Basel, Switzerland-based agricultural products company Syngenta AG announced the acquisition of Italian durum wheat seed company Società Produttori Sementi. The financial details pertaining to the deal were not disclosed.
Apart from durum wheat seed, Società Produttori Sementi also deals with other crops such as common wheat and alfalfa. The durum wheat is grown in over 330,000 hectares of land in Bologna. The deal will enable farmers in Italy and other countries to fulfill the increasing need for pasta which has a global market worth $16 billion.
The acquisition is expected to significantly boost Syngenta’s revenues in the upcoming quarters. Recently, the company reported mixed results for 2013, with earnings per share of $19.30, down 12% year over year. However, revenues increased 5% year over year to $14.6 billion (at constant exchange rate).In 2014, management expects growth in integrated sales in a similar range as 2013. Moreover, the company expects to reach $25 billion in sales by 2020. Also, earnings before interest, taxes, depreciation and amortization (EBITDA) margin is targeted within 24–26% by 2018. It is also expected that the cash return to investors will continue increasing via a hike in dividend payments.
With the acquisition, the company will expand its overseas operations which expose it to foreign currency translation risks. In 2013, currency translation had a negative impact of roughly $238.0 million on the company’s revenues. According to the company, the currency environment in emerging markets is currently not favorable.
Syngenta AG is involved in the manufacturing, marketing and research of seeds and pesticides, enhancing crop yields and food quality.
With a market capitalization of $34.6 billion, Syngenta currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include The Andersons, Inc. (ANDE - Free Report) , Gruma S.A.B. de CV and The Scotts Miracle-Gro Company (SMG - Free Report) . All these stocks carry a Zacks Rank #2 (Buy).