
|
32
|
|
|
57
|
|
|
15
|
|
|
58
|
|
|
102
|
|
|
-
|
|
|
-
|
|
US
dollar
|
|
|
105
|
|
|
25
|
|
|
37
|
|
|
17
|
|
|
26
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Total
2006
|
|
|
659
|
|
|
57
|
|
|
159
|
|
|
54
|
|
|
185
|
|
|
204
|
|
|
-
|
|
|
-
|
|
Total
2005
|
|
|
711
|
|
|
60
|
|
|
94
|
|
|
117
|
|
|
305
|
|
|
135
|
|
|
-
|
|
|
-
|
|
Total
2004
|
|
|
1,020
|
|
|
69
|
|
|
113
|
|
|
131
|
|
|
292
|
|
|
415
|
|
|
-
|
|
|
-
|
|
Commodity
Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
dollar
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
2006
|
|
|
184
|
|
|
23
|
|
|
31
|
|
|
49
|
|
|
65
|
|
|
16
|
|
|
-
|
|
|
-
|
|
Total
2005
|
|
|
131
|
|
|
17
|
|
|
22
|
|
|
35
|
|
|
46
|
|
|
11
|
|
|
-
|
|
|
-
|
|
Total
2004
|
|
|
90
|
|
|
11
|
|
|
15
|
|
|
24
|
|
|
32
|
|
|
8
|
|
|
-
|
|
|
-
|
|
The
currency shown
in the above tables reflects the bought currency, which is in most cases the
functional currency of the entity involved. There are many sold currencies
reflecting the broad range of Syngenta’s exposures.
Hedge
accounting
Fair
Value
Hedges
The
Group maintains
a combination of interest rate swaps and cross currency swaps that qualify
for
hedge accounting as designated fair value hedges relating to bond liabilities.
The swap portfolio involves the exchange of fixed for floating rate interest
payments and (economically) converts fixed Euro denominated debt into floating
US dollar denominated debt. The fair value movements of these derivatives are
included in the income statement and are largely offset by changes in the fair
value of the debt due to interest rate changes and the retranslation of the
debt
from Euro to US dollar. There is an immaterial amount of hedge ineffectiveness
on these swaps. Hedge effectiveness for these hedges is measured on a quarterly
basis, by comparing the movement in the period of the present value of future
coupon bond payments to the movement in the value of the associated
swaps.
Cash
Flow
Hedges
Cross
currency
swaps are contracts which involve the exchange of both periodic and final
amounts in two different currencies.
Cross
currency
swaps and interest rate swaps are maintained by Syngenta to economically convert
fixed Euro denominated debt into fixed US dollar denominated debt. The swaps
that qualify for hedge accounting are designated as cash flow hedges relating
to
future interest and principal payments on bond liabilities. The revaluation
of
these swaps is included in the cash flow hedge reserve and is recycled to the
income statement as the interest charges relating to the bond are recorded.
There is an immaterial amount of hedge ineffectiveness related to these hedges.
Hedge effectiveness for these hedges is measured on a quarterly basis, by
comparing the movement in the present value of future coupon bond payments,
to
the movement in the present value of forecast future cash flows of the
associated swaps.
In
2006 interest
rate swaps and cross currency swaps with a notional value of US$214 million
and
US$100 million were de-designated as cash flow hedges of the 4.125% Eurobond
2015 issuance, and 4.125% Eurobond 2011 issuance, respectively. The revaluation
of these swaps at the time of de-designation will be recycled to the income
statement as the interest charges relating to the bond are
recorded.
In
2005 Syngenta
also entered into forward starting interest rate swaps to hedge its exposure
to
increases in interest rates prior to the issuance of the US dollar fixed rate
private placement. Hedge effectiveness was measured using the hypothetical
derivative method whereby the change in value of the hypothetical swap is
compared to the change in value of the actual swap. There is an immaterial
amount of hedge ineffectiveness related to these hedges. Forward starting rate
swaps are contracts which define a future date, rather than the date the
contract is agreed, as the start of the period during which interest payments
will be swapped.
Syngenta
uses
forward contracts and net purchased currency options to hedge forecast foreign
currency cash flows arising from forecast sales and purchases between Syngenta
subsidiaries and related third party transactions. The contracts that qualify
for hedge accounting are designated as foreign currency cash flow hedges. Gains
and losses on the cash flow hedges are held in the cash flow hedge reserve
and
are recycled to operating income when the third party transaction occurs in
order to match the revenue recognition of the underlying hedged transaction.
There is an immaterial amount of hedge ineffectiveness related to these hedges.
Hedge effectiveness for net purchased options is measured on a quarterly basis.
The option hedge designation and effectiveness test excludes the time value
element and uses the forward rate methodology. Each quarter the cumulative
movement in intrinsic value is compared to the movement in the notional
underlying value. Effectiveness for the forward contracts is measured quarterly
using the forward rate basis. The probability of forecast items occurring is
assessed by updating budgets on a quarterly basis and by the application of
quarterly back testing methods.
Syngenta
uses
commodity forwards, futures and purchased options to hedge anticipated and
committed future purchases. The contracts that qualify for hedge accounting
are
designated as cash flow hedges. Gains and losses are held in the cash flow
hedge
reserve and are recycled to the income statement when the related purchases
are
recorded and recognized in the income statement. There is an immaterial amount
of hedge ineffectiveness related to these hedges. Hedge effectiveness for net
purchased commodity options is measured on a quarterly basis. The option hedge
designation and effectiveness test excludes the time value element and uses
the
forward rate methodology. Each quarter the cumulative movement in intrinsic
value is compared to the movement in the notional underlying value.
Gains
and losses on
cash flow hedges are ultimately recorded in the income statement on a consistent
basis with the underlying hedged item. Any gains or losses on cash flow hedges
arising due to hedge ineffectiveness will be shown in the income statement
within financial expense, net. If it becomes apparent that the hedged forecasted
transaction is no longer likely to occur, the hedge will be de-designated and
the amount held in the cash flow hedge reserve reclassified into
earnings.
Hedges
of
Net Investments in Foreign Operations
The
Group
designates forward contracts and net purchased currency options as hedges of
net
investments in foreign operations. Gains and losses are held in the cash flow
hedge reserve and will be recycled to the income statement on disposal of the
underlying investments. Effectiveness for the forward contracts is measured
quarterly using the forward rate basis. Hedge effectiveness for net purchased
options is measured on a quarterly basis. The option hedge designation and
effectiveness test excludes the time value element and uses the forward rate
methodology. Each quarter the cumulative movement in intrinsic value is compared
to the movement in the notional underlying value. There is an immaterial amount
of hedge ineffectiveness related to these hedges.
Gains
and losses on
exchange forward contracts and net purchased options recognized as net
investment hedges during the period were as follows:
|
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Gains/(losses)
recognized in equity
|
|
|
(104
|
)
|
|
46
|
|
|
-
|
|
Gains/(losses)
removed from equity and recognized in net income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Undesignated
Hedges
The
Group enters
into certain foreign currency, commodity and interest rate transactions that
are
not designated as hedges for accounting purposes. The foreign currency hedges
relate to on balance sheet exposures as part of the Group’s committed exposure
program. The fair value movements of the hedge and the retranslation of the
underlying exposure are recorded in the income statement and largely offset.
In
2006 and 2005,
Syngenta entered into oil options to hedge an indirect exposure to oil prices.
The fair value movements of the hedges are recorded in the income statement.
There were no similar transactions in 2004. The amount reported in the 2006
income statement was a loss of US$3 million (2005: gain of US$1
million).
Syngenta
also
entered into commodity futures and options to hedge certain indirect exposures
to commodity crop prices, which did not qualify for hedge accounting. The
movements in the fair value of the hedges are recorded in the income statement.
The amount reported in the 2006 income statement was a gain of US$5 million
(2005 and 2004: nil).
In
2005 and 2006,
Syngenta entered into interest rate swaps to hedge its economic exposure to
increases in US dollar interest rates prior to the issuance of the 4.125%
Eurobond 2015 and the 4.125% Eurobond 2011, respectively. These interest rate
swaps did not qualify for hedge accounting, so the movement in the fair value
and realized gain on unwinding the swaps was recorded in the income statement
in
2006 and 2005 respectively. There were no similar transactions in
2004.
The
notional
amounts and fair values of the above instruments at December 31, 2006, 2005
and
2004 are as follows:
|
|
|
|
|
|
|
|
|
|
Notional
amount
|
|
Positive
fair value
|
|
Negative
fair value
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Interest
Rate
Swaps
|
|
|
1,683
|
|
|
399
|
|
|
1,491
|
|
|
1
|
|
|
6
|
|
|
46
|
|
|
(26
|
)
|
|
(10
|
)
|
|
(24
|
)
|
– designated
as
cash flow hedges
|
|
|
1,090
|
|
|
-
|
|
|
1,044
|
|
|
1
|
|
|
-
|
|
|
27
|
|
|
(12
|
)
|
|
-
|
|
|
(24
|
)
|
– designated
as
fair value hedges
|
|
|
493
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(14
|
)
|
|
-
|
|
|
-
|
|
Cross
Currency Swaps
|
|
|
1,277
|
|
|
826
|
|
|
677
|
|
|
38
|
|
|
73
|
|
|
428
|
|
|
-
|
|
|
(30
|
)
|
|
-
|
|
– designated
as
cash flow hedges
|
|
|
963
|
|
|
428
|
|
|
-
|
|
|
29
|
|
|
(20
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
– designated
as
fair value hedges
|
|
|
314
|
|
|
-
|
|
|
-
|
|
|
9
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Foreign
Exchange Forward Contracts
|
|
|
7,531
|
|
|
6,413
|
|
|
6,480
|
|
|
87
|
|
|
75
|
|
|
111
|
|
|
(67
|
)
|
|
(96
|
)
|
|
(57
|
)
|
– designated
as
cash flow hedges
|
|
|
1,241
|
|
|
382
|
|
|
402
|
|
|
15
|
|
|
4
|
|
|
21
|
|
|
(12
|
)
|
|
(16
|
)
|
|
(10
|
)
|
– designated
as
hedges of net investments in foreign operations
|
|
|
931
|
|
|
1,055
|
|
|
-
|
|
|
9
|
|
|
26
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Currency
Option Contracts
|
|
|
659
|
|
|
711
|
|
|
1,020
|
|
|
20
|
|
|
7
|
|
|
46
|
|
|
(1
|
)
|
|
(5
|
)
|
|
(3
|
)
|
– designated
as
cash flow hedges
|
|
|
659
|
|
|
711
|
|
|
1,020
|
|
|
20
|
|
|
7
|
|
|
46
|
|
|
(1
|
)
|
|
(5
|
)
|
|
(3
|
)
|
Commodity
Contracts
|
|
|
184
|
|
|
131
|
|
|
90
|
|
|
6
|
|
|
6
|
|
|
5
|
|
|
(2
|
)
|
|
-
|
|
|
-
|
|
– designated
as
cash flow hedges
|
|
|
32
|
|
|
57
|
|
|
90
|
|
|
2
|
|
|
2
|
|
|
5
|
|
|
(2
|
)
|
|
-
|
|
|
-
|
|
At
December 31,
2006 Syngenta has the following hedges in place to manage its exposure to its
debt portfolio:
The
4.125% Eurobond
2015 is partly hedged by cross currency swaps which convert the Euro denominated
fixed rate debt into US dollar fixed rate debt. These swaps are designated
as
cash flow hedges. The remainder of the bond is hedged by a combination of cross
currency and interest rate swaps which convert the Euro fixed interest rate
debt
to US dollar floating rate debt. These swaps are designated as fair value
hedges.
At
inception the
4.125% Eurobond 2011 has been fully hedged through cross currency swaps which
convert the Euro denominated fixed rate debt into US dollar fixed rate debt.
These swaps have been designated as cash flow hedges. Part of this US fixed
rate
position has subsequently been put into US dollar floating interest rate. This
was achieved through entry into
interest
rate swaps
which partially offset the USD floating to USD fixed part of the initial cross
currency swaps. The portion of the original cross currency swaps that is offset
by this subsequent transaction has been de-designated and the mark-to-market
value held in equity will be amortized through net income over the remaining
life of the bond. The new interest rate swaps remain undesignated.
Gains
and losses on
derivative instruments recognized as cash flow hedges during the period were
as
follows:
|
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Interest
Rate
Swaps
|
|
|
|
|
|
|
|
|
|
|
Gains/(losses)
recognized in equity
|
|
|
(20
|
)
|
|
(23
|
)
|
|
1
|
|
Gains/(losses)
removed from equity and recognized in net income
|
|
|
-
|
|
|
(9
|
)
|
|
-
|
|
Cross
Currency Swaps
|
|
|
|
|
|
|
|
|
|
|
Gains/(losses)
recognized in equity
|
|
|
(15
|
)
|
|
(2
|
)
|
|
-
|
|
Gains/(losses)
removed from equity and recognized in net income
|
|
|
-
|
|
|
(2
|
)
|
|
-
|
|
Foreign
Exchange Forward Contracts
|
|
|
|
|
|
|
|
|
|
|
Gains/(losses)
recognized in equity
|
|
|
16
|
|
|
(38
|
)
|
|
15
|
|
Gains/(losses)
removed from equity and recognized in net income
|
|
|
(4
|
)
|
|
(7
|
)
|
|
1
|
|
Currency
Option Contracts
|
|
|
|
|
|
|
|
|
|
|
Gains/(losses)
recognized in equity
|
|
|
20
|
|
|
(42
|
)
|
|
36
|
|
Gains/(losses)
removed from equity and recognized in net income
|
|
|
(10
|
)
|
|
12
|
|
|
40
|
|
Commodity
Contracts
|
|
|
|
|
|
|
|
|
|
|
Gains/(losses)
recognized in equity
|
|
|
5
|
|
|
12
|
|
|
(13
|
)
|
Gains/(losses)
removed from equity and recognized in net income
|
|
|
3
|
|
|
(2
|
)
|
|
7
|
|
The
forecasted
future interest payments designated as the hedged item in a cash flow hedge
for
the above interest rate and cross currency swaps were expected to occur and
be
reported in net income as follows:
|
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Less
than one
year
|
|
|
41
|
|
|
16
|
|
|
4
|
|
One
to five
years
|
|
|
164
|
|
|
65
|
|
|
4
|
|
Five
years or
later
|
|
|
82
|
|
|
81
|
|
|
-
|
|
The
forecasted
transactions designated as the hedged items for the above foreign exchange
forward contracts, currency options and commodity contracts are expected to
occur and be reported within net income within one year from the balance sheet
date. In 2006 there were no gains/(losses) reclassified into earnings as a
result of cash flow hedge accounting being discontinued on the grounds that
it
had become unlikely that the hedged forecasted transaction would
occur.
Gains
and losses
recognized in net income on financial instruments designated as fair value
hedges and on the hedged items attributable to the hedged risk are as
follows:
|
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Interest
rate
swaps
|
|
|
2
|
|
|
(24
|
)
|
|
11
|
|
Cross
currency swaps
|
|
|
(5
|
)
|
|
3
|
|
|
-
|
|
Underlying
hedged items
|
|
|
3
|
|
|
19
|
|
|
(11
|
)
|
The
following
transactions were de-designated as hedges for accounting purposes:
Interest
rate swaps
designated as cash flow hedges were unwound during 2005 on partial repurchase
of
the underlying 5.5% Eurobond 2006 on April 22, 2005. The movement in the fair
value of the interest rate swaps was recognized in equity until this date.
When
the underlying debt was repurchased the interest rate swaps were de-designated
and the remaining fair value was removed from equity and recognized in net
income.
During
2005 the
portfolio of derivatives hedging the 4.125% Eurobond 2015 was revised and cross
currency swaps with a notional amount of US$214 million were de-designated
as
cash flow hedges. The revaluation deferred in the cash flow hedge
reserve
to the
point of de-designation is being amortized over the remaining life of the cross
currency swaps. An immaterial expense has been charged to financial expense,
net.
Syngenta
entered
into forward starting interest rate swaps in 2005 for a future issuance of
fixed
rate debt and designated the swaps as cash flow hedges. The movement in the
fair
value of these interest rate swaps to the point of de-designation is being
amortized to the income statement over the first fifteen years of the private
placement. An immaterial expense has been reported in financial expense, net.
Interest
swaps were
entered into in 2005 to hedge Syngenta’s economic exposure to increases in US
dollar interest rates prior to the issuance of the 4.125% Eurobond 2015. These
interest rate swaps did not qualify for hedge accounting. Income relating to
the
unwinding of these swaps was reported in financial expense, net and was not
material.
At
the end of 2005
after reviewing forecast transactional cover available for cash flow hedge
designation a number of net income currency hedges were de-designated. In 2006
these de-designated hedges were marked to market through the income statement
generating a gain of US$3.5 million.
Reported
gains and
losses on revaluation of available-for-sale financial assets were as
follows:
|
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Impairment
losses reported in profit or loss
|
|
|
-
|
|
|
(19
|
)
|
|
-
|
|
Unrealized
holding gains/(losses) reported in shareholders’ equity
|
|
|
39
|
|
|
(3
|
)
|
|
9
|
|
Unrealized
holding gains/(losses) removed from equity and classified in net
income
|
|
|
-
|
|
|
10
|
|
|
-
|
|
Quoted
equity
securities are valued at quoted closing prices. Fair value of unquoted equity
securities is not material.
Off-balance
sheet finance
At
December 31,
2006, non-recourse factoring amounted to US$23 million (2005: US$6 million;
2004: US$7 million). Under these arrangements, Syngenta has no liability under
the factored principal, but pays interest at a commercial rate until the
underlying debtor has either settled or has been declared
insolvent.
Syngenta
has no
other off-balance sheet financing transactions or arrangements.
33.
Syngenta’s operations, associates and joint ventures as at December 31,
2006
The
following are
the significant legal entities in the Syngenta group. Please refer to Note
2
“Accounting Policies” for the appropriate accounting method applied to each type
of entity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Country
|
|
|
Domicile
|
|
|
Percentage
owned by Syngenta
|
|
|
|
|
|
Share
capital local
currency1
|
|
|
Function
of company
|
|
Argentina
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Agro
S.A.
|
|
|
Buenos
Aires
|
|
|
100
|
%
|
|
ARS
|
|
|
1,998,205
|
|
|
Sales/Production
|
|
Australia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Crop
Protection Pty Ltd.
|
|
|
North
Ryde
|
|
|
100
|
%
|
|
AUD
|
|
|
83,942,909
|
|
|
Sales/Production
|
|
Syngenta
Seeds Pty Ltd.
|
|
|
Keysborough
|
|
|
100
|
%
|
|
AUD
|
|
|
1,000,000
|
|
|
Sales/Production
|
|
Bangladesh
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Bangladesh Limited
|
|
|
Dhaka
|
|
|
60
|
%
|
|
BDT
|
|
|
102,644,000
|
|
|
Sales/Production
|
|
Belgium
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Crop
Protection N.V.
|
|
|
Ruisbroek
|
|
|
100
|
%
|
|
EUR
|
|
|
3,809,521
|
|
|
Sales
|
|
Bermuda
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Investment Ltd.
|
|
|
Hamilton
|
|
|
100
|
%
|
|
USD
|
|
|
12,000
|
|
|
Finance
|
|
Syngenta
Reinsurance Ltd.
|
|
|
Hamilton
|
|
|
100
|
%
|
|
USD
|
|
|
120,000
|
|
|
Insurance
|
|
Brazil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Seeds Ltda.
|
|
|
São
Paulo
|
|
|
100
|
%
|
|
BRL
|
|
|
34,678,391
|
|
|
Sales/Production/
Research
|
|
Syngenta
Proteção de Cultivos Ltda.
|
|
|
São
Paulo
|
|
|
100
|
%
|
|
BRL
|
|
|
1,620,211,424
|
|
|
Sales/Production/
Research
|
|
Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Seeds Canada, Inc.
|
|
|
Arva,
Ont
|
|
|
100
|
%
|
|
CAD
|
|
|
1,000
|
|
|
Sales/Production/
Research
|
|
Syngenta
Crop
Protection Canada, Inc.
|
|
|
Guelph,
Ont
|
|
|
100
|
%
|
|
CAD
|
|
|
1,700,000
|
|
|
Sales/Research
|
|
Chile
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Agribusiness S.A.
|
|
|
Santiago
de Chile
|
|
|
100
|
%
|
|
CLP
|
|
|
2,190,898,985
|
|
|
Sales/Production
|
|
China
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
(Suzhou) Crop Protection Company Limited
|
|
|
Kunshan
|
|
|
100
|
%
|
|
CNY
|
|
|
203,747,322
|
|
|
Production
|
|
Syngenta
Seeds (Beijing) Co., Ltd.
|
|
|
Beijing
|
|
|
100
|
%
|
|
CNY
|
|
|
8,277,793
|
|
|
Sales
|
|
Syngenta
(China) Investment Company Limited
|
|
|
Beijing
|
|
|
100
|
%
|
|
CNY
|
|
|
383,080,523
|
|
|
Holding/Sales
|
|
Syngenta
Nantong Crop Protection Company Limited
|
|
|
Jiangsu
Province
|
|
|
100
|
%
|
|
CNY
|
|
|
354,417,000
|
|
|
Production
|
|
Syngenta
Crop
Protection Limited
|
|
|
Hong
Kong
|
|
|
100
|
%
|
|
HKD
|
|
|
500,000
|
|
|
Sales
|
|
Colombia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
S.A.
|
|
|
Bogotá
|
|
|
100
|
%
|
|
COP
|
|
|
58,134,293,300
|
|
|
Sales/Production
|
|
Czech
Republic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Czech s.r.o.
|
|
|
Prague
|
|
|
100
|
%
|
|
CZK
|
|
|
21,100,000
|
|
|
Sales/Development
|
|
Denmark
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Seeds A/S
|
|
|
Copenhagen
|
|
|
100
|
%
|
|
DKK
|
|
|
2,000,000
|
|
|
Sales
|
|
Syngenta
Crop
Protection A/S
|
|
|
Copenhagen
|
|
|
100
|
%
|
|
DKK
|
|
|
9,500,000
|
|
|
Sales
|
|
L.
Daehnfeldt
A/S
|
|
|
Odense
|
|
|
100
|
%
|
|
DKK
|
|
|
130,000,000
|
|
|
Sales/Production
|
|
Egypt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Agro
S.A.E.
|
|
|
Giza
|
|
|
100
|
%
|
|
EGP
|
|
|
3,000,000
|
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Country
|
|
|
Domicile
|
|
|
Percentage
owned by Syngenta
|
|
|
|
|
|
Share
capital
local
currency1
|
|
|
Function
of company
|
|
France
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
France S.A.
|
|
|
Saint
Cyr l’Ecole
|
|
|
100
|
%
|
|
EUR
|
|
|
99,965,085
|
|
|
Holding
|
|
Syngenta
Seeds S.A.S.
|
|
|
Saint-Sauveur
|
|
|
100
|
%
|
|
EUR
|
|
|
47,600,000
|
|
|
Sales/Production/
Development
|
|
Syngenta
Production France S.A.S.
|
|
|
Saint
Pierre La Garenne
|
|
|
100
|
%
|
|
EUR
|
|
|
16,500,000
|
|
|
Production
|
|
Syngenta
Agro. S.A.S.
|
|
|
Saint
Cyr l’Ecole
|
|
|
100
|
%
|
|
EUR
|
|
|
22,543,903
|
|
|
Sales/Development
|
|
Agrosem
S.A.S
|
|
|
Sacy-Le-Petit
|
|
|
80
|
%
|
|
EUR
|
|
|
290,000
|
|
|
Sales
|
|
C.C.
Benoist
S.A.S
|
|
|
Orgerus
|
|
|
100
|
%
|
|
EUR
|
|
|
2,222,768
|
|
|
Sales/Production
|
|
Germany
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Seeds GmbH
|
|
|
Kleve
|
|
|
100
|
%
|
|
EUR
|
|
|
1,330,000
|
|
|
Sales/Research/
Production
|
|
Syngenta
Germany GmbH
|
|
|
Maintal
|
|
|
100
|
%
|
|
EUR
|
|
|
6,129,000
|
|
|
Holding
|
|
Syngenta
Agro
GmbH
|
|
|
Maintal
|
|
|
100
|
%
|
|
EUR
|
|
|
2,100,000
|
|
|
Sales
|
|
Greece
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Hellas AEBE
|
|
|
Athens
|
|
|
100
|
%
|
|
EUR
|
|
|
4,126,933
|
|
|
Sales/Production
|
|
Guatemala
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agro
Insumos,
S.A.
|
|
|
Guatemala
City
|
|
|
100
|
%
|
|
GTQ
|
|
|
1,945,400
|
|
|
Sales/Production
|
|
Hungary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Seeds Kft.
|
|
|
Budapest
|
|
|
100
|
%
|
|
HUF
|
|
|
47,450,000
|
|
|
Sales/Production
|
|
Syngenta
Kft.
|
|
|
Budapest
|
|
|
100
|
%
|
|
HUF
|
|
|
280,490
|
|
|
Sales
|
|
India
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
India Limited
|
|
|
Mumbai
|
|
|
84
|
%
|
|
INR
|
|
|
159,308,320
|
|
|
Sales/Production/
Research
|
|
Syngenta
Crop
Protection Private Limited
|
|
|
Mumbai
|
|
|
100
|
%
|
|
INR
|
|
|
275,000,000
|
|
|
Sales/Production
|
|
Indonesia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P.T.
Syngenta
Indonesia
|
|
|
Jakarta
|
|
|
100
|
%
|
|
IDR
|
|
|
58,122,874,000
|
|
|
Sales/Development
|
|
Ireland
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Ireland Limited
|
|
|
Dublin
|
|
|
100
|
%
|
|
EUR
|
|
|
50,790
|
|
|
Sales
|
|
Italy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Crop
Protection S.p.A.
|
|
|
Milan
|
|
|
100
|
%
|
|
EUR
|
|
|
5,200,000
|
|
|
Sales/Production/
Research
|
|
Syngenta
Seeds S.p.A.
|
|
|
Milan
|
|
|
100
|
%
|
|
EUR
|
|
|
5,772,000
|
|
|
Sales/Production/
Research
|
|
Golden
Harvest S.R.L.
|
|
|
Massa
Lombarda
|
|
|
100
|
%
|
|
EUR
|
|
|
52,000
|
|
|
Sales
|
|
Ivory
Coast
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Côte
d'Ivoire S.A.
|
|
|
Abidjan
|
|
|
100
|
%
|
|
XOF
|
|
|
5,858,930,000
|
|
|
Sales/Production
|
|
Japan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Seeds K.K.
|
|
|
Chiba-ken
|
|
|
100
|
%
|
|
JPY
|
|
|
35,800,000
|
|
|
Sales
|
|
Syngenta
Japan K.K.
|
|
|
Tokyo
|
|
|
100
|
%
|
|
JPY
|
|
|
475,000,000
|
|
|
Sales/Production/
Research
|
|
Liechtenstein
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syntonia
Insurance AG
|
|
|
Vaduz
|
|
|
100
|
%
|
|
USD
|
|
|
7,500,000
|
|
|
Insurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Country
|
|
|
Domicile
|
|
|
Percentage
owned by Syngenta
|
|
|
|
|
|
Share
capital
local
currency1
|
|
|
Function
of company
|
|
Luxembourg
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Participations AG & Co. SNC
|
|
|
Luxembourg
|
|
|
100
|
%
|
|
USD
|
|
|
100,000
|
|
|
Holding/Finance
|
|
Syngenta
Luxembourg Finance (#2) Sàrl
|
|
|
Luxembourg
|
|
|
100
|
%
|
|
USD
|
|
|
12,500
|
|
|
Finance
|
|
Syngenta
Luxembourg Finance (#2) S.c.A.
|
|
|
Luxembourg
|
|
|
100
|
%
|
|
EUR
|
|
|
100,000
|
|
|
Finance
|
|
Syngenta
Luxembourg (#1) S.A.
|
|
|
Luxembourg
|
|
|
100
|
%
|
|
USD
|
|
|
100,000
|
|
|
Finance
|
|
Malaysia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Corporation Sdn. Bhd.
|
|
|
Shah
Alam
|
|
|
100
|
%
|
|
MYR
|
|
|
10,000,002
|
|
|
Holding
|
|
Syngenta
Crop
Protection Sdn. Bhd.
|
|
|
Shah
Alam
|
|
|
85
|
%
|
|
MYR
|
|
|
6,000,000
|
|
|
Sales
|
|
Mexico
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Agro, S.A. de C.V.
|
|
|
Mexico
City
|
|
|
100
|
%
|
|
MXN
|
|
|
157,580,000
|
|
|
Sales/Production
|
|
Morocco
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Maroc S.A.
|
|
|
Casablanca
|
|
|
100
|
%
|
|
MAD
|
|
|
55,000,000
|
|
|
Sales/Development
|
|
Netherlands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Seeds B.V.
|
|
|
Enkhuizen
|
|
|
100
|
%
|
|
EUR
|
|
|
488,721
|
|
|
Holding/Sales/
Production/Research
|
|
Syngenta
Mogen B.V.
|
|
|
Enkhuizen
|
|
|
100
|
%
|
|
EUR
|
|
|
9,343,785
|
|
|
Holding
|
|
Syngenta
Chemicals B.V.
|
|
|
Enkhuizen
|
|
|
100
|
%
|
|
EUR
|
|
|
31,583,104
|
|
|
Sales/Production
|
|
Syngenta
Crop
Protection B.V.
|
|
|
A.M.
Bergen op Zoom
|
|
|
100
|
%
|
|
EUR
|
|
|
19,059
|
|
|
Sales
|
|
Syngenta
Alpha B.V.
|
|
|
Enkhuizen
|
|
|
100
|
%
|
|
EUR
|
|
|
18,193
|
|
|
Holding
|
|
Syngenta
Beta
B.V.
|
|
|
Enkhuizen
|
|
|
100
|
%
|
|
EUR
|
|
|
18,154
|
|
|
Holding
|
|
Syngenta
Kappa B.V.
|
|
|
Enkhuizen
|
|
|
100
|
%
|
|
EUR
|
|
|
20,001
|
|
|
Holding
|
|
Pakistan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Pakistan Limited
|
|
|
Karachi
|
|
|
99.7
|
%
|
|
PKR
|
|
|
75,937,500
|
|
|
Sales/Production/
Development
|
|
Panama
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
S.A.
|
|
|
Panama
|
|
|
100
|
%
|
|
USD
|
|
|
10,000
|
|
|
Sales
|
|
Philippines
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Philippines, Inc.
|
|
|
Makati
City
|
|
|
100
|
%
|
|
PHP
|
|
|
59,850,000
|
|
|
Sales
|
|
Poland
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Crop
Protection Sp.z.o.o.
|
|
|
Warsaw
|
|
|
100
|
%
|
|
PLN
|
|
|
15,000,000
|
|
|
Sales
|
|
Syngenta
Seeds Sp.z.o.o.
|
|
|
Piaseczno
|
|
|
100
|
%
|
|
PLN
|
|
|
50,000
|
|
|
Sales
|
|
Portugal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Crop
Protection –
Solucões
Para A Agricultura, Lda.
|
|
|
Lisbon
|
|
|
100
|
%
|
|
EUR
|
|
|
30,000
|
|
|
Sales
|
|
Russian
Federation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OOO
Syngenta
|
|
|
Moscow
|
|
|
100
|
%
|
|
RUB
|
|
|
675,000
|
|
|
Sales
|
|
Singapore
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Asia
Pacific Pte Ltd.
|
|
|
Singapore
|
|
|
100
|
%
|
|
SGD
|
|
|
1,588,023,595
|
|
|
Sales
|
|
Syngenta
Singapore (Biotech) Pte Ltd.
|
|
|
Singapore
|
|
|
100
|
%
|
|
SGD
|
|
|
2
|
|
|
Research/
Development
|
|
South
Africa
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
South Africa (Pty) Ltd.
|
|
|
Midrand
|
|
|
100
|
%
|
|
ZAR
|
|
|
100
|
|
|
Sales/Production/
Research
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Country
|
|
|
Domicile
|
|
|
Percentage
owned by Syngenta
|
|
|
|
|
|
Share
capital
local
currency1
|
|
|
Function
of company
|
|
South
Korea
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Seeds Co. Ltd.
|
|
|
Seoul
|
|
|
100
|
%
|
|
KRW
|
|
|
20,050,000,000
|
|
|
Sales/Production/
Research
|
|
Syngenta
Korea Ltd.
|
|
|
Seoul
|
|
|
100
|
%
|
|
KRW
|
|
|
55,000,000,000
|
|
|
Sales/Production
|
|
Spain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Agro
S.A.
|
|
|
Madrid
|
|
|
100
|
%
|
|
EUR
|
|
|
7,544,828
|
|
|
Sales/Production
|
|
Syngenta
Seeds S.A.
|
|
|
Barcelona
|
|
|
100
|
%
|
|
EUR
|
|
|
2,404,000
|
|
|
Sales/Production
|
|
Syngenta
Spain S.L.
|
|
|
Madrid
|
|
|
100
|
%
|
|
EUR
|
|
|
3,006
|
|
|
Holding
|
|
Koipesol
Semillas S.A.
|
|
|
Seville
|
|
|
68
|
%
|
|
EUR
|
|
|
3,966,600
|
|
|
Sales/Production/
Research
|
|
Sweden
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Seeds AB
|
|
|
Landskrona
|
|
|
100
|
%
|
|
SEK
|
|
|
210,000,000
|
|
|
Sales/Production/
Research
|
|
Switzerland
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Supply AG
|
|
|
Basel
|
|
|
100
|
%
|
|
CHF
|
|
|
250,000
|
|
|
Sales
|
|
Syngenta
Crop
Protection AG
|
|
|
Basel
|
|
|
100
|
%
|
|
CHF
|
|
|
257,000
|
|
|
Holding/Sales/
Production/Research
|
|
Syngenta
Agro
AG
|
|
|
Dielsdorf
|
|
|
100
|
%
|
|
CHF
|
|
|
2,100,000
|
|
|
Sales/Production/
Research
|
|
Syngenta
Crop
Protection Schweizerhalle AG
|
|
|
Schweizerhalle
|
|
|
100
|
%
|
|
CHF
|
|
|
103,000
|
|
|
Production
|
|
Syngenta
Crop
Protection Münchwilen AG
|
|
|
Münchwilen
|
|
|
100
|
%
|
|
CHF
|
|
|
5,010,000
|
|
|
Production/Research
|
|
Syngenta
Crop
Protection Monthey SA
|
|
|
Monthey
|
|
|
100
|
%
|
|
CHF
|
|
|
70,000,000
|
|
|
Production
|
|
CIMO
Compagnie Industrielle de Monthey SA
|
|
|
Monthey
|
|
|
50
|
%
|
|
CHF
|
|
|
10,000,000
|
|
|
Production
|
|
Syngenta
International AG
|
|
|
Basel
|
|
|
100
|
%
|
|
CHF
|
|
|
100,000
|
|
|
Management
Services
|
|
Syngenta
Participations AG
|
|
|
Basel
|
|
|
100
|
%
|
|
CHF
|
|
|
25,000,020
|
|
|
Holding
|
|
Syngenta
Finance AG
|
|
|
Basel
|
|
|
100
|
%
|
|
CHF
|
|
|
2,000,000
|
|
|
Finance
|
|
Syngenta
South Asia AG
|
|
|
Basel
|
|
|
100
|
%
|
|
CHF
|
|
|
9,000,000
|
|
|
Holding
|
|
Taiwan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Taiwan Ltd.
|
|
|
Taipei
|
|
|
100
|
%
|
|
TWD
|
|
|
30,000,000
|
|
|
Sales
|
|
Thailand
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Crop
Protection Limited
|
|
|
Bangkok
|
|
|
100
|
%
|
|
THB
|
|
|
100,000,000
|
|
|
Sales/Production/
Research
|
|
Turkey
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Tarim Sanayi ve Ticaret A.S.
|
|
|
Izmir
|
|
|
100
|
%
|
|
TRL
|
|
|
2,035,000,000,000
|
|
|
Sales/Production
|
|
United
Kingdom
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Seeds Limited
|
|
|
Halsall
|
|
|
100
|
%
|
|
GBP
|
|
|
1,760,935
|
|
|
Sales/Production/
Research
|
|
Syngenta
Bioline Production Limited
|
|
|
Little
Clacton
|
|
|
100
|
%
|
|
GBP
|
|
|
10,000
|
|
|
Sales/Production
|
|
Syngenta
Crop
Protection UK Limited
|
|
|
Whittlesford
|
|
|
100
|
%
|
|
GBP
|
|
|
500
|
|
|
Sales/Research
|
|
Syngenta
Grimsby Limited
|
|
|
Guildford
|
|
|
100
|
%
|
|
GBP
|
|
|
16,500,000
|
|
|
Production
|
|
Syngenta
Holdings Limited
|
|
|
Guildford
|
|
|
100
|
%
|
|
GBP
|
|
|
135
|
|
|
Holding/Finance
|
|
Syngenta
Treasury Services Limited
|
|
|
Guildford
|
|
|
100
|
%
|
|
GBP
|
|
|
100
|
|
|
Holding/Finance
|
|
Syngenta
Limited
|
|
|
Guildford
|
|
|
100
|
%
|
|
GBP
|
|
|
464,566,941
|
|
|
Holding/Production/
Research
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Country
|
|
|
Domicile
|
|
|
Percentage
owned by Syngenta
|
|
|
|
|
|
Share
capital
local
currency1
|
|
|
Function
of company
|
|
USA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Crop
Protection, Inc.
|
|
|
Greensboro,
NC
|
|
|
100
|
%
|
|
USD
|
|
|
1
|
|
|
Sales/Production/
Research
|
|
Syngenta
Seeds, Inc
|
|
|
Golden
Valley MN
|
|
|
100
|
%
|
|
USD
|
|
|
-
|
|
|
Sales/Production/
Research
|
|
Syngenta
Biotechnology, Inc.
|
|
|
Research
Triangle Park, NC
|
|
|
100
|
%
|
|
USD
|
|
|
-
|
|
|
Research
|
|
Syngenta
Corporation
|
|
|
Wilmington,
DE
|
|
|
100
|
%
|
|
USD
|
|
|
100
|
|
|
Holding/Finance
|
|
Syngenta
Finance Corporation
|
|
|
Wilmington,
DE
|
|
|
100
|
%
|
|
USD
|
|
|
10
|
|
|
Finance
|
|
Syngenta
Investment Corporation
|
|
|
Wilmington,
DE
|
|
|
100
|
%
|
|
USD
|
|
|
1,000
|
|
|
Holding/Finance
|
|
GB
Biosciences Corporation
|
|
|
Greensboro,
NC
|
|
|
100
|
%
|
|
USD
|
|
|
-
|
|
|
Sales/Production
|
|
Garst
Seed
Company
|
|
|
Slater,
IA
|
|
|
90
|
%
|
|
USD
|
|
|
101
|
|
|
Sales/Research
|
|
Golden
Seed
Company, Inc.
|
|
|
Cordova,
IL
|
|
|
90
|
%
|
|
USD
|
|
|
1,477
|
|
|
Sales/Production
|
|
Garwood
Seed
Co.
|
|
|
Stonington,
IL
|
|
|
90
|
%
|
|
USD
|
|
|
56,916
|
|
|
Sales/Production
|
|
J.C.
Robinson
Seeds Inc.
|
|
|
Waterloo,
NE
|
|
|
90
|
%
|
|
USD
|
|
|
472,927
|
|
|
Sales/Production/
Research
|
|
Sommer
Bros.
Seeds Co.
|
|
|
Pekin,
IL
|
|
|
90
|
%
|
|
USD
|
|
|
69,911
|
|
|
Sales
|
|
Thorp
Seed
Co.
|
|
|
Clinton,
IL
|
|
|
90
|
%
|
|
USD
|
|
|
142,475
|
|
|
Sales
|
|
Dulcinea
Farms, LLC
|
|
|
Ladera
Ranch, CA
|
|
|
100
|
%
|
|
USD
|
|
|
-
|
|
|
Sales/Development
|
|
Syngenta
Animal Nutrition, Inc.
|
|
|
Research
Triangle Park, NC
|
|
|
100
|
%
|
|
USD
|
|
|
-
|
|
|
Sales/Production/
Research
|
|
Conrad
Fafard
Inc.
|
|
|
Agawam,
MA
|
|
|
100
|
%
|
|
USD
|
|
|
-
|
|
|
Sales/Marketing
|
|
Ukraine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOV
Syngenta
|
|
|
Kiev
|
|
|
100
|
%
|
|
USD
|
|
|
15,000
|
|
|
Sales
|
|
Vietnam
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syngenta
Vietnam Limited
|
|
|
Bien
Hoa City
|
|
|
100
|
%
|
|
VND
|
|
|
55,063,000,000
|
|
|
Sales
|
|
1
Currency code
used is according to ISO 4217.
Listed
Companies
Syngenta
India
Limited (International Securities Identification Number: INE. 402.CO.1016)
is
listed on the Calcutta Stock Exchange and the Mumbai Stock Exchange. On December
31, 2006 it had a market capitalization of INR 10,005 million.
34.
Significant differences between IFRS and United States Generally Accepted
Accounting Principles
Syngenta’s
consolidated financial statements have been prepared in accordance with IFRS
which, as applied by Syngenta, differ in certain significant respects from
US
GAAP. As described in Note 2 above, in certain markets, sales terms allow
customers the option of a one time, non repeatable extension of credit, for
a
defined additional period in the following growing season, in respect of a
defined proportion of purchases they have made during a defined period, if
the
customers still have the inventories on hand on expiry of the current growing
season. In these consolidated financial statements, for US GAAP Syngenta has
treated this arrangement as a “de facto consignment” with reference to the
guidance in SEC Staff Accounting Bulletin (SAB) 104, topic A2, Question 2.
This
treatment differs from that adopted in Syngenta’s previously published
consolidated financial statements, in which revenue for these arrangements
was
recognized on product delivery for US GAAP. The change has been accounted for
as
the correction of a prior year misstatement, by adjusting the opening balance
of
retained earnings at January 1, 2006, in accordance with the transitional
accounting allowed in the SEC staff response to Question 3 in SAB 108. Before
SAB 108 was issued, Syngenta used the rollover method of quantifying the
materiality of misstatements. When assessed by this method, the change would
not
be material to any period presented. However, because the adjustment to January
1, 2006 retained earnings is US$68 million, it is considered material when
assessed by the iron curtain method in accordance with SAB 108. The effect
of
this change on 2006 US GAAP net income is to reduce it by US$1 million, as
shown
in the net income reconciliation. The effects of the application of US GAAP
to
net income and equity are set out in the tables below.
|
|
|
|
|
|
|
|
|
|
(US$
million, except earnings per share amounts)
|
|
Notes
|
|
2006
|
|
2005
|
|
2004
|
|
Net
income/(loss) reported under IFRS attributable to Syngenta AG
shareholders
|
|
|
|
|
|
634
|
|
|
622
|
|
|
460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
GAAP
adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
accounting: Zeneca agrochemicals business
|
|
|
a
|
|
|
30
|
|
|
(7
|
)
|
|
62
|
|
Purchase
accounting: other acquisitions
|
|
|
b
|
|
|
(86
|
)
|
|
(80
|
)
|
|
(62
|
)
|
Restructuring
charges
|
|
|
c
|
|
|
(9
|
)
|
|
(9
|
)
|
|
47
|
|
Pension
provisions (including post-retirement benefits)
|
|
|
d
|
|
|
(48
|
)
|
|
(15
|
)
|
|
43
|
|
Deferred
taxes on share based compensation
|
|
|
e
|
|
|
-
|
|
|
3
|
|
|
(3
|
)
|
Deferred
taxes on unrealized profit in inventory
|
|
|
f
|
|
|
26
|
|
|
(33
|
)
|
|
(61
|
)
|
Impairment
losses
|
|
|
g
|
|
|
2
|
|
|
(7
|
)
|
|
(1
|
)
|
Inventory
provisions
|
|
|
h
|
|
|
(13
|
)
|
|
-
|
|
|
-
|
|
Revenue
recognition (see above)
|
|
|
|
|
|
(1
|
)
|
|
-
|
|
|
-
|
|
Environmental
remediation costs
|
|
|
i
|
|
|
(27
|
)
|
|
-
|
|
|
-
|
|
Other
items
|
|
|
j
|
|
|
9
|
|
|
28
|
|
|
(17
|
)
|
Grant
of put
option to Syngenta AG shareholders
|
|
|
k
|
|
|
(60
|
)
|
|
-
|
|
|
-
|
|
Valuation
allowance against deferred tax assets
|
|
|
l
|
|
|
-
|
|
|
26
|
|
|
(34
|
)
|
Income
tax on
undistributed earnings of subsidiaries
|
|
|
m
|
|
|
1
|
|
|
1
|
|
|
(27
|
)
|
Deferred
tax
effect of US GAAP adjustments
|
|
|
|
|
|
46
|
|
|
27
|
|
|
(55
|
)
|
Net
income/(loss) reported under US GAAP
|
|
|
|
|
|
504
|
|
|
556
|
|
|
352
|
|
Basic
earnings/(loss) per share under US GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
|
|
|
|
5.13
|
|
|
5.56
|
|
|
4.14
|
|
Discontinued
operations
|
|
|
|
|
|
-
|
|
|
-
|
|
|
(0.79
|
)
|
Total
|
|
|
|
|
|
5.13
|
|
|
5.56
|
|
|
3.35
|
|
Diluted
earnings/(loss) per share under US GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
|
|
|
|
5.07
|
|
|
5.49
|
|
|
4.10
|
|
Discontinued
operations
|
|
|
|
|
|
-
|
|
|
-
|
|
|
(0.78
|
)
|
Total
|
|
|
|
|
|
5.07
|
|
|
5.49
|
|
|
3.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(US$
million, except earnings per share amounts)
|
|
|
Notes
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Shareholders’
Equity reported under IFRS
|
|
|
|
|
|
5,666
|
|
|
5,403
|
|
|
5,658
|
|
US
GAAP
adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
accounting: Zeneca agrochemicals business
|
|
|
a
|
|
|
(449
|
)
|
|
(486
|
)
|
|
(483
|
)
|
Purchase
accounting: other acquisitions
|
|
|
b
|
|
|
638
|
|
|
724
|
|
|
806
|
|
Restructuring
provisions
|
|
|
c
|
|
|
51
|
|
|
57
|
|
|
76
|
|
Pension
provisions (including post-retirement benefits)
|
|
|
d
|
|
|
(730
|
)
|
|
18
|
|
|
(176
|
)
|
Deferred
taxes on stock based compensation
|
|
|
e
|
|
|
(40
|
)
|
|
(26
|
)
|
|
(13
|
)
|
Deferred
taxes on unrealized profit in inventory
|
|
|
f
|
|
|
(94
|
)
|
|
(118
|
)
|
|
(79
|
)
|
Impairment
losses
|
|
|
g
|
|
|
18
|
|
|
16
|
|
|
23
|
|
Inventory
provisions
|
|
|
h
|
|
|
(14
|
)
|
|
-
|
|
|
-
|
|
Revenue
recognition (see above)
|
|
|
|
|
|
(112
|
)
|
|
-
|
|
|
-
|
|
Environmental
remediation costs
|
|
|
i
|
|
|
(28
|
)
|
|
-
|
|
|
-
|
|
Other
items
|
|
|
j
|
|
|
38
|
|
|
34
|
|
|
32
|
|
Valuation
allowance against deferred tax assets
|
|
|
l
|
|
|
(4
|
)
|
|
(4
|
)
|
|
(35
|
)
|
Tax
on
undistributed earnings of subsidiaries
|
|
|
m
|
|
|
(25
|
)
|
|
(26
|
)
|
|
(27
|
)
|
Deferred
tax
effect of US GAAP adjustments
|
|
|
|
|
|
131
|
|
|
(175
|
)
|
|
(134
|
)
|
Shareholders’
Equity reported under US GAAP
|
|
|
|
|
|
5,046
|
|
|
5,417
|
|
|
5,648
|
|
|
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Components
of shareholders’ equity in accordance with US
GAAP:
|
|
|
|
|
|
|
|
|
|
|
Share
capital
|
|
|
142
|
|
|
353
|
|
|
525
|
|
Additional
paid-in capital
|
|
|
5,049
|
|
|
5,067
|
|
|
5,223
|
|
Treasury
shares, at cost
|
|
|
(784
|
)
|
|
(473
|
)
|
|
(329
|
)
|
Retained
earnings/(deficit)
|
|
|
892
|
|
|
507
|
|
|
(282
|
)
|
Accumulated
other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
– Currency
translation adjustment
|
|
|
170
|
|
|
(126
|
)
|
|
520
|
|
– Unrealized
holding
gains/(losses) on available-for-sale financial assets:
gains
|
|
|
61
|
|
|
21
|
|
|
34
|
|
– Unrealized
holding
gains/(losses) on available-for-sale financial assets:
losses
|
|
|
(1
|
)
|
|
-
|
|
|
-
|
|
– Unrealized
holding
gains/(losses) on derivative financial instruments designated as
cash flow
hedges, net and hedges of net investments in foreign
operations
|
|
|
(81
|
)
|
|
12
|
|
|
73
|
|
– Additional
minimum
pension liability adjustment
|
|
|
-
|
|
|
(12
|
)
|
|
(229
|
)
|
– Actuarial
(loss) of
pension and other post-retirement plans not yet recognized in net
income
|
|
|
(765
|
)
|
|
-
|
|
|
-
|
|
– Past
service
gain/(cost) not yet recognized in net income
|
|
|
50
|
|
|
-
|
|
|
-
|
|
– Deferred
taxes
|
|
|
313
|
|
|
68
|
|
|
113
|
|
Total
|
|
|
5,046
|
|
|
5,417
|
|
|
5,648
|
|
Changes
in
shareholders’ equity in accordance with US GAAP are as follows:
|
|
|
|
|
(US$
million)
|
|
|
(Adjusted
|
)
|
January
1, 2004
|
|
|
5,202
|
|
Net
income
for the year under US GAAP attributable to Syngenta AG
shareholders
|
|
|
352
|
|
Re-issuance
of treasury shares under employee share purchase plans
|
|
|
32
|
|
Share
based
compensation
|
|
|
33
|
|
Sale
of
treasury shares in exchange for own equity instruments
|
|
|
4
|
|
Repurchase
of
shares under share repurchase program
|
|
|
(143
|
)
|
Cash
impact
of share options related to share repurchase program
|
|
|
9
|
|
Distributions
paid to Group shareholders as par value reduction
|
|
|
(142
|
)
|
Unrealized
holding gains on available-for-sale financial assets
|
|
|
10
|
|
Net
gains on
derivative financial instruments designated as cash flow
hedges
|
|
|
7
|
|
Additional
minimum pension liability
|
|
|
(54
|
)
|
Income
taxes
credited to shareholders’ equity
|
|
|
28
|
|
Foreign
currency translation adjustment
|
|
|
310
|
|
US$
million)
|
|
|
(Adjusted
|
)
|
December
31, 2004 (US GAAP)
|
|
|
5,648
|
|
Net
income
for the year under US GAAP attributable to Syngenta AG
shareholders
|
|
|
556
|
|
Re-issuance
of shares under employee share purchase plan
|
|
|
68
|
|
Share
based
compensation
|
|
|
37
|
|
Repurchase
of
shares under share repurchase program
|
|
|
(251
|
)
|
Distributions
paid to group shareholders as par value reduction
|
|
|
(207
|
)
|
Unrealized
holding gains on available-for-sale financial assets
|
|
|
(13
|
)
|
Net
gains on
derivative financial instruments designated as cash flow
hedges
|
|
|
(61
|
)
|
Additional
minimum pension liability
|
|
|
217
|
|
Income
taxes
credited to shareholders’ equity
|
|
|
(45
|
)
|
Foreign
currency translation adjustment
|
|
|
(532
|
)
|
|
|
|
|
|
December
31, 2005 (US GAAP)
|
|
|
5,417
|
|
Transition
adjustment on adoption of SAB No. 108
|
|
|
(68
|
)
|
January
1, 2006 (US GAAP as adjusted)
|
|
|
5,349
|
|
Net
income
for the year under US GAAP attributable to Syngenta AG
shareholders
|
|
|
504
|
|
Reissuance
of
shares under employee share purchase plan
|
|
|
77
|
|
Share
based
compensation
|
|
|
58
|
|
Grant
of put
option to Syngenta AG shareholders
|
|
|
(574
|
)
|
Distributions
paid to group shareholders as par value reduction
|
|
|
(260
|
)
|
Unrealized
holding gains on available-for-sale financial assets
|
|
|
39
|
|
Net
losses on
derivative financial instruments designated as cash flow
hedges
|
|
|
(93
|
)
|
Actuarial
gains and losses and past service costs of pensions and other
post-retirement plans
|
|
|
(700
|
)
|
Income
taxes
credited to shareholders’ equity
|
|
|
245
|
|
Foreign
currency translation adjustment
|
|
|
401
|
|
December
31, 2006 (US GAAP)
|
|
|
5,046
|
|
a:
Purchase
accounting: Zeneca agrochemicals business
The
November 13,
2000 merger of Novartis agribusiness and Zeneca agrochemicals business to form
Syngenta has been accounted for under the purchase method for both IFRS and
US
GAAP. Initial application of the purchase method under US GAAP rules then in
force differed from IFRS, mainly in the following areas:
-
In-Process
Research and Development costs of US$365 million were expensed for US GAAP
in
2000 but were treated as part of goodwill for IFRS.
– Exit
costs
of US$174 million associated with restructuring Zeneca agrochemicals business
increased goodwill for US GAAP but were expensed for IFRS because IAS 22 had
a
shorter time period for recognizing such costs in goodwill than does EITF
95-3.
– Additional
evidence became
available before the end of 2001, which changed the estimated values of certain
assets and liabilities as of the acquisition date. For IFRS, goodwill was
adjusted for these changes in accordance with IAS 22 paragraph 71, whereas
for
US GAAP, 2001 net income was reduced by US$364 million. As a result US GAAP
property, plant and equipment and intangible asset carrying amounts were lower
than the IFRS carrying amounts of these assets by US$54 million and US$47
million respectively. US GAAP depreciation and amortization expense for
subsequent periods has consequently been lower than the IFRS
expense.
Subsequent
IFRS and
US GAAP accounting has led to further differences:
– In
2006, Syngenta disposed of
the product rights to ACANTO®, which were recognized as an asset for IFRS but
not for US GAAP. The IFRS carrying amount on retirement of the asset resulted
in
US GAAP profit on disposal being higher than IFRS by US$24 million.
– In
2005, goodwill was
adjusted by US$8 million post-tax for a refund of escrow monies.
– In
2006, to reflect new
developments in income tax matters which were uncertain at the date of
acquisition, Syngenta recorded a US$7 million increase (2004: US$51 million
reduction) in income tax liabilities. There was no corresponding adjustment
in
2005. IAS 22 requires changes in estimates of pre-acquisition income tax
liabilities to be recorded in net income if they are made after the end of
the
first full accounting period following the acquisition - in this case, after
December 31, 2001. Under US GAAP (Emerging Issues Task Force consensus 93-7
(EITF 93-7)) and Statement of Financial Accounting Standards (SFAS) 109 -
changes in estimates relating to taxes of the acquired entity and to periods
prior to the acquisition date are adjusted against goodwill in whichever
subsequent period they are made.
– With
effect from January 1,
2002, Syngenta adopted SFAS No.142 and consequently ceased to amortize goodwill
for US GAAP. For IFRS, Zeneca agrochemicals business goodwill of US$694 million
was amortized until December 31, 2004.
The
purchase price
allocation was as follows under US GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
Purchase price allocation
|
|
|
2006
changes
|
|
|
2005
Purchase price allocation
|
|
|
2005
changes
|
|
|
2004
Purchase price allocation
|
|
|
2004
changes
|
|
Intangible
assets related to marketed products
|
|
|
1,491
|
|
|
-
|
|
|
1,491
|
|
|
-
|
|
|
1,491
|
|
|
-
|
|
Property,
plant and equipment
|
|
|
1,200
|
|
|
-
|
|
|
1,200
|
|
|
-
|
|
|
1,200
|
|
|
-
|
|
Assembled
workforce
|
|
|
142
|
|
|
-
|
|
|
142
|
|
|
-
|
|
|
142
|
|
|
-
|
|
Other
identifiable intangible assets
|
|
|
149
|
|
|
-
|
|
|
149
|
|
|
-
|
|
|
149
|
|
|
-
|
|
In
process
R&D
|
|
|
365
|
|
|
-
|
|
|
365
|
|
|
-
|
|
|
365
|
|
|
-
|
|
Current
assets
|
|
|
2,013
|
|
|
-
|
|
|
2,013
|
|
|
-
|
|
|
2,013
|
|
|
-
|
|
Current
liabilities
|
|
|
(2,166
|
)
|
|
-
|
|
|
(2,166
|
)
|
|
-
|
|
|
(2,166
|
)
|
|
-
|
|
Other
net
liabilities
|
|
|
(1,500
|
)
|
|
(7
|
)
|
|
(1,492
|
)
|
|
4
|
|
|
(1,496
|
)
|
|
51
|
|
Goodwill
|
|
|
63
|
|
|
7
|
|
|
55
|
|
|
(12
|
)
|
|
67
|
|
|
(51
|
)
|
Total
|
|
|
1,757
|
|
|
-
|
|
|
1,757
|
|
|
(8
|
)
|
|
1,765
|
|
|
-
|
|
The
components of
the equity and income adjustment related to the US GAAP purchase accounting
adjustments are as follows:
|
|
|
|
|
|
|
2006
Components to
reconcile
|
2005
Components
to reconcile
|
2004
Components
to reconcile
|
(US$
million)
|
|
|
Net
income
|
|
|
Equity
|
|
|
Net
income
|
|
|
Equity
|
|
|
Net
income
|
|
|
Equity
|
|
Property,
plant and equipment
|
|
|
3
|
|
|
(14
|
)
|
|
3
|
|
|
(17
|
)
|
|
22
|
|
|
(20
|
)
|
Intangible
assets - marketed products
|
|
|
27
|
|
|
(12
|
)
|
|
2
|
|
|
(39
|
)
|
|
2
|
|
|
(41
|
)
|
Goodwill
|
|
|
-
|
|
|
(423
|
)
|
|
(12
|
)
|
|
(430
|
)
|
|
38
|
|
|
(422
|
)
|
Total
adjustment
|
|
|
30
|
|
|
(449
|
)
|
|
(7
|
)
|
|
(486
|
)
|
|
62
|
|
|
(483
|
)
|
b:
Purchase
accounting: other acquisitions
The
components of
the equity and income adjustments related to the US GAAP purchase accounting
adjustments for 2006, 2005 and 2004 related to other acquisitions are as
follows:
|
|
|
|
|
|
|
2006
Components
to reconcile
|
2005
Components
to reconcile
|
2004
Components
to reconcile
|
(US$
million)
|
|
|
Net
income
|
|
|
Equity
|
|
|
Net
income
|
|
|
Equity
|
|
|
Net
income
|
|
|
Equity
|
|
Ciba-Geigy
|
|
|
(85
|
)
|
|
521
|
|
|
(85
|
)
|
|
606
|
|
|
(88
|
)
|
|
691
|
|
Pre-1995
goodwill
|
|
|
-
|
|
|
81
|
|
|
-
|
|
|
81
|
|
|
-
|
|
|
81
|
|
Merck
goodwill
|
|
|
-
|
|
|
(11
|
)
|
|
-
|
|
|
(11
|
)
|
|
6
|
|
|
(11
|
)
|
Other
goodwill
|
|
|
(1
|
)
|
|
47
|
|
|
5
|
|
|
48
|
|
|
20
|
|
|
45
|
|
Total
|
|
|
(86
|
)
|
|
638
|
|
|
(80
|
)
|
|
724
|
|
|
(62
|
)
|
|
806
|
|
Ciba-Geigy
Novartis,
the
former parent company of Novartis agribusiness, Syngenta’s predecessor, was
formed on December 20, 1996 by the merger of Sandoz and Ciba-Geigy. The merger
was accounted for as a uniting (pooling) of interests under IFRS business
combination rules then in force, but US GAAP rules required accounting under
the
purchase method, with Sandoz deemed to be the acquirer. The fair value of net
assets acquired exceeded the purchase price, resulting in negative goodwill
of
US$1,163 million. Acquired non-current non-monetary assets were reduced by
this
amount and by the allocation of the deferred tax adjustment arising from that
reduction. Therefore, no goodwill is carried on the balance sheet for either
IFRS or US GAAP. However, the US GAAP carrying amounts of acquired property,
plant and equipment and intangible assets are based on their fair values at
the
acquisition date. The intangible asset fair values are greater than the
equivalent IFRS carrying amounts, which were not revalued; US GAAP amortization
expense for subsequent periods has consequently been greater than the IFRS
expense.
The
purchase price
allocation was as follows under US GAAP:
|
|
|
|
(US$
million)
|
|
|
|
|
Intangible
assets related to marketed products
|
|
|
1,787
|
|
Property,
plant and equipment
|
|
|
1,095
|
|
Other
identifiable intangible assets
|
|
|
257
|
|
In-process
R&D
|
|
|
866
|
|
Other
net
assets
|
|
|
1,471
|
|
Total
|
|
|
5,476
|
|
Pre-1995
Goodwill
Prior
to January 1,
1995, Sandoz, Syngenta’s predecessor, wrote-off all goodwill directly to equity
in accordance with IFRS existing at that time. The adoption of IAS 22 (revised)
did not require prior period restatement. Accordingly, a US GAAP difference
exists with respect to pre-January 1, 1995 goodwill, which was capitalized
in
accordance with US GAAP. In accordance with SFAS No. 142, this goodwill ceased
to be amortized with effect from January 1, 2002.
Merck
&
Co, Inc.
The
May 10, 1997
acquisition of product rights and related net assets from Merck & Co. Inc.
by Novartis agribusiness, Syngenta’s predecessor, was accounted for under the
purchase method for both IFRS and US GAAP. Under IFRS rules then in force,
US$38
million in-process research and development was treated as part of goodwill,
whereas under US GAAP it was expensed at the time of acquisition. As a result,
IFRS goodwill of US$91 million at the acquisition date exceeded US GAAP
goodwill. In accordance with SFAS No. 142, US GAAP goodwill ceased to be
amortized as from January 1, 2002. IFRS goodwill continued to be amortized
until
December 31, 2004.
Garst
and
Golden Harvest
The
acquisitions of
Garst and Golden Harvest, which are further described in Note 3, have been
accounted for under the purchase method for both IFRS and US GAAP. Initial
application of the purchase method differs as follows:
-
Syngenta
announced before the acquisitions that it intended to restructure the combined
NAFTA corn and soy seed businesses once the acquisitions had completed. IFRS
3
requires exit costs related to restructuring acquired businesses to be expensed,
whereas US GAAP (EITF 95-3) requires goodwill to be increased by the amount
of
exit costs if exit plans are finalized within 12 months of acquisition and
implemented within a further limited period. Restructuring costs of US$5
million
less
related
deferred tax of US$2 million (2004: Costs of US$9 million less deferred tax
of
US$4 million) were expensed for IFRS in 2005 but were added to goodwill for
US
GAAP.
– IAS
38 (revised March 2004)
requires in-process research and development to be recognized as an intangible
asset and subsequently tested for impairment annually until the development
leads to the introduction of a marketed product. US GAAP requires in-process
research and development to be expensed if its technological feasibility has
not
been established and there is no alternative future use for it. In-process
research and development of US$4 million capitalized as an intangible asset
for
IFRS was expensed for US GAAP in 2004.
– The
transaction agreements
for Golden Harvest give both Syngenta and the former owners of Golden Harvest
options to transfer to Syngenta the remaining 10% shareholding under certain
future circumstances. Syngenta’s option has been accounted for as an asset, and
the former owners’ option as a liability. For IFRS, both options are measured at
fair value at the balance sheet date; the net effect on the consolidated
financial statements is not material. For US GAAP, the former owners’ option is
measured at fair value at the balance sheet date, whereas Syngenta’s option is
carried at its fair value at the acquisition date and is not marked to
market.
The
final purchase
price allocation for these two acquisitions in accordance with US GAAP is as
follows:
|
|
|
|
|
|
Garst
(final)
|
Golden
Harvest (final)
|
(US$
million)
|
|
|
Carrying
amount
|
|
|
Fair
value Adjustments
|
|
|
Fair
values
|
|
|
Carrying
amount
|
|
|
Fair
value Adjustments
|
|
|
Fair
values
|
|
Cash
and cash
equivalents
|
|
|
60
|
|
|
-
|
|
|
60
|
|
|
33
|
|
|
-
|
|
|
33
|
|
Trade
receivables
|
|
|
73
|
|
|
-
|
|
|
73
|
|
|
49
|
|
|
-
|
|
|
49
|
|
Other
receivables and current assets
|
|
|
15
|
|
|
(4
|
)
|
|
11
|
|
|
5
|
|
|
-
|
|
|
5
|
|
Inventories
|
|
|
44
|
|
|
18
|
|
|
62
|
|
|
48
|
|
|
5
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
plant & equipment
|
|
|
33
|
|
|
9
|
|
|
42
|
|
|
26
|
|
|
6
|
|
|
32
|
|
Intangible
assets
|
|
|
-
|
|
|
39
|
|
|
39
|
|
|
-
|
|
|
24
|
|
|
24
|
|
In-process
research and development
|
|
|
-
|
|
|
3
|
|
|
3
|
|
|
-
|
|
|
1
|
|
|
1
|
|
Deferred
tax
assets
|
|
|
13
|
|
|
3
|
|
|
16
|
|
|
8
|
|
|
3
|
|
|
11
|
|
Assets
held
for resale
|
|
|
195
|
|
|
-
|
|
|
195
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade
accounts payable
|
|
|
(32
|
)
|
|
-
|
|
|
(32
|
)
|
|
(72
|
)
|
|
-
|
|
|
(72
|
)
|
Financial
debts
|
|
|
(72
|
)
|
|
-
|
|
|
(72
|
)
|
|
(24
|
)
|
|
-
|
|
|
(24
|
)
|
Income
taxes
payable
|
|
|
(7
|
)
|
|
(2
|
)
|
|
(9
|
)
|
|
(1
|
)
|
|
-
|
|
|
(1
|
)
|
Other
current
liabilities
|
|
|
(4
|
)
|
|
(14
|
)
|
|
(18
|
)
|
|
(15
|
)
|
|
-
|
|
|
(15
|
)
|
Provisions
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2
|
)
|
|
(10
|
)
|
|
(12
|
)
|
Deferred
tax
liabilities
|
|
|
(7
|
)
|
|
(20
|
)
|
|
(27
|
)
|
|
(6
|
)
|
|
(13
|
)
|
|
(19
|
)
|
Other
liabilities
|
|
|
-
|
|
|
(11
|
)
|
|
(11
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
Net
assets
acquired
|
|
|
311
|
|
|
21
|
|
|
332
|
|
|
49
|
|
|
16
|
|
|
65
|
|
Minority
interest
|
|
|
(6
|
)
|
|
(2
|
)
|
|
(8
|
)
|
|
(5
|
)
|
|
(2
|
)
|
|
(7
|
)
|
Syngenta
AG
shareholders’ interest
|
|
|
305
|
|
|
19
|
|
|
324
|
|
|
44
|
|
|
14
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
price paid, including acquisition costs
|
|
|
|
|
|
|
|
|
582
|
|
|
|
|
|
|
|
|
187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
258
|
|
|
|
|
|
|
|
|
129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
Post-acquisition Profit/(Loss) of acquiree
|
|
|
|
|
|
|
|
|
(29
|
)
|
|
|
|
|
|
|
|
(35
|
)
|
The
seeds business
is highly seasonal. The Garst and Golden Harvest acquisitions were made at
the
end of the 2004 selling season. Post-acquisition losses in 2004 resulted from
this seasonal effect and are not indicative of full year
performance.
Pro
forma
disclosures for Post-combination Syngenta group:
The
following pro
forma figures have been prepared as though the acquisition date for the
above
acquisitions had been January 1, 2004.
|
|
|
|
|
(US$
million)
|
|
|
2004
|
|
Pro
forma net
income in accordance with US GAAP (unaudited)
|
|
|
408
|
|
Pro
forma
earnings per share in accordance with US GAAP (unaudited)
|
|
|
|
|
Basic:
|
|
|
4.16
|
|
Fully
diluted:
|
|
|
4.13
|
|
The
weighted
average amortization period of the acquired intangibles is 11 years. Syngenta
expects to claim a tax deduction for the goodwill in future periods’ tax
returns.
Other
goodwill
The
2006
post-acquisition loss of EGV and Fafard was US$8 million in accordance with
US
GAAP. This includes US$9 million expense from reversing the inventory step-up
purchase accounting adjustments as the related inventories were sold in 2006,
and US$1 million expense for acquired In-process Research and Development.
Unaudited pro forma disclosures for the post-combination Syngenta group in
respect of EGV and Fafard are as follows:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
Pro
forma net
income in accordance with US GAAP (unaudited) (US$
million)
|
|
|
503
|
|
|
568
|
|
Pro
forma
earnings per share in accordance with US GAAP (unaudited)
|
|
|
|
|
|
|
|
Basic:
|
|
|
5.12
|
|
|
5.68
|
|
Fully
diluted:
|
|
|
5.06
|
|
|
5.61
|
|
The
weighted
average amortization period of the acquired intangibles is 10 years. Syngenta
expects to claim a tax deduction for the EGV goodwill in future periods’ tax
returns. No tax deduction is allowable for the Fafard goodwill.
The
adjustment for
Other goodwill in 2004 mainly represents the amortization expense charged in
that year in accordance with IFRS on goodwill arising from business
combinations, which occurred between 1996 and 2003. In accordance with SFAS
142,
this goodwill has not been amortized after January 1, 2002, whereas for IFRS
it
continued to be amortized until December 31, 2004.
c:
Restructuring charges
Under
IFRS,
restructuring charges are accrued in full against operating income in the period
in which Syngenta develops a detailed formal plan in respect of the
restructuring, a valid expectation has been raised in those affected by the
restructuring that termination benefits will be paid, and the amount can be
reasonably estimated. Provision is made for the cost of terminating contracts
which have or will become onerous as a result of restructuring plans when it
becomes probable that the costs of fulfilling the contract exceed the economic
benefits Syngenta will obtain from it.
For
US GAAP,
Syngenta has applied SFAS No. 146 to exit and disposal initiatives initiated
after December 31, 2002. Certain employees affected by these restructuring
initiatives will continue to work beyond the minimum retention period stipulated
by SFAS 146. Where this is the case, SFAS 146 requires that employee termination
costs are accrued rateably over the remaining service period of the employees.
SFAS 146 also requires onerous contract termination costs to be recognized
only
when legal notice of termination has been given or an agreement to terminate
has
been made, or, for onerous leases, when the leased premises have been vacated.
The following schedule reconciles restructuring provisions under IFRS to amounts
determined under US GAAP:
|
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Restructuring
provisions in accordance with IFRS
|
|
|
247
|
|
|
203
|
|
|
273
|
|
Adjustments
in restructuring provisions to accord with US GAAP
|
|
|
(51
|
)
|
|
(57
|
)
|
|
(76
|
)
|
Restructuring
provisions in accordance with US GAAP
|
|
|
196
|
|
|
146
|
|
|
197
|
|
Adjustments
to
restructuring provisions to accord with US GAAP are comprised of the
following:
|
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Employee
termination costs
|
|
|
(51
|
)
|
|
(17
|
)
|
|
(53
|
)
|
Other
third
party costs
|
|
|
-
|
|
|
(40
|
)
|
|
(23
|
)
|
Adjustments
to restructuring provisions to accord with US
GAAP
|
|
|
(51
|
)
|
|
(57
|
)
|
|
(76
|
)
|
Restructuring
provisions in accordance with US GAAP are comprised of the
following:
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Employee
termination costs
|
|
|
139
|
|
|
95
|
|
|
118
|
|
Other
third
party costs
|
|
|
57
|
|
|
51
|
|
|
79
|
|
Restructuring
provisions in accordance with US GAAP
|
|
|
196
|
|
|
146
|
|
|
197
|
|
Restructuring
charges in accordance with US GAAP are comprised of the following:
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Total
charges
in accordance with IFRS
|
|
|
204
|
|
|
115
|
|
|
221
|
|
Adjustments
in restructuring charges to accord with US GAAP
|
|
|
9
|
|
|
4
|
|
|
(56
|
)
|
Restructuring
charges in accordance with US GAAP
|
|
|
213
|
|
|
119
|
|
|
165
|
|
Adjustments
to
restructuring charges to accord with US GAAP are comprised of the
following:
|
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Restructuring
provision recognition
|
|
|
9
|
|
|
9
|
|
|
(47
|
)
|
Garst
and
Golden Harvest fair value adjustments (Note 33b)
|
|
|
-
|
|
|
(5
|
)
|
|
(9
|
)
|
Adjustments
to restructuring charges to accord with US GAAP
|
|
|
9
|
|
|
4
|
|
|
(56
|
)
|
d:
Pension
provisions (including post-retirement benefits)
Under
IFRS, pension
costs and similar obligations are accounted for in accordance with IAS 19
(revised 2004), “Employee Benefits”. For purposes of US GAAP, pension costs for
defined benefit plans are accounted for in accordance with SFAS No. 87
“Employers’ Accounting for Pensions”, other post-employment benefits are
recorded in accordance with SFAS No. 106 “Employers’ Accounting for
Post-retirement Benefits other than Pensions” and the disclosure is presented in
accordance with SFAS No. 132 “Employers’ Disclosures about Pensions and Other
Post-retirement Benefits”. Syngenta has adopted SFAS No.158, “Employers
Accounting for Defined Benefit Pension and Other Post-retirement Plans”, an
amendment of FASB Statements No. 87, 106 and 132(R)”, as at December 31, 2006.
SFAS No. 158 requires the funded status of these plans to be recognized in
full
as an asset or a liability in the employer’s balance sheet. Changes in plan
assets, plan amendments, changes in the actuarial assumptions used to measure
the benefit obligation and experience gains and losses compared to those
assumptions are all recognized in the balance sheet as they occur, but their
recognition in net income is deferred using the corridor method for actuarial
gains and losses, and is amortized over expected future service for plan
amendments. IAS 19 allows deferred recognition of these amounts in both the
income statement and balance sheet. Shareholders’ equity for US GAAP as at
December 31, 2006 is lower, and the net benefit liability recorded in the
balance sheet is higher, by the post-tax amount of actuarial gains and losses
and past service costs of US$483 million. SFAS No. 158 does not change the
basic
approach to measuring plan assets, benefit obligation or benefit
cost.
SFAS
No.158 has not
been applied retrospectively. In 2005 and prior years, US GAAP also deferred
recognition of actuarial gains and losses and past service costs in the income
statement. The main differences between IFRS and US GAAP for Syngenta in those
years were:
– An
additional minimum pension
liability was recorded as a liability and reduction in shareholders’ equity for
any unfunded deficit of a pension plan calculated on an accumulated benefit
(ABO) basis. There is no equivalent IFRS requirement. For the years ended
December 31, 2005 and 2004, the minimum liability in the balance sheet was
US$12
million and US$229 million respectively, and the credit (charge) to
shareholders’ equity was US$217 million and US$(54) million respectively. SFAS
No. 158 has removed the concept of the additional minimum liability, because
all
unfunded deficits and funded surpluses are now recognized in full as liabilities
and assets. Immediately prior to SFAS No. 158 adoption at December 31, 2006,
the
additional minimum liability was US$10 million.
– For
US GAAP, past service
costs and gains resulting from plan amendments were amortized over average
future service. IFRS past service costs are amortized over the vesting period,
and are recognized immediately if there is no vesting period; past service
gains
which represent reductions in benefits for future service are treated as
curtailments and are recognized immediately. In 2005 and 2004, these IFRS and
US
GAAP differences created reconciling items in both net income and shareholders’
equity for Syngenta related to amendments to Syngenta’s Dutch and Swiss pension
plans. Adoption of SFAS No.158 has not affected the net income reconciling
difference, but has changed the amount of the shareholders’ equity reconciling
item for the Swiss plan amendment and has removed the reconciling item for
the
Dutch plan amendment, which is now fully recognized on the balance sheet for
both IFRS and US GAAP.
As
disclosed in
Note 27 above, Syngenta recorded a US$45 million settlement gain within 2006
IFRS net income in respect of the change to lump sum benefits of UK pension
fund
members. For US GAAP, this amount has been accounted for as a negative past
service cost and is being amortized over average remaining member service.
US$3
million was amortized in 2006, resulting in a US$42 million increase in 2006
US
GAAP benefit cost compared to IFRS.
Curtailment
and
settlement gains were recognized in 2005 and 2004 for IFRS as a result of
restructuring actions under which Syngenta has materially reduced, or is
committed to make material reductions in, the number of employees who are
members of certain pension plans. Under IAS 19 (revised 2004), a proportion
of
unrecognized actuarial gains or losses is recognized in net income when a
curtailment or settlement occurs, in addition to the change in benefit
obligation and, if applicable, plan assets. Under SFAS 88, there was no such
proportionate recognition of unrecognized gains and losses when a curtailment
occurs. Consequently, certain losses recognized for IFRS in net income were
not
recognized for US GAAP. Also, under IAS 19 (revised 2004), the net curtailment
result is recognized in net income whether it is a gain or loss. Under SFAS
88,
curtailment gains were only recognized to the extent that they exceeded
cumulative unrecognized actuarial losses at the curtailment date. Consequently,
certain gains recognized for IFRS were not recognized for US GAAP. The timing
of
recognition of curtailments and settlements under US GAAP and IFRS also differs.
Under IFRS, curtailments and settlements are recognized at the same time as
the
related restructuring provisions. Under SFAS 88, curtailment losses are
recognized when their occurrence becomes probable, while curtailment gains
and
settlements are not recognized until the event or transaction which causes
the
curtailment or settlement has occurred. Consequently, certain gains recognized
for IFRS in net income were not recognized for US GAAP.
The
following is a
reconciliation of the balance sheet and income statement amounts recognized
for
IFRS and US GAAP for both pension and post-retirement benefit
plans:
Pension
benefits:
|
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Asset/(liability)
recognized for IFRS
|
|
|
402
|
|
|
304
|
|
|
(110
|
)
|
Past
service
costs
|
|
|
29
|
|
|
37
|
|
|
64
|
|
Additional
minimum pension liability for US GAAP
|
|
|
-
|
|
|
(12
|
)
|
|
(229
|
)
|
Effect
of
curtailment recognition timing on reported funded status
|
|
|
(9
|
)
|
|
(9
|
)
|
|
(11
|
)
|
Actuarial
gains and losses
|
|
|
(730
|
)
|
|
9
|
|
|
10
|
|
Asset/(liability)
recognized for US GAAP
|
|
|
(308
|
)
|
|
329
|
|
|
(276
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
periodic
benefit cost recognized for IFRS
|
|
|
110
|
|
|
125
|
|
|
221
|
|
Past
service
cost
|
|
|
6
|
|
|
7
|
|
|
(55
|
)
|
IFRS
curtailment gain deferred as past service gain for US GAAP
|
|
|
42
|
|
|
10
|
|
|
-
|
|
Other
curtailment and settlement gains/(losses)
|
|
|
1
|
|
|
-
|
|
|
11
|
|
Amortization
of actuarial gains and losses
|
|
|
1
|
|
|
1
|
|
|
3
|
|
Net
periodic benefit cost recognized for US GAAP
|
|
|
160
|
|
|
143
|
|
|
180
|
|
Other
post-retirement benefits:
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Liability
recognized for IFRS
|
|
|
(37
|
)
|
|
(38
|
)
|
|
(39
|
)
|
Unrecognized
amounts under IFRS
|
|
|
(22
|
)
|
|
(7
|
)
|
|
(9
|
)
|
Liability
recognized for US GAAP
|
|
|
(59
|
)
|
|
(45
|
)
|
|
(48
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
periodic
benefit cost recognized for IFRS
|
|
|
9
|
|
|
10
|
|
|
14
|
|
Amortization
of actuarial amounts
|
|
|
(1
|
)
|
|
(2
|
)
|
|
(2
|
)
|
Net
periodic benefit cost recognized for US GAAP
|
|
|
8
|
|
|
8
|
|
|
12
|
|
e:
Stock
based compensation and deferred tax thereon
IFRS
2 requires a
deferred tax asset to be recognized for stock compensation as if the market
value of Syngenta shares at the period end, less the price payable by the
employee, was the tax base for the stock based payment transaction. SFAS No.
123(R) requires the deferred tax asset to be calculated as if the cumulative
stock compensation expense recognized was the tax base for the transaction.
For
the periods presented, this had the following effects on deferred tax amounts
in
the financial statements:
Income
tax
expense/(credit) in net income:
|
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
In
accordance
with IFRS:
|
|
|
|
|
|
|
|
|
|
|
Current
income tax
|
|
|
(5
|
)
|
|
4
|
|
|
(5
|
)
|
Deferred
income tax
|
|
|
(2
|
)
|
|
(4
|
)
|
|
(8
|
)
|
Total
income
tax in accordance with IFRS
|
|
|
(7
|
)
|
|
-
|
|
|
(13
|
)
|
Adjustments
in accordance with US GAAP
|
|
|
-
|
|
|
(3
|
)
|
|
3
|
|
In
accordance with US GAAP
|
|
|
(7
|
)
|
|
(3
|
)
|
|
(10
|
)
|
Income
tax
expense/(benefit) in shareholders’ equity:
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
In
accordance
with IFRS
|
|
|
(29
|
)
|
|
(17
|
)
|
|
(14
|
)
|
Adjustments
in accordance with US GAAP
|
|
|
14
|
|
|
16
|
|
|
14
|
|
In
accordance with US GAAP
|
|
|
(15
|
)
|
|
(1
|
)
|
|
-
|
|
f:
Deferred
taxes on unrealized profit in inventory
Under
IAS 12
(revised 2000), unrealized profits resulting from intercompany transactions
are
eliminated from the carrying amount of assets, such as inventory. The tax effect
thereon is calculated with reference to the local tax rate of the company that
holds the inventory (the buyer) at the period-end. However, US GAAP prohibits
the recognition of a deferred tax asset for the difference between the tax
basis
of the assets in the buyer’s tax jurisdiction and their cost as reported in the
historical consolidated financial statements and requires the deferral of the
seller’s tax expense incurred upon the intercompany sale.
g:
Impairment losses:
(1)
Goodwill
In
accordance with
IAS 36, goodwill has been reviewed for impairment at the lowest level of
cash-generating unit where cash flows are separately identifiable. This led
to
impairments of US$23 million being recognized for the year ended December 31,
2002. Since the adoption of SFAS No. 142, under US GAAP, goodwill is required
to
be tested for impairment at the level of reporting unit. On review of published
guidance, Syngenta has determined that the operating segments are the most
appropriate interpretation of the definition of a reporting unit. Under SFAS
No.
131, Syngenta’s operating segments are the same as its reportable
segments.
Hence,
under US
GAAP, goodwill was tested for impairment at the segment level. For each segment,
there was no indication of impairment to goodwill from the first step of the
test set out in SFAS 142 for either the transitional test performed with data
as
at January 1, 2002 or the annual test performed with data as at September 30,
in
2002 and all subsequent years. As a result, in 2002, impairment was recognized
under IFRS, but not under US GAAP, due to the differences between the prescribed
testing regimes. There have been no significant events or changes in
circumstances between September 30, 2006 and the balance sheet date that
indicate goodwill needs to be re-tested for impairment.
(2)
Property, Plant and Equipment
In
accordance with
IAS 36, impairment losses recorded for property, plant and equipment in prior
periods are reversed if impairment testing in subsequent periods re-assesses
the
asset’s recoverable amount as higher than estimated when the original loss was
recorded. US GAAP, in accordance with SFAS 144, does not permit the subsequent
reversal of impairment losses. Reversals of impairment losses of US$5 million
recognized for IFRS in 2006 have not been recognized for US GAAP. (2005: US$7
million, of which US$4 million has been recognized in 2006 on sale of the
asset). SFAS 144 also prohibits the recognition of an impairment loss if
undiscounted forecast cash flows for the asset or asset group are greater than
its carrying amount. IAS 36 has no such requirement and recognizes an impairment
loss by comparing the discounted forecast future cash flows with the asset’s
carrying amount where the asset’s recoverable amount is based on its value in
use. 2006 IFRS impairment losses of US$3 million were not recognized for US
GAAP
because undiscounted cash flows exceeded the related asset carrying
amounts.
h:
Inventory provisions
In
accordance with
IAS 2, valuation allowances for inventory are reversed by crediting the income
statement when, in a subsequent period, the estimated net realizable value
of
the inventory has increased because of changes in market conditions
since
the
allowances were recorded. US GAAP does not permit the reversal of inventory
valuation allowances to income until the related inventories have been
sold.
i:
Environmental remediation costs
In
2006, US$27
million of environmental remediation costs were incurred in respect of one
manufacturing site where operations have ceased. These costs have been added
to
the carrying amount of the site in accordance with IAS 16, “Property, plant and
equipment”. However, because they arise in the context of a plan to sell or
dispose of the site, they are not eligible for capitalization in accordance
with
SFAS No. 143, “Accounting for Asset Retirement Obligations”, and have
consequently been expensed for US GAAP.
j:
Other
items
(1)
Capitalized interest
Syngenta
does not
capitalize interest on constructed assets, as it is not required by IFRS. In
accordance with US GAAP, interest costs incurred during the construction period
(i.e. the period of time necessary to bring a constructed fixed asset to the
condition and location necessary for its intended use) must be capitalized
and
amortized over the useful life of the asset. Under US GAAP, Syngenta would
have
capitalized US$4 million, US$3 million and US$1 million of interest costs that
were expensed for IFRS reporting purposes for the years ended December 31,
2006,
2005 and 2004 respectively. This amount is net of amortization expense of US$3
million, US$3 million and US$3 million respectively.
(2)
Cash
flow hedges
Until
December 31,
2004, for IFRS, Syngenta recognized gains and losses on cash flow hedges of
intercompany forecast transactions in profit or loss when the hedged transaction
occurred. For US GAAP, in accordance with SFAS No. 133 implementation guidance
issue H13, Syngenta deferred these gains and losses until the related third
party transaction occurred. Syngenta has adopted a revised version of IAS 39
as
from January 1, 2005, with the result that gain and loss recognition for IFRS
is
now also deferred until the third party transaction occurs. This IFRS accounting
change has been applied prospectively, so that the IFRS US GAAP net income
reconciliation for 2005 contains a reversal of the timing differences reported
in prior years. US GAAP pre-tax income was higher/(lower) than IFRS by the
following amounts in each year:
|
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
5
|
|
|
25
|
|
|
(16
|
)
|
IAS
39 does not
restrict cash flow hedge accounting relationships based on which legal entity
within the group transacts the hedging instrument with a third party. SFAS
133
and implementation guidance issue H1 require the hedging instrument to be held
by the entity exposed to the hedged risk or an entity with the same functional
currency as that entity. In 2006, Syngenta had hedging relationships which
met
IAS 39 criteria but not the SFAS 133 criteria, to be accounted for as cash
flow
hedges. Gains of US$5 million on these hedges which were deferred in IFRS
shareholders’ equity at December 31, 2006 because the hedged transaction had not
yet occurred, have been recognized in 2006 net income for US GAAP. There is
no
corresponding adjustment for 2005 or 2004.
Gains/(losses)
recognized in US GAAP shareholders’ equity on derivative financial instruments
recognized as cash flow hedges were as follows as at December 31, 2006, 2005
and
2004.
|
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
In
accordance
with IFRS, before income taxes
|
|
|
(58
|
)
|
|
12
|
|
|
48
|
|
Adjustment
for US GAAP
|
|
|
(5
|
)
|
|
-
|
|
|
25
|
|
In
accordance
with US GAAP
|
|
|
(63
|
)
|
|
12
|
|
|
73
|
|
k:
Put
option grant to Syngenta AG shareholders
In
accordance with
IAS 32, Syngenta’s February, 2006 grant of put options to shareholders
exercisable in May 2006 has been accounted for as an equity instrument, because
the option could be settled only by shareholders physically exchanging a fixed
number of Syngenta shares for a fixed cash exercise price. In accordance with
US
GAAP, this written put option has been marked to market, with an initial fair
value of US$132 million, and a fair value on exercise of US$192 million. The
US$60 million difference between the fair value at grant and on exercise has
been recorded as an expense in 2006 net income for US GAAP.
l:
Valuation allowance against deferred tax assets
IAS
12, “Income
Taxes” requires a deferred tax asset to be recognized for unused tax losses and
other deductible temporary differences to the extent that it is probable that
future taxable profit will be available to allow their utilization. At December
31,
2004
a deferred tax
asset was recognized in full for unused tax losses and other temporary
differences of US$35 million in France. The majority of the tax losses were
incurred in association with three recent restructuring initiatives which have
been or are being implemented.
SFAS
No. 109,
“Accounting for Income Taxes” requires deferred tax assets to be reduced by a
valuation allowance if, based on the weight of available evidence, it is more
likely than not that some portion or all of the deferred tax assets will not
be
realized. All available evidence, both positive and negative, is considered
to
determine whether, based on the weight of that evidence, a valuation allowance
is needed. However, where cumulative recent losses have been incurred, based
on
the criteria in SFAS No. 109, future projections of income alone, which are
by
their nature subject to estimation uncertainty, are not generally sufficient
to
support a position that a valuation allowance is not needed. In assessing the
potential need for a valuation allowance for the French deferred tax assets,
therefore, Syngenta has not taken account of the future forecast benefits of
the
restructuring in France. Accordingly, a valuation allowance of US$34 million
was
recognized for these deferred tax assets at December 31, 2004 for US
GAAP.
In
2005, the tax
position of this Syngenta entity changed, and it recorded a taxable profit.
Consequently, the US GAAP valuation allowance has been reduced to US$4 million,
increasing US GAAP net income for 2005 by US$26 million and the currency
translation shareholders’ equity component by US$4 million. In 2006 a taxable
profit was also recorded and the US GAAP valuation allowance has been reversed.
A deferred tax valuation allowance of US$3 million was established in respect
of
Portugal.
m:
Income
tax on undistributed earnings of subsidiaries
In
accordance with
IAS 12, no deferred tax liability is recognized for the irrecoverable
withholding tax which would be payable if the retained earnings of subsidiaries
were distributed to the parent company, if the parent has determined that no
distribution will be made in the foreseeable future. Syngenta has recognized
a
deferred tax liability in line with its best estimate of future distributions
by
group subsidiaries. This is shown within “other” deferred tax liabilities in
Note 16 above. However, for US GAAP, Accounting Principles Board (APB) No.
23
and SFAS No. 109 require full provision to be made assuming all earnings will
be
distributed, unless there is evidence that the subsidiaries’ reinvestment
requirements would prevent distribution of their retained earnings. An
additional US$25 million deferred tax liability and a US$1 million reduction
in
income tax expense have been recognized for US GAAP in 2006 (2005: US$26 million
additional deferred tax liability and US$1 million reduction in income tax
expense; 2004: US$27 million additional deferred tax liability and additional
income tax expense) in respect of subsidiaries where distribution of earnings
would be possible but no distribution of earnings is currently
planned.
Additional
US GAAP disclosures
Earnings
per share
The
following is a
reconciliation of the numerators and denominators of the basic and diluted
earnings per share computation for the years ended December 31, 2006, 2005
and
2004.
|
|
|
|
|
|
|
|
Numerator:
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income/(loss) attributable to Syngenta AG shareholders
(US$
million)
|
|
|
504
|
|
|
556
|
|
|
352
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
number of shares –
basic
|
|
|
98,165,298
|
|
|
100,017,271
|
|
|
105,208,929
|
|
Adjustments
for dilutive potential ordinary shares:
|
|
|
|
|
|
|
|
|
|
|
Grants
of
options over Syngenta AG shares under employee share participation
plans
|
|
|
1,004,467
|
|
|
1,023,052
|
|
|
672,031
|
|
Grants
of
Syngenta AG shares to employees under employee share participation
plans
|
|
|
264,691
|
|
|
204,763
|
|
|
134,409
|
|
Weighted-average
number of shares –
diluted
|
|
|
99,434,456
|
|
|
101,245,086
|
|
|
106,015,369
|
|
The
following
numbers of potential shares outstanding at the years ended December 31, 2006,
2005 and 2004 have not been included in the computation of diluted earnings
per
share, because the effect would have been antidilutive:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Grants
of
options over Syngenta AG shares to employees
|
|
|
319,411
|
|
|
429,188
|
|
|
-
|
|
Grant
of
Syngenta AG shares to employees
|
|
|
-
|
|
|
101,250
|
|
|
-
|
|
Share
repurchase options
|
|
|
-
|
|
|
-
|
|
|
4,500,000
|
|
The
above potential
shares may cause dilution of earnings per share in the future.
The
weighted
average diluted number of shares is lower than the corresponding IFRS number
because, for US GAAP, in accordance with SFAS 123(R), the hypothetical share
issuance proceeds that Syngenta would have received if all options outstanding
during the period had been exercised, must include the excess tax benefits
that
Syngenta would have received from claiming related tax deductions based on
the
average share price during the period. For IFRS, the calculation of the
hypothetical share issuance proceeds does not include this tax benefit in
accordance with IFRS 2. For this reason, the dilutive effect of these options
is
lower in the US GAAP calculation. Also, the put option granted to shareholders
in 2006 has been treated as anti-dilutive for the US GAAP diluted earnings
per
share calculation. That calculation assumes exercise of the option on its
February, 2006 grant date. The US$60 million change in fair value recorded
in US
GAAP net income for this option would be excluded from adjusted earnings because
it relates to the period before exercise. Excluding this expense would make
the
options anti-dilutive. For IFRS, because no expense is recorded in the income
statement and the option was in the money, it was dilutive to earnings during
its term.
Amortization
of intangible assets
Amortization
expense under US GAAP for intangible assets, excluding goodwill was US$274
million, US$290 million and US$283 million for the years ended December 31,
2006, 2005 and 2004, respectively.
The
estimated
amortization expense for intangible assets under US GAAP for each of the five
years following the balance sheet date is as follows assuming all existing
assets are held and used until the end of their lives and no impairments are
recorded. Future acquisitions, divestments or impairments may occur and would
affect the actual amortization expense for these future years:
|
|
|
|
|
(US
million)
|
|
|
|
|
2007
|
|
|
255
|
|
2008
|
|
|
235
|
|
2009
|
|
|
205
|
|
2010
|
|
|
194
|
|
2011
|
|
|
193
|
|
Carrying
amount of goodwill
The
movements in
the carrying amount of goodwill for the years ended December 31, 2006, 2005
and
2004 were as follows:
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
January
1
|
|
|
817
|
|
|
794
|
|
|
459
|
|
Movements
due
to purchase business combinations
|
|
|
45
|
|
|
25
|
|
|
327
|
|
Impairment
losses
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Other
movements
|
|
|
-
|
|
|
(8
|
)
|
|
(4
|
)
|
Translation
effects
|
|
|
9
|
|
|
6
|
|
|
12
|
|
December
31
|
|
|
871
|
|
|
817
|
|
|
794
|
|
The
above figures
are analyzed by reportable segment as follows. No goodwill is attributable
to
the Plant Science segment.
Crop
Protection
|
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
January
1
|
|
|
364
|
|
|
297
|
|
|
339
|
|
Movements
due
to purchase business combinations
|
|
|
43
|
|
|
6
|
|
|
(48
|
)
|
Impairment
losses
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Other
movements
|
|
|
-
|
|
|
52
|
|
|
(4
|
)
|
Translation
effects
|
|
|
6
|
|
|
9
|
|
|
10
|
|
December
31
|
|
|
413
|
|
|
364
|
|
|
297
|
|
Seeds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
January
1
|
|
|
453
|
|
|
497
|
|
|
120
|
|
Movements
due
to purchase business combinations
|
|
|
3
|
|
|
19
|
|
|
375
|
|
Impairment
losses
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Other
movements
|
|
|
-
|
|
|
(60
|
)
|
|
-
|
|
Translation
effects
|
|
|
2
|
|
|
(3
|
)
|
|
2
|
|
December
31
|
|
|
458
|
|
|
453
|
|
|
497
|
|
Cash
flow
statement presentation
As
permitted by IAS
7, Syngenta has classified all interest and income tax cash flows within cash
flow from operating activities. In accordance with US GAAP, current income
tax
benefits of US$16 million arising from share based payment awards exercised
by
or released to employees in 2006, would be classified as a cash inflow from
financing activities.
Shipping
and handling costs
Syngenta
classifies
shipping and handling costs associated with purchasing and movements of products
between Syngenta locations within Cost of goods sold. Shipping and handling
costs directly related to delivery of products to third party customers are
classified within Marketing and distribution. The amount included in Marketing
and distribution in 2006 was US$208 million (2005: US$178 million; 2004: US$129
million).
Advertising
and promotion costs
Advertising
and
promotion costs for the periods ended December 31, 2006, 2005 and 2004 were
US$189 million, US$202 million, and US$217 million respectively. Advertising
and
promotion costs are expensed as incurred.
Available-for-sale
financial assets
Gross
proceeds from
the sale of available-for-sale financial assets during 2006 were US$12 million
(2005 and 2004: US$ nil).
There
were US$1
million available-for-sale financial assets with unrealized losses at December
31, 2006.
Syngenta’s
share of
the unrealized gain on available-for-sale securities held by an associated
company is US$0.3 million on a post-tax basis, according to the most recent
valuations available at December 31, 2006 (2005: US$3 million; 2004: US$
nil).
Assets
held
for sale
US$5
million of the
assets shown as held for sale in the consolidated balance sheet at December
31,
2006 would be shown as Property, plant and equipment in accordance with US
GAAP,
because the lease payments due by Syngenta under an operating leaseback to
be
entered into when these assets are sold, exceed 10% of the fair value of those
assets.
Foreign
currency translation
Syngenta
has
accounted for operations in highly-inflationary economies in accordance with
IAS
21 (revised) and IAS 29. The accounting required under IAS 21 (revised) and
IAS
29 complies with the rules as promulgated by the US Securities and Exchange
Commission although it is different from that required by US GAAP. As such,
no
reconciling adjustment has been included for this difference between IFRS and
US
GAAP.
Comprehensive
income
SFAS
No. 130
“Reporting Comprehensive Income” established standards for the reporting and
display of comprehensive income and its components. Comprehensive income
includes net income and all changes in equity during a period that arise from
non-owner sources, such as foreign currency items and unrealized gains and
losses on available-for-sale securities. The additional disclosures required
under US GAAP are as follows.
|
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Net
income
under US GAAP
|
|
|
504
|
|
|
556
|
|
|
352
|
|
Other
comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
Net
unrealized holding gains/(losses) on available-for-sale financial
assets
|
|
|
39
|
|
|
(10
|
)
|
|
10
|
|
Net
gains/(losses) on derivative financial instruments designated as
cash flow
hedges
|
|
|
(93
|
)
|
|
(61
|
)
|
|
7
|
|
Foreign
currency translation adjustment
|
|
|
401
|
|
|
(532
|
)
|
|
310
|
|
Additional
minimum pension liability adjustment
|
|
|
3
|
|
|
217
|
|
|
(54
|
)
|
Income
tax
(charged)/credited to other comprehensive income
|
|
|
23
|
|
|
(45
|
)
|
|
28
|
|
Comprehensive
income under US GAAP
|
|
|
877
|
|
|
125
|
|
|
653
|
|
Income
Taxes
Income
tax
(expense)/benefit from continuing operations in accordance with US GAAP consists
of the following:
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Current
|
|
|
(87
|
)
|
|
(158
|
)
|
|
(146
|
)
|
Deferred
|
|
|
1
|
|
|
41
|
|
|
33
|
|
Total
income tax (expense)/benefit from continuing
operations
|
|
|
(86
|
)
|
|
(117
|
)
|
|
(113
|
)
|
Deferred
income
taxes in accordance with US GAAP consist of the following:
|
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Assets
associated with:
|
|
|
|
|
|
|
|
|
|
|
– inventories
|
|
|
212
|
|
|
242
|
|
|
169
|
|
– accounts
receivable
|
|
|
122
|
|
|
85
|
|
|
75
|
|
– property,
plant and
equipment
|
|
|
25
|
|
|
11
|
|
|
16
|
|
– pension
and employee
costs
|
|
|
276
|
|
|
11
|
|
|
107
|
|
– other
provisions
|
|
|
349
|
|
|
249
|
|
|
262
|
|
– net
operating
losses
|
|
|
144
|
|
|
179
|
|
|
212
|
|
– financial
instruments,
including derivatives
|
|
|
44
|
|
|
41
|
|
|
24
|
|
– other
|
|
|
50
|
|
|
41
|
|
|
194
|
|
Total
assets
|
|
|
1,222
|
|
|
859
|
|
|
1,059
|
|
Less
valuation allowance
|
|
|
(209
|
)
|
|
(195
|
)
|
|
(192
|
)
|
Total
assets, net
|
|
|
1,013
|
|
|
664
|
|
|
867
|
|
Liabilities
associated with:
|
|
|
|
|
|
|
|
|
|
|
– property,
plant and
equipment depreciation
|
|
|
185
|
|
|
172
|
|
|
289
|
|
– intangible
assets
|
|
|
584
|
|
|
618
|
|
|
713
|
|
– pension
and employee
costs
|
|
|
104
|
|
|
35
|
|
|
13
|
|
– inventories
|
|
|
50
|
|
|
55
|
|
|
42
|
|
– financial
instruments,
including derivatives
|
|
|
50
|
|
|
55
|
|
|
59
|
|
– other
provisions and
accruals
|
|
|
202
|
|
|
148
|
|
|
213
|
|
Total
liabilities
|
|
|
1,175
|
|
|
1,083
|
|
|
1,329
|
|
Net
deferred tax asset/(liability)
|
|
|
(162
|
)
|
|
(419
|
)
|
|
(462
|
)
|
A
reversal of the
valuation allowance could occur when circumstances result in the realization
of
deferred tax assets becoming more likely than not. This would result in a
decrease in Syngenta’s effective tax rate.
The
movement on the
valuation allowance for deferred tax assets during the year was as
follows:
|
|
|
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
January
1
|
|
|
(195
|
)
|
|
(192
|
)
|
|
(312
|
)
|
Net
operating
losses and deductible temporary differences:
|
|
|
|
|
|
|
|
|
|
|
– arising
during the
period but not recognized
|
|
|
(17
|
)
|
|
(40
|
)
|
|
(11
|
)
|
– which
arose in previous
periods and were recognized in the period
|
|
|
8
|
|
|
13
|
|
|
112
|
|
– which
expired during
the period
|
|
|
9
|
|
|
1
|
|
|
25
|
|
Effect
of
change in tax rate
|
|
|
-
|
|
|
10
|
|
|
-
|
|
Translation
effects
|
|
|
(14
|
)
|
|
13
|
|
|
(6
|
)
|
December
31
|
|
|
(209
|
)
|
|
(195
|
)
|
|
(192
|
)
|
In
assessing the
realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not
be
realized. The ultimate realization of deferred tax assets is dependent upon
the
generation of future taxable income during the periods in which those temporary
differences become deductible or in which tax losses can be utilized. In making
this assessment, management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income and tax planning strategies. Based
upon the level of historical taxable income and projections for future taxable
income over the periods in which the deferred tax assets are deductible,
management believes that it is more likely than not that Syngenta will realize
the benefits of these deductible differences, net of the existing valuation
allowances, at December 31, 2006. The amount of the deferred tax asset
considered realizable could however be reduced in subsequent years if estimates
of future taxable income during the carry forward period are
reduced.
The
valuation
allowances principally relate to deferred tax assets arising from taxable losses
and deductible temporary differences in jurisdictions where there was
insufficient evidence to support the likelihood of their utilization against
taxable profits in future periods. The principal jurisdiction where valuation
allowances against deferred tax assets have been established is
Brazil.
The
above deferred
tax balances would be classified as follows in accordance with SFAS No. 109:
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Total
deferred tax assets, net
|
|
|
1,013
|
|
|
664
|
|
|
867
|
|
Offset
against deferred tax liabilities
|
|
|
(435
|
)
|
|
(62
|
)
|
|
(218
|
)
|
|
|
|
578
|
|
|
602
|
|
|
649
|
|
|
|
|
|
|
|
|
|
|
|
|
Of
which:
|
|
|
|
|
|
|
|
|
|
|
Current
deferred tax assets
|
|
|
300
|
|
|
356
|
|
|
400
|
|
Non-current
deferred tax assets
|
|
|
278
|
|
|
246
|
|
|
249
|
|
|
|
|
578
|
|
|
602
|
|
|
649
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
deferred tax liabilities
|
|
|
1,175
|
|
|
1,083
|
|
|
1,329
|
|
Offset
against deferred tax assets
|
|
|
(435
|
)
|
|
(62
|
)
|
|
(218
|
)
|
|
|
|
740
|
|
|
1,021
|
|
|
1,111
|
|
|
|
|
|
|
|
|
|
|
|
|
Of
which:
|
|
|
|
|
|
|
|
|
|
|
Current
deferred tax liabilities
|
|
|
57
|
|
|
76
|
|
|
90
|
|
Non-current
deferred tax liabilities
|
|
|
683
|
|
|
945
|
|
|
1,021
|
|
|
|
|
740
|
|
|
1,021
|
|
|
1,111
|
|
Analysis
of
tax rate
The
main elements
contributing to the difference between Syngenta's overall expected tax rate
and
the effective tax rate for US GAAP for the years ended December 31, 2006, 2005
and 2004 are given below.
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
(US$
million
|
|
|
% |
|
|
% |
|
|
% |
|
Statutory
tax
rate
|
|
|
25
|
|
|
25
|
|
|
25
|
|
Overseas
income taxed at different rates
|
|
|
(15
|
)
|
|
(6
|
)
|
|
2
|
|
Restructuring
costs
|
|
|
2
|
|
|
(2
|
)
|
|
(13
|
)
|
Effect
of
disallowed expenditures and income not subject to tax
|
|
|
3
|
|
|
(1
|
)
|
|
5
|
|
Effect
of
utilization of previously unrecognized deferred tax assets
|
|
|
(1
|
)
|
|
(6
|
)
|
|
(23
|
)
|
Effect
of
non-recognition of tax losses in current year
|
|
|
1
|
|
|
4
|
|
|
2
|
|
Effect
of
change in tax rates on opening deferred tax balances
|
|
|
(1
|
)
|
|
-
|
|
|
-
|
|
Increase
in
valuation allowance against previously recognized deferred tax
assets
|
|
|
3
|
|
|
9
|
|
|
6
|
|
Changes
in
prior year estimates and other items
|
|
|
(3
|
)
|
|
(6
|
)
|
|
17
|
|
Effective
tax rate
|
|
|
14
|
|
|
17
|
|
|
21
|
|
Subsequently
recognized tax benefits relating to the valuation of deferred tax assets as
of
December 31, 2006, 2005 and 2004 would be allocated as follows:
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Income
tax
benefit that would be reported in the consolidated statement of net
income
|
|
|
167
|
|
|
153
|
|
|
150
|
|
Goodwill
|
|
|
42
|
|
|
42
|
|
|
42
|
|
Total
|
|
|
209
|
|
|
195
|
|
|
192
|
|
Income
tax
(expense)/benefit for the period was allocated as follows:
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
To
continuing
operations
|
|
|
(86
|
)
|
|
(117
|
)
|
|
(113
|
)
|
To
discontinued operations
|
|
|
-
|
|
|
-
|
|
|
1
|
|
To
gains and
losses included directly in comprehensive income
|
|
|
15
|
|
|
(45
|
)
|
|
28
|
|
Total
income tax (expense)/benefit for the period
|
|
|
(71
|
)
|
|
(162
|
)
|
|
(84
|
)
|
The
income tax
(charged)/credited to other comprehensive income was as follows:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
On
unrealized
holding gains/losses on available-for-sale financial
assets
|
|
|
(4
|
)
|
|
(1
|
)
|
|
(4
|
)
|
On
unrealized
gains/losses on derivative financial instruments designated as cash
flow
hedges
|
|
|
19
|
|
|
17
|
|
|
(3
|
)
|
On
additional
minimum pension liability
|
|
|
-
|
|
|
(73
|
)
|
|
20
|
|
On
items
included in foreign currency translation adjustment
|
|
|
8
|
|
|
12
|
|
|
15
|
|
Total
tax (charge)/credit on comprehensive
income/(loss)
|
|
|
23
|
|
|
(45
|
)
|
|
28
|
|
Income/(losses)
before tax from continuing operations consists of:
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Switzerland
|
|
|
163
|
|
|
317
|
|
|
238
|
|
Foreign
|
|
|
432
|
|
|
360
|
|
|
303
|
|
Total
|
|
|
595
|
|
|
677
|
|
|
541
|
|
Income
tax
(expense)/benefit from continuing operations consists of:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Current
income tax expense
|
|
|
|
|
|
|
|
|
|
|
Switzerland
|
|
|
(31
|
)
|
|
(50
|
)
|
|
(22
|
)
|
Foreign
|
|
|
(56
|
)
|
|
(108
|
)
|
|
(124
|
)
|
Total
|
|
|
(87
|
)
|
|
(158
|
)
|
|
(146
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
income tax expense
|
|
|
|
|
|
|
|
|
|
|
Switzerland
|
|
|
29
|
|
|
(29
|
)
|
|
76
|
|
Foreign
|
|
|
(28
|
)
|
|
70
|
|
|
(43
|
)
|
Total
|
|
|
1
|
|
|
41
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
income
tax expense
|
|
|
|
|
|
|
|
|
|
|
Switzerland
|
|
|
(2
|
)
|
|
(79
|
)
|
|
54
|
|
Foreign
|
|
|
(84
|
)
|
|
(38
|
)
|
|
(167
|
)
|
Total
|
|
|
(86
|
)
|
|
(117
|
)
|
|
(113
|
)
|
Presented
below are
the disclosures required by US GAAP that are different than those provided
under
IFRS. The following provides a reconciliation of benefit obligations, plan
assets and funded status of the plans. Principal actuarial assumptions are
given
in Note 27. All plans were measured as of December 31, in each year
presented.
|
|
|
|
|
|
|
|
Pension
|
Other
post-retirement benefits
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Benefit
obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected
benefit obligation January 1
|
|
|
3,962
|
|
|
3,903
|
|
|
3,382
|
|
|
170
|
|
|
170
|
|
|
176
|
|
Current
service cost
|
|
|
135
|
|
|
108
|
|
|
126
|
|
|
2
|
|
|
2
|
|
|
2
|
|
Interest
cost
|
|
|
185
|
|
|
167
|
|
|
176
|
|
|
9
|
|
|
10
|
|
|
10
|
|
Curtailments
and settlements
|
|
|
43
|
|
|
(12
|
)
|
|
29
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Plan
amendments
|
|
|
(45
|
)
|
|
(10
|
)
|
|
25
|
|
|
(2
|
)
|
|
(3
|
)
|
|
(3
|
)
|
Actuarial
(gain)/loss
|
|
|
(17
|
)
|
|
368
|
|
|
230
|
|
|
(6
|
)
|
|
2
|
|
|
(7
|
)
|
Foreign
currency translation
|
|
|
378
|
|
|
(397
|
)
|
|
257
|
|
|
1
|
|
|
(1
|
)
|
|
2
|
|
Benefit
payments
|
|
|
(217
|
)
|
|
(158
|
)
|
|
(191
|
)
|
|
(10
|
)
|
|
(10
|
)
|
|
(10
|
)
|
Acquired
in
business combinations
|
|
|
-
|
|
|
(1
|
)
|
|
10
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Disposals
of
subsidiaries
|
|
|
-
|
|
|
-
|
|
|
(163
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
Other
movements
|
|
|
151
|
|
|
(6
|
)
|
|
22
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Projected
benefit obligation December 31
|
|
|
4,575
|
|
|
3,962
|
|
|
3,903
|
|
|
164
|
|
|
170
|
|
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
benefit obligation at December 31
|
|
|
4,123
|
|
|
3,573
|
|
|
3,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
assets
at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
January
1
|
|
|
3,525
|
|
|
3,212
|
|
|
2,852
|
|
|
95
|
|
|
91
|
|
|
50
|
|
Actual
return
on plan assets
|
|
|
264
|
|
|
310
|
|
|
247
|
|
|
9
|
|
|
4
|
|
|
5
|
|
Curtailments
and settlements
|
|
|
(5
|
)
|
|
(34
|
)
|
|
(9
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
Foreign
currency translation
|
|
|
335
|
|
|
(346
|
)
|
|
223
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Employer
contributions
|
|
|
181
|
|
|
520
|
|
|
187
|
|
|
11
|
|
|
10
|
|
|
46
|
|
Employee
contributions
|
|
|
26
|
|
|
24
|
|
|
25
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Benefit
payments
|
|
|
(217
|
)
|
|
(158
|
)
|
|
(191
|
)
|
|
(10
|
)
|
|
(10
|
)
|
|
(10
|
)
|
Acquired
in
business combinations
|
|
|
-
|
|
|
-
|
|
|
9
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Disposals
of
subsidiaries
|
|
|
-
|
|
|
-
|
|
|
(170
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
Other
movements
|
|
|
158
|
|
|
(3
|
)
|
|
39
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Plan
assets at fair value at December 31
|
|
|
4,267
|
|
|
3,525
|
|
|
3,212
|
|
|
105
|
|
|
95
|
|
|
91
|
|
Funded
status
|
|
|
(308
|
)
|
|
(437
|
)
|
|
(691
|
)
|
|
(59
|
)
|
|
(75
|
)
|
|
(79
|
)
|
Unrecognized
past service cost/(gain)
|
|
|
-
|
|
|
7
|
|
|
24
|
|
|
-
|
|
|
(15
|
)
|
|
(17
|
)
|
Unrecognized
actuarial (gain)/loss
|
|
|
-
|
|
|
771
|
|
|
620
|
|
|
-
|
|
|
45
|
|
|
48
|
|
Additional
minimum liability adjustment
|
|
|
-
|
|
|
(12
|
)
|
|
(229
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
Prepaid/(accrued)
benefit cost
|
|
|
(308
|
)
|
|
329
|
|
|
(276
|
)
|
|
(59
|
)
|
|
(45
|
)
|
|
(48
|
)
|
Amounts
recognized in the balance sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current
asset
|
|
|
6
|
|
|
526
|
|
|
124
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Non-current
liabilities
|
|
|
(314
|
)
|
|
(197
|
)
|
|
(400
|
)
|
|
(59
|
)
|
|
(45
|
)
|
|
(48
|
)
|
Net
amount recognized
|
|
|
(308
|
)
|
|
329
|
|
|
(276
|
)
|
|
(59
|
)
|
|
(45
|
)
|
|
(48
|
)
|
Other
Adjustments to Closing Balance
Other
comprehensive
income: amounts not yet recognized as benefit cost.
|
|
|
|
|
|
Pension
|
Other
post-retirement benefits
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Actuarial
gain/(loss)
|
|
|
(729
|
)
|
|
-
|
|
|
-
|
|
|
(36
|
)
|
|
-
|
|
|
-
|
|
Past
service
(cost)/gain
|
|
|
36
|
|
|
-
|
|
|
-
|
|
|
14
|
|
|
-
|
|
|
-
|
|
|
|
|
(693
|
)
|
|
-
|
|
|
-
|
|
|
(22
|
)
|
|
-
|
|
|
-
|
|
The
effect of
adopting SFAS No. 158 on the financial statements was as follows:
|
|
|
|
(US$
million)
|
|
|
Increase/Decrease)
in
line item
2006
|
|
Non-current
liabilities
|
|
|
106
|
|
Non-current
assets
|
|
|
(600
|
)
|
Deferred
tax
assets
|
|
|
223
|
|
Shareholders’
equity
|
|
|
(483
|
)
|
In
2007, the
estimated actuarial (loss) and past service cost gain which will be recorded
as
an (increase)/reduction in benefit cost are US$(29) million and US$2 million
respectively.
Certain
pension
plans had an accumulated benefit obligation in excess of the fair value of
plan
assets. The benefit obligation and plan assets for these plans were as
follows:
|
|
|
|
|
|
|
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Projected
benefit obligation as at December 31
|
|
|
170
|
|
|
159
|
|
|
2,495
|
|
Accumulated
benefit obligation as at December 31
|
|
|
159
|
|
|
146
|
|
|
2,242
|
|
Fair
value of
plan assets as at December 31
|
|
|
7
|
|
|
20
|
|
|
1,927
|
|
The
corresponding
figures for pension plans with projected benefit obligation in excess of the
fair value of plan assets were as follows:
|
|
|
|
|
|
|
|
(US$
million)
|
|
2006
|
|
2005
|
|
2004
|
|
Funded
plans:
|
|
|
|
|
|
|
|
|
|
|
Projected
benefit obligation as at December 31
|
|
|
3,789
|
|
|
3,782
|
|
|
3,586
|
|
Fair
value of
plan assets as at December 31
|
|
|
3,642
|
|
|
3,483
|
|
|
3,049
|
|
Unfunded
plans:
|
|
|
|
|
|
|
|
|
|
|
Projected
benefit obligation as at December 31
|
|
|
168
|
|
|
150
|
|
|
154
|
|
An
analysis of
defined benefit pension plan assets by type of asset at December 31, 2006,
with
weighted average target asset allocation ranges, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
2006
Target
allocation %
|
2006
Market
value
|
2005
Market
value
|
2004
Market
value
|
Asset
Category
|
|
|
Min
|
|
|
Max
|
|
|
US$m
|
|
|
Percentage
|
|
|
US$m
|
|
|
Percentage
|
|
|
Min
|
|
|
Max
|
|
Total
Equity
Securities
|
|
|
25
|
|
|
40
|
|
|
1,379
|
|
|
32
|
|
|
1,001
|
|
|
29
|
|
|
1,038
|
|
|
32
|
|
Debt
Securities
|
|
|
35
|
|
|
55
|
|
|
1,806
|
|
|
43
|
|
|
1,740
|
|
|
49
|
|
|
1,589
|
|
|
50
|
|
Real
Estate
|
|
|
3
|
|
|
7
|
|
|
172
|
|
|
4
|
|
|
156
|
|
|
4
|
|
|
136
|
|
|
4
|
|
Other
|
|
|
15
|
|
|
30
|
|
|
910
|
|
|
21
|
|
|
628
|
|
|
18
|
|
|
449
|
|
|
14
|
|
Total
assets
|
|
|
|
|
|
|
|
|
4,267
|
|
|
100
|
|
|
3,525
|
|
|
100
|
|
|
3,212
|
|
|
100
|
|
Investment
policies
and strategies are determined separately for each of the major defined benefit
pension plans. Asset allocation strategies are set with the aim of ensuring
that:
$ investment
return
objectives are balanced against volatility risk;
$ sufficient
liquid
or readily realizable assets are held to meet any unexpected cash flow
requirements arising from foreseeable circumstances;
$ responsibility
for
day-to-day investment decisions is diversified across a range of Investment
Managers with different investment styles;
$ currency,
inflation
and interest rate risk is minimized through the use of derivatives;
and
$ political
risk is
reduced by diversification of assets across many countries.
|
|
|
|
|
|
|
|
Pension
|
Other
post-retirement benefits
|
(US$
million)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Benefit
cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
service cost
|
|
|
135
|
|
|
108
|
|
|
126
|
|
|
2
|
|
|
2
|
|
|
2
|
|
Past
service
cost/(gain)
|
|
|
(1
|
)
|
|
15
|
|
|
12
|
|
|
(4
|
)
|
|
(5
|
)
|
|
(3
|
)
|
Interest
cost
|
|
|
185
|
|
|
167
|
|
|
176
|
|
|
9
|
|
|
10
|
|
|
10
|
|
Expected
return on plan assets
|
|
|
(216
|
)
|
|
(161
|
)
|
|
(172
|
)
|
|
(6
|
)
|
|
(6
|
)
|
|
(3
|
)
|
Employee
contributions
|
|
|
(26
|
)
|
|
(24
|
)
|
|
(25
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
Amortization
of actuarial (gain)/loss
|
|
|
32
|
|
|
20
|
|
|
17
|
|
|
7
|
|
|
7
|
|
|
6
|
|
Curtailments
and settlements
|
|
|
51
|
|
|
18
|
|
|
46
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Net
periodic benefit cost
|
|
|
160
|
|
|
143
|
|
|
180
|
|
|
8
|
|
|
8
|
|
|
12
|
|
Variable
Interest Entities (VIE)
As
disclosed in
Note 15 to the financial statements, Syngenta has a 25% equity interest in
the
North American Nutrition and Agribusiness Fund, LLP (“NANAF”), a limited
liability partnership. Syngenta is a limited partner in NANAF, and Syngenta’s
potential losses are therefore limited to the value of its investment and any
future investments it is committed to make. In the opinion of Syngenta, the
LLP
is a VIE as defined by FASB Interpretation (FIN) No. 46 (revised December 2003).
Syngenta is not the primary beneficiary of the VIE, but its interest is a
significant variable interest.
NANAF
is an
investment fund specializing in biotechnology and nutrition research and
start-up entities in the USA and Canada. Syngenta’s involvement with NANAF began
in 1999. Syngenta’s 25% interest is valued at US$3 million as disclosed in Note
15. This represents Syngenta’s proportionate share of the fair value of the
total investments in the fund. Syngenta’s maximum exposure to potential loss is
this amount, together with potential future investment of US$6 million which
Syngenta would be committed to make if required, under its agreement with NANAF.
This amount of US$6 million is included in the US$27 million “Other commitments”
disclosed in Note 30.
Pivot
Point
Services LLC (Pivot Point), provides warehousing and seed customization services
exclusively to Syngenta in central Illinois, USA, under a 10 year agreement.
Syngenta guarantees Pivot Point’s lease payments to its lessors. These leases
are classified as operating leases. In the opinion of Syngenta, Pivot Point
is a
VIE, and Syngenta is its primary beneficiary. Syngenta therefore consolidates
Pivot Point, although it has no voting equity interest. Estimated payments
by
Syngenta to Pivot Point will be US$2 million per year over the 10 year
agreement. Other than through the operating lease payment guarantees, Pivot
Point’s creditors have no recourse to Syngenta.
Syngenta
is the
limited partner in a limited partnership venture capital fund in which it has
committed to invest US$100 million, of which US$5 million has been invested
to
date. The fund manager, LSP Bioventures Management B.V., is the general partner.
For IFRS, in accordance with SIC-12, Syngenta consolidates the fund because
the
fund’s activities are conducted on behalf of Syngenta and Syngenta has power to
obtain the majority of the benefits arising from the fund. The individual
investments of the fund are accounted for by Syngenta as available-for-sale
financial assets. For US GAAP, in accordance with FIN No. 46(R), the fund is
considered to be a VIE and the general partner is considered to be its primary
beneficiary in accordance with EITF 04-5. Syngenta accounts for its 99% economic
and voting interest in the fund in accordance with the equity method. There
was
no difference between the related net income and shareholders’ equity amounts in
accordance with IFRS and US GAAP at December 31, 2006.
35.
Effect
of new accounting pronouncements
International
Financial Reporting Standards
The
effect of new
and revised standards adopted by Syngenta in these consolidated financial
statements, is set out in Note 2 above.
IFRS
8, “Operating
Segments”, was issued in November 2006, and requires Syngenta to analyze certain
items in the consolidated financial statements into operating segments,
identified based on the segmental information and analysis that management
uses
to make operating decisions. IFRS 8 will replace IAS 14, which required reported
segments to be identified based on the products and services sold by Syngenta
and the geographical areas in which Syngenta operates. The information required
by IAS 14 is disclosed in Notes 4 and 5 above. IFRS 8 will be mandatory for
Syngenta with effect from January 1, 2009. Syngenta does not believe that the
new IFRS 8 requirements will of themselves lead to identification of different
operating segments compared to those set out in Notes 4 and 5.
IFRIC
12, “Service
Concession Arrangements”, was issued in November 2006 and gives guidance on how
operators of public-to-private service concession arrangements should account
for them where the services the operator must provide under the arrangements
are
regulated. Syngenta operates no such arrangements.
US
GAAP
The
effect of new
and revised accounting pronouncements is as follows:
SFAS
No 154,
“Accounting Changes and Error Corrections”, was issued in May 2005, and requires
error corrections and voluntary changes of accounting policy to be accounted
for
by retrospective adjustment to previously published figures for the periods
affected. Adoption of new US GAAP accounting standards, and pronouncements
is
also required to be accounted for in this way if the pronouncement in question
does not specify a transition method. Syngenta adopted SFAS No. 154 with effect
from January 1, 2006. Adoption had no effect on the consolidated financial
statements.
SFAS
No. 155,
“Accounting for Certain Hybrid Financial Instruments” was issued in February
2006, and, among other requirements, permits a preparer to elect fair value
measurement at acquisition, at issuance, or when a previously recognized
financial instrument is subject to a remeasurement (new basics) event, on an
instrument-by-instrument basis, in cases in which a derivative, such as
conversion or early prepayment options, would otherwise have to be bifurcated.
SFAS No. 155 will be mandatory for Syngenta with effect from January 1, 2007.
Syngenta does not believe that SFAS No. 155 will have a material effect on
its
consolidated financial statements.
SFAS
No. 156,
“Accounting for Servicing of Financial Assets”, was issued in March 2006. SFAS
No. 156 requires servicing assets and liabilities to be recognized initially
at
fair value, and allows entities to choose either amortization or fair value
measurement as its subsequent measurement method for them. SFAS No. 156 will
be
mandatory for Syngenta with effect from January 1, 2007. Syngenta does not
believe that SFAS No. 156 will have a material effect on its consolidated
financial statements.
SFAS
No. 157, “Fair
Value Measurements”, was issued in September 2006, and provides detailed
guidance on how to calculate fair value, for application in those situations
in
which another US GAAP pronouncement requires a financial statement item to
be
measured at fair value. SFAS No. 157 will be mandatory for Syngenta with effect
from January 1, 2008. Syngenta is assessing what effect, if any, adoption of
SFAS No 157 will have on its consolidated financial statements. US GAAP
currently requires fair value measurements in several significant areas relevant
to Syngenta, such as non-monetary exchanges of assets, business combination
purchase price allocation, the assets of defined benefit pension plans,
impairment testing for goodwill and long-lived assets, investments in equity
securities, derivative financial instruments, and costs associated with exit
or
disposal activities in a business restructuring.
SFAS
No. 158,
“Employers’ Accounting for Defined Benefit Pension and Other Post-retirement
Plans” was issued in September 2006. The changes introduced by SFAS No. 158 and
their effect on the line items in the financial statements are set out in Note
34 d: and in the supplemental disclosures at the end of Note 34. Syngenta
adopted SFAS No. 158 with effect from December 31, 2006.
FASB
Interpretation
position (FIN) No. 48, “Accounting for Uncertainty in Income Taxes”, was issued
in June 2006. FIN No. 48 requires an uncertain tax position to be recognized
in
the financial statements if it is more likely than not that the taxpayer’s
position would be sustained on examination by the tax authorities. A tax
position meeting the recognition thresholds of FIN No. 48 is measured at the
largest amount of benefit that is greater than 50% likely of being realized,
after accounting for accrued interest and penalties, if applicable, on any
benefits claimed by the entity which do not meet these criteria. FIN No. 48
allows interest and penalties to be classified as income tax expense, which
is
Syngenta’s existing policy and thus will continue on adoption of FIN No.48.
Syngenta’s existing accounting policy for uncertain tax positions is disclosed
in Note 2 above. After a preliminary evaluation of its open tax positions in
accordance with the requirements of FIN No. 48, Syngenta is of the opinion
that
the effect of adopting FIN No. 48 on the amount of uncertain tax benefits
recognized will be an adjustment of approximately US$20 million reducing the
balance of retained earnings. Prior periods will not be restated as a result
of
this required accounting change. Syngenta is required to adopt FIN No. 48 as
of
January 1, 2007.
EITF
06-3, “How
Taxes Collected from Customers and Remitted to Governmental Authorities Should
be Presented in the Income Statement (That Is Gross versus Net Presentation)”
was ratified in March 2006.
EITF
06-3 permits
taxes imposed on a sales transaction and related recharges to customers to
be
presented either gross, in sales and in costs, or net, based upon an accounting
policy election. Syngenta has adopted EITF 06-3 early, with effect from January
1, 2006. Syngenta had elected to show such taxes net, that is, to exclude the
related amounts from both sales and costs.
FSP
FAS 115-1 &
124-1, “The Meaning of Other than Temporary Impairment and Its Application to
Certain Investments” was issued in November 2005, and provides guidance on
recognizing and measuring impairment losses on available-for-sale financial
assets. Syngenta adopted this FSP with effect from January 1, 2006. Adoption
had
no effect on the consolidated financial statements.
FASB
Staff Position
(FSP) FAS 13-1, “Accounting for Rental Costs Incurred during a Construction
Period” was issued in October 2005, and prohibits the capitalization of
operating lease expense for land and buildings as part of the cost of assets
constructed on or in the leased land and buildings. Syngenta adopted FSP FAS
13-1 with effect from January 1, 2006. Adoption of FSP FAS 13-1 did not have
a
material effect on the consolidated financial statements.
FSP
FAS 13-2,
“Accounting for a Change or Projected Change in the Timing of Cash Flows
Relating to Income Taxes Generated by a Leveraged Lease Transaction” was issued
in July 2006, and will be mandatory for Syngenta with effect from January 1,
2007. Syngenta does not believe that adoption of FSP FAS 13-2 will have a
material effect on the consolidated financial statements.
SEC
Staff
Accounting Bulletin (SAB) No. 108 “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements” was issued in September 2006, and provides SEC registrants with the
staff’s views regarding the process of quantifying Financial Statement
misstatements, specifically, how the effects of prior year uncorrected errors
must be considered in quantifying misstatements in the current year Financial
Statements. SAB No. 108 requires assessment of the impact of the misstatement
on
both current year earnings (the “rollover” method) and on the balance sheet
statement of financial positions at the period end (the “iron curtain” method)
in addition to considering relevant qualitative factors. Syngenta has applied
SAB No. 108 with effect from January 1, 2006.
36.
Subsequent events
On
February 2nd,
2007, Syngenta announced that it has signed an agreement to divest major parts
of its Rosental site in Basel, Switzerland to two real estate companies.
Proceeds of disposal will be approximately CHF 175 million.
On
February 7,
2007, the Board of Directors approved a new restructuring program. Savings
will
be made in both cost of goods sold and operating expenses and will enable the
company to make additional investments in technology, marketing and product
development to drive future growth. The total cost of the new program over
the
next five years is estimated at US$700 million in cash and US$250 million in
non-cash charges.
Approval
of
the Financial Statements
These
financial
statements were approved by the Board of Directors on February 7,
2007.
F-114