Financial Report 2018
Table of Contents
Key Information
Operating and Financial Review and Prospects
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Consolidated Statement of Changes in Equity
Notes to the Syngenta Group Consolidated Financial Statements
Report of the Statutory Auditor
Financial Report 2018
1
2
20
21
22
23
24
25
91
Key Information
Selected Financial Data
Financial Report 2018
Syngenta has prepared the consolidated financial statements in US dollars ($) and in accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board (IFRS). Financial figures are presented in millions of dollars ($m) except where
otherwise stated. The basis of preparation of the consolidated financial statements and the key accounting policies are discussed in Note 1 and in
Notes 2 and 27, respectively, to the consolidated financial statements.
The selected financial highlights information in accordance with IFRS presented below has been extracted from the consolidated financial
statements of Syngenta. Investors should read the entire consolidated financial statements and not rely on the summarized information. The
information includes the results of operations and the net assets of Società Produttori Sementi S.p.A. from April 4, 2014, Lantmännen SW Seed
Hadmersleben GmbH, Lantmännen SW Seeds GmbH and SW Winter Oilseed AB from July 21, 2014, Land.db Enterprises Inc. from October 15,
2015, FarmShots, Inc. from February 1, 2018, Nidera Seeds Holdings B.V. from February 6, 2018, Abbot & Cobb from March 30, 2018, Strider
Desenvolvimento de Software Ltda from April 30, 2018 and Icepage Limited from July 26, 2018.
Financial highlights
($m, except where otherwise stated)
Amounts in accordance with IFRS
Income statement data:
Sales
Cost of goods sold
Gross profit
Operating expenses
Operating income
Income/(loss) before taxes
Net income/(loss)
Net income/(loss) attributable to Syngenta AG
shareholders
Cash flow data:
Cash flow from operating activities
Cash flow used for investing activities
Cash flow from (used for) financing activities
Capital expenditure on tangible fixed assets
Balance sheet data:
Current assets less current liabilities
Total assets
Total non-current liabilities
Total liabilities
Share capital
Total shareholders’ equity
All activities were in respect of continuing operations.
Year ended December 31,
2018
2017
2016
2015
2014
13,523
(7,288)
6,235
(4,167)
2,068
1,717
1,442
1,438
1,367
(1,641)
(350)
(448)
3,789
21,250
(9,093)
(17,048)
(6)
(4,176)
12,649
(6,491)
6,158
(6,104)
54
(116)
(96)
12,790
(6,507)
6,283
(4,636)
1,647
1,361
1,181
(98)
1,178
1,839
(577)
(303)
(394)
5,341
20,333
(5,615)
(12,333)
(6)
(7,976)
1,807
(521)
(1,134)
(425)
5,089
19,068
(4,830)
(11,097)
(6)
(7,950)
13,411
(7,042)
6,369
(4,528)
1,841
1,592
1,344
1,339
1,190
(462)
(1,188)
(453)
5,537
18,977
(4,896)
(10,557)
(6)
(8,401)
15,134
(8,192)
6,942
(4,837)
2,105
1,895
1,622
1,619
1,931
(729)
(420)
(600)
4,858
19,929
(4,317)
(11,024)
(6)
(8,889)
1
Operating and Financial Review and Prospects
Financial Report 2018
Introduction
The following discussion includes forward-looking statements subject to risks and uncertainty. See “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 this section
for a reconciliation of this data and explanation of the reasons for presenting such data.
Constant exchange rates
Approximately 45 percent of Syngenta’s sales and 67 percent of Syngenta’s costs in 2018 were denominated in currencies other than US dollars.
Therefore, Syngenta’s results for the period covered by the review were significantly impacted by movements in exchange rates. Sales in 2018
were 7 percent higher than 2017 on a reported basis, 9 percent higher 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, seeds, controls and flowers markets. Crop protection chemicals include
herbicides, insecticides, fungicides and seed treatments to control weeds, insects and diseases in crops, and are essential inputs enabling
growers around the world to improve agricultural productivity and food quality. In Seeds, Syngenta operates in the high value commercial sectors
of field crops (including corn, oilseeds, and cereals) and vegetables. The controls business provides turf and landscape and professional pest
management products, and the flowers business provides flower seeds, cuttings and young plants to professional growers and consumers.
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 and the quantity and cost of seeds supply; commodity crop prices; and
exchange rate fluctuations. Government measures, such as subsidies or rules regulating the use of agricultural products, genetically modified
seeds, or 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. In future years, climate change may have both
positive and negative impacts on Syngenta’s results. Climate change may make growing certain crops more or less viable in different geographic
areas, but is not likely to reduce overall demand for food and feed. Syngenta currently sells and is developing products to improve the water
productivity of plants and increase tolerance to drought and heat. Legislation may be enacted in the future that limits carbon dioxide emissions in
the manufacture of Syngenta’s products or increases the costs associated with such emissions. Syngenta works actively to make its production
operations more energy efficient and to reduce the rate of carbon dioxide emissions per unit of sales revenue.
Syngenta operates globally to capitalize on its technology and marketing base. Syngenta’s largest market in 2018 was Europe, Africa and the
Middle East, which represented approximately 31 percent of consolidated sales (2017: 33 percent) followed by Latin America at 27 percent (2017:
23 percent), North America at 27 percent (2017: 29 percent), and Asia Pacific at 15 percent (2017: 15 percent). Markets for agricultural products in
Europe, Africa and the Middle East and North America are seasonal resulting in both sales and operating profit for Syngenta in these markets
being weighted towards the first half of the calendar year, which largely reflects the northern hemisphere planting and growing cycle. Latin America
has its main selling season in the second half of the year due to its location in the southern hemisphere. Asia Pacific sales and operating profit are
more uniform throughout the year.
Syngenta’s most significant manufacturing and research and development sites are located in Switzerland, the United Kingdom (“UK”), the United
States of America (“USA” or “US”) and China. Syngenta has major research centers focused on identifying new active ingredients in Stein,
Switzerland and Jealott’s Hill, UK. Syngenta’s primary center for agricultural genomics and biotechnology research is in the USA.
References in this document to market share estimates are based where possible on global agrochemical and biotechnology industry information
provided by a third party or on 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 15 percent of sales in 2018 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 (approximately 16 percent in
total). Sales in Swiss francs and British pounds sterling together made up approximately 2 percent 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, Euro and Brazilian real, relative to the US dollar, and the
relative impact on operating profit may differ from that on sales. Sales in emerging markets are over 50 percent of Syngenta’s total sales. Where it
is not commercially disadvantageous, Syngenta sets sales prices in these markets in US dollars, particularly in parts of Latin America and the CIS.
However, in many emerging territories Syngenta sells in the local currency of the countries in the territory and as a result has a long exposure to
multiple emerging market currencies. The effects of currency fluctuations within any one year have been reduced by risk management strategies
such as hedging and the aforementioned US dollar sales pricing. For further information on these strategies please refer to Note 25 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 statements are in the areas of (i)
royalty and license income, (ii) impairment, (iii) acquisition accounting, (iv) adjustments to revenue and trade receivables, (v) deferred tax assets
(vi) uncertain tax positions (vii) seeds inventory valuation and allowances, (viii) environmental provisions and (ix) defined benefit post-employment
benefits. These policies are described in more detail in Notes 2 and 27 to the consolidated financial statements.
2
Operating and Financial Review and Prospects
Financial Report 2018
Summary of results
Net income in 2018 attributable to Syngenta’s shareholder was $1,438 million. The net result in 2017 was a loss of $98 million due to the
establishment in the year of provisions of $1,550 million to settle lawsuits related to the commercialization of Syngenta’s AGRISURE VIPTERA®
and DURACADETM corn seed in the United States before import approval for these products from China had been received. Excluding these
charges and the related tax effect, net income was $1,152 million. The net result in 2017 also reflected adverse impacts on the tax charge of $96
million arising from the US tax reform, particularly with regards to previously recognized deferred tax assets. The combined effect of these items
reduced the reported net result by $1,344 million to the reported net loss of $98 million.
Sales in 2018 were 7 percent higher, 9 percent at constant exchange rates, with a 7 percent increase in sales volumes and a 2 percent increase in
local currency sales prices. Sales volume growth was reduced by 2 percent as a result of the mandated divestments of Crop Protection products
following the ChemChina acquisition and the 2017 divestment of the sugarbeet seeds business, but were increased by a similar amount following
the acquisition of the Nidera seeds business. Currency movements reduced reported sales by 2 percent, with a stronger Euro more than offset by
weakness in emerging market currencies, particularly the Brazilian real, though the impact in Brazil was mitigated by local currency sales price
increases in Crop Protection products. Sales of Crop Protection products increased by 7 percent, 8 percent adjusted for the mandated
divestments, with a strong recovery in Brazil where sales in 2017 were impacted by a high level of general industry inventories at distributors.
Seeds sales were 6 percent higher than 2017, 10 percent adjusted for the sugarbeet divestment, driven by the Nidera acquisition, but with further
growth in sunflower seed sales in Europe, growth in Vegetable seed sales and higher corn seed sales in ASEAN offsetting challenging market
conditions in the Americas. Seeds sales in 2018 included income received under change of control clauses of approximately $100 million, while
2017 included royalty income both from the licensing of corn containing the MIR604 trait, subsequent to import approval of the trait in China, and
from another change of control clause. Local currency sales prices were 2 percent higher in Crop Protection, largely due to the recovery of
adverse currency impacts in Brazil. Local currency sales prices in Seeds were 1 percent higher.
Operating income as a percentage of sales was 15 percent in 2018. General and administrative expenses in 2017 included the establishment of
provisions of $1,550 million to settle lawsuits related to the commercialization of Syngenta’s AGRISURE VIPTERA® and DURACADETM corn seed
in the United States before import approval for these products from China had been received. Excluding this provision, operating income as a
percentage of sales was 13 percent in 2017. Excluding also restructuring costs, the gains on the mandated anti-trust divestments and, from 2017,
the incremental share based payment costs associated with the ChemChina Tender Offer, operating income as a percentage of sales decreased
by 1 percentage point in 2018 compared with 2017 due to the impact of the divestments on gross profit, an increase in employee incentive costs
totaling over $100 million from a low 2017 base, higher oil, logistics and raw material costs and adverse exchange impacts. Including the gains on
the anti-trust divestments in 2018 and the incremental share based payment costs in 2017, Restructuring and impairment costs before
related taxation were a net gain of $51 million in 2018 compared to a charge of $453 million in 2017. Currency exchange rate impacts
increased operating income by approximately $249 million, including increased losses on related hedges in 2018 compared to 2017, but
this was significantly offset by the higher local currency sales prices achieved in emerging markets.
Cash flow from operating activities was $472 million lower due mainly to payments totaling $450 million related to settlement of the US litigation
noted above; excluding these payments, cash flow from operating activities was $22 million lower, including higher working capital outflows linked
to the increased sales, particularly in Brazil the the final months of the year, and increased interest paid after the bond issuance and dividend in
2018. Cash flow used for investing activities in 2018 was $1,064 million higher than in 2017, with cash paid on business acquisitions of $1,375
million in 2018 (2017: $164 million) and increased purchases of financial assets, partially offset by the proceeds from the mandated anti-trust
divestments and the partial sale and leaseback of Syngenta’s Basel HQ. Cash flow used for financing activities was $47 million higher than in
2017. In 2018, $4.75 bilion of bonds of various maturities were issued, with a dividend of $4.71 billion subsequently paid to Syngenta’s
shareholder. In 2017 Syngenta paid only a special dividend of $470 million (CHF 5.00 per share) immediately prior to the first settlement of the
ChemChina tender offer.
Sales of Crop Protection products were 7 percent higher, 10 percent higher at constant exchange rates and were 8 percent higher excluding the
anti-trust divestments. Sales growth was driven by recovery and growth in Brazil and by new product growth in EAME and the US and was
achieved despite key commodity crop prices and agricultural markets remaining subdued. Seeds sales grew 6 percent, 8 percent at constant
exchange rates and were 10 percent higher adjusted for the 2017 divestment of the sugarbeet business. Volume growth was driven by the Nidera
acquisition, but was supplemented by continued sunflower growth in East Europe, higher corn seed sales in East Europe and ASEAN and broad
based growth in Vegetable seeds.
Sales of Flowers products were 7 percent higher, 2 percent at constant exchange rates.
Gross profit margin was approximately 3 percentage points lower including the reversal of purchase accounting inventory step ups on the Nidera
acquisition; excluding this, gross profit margin was approximately 2 percentage points lower, with adverse impact from the mandated divestments
and increased cost of goods sold in Crop Protection due a higher oil price, higher logistics costs and raw material supply constraints in China.
Marketing and distribution expenses excluding restructuring and impairment increased by 1 percent, 5 percent at constant exchange rates, with
lower charges for doubtful receivables more than offset by higher staff incentive costs and inflation.
Total Research and development expense excluding restructuring was 3 percent higher than 2017, 4 percent at constant exchange rates, with
higher incentives, cost inflation and increased activity offsetting productivity improvements. Expenditure on Crop Protection research and
development was broadly flat, with productivity improvements re-invested in increased activity. Expenditure on Seeds was marginally higher
following the acquisition of Nidera’s seeds business. The basis of allocating Research and development costs to segments was revised in 2018,
with the regional segments bearing the cost of development activities on sites in the regions except initial development costs of a new active
ingredient or product, which are included in All other segments as part of global research and development activities.
General and administrative, including divestment gains and restructuring and impairment, the components of which are described under the
Restructuring and impairment heading below, reduced by $1,957 million compared with 2017. General and administrative excluding the gains on
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Operating and Financial Review and Prospects
Financial Report 2018
the mandated divestment, restructuring and impairment and the provision for settlement of the Viptera litigation was $78 million higher than 2017,
including foreign exchange hedging losses of $67 million compared with losses of $8 million in 2017. Excluding currency effects, General and
administrative excluding restructuring and impairment was 6 percent higher, with productivity savings more than offset by higher staff incentives,
inflation and gains reported in 2017 of approximately $89 million from changes to the defined benefit pension and other post-employment benefit
plans in the USA and Switzerland.
Divestment gains in 2018 included $365 million related to the mandated Crop Protection product divestments. Other Restructuring and impairment
expenses in 2018, including $33 million reported in cost of goods sold, were $314 million; expenses in 2017, including the $98 million incremental
effect of applying cash-settled share based payment accounting due to the ChemChina acquisition, totaled $453 million. Cash costs under the
productivity program (“AOL”) reduced by $128 million, but impairment costs were higher including the $70 million impairment of an intangible
asset.
Financial expense, net was $175 million higher than 2017. As noted above, bonds totaling $4.75 billion were issued in 2018, with the proceeds
largely paid as a dividend to Syngenta’s shareholder, largely driving the $214 million increase in interest expense; this was partly offset by lower
currency losses, net. The tax rate was 16 percent, compared to 17 percent in 2017; excluding taxes related to restructuring and impairment, the
tax rate reduced by 4 percentage points to 17 percent; US tax reform increased the 2017 tax rate by 5 percent due to an adverse impact on pre-
existing deferred tax assets and the 2017 rate was increased by a further 2 percent due to the provision for settlement of the Viptera litigation.
Acquisitions, divestments and other significant transactions
2018
On February 1, 2018, Syngenta acquired 100% of the stock of FarmShots, Inc., a US-based innovator of high-resolution satellite imagery that
detects plant health by analyzing absorbed light from field images. This platform with proprietary processing and multiple plant health index
capabilities provides actionable insights normally acquired by walking through a farm and visually inspecting plants. It enables growers to reduce
field scouting by as much as 90 percent and helps them focus on areas of need. The acquisition will enhance Syngenta’s offer to growers.
On February 6, 2018, Syngenta completed the acquisition of the global seeds business of Nidera from Nidera B.V., a subsidiary of COFCO
International Ltd., by acquiring 100% of the issued shares of Nidera Seeds Holding B.V.. The acquisition of Nidera Seeds will strengthen
Syngenta’s position in the Latin American seeds market and create value by leveraging Nidera’s corn and soybean seed germplasm, strong
research and development pipeline and broad footprint in Latin America.
On March 30, 2018, Syngenta purchased the business of Abbott & Cobb, a US-based privately owned global breeder and seller of proprietary
hybrid vegetable seeds. The acquisition will strengthen Syngenta’s sweet corn vegetable seeds business.
On April 30, 2018, Syngenta purchased 100% of the quotas of Strider Desenvolvimento de Software Ltda (“Strider”), a company incorporated in
Brazil. Strider is an important participant in the Latin American digital agriculture market. Strider develops and markets technological tools and
digital farm management solutions. The acquisition will enhance Syngenta’s digital agriculture capability, and hence its offer to growers, in Latin
America and globally.
On July 26, 2018 Syngenta acquired 100% of the shares of Icepage Limited, the holding company of Floranova, a respected UK based flower and
home garden vegetable seeds breeder. The acquisition covers some important gaps in Syngenta’s portfolio of flower seeds crops and enhances
its flower business in fast growing Asian markets.
2017
On September 29, 2017, Syngenta completed the sale of its global Sugar Beet seeds business to DLF Seeds A/S (DLF) for a cash consideration
of $49 million. The divestment of the Sugar Beet seeds business resulted in $47 million of asset impairment and divestment losses being incurred.
On November 6, 2017, Syngenta and COFCO International Ltd announced that Syngenta had entered into a binding agreement to acquire the
global seeds business of Nidera, from Nidera B.V., a subsidiary of COFCO International Ltd.
As of March 23, 2016, CNAC Saturn (NL) B.V. (“the Offeror”), a subsidiary of ChemChina, launched public tender offers in Switzerland and the
United States to acquire all the publicly held registered shares and, in the U.S. offer, also all American Depositary Shares (ADSs) of Syngenta AG
(“the ChemChina Tender Offer”) for $465 per registered share in cash. On May 10, 2017, it was announced that, as of the end of the Main Offer
Period, 76,128,826 Syngenta AG registered shares (including those represented by ADSs), corresponding to 82.23% of the voting rights, had
been tendered in the ChemChina Tender Offer and that the Offer had been successful. On May 31, 2017, it was further announced that, as of the
end of the Additional Acceptance Period, the definitive end result of the ChemChina Tender Offer was that the Offeror’s participation was
87,650,988 Syngenta AG registered shares (including those represented by ADSs), corresponding to 94.68% of the voting rights. On July 13,
2017, following the purchase of additional Syngenta shares, ChemChina announced that its participation in Syngenta AG had exceeded 98
percent of Syngenta's share capital. As a consequence, following filing of a petition by ChemChina, on December 18, 2017, Syngenta announced
that the Appellate Court Basel-City had cancelled all publicly held registered shares of Syngenta AG. Holders of cancelled shares were paid a
cash compensation in the amount of $465 for each cancelled share. Syngenta AG shares were delisted from SIX Swiss Exchange on January 8,
2018, with the last trading day being January 5, 2018. Syngenta ADSs were delisted from the New York Stock Exchange effective on January 18,
2018, with trading of the ADSs suspended prior to the market opening on January 8, 2018.
Restructuring programs
In February 2014, Syngenta announced the AOL restructuring program to drive further improvement in operating income margins and accelerate
delivery of operational leverage. The program targets an improvement in profitability as a percentage of sales over the period up to 2018 from a
reduction in the ratios of cost of goods sold, marketing and distribution, research and development and general and administrative expenses to
sales. The program includes plans to further improve efficiency in customer facing operations, research and development and production and to
4
Operating and Financial Review and Prospects
Financial Report 2018
enable an improvement in the ratio of trade working capital to sales. The cash cost of the restructuring program was forecast at approximately
$900 million, including the costs of implementing new systems, but excluding related capital expenditures, and significant benefits began to be
realized in 2015. During 2018, cash costs of $155 million were charged under the program (2017: $283 million) and cash spent was $174 million
(2017: $277 million). Non-cash charges of $1 million were incurred to write down assets (2017: $1 million). Cumulative costs incurred for the
program through December 31, 2018 total $929 million and cumulative spending totals $891 million.
Results of operations
2018 compared with 2017
Sales commentary
Syngenta’s consolidated sales for 2018 were $13,523 million, compared with $12,649 million in 2017, a 7 percent increase year on year. At
constant exchange rates sales increased by 9 percent. The analysis by segment is as follows:
($m, except change %)
Segment
Europe, Africa and Middle East
North America
Latin America
Asia Pacific
China
Other
Total
Flowers
Group sales
2018
3,877
3,514
3,646
1,667
319
300
2017
3,871
3,487
2,907
1,642
300
256
13,323
12,463
200
186
13,523
12,649
Volume %
Local price %
CER % Currency %
Actual %
Change
-3
+1
+32
+2
+5
n/a
+7
+2
+7
-1
-1
+9
+2
-2
n/a
+2
-
+2
-4
-
+41
+4
+3
n/a
+9
+2
+9
+4
+1
-16
-2
+3
n/a
-2
+5
-2
-
+1
+25
+2
+6
n/a
+7
+7
+7
Europe, Africa and Middle East
Sales in Europe, Africa and the Middle East were flat against 2017 but 7 percent higher adjusting for the 2017 divestment and despite a
challenging market environment. The start of the season was delayed across most of Europe affecting fungicide sales and then severe drought in
the summer slowed momentum. Good sales growth in Seedcare, strong new product sales of SDHI chemistry including ELATUS™ and sunflower
seed sales in Eastern Europe helped to offset the early season impacts.
North America
In North America, Crop Protection sales were up 2 percent against 2017, driven by new product sales including TRIVAPROTM. Grower and
channel partner adoption of digital solutions including AGRIEDGE EXCELSIOR® has continued to strengthen. Seeds sales were 3 percent lower
as a result of softer demand across the sector with fewer corn and soy acres planted. Vegetable seeds volumes and prices were higher.
Latin America
In Latin America, sales volumes in crop protection rebounded to more normal levels after a difficult year in 2017. Crop Protection sales in 2018
were 20 percent higher than in 2017, while seeds sales rose by 55 percent following the acquisition of Nidera™. Improved channel inventory
management and new product introductions including PROCLAIM® in Brazil and ORONDIS® in Mexico provided an excellent growth foundation.
Increased acres of soy and cotton helped drive greater demand.
Asia Pacific
In Asia Pacific, recovery in South Asia helped lead an overall sales improvement for the region of 2 percent within which, crop protection sales
increased by 1 percent and seeds sales increased by 6 percent, including volume and local currency price growth in Vegetable seeds in South
Asia.
China
Sales in China continued to grow as farmers shift to higher value products with crop protection sales increasing by 7 percent and from a small
base, seeds sales increasing by 2 percent compared to 2017.
Flowers: major brands GOLDSMITH® SEEDS, YODER®, SYNGENTA® FLOWER
Sales increased by 7 percent, 2 percent at constant exchange rates, driven by increased sales volumes.
5
Operating and Financial Review and Prospects
Financial Report 2018
Sales by product line are set out below:
($m, except change %)
Product line
Selective herbicides
Non-selective herbicides
Fungicides
Insecticides
Seedcare
Controls
Other crop protection
Total Crop Protection
Corn and soybean
Diverse field crops
Vegetables
Total Seeds
Elimination*
Total
Flowers
Group sales
* Crop Protection sales to Seeds
Crop Protection
2018
2,821
857
3,117
1,895
1,129
504
90
10,413
1,693
659
652
3,004
(94)
2017
2,720
791
2,896
1,632
1,055
495
150
9,739
1,503
701
622
2,826
(102)
13,323
12,463
200
186
13,523
12,649
Volume %
Local price %
CER % Currency %
Actual %
Change
+4
+2
+9
+20
+10
+4
-41
+8
+16
-10
+1
+7
n/a
+7
+2
+7
-
+14
-
+4
+1
-2
+4
+2
-
+3
+4
+1
n/a
+2
-
+2
+4
+16
+9
+24
+11
+2
-37
+10
+16
-7
+5
+8
n/a
+9
+2
+9
-
-8
-1
-8
-4
-
-3
-3
-3
+1
-
-2
n/a
-2
+5
-2
+4
+8
+8
+16
+7
+2
-40
+7
+13
-6
+5
+6
n/a
+7
+7
+7
Selective herbicides: major brands ACURON®, AXIAL®, CALLISTO® family, DUAL MAGNUM®, BICEP II MAGNUMTM, FUSILADE® MAX, FLEX®,
TOPIK®
Sales increased by 4 percent, also at constant exchange rates, with a recovery in sales volumes in both Brazil and South Asia following reduced
sales to distributors in 2017. This was partly offset by lower sales volumes in EAME, after the difficult spring weather, and Latin America North.
Non-selective herbicides: major brands GRAMOXONE®, TOUCHDOWN®
Sales increased by 8 percent, 16 percent at constant exchange rates, with volume recovery and local currency price increases in Brazil to offset
weakness in the Brazilian real, partly offset by weaker volumes in the East Europe and ASEAN.
Fungicides: major brands ALTO®, AMISTAR®, BONTIMA®, BRAVO®, ELATUSTM, MIRAVISTM (based on ADEPIDYNTM fungicide) , MODDUS®,
REVUS®, RIDOMIL GOLD ®, SCORE®, SEGURIS®, UNIX®
Fungicide sales increased by 8 percent, 9 percent at constant exchange rates; excluding the mandated anti-trust divestments, sales were 10
percent higher. Sales volume growth was driven by the recovery in Brazil and by new product growth in the US and Europe. Local currency sales
price increases in Brazil mitigated the adverse exchange rate impact.
Insecticides: major brands ACTARA®, DURIVO®, FORCE®, KARATE®, PROCLAIM®, VERTIMEC®
Sales were 16 percent higher, 24 percent at constant exchange rates and were 18 percent higher adjusted for divestments. Sales volume growth
was driven by the recovery in Brazil and South Asia, with local currency sales price increases in Brazil significantly reducing the impact of the
weaker real.
Seedcare: major brands AVICTA®, CRUISER®, DIVIDEND®, CELEST®/MAXIM®, VIBRANCETM
Seedcare sales were 7 percent higher, 11 percent higher at constant exchange rates, with double digit sales volume growth driven by Brazil,
EAME and Canada.
Seeds
Corn and soybean: major brands AGRISURETM, GOLDEN HARVEST®, NK®
Sales increased by 13 percent, 16 percent at constant exchange rates, due to higher volumes. Sales growth was driven by the NideraTM
acquisition in Latin America. Otherwise higher sales in East Europe and ASEAN were offset by a reduced market size in the Americas. While 2018
licensing income included approximately $100 million related to a change of control clause, income was lower than 2017, which included both
royalties from China DURACADETM import approval and income related to a change of control.
6
Operating and Financial Review and Prospects
Financial Report 2018
Diverse field crops: major brands NK® oilseeds
Sales reduced by 6 percent, 7 percent at constant exchange rates; excluding the 2017 divestment of the sugar beet business, sales were
9 percent higher. Excluding the divestment, sales growth reflected continued positive momentum in sunflower seed sales in East Europe,
supplemented by higher local currency prices and higher sales in Argentina.
Vegetables: major brands ROGERSTM, S&G®
Vegetables sales increased by 5 percent, also at constant exchange rates. Sales growth reflected increased focus in India, where volumes and
prices were higher and solid growth in China. Growth in the US was supplemented by the Abbott & Cobb acquisition. Sales in EAME were
marginally higher at constant exchange rates, but with higher prices partially offset by some reduction in volume.
Operating income
Variances in the tables below reflect the profit impact of changes year on year. For example, an increase of sales or a decrease in costs is a
positive variance and a decrease in sales or increase in costs is a negative variance.
Group Operating Income
Total as reported under
IFRS
Change
Restructuring and
impairment
Before restructuring
and impairment¹
Change before
restructuring and
impairment¹
($m, except change %)
Sales
Cost of goods sold
Gross profit
as a percentage of sales
2018
13,523
2017 Actual %
7%
12,649
CER %
9%
(7,288)
(6,491)
-12%
-12%
6,235
46%
6,158
49%
1%
6%
Marketing and distribution
Research and development
(2,190)
(1,300)
(2,197)
(1,273)
-
-2%
-3%
-3%
General and administrative
Operating income
as a percentage of sales
(677)
2,068
15%
(2,634)
74%
76%
54 3728% 4190%
0%
2018
‐
(33)
(33)
‐
‐
84
51
2017
‐
(9)
(9)
(31)
(12)
(401)
(453)
2018
2017
13,523
12,649
Actual %
7%
CER %
9%
(7,255)
(6,482)
-12%
-12%
6,268
46%
6,167
49%
(2,190)
(1,300)
(2,166)
(1,261)
(761)
(2,233)
2,017
15%
507
4%
2%
6%
-1%
-3%
66%
-5%
-4%
68%
298%
347%
In 2018, Syngenta adopted revisions to its segment reporting to reflect changes in management structure, which followed on from the completion
of the takeover by ChemChina and the announcement of Syngenta’s new ambitions and priorities during 2017. There are six operating segments
consisting of five geographic regions, which include the Crop Protection, Seeds and Controls businesses, and the global Flowers business.
All other segments consists of:
the Flowers business, which is managed separately, but is not material enough to report separately;
sales and costs that are incidental to the commercial strategies
costs not directly attributable to an operating segment, including global marketing and research and development teams, corporate
headquarter functions and some centrally provided support services in the finance, information systems, human resources and procurement
areas
The segment information for the year ended December 31, 2017 has been restated in accordance with the new management structure.
Operating Income/(Loss)
($m, except change %)
Europe, Africa and Middle East
North America
Latin America
Asia Pacific
2018
1,051
797
730
535
2017
1,086
(728)
469
530
Change %
-3%
210%
56%
1%
All other segments
Group
The two tables above do not represent income statements prepared under IFRS. Please refer to the information reported in the consolidated financial statements.
1 Amounts before restructuring and impairment are non-GAAP measures. Please refer to Appendix A of the Operating and Financial Review for a more detailed description.
(1,303)
54
20%
3728%
(1,045)
2,068
Overall Group operating income
Operating income in 2017 included a provision of $1,550 million for settlement of litigation in relation to commercializing the MIR162 trait before
import approval for corn containing that trait had been received in China. Excluding that provision, operating income was $1,604 million. Operating
income in 2018 was 29 percent higher at $2,068 million including $365 million gains on the mandated crop protection product divestment and a
lower level of restructuring charges. Including the divestment gains, restructuring was a net income of $51 million in 2018 compared to a charge of
$453 million in 2017. Excluding restructuring and the 2017 litigation provision, operating income in 2018 was $2,017 million, compared to $2,057
million in 2017. The divestments of the sugar beet business in 2017 and the mandated crop protection products in 2018 reduced 2018 operating
7
Operating and Financial Review and Prospects
Financial Report 2018
income by $90 million compared to 2017. Otherwise, operating income growth was 3 percent, with strong sales growth, a lower percentage gross
profit margin after increases in oil and raw material costs in Crop Protection and an increase in General and administrative, reflecting a higher level
of staff incentives in 2018 and gains on defined benefit pension plans in the US and Switzerland recorded in 2017.
For further discussion on Group operating income, see Summary of results above.
Operating income by segment
Europe, Africa and Middle
East
($m, except change %)
Sales
Cost of goods sold
Gross profit
as a percentage of sales
Marketing and distribution
Research and development
General and administrative
Operating income
Total as reported under
IFRS
Change
Restructuring and
impairment
Before restructuring
and impairment¹
Change before
restructuring and
impairment¹
2018
3,877
2017 Actual %
-
3,871
(1,850)
(1,799)
2,027
2,072
-3%
-2%
52%
(607)
(161)
(208)
54%
(602)
(80)
(304)
1,051
1,086
-1%
-100%
31%
-3%
CER %
-4%
2%
-6%
1%
-95%
32%
-8%
2018
‐
(1)
(1)
‐
‐
(79)
(80)
2017
‐
‐
‐
2018
2017
3,877
3,871
Actual %
-
(1,849)
(1,799)
2,028
2,072
-3%
-2%
52%
(607)
(161)
(129)
54%
(591)
(80)
(148)
1,131
1,253
-3%
-100%
13%
-10%
(11)
‐
(156)
(167)
CER %
-4%
2%
-6%
-1%
-95%
13%
-14%
as a percentage of sales
This table does not represent an income statement prepared under IFRS. Please refer to the segmental information reported in Note 4 to the consolidated financial statements.
1 Amounts before restructuring and impairment are non-GAAP measures. Please refer to Appendix A of the Operating and Financial Review for a more detailed description.
32%
28%
27%
29%
Reported sales in Europe, Africa and Middle East were flat with 2017, 4 percent lower at constant exchange rates with sales volumes 3 percent
lower and local currency prices averaging 1 percent lower. See the Sales commentary section above for further information on sales in the region.
Gross profit margin was 2 percentage points lower due to higher seeds product costs and increased oil and raw material costs in Crop Protection.
Marketing and distribution costs, excluding restructuring and impairment, were 3 percent higher, 1 percent at constant exchange rates, with
productivity savings offset by inflation and an increased charge for doubtful receivables in East Europe.
Research and development costs allocated to the region doubled, with a revised charging basis under which the region bears the cost of
development activities on sites in the region except initial development costs of a new active ingredient, where costs are included in All other
segments as part of global research and development activities.
General and administrative was 31 percent lower including reduced restructuring charges. Excluding restructuring and impairment, General and
administrative was 13 percent lower, also at constant exchange rates with productivity savings in the region and savings and a reduced allocation
in global support functions.
Restructuring and impairment charges were $80 million in 2018 compared with $167 million in 2017. Charges in 2018 were for AOL productivity
projects, including simplifying the layers of management, restructuring the marketing organizations and the relocation of certain support activities to
lower cost countries. Charges in 2017 included $124 million related to progressing the AOL productivity restructuring program, $23 million of write
downs and impairments associated with the divestment of a seeds crop and $12 million of share based payment charges related to the
ChemChina Tender Offer.
North America
($m, except change %)
Sales
Cost of goods sold
Gross profit
as a percentage of sales
Marketing and distribution
Research and development
General and administrative
Operating income
Total as reported under
IFRS
Change
Restructuring and
impairment
Before restructuring
and impairment¹
Change before
restructuring and
impairment¹
2018
3,514
2017 Actual %
1%
3,487
(1,855)
(1,793)
CER %
-
-2%
-1%
-9%
-6%
95%
-3%
-2%
-9%
-6%
95%
2018
‐
(1)
(1)
‐
‐
(17)
(18)
2017
‐
(2)
(2)
(9)
‐
(41)
(52)
2018
2017
3,514
3,487
Actual %
1%
(1,854)
(1,791)
1,696
49%
(564)
(138)
(1,670)
1,660
47%
(624)
(146)
(75)
815
CER %
-
-2%
-1%
-11%
-6%
95%
-3%
-2%
-11%
-6%
96%
(728)
210%
211%
(676)
221%
222%
1,694
49%
(573)
(138)
(1,711)
1,659
47%
(624)
(146)
(92)
797
as a percentage of sales
This table does not represent an income statement prepared under IFRS. Please refer to the segmental information reported in Note 4 to the consolidated financial statements.
1 Amounts before restructuring and impairment are non-GAAP measures. Please refer to Appendix A of the Operating and Financial Review for a more detailed description.
(21)%
(19)%
23%
23%
Sales were 1 percent higher in US dollars, flat at constant exchange rates, with sales volumes 1 percent higher and 1 percent lower local currency
sales prices. See the Sales commentary section above for further information on sales in the region.
8
Operating and Financial Review and Prospects
Financial Report 2018
Gross profit margin was 2 percentage points lower in 2018, with lower royalty income and increased costs for inventory provisions and write-offs in
Seeds and increased oil and raw material costs in Crop Protection.
Marketing and distribution costs excluding restructuring and impairment were 11 percent higher in US dollars and at constant exchange rates, with
increased distribution costs in Crop Protection and increased resource in Seeds to drive market share growth.
Research and development expense was 6 percent higher, with a revised charging basis under which the region bears the cost of development
activities on sites in the region except initial development costs of a new active ingredient, where costs are included in All other segments as part of
global research and development activities.
General and administrative excluding restructuring and impairment in 2017 included $1,550 million associated with the settlement of litigation
relating to the sale of seeds including the MIR162 trait; excluding this, General and administrative was $120 million in 2017 and 2018 expense 37
percent lower, including a significant reduction in legal expenses following the settlement.
Restructuring and impairment costs were $18 million in 2018 and mainly related to AOL productivity projects. Costs in 2017 were $52 million and
included $40 million from AOL projects, $8 million of inventory write downs and impairments associated with the divestment of a Seed crop and
$13 million of share based payment charges related to the ChemChina Tender Offer and were net of the gain from divesting various Crop
Protection products as part of the anti-trust clearance of the ChemChina acquisition of Syngenta.
Latin America
($m, except change %)
Sales
Cost of goods sold
Gross profit
as a percentage of sales
Marketing and distribution
Research and development
General and administrative
Operating income
Total as reported under
IFRS
Change
Restructuring and
impairment
Before restructuring
and impairment¹
Change before
restructuring and
impairment¹
2018
3,646
2017 Actual %
25%
2,907
(2,158)
(1,665)
1,488
41%
(511)
(96)
(151)
730
1,242
43%
(603)
(62)
(108)
469
-30%
20%
15%
-56%
-39%
56%
CER %
41%
-39%
43%
1%
-81%
-50%
93%
2018
‐
(31)
(31)
‐
‐
(51)
(82)
2017
‐
(1)
(1)
(5)
‐
(49)
(55)
2018
2017
3,646
2,907
(2,127)
(1,664)
1,519
42%
(511)
(96)
(100)
812
1,243
43%
(598)
(62)
(59)
524
Actual %
25%
-28%
22%
14%
-56%
-68%
55%
CER %
41%
-37%
46%
-
-81%
-83%
89%
as a percentage of sales
This table does not represent an income statement prepared under IFRS. Please refer to the segmental information reported in Note 4 to the consolidated financial statements.
1 Amounts before restructuring and impairment are non-GAAP measures. Please refer to Appendix A of the Operating and Financial Review for a more detailed description.
18%
16%
20%
22%
Sales increased by 25 percent, 41 percent at constant exchange rates with 32 percent higher sales volumes and 9 percent higher local currency
sales prices. Sales volumes of Crop Protection products in Brazil reflected a strong recovery from 2017, when sales had been impacted by high
inventories in the distribution channel, due to two years of adverse weather, which reduced sales broadly across the industry. Sales in 2018 were
closer to consumption. Seeds sales in 2018 included $315 million from the Nidera seeds acquisition. See the Sales commentary section above for
further information on sales in the region.
Gross profit margin reduced by approximately 2 percentage points, 1 percent lower excluding the impact of the inventory step up under the
purchase accounting of Nidera seeds reported within restructuring, with a lower gross profit margin in the acquired Nidera seeds business and
increased oil and raw material costs in Crop Protection.
Marketing and distribution costs excluding restructuring and impairment were 14 percent lower than 2017, flat at constant exchange rates, with a
reduced charge to provisions for doubtful receivables in Brazil after strong collections and compared to a high 2017 base and the benefit of cost
cutting actions taken in the second half of 2017, offsetting general salary and cost inflation and the costs of the acquired Nidera seeds business.
Research and development costs allocated to the region increased by 56 percent, 81 percent at constant exchange rates. Costs were allocated in
2018 on a revised charging basis under which the region bears the cost of development activities on sites in the region except initial development
costs of a new active ingredient, where costs are included in All other segments as part of global research and development activities. Costs in
2018 also included the Nidera seeds business.
General and administrative excluding restructuring and impairment was 68 percent higher than 2017, 83 percent higher at constant exchange
rates due to the costs of the acquired Nidera seeds business including related amortisation.
Restructuring and impairment charges were $82 million in 2018 and included $30 million for the reversal of inventory step ups, $24 million of
provision for indirect tax exposures and approximately $5 million of integration costs from the Nidera acquisition. Other charges in 2018 were for
AOL projects. Charges in 2017 were $55 million including $43 million for AOL productivity restructuring projects, including completion of the project
to establish an integrated system platform and restructuring of the management and commercial teams in Brazil, and $10 million of share based
payment charges related to the ChemChina acquisition.
9
Operating and Financial Review and Prospects
Financial Report 2018
Asia Pacific
($m, except change %)
Sales
Cost of goods sold
Gross profit
as a percentage of sales
Marketing and distribution
Research and development
General and administrative
Operating income
Total as reported under
IFRS
Change
Restructuring and
impairment
Before restructuring
and impairment¹
Change before
restructuring and
impairment¹
2018
1,986
(1,019)
967
49%
(319)
(56)
(57)
535
2017 Actual %
2%
1,942
(986)
956
49%
(313)
(49)
(64)
530
-3%
1%
-2%
-15%
12%
1%
CER %
4%
-3%
5%
-2%
-17%
11%
7%
2018
‐
‐
‐
‐
‐
(11)
(11)
2017
‐
(1)
(1)
(2)
‐
(20)
(23)
2018
1,986
(1,019)
967
49%
(319)
(56)
(46)
546
2017
1,942
(985)
957
49%
(311)
(49)
(44)
553
Actual %
2%
-3%
1%
-2%
-15%
-4%
-1%
CER %
4%
-3%
5%
-3%
-17%
-4%
4%
as a percentage of sales
This table does not represent an income statement prepared under IFRS. Please refer to the segmental information reported in Note 4 to the consolidated financial statements.
1 Amounts before restructuring and impairment are non-GAAP measures. Please refer to Appendix A of the Operating and Financial Review for a more detailed description.
29%
27%
27%
28%
Sales in Asia Pacific, including China, increased by 2 percent, 4 percent at constant exchange rates, including growth of 2 percent in both sales
volumes and local currency sales prices, with a strong recovery in South Asia partly offset by a challenging market in Vietnam. See the Sales
commentary section above for further information regarding sales in the region. Gross profit margin remained at the same level as in 2017, with
higher margins in Seeds, but the impact of increased oil and raw material costs reducing Crop Protection.
Marketing and distribution costs excluding restructuring and impairment were 2 percent higher in 2018, 3 percent at constant exchange rates, with
general cost inflation and additional investment in business development in China.
Research and development expense increased by 15 percent, 17 percent at constant exchange rates due to a revised charging basis under which
the region bears the cost of development activities on sites in the region except initial development costs of a new active ingredient, where costs
are included in All other segments as part of global research and development activities.
General and administrative costs excluding restructuring and impairment were 4 percent higher, also at constant exchange rates, reflecting
general cost inflation as well as investment in China offset by productivity savings and rationalization at the regional marketing headquarters.
Restructuring and impairment charges in 2018 were $12 million lower than 2017. Charges of $11 million in 2018 were for AOL restructuring
projects, including the restructuring of the rice business. The 2017 amount includes $18 million for AOL restructuring projects including
restructuring at the regional headquarters and projects to improve effectiveness of back office support services and $5 million of share based
payment charges related to the ChemChina Tender Offer.
All other segments
All other segments consists of:
the Flowers business, which is managed separately, but is not material enough to report separately;
sales and costs that are incidental to the commercial strategies
costs not directly attributable to an operating segment, including global marketing and research and development teams, corporate
headquarter functions and some centrally provided support services in the finance, information systems, human resources and procurement
areas
Income and expense transactions have been attributed to the geographic regions based on the market destination to which they relate, rather than
on the region in which they originated. The operating segments do not include sales and costs of goods sold that are incidental to the announced
business strategies. Some costs are not directly attributable to an operating segment, including global marketing and research and development
teams, corporate headquarter functions and some centrally provided support services in the finance, information systems, human resources and
procurement areas. These costs are presented separately from the operating segments.
Sales in All other segments increased from $442 million in 2017 to $500 million in 2018, an increase of 13 percent, including a 7 percent increase
in Flowers sales and 3 percent attributable to currency. Unallocated costs increased by $35 million from 2017 with reduced research and
development costs of 10 percent due to a revised charging basis under which the regions bear the cost of development activities on sites in the
regions, except initial development costs of a new active ingredient, offset by a 32 percent increase in general and administrative costs.
General and administrative in 2017 included gains reported on changes made to the defined benefit pension plans in the United States
and Switzerland. General and administrative in 2018 included increased hedging losses of approximately $59 million and higher incentive
costs compared with a low base in 2017. These increases were partly offset by the gain of $69 million recorded on the sale of two
buildings at the headquarter site.
Restructuring and impairment costs decreased by $398 million from 2017 to 2018 mainly due to the gains of $365 million recorded in 2018 from
the mandated Crop Protection product divestments. Excluding the divestment gains, restructuring and impairment charges were relatively flat with
restructuring charges in 2017 of approximately $75 million of transaction costs related to the ChemChina Tender Offer, including charges for the
incremental effect of applying cash-settled share based payment accounting, offset by increased impairment charges of $68 million in 2018.
Restructuring and impairment costs are described in more detail below.
10
Operating and Financial Review and Prospects
Financial Report 2018
Defined Benefit Pensions
Defined benefit pension expense was a charge of $127 million in 2018 compared with $71 million in 2017. 2017 expense was lower because of
past service gains of $34 million in Switzerland and $41 million in US due to changes made to the pension plans in 2017 as described in Note 22
to the consolidated financial statements. Syngenta expects 2019 defined benefit pension expense, excluding costs associated with restructuring,
to be lower by a double digit percentage compared to the 2018 expense at constant exchange rates due to the impact of US plan changes and
improved funded status at the end of 2018. However, the final expense will be subject to the prevailing exchange rates in 2019.
Syngenta contributions to defined benefit pension plans were $241 million in 2018 compared with $166 million in 2017. These included early
retirement contributions of $11 million in 2018 and $6 million in 2017. In 2019, Syngenta expects contributions to defined benefit pension plans,
excluding early retirement contributions associated with restructuring actions, to decrease to approximately $130 million because there will be no
one time lump sum payments associated with the 2017 changes to the Swiss pension plan and with the revised schedule of contributions for the
UK pension plan, as described in Note 22 to the consolidated financial statements.
Restructuring and impairment
Restructuring and impairment charges for the years ended December 31, 2018 and 2017, broken down into the main restructuring initiatives,
consist of the following:
($m)
Accelerating operational leverage programs:
Cash costs
Non-cash costs
Acquisition, divestment and related costs:
Associated with industry consolidation, including ChemChina
Other acquisition and related integration costs
Non-cash items
Other non-cash restructuring and impairment:
Other non-current asset impairments
Total
2018
2017
155
1
‐
46
35
77
314
283
1
7
24
30
10
355
In 2018, $33 million for the reversal of inventory step ups reported on acquisitions is presented within Cost of goods sold in the consolidated
income statement (2017: $nil). The other costs above for the years ended December 31, 2018 and 2017 are presented within Restructuring in the
consolidated income statement.
In 2018, in addition to the above, $365 million of divestments gains were recognized on mandated product divestments as part of the anti-trust
clearance of the ChemChina acquisition of Syngenta.
In 2017, in addition to the above, of the $95 million share based payment expense charged to the 2017 consolidated income statement, $81
million was the incremental effect of applying cash-settled share based payment accounting due to the share plan amendments related to the
ChemChina Tender Offer, as described in Note 3. The $81 million, along with an additional $17 million of related social costs, was presented as
costs of the following functions: Cost of goods sold $9 million; Marketing and distribution $31 million; Research and development $12 million and
Other general and administrative $46 million. Total share based payment expense charged to the consolidated income statement is disclosed in
Note 23 to the consolidated financial statements.
Analysis of restructuring costs
2018
Accelerating operational leverage programs
Cash costs of $101 million, including $25 million for information systems projects, consist of $35 million for initiatives to restructure marketing and
commercial operations, $32 million for projects to improve the effectiveness of back office support, $23 million for Research and Development
productivity projects, $8 million for activity to optimize production and supply and $3 million for project management. A further $54 million of
severance and pension costs were incurred to simplify the layers of management, including at the global headquarters. Non-cash costs included
tangible asset write-downs associated with the above projects.
Acquisition, divestment and related costs
A provision for $24 million was charged to the income statement for indirect tax exposures related to the Nidera acquisition. Other cash costs for
acquisition and related integration costs include $12 million for merger and acquisition projects and other transaction costs and $10 million incurred
for integration projects. Non-cash costs include $33 million for the reversal of inventory step ups reported on acquisitions and $2 million of
inventory impairment provisions. Five acquisitions were completed during 2018 as further described in Note 3 to the consolidated financial
statements.
11
Operating and Financial Review and Prospects
Financial Report 2018
Other non-cash restructuring
Other non-current asset impairments consist of $70 million for an intangible asset impairment where further development of technologies held by
Syngenta is not considered cost effective and activities have been suspended and $7 million for the impairment of a research collaboration
agreement whose expected future benefit no longer supports its value.
2017
Accelerating operational leverage programs
Cash costs of $229 million, including $30 million of severance and pension charges and $44 million of information systems projects, consisted of
$97 million for initiatives to restructure marketing and commercial operations, $61 million for projects to improve the effectiveness of back office
support, $38 million for Research and Development productivity projects, $27 million for activity to optimize production and supply and $6 million
for project management. A further $54 million of severance and pension costs were incurred to simplify the layers of management, including at the
global headquarters.
Non-cash costs included tangible asset write-downs associated with the above projects.
Acquisition, divestment and related costs
Cash costs included $7 million of costs related to the ChemChina Tender Offer. Other acquisition and related integration costs included $17 million
of transaction costs and $7 million incurred for integration projects. Non-cash items included $45 million of asset impairments and divestment
losses related to the Sugar beet business, which was divested during September, gains of $16 million on the sale of product rights in the USA and
Mexico and a small impairment for assets acquired in an earlier transaction.
Other non-cash restructuring
Other non-current asset impairments consisted of an additional $5 million for two sites in the US that were sold during the first half of 2017 and the
impairment of a research collaboration agreement whose future benefit became less certain.
Financial expense, net
Financial expense, net increased by $175 million in 2018 to $353 million. Net interest expense at $232 million was $222 million higher than 2017
due mainly to the $4,750 million of senior unsecured notes Syngenta issued during April 2018 with various maturities up to 30 years, the proceeds
of which were largely paid as a dividend to Syngenta’s shareholder, and higher average net debt following the acquisition of Nidera seeds.
Currency related financial expenses in 2018 of $79 million were $53 million lower than 2017 due to lower hedging costs following the change in the
net Swiss franc exposure after the dividend.
Taxes
In 2018, Syngenta recorded a net tax expense of $275 million on an income before taxes of $1,717 million, an effective tax rate of 16 percent. In
2017, Syngenta recorded a net loss before taxes of $116 million and a net tax credit of $20 million. The loss before taxes arose in 2017 due to the
litigation provision discussed in detail in Note 20 to the consolidated financial statements. Syngenta has assumed that all of the provision will be
deductible for income tax, but that deductions will be claimed in more than one jurisdiction. Syngenta has used an average of the tax rates of the
relevant jurisdictions to estimate the tax credit on the provision. The ultimate benefit realized may be different and this difference may have a
material effect on Syngenta’s income tax expense for future years.
Syngenta’s Swiss domestic statutory tax rate was 22 percent in both years. Income taxed at different rates reduced the effective tax rate by 6
percent in 2018, compared with 8 percent in 2017 due to differences in the mix of jurisdictions in which estimated taxable profits arose in the
respective years. Changes to prior year income tax estimates reduced the effective tax rate in 2018 by 2 percent, but had no impact on the
effective tax rate in 2017. Non-recognition of deferred tax assets in the US, Argentina and Brazil increased the tax rate by 5 percent in 2018 (4
percent in 2017). In 2018, recognition of previously unrecognized deferred tax assets was not material and did not impact the effective tax rate,
whereas in 2017 the effect of tax reforms and improved local profitability in Argentina allowed recognition of deferred tax assets that had not been
recognized in prior years, which reduced the tax rate by 3 percent.
The tax rate on restructuring and impairment and divestment gains was minus 23 percent in 2018, compared with 20 percent for 2017, due to the
different mix of gains and losses included in the net charge over the period and the varying tax treatments applied in different countries. Future
rates applicable to restructuring and impairment will be dependent on the nature and size of the charges and may vary from year to year.
Net income for the period and other supplementary income data
Net income attributable to Syngenta shareholders in 2018 was $1,438 million, compared to a loss of $98 million in 2017. Approximately $1,248
million of the 2017 net loss related to the post-tax impact of the Viptera litigation provision. In addition, income tax expense in 2017 included $96
million due to the impact of US tax reform on pre-existing deferred tax assets. Excluding these items, net income was $1,246 million in 2017.
Sales in 2018 were 7 percent higher and operating income margin, excluding the impact of the litigation provision, was 3 percentage points higher
in 2018 than 2017 due to the divestment gains realized in 2018, described above. With the higher financial expense, net income before taxes,
excluding the impact of the litigation provision, was 20 percent higher in 2018. Excluding the impacts of the Viptera litigation provision and US tax
reform, the 2017 tax rate was 13 percent, compared to 16 percent in 2018. After this higher tax rate, net income in 2018 was 15 percent higher
than 2017 adjusted for the litigation provision and US tax reform impacts.
After related taxation, restructuring and impairment income, including the gains on divesting various crop protection products as part of the anti-
trust settlement, was $63 million in 2018 compared with charges of $361 million in 2017.
12
Operating and Financial Review and Prospects
Financial Report 2018
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.
Syngenta operates worldwide and its business has grown significantly in emerging markets over the last years, with a broadening of the currency
effects that need to be closely monitored. Syngenta regularly analyzes how currency fluctuations will impact its operating results and manages the
impact with a combination of commercial actions, such as product pricing, and financial risk management strategies, such as hedging. Next to the
Euro, the Swiss franc and the British pound, the Brazilian real gives rise to a major currency exposure due to the large size of Syngenta’s business
activities in Brazil. Sales prices to customers in Brazil largely are linked to the US dollar, which limits the impact of fluctuations in the US
dollar/Brazilian real exchange rate. Similarly, Syngenta manages its currency exposure in Argentina and the CIS, mainly Russia and Ukraine, by
linking local currency sales prices to the US dollar to compensate for the fluctuations in sales value from the currency devaluation. During 2018,
the Argentine peso devalued by over 100 percent, the Russian ruble devalued by over 20 percent against the US dollar, but the Ukrainian hryvnia
remained flat.
Syngenta regularly monitors receivables exposure in all countries in which it operates. In the Eurozone, Greece, Italy, Portugal and Spain have
been experiencing weak macro-economic conditions since 2010. Parts of Latin America, including Argentina and Brazil are also experiencing
economic and financial difficulties and this has led to continued constraints in the availability of credit; in Brazil the collections performance
improved substantially during 2018, whilst in Argentina the economy moved into hyperinflation putting pressure on liquidity and collections. In
Venezuela, exchanging local currency into US dollars to pay for imported goods can be difficult. Receivables exposure from customers in Russia
and the Ukraine increased slightly during 2018, with 57 percent of 2018 sales in those countries having been collected as of December 31, 2018
compared with 64 percent of 2017 sales.
The following table outlines for the above named countries the aggregate, gross trade receivables, those past due for more than 180 days and the
related provision for doubtful receivables at December 31, 2018 and 2017.
($m)
Gross trade receivables
Past due for more than 180 days
Provision for doubtful trade receivables
2018
2,447
305
259
2017
2,294
432
360
The reductions in past due for more than 180 days and the provision for doubtful receivables is mainly due to Brazil where collections have
improved during 2018 and some receivables that had been fully provided for were sold to a third party on a non-recourse basis and derecognized.
At December 31, 2018, approximately 62 percent of Syngenta’s cash and cash equivalents was held in US dollars, approximately 9 percent in
Indian rupees, approximately 7 percent in Swiss francs, approximately 3 percent in Euros and approximately 2 percent in each of Canadian dollar,
Korean won and Thai baht. No other individual currency made up more than 2 percent.
Liquidity and capital resources
Syngenta’s principal source of liquidity is cash generated from operations.
Working capital fluctuations due to the seasonality of the business are supported by short-term funding available from a $2.5 billion Global
Commercial Paper program and a $3 billion committed, revolving, multi-currency syndicated credit facility. Operating in a seasonal business,
Syngenta typically obtains funds from its short-term facilities during the first half of the year to fund operations during the northern hemisphere
growing season and repays these funds during the second half when receivables are collected. Longer-term capital resources include unsecured
non-current bonds issued under a Euro Medium Term Note (EMTN) program, unsecured non-current Notes issued under a Note Purchase
Agreement in the US Private Placement market and unsecured non-current bonds issued in the US public debt market. In April 2018, $ 4.75 billion
of Rule 144/Regulation S under the U.S. Securities Act of 1933 notes were issued. In May 2018, Syngenta AG paid $4.71 billion of the proceeds
of those notes to its shareholder as a dividend, allowing CNAC Saturn (NL) BV to pay back its outstanding acquisition debt.
See Capital markets and credit facilities for details of outstanding debt.
For information on Syngenta’s funding and treasury policies and objectives in terms of the manner in which treasury activities are controlled, see
Note 25 to the consolidated financial statements.
Syngenta reported cash and cash equivalents on December 31, 2018 and 2017 of $1,563 million and $2,253 million, respectively. At December
31, 2018 and 2017, Syngenta had current financial debt of $925 million and $1,022 million, respectively, and non-current financial debt of $7,178
million and $2,860 million, respectively.
Capital markets and credit facilities
Funds for Syngenta’s working capital needs were available during the year from its $2,500 million Global Commercial Paper program and a $3
billion committed, revolving, multi-currency syndicated credit facility, which was increased, extended and amended following the change of control
related to the ChemChina takeover in May 2017. In 2018, the syndicated credit facility was extended by one year and will now mature in 2023. It
provides the possibility to extend by one year in 2019. The amount drawn under the syndicated credit facility at December 31, 2018 was $150
million (2017: $200 million). The average outstanding balance under the syndicated credit facility for the year 2018 was $564 million (2017: $7
million).The amount drawn under the Global Commercial Paper program at December 31, 2018 was $80 million (2017: $473 million). The average
outstanding balance under the Global Commercial Paper program for the year 2018 was $570 million (2017: $1,388 million).
13
Operating and Financial Review and Prospects
Financial Report 2018
Absent major acquisitions, Syngenta targets maintaining an investment grade credit rating, as recognized by major third-party rating agencies,
which it currently believes provides an optimal balance between financial flexibility and the cost of capital. At December 31, 2018, Syngenta’s credit
ratings were investment grade as follows: Fitch Ratings Ltd BBB/F-3; Standard & Poor's Rating Services BBB-/A-3; and Moody's Investors'
Services Limited Ba2/NP (December 31, 2017: Moody’s Investors’ Services Limited Ba2/NP; Standard & Poor’s Rating Services BBB-/A-3; and
Fitch Ratings Ltd BBB/F3). There are no material legal or economic restrictions on the ability of subsidiaries to transfer funds to the Company in
the form of cash dividends except as disclosed in the consolidated cash flow statement.
The table below summarizes Syngenta’s unsecured notes in issuance at December 31, 2018:
($m)
0.750% CHF bond 2019
3.698% US dollar bond 2020
5.110% US dollar private placement 2020
1.875% Eurobond 2021
3.933% US dollar bond 2021
3.125% US dollar bond 2022
4.441% USD bond 2023
1.625% CHF bond 2024
4.892% USD bond 2025
5.350% US dollar private placement 2025
1.250% Eurobond 2027
5.182% USD bond 2028
2.125% CHF bond 2029
5.590% US dollar private placement 2035
4.375% US dollar bond 2042
5.676% USD bond 2048
Total
Issuance date
March 2014
April 2018
December 2005
March 2014
April 2018
March 2012
April 2018
March 2014
April 2018
December 2005
March 2015
April 2018
March 2014
December 2005
March 2012
April 2018
Carrying amount
Value at issue
356
748
39
571
747
501
996
253
747
55
568
995
152
11
248
498
396
750
38
689
750
500
1,000
283
750
55
559
1,000
170
11
250
500
7,485
7,701
Management is of the opinion that, absent a major business acquisition or a very significant deterioration in working capital or the rate of
receivables collections from that currently expected, the funding available from the sources described above will be sufficient to satisfy Syngenta’s
working capital, capital expenditures and debt service requirements for the foreseeable future, including cash expenditures relating to restructuring
programs. In the event of a major business acquisition, Syngenta would seek additional funding from capital markets or other sources. Syngenta
regards as sufficiently remote the likelihood that a very significant deterioration in working capital or unexpected decline in the rate of receivables
collections will occur as not to require the development of a detailed contingency funding plan.
Cash flow
The following table sets out certain information about cash flow for each of the periods indicated:
($m)
Cash flow from operating activities
Cash flow used for investing activities
Cash flow used for financing activities
Year ended December 31,
2018
1,367
(1,641)
(350)
2017
1,839
(577)
(303)
Cash flow from operating activities
2018 compared with 2017
Cash flow from operating activities decreased by $472 million to $1,367 million in 2018 including the payment of $450 million related to the
settlement of the US litigation. Income before taxes after the reversal of non-cash and other reconciling items was $2,600 million on 2018
compared to $2,381 million in 2017. Cash paid in respect of other provisions, which in 2018 included the above $450 million, was $448 million
higher than 2017. Interest paid increased by $126 million to $266 million largely as a result of the issuance of $4.75 billion bonds in 2018. Other
financial payments were lower including reduced hedging costs. Cash paid in 2017 in respect of share based compensation related to cash
settlement of share awards after the ChemChina acquisition. Change in net working capital was an outflow of $55 million in 2018 compared to an
inflow of $460 million in 2017. An outflow from trade and other working capital assets of $507 million compared to an inflow of $616 million in 2017
and reflected sales growth and particularly the higher final quarter sales in Latin America. Cash flows from trade and other working capital liabilities
were an outflow of $3 million in 2017, but an inflow of $682 million in 2018 including higher sales rebates payable from the increased sales, again
particularly in Latin America, and the benefits from harmonizing supplier terms.
14
Operating and Financial Review and Prospects
Financial Report 2018
Cash flow used for investing activities
2018 compared with 2017
Cash flow used for investing activities was $1,641 million in 2018, $1,064 million more than in 2017. Additions to property, plant and equipment
were $54 million lower; a similar level is currently expected in 2019. Purchases of investments in associates and other financial assets were $192
million higher mainly due to purchases of marketable securities. Proceeds from disposals of property plant and equipment were $52 million higher
including the sale and leaseback of buildings in Switzerland, while proceeds from disposals of intangible and financial assets increased by $393
million due to the divestment in 2018 of remedy assets as a result of the ChemChina acquisition. Cash outflows for business acquisitions
increased by $1,211 million and included the acquisition of Nidera Seeds in 2018. Cash inflows for business divestments in 2017 largely related to
the sale of the sugar beet business.
Cash flow used for financing activities
2018 compared with 2017
Cash flow used for financing activities of $350 million was $47 million higher than in 2017. The net cash received from interest-bearing debt
increased by $4,214 million due mainly to the new bonds issued in 2018. The dividend paid to shareholders in 2018 increased by $4,237 million
compared with 2017 as only the CHF 5.00 per share special dividend related to the ChemChina Tender Offer was paid in 2017. Sales of treasury
shares in 2017 related to employee share and share option plans.
Research and development (“R&D”)
Syngenta’s Research and Development organization is dedicated to developing quality crop protection and seeds products, as well as crop-
focused solutions which integrate multiple technologies. R&D focuses on taking a holistic approach to help customers grow their specific crop
using the best technology to address their needs, be it a single technology, a combination of technologies, or technologies and services.
Syngenta is committed to improving crop yield and quality in a sustainable way and, through its global product safety group and global regulatory
team, is committed to developing and registering products that are safe and effective. Syngenta maximizes its innovation potential by leveraging its
industry expertise and partnering with other technology leaders across the globe.
The total spent on research and development was $1,300 million in 2018 and $1,273 million in 2017. For the attribution of research and
development costs to reported operating segments, see Note 4 to the consolidated financial statements.
There are no off-balance sheet financing transactions associated with research and development activity.
Contractual obligations, commitments and contingent liabilities
At December 31, 2018 Syngenta had contractual obligations to make future payments in the periods indicated in the following:
($m)
Financial debt
Interest on fixed rate financial debt
Other liabilities
Capital lease payments
Operating lease payments
Capital expenditures
Pension contribution commitments
Unconditional purchase obligations
Long-term research agreements and other long-term
commitments
Total
Notes to the
financial
statements
reference
17, 19
25
20
20
20
22
20
20
Total
8,042
2,511
110
63
241
112
288
Less than
1 year
910
278
55
19
68
103
47
1,693
1,090
104
70
1–3 years
3–5 years
5–10 years
2,107
522
1,498
396
2,618
587
More than
10 years
909
728
53
26
89
9
134
464
23
2
11
37
‐
95
138
9
‐
7
47
‐
12
1
2
‐
‐
‐
‐
‐
‐
‐
1,637
13,164
2,640
3,427
2,186
3,274
Of the total financial debt, floating rate financial debt is $557 million (mainly local bank loans and overdraft facilities), all 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 $7,485 million is comprised primarily of the outstanding Eurobonds, Swiss franc domestic bonds, $ bonds and private placement
notes. Fixed rate interest payments of $2,511 million on these are included above.
Other liabilities arise from deferred payments related to acquisitions and license agreements.
Provisions for long-term liabilities totaling $753 million 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 2019. Note 20 to the consolidated financial
statements presents the components of the estimated $1,268 million of provisions that are expected to be paid during 2019.
15
Operating and Financial Review and Prospects
Financial Report 2018
The supply agreements for materials giving rise to the unconditional purchase obligations are entered into by Syngenta to ensure availability of
materials meeting 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 terminates the agreements before their expiry dates.
Pension contribution commitments totaling $288 million represent unconditional fixed payments to the UK pension fund according to the revised
schedule of contributions agreed during 2018. Contributions for future service in the UK and Switzerland which are calculated as a fixed
percentage of employees’ pensionable pay are not included in the above table. The rules of the Swiss pension fund commit Syngenta to
contributing a fixed percentage of employees’ pensionable pay to the fund.
As disclosed in Note 22 to the consolidated financial statements, Syngenta expects to pay $130 million of contributions to its defined benefit
pension plans in 2019, excluding restructuring costs and excluding any accelerated payments which Syngenta may decide to make as business
and financial market conditions develop during 2019. $47 million of those contributions are included as commitments in the table above. The
remaining $83 million represents 2019 service contributions, which are not included as commitments in the table above.
The above table excludes income tax liabilities of $410 million in respect of uncertain tax positions. These are presented within current income tax
liabilities in the consolidated balance sheet because it is not possible to make a reasonably reliable estimate of the actual period of cash settlement
with the respective taxing authorities.
Off-balance sheet arrangements
Syngenta had no off-balance sheet arrangements as at December 31, 2018, other than the above contractual obligations, commitments and
contingent liabilities. Syngenta has no unconsolidated special purpose entities that are likely to create material contingent obligations.
Critical accounting estimates
Critical accounting estimates and new accounting pronouncements are discussed in Notes 2 and 27 to the consolidated financial statements.
Recent developments
Note 28 to the consolidated financial statements provides details of events which occurred between the balance sheet date and February 14, 2018
that would require adjustment to or disclosure in the consolidated financial statements.
Trend and Outlook
Sales growth in 2018 was negatively impacted by the mandated divestments of several Crop Protection products required by anti-trust authorities
and the 2017 disposal of the sugar beet business, but positively impacted by the acquisition of the Nidera seeds business, with the two factors
largely offsetting. 2018 sales growth also included significant growth in Crop Protection sales in Brazil off a reduced 2017 base, where sales in
2017 to distributors were below consumption to cut the level of distributor inventories; sales in 2018 were more in line with consumption and sales
in 2019 similarly are expected to be more reflective of consumption. In Seeds, sales in 2018 included royalty income of approximately $100 million
relating to change of control clauses. Individually, these will not recur in 2019; further royalties may be received, but are not expected currently to
be at a similar level. Underlying sales revenue is currently expected to grow by low to mid single digits in crop protection and seeds markets that
are both expected to continue to show low single digit growth in 2019.
Based on exchange rates prevailing at the date of publication, a stronger dollar and weaker Euro is expected to reduce reported sales by
approximately 2 percent. The impact of exchange rate movements on operating income is discussed below.
Syngenta will continue to focus on and drive productivity savings in 2019. In Research and development, overall expenditure as a percentage of
sales is expected to be at a broadly similar level in 2019 as 2018 at constant exchange rates, with productivity savings re-invested. Savings from
the productivity focus in Marketing and distribution costs and General and administrative costs (excluding restructuring) are planned partly to be re-
invested in increased marketing expenditure to drive future market share growth and to develop further solutions and capabilities in the application
of new digital technologies. In 2018, Syngenta completed a sale and leaseback for two buildings at its Basel headquarters, recognizing a $69
million gain on disposal; the remaining buildings on the site were sold under a similar transaction in 2019 and the overall level of gains on disposal
of tangible fixed assets in 2019 is expected to be similar to that of 2018. Charges for doubtful receivables in 2018 were at a lower level than the
average of the previous 3 years, largely due to better than anticipated customer collections in Brazil; a return towards the previous average is
currently expected in 2019.
In 2018, Syngenta recorded a pre-tax gain of $365 million on the divestment of various crop protection products required to be divested under anti-
trust agreements; no similar gain is expected to be recorded in 2019. While the AOL productivity program completed in 2018, with cash costs in
2018 of $155 million, the drive for further productivity savings will continue and cash costs in 2019 are expected to be at a broadly similar level.
However, in general, the timing of the recognition of charges for particular restructuring events, which is dependent on when irreversible
commitments to the events occur, makes it difficult to predict such costs with certainty. Restructuring charges in 2018 also included $70 million
related to the impairment of an intangible asset where further development of technologies held by Syngenta was discontinued. It is generally not
possible to predict future non-cash impairments.
In 2017, oil prices (Brent) traded in a range of $45-70 per barrel, being towards the upper end of the range in the latter part of the year. In 2018,
prices were volatile and traded in a range between $50-85 per barrel, increasing towards the top of the range in the period through to October and
then falling back to the bottom of the range around the end of the year. The average of monthly prices in 2018 was approximately $68 per barrel,
compared to approximately $53 in 2017. With its current product mix, Syngenta estimates that each $10 movement in the price of a barrel of oil
impacts its cost of goods sold by approximately $30-35 million. However, due to supplier production chains and Syngenta’s own inventory, it can
16
Operating and Financial Review and Prospects
Financial Report 2018
take from 9 to 12 months for movements in the oil price to feed through into cost of goods sold. As at the end of January 2019, the impact of
movements in the price of oil is expected to have an adverse impact on 2019 compared to 2018 of the order of $30-50 million. Further price
movements would take time to pass through to Syngenta’s cost of goods but increases may have an adverse impact if Syngenta is not able to
pass on the increase through increased sales prices. In addition, in 2018, supply constraints of raw material chemicals sourced from China led to
cost increases of several raw material and intermediate chemicals used by Syngenta. The impact of these cost increases is currently estimated to
be approximately $40 million in 2019. As the impact of both the oil price and China supply shortage is industry-wide, Syngenta will seek to increase
sales prices to cover this additional cost, but this may not prove possible.
In 2018, 53 percent of Syngenta’s sales were in emerging markets. Emerging markets continue to have higher long-term growth potential because
significant crop yield gaps exist versus developed markets; this growth potential is further supported by ongoing technology adoption. Managing
volatility in such markets, in particular credit and currency exposures, is integral to Syngenta’s business model.
Overall, Syngenta has significant currency exposures, which at a high level can be summarized as:
a short position against the US dollar in Swiss francs and British pounds
a net long position in Euros over the course of a full year, relatively minor compared with sales in Euros, but with a long position in the first
half selling season and a short position in the second half from more evenly spread Euro-based operating costs including raw material costs
a long position in Japanese yen, Australian and Canadian dollars and many emerging market currencies
in Brazil and Argentina, a significant portion of sales are effectively priced in US dollars, resulting in a net short local currency exposure, though the
linkage has weakened in Brazil and there can be a time lag before local currency prices are adjusted. Syngenta has also acted to link local
currency pricing of sales in Russia and the Ukraine (both of which export grain to the global market) to US dollars to reduce the long exposure to
these currencies.
Forecast transaction exposures in the major currencies are hedged under a rolling 12 month program, largely through forward contracts. In 2018,
Syngenta estimates the net impact on underlying sales and operating costs of exchange rate movements to have been approximately $190 million
adverse to 2017, which together with a net hedging cost of $67 million compared with a cost of $8 million in 2017, resulted in an adverse year-on-
year impact on operating income from exchange rate movements of approximately $249 million when compared with 2017. The largest driver of
the adverse underlying net impact was a weaker Brazilian real; accordingly, the negative exchange movement impact was significantly offset by
local currency sales price increases as noted above. At rates prevailing in January 2019, Syngenta expects a 2 percent negative impact on sales
from the currency movements, but a relatively minor impact on operating profit as the most significant sales impact comes from sales in Euro,
where the net position is relatively minor. A significant portion of emerging market currency exposures in particular are unhedged, so the actual
impact may differ positively or negatively from the above estimate. The net hedging result is reported within General and administrative in the
consolidated income statement.
Syngenta expects to pay $1.1 billion related to the US litigation settlement in the second quarter of 2019.
Appendix A
Reconciliation of non-GAAP measures to equivalent GAAP measures
A non-GAAP measure is a numerical measure of financial performance, financial position or cash flows that either:
includes, or is subject to adjustments that have the effect of including, amounts that are excluded in the most directly comparable measure
calculated and presented under IFRS; or
excludes, or is subject to adjustments that have the effect of excluding, amounts that are included in the most directly comparable measure
calculated and presented under IFRS.
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, impairment losses and divestment gains and losses. The Company presents these measures because:
movements in exchange rates historically have had, and in the future are expected to have, a significant impact on sales and operating
income from period to period; and
restructuring and impairment charges historically have fluctuated, and in the future are expected to fluctuate, significantly from period to
period and thereby have a volatile impact on results.
Syngenta has been engaged in significant restructuring activities since the formation of the Company in 2000, including programs to integrate and
extract synergies from the combined operations of the Zeneca agrochemicals business and the Novartis agribusiness, the integration of business
combinations, the Operational Efficiency programs, the implementation of the integrated crop strategy and, beginning in 2014, the AOL program.
The incidence of restructuring charges is periodic and volatile, reflecting the timing of irrevocable commitments related to specific sites and
operations. Therefore the impact on reported performance varies from period to period and there is limited continuity in the specific composition or
size of such charges. In 2017, measures excluding restructuring and impairment also exclude the incremental effect of applying cash-settled share
based payment accounting due to the share plan amendments related to the ChemChina Tender Offer described in Note 3 to the consolidated
financial statements. Internal financial reporting and management and employee incentive plans are substantially based on financial measures
excluding the charges for restructuring and impairment so that management is incentivized to deliver the benefits of the associated restructuring
and not to achieve short-term financial targets by deferring implementation of restructuring plans. Restructuring programs typically deliver benefits
with a payback over several years, similar to capital investments, and control over restructuring expenditures is performed on a similar project
basis to that applied with capital investments.
17
Operating and Financial Review and Prospects
Financial Report 2018
Syngenta presents non-GAAP measures on operating income before restructuring and impairment at both the segmental and group levels.
Restructuring and impairment charges have had a material effect on operating income in the period covered by the review. In the opinion of
management, reporting operating performance excluding restructuring and impairment in addition to the GAAP measures provides a more
thorough understanding of business performance. Together with disclosure of the material elements within restructuring and impairment and of the
overall anticipated size and timeframe of restructuring programs, these measures may assist investors in forecasting future operating performance.
Syngenta presents non-GAAP information on income before taxes excluding restructuring and impairment together with income tax expense
before restructuring and impairment to assist investors to calculate the Group tax rate both including and excluding the impact of restructuring and
impairment charges. The tax rate on restructuring and impairment charges has been volatile and different from the tax rate on income before taxes
excluding restructuring and impairment, due in part to many categories of restructuring or impairment charges not being deductible for tax
purposes.
In addition to GAAP measures, Syngenta uses these measures excluding restructuring and impairment in internal reporting to management and
the Board of Directors, and these measures are used in the incentive plans for Syngenta management and other employees. Restructuring and
impairment charges have been incurred in all the periods covered by the review and are expected to continue to arise and have a material effect
on operating performance in future periods. Consequently, non-GAAP measures of operating income before restructuring and impairment do not
present a complete picture of operating performance and these measures should be seen only as supplementary to the GAAP measure.
For improved clarity, the definitions of these non-GAAP measures and reconciliations of non-GAAP measures to the appropriate GAAP measure
are provided below. The tables below are included to show the reconciliation of the GAAP measures to the non-GAAP measures used in the
report and do not represent income statements prepared under IFRS.
Reconciliation of net income excluding restructuring and impairment (non-GAAP measure) to profit for the period (GAAP measure)
2018 ($m, except percentage)
Operating income
Income/(loss) from associates and joint ventures
Financial expense, net
Income/(loss) before taxes
Income tax (expense)/benefit
Net income/(loss)
Attributable to non-controlling interests
Net income/(loss) attributable to Syngenta AG shareholders
Tax rate
2017 ($m, except percentage)
Operating income
Income from associates and joint ventures
Financial expense, net
Income/(loss) before taxes
Income tax (expense)/benefit
Net income/(loss)
Attributable to non-controlling interests
Net income attributable to Syngenta AG shareholders
Tax rate
Restructuring
and impairment
Before
restructuring
and impairment
51
‐
‐
51
12
63
‐
63
(23)%
2,017
2
(353)
1,666
(287)
1,379
(4)
1,375
17%
Restructuring and
impairment
Before
restructuring and
impairment
(453)
‐
‐
(453)
92
(361)
‐
(361)
20%
507
8
(178)
337
(72)
265
(2)
263
21%
Total
2,068
2
(353)
1,717
(275)
1,442
(4)
1,438
16%
Total
54
8
(178)
(116)
20
(96)
(2)
(98)
17%
18
Operating and Financial Review and Prospects
Financial Report 2018
2016 ($m, except percentage)
Operating income
Income from associates and joint ventures
Financial expense, net
Income before taxes
Income tax expense
Net income
Attributable to non-controlling interests
Net income attributable to Syngenta AG shareholders
Tax rate
2015 ($m, except percentage)
Operating income
Income from associates and joint ventures
Financial expense, net
Income before taxes
Income tax expense
Net income
Attributable to non-controlling interests
Net income attributable to Syngenta AG shareholders
Tax rate
2014 ($m, except percentage)
Operating income
Income from associates and joint ventures
Financial expense, net
Income before taxes
Income tax expense
Net income
Attributable to non-controlling interests
Net income attributable to Syngenta AG shareholders
Tax rate
Restructuring and
impairment
Before
restructuring and
impairment
(477)
‐
‐
(477)
87
(390)
‐
(390)
18%
2,124
5
(291)
1,838
(267)
1,571
(3)
1,568
15%
Restructuring and
impairment
Before
restructuring and
impairment
(388)
‐
‐
(388)
88
(300)
‐
(300)
23%
2,229
7
(256)
1,980
(336)
1,644
(5)
1,639
17%
Restructuring and
impairment
Before
restructuring and
impairment
(206)
‐
‐
(206)
38
(168)
‐
(168)
18%
2,311
7
(217)
2,101
(311)
1,790
(3)
1,787
15%
Total
1,647
5
(291)
1,361
(180)
1,181
(3)
1,178
13%
Total
1,841
7
(256)
1,592
(248)
1,344
(5)
1,339
16%
Total
2,105
7
(217)
1,895
(273)
1,622
(3)
1,619
14%
Constant exchange rates
Syngenta compares 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 the current year. See Note 26 to the consolidated financial statements for information
on average exchange rates in 2018 and 2017. For example, if a European entity reporting in CHF sold CHF 100 million of products in 2018 and
2017, Syngenta’s financial statements would report $102 million of revenues in 2018 (using 0.98 as the rate, which was the average exchange
rate in 2018) and $101 million in revenues in 2017 (using 0.99 as the rate, which was the average exchange rate in 2017). The CER presentation
would translate the 2018 results using the 2017 exchange rates and indicate that underlying revenues were flat. Syngenta presents this CER
variance information in order to assess how its underlying business performed before taking into account currency exchange fluctuations.
Syngenta also presents its actual reported results in order to provide the most directly comparable data under GAAP.
19
Syngenta Group Consolidated Financial Statements
Financial Report 2018
Consolidated Income Statement
(for the years ended December 31, 2018 and 2017)
($m, except share and per share amounts)
Sales
Cost of goods sold
Gross profit
Marketing and distribution
Research and development
General and administrative:
Restructuring, excluding divestment gains
Divestment gains
Other general and administrative
Operating income
Income from associates and joint ventures
Interest income
Interest expense
Other financial expense
Currency losses, net
Financial expense, net
Income/(loss) before taxes
Income tax (expense)/benefit
Net income/(loss)
Attributable to:
Syngenta AG shareholders
Non-controlling interests
Net income/(loss)
Earnings per share ($):
Basic
Diluted
Weighted average number of shares:
Basic
Diluted
The accompanying notes form an integral part of the consolidated financial statements.
All activities were in respect of continuing operations.
Notes
4, 5
6
3
26
26
26
7
8
8
8
2018
13,523
(7,288)
6,235
(2,190)
(1,300)
(281)
434
(830)
2,068
2
147
(379)
(42)
(79)
(353)
1,717
(275)
1,442
1,438
4
1,442
15.57
15.57
2017
12,649
(6,491)
6,158
(2,197)
(1,273)
(355)
‐
(2,279)
54
8
155
(165)
(36)
(132)
(178)
(116)
20
(96)
(98)
2
(96)
(1.06)
(1.06)
92,382,473
92,382,473
92,354,881
92,366,107
20
Syngenta Group Consolidated Financial Statements
Financial Report 2018
Consolidated Statement of Comprehensive Income
(for the years ended December 31, 2018 and 2017)
($m)
Net income/(loss)
Components of other comprehensive income/(loss) (OCI)
Items that will not be reclassified to profit or loss:
Gains on equity investments at fair value through OCI
Actuarial gains of defined benefit post-employment plans
Income tax relating to items that will not be reclassified to profit or loss
Items that may be reclassified subsequently to profit or loss:
Unrealized gains/(losses) on derivatives designated as cash flow and net investment
hedges and related hedging costs
Currency translation effects
Income tax relating to items that may be reclassified subsequently to profit or loss
Total OCI
Total comprehensive income
Attributable to:
Syngenta AG shareholders
Non-controlling interests
Total comprehensive income
The accompanying notes form an integral part of the consolidated financial statements.
All activities were in respect of continuing operations.
Notes
2018
1,442
26
15, 22
7
25
7
15
18
(12)
21
31
(566)
(24)
(559)
(538)
904
902
2
904
2017
(96)
5
262
(55)
212
(27)
372
12
357
569
473
470
3
473
21
Syngenta Group Consolidated Financial Statements
Financial Report 2018
Consolidated Balance Sheet
(at December 31, 2018 and 2017)
($m, except share amounts)
Assets
Current assets:
Cash and cash equivalents
Trade receivables
Other accounts receivable
Inventories
Derivative and other financial assets
Other current assets
Income taxes recoverable
Total current assets
Non-current assets:
Property, plant and equipment
Intangible assets
Deferred tax assets
Financial and other non-current assets
Investments in associates and joint ventures
Total non-current assets
Assets held for sale
Total assets
Liabilities and equity
Current liabilities:
Trade accounts payable
Contract liabilities
Current financial debt and other financial liabilities
Income taxes payable
Other current liabilities
Provisions
Total current liabilities
Non-current liabilities:
Financial debt and other non-current liabilities
19, 26
(7,415)
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Shareholders’ equity:
Issued share capital 2018 and 2017: 92,578,149 ordinary shares
Retained earnings
Other reserves
Treasury shares: 2018 and 2017: 195,676 ordinary shares
Total shareholders’ equity
Non-controlling interests
Total equity
Total liabilities and equity
The accompanying notes form an integral part of the consolidated financial statements.
7
20
8
8
(925)
(753)
(9,093)
(17,048)
(6)
(2,369)
(1,868)
67
(4,176)
(26)
(4,202)
(21,250)
Notes
2018
2017
1,563
4,398
536
4,292
425
385
145
2,253
4,087
836
4,174
343
198
168
11,744
12,059
26
9, 26
26
11
26
10
12
13
7
14, 26
15
10
16, 26
16
17, 26
18, 26
20
3,362
4,221
1,099
492
192
9,366
140
21,250
(3,613)
(445)
(1,195)
(539)
(895)
(1,268)
(7,955)
3,460
2,973
1,099
550
192
8,274
‐
20,333
(3,174)
(480)
(1,141)
(474)
(773)
(676)
(6,718)
(3,064)
(613)
(1,938)
(5,615)
(12,333)
(6)
(5,629)
(2,408)
67
(7,976)
(24)
(8,000)
(20,333)
22
Syngenta Group Consolidated Financial Statements
Financial Report 2018
Consolidated Cash Flow Statement
(for the years ended December 31, 2018 and 2017)
($m)
Income/(loss) before taxes
Reversal of non-cash and other reconciling items
Cash (paid)/received in respect of:
Interest received
Interest paid
Other financial receipts
Other financial payments
Income taxes
Restructuring costs
Contributions to pension plans, excluding restructuring costs
Other provisions
Share based compensation
Operating cash flow before change in net working capital
Change in net working capital:
Change in inventories
Change in trade and other working capital assets
Change in trade and other working capital liabilities
Cash flow from operating activities
Additions to property, plant and equipment
Proceeds from disposals of property, plant and equipment
Purchases of intangible assets
Purchases of investments in associates and other financial assets
Proceeds from disposals of intangible and financial assets
Business acquisitions
Business divestments, net of cash divested
Cash flow used for investing activities
Proceeds from increase in third party interest-bearing debt
Repayments of third party interest-bearing debt
Sales of treasury shares and options over own shares
Distributions paid to shareholders
Cash flow used for financing activities
Net effect of currency translation on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Notes
21
20
20
20
3
12
13
3
3
21
21
23
2018
1,717
883
142
(266)
99
(166)
(183)
(73)
(229)
(502)
‐
1,422
(230)
(507)
682
1,367
(448)
127
(193)
(239)
486
(1,375)
1
(1,641)
4,936
(579)
‐
(4,707)
(350)
(66)
(690)
2,253
1,563
2017
(116)
2,497
156
(140)
86
(310)
(224)
(80)
(160)
(54)
(276)
1,379
(153)
616
(3)
1,839
(394)
75
(184)
(47)
93
(164)
44
(577)
872
(729)
24
(470)
(303)
10
969
1,284
2,253
Of total cash and cash equivalents of $1,563 million (2017: $2,253 million), $119 million (2017: $99 million) is required to meet insurance solvency
requirements of the Group’s insurance subsidiaries. These amounts therefore were not readily available for the general purposes of the Group.
There are no other significant restrictions on Syngenta’s ability to use assets or settle liabilities.
At December 31, 2018 cash equivalents totaled $1,059 million (2017: $1,617 million) and consisted of bank and money market fund deposits.
The accompanying notes form an integral part of the consolidated financial statements.
23
Syngenta Group Consolidated Financial Statements
Financial Report 2018
Consolidated Statement of Changes in Equity
(for the years ended December 31, 2018 and 2017)
Par value of
ordinary
shares
Additional
paid-in
capital
Treasury
shares, at
cost
Attributable to Syngenta AG shareholders
Cumulative
translation
adjustment
Fair value
reserves
Retained
earnings
Total share-
holders’
equity
Non-
controlling
interests Total equity
6
3,416
(125)
(49)
(1,316)
6,018
7,950
21
7,971
(15)
(15)
374
374
(98)
209
111
(98)
568
470
2
1
3
($m)
January 1, 2017
Net income
OCI
Total comprehensive income
Transactions with owners as
owners:
Share based compensation
Distributions paid to
shareholders
Other
December 31, 2017
Net income
OCI
Total comprehensive income
Transactions with owners as
owners:
Distributions paid to
shareholders
Other
December 31, 2018
‐
‐
‐
58
6
3,416
(67)
‐
‐
‐
(2)
(66)
36
36
(942)
(581)
(581)
(37)
21
(470)
(470)
7
5,629
1,438
9
1,447
5
7,976
1,438
(536)
902
(4,707)
(4,707)
24
4
(2)
2
(96)
569
473
21
(470)
5
8,000
1,442
(538)
904
(4,707)
5
4,202
6
3,416
(67)
5
(25)
‐
(1,523)
‐
2,369
5
4,176
‐
26
The accompanying notes form an integral part of the consolidated financial statements.
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. On May 7, 2018, a dividend of $4,707 million was paid to Syngenta’s parent company, CNAC Saturn (NL) B.V.
In 2017, a special dividend of CHF 5.00 ($5.05) per share was paid as further disclosed in Note 3.
Included within the fair value reserves are (i) cash flow hedge reserves, which comprise the effective portion of the cumulative net change in the
fair value of cash flow hedging instruments related to hedged items that have not yet been recognized in profit or loss, and (ii) fair value reserves,
which comprise the cumulative net change in the fair value of equity investments at fair value through OCI. Movements in the cash flow hedge
reserves are shown in Note 25. Movements in the fair value reserves for equity investments are shown in Note 26. Amounts within OCI related to
actuarial gains and losses of defined benefit post-employment plans are presented within retained earnings.
The cumulative translation adjustment comprises all foreign currency differences arising from the translation of the financial statements of foreign
operations, as well as from the translation of long-term monetary items that are part of net investments in foreign subsidiaries.
24
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
1. Basis of preparation of the consolidated financial statements
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS or IFRSs) as
issued by the International Accounting Standards Board (IASB). The consolidated financial statements have been prepared on an historical cost
basis, except for items that are required by IFRSs to be measured at fair value, principally certain financial instruments and biological assets, which
are valued at fair value less costs to sell.
The consolidated financial statements incorporate the financial statements of Syngenta AG, a company domiciled and incorporated in Switzerland,
and all of its more than 150 subsidiaries globally (together referred to as “Syngenta”) and Syngenta’s interests in associates and joint ventures.
Approximately 40 subsidiaries are considered to be significant legal entities. There are no material non-controlling interests or structured entities.
Syngenta’s main research and development facilities are located in Switzerland, UK and USA and its main production sites are in Switzerland, UK,
USA, France, China and Brazil. Syngenta AG’s principal executive offices are at Schwarzwaldallee 215, 4058 Basel, Switzerland.
The parent of Syngenta is CNAC Saturn (NL) B.V., a private company incorporated in the Netherlands. The ultimate parent of Syngenta is China
National Chemical Corporation, a state-owned enterprise of the People’s Republic of China.
The consolidated financial statements are presented in United States dollars (“$”) as this is the major currency in which revenues are
denominated. “$m” refers to millions of United States dollars. The functional currency of Syngenta AG is the Swiss franc (“CHF”).
Syngenta is a world leading agribusiness operating in the crop protection, seeds, controls and flowers markets. Crop protection chemicals include
herbicides, insecticides, fungicides and seed treatments to control weeds, insects and diseases in crops, and are essential inputs enabling
growers around the world to improve agricultural productivity and food quality. In Seeds, Syngenta operates in the high value commercial sectors
of field crops (including corn, oilseeds and cereals) and vegetables. The controls business provides turf and landscape and professional pest
management products, and the flowers business provides flower seeds, cuttings and young plants, to professional growers and consumers.
The preparation of financial statements requires management to exercise judgment when applying accounting policies and to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the 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.
The consolidated financial statements were approved for issue by the Board of Directors on February 14, 2019.
2. Significant accounting policy judgments and estimates
This note describes the impact on Syngenta’s consolidated financial statements of significant accounting judgments made when applying IFRSs
and critical assumptions and accounting estimates.
Application of critical accounting policies
Royalty and license income
Individual agreements licensing to third parties the right to use Syngenta technology can and do have unique terms and, consequently, the
accounting judgments required to apply IFRS 15 to each such agreement can differ significantly. Syngenta recognizes revenue for non-refundable
lump sum and guaranteed minimum license income at the start of a license only when the license is distinct from any related Syngenta obligations
to supply licensed products during the license term and Syngenta has performed any obligations related to the license grant. For licenses of seed
germplasm and trait technology, Syngenta considers that these criteria are met when the license has become effective, the licensee either has
control of biological material from which it can independently breed, produce and sell seeds containing the technology Syngenta has licensed to it
under the agreement or can obtain any seed purchase requirements in the market from producers other than Syngenta. For licenses of crop
protection technology, Syngenta considers that these criteria are met when the license grants the right to manufacture and sell chemical products
containing the licensed technology, the right to obtain related manufacturing and formulation know-how and to use existing regulatory data
necessary for the licensee to establish its own independent registration to sell the licensed products.
Impairment
For purposes of testing goodwill for impairment, goodwill is allocated to cash generating units (CGUs). Syngenta generally defines each crop
protection product active ingredient and each seed crop as a CGU. However, where one active ingredient is sold in mixture with other active
ingredients to a significant extent, the active ingredients concerned are grouped together into a single CGU because independent cash inflows
only exist at this higher level. Each CGU is generally defined on a global basis, reflecting the international nature of the business, and contains
tangible assets such as Property, plant and equipment (PP&E) as well as intangible assets such as product and patent rights.
North America corn and soybean seeds are defined as a single CGU because of common intellectual property and other interdependencies
between these two crops, which do not apply to other crops. Goodwill on certain major acquisitions, principally Zeneca agrochemicals business
goodwill of $548 million, was allocated to each Syngenta operating segment in proportion to each such segment’s relative value at the time
Syngenta established its current basis of segmentation, and is tested for impairment at those levels by relating the allocated amount for each
segment to the total cash flows of the respective segment. The goodwill amounts allocated to segments and significant other CGUs are disclosed
in Note 13.
For CGUs to which no goodwill is allocated, a reduction in forecast sales within management’s five year forecast horizon compared with the
previous year’s five year forecast cycle, combined with a reduction in latest forecasts of current year sales compared with the current year budget,
is generally considered an indicator of market related impairment and results in the performance of detailed impairment tests. Syngenta also
performs detailed impairment tests when there are asset specific indicators of impairment such as withdrawal of or restrictions placed upon
25
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
product registrations, plans to divest products or, for property, plant and equipment, plans to restructure or close a site. Higher discount rates are
used to test property, plant and equipment for impairment in the case of restructuring because of the higher risk associated with remaining cash
flows when operations are being physically relocated. The value in use calculation takes account of cash flows from the remaining period
of operations and includes decommissioning costs.
If a CGU becomes impaired, the impairment loss is allocated first to any goodwill in the CGU, and then to reduce the CGU’s other assets pro rata.
Critical accounting estimates
Acquisition accounting
Applying the acquisition method of accounting requires significant management judgment to estimate the fair values and useful lives of the
acquired assets, in particular intangible assets such as intellectual property (IP) related to currently marketed products and in-process research
and development (IPR&D). In 2018, Syngenta recognized new intangible assets, excluding goodwill, of $737 million (2017: $nil) resulting from
acquisitions, principally the Nidera Seeds acquisition. These acquisitions and the fair values recognized for the acquired intangible assets are set
out in Note 3. Key valuation assumptions include market size and share, sales pricing trends and competitors’ reaction, cost and efficiency of the
production process for the products; and the period over which the products are likely to generate economic benefits. Forecast cash flows for each
asset are discounted using a rate developed from the estimated Weighted Average Cost of Capital (WACC) of the acquired company. Where
Syngenta considers the risks applicable to an asset are not fully reflected in the forecast data available, it incorporates a risk premium into the
discount rate. If actual cash flows are materially different from those used in calculating fair values, this may lead to changes in amortization
expense or asset specific impairment losses in future periods.
For Nidera Seeds, from the February 6, 2018 acquisition date onwards, Syngenta has charged to the consolidated income statement amortization
of acquired intangible assets based on estimated useful lives of 18 to 20 years on a straight-line basis, consistent with its cash flow forecasts for
these assets, its accounting policy and the useful lives for other Syngenta intangible assets of a similar nature. Had useful lives of 15 years been
applied instead for acquired Nidera intangible assets, annualized amortization expense would have increased by approximately $10 million. Fair
value measurements of identifiable intangible assets are based on the forecast cash flows which Syngenta believes a typical potential buyer would
use to value the assets, excluding Syngenta specific synergy benefits which consequently increase the amount of goodwill recognized on
acquisition. Syngenta includes forecast cost synergies from integrating the acquired entity in the fair value measurements of the assets, as a
typical buyer would generally be able to realize these synergies. Significant judgment is required to determine which revenue synergies are
relevant to the valuation of each asset, which of these are Syngenta specific and which could be also realized by a typical buyer. Many of
Syngenta’s forecast synergies for the Nidera Seeds acquisition relate to expected new product introductions from breeding Syngenta’s proprietary
traits into Nidera’s seed germplasm portfolio. In the opinion of Syngenta, trait technology and germplasm technology are separate and, as Nidera
Seeds had no significant rights to Syngenta traits at the acquisition date, Syngenta has excluded trait related synergies from the valuation of
Nidera’s IP for current products and its IPR&D. In deciding to what extent to include revenue synergies in the fair value of Nidera’s brand name
and customer relationships, Syngenta has reflected its belief that a minority of potential buyers would be able to realize lower synergies than
Syngenta’s forecasts, and that the majority of buyers would not be able to realize any synergies. If Syngenta had considered that all its forecast
synergies could also be realized by typical buyers, the fair value of intangible assets and deferred tax liabilities recognized would have been
approximately $400 million and $120 million higher respectively, goodwill on acquisition would have been $280 million lower, and 2018
amortization expense would have been approximately $20 million higher, than the amounts actually recognized.
Adjustments to revenue and trade receivables
Syngenta’s products are consumed mainly by growers, but Syngenta invoices the majority of its sales to distributors. The timing and amount of
cash inflows received by growers is impacted by a broad range of economic and political risks, including crop yields and prices, the availability of
credit, and the cost of agricultural inputs such as the products sold by Syngenta and its competitors. The cash flows of distributors that supply
Syngenta’s products to growers and represent the majority of Syngenta’s customers are also impacted by these factors. These distributors vary in
size and nature from large publicly owned entities to small or medium sized owner-managed businesses. Syngenta’s customer base reflects the
geographical diversity of its operations, which encompass more than 90 countries and all significant agriculture areas. Considerable management
effort and judgment is applied to actively manage and mitigate the risks to Syngenta from these factors and to determine the accounting estimates
associated with them, which are set out below:
the estimated cost of incentive programs that provide rebates and discounts is dependent upon achievement of sales targets, as well as
cash discounts for punctual payment of accounts receivable. Syngenta records the estimated cost of these programs when the related
sales are made, based on the programs’ terms, market conditions and historical experience. At December 31, 2018, trade accounts
payable include $1,597 million (2017: $1,360 million) of accruals for customer rebates and incentive programs.
commercial terms in certain markets also provide a right of return, subject to eligibility restrictions by product and either an annual cap
equal to a percentage of sales in the immediately prior year, or a return period typically extending up to the end of the agricultural season in
which the product was originally sold, which can be 9 months. Accruals for estimated product returns are based on contractual sales terms
and on historical experience of actual returns where Syngenta considers these to be reliable estimates of future returns. At December 31,
2018, trade accounts payable includes $255 million (2017: $284 million) of accruals for sales returns. Actual returns can vary significantly
from estimates in market segments where the distribution channel holds several months’ sales of Syngenta products at the reporting date,
forecast consumption of those products by growers could be materially affected if market or weather conditions after the reporting date
were significantly different from those expected and the volume of products returned by distributors varies with changes in grower
consumption. This is especially relevant to Brazil and certain other markets in the southern hemisphere given the Group’s financial
reporting year-end falls in the middle of the peak demand season for the Group’s crop protection products. Actual sales returns in 2017 in
Brazil of crop protection products Syngenta sold during 2016 were $201 million, representing 12% of relevant sales. This exceeded the
$87 million provided at December 31, 2016, mainly due to two reasons: firstly, high inventories arose in the distribution channel in southern
Brazil from continuing lower levels of pest pressure and crop prices than in prior years. A significant proportion of 2017 returns resulted
from Syngenta working with customers to manage their inventory levels and accounts receivable. This significantly reduced receivable
26
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
balances through increased collections as well as credits for returned products. Secondly, Syngenta repositioned its key fungicide ElatusTM
to ensure growers receive maximum benefit from using the product as the Brazilian crop protection industry addresses performance
issues growers have experienced from applying carboxamide fungicides. Returns of ElatusTM in 2017 were $50 million. Actual sales
returns in 2018 in Brazil of crop protection products Syngenta sold during 2017 were $137 million, representing 11 percent of relevant
sales. This is less than the $171 million provided at December 31, 2017. In accordance with IFRS 15, sales subject to returns are
recognized only to the extent that it is highly probable that a significant reversal in the amount of revenue recognized will not occur when
the uncertainty associated with the amount of returns is subsequently resolved. Syngenta expects significantly lower levels of sales returns
in 2019 compared to 2018 for the following reasons:
o Syngenta believes that channel inventories of crop protection products are lower than at the end of 2017.
o
consumption of crop protection products in the 2018/19 agricultural season is expected to be higher than in 2017/18 by a high
single digit percentage, driven by growth in the cotton area planted and in the sugar cane market, increased use of herbicides
due to the spread of weed resistance, and adoption of premium fungicide products by growers.
The effect of these positive factors is expected to be partly offset by the impact of adverse weather patterns in Southern Brazil. At
December 31, 2018, Syngenta has recorded a $110 million allowance for sales returns of crop protection products in Brazil, representing 7
percent of relevant sales in 2018.
allowances for doubtful receivables, which are estimated by critically analyzing individual receivable account balances, taking into account
historical levels of recovery and the value of any security held or agreed barter programs which mitigate credit exposure, the economic
condition of individual customers, and the overall economic and political environment in relevant countries. As shown in Note 9, the
provision for doubtful receivables at December 31, 2018 amounted to $375 million, or 8 percent (2017: $448 million or 10 percent) of total
trade receivables, of which $98 million and $60 million (2017: $230 million and $52 million) related respectively to sales made to the
Brazilian and Venezuelan markets. In Brazil in 2017, Syngenta increased the allowance because lower crop prices and high inventory
levels resulted in several customers experiencing payment difficulties. In Venezuela the collection shortfall is due to constraints on
availability of credit and foreign currency at both customer and country level. In 2018, Syngenta reported $33 million bad debt expense
(2017: $69 million). The main reason for the reduced expense was successful recovery of certain overdue receivables in Brazil and
release of the related allowances made at December 31, 2017.
Syngenta records these estimates as separate allowances, but its estimation process recognizes their interdependency, as the level of credits to
accounts receivable for discounts and product returns may affect the probability of receiving full payment of the net receivable balances.
Deferred tax assets
At December 31, 2018, Syngenta’s deferred tax assets are $1,099 million (2017: $1,099 million), as further analyzed in Note 7. Included in this
balance are deferred tax assets for unused tax losses and tax credits of $101 million (2017: $31 million), of which $88 million (2017: $13 million)
relates to tax losses. 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. The tax effect of unused tax losses is recognized
as a deferred tax asset when it becomes probable that the tax losses will be utilized. In making assessments regarding deferred tax assets,
management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies. At December
31, 2018, based upon the level of historical taxable income and projections for future taxable income over the periods in which deferred tax assets
are deductible, management believes that it is more likely than not that Syngenta will realize the benefits of these deductible differences.
The amount of deferred tax assets considered realizable could however be reduced in subsequent years if estimates of future taxable income
during their carry forward periods are reduced, or rulings by the tax authorities are unfavorable. Estimates are therefore subject to change due to
both market related and government related uncertainties, as well as Syngenta’s own future decisions on restructuring and other matters.
Syngenta is unable to accurately quantify the future adjustments to deferred income tax expense that may occur as a result of these uncertainties.
The principal jurisdictions where deferred tax assets have not been recognized at December 31, 2018 are Brazil, the USA and Argentina (2017:
Brazil and Belgium). At December 31, 2018, Syngenta has recognized $87 million (2017: $131 million) of net deferred tax assets in Brazil and has
not recognized $77 million (2017: $73 million) of deferred tax assets. Restriction of the amount recognized increased 2018 deferred income tax
expense by $4 million (2017: $49 million). Syngenta has assumed local profitability in 2019 and future years similar to the historical average. In
making this assessment, the forecast horizon used for taxable profits is 5 years. Taxable profits that may arise beyond the 5 year horizon are
subject to greater uncertainty and have not been considered.
Interpretation of the US tax law enacted in December 2017 indicates that stricter criteria limiting interest deductions will apply. At December 31,
2018, Syngenta has recognized $170 million (2017: $110 million) of net deferred tax assets in the USA, and has not recognized $48 million (2017:
$nil) of deferred tax assets relating to a $190 million temporary difference for interest carryforwards. Syngenta has performed an analysis in order
to determine the amount of deferred tax asset it should recognize, assuming that the level of debt financing of Syngenta’s US subsidiaries will
remain stable. In 2017, Syngenta had remeasured its US deferred tax assets to take account of the tax reforms. That remeasurement increased
Syngenta’s 2017 deferred tax expense by $96 million.
At December 31, 2018, Syngenta has recognized $78 million (2017: $33 million) of net deferred tax assets in Argentina, and has not recognized
$16 million (2017: $nil) of deferred tax assets. The tax law enacted in December 2018 restricts deduction of financial expenses and limits
carryforward to 5 years. There is now uncertainty as to whether Syngenta will be able to recover deductions carried forward. A further extension of
this rule is that foreign exchange losses arising on loans in foreign currencies are also subject to the limitation.
Uncertain tax positions
Syngenta estimates and accrues taxes that will ultimately be payable when reviews or audits by tax authorities of tax returns are completed. These
estimates 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 expected to be taken by each tax authority. Actual outcomes and settlements may differ significantly from
27
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
the estimates recorded in these consolidated financial statements. This may affect income tax expense reported in future years’ consolidated
income statements.
Syngenta has a global supply chain, and intellectual property rights owned by Syngenta are used internationally within the Group. Transfer prices
for the delivery of goods and charges for the provision of services, which include contract research and development, contract manufacturing and
internal financing arrangements, by one Syngenta subsidiary to another may be subject to challenge by the national tax authorities in any of the
jurisdictions in which Syngenta operates. Syngenta has a global transfer pricing policy in place and applies, to the maximum extent possible, a
consistent methodology on a global basis. Transfer pricing determination in general, and the benchmarking process in particular, involve significant
judgment and therefore a certain level of uncertainty remains as to whether tax authorities will challenge the pricing applied in the light of the new,
complex transfer pricing guidelines in connection with the Base Erosion and Profit Shifting (BEPS) initiative.
At December 31, 2018, Syngenta’s balance sheet includes assets of $145 million (2017: $168 million), and liabilities of $539 million (2017: $474
million), for current income taxes. These liabilities include $410 million in respect of the uncertain tax positions described above (2017: $413
million).
Releases of uncertain tax liabilities during 2018 and 2017 related to changes in tax legislation, closure of previously open tax computations through
expiry and settlement of tax audits. The liability for uncertain income tax positions that Syngenta expects will be resolved in 2019 is approximately
9 percent of total recognized current income tax liabilities.
Significant management judgment has been required to estimate the income tax benefits associated with the $1,100 million (2017: $1,500 million)
Viptera litigation provision described in Note 20 because the Syngenta entities named as parties to the litigation are incorporated in different tax
jurisdictions. Syngenta’s estimates at December 31, 2018 and 2017 assume that all the provision will be deductible for income taxes but that
deductions will be claimed in more than one jurisdiction. Syngenta estimated the benefit using an average of the tax rates of the relevant
jurisdictions. The ultimate benefit realized may be different from this estimate and this difference may have a material effect on Syngenta’s income
tax expense for 2019 and/or future periods.
In Brazil, Syngenta received adverse rulings at administrative court level in transfer pricing disputes for fiscal years 2003 and 2011, and has filed
appeals at civil court level. Additionally, Syngenta has appealed at administrative level against a transfer pricing assessment for fiscal year 2013.
Syngenta believes these appeals will succeed and has recognized no liability for the estimated aggregate $104 million (2017: $93 million)
contingent liabilities in these disputes.
Seeds inventory valuation and allowances
Inventories of $4,292 million (2017: $4,174 million) reported in Note 11 include $1,221 million (2017: $1,123 million) of seeds, which are subject to
the risk of loss through physical deterioration at all stages of the operating cycle. Syngenta accounts for normal losses that occur during
production, both in the pre-harvest growing and the post-harvest processing stages, as part of the cost of inventories of in-process and finished
seeds. Normal losses in production, which include the cost of seeds discarded before processing because they do not meet Syngenta’s quality
standards, are therefore expensed when the related finished seed is sold to customers. Losses of finished seeds are expensed as incurred.
Syngenta records allowances against the cost of seeds inventories for both quality and obsolescence. Syngenta records allowances for quality for
finished seed which is currently of defective quality and for finished seed which is expected to deteriorate physically before sale, based on past
experience. Syngenta records allowances for obsolescence for excess seed for which there is insufficient forecast customer demand over the
expected remaining commercial life of each seed variety. For excess seeds that Syngenta is likely to be able to sell in the commodity market, the
allowance is the cost of the seed minus its net realizable value, which is estimated as the expected net proceeds of commodity sale. If commodity
sale is not probable, the allowance is the full cost of the excess seed inventories.
To determine the allowances required, management effort and judgment is applied to analyze at crop, variety and batch level seed inventory
quantity, quality and forecast sales data, developing commercial practices, available markets and the speed of expected product portfolio changes.
The rapidly evolving combination of corn seed genetics and trait stacks in North America and Latin America result in shorter commercial lives of a
typical hybrid seed variety than in other crops and regions, with variation between actual and previously forecast sales and consequent greater risk
of excess seed at individual hybrid level. Excess seed quantities are also affected by harvest yield, which is influenced by unpredictable weather
and growing conditions. Seeds inventory allowance expense for 2018 was $174 million, with increased soybean seeds provision expense driven
by lower commodity prices (2017: $179 million, which included $29 million directly related to divestment of the sugar beet seeds business), and the
allowance balance at December 31, 2018 was $233 million (2017: $240 million), with lower provisions required in vegetables seeds and EAME.
Impairment review
At December 31, 2018, Syngenta has reported intangible assets of $2,260 million (2017: $1,659 million) for goodwill and $1,961 million (2017:
$1,314 million) for intangible assets other than goodwill, as reported in Note 13. The recoverable amount for goodwill has been determined based
on value in use of the relevant operating segment, CGU or group of CGUs to which the goodwill is allocated. The recoverable amounts of all
material intangible assets and property, plant and equipment (PP&E) have also been based on their value in use.
The main assumptions used in determining the recoverable amounts for operating segments and other CGUs include market size and Syngenta’s
market share, future sales prices and volumes, future development expenditures required to maintain products’ marketability and registration in the
relevant jurisdictions, and products’ lives. At operating segment level, the key assumptions related to sales volume and value are expressed
separately for each product line, market segment and crop, and assumptions related to expenses are expressed by region. At CGU level,
assumptions are expressed by product. The assumptions are reviewed annually as part of management’s budgeting and strategic planning
cycles. These assumptions can be subject to significant adjustment from such factors as changes in crop growing patterns in major markets (for
example, as a result of movements in crop prices), changes in product registration, or pressure from competitor products. Estimated cash flows for
operating segments and other CGUs are based on Syngenta management forecasts, cover a five year horizon except where a longer horizon is
required to reflect cash flows from the development and introduction of new products due to the length of the product development cycle, and
include a terminal value which assumes a 2.0 percent long-term growth rate (2017: 2.0 percent). Syngenta’s forecasts for the North America corn
and soybean seed CGU also include the following key assumptions for revenue from seed sales:
28
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
for each of the two crops, market size expressed as acres planted, Syngenta’s market share, crop commodity prices, and licensing
revenues;
for new genetic traits, the timing of regulatory approval and marketing launch, and seed pricing compared with existing products.
Management believes, based on recent and expected future growth in agricultural markets, that there are long-term prospects for continued
growth in Syngenta’s business.
The key inputs used to calculate the pre-tax discount rates used to discount the estimated future cash flows included in the value in use
calculations are as follows:
post-tax weighted average cost of capital: 7.2 percent (2017: 7.0 percent)
risk-free rate: 3.2 percent (2017: 2.9 percent) equal to market yields on 30-year government bonds at the date of performing the annual
impairment test
equity risk premium 5.0 percent (2017: 5.0 percent).
The discount rate determined in this way is considered to include market estimates of industry sector risk premium. Syngenta’s CGUs generally
reflect the global nature of its Crop Protection and Seeds product sales, and a country risk premium is applied only to those CGUs where the
geographical scope of operations and cash flows is limited. The pre-tax discount rates used for all segments, CGUs and groups of CGUs ranged
from 7.9 percent to 14.9 percent (2017: 7.8 percent to 11.4 percent).
At December 31, 2018 and 2017, the largest amounts of goodwill were allocated to the Asia Pacific operating segment (2018: $326 million; 2017:
$343 million), the North America corn and soybean CGU (2018: $318 million; 2017: $315 million) and the Rest of World (excluding North America)
corn and soybean CGU (2018: $571 million including Nidera Seeds which was acquired during the year; 2017: $35 million). The pre-tax discount
rate used for goodwill impairment testing was 8.4 percent (2017: 9.3 percent) for Asia Pacific, 8.5 percent (2017: 8.1 percent) for the North
America corn and soybean CGU and 8.6 percent (2017: 8.2 percent) for the Rest of World corn and soybean CGU. The forecast terminal growth
rate was 2.0 percent (2017: 2.0 percent) for all three CGUs.
For the North America corn and soybean CGU, recoverable amount exceeds carrying amount by $823 million at the 8.5 percent discount rate
used, and is approximately equal to carrying amount at a 12.5 percent discount rate. In the opinion of Syngenta, the outcomes of the impairment
tests are not sensitive to reasonably likely changes in any of the assumptions underlying the cash flow projections used for the impairment tests or
in the discount rate in the periods presented for any other segment, CGU or group of CGUs for which the carrying amount of goodwill is significant.
For the year ended December 31, 2018, impairment losses for intangible assets were $77 million (2017: $5 million) relating mainly to a seeds crop
CGU where further development of certain technologies held by Syngenta is not considered cost effective and activities have been suspended. At
December 31, 2018, the recoverable amount of this CGU was $56 million and its carrying amount included non-current assets of $39 million.
Environmental provisions
At December 31, 2018, Syngenta reported in Note 20 provisions for environmental remediation of $176 million (2017: $186 million). Remediation
of environmental damage at sites with which Syngenta is associated typically takes a long time to complete due to the substantial amount of
planning and regulatory approvals normally required before remediation activities can begin. The assumptions used by Syngenta to estimate its
environmental provisions may change significantly before or during the remediation period due to changes in the extent of remediation required or
the method used to remediate the damage. In addition, increases in or releases of environmental provisions may be necessary whenever new
developments occur or additional information becomes available. The major uncertainties that impact the outcome of remediation are:
the extent of the contaminated land area, which is not always limited to land occupied by the Syngenta site. Ongoing monitoring or
remediation work may identify changes in the area believed to be contaminated.
the nature of the work Syngenta will be obliged to perform or pay for. This depends upon the current or proposed use of contaminated
land, substantively enacted legislation, and land zoning by and negotiation with the relevant regulatory authorities. In Switzerland,
proposed remediation plans at certain sites may be subject to public referenda.
sharing of costs with other past and present occupiers of Syngenta’s sites. At certain shared sites, Syngenta is responsible for an agreed
proportion of remediation costs, which may change following discussions with authorities and the affected third parties. At other sites, third
parties have agreed to reimburse Syngenta for some or all of the costs it incurs.
Consequently, environmental provisions can change significantly. Because of the inherent uncertainties in estimating such long-term future
obligations, Syngenta periodically supplements its internal expertise with external expertise when determining environmental provisions.
In 2018 and 2017, except for $12 million (2017: $11 million) of cash outflows reflecting remediation activity, there were no significant changes to
environmental provisions.
Proposals have been made suggesting remediation of the existing contamination on certain shared sites in preference to monitoring and
containment. Syngenta will negotiate the proposals with the relevant authorities but the final adopted solution is subject to regulatory uncertainty
and the ultimate liability may be higher or lower than the amount provided. Taken together, the provisions at December 31, 2018, for these shared
sites comprise approximately 25 percent of total environmental provisions. The top ten exposures at the end of 2018 comprise approximately
78 percent of the total environmental provisions. In the opinion of management, reasonably possible increases in the provisions related to these
top 10 exposures would not exceed 85 percent of the total environmental provision recognized at December 31, 2018.
At Syngenta’s Monthey, Switzerland, production site, the majority of the work currently needed to remediate groundwater and soil contamination at
the site has been carried out. Future expenditure will be related to the ongoing remediation of contamination hot spots and the groundwater
treatment programs. The responsibility for these activities lies with Syngenta and one other chemical enterprise. In management’s opinion, based
on its current knowledge, Syngenta’s environmental provisions are adequate to cover Syngenta’s share of the expected costs to perform this
29
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
remediation and no significant change to the provision has been made in 2018 or 2017. However, the final extent of the remediation work required,
the cost estimates and their allocation continue to be subject to uncertainty.
Defined benefit post-employment benefits
At December 31, 2018, Syngenta has reported other non-current assets of $nil (2017: $13 million) and provisions of $421 million (2017:
$577 million) as net defined benefit (DB) pension assets and liabilities, respectively, as set out in Note 22. These amounts may change
significantly from one accounting period end to another due not only to expense recognized in profit and loss and cash payments, but also to
changes in the actuarial assumptions used to measure the defined benefit obligation (DBO) and to variances between those assumptions and
actual outcomes (“experience variances”), both of which are recognized in OCI. Significant judgment is required when selecting key assumptions
for measuring post-employment benefit expense for a period and the DBO at the period end for each defined benefit plan. The specific
assumptions used and experience variances are disclosed in Note 22. These variances were caused principally by external financial market
movements in corporate bond yields used to benchmark the discount rate, and in asset prices affecting the actual return on assets. These factors
are outside Syngenta’s direct control, and it is reasonably possible that future variances will be at least as great as past variances.
At December 31, 2018 and 2017, for each of Syngenta’s three largest defined benefit pension plans, the sensitivity of the DBO to a change in
each significant actuarial assumption is as follows:
($m)
2018
2017
Increase (decrease) in DBO
Discount rate – 25 basis point decrease in rate
Discount rate – 25 basis point increase in rate
Pension increase – 25 basis point increase in rate
Pension increase – 25 basis point decrease in rate
Interest credit rate – 25 basis point increase in rate
Interest credit rate – 25 basis point decrease in rate
Life expectancy1
1 The life expectancy sensitivity is calculated using the difference between the reported DBO amount and the DBO amount projected using a one year increase, compared with the
Switzerland
96
(90)
n/a
n/a
17
( 16 )
63
Switzerland
103
(96)
n/a
n/a
19
(19)
64
UK
143
(139)
127
(124)
n/a
n/a
134
UK
106
(103)
94
( 92)
n/a
n/a
107
USA
23
(22)
n/a
n/a
n/a
n/a
8
USA
26
(26)
n/a
n/a
n/a
n/a
10
assumptions actually used, in the life expectancy for each plan member. This alternative projection is calculated using mortality rates that produce an immediate increase of one year
for a plan member at normal retirement date, with corresponding changes at other ages.
Each sensitivity amount is calculated assuming that all other assumptions are held constant. It should be noted that economic factors and
conditions often affect multiple assumptions simultaneously. For the UK pension plan, the discount rate and pension increase sensitivities shown
are relative to price inflation, because limited price indexation of pensions in payment and deferred pension rights is required both by the Syngenta
UK pension plan rules and by UK statutory pension regulations. For Syngenta’s Swiss and US plans, the sensitivities are for changes in the
nominal discount rates, because the rules and statutory regulations applicable to those plans contain no inflation linkage and indexation of benefits
to inflation is not general market practice in those countries. Syngenta is not able to predict the extent of likely future changes in the discount rate or
life expectancy assumptions, but based on past experience, the discount rate for each plan could change by up to 150 basis points (bp) within a
twelve month period. Pensionable pay is now permanently frozen for the UK DB pension plan as explained below, and the sensitivity of the DBO
to the assumed rate of increase in pensionable pay is not material for the Swiss or US plans.
To select the discount rate, Syngenta uses yields of AA rated corporate bonds. The relevant yield is determined either by analyzing a population of
bonds whose cash flows collectively approximate the estimated cash flow profile of benefit payments by a Syngenta plan (UK and USA), or by
using the yield of a published bond index and adjusting it in line with the relevant market yield curve to the extent that the average maturity of the
bonds in the index is different from that of the relevant Syngenta benefits (Switzerland). In 2018, Syngenta excluded government bonds from the
bond population used to estimate its UK discount rate. The effect of this change in estimate was to increase the discount rate by approximately 15
bp. Nominal discount rates at December 31, 2018 are as follows:
Switzerland 0.75 percent (2017: 0.65 percent)
2.80 percent (2017: 2.38 percent)
UK
4.25 percent (2017: 3.60 percent)
USA
In valuing the UK DBO at December 31, 2018, the UK long-term rate of retail price inflation (RPI) is assumed to be 3.23 percent (2017: 3.19
percent). Future statutory pension increases are based on consumer price inflation (CPI). Most Syngenta UK pension plan members have benefits
specifically linked to RPI in accordance with the plan rules, but some members will see increases linked to CPI. CPI is assumed to be 100 basis
points (2017: 100 basis points) below RPI.
Over the last 20 years, life expectancy estimates steadily increased in all major countries in which Syngenta sponsors pension plans, although
available data for the UK and USA for the two most recent years indicates a slowing of the rate of increase compared to previous projections, and
Syngenta’s projections of future life expectancy improvement have reduced accordingly. Syngenta sets mortality assumptions after considering
the most recent statistics practicable. Syngenta uses generational mortality tables to estimate probable future mortality improvements. These
tables assume that the trend of increasing life expectancy will continue, resulting in pension benefit payments to younger members being likely to
be paid for longer time periods than older members’ pensions, given that assumed retirement ages are those defined in the rules of each plan. At
December 31, 2018, the UK DBO was estimated using mortality rates based on the UK Institute and Faculty of Actuaries’ CMI SAPS Pensioner
Amounts Light Tables with 1.75 percent per annum long term trend from 2008-2018 (2017: CMI SAPS Pensioner Amounts Light tables reflecting
long cohort improvements from 2002-2012), with assumed future improvement of 1.25 percent (2017: 1.25 percent) per annum in line with the
CMI Core Projections model 2017 (2017: CMI Core Projections model 2016). Mortality assumptions were updated in 2018 following the most
recent triennial valuation for UK statutory purposes at March 31, 2018, reducing the DBO by $54 million (2.2 percent) Syngenta’s use of updated
30
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
future improvement projections in 2017 reduced the DBO in that year by $51 million. The next statutory valuation of the plan will be performed at
the latest at March 31, 2021.
At December 31, 2018 and 2017 Syngenta valued the benefit obligation for its Swiss pension plan using mortality, disability and employee
turnover assumptions from the BVG 2015 generational table. When Syngenta began to apply that table in 2016, the Swiss DBO increased by
$75 million (3.4 percent). At December 31, 2018, Syngenta valued the benefit obligation for its US pension plan using mortality assumptions from
the RP-2017 generational mortality table together with Scale MP-2017 mortality improvements starting with base year 2017 (2017: base year
2006). This resulted in no material change in the benefit obligation compared to the assumptions previously used.
Syngenta’s major pension plans give members lump sum or annuity benefit payment options. Syngenta values its pension liabilities on the
assumption that the choices made by members who will retire in the future will be consistent with choices made by members who have retired
recently.
In 2014, Syngenta amended the benefits of the UK plan so that pensionable pay will remain frozen at January 1, 2016 levels. The plan remains
open to benefit accrual for existing members, and pay increases awarded after January 1, 2016, which are not part of defined benefit pensionable
pay, are pensionable under the Syngenta Group Personal Pension (GPP), a separate defined contribution plan, for those who choose to join.
Employees who choose to leave the defined benefit section of the UK pension plan are able to join the GPP. From 2014 up to and including 2017,
Syngenta assumed that 10 per cent of members would opt-out from the DB section of the plan in future due to the pensionable pay freeze. In
2018, because of the time that has elapsed since the plan amendment, Syngenta no longer considers such an assumption to be necessary,
Recent regulatory changes allow members aged at least 55 to transfer their benefits out of the plan into arrangements which allow flexible cash
withdrawals, in contrast to the previous requirement that members take at least 75% of their benefit in annuity form. Market conditions in 2018 and
2017 resulted in transfer values favorable to members. These factors resulted in $203 million (2017: $261 million) of benefit payments out of the
UK plan as certain members withdrew all their benefits. Syngenta has not made any allowance for future transfers out in connection with the
regulatory changes. Available data indicates that if transfers were to continue at the current rate until the next statutory valuation, this would not
cause Syngenta to recognize a material actuarial gain or loss in its consolidated financial statements.
Certain UK pension plans, including the Syngenta UK plan, were required by legislation in force between 1978 and 1997 to accrue part of their
members’ pension (“GMP”) in a way that gave rise to inequalities between men and women, but also had a formula independent of GMP for the
total pension, resulting in the non-GMP part of total pension also being unequal. The European Court of Justice in Barber v Guardian Royal
Exchange Assurance Group [1991] ruled that pensions earned from that point onwards must treat men and women equally. However, given GMP
benefits were unequal but were prescribed in legislation, it was unclear what would need to be equalized or how. This remained the case until the
October 2018 UK High Court decision in Lloyds Trustees vs Lloyds Bank PLC and Others (the Lloyds case), which confirmed that pension plans
are required to equalize the non-GMP part of members’ benefits earned between 1990 and 1997, when legislation changed so that GMPs ceased
to accrue. The Lloyds case decision also indicated that the employers could require the plan trustees to choose a particular approach to
equalization, “Method C2”, which requires comparison of the pension payable to each member with the pension that would be payable to a
notional member identical to the member in all respects except gender, and retrospective payment of accumulated pension equal to the higher of
the unequalized male or female benefit, together with interest on the underpaid amount. Syngenta has increased the UK DBO in 2018 by $22
million to reflect the effect of applying Method C2 as set out in the Lloyds case decision using estimates based on current aggregate member data,
accounting for this as an actuarial loss. This estimate is subject to significant uncertainty because certain points remain to be clarified following the
court judgment, detailed calculations by member are not yet available and the actual effect of equalizing benefits may differ.
IFRSs require Syngenta to estimate the economic benefit it can obtain from the amount by which the fair value of assets held in a DB plan
exceeds the DBO measured in accordance with IAS 19 (“surplus”), and recognize a reduction in the net DB asset to the extent that the future
economic benefit is lower than the actual surplus at the reporting date, or an increase in the net DB liability if the future economic benefit is lower
than the projected future surplus that would arise when Syngenta meets an existing minimum funding obligation. Accounting recognition of a
surplus in Syngenta’s UK defined benefit pension plan is supported by the economic benefit of future contribution savings and, when that benefit is
less than the surplus, also by the future refund, net of applicable taxes, which will be unconditionally available to Syngenta when all liabilities have
been settled. At December 31, 2018, Syngenta recognized $72 million (2017: $20 million) additional liability, mainly because the projected surplus
increased due to lower discount rate and mortality rate assumptions (2017: due to the 2017 funding agreement between Syngenta and the plan
Trustee described in detail in Note 22 below). This additional liability represents taxes Syngenta would suffer on the portion of the projected surplus
supported by Syngenta’s refund rights. In 2017, Syngenta’s main US pension plan was amended to freeze benefit accrual for existing members as
from December 31, 2018, as further described in Note 22 below. At December 31, 2018, Syngenta has recognized $nil ($12 million) of the $5
million (2017: $26 million) surplus as an asset, because without future service cost there is no economic benefit from future contribution savings,
and US pension regulations do not permit a refund. At December 31, 2018 and 2017, there was no surplus in Syngenta’s Swiss pension plan.
Litigation provisions
Syngenta’s accounting estimates related to provisions for litigation are disclosed in Note 20.
3. Acquisitions, divestments and other significant transactions
The following significant transactions occurred during 2018 and 2017.
2018
Acquisition of Nidera Seeds
On February 6, 2018, Syngenta completed the acquisition of the global seeds business of Nidera from Nidera B.V., a subsidiary of COFCO
International Ltd., by acquiring 100% of the issued shares of Nidera Seeds Holding B.V.. The acquisition of Nidera Seeds will strengthen
Syngenta’s position in the Latin American seeds market and create value by leveraging Nidera’s corn and soybean seed germplasm, strong
research and development pipeline and broad footprint in Latin America.
31
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
Other acquisitions
On February 1, 2018, Syngenta acquired 100% of the stock of FarmShots, Inc., a US-based innovator of high-resolution satellite imagery that,
inter alia, detects plant health by analyzing absorbed light from field images. This platform with proprietary processing and multiple plant health
index capabilities provides actionable insights normally acquired by walking through a farm and visually inspecting plants. It enables growers to
reduce field scouting by as much as 90 percent and helps them focus on areas of need. The acquisition will enhance Syngenta’s offer to growers.
On March 30, 2018, Syngenta purchased the business of Abbott & Cobb, a US-based privately owned global breeder and seller of proprietary
hybrid vegetable seeds. The acquisition will strengthen Syngenta’s sweet corn vegetable seeds business.
On April 30, 2018, Syngenta purchased 100% of the quotas of Strider Desenvolvimento de Software Ltda (“Strider”), a company incorporated in
Brazil. Strider is an important participant in the Latin American digital agriculture market. Strider develops and markets technological tools and
digital farm management solutions. The acquisition will enhance Syngenta’s digital agriculture capability, and hence its offer to growers, in Latin
America and globally.
On July 26, 2018 Syngenta acquired 100% of the shares of Icepage Limited, the holding company of Floranova, a respected UK based flower and
home garden vegetable seeds breeder. The acquisition covers some important gaps in Syngenta’s portfolio of flower seeds crops and enhances
its flower business in fast growing Asian markets.
The assets, liabilities and acquisition-date fair value of consideration currently recognized for all 2018 business combinations are as follows:
($m)
Cash and cash equivalents
Inventories
Trade receivables and other current assets
Property, plant and equipment
Intangible assets
Deferred tax and other non-current assets
Trade and other liabilities
Deferred tax liabilities
Net assets acquired
Purchase price
Goodwill
Nidera
Other
Total
23
97
240
79
710
6
(74)
(197)
884
1,473
589
1
10
5
5
27
2
(3)
(5)
42
85
43
24
107
247
84
737
6
(77)
(202)
926
1,558
632
The purchase price of other acquisitions includes $9 million of contingent and deferred consideration. Transaction costs related to all the above
acquisitions were $6 million. Syngenta currently does not expect to be able to claim significant tax deductions in respect of the above goodwill.
Cash flow from these acquisitions was as follows:
($m)
Total cash paid
Net cash acquired
Net cash outflow
Nidera
(1,473)
23
(1,450)
Other
(76)
1
(75)
Total
(1,549)
24
(1,525)
As noted below, a deposit of $150 million was paid into escrow in 2017 for the acquisition of Nidera Seeds.
For the Nidera acquisition, amounts included in the 2018 consolidated income statement were sales of $315 million and net loss of $58 million.
The net loss includes both the purchase accounting impacts of $30 million for releases of inventory step up and $19 million of amortization of
intangible assets and the provision for indirect tax exposures of $24 million described in Note 6. The amounts that would be included in a 2018
consolidated income statement on a proforma basis, as though the acquisition had occurred on January 1, 2018 are sales of $326 million and net
loss of $80 million. The gross contractual amounts of acquired receivables were $203 million and the estimate of uncollectible amounts was $17
million. For the other acquisitions the amounts are immaterial.
Divestment of remedy assets
On October 24, 2017, Syngenta announced that Adama Agricultural Solutions Ltd ("Adama") and Syngenta had entered into binding agreements
with Nufarm Limited (“Nufarm”) to sell a portfolio of crop protection product rights for a total agreed transaction value of $490 million, of which $95
million related to Syngenta product rights. Syngenta, Adama and Nufarm completed these transactions on March 16, 2018. The combined
portfolio of products divested includes off-patent crop protection formulations in the herbicides, fungicides, insecticides and other categories in the
European Economic Area (EEA), and related inventories. No other physical assets or personnel were transferred by Syngenta as part of the
transaction. The transaction was carried out in accordance with the commitments given to the European Commission relating to ChemChina’s
acquisition of Syngenta.
In connection with this transaction, Syngenta agreed to divest and license to Adama certain of its crop protection products, and Adama agreed to
grant Syngenta distribution rights to certain of its crop protection products in EAME. The parties also entered into necessary transitional supply
agreements. In relation to all the transactions mentioned above, Adama agreed to transfer to Syngenta the cash consideration, net of taxes and
transaction costs, which it received for the divestment of its crop protection products, amounting to $313 million, together with the distribution rights
to Adama products mentioned above, the fair value of which Syngenta has estimated at $26 million.
32
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
The $365 million gain recognized by Syngenta on the above transactions is reported within Divestment gains in the consolidated income
statement.
Sale and leaseback of Syngenta headquarters
On December 31, 2018, Syngenta completed a sale and leaseback transaction for two buildings at its Basel headquarters site, recognizing a $69
million gain on disposal within Divestment gains in the consolidated income statement. Syngenta has classified the leases as operating leases in
accordance with IAS 17.
2017
Public tender offer for Syngenta AG shares by CNAC Saturn (NL) B.V. (“the Offeror”)
Syngenta AG registered shares and ADSs
As of March 23, 2016, CNAC Saturn (NL) B.V. (“the Offeror”), a subsidiary of ChemChina, launched public tender offers in Switzerland and the
United States to acquire all the publicly held registered shares and, in the U.S. offer, also all American Depositary Shares (ADSs) of Syngenta AG
(“the ChemChina Tender Offer”) for $465 per registered share in cash. On May 10, 2017, it was announced that, as of the end of the Main Offer
Period, 76,128,826 Syngenta AG registered shares (including those represented by ADSs), corresponding to 82.23% of the voting rights, had
been tendered in the ChemChina Tender Offer and that the Offer had been successful. On May 31, 2017, it was further announced that, as of the
end of the Additional Acceptance Period, the definitive end result of the ChemChina Tender Offer was that the Offeror’s participation was
87,650,988 Syngenta AG registered shares (including those represented by ADSs), corresponding to 94.68% of the voting rights. On July 13,
2017, following the purchase of additional Syngenta shares, ChemChina announced that its participation in Syngenta AG had exceeded 98
percent of Syngenta's share capital. As a consequence, following filing of a petition by ChemChina, on December 18, 2017, Syngenta announced
that the Appellate Court Basel-City had cancelled all publicly held registered shares of Syngenta AG. Holders of cancelled shares were paid a
cash compensation in the amount of $465 for each cancelled share. Syngenta AG shares were delisted from SIX Swiss Exchange on January 8,
2018, with the last trading day being January 5, 2018. Syngenta ADSs were delisted from the New York Stock Exchange effective on January 18,
2018, with trading of the ADSs suspended prior to the market opening on January 8, 2018.
Special dividend
On May 16, 2017, as a result of the ChemChina Tender Offer being declared successful, Syngenta AG paid a special dividend of $470 million
(CHF 5.00 per share).
Amendments to Syngenta’s Equity Plans
On February 1 and 2, 2016 the Syngenta Board of Directors and the Compensation Committee of the Board of Directors, amended Syngenta’s
Equity Plans for Directors and Employees, respectively. Under the amended terms of the Equity Plans, on the ChemChina Tender Offer being
declared unconditional:
all blocking and holding periods for vested shares held in the plans were waived to enable holders of these shares to tender them into the
ChemChina Tender Offer during the Additional Acceptance Period;
all outstanding share awards and Restricted Share Units were converted into Syngenta shares, deferral and vesting periods were waived,
and matching shares were granted, Performance Share Units vested at target levels of performance and were converted into Syngenta
shares, options vested and their exercise periods lapsed, and performance options vested at target levels of performance and their
exercise periods lapsed. Phantom awards and ADSs have been treated in an analogous way to the above.
On June 7, 2017, Syngenta AG paid $276 million to settle all outstanding awards, other than Syngenta shares to which the Equity Plan
participants had acquired valid title before the ChemChina Tender Offer became unconditional, in cash instead of Syngenta shares. As a result of
these amendments, Syngenta applied cash-settled share based payment accounting for these awards from the date the plans were amended
until the outstanding awards were settled. As a result of this change, $81 million of share based payment expense was recognized in function
expenses according to where the related personnel costs were charged for 2017, in addition to the $14 million charge that would have been made
under equity-settled share based payment accounting for the periods during which the awards were outstanding.
Under cash-settled share based payment accounting, the fair value of the awards is charged to profit or loss and no equity instruments are
assumed to be issued on settlement. Therefore, basic and diluted numbers of shares were the same in respect of cash-settled awards.
Change of Control payments
Changes in the credit rating of Syngenta AG following acquisition by ChemChina required Syngenta Finance N.V. to make an offer to note holders
of three US private placements issued in December 2005, to prepay the notes at par together with interest thereon to the prepayment date
selected by Syngenta. The acceptance deadline for the prepayment offer was July 13, 2017. On July 20, 2017, $147 million of the notes were
repaid to note holders who had accepted the offer. As note holders have no further prepayment rights following expiry of the offer, the amount of
notes that remains outstanding is presented within non-current liabilities in the consolidated balance sheet.
33
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
Acquisitions
On November 6, 2017, Syngenta and COFCO International Ltd. announced that Syngenta had entered into a binding agreement to acquire the
global seeds business of Nidera, from Nidera B.V., a subsidiary of COFCO International Ltd.
In the 2017 consolidated cash flow statement, business acquisitions of $164 million were as follows:
($m)
Escrow deposit for the acquisition of Nidera Seeds
Deferred consideration paid in relation to acquisitions completed in prior periods
Total
2017
(150)
(14)
(164)
Divestment of Sugar Beet seeds business
On September 29, 2017, Syngenta completed the sale of its global Sugar Beet seeds business to DLF Seeds A/S (DLF) for a final cash
consideration of $49 million. The divestment of the Sugar Beet seeds business resulted in $47 million of asset impairment and divestment losses
being incurred.
The net cash received on the divestment is included in Cash flow used for investing activities in the consolidated cash flow statement as follows:
($m)
Gross proceeds
Cash and cash equivalents divested
Net cash flow received from the divestment
49
(18)
31
$14 million cash outflows included in the above net cash flow are reflected within change in net working capital in the consolidated cash flow
statement.
In addition to cash and cash equivalents, aggregate assets and liabilities divested were as follows:
($m)
Inventories
Trade receivables and other current assets
Total non-current assets
Trade accounts payable
Other current liabilities
Net assets divested
Carrying amounts
39
31
8
(11)
(33)
34
34
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
4. Segmental breakdown of key figures for the years ended December 31, 2018 and 2017
As further described in Note 27, Syngenta has adopted new segment reporting in 2018. Segment reporting for 2017 has been restated
accordingly. There are six operating segments consisting of five geographic regions, which include the Crop Protection, Seeds and Controls
businesses, and the global Flowers business. Segment performance is managed based on segment operating income, which is the measure of
segment profit or loss presented, and is based on the same accounting policies as consolidated operating income.
The China geographic operating segment has been aggregated with Asia Pacific. China is managed separately, but the underlying nature of the
business and economic characteristics are similar to the rest of Asia Pacific.
All other segments consists of:
-
-
-
the Flowers business, which is managed separately, but is not material enough to report separately;
sales and costs that are incidental to the commercial strategies;
costs not directly attributable to an operating segment, including global marketing and research and development teams, corporate
headquarter functions and some centrally provided support services in the finance, information systems, human resources and
procurement areas.
2018 ($m)
Product sales - to third parties
Royalty and license income - from third
parties
Total segment sales
Cost of goods sold
Gross profit
Marketing and distribution
Research and development
General and administrative:
Restructuring
Divestment gains
Other general and administrative
Operating income/(loss) - continuing
operations
Included in the above operating income
from continuing operations are:
Personnel costs
Depreciation of property, plant and
equipment
Amortization of intangible assets
Impairment of property, plant and
equipment, intangible and financial
assets
Other non-cash items including
charges in respect of provisions
Gains/(losses) on hedges reported
in operating income
Europe, Africa,
Middle East
3,837
North America
3,293
Latin America
3,615
Asia Pacific incl.
China
1,980
All other
segments
474
40
3,877
(1,850)
2,027
(607)
(161)
(79)
‐
(129)
1,051
221
3,514
(1,855)
1,659
(624)
(146)
(17)
‐
(75)
797
31
3,646
(2,158)
1,488
(511)
(96)
(51)
‐
(100)
730
6
1,986
(1,019)
967
(319)
(56)
(11)
‐
(46)
26
500
(406)
94
(129)
(841)
(123)
434
(480)
535
(1,045)
2,068
Group
13,199
324
13,523
(7,288)
6,235
(2,190)
(1,300)
(281)
434
(830)
(565)
(486)
(501)
(317)
(1,024)
(2,893)
-
-
-
-
5
-
-
-
-
9
-
-
-
-
11
-
-
(1)
-
-
(346)
(253)
(72)
184
(69)
Segment operating income/(loss) reconciles to consolidated income before taxes as follows:
2018 ($m)
Segment operating income
Income from associates and joint ventures
Financial expense, net
Income before taxes
(346)
(253)
(73)
184
(44)
2,068
2
(353)
1,717
35
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
2017 ($m)
Product sales - to third parties
Royalty and license income - from third
parties
Total segment sales
Cost of goods sold
Gross profit
Marketing and distribution
Research and development
General and administrative:
Restructuring
Other general and administrative
Operating income/(loss) - continuing
operations
Included in the above operating income
from continuing operations are:
Personnel costs
Depreciation of property, plant and
equipment
Amortization of intangible assets
Impairment of property, plant and
equipment, intangible and financial
assets
Other non-cash items including
charges in respect of provisions
Gains/(losses) on hedges reported
in operating income
Europe, Africa,
Middle East
North America
Latin America
Asia Pacific incl.
China
All other
segments
3,831
3,276
2,888
40
3,871
(1,799)
2,072
(602)
(80)
(155)
(149)
211
3,487
(1,793)
1,694
(573)
(138)
(36)
(1,675)
1,086
(728)
19
2,907
(1,665)
1,242
(603)
(62)
(44)
(64)
469
1,939
3
1,942
(986)
956
(313)
(49)
(18)
(46)
354
88
442
(248)
194
(106)
(944)
(102)
(345)
Group
12,288
361
12,649
(6,491)
6,158
(2,197)
(1,273)
(355)
(2,279)
530
(1,303)
54
(584)
(495)
(454)
(285)
(1,024)
(2,842)
-
-
(3)
-
2
-
-
-
(1,550)
8
-
-
-
-
6
-
-
-
-
-
(335)
(199)
(335)
(199)
(14)
(17)
(139)
(1,689)
(8)
8
Segment operating income/(loss) reconciles to consolidated loss before taxes as follows:
2017 ($m)
Segment operating income
Income from associates and joint ventures
Financial expense, net
Loss before taxes
The analysis of revenue by major product line for the years ended December 31, 2018 and 2017 is as follows:
($m)
Selective herbicides
Non-selective herbicides
Fungicides
Insecticides
Seedcare
Controls
Other crop protection
Total Crop Protection
Corn and soybean
Diverse field crops
Vegetables
Total Seeds
Elimination of Crop Protection sales to Seeds
Flowers
Group sales
54
8
(178)
(116)
2017
2,720
791
2,896
1,632
1,055
495
150
9,739
1,503
701
622
2,826
(102)
186
2018
2,821
857
3,117
1,895
1,129
504
90
10,413
1,693
659
652
3,004
(94)
200
13,523
12,649
36
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
Summarized additional information on the nature of expenses for the years ended December 31, 2018 and 2017 is as follows:
($m)
Salaries, short-term employee benefits and other personnel expense
Pension and other post-employment benefit expense
Share based payment expense
Total personnel costs
Depreciation of property, plant and equipment
Impairment of property, plant and equipment
Amortization of intangible assets
Impairment of intangible assets
2018
2,710
183
-
2,893
346
1
253
77
2017
2,641
106
95
2,842
335
6
199
5
Pension and other post-employment benefit expense for 2017 included $89 million of gains on amendments of benefit plans. See Note 22 for
further discussion.
5. Regional breakdown of key figures for the years ended December 31, 2018 and 2017
The following countries individually accounted for more than 5 percent of one or more of the respective Syngenta totals for the years ended
December 31, 2018 and 2017.
($m, except %)
Sales¹
Total non-current assets²
Country
Argentina
Brazil
France
Switzerland
UK
USA
Rest of world
Total
1 Sales by location of third party customer
2 Excluding deferred tax assets, defined benefit pension assets and derivative financial assets
2017
466
1,845
574
50
174
3,163
6,377
12,649
2018
557
2,463
579
73
184
3,141
6,526
13,523
%
4
15
5
-
1
25
50
100
%
4
18
4
1
1
23
49
100
No single customer accounted for 10 percent or more of Syngenta’s total sales.
2018
526
971
146
2,695
476
1,960
1,409
8,183
%
6
12
2
33
6
24
17
100
2017
27
316
152
2,742
474
1,930
1,411
7,052
%
-
4
2
39
7
27
21
100
37
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
6. Restructuring
Restructuring for the years ended December 31, 2018 and 2017, broken down into the main restructuring initiatives, consists of the following:
($m)
Accelerating operational leverage programs:
Cash costs
Charged to provisions
Expensed as incurred
Non cash costs
Acquisition, divestment and related costs:
Cash costs
Associated with industry consolidation, including ChemChina
Charged to provisions
Other, expensed as incurred
Non-cash items
Other non-cash restructuring:
Other non-current asset impairments
Total restructuring
2018
2017
54
101
1
‐
24
22
35
77
314
75
208
1
7
‐
24
30
10
355
In 2018, $33 million for the reversal of inventory step ups reported on acquisitions is presented within Cost of goods sold in the consolidated
income statement (2017: $ nil). The other costs above for the years ended December 31, 2018 and 2017 are presented within Restructuring in the
consolidated income statement.
In 2017, in addition to the above, of the $95 million share based payment expense charged to the 2017 consolidated income statement, $81
million was the incremental effect of applying cash-settled share based payment accounting due to the share plan amendments related to the
ChemChina Tender Offer, as described in Note 3. The $81 million, along with an additional $17 million of related social costs, was presented as
costs of the following functions: Cost of goods sold $9 million; Marketing and distribution $31 million; Research and development $12 million and
Other general and administrative $46 million. Total share based payment expense charged to the consolidated income statement is disclosed in
Note 23.
Analysis of restructuring costs
2018
Accelerating operational leverage programs
Cash costs of $101 million, including $25 million for information systems projects, consist of $35 million for initiatives to restructure marketing and
commercial operations, $32 million for projects to improve the effectiveness of back office support, $23 million for Research and Development
productivity projects, $8 million for activity to optimize production and supply and $3 million for project management. A further $54 million of
severance and pension costs were incurred to simplify the layers of management, including at the global headquarters. Non-cash costs included
tangible asset write-downs associated with the above projects.
Acquisition, divestment and related costs
A provision for $24 million was charged to the income statement for indirect tax exposures related to the Nidera acquisition. Other cash costs for
acquisition and related integration costs include $12 million for merger and acquisition projects and other transaction costs and $10 million incurred
for integration projects. Non-cash costs include $33 million for the reversal of inventory step ups reported on acquisitions and $2 million of
inventory impairment provisions. Five acquisitions were completed during 2018 as further described in Note 3.
Other non-cash restructuring
Other non-current asset impairments consist of $70 million for an intangible asset impairment where further development of technologies held by
Syngenta is not considered cost effective and activities have been suspended and $7 million for the impairment of a research collaboration
agreement whose expected future benefit no longer supports its value.
2017
Accelerating operational leverage programs
Cash costs of $229 million, including $30 million of severance and pension charges and $44 million of information systems projects, consisted of
$97 million for initiatives to restructure marketing and commercial operations, $61 million for projects to improve the effectiveness of back office
support, $38 million for Research and Development productivity projects, $27 million for activity to optimize production and supply and $6 million
for project management. A further $54 million of severance and pension costs were incurred to simplify the layers of management, including at the
global headquarters. Non-cash costs included tangible asset write-downs associated with the above projects.
38
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
Acquisition, divestment and related costs
Cash costs included $7 million of costs related to the ChemChina Tender Offer. Other acquisition and related integration costs included $17 million
of transaction costs and $7 million incurred for integration projects. Non-cash items included $45 million of asset impairments and divestment
losses related to the Sugar Beet business, which was divested during September, gains of $16 million on the sale of product rights in the USA and
Mexico and a small impairment for assets acquired in an earlier transaction.
Other non-cash restructuring
Other non-current asset impairments consisted of $5 million for two sites in the US that were sold during the first half of 2017 and the impairment of
a research collaboration agreement whose future benefit became less certain.
7. Income taxes
Income before taxes from continuing operations for the years ended December 31, 2018 and 2017 consists of the following:
($m)
Switzerland
Foreign
Total income/(loss) before taxes
2018
932
785
1,717
2017
138
(254)
(116)
Income tax (expense)/benefit on income from continuing operations for the years ended December 31, 2018 and 2017 consists of the following:
($m)
Current income tax (expense):
Switzerland
Foreign
Total current income tax (expense)
Deferred income tax (expense)/benefit:
Switzerland
Foreign
Total deferred income tax (expense)/benefit
Total income tax (expense)/benefit:
Switzerland
Foreign
Total income tax (expense)/benefit:
2018
2017
(109)
(139)
(248)
(6)
(21)
(27)
(115)
(160)
(275)
(15)
(162)
(177)
1
196
197
(14)
34
20
The components of current income tax (expense)/benefit on income from continuing operations for the years ended December 31, 2018 and 2017
are:
($m)
Current tax (expense) relating to current years
Adjustments to current tax for prior periods
Total current income tax (expense)
2018
(348)
100
(248)
2017
(266)
89
(177)
The components of deferred income tax (expense)/benefit on income from continuing operations for the years ended December 31, 2018 and
2017 are:
($m)
Origination and reversal of temporary differences
Changes in tax rates or legislation
Other adjustments to deferred tax for prior periods
Utilization of tax losses previously recognized as deferred tax assets
Benefit of previously unrecognized deferred tax assets
Non-recognition of deferred tax assets
Total deferred income tax (expense)/benefit
2018
69
(11)
(6)
(11)
12
(80)
(27)
2017
268
(98)
(6)
(8)
41
‐
197
39
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
OCI and Income tax relating thereto, for each component of equity, for the years ended December 31, 2018 and 2017 are as follows:
($m)
Items that will not be reclassified to profit or
loss:
Fair value reserves: Equity investments
at fair value through OCI
Retained earnings: Actuarial
gains/(losses)
Items that may be reclassified to profit or
loss:
Fair value reserves: Cash flow and net
investment hedges
Currency translation effects
Total
2018
2017
Pre-tax
Tax
Post-tax
Pre-tax
Tax
Post-tax
15
18
31
(566)
(502)
(3)
(9)
(8)
(16)
(36)
12
9
23
(582)
(538)
5
262
(27)
372
612
3
(58)
4
8
(43)
8
204
(23)
380
569
Income tax (charges)/credits recognized in OCI on cash flow and net investment hedges were $1 million (2017: $8 million). Income tax
charges/(credits) reclassified to profit or loss were $(9) million (2017: $(4) million).
No income tax was (charged)/credited to shareholders’ equity for the years ended December 31, 2018 and 2017.
Analysis of tax rate
The table below presents the main elements causing Syngenta’s effective tax rate to differ from the statutory tax rate for the years ended
December 31, 2018 and 2017. Syngenta’s statutory rate consists of the domestic Swiss tax rate. Syngenta applies the domestic Swiss tax rate as
it is more meaningful than using the weighted average tax rate.
The domestic Swiss tax rate consists of the Swiss federal income tax rate (8.50 percent) and the income tax rate of the canton Basel (20.00
percent). Federal and canton tax rates are deductible from the tax basis, therefore the Swiss domestic tax rate is 22.18 percent in 2018 and 2017.
Statutory tax rate
Effect of income taxed at different rates
Effect of other disallowed expenditures and income not subject to tax
Tax deduction for amortization and impairments not recognized for IFRS
Restructuring and impairment
Effect of changes in tax rates and laws on previously recognized deferred tax assets and liabilities
Effect of recognition of previously unrecognized deferred tax assets
Effect of recognition of previously unrecognized tax losses
Changes in prior year estimates and other items
Effect of non-recognition of deferred tax assets
Effect of Viptera litigation settlement provision
Effective tax rate
2018 %
2017 %
22
(6)
(2)
(1)
‐
1
‐
(1)
(2)
5
‐
16
22
(8)
-
‐
(2)
7
(3)
-
‐
4
(3)
17
Effect of income taxed at different rates includes rate differences from the domestic Swiss tax rate attributable to income generated from
intellectual property that is taxed at reduced rates and the effect of lower tax rates in certain countries with regard to treasury, investment, group
funding and regional management activities as well as logistical operations management. In most of these countries, Syngenta has entered into
advance pricing agreements. To enhance comparability of Syngenta’s effective tax rate for 2018 and 2017, the entire effect of the 2017 Viptera
litigation settlement provision has been presented separately in the table above; therefore all other elements causing Syngenta’s effective tax rate
to differ from the statutory rate were calculated on a pretax profit that excluded the Viptera litigation settlement provision.
40
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
The movements in deferred tax assets and liabilities during the year ended December 31, 2018 are as follows:
2018 ($m)
Assets associated with:
Inventories
Accounts receivable
Pensions and employee costs
Provisions
Unused tax losses and tax credits
Financial instruments, including
derivatives
Other
Deferred tax assets
Liabilities associated with:
Property, plant and equipment
Intangible assets
Inventories
Financial instruments, including
derivatives
Other provisions and accruals
Other
Deferred tax liabilities
Net deferred tax asset/(liability)
January 1
Recognized in
net income
Recognized
in OCI
Currency
translation
effects
Other
movements and
acquisitions
December 31
418
336
148
453
31
14
46
1,446
(300)
(245)
(132)
(41)
(176)
(66)
(960)
486
(27)
(41)
2
27
79
2
8
50
(12)
16
18
(4)
(102)
7
(77)
(27)
(18)
‐
(9)
‐
‐
‐
‐
(27)
‐
‐
‐
(5)
‐
‐
(5)
(32)
(13)
(35)
(8)
(11)
(9)
(1)
(2)
(79)
6
3
10
1
(1)
3
22
(57)
2
6
(1)
‐
‐
1
(1)
7
7
(199)
(11)
‐
‐
‐
(203)
(196)
362
266
132
469
101
16
51
1,397
(299)
(425)
(115)
(49)
(279)
(56)
(1,223)
174
The movements in deferred tax assets and liabilities during the year ended December 31, 2017 are as follows:
2017 ($m)
Assets associated with:
Inventories
Accounts receivable
Pensions and employee costs
Provisions
Unused tax losses and tax credits
Financial instruments, including
derivatives
Other
Deferred tax assets
Liabilities associated with:
Property, plant and equipment
Intangible assets
Inventories
Financial instruments, including
derivatives
Other provisions and accruals
Other
Deferred tax liabilities
Net deferred tax asset/(liability)
January 1
Recognized in net
income
Recognized
in OCI
Currency
translation effects
Other
movements and
acquisitions
December 31
483
210
248
366
35
28
43
1,413
(308)
(259)
(163)
(54)
(204)
(94)
(1,082)
331
(72)
126
(53)
87
(8)
(14)
1
67
16
20
34
(6)
37
29
130
197
8
‐
(58)
‐
‐
‐
‐
(50)
‐
‐
‐
21
‐
‐
21
(29)
(1)
‐
11
‐
4
‐
2
16
(8)
(6)
(3)
(2)
(9)
(1)
(29)
(13)
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
418
336
148
453
31
14
46
1,446
(300)
(245)
(132)
(41)
(176)
(66)
(960)
486
41
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
The deferred tax assets and liabilities at December 31, 2018 and 2017 reconcile to the amounts presented in the consolidated balance sheet as
follows:
($m)
Deferred tax assets
Adjustment to offset deferred tax assets and liabilities1
Adjusted deferred tax assets
2018
1,397
(298)
1,099
2017
1,446
(347)
1,099
Deferred tax liabilities
Adjustment to offset deferred tax assets and liabilities1
Adjusted deferred tax liabilities
1 Deferred tax assets and liabilities relating to income taxes levied by the same taxation authority on the same taxable entity or on entities which intend to settle current tax assets and
(613)
(925)
(960)
298
347
(1,223)
liabilities on a net basis or to realize the assets and settle the liabilities simultaneously are offset for presentation on the face of the consolidated balance sheet where a legal right of set-
off exists
The gross value at December 31, 2018 and 2017 of unused tax loss carry forwards and other deductible temporary differences for which no
deferred tax asset has been recognized, by expiration date, is as follows:
($m)
One year
Two years
Three years
Four years
Five years
More than five years
No expiry
Total
2018
1
‐
9
2
1
518
554
1,085
2017
16
‐
3
3
1
537
273
833
The above losses consist mainly of US state tax loss carry forwards. The applicable tax rate for these US state tax carry forwards is 0.1 percent
(2017: 0.1 percent) of the gross amounts.
Deferred tax assets, other than those related to unused tax losses, are not subject to expiry except as follows:
A $52 million unrecognized tax credit carry forward in one jurisdiction will expire in more than five years.
A $15 million temporary difference for deferred deduction of interest paid in one jurisdiction will expire in five years.
A deferred tax liability has not been recognized at December 31, 2018 and 2017 on the following items:
($m)
Temporary differences associated with investments in subsidiaries for which deferred tax liabilities have
not been recognized
2018
989
2017
1,011
There are no income tax consequences for Syngenta of paying a dividend to its shareholders.
8. Earnings per share and share capital
Basic earnings per share amounts are calculated by dividing net income 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 income attributable to ordinary shareholders of Syngenta AG by the sum of
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. Unvested share awards subject to Syngenta specific
performance conditions are included in potential ordinary shares only if those conditions would have been met based on cumulative actual
performance from the start of the performance period up to December 31 in the year concerned.
Treasury shares are deducted from total shares in issue for the purposes of calculating earnings per share.
As disclosed in Note 3, the majority of outstanding awards under employee share participation plans were accounted for as cash-settled with effect
from February 2, 2016. Under cash-settled share based payment accounting, the fair value of the awards is charged to profit or loss and no equity
instruments are assumed to be issued on settlement. Therefore adjustments for dilutive potential ordinary shares include only those shares that
would have vested prior to the cash settlement. There were no Syngenta AG shares and options granted that would have had an antidilutive effect
on the calculation of diluted earnings per share.
42
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
($m, except number of shares)
Net income/(loss) attributable to Syngenta AG shareholders
Weighted average number of shares
Weighted average number of shares – basic
Adjustments for dilutive potential ordinary shares:
Grants of Syngenta AG shares under employee share participation plans
Weighted average number of shares – diluted
2018
1,438
2017
(98)
92,382,473
92,354,881
-
92,382,473
11,226
92,366,107
Each Syngenta ordinary share carries one vote at the shareholder’s meetings of Syngenta. Voting rights may be exercised only after a
shareholder has been registered in Syngenta’s share register. Registration as a shareholder with voting rights is subject to certain declarations
on the ownership of Syngenta shares. The number of ordinary shares of par value CHF 0.10 that were authorized, issued, fully paid and
outstanding at, and the movements during the years ended, December 31, 2018 and 2017 are presented in the table below.
(Millions of shares)
January 1
Issue of ordinary shares under employee share purchase and option plans
December 31
2018
2017
Shares
in issue
92.5
-
92.5
Treasury
shares held
(0.2)
-
(0.2)
Shares
in issue
92.5
-
92.5
Treasury
shares held
(0.4)
0.2
(0.2)
At December 31, 2018 and 2017 Syngenta had no open options accounted for as equity instruments.
9. Trade and other accounts receivable
Trade receivables at December 31, 2018 and 2017 are as follows:
($m)
Trade receivables, gross
Provision for doubtful trade receivables
Trade receivables, net
2018
4,773
(375)
4,398
2017
4,535
(448)
4,087
Information relating to Syngenta’s credit risk exposure at December 31, 2018 and movements in the provision for expected credit losses (ECL) on
trade and other receivables and amortized cost financial assets in accordance with IFRS 9 for the years ended December 31, 2018 and 2017 are
as follows:
($m)
Maximum exposure to credit risk
Collateral held
Impairment provisions
January 1
Additions due to business acquisitions
Amounts credited/(charged) to income
Amounts written off
Currency translation effects and other
December 31
2018
2017
12-month ECL
506
-
(13)
-
5
-
1
(7)
Lifetime ECL
(collectively
assessed)
4,773
179
(448)
(18)
(33)
87
37
(375)
12-month ECL
Lifetime ECL
(collectively assessed)
757
-
(9)
-
(6)
2
-
(13)
4,535
219
(396)
-
(69)
17
-
(448)
Carrying value, net
499
4,398
744
4,087
43
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
Analysis of gross carrying amount by internal rating grades:
($m)
Amounts not yet due
Amounts past due:
0-90 days
90-180 days
180 days-1 year
More than 1 year
Maximum exposure to credit risk
2018
2017
Lifetime ECL
(collectively
assessed)
3,842
375
148
220
188
4,773
Lifetime ECL
(collectively assessed)
3,576
348
102
475
34
4,535
The carrying amount of trade receivables includes $15 million (2017: $46 million) that are due more than one year from the balance sheet date.
The carrying amount of trade receivables transferred in full and partial recourse factoring arrangements, but not derecognized is $52 million (2017:
$55 million). Related liabilities of $52 million (2017: $55 million) are disclosed in Note 17. The amount of these receivables before the transfer
transactions was $67 million (2017: $56 million).
The fair value of trade receivables containing embedded exchange rate options that Syngenta has classified as at fair value through profit or loss
at December 31, 2018 was $9 million (2017: $26 million). These amounts represent Syngenta’s maximum exposure to credit risk relating to these
types of trade receivables. Amounts charged to profit or loss in relation to these trade receivables for the years ended December 31, 2018 and
2017 were not material.
10. Other current assets and assets held for sale
Other current assets at December 31, 2018 and 2017 are as follows:
($m)
Prepaid expenses
Assets held under barter agreements
Other
Total
2018
305
49
31
385
2017
128
47
23
198
Assets classified separately on the balance sheet as held for sale of $140 million relate principally to the buildings and land at the Syngenta
headquarters in Basel, Switzerland other than those disposed of in 2018 as disclosed in Note 3. Syngenta entered into binding contracts to sell
and lease back the parts of the headquarter site which were still owned by Syngenta at December 31, 2018. The buildings, other than those
disposed of in 2018, will be leased back for an initial term of ten years. In 2017, assets held for sale were immaterial and are included in Other in
the table above.
11. Inventories
Inventories at December 31, 2018 and 2017 are as follows:
($m)
Raw materials and consumables
Biological assets
Work in progress
Finished products
Total
2018
519
37
1,105
2,631
4,292
2017
551
36
1,234
2,353
4,174
Finished products includes $120 million (2017: $175 million) of inventory held by customers under a sale with a right of return.
44
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
Movements in inventory write-downs for the years ended December 31, 2018 and 2017 are as follows:
($m)
January 1
Additions charged to income
Reversals of inventory write-downs
Amounts utilized on disposal of related inventories
Currency translation effects and other
December 31
2018
(308)
(256)
52
190
14
(308)
2017
(319)
(238)
31
224
(6)
(308)
Reversals of inventory write-downs arise in the normal course of business when actual outcomes are more favorable than assumptions made in
prior periods about Syngenta’s future ability to sell inventories that are subject to risks of degradation and obsolescence, such as germination of
seeds.
Movements in biological assets for the years ended December 31, 2018 and 2017 are as follows. These include amounts classified as other non-
current assets.
($m)
January 1
Changes in fair value
Additions to cost
Sales and harvest
Currency translation effects and other
December 31
Of which: carried at fair value less costs to sell
2018
36
133
16
2017
31
128
7
(147)
(133)
(1)
37
34
3
36
34
Syngenta’s inputs for measuring the fair value of those assets that are carried at fair value less costs to sell include both market data from actual
sales and inputs based on the stage of growth of immature assets, which is not observable in the market. The fair values therefore represent a
level 3 measurement in the fair value hierarchy as defined by IFRS 13. Their sensitivity to changes in the unobservable inputs is not material to the
consolidated financial statements.
Quantities of biological assets in inventories at December 31, 2018 and 2017 are:
(Millions of plants)
Plants
Cuttings
(Thousands of hectares cultivated)
Growing crops
2018
2017
76
529
78
523
1
1
45
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
12. Property, plant and equipment
Movements in property, plant and equipment for the year ended December 31, 2018 are as follows:
2018 ($m)
Cost
January 1
Additions
Additions due to acquisitions
Disposals
Classified as held-for-sale
Transfers between categories
Currency translation effects and other
December 31
Accumulated depreciation and impairment losses
January 1
Depreciation charge
Depreciation on disposals
Classified as held-for-sale
Currency translation effects and other
December 31
Net book value – December 31
Land
Buildings
Machinery and
equipment
Assets under
construction
2,169
5,283
152
1
10
(2)
(1)
‐
(4)
44
37
(85)
(88)
33
(45)
156
2,065
‐
‐
‐
‐
‐
‐
156
(1,112)
(70)
62
10
22
(1,088)
977
193
37
(251)
(84)
86
(110)
5,154
(3,349)
(277)
223
27
65
(3,311)
1,843
Total
7,921
479
84
(338)
(173)
‐
(212)
7,761
(4,461)
(347)
285
37
87
(4,399)
3,362
317
241
‐
‐
‐
(119)
(53)
386
‐
‐
‐
‐
‐
‐
386
Additions to property, plant and equipment of $479 million (2017: $409 million) comprise $448 million (2017: $394 million) of cash purchases and
$31 million (2017: $15 million) of other additions, including initial recognition of finance leases and capitalized borrowing costs.
The net book value of property, plant and equipment accounted for as finance lease assets at December 31, 2018 was $63 million (2017: $58
million) of which $54 million is classified as Machinery and equipment (2017: $48 million) and $9 million is classified as Buildings (2017: $10
million).
Movements in property, plant and equipment for the year ended December 31, 2017 were as follows:
2017 ($m)
Cost
January 1
Additions
Disposals
Classified as held-for-sale
Transfers between categories
Currency translation effects and other
December 31
Accumulated depreciation and impairment losses
January 1
Depreciation charge
Impairment losses
Depreciation on disposals
Currency translation effects and other
December 31
Net book value – December 31
Land
Buildings
Machinery and
equipment
Assets under
construction
156
1,987
4,864
1
(1)
‐
‐
(4)
48
(21)
‐
27
128
148
(156)
‐
131
296
152
2,169
5,283
‐
‐
‐
‐
‐
‐
152
(1,007)
(3,062)
(68)
(5)
18
(50)
(1,112)
1,057
(267)
(1)
141
(160)
(3,349)
1,934
360
212
(11)
‐
(158)
(86)
317
‐
‐
‐
‐
‐
‐
317
Total
7,367
409
(189)
‐
‐
334
7,921
(4,069)
(335)
(6)
159
(210)
(4,461)
3,460
46
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
13. Intangible assets
Movements in intangible assets for the year ended December 31, 2018 are as follows:
2018 ($m)
Cost
January 1
Additions from business combinations
Additions
Retirements and disposals
Currency translation effects
December 31
Accumulated amortization and impairment losses
January 1
Amortization charge
Impairment losses
Retirements and disposals
Currency translation effects
December 31
Net book value – December 31
Product
Goodwill
rights Trademarks
Patents
Software
Other
intangibles
Total
1,933
632
‐
(1)
(33)
3,077
337
218
(143)
(18)
2,531
3,471
(274)
(2,248)
‐
‐
‐
3
(154)
(77)
123
11
(271)
(2,345)
2,260
1,126
74
111
‐
(12)
1
174
(53)
(9)
‐
12
1
(49)
125
41
‐
‐
(1)
‐
40
(27)
(2)
‐
1
‐
(28)
12
564
8
37
(39)
(8)
562
(344)
(52)
‐
39
4
425
281
16
(1)
(9)
6,114
1,369
271
(197)
(67)
712
7,490
(195)
(3,141)
(36)
‐
2
6
(253)
(77)
177
25
(353)
209
(223)
(3,269)
489
4,221
Additions in 2018 and 2017 include intangible assets arising from license agreements involving non-monetary exchanges or where the cash flows
related to the acquisition of the asset are payable over several years. Internally developed intangible assets of $52 million (2017: $111 million) are
included within Additions. Cash paid to acquire and develop intangible assets was $193 million (2017: $184 million).
Amortization is included partly within cost of goods sold and partly within general and administrative expenses.
Other intangibles consist principally of values assigned to leases, supply contracts, production know-how and customer relationships acquired in
business combinations.
Movements in intangible assets for the year ended December 31, 2017 were as follows:
Product
Goodwill
rights Trademarks
Patents
Software
Other
intangibles
2017 ($m)
Cost
January 1
Additions
Retirements and disposals
Classified as held-for-sale
Currency translation effects
December 31
Accumulated amortization and impairment losses
January 1
Amortization charge
Impairment losses
Retirements and disposals
Classified as held-for-sale
Currency translation effects
December 31
Net book value – December 31
1,894
‐
‐
‐
39
2,919
145
(11)
(29)
53
1,933
3,077
(267)
‐
‐
‐
‐
(7)
(2,127)
(120)
(4)
9
25
(31)
(274)
(2,248)
1,659
829
82
‐
(9)
‐
1
74
47
‐
(8)
‐
2
41
459
90
(3)
‐
18
564
Total
5,802
259
(39)
(29)
121
401
24
(8)
‐
8
425
6,114
(55)
(30)
(286)
(174)
(2,939)
(5)
‐
9
‐
(2)
(53)
21
(2)
(1)
8
‐
(2)
(27)
14
(43)
‐
1
‐
(16)
(344)
220
(29)
‐
8
‐
‐
(199)
(5)
35
25
(58)
(195)
(3,141)
230
2,973
47
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
The net book value at December 31, 2018 and 2017 of goodwill is allocated to Syngenta’s operating segments and other CGUs
as summarized below. As further described in Note 27, Syngenta has adopted new segment reporting in 2018 and the allocation of goodwill to
Syngenta’s operating segments and other CGUs for 2017 has been restated accordingly.
($m)
Allocated to operating segments:
Europe, Africa and Middle East
North America
Latin America
Asia Pacific
Flowers
Total allocated to operating segments
Allocated to other individual CGUs:
North America Corn and Soybean seed
Corn and Soybean seed rest of world
Other, not individually significant
Total allocated to other individual CGUs
Total goodwill
14. Financial and other non-current assets
Financial and other non-current assets at December 31, 2018 and 2017, are as follows:
($m)
Equity securities at fair value through OCI
Precious metal catalysts
Royalties receivable
Other non-current receivables
Post-employment benefit assets (Note 22)
Long-term derivative financial assets (Note 26)
Total financial and other non-current assets
2018
241
220
178
326
14
979
318
571
392
1,281
2,260
2018
123
59
81
145
54
30
492
2017
246
218
174
343
15
996
315
35
313
663
1,659
2017
94
70
95
168
67
56
550
15. Associates, Joint ventures and transactions and agreements with related parties
Associates and joint ventures
Investments in associates and joint ventures at December 31, 2018 are $192 million (2017: $192 million).
None of Syngenta’s investments in associates and joint ventures are publicly quoted. At December 31, 2018, these investments consist mainly of
$114 million (2017: $109 million) for a 50 percent ownership of the joint venture CIMO Compagnie Industrielle de Monthey SA, Switzerland
(CIMO), which provides utility services to Syngenta and other occupants of the Monthey manufacturing site, $41 million (2017: $44 million) for a 49
percent ownership of the associate Sanbei Seeds Co. Ltd., China and $29 million (2017: $30 million) for a 40 percent ownership of the associate
Maisadour Semences SA, France (Maisadour). The latter two entities produce and sell seeds. Maisadour sells seeds to Syngenta.
During 2018, Syngenta’s share of CIMO’s actuarial gains recognized in OCI is $2 million (2017: $6 million). Other effects on Syngenta’s
consolidated income statement for the periods presented, or any financial statement line items of the above associates and joint ventures
themselves, are not material.
Transactions between Syngenta and its associates and joint ventures during the year ended December 31, 2018 are as follows:
Goods and services provided by Syngenta to its associates and joint ventures $9 million (2017: $7 million)
Goods and services provided by associates and joint ventures to Syngenta $87 million (2017: $92 million)
Non-current assets and research and development provided by Syngenta to an associate of $2 million (2017: $2 million)
At December 31, 2018 Syngenta has accounts receivable and accrued income from associates and joint ventures of $6 million (2017: $5 million)
and accrued liabilities to associates and joint ventures of $6 million (2017: $6 million).
A bank overdraft guarantee of $8 million (2017: $9 million) has been provided to an associate.
48
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
On November 12, 2013 Syngenta agreed to advance EUR 9 million ($10 million at December 31, 2018 currency translation rates) to Maisadour
for 7 years to help finance the planned expansion of corn seed processing capacity in Maisadour Ukraine LLC, a subsidiary of Maisadour, which is
a supplier of corn seeds to Syngenta. This current account advance will be made in instalments when called by Maisadour and bears a market
rate of interest. At December 31, 2018 the balance outstanding was $7 million (2017: $7 million). By a deed between Syngenta, Maisadour and
the European Bank for Reconstruction and Development (EBRD), repayment of the principal is subordinated to a loan between the EBRD and
Maisadour Ukraine LLC which is guaranteed by Maisadour.
Key management personnel
Key management personnel are considered to be the members of the Syngenta Executive Team and the Board of Directors. Their compensation
is as follows for the years ended December 31, 2018 and 2017:
($m)
Fees, salaries and other short-term benefits
Post-employment benefits
Payments to end of contractual notice period
Share based compensation
Total
2018
23
1
1
-
25
2017
16
1
6
16
39
During 2017, $1 million in aggregate was paid to two former Executive Team members in relation to non-compete agreements, which Syngenta
concluded with them in 2016.
Members of the Syngenta Executive Team and Board of Directors receive their cash compensation in Swiss francs, except one member of the
Executive Team who is based in the US and is paid in US dollars. The compensation amounts presented above have been converted into US
dollars using the average currency exchange rate in effect during each year reported. The average Swiss franc per US dollar exchange rate for the
year ended December 31, 2018 is 0.98 (2017: 0.99).
Post-employment benefits include healthcare, disability, death in service and pension costs.
As described in Note 3, all outstanding share awards were settled during 2017 and there is no share based compensation in 2018. For 2017, 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 Notes 3 and 27, 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.
ChemChina and its subsidiaries
The Transaction Agreement between ChemChina, its subsidiary China National Agrochemical Corporation (CNAC) and Syngenta AG relating to
the ChemChina Tender Offer provides that after the first settlement of the Offer, 4 out of 10 members of Syngenta’s Board of Directors shall be
persons who have no affiliation with ChemChina or its affiliates (each, an Independent Director). Certain matters will require the affirmative vote of
at least two Independent Directors, including, among others, (i) any change in the location of Syngenta’s headquarters, (ii) any raising of new debt
or making of distributions which would lower the rating of Syngenta to a level below investment grade (by Moody’s and Standard & Poor’s), (iii) any
reduction in Syngenta’s Research and Development budget in any given year to a level below 80 percent of the average Research and
Development spend in the years 2012– 2015, (iv) any material change in the agricultural sustainability programs or reduction of funding of the
Syngenta Foundation for Sustainable Agriculture to a level below 80 percent of the average funding per year 2012–2015, (v) any material change
to Syngenta’s Health, Safety and Environment Policy and Standards and (vi) any material change to Syngenta’s Code of Conduct. Approval by
the Independent Directors will also be required, subject to certain exceptions, for any transaction between any member of the ChemChina group,
on the one hand, and any member of the Syngenta group, on the other hand, if the transaction is not made at market terms. The above corporate
governance arrangements shall remain in place until the earlier of (i) five years following the first settlement of the ChemChina Tender Offer and (ii)
a re-listing of Syngenta shares through an initial public offering.
Transactions between Syngenta and fellow subsidiaries of ChemChina, its ultimate parent company, during the year ended December 31, 2018
and the period following the successful completion of the Offer to December 31, 2017 are as follows:
Goods and services provided to fellow subsidiaries of ChemChina $151 million (2017: $42 million)
Goods and services provided by fellow subsidiaries of ChemChina to Syngenta $32 million (2017: $3 million)
At December 31, 2018, Syngenta has accounts receivable from fellow subsidiaries of ChemChina of $51 million (2017: $19 million) and accounts
payable to fellow subsidiaries of ChemChina of $7 million (2017: $3 million).
In respect of the 2018 transaction with Adama described in Note 3 for the divestment of remedy assets, each product transfer agreement also
contains an ongoing supply agreement, whereby Syngenta agrees to provide the divested active ingredients and formulated products to various
subsidiaries of Adama to their required level of demand for the duration of the non-compete period in each agreement, none of which exceed five
years. During the year ended December 31, 2018, Syngenta made sales under these agreements of $88 million.
On June 12, 2017 Syngenta divested and licensed the U.S. rights to certain products to Adama Celsius B.V, a fellow subsidiary of ChemChina, for
cash consideration of $8 million, settled on the same date. As part of this agreement, Syngenta entered into a non-compete undertaking and
under related agreements, will supply each of the products for the U.S. market to Makhteshim Agan of North America Inc., another fellow
49
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
subsidiary. The terms of these agreements do not exceed five years. Pursuant to the agreements, sales of inventory totaling $8 million were made
by Syngenta to Adama Celsius B.V in the year ended December 31, 2018 ($8 million in the period ended December 31, 2017).
Other related party transactions
Transactions and balances between Syngenta and its employee post-retirement benefit plans are disclosed in Note 22.
16. Trade accounts payable and contract liabilities
The contractual maturities of trade accounts payable at December 31, 2018 and 2017 are as follows:
($m)
2018
2017
Total
3,613
3,174
0–90 days
2,026
1,920
90–180 days
435
180 days–1 year
1,152
345
909
Included within trade accounts payable are rebates payable and provisions for sales returns. Movements in these liabilities with customers for the
years ended December 31, 2018 and 2017 are as follows:
($m)
January 1
Changes in liabilities recognized in the period from:
Products supplied in the period
Prior period estimates
Rebates settled and product returns received
Currency translation effects and other
December 31
2018
1,645
2,909
(43)
(2,574)
(85)
1,852
2017
1,526
2,645
112
(2,668)
30
1,645
Contract liabilities consists of advance payments from customers and deferred revenue, mainly from customer loyalty programs.
Movements in contract liabilities for the years ended December 31, 2018 and 2017 are as follows:
($m)
January 1
Effect of adoption of IFRS 15
Advance payments received from customers
Performance obligations recognised in the period
Revenue recognized in the period from:
Amounts included in the contract liability at the beginning of the period
Contract liabilities applied to current period
Currency translation effects and other
December 31
2018
480
-
1,144
59
(482)
(744)
(12)
445
2017
-
517
1,740
110
(590)
(1,317)
20
480
At December 31, 2018, contract liabilities for customer loyalty programs are $52 million (2017: $44 million) and will be recognized as revenue as
the promised goods and services are transferred to the customers, which is expected to occur over the next three years.
17. Current financial debt and other financial liabilities
Current financial debt and other financial liabilities at December 31, 2018 and 2017 are as follows:
($m)
Bank and other financial debt
Receivables factored with recourse
Current portion of financial debt (Note 19)
Total current financial debt
Short-term derivative and other financial liabilities
Total
2018
501
52
372
925
270
1,195
2017
951
55
16
1,022
119
1,141
50
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
The contractual maturities of current financial debt at December 31, 2018 and 2017 are as follows:
($m)
2018
2017
Total
925
1,022
0–90 days
90–180 days
180 days–1 year
454
848
60
66
411
108
The maturities of short-term derivatives are presented in Note 25. The maturities of other financial liabilities is as follows: $74 million 0-90 days; $41
million 90-180 days and $39 million 180 days-1 year (2017: $25 million 0-90 days and $15 million 180 days-1 year).
Information about fair values of financial liabilities is presented in Note 26.
18. Other current liabilities
Other current liabilities at December 31, 2018 and 2017 consist of the following:
($m)
Accrued short-term employee benefits
Taxes other than income taxes
Accrued utility costs
Social security and pension contributions
Other payables
Other accrued expenses
Total
2018
406
129
83
59
116
102
895
2017
311
114
53
62
92
141
773
The maturities of other current liabilities are as follows. For liabilities without a contractual maturity date, the analysis represents the estimated
timing of cash outflows.
($m)
2018
2017
Total
895
773
0–90 days
90–180 days
180 days-1 year
501
555
58
39
336
179
51
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
19. Financial debt and other non-current liabilities
In April 2018, Syngenta issued USD senior unsecured notes with various maturities up to 30 years representing a total issuance amount of $4,750
million. Financial debt and other non-current liabilities at December 31, 2018 and 2017 are as follows:
($m)
0.750% CHF bond 2019
3.698% USD bond 2020
$ private placement notes
1.875% Eurobond 2021
3.933% USD bond 2021
3.125% $ Notes 2022
4.441% USD bond 2023
1.625% CHF bond 2024
4.892% USD bond 2025
1.250% Eurobond 2027
5.182% USD bond 2028
2.125% CHF bond 2029
4.375% $ Notes 2042
5.676% USD bond 2048
Unsecured bond issues and US private placement notes
Liabilities to banks and other financial institutions
Finance lease obligations
Less: current portion of financial debt (Note 17)
Total non-current financial debt
Non-current derivative financial liabilities
Other non-current liabilities and deferred income
Total
2018
356
748
105
571
747
501
996
253
747
568
995
152
248
498
2017
359
‐
106
598
‐
506
‐
256
‐
594
‐
153
248
‐
7,485
2,820
4
61
(372)
7,178
90
147
7,415
1
55
(16)
2,860
104
100
3,064
Information about fair values of financial liabilities is presented in Note 26.
Other non-current liabilities and deferred income relates to license and acquisition agreements with several counterparties and long-term incentive
programs. Related cash flows of $55 million (2017: $nil) are payable between one and five years and $92 million of deferred income at December
31, 2018 (2017: $100 million) will be recognized in income as related licensed product sales occur.
Interest paid on non-current financial debt was $169 million (2017: $65 million). All non-current debt ranks equally.
Syngenta AG has fully and unconditionally guaranteed on a senior unsecured basis the due and punctual payment of the principal of and any
premium and interest on the debt securities issued by Syngenta Finance N.V., which is an indirect, wholly-owned finance subsidiary. The
guarantees will rank equally with all of Syngenta’s other unsecured and unsubordinated debt. No other subsidiary of Syngenta guarantees such
debt securities.
52
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
20. Provisions, commitments and contingencies
Provisions
Provisions at December 31, 2018 and 2017 are as follows:
($m)
Restructuring provisions
Employee benefits:
Pensions (Note 22)
Other post-retirement benefits (Note 22)
Other long-term employee benefits
Environmental provisions
Provisions for legal and product liability settlements
Other provisions
Total
($m)
Current portion of:
Restructuring provisions
Employee benefits
Environmental provisions
Provisions for legal and product liability settlements
Other provisions
Total current provisions
Total non-current provisions
Total
2018
77
421
18
57
173
1,210
65
2,021
2017
70
564
21
61
184
1,659
55
2,614
2018
2017
63
61
8
1,112
24
1,268
753
2,021
62
112
13
467
22
676
1,938
2,614
The timing of payment in respect of non-current provisions is, with few exceptions, not contractually fixed and cannot be estimated with certainty.
Key assumptions and sources of estimation uncertainty are discussed in Note 2.
At December 31, 2018, Syngenta recognized $17 million (2017: $16 million) in Financial and other non-current assets in respect of virtually certain
reimbursements related to the above provisions.
Syngenta has recorded provisions for environmental liabilities at some currently or formerly owned, leased and third party sites throughout the
world. These provisions are estimates of amounts payable or expected to become payable and take into consideration the number of other
potentially responsible parties at each site and the identity and financial positions of such parties in light of the joint and several nature of certain of
the liabilities. The material components of Syngenta’s environmental provisions are based on a risk assessment involving investigation of the
various sites.
It is reasonably possible that Syngenta may be required to make expenditures in excess of the established provisions to remediate environmental
liabilities at some currently or formerly owned, leased and third party sites throughout the world. Further, in cases where it is not possible to
estimate reliably the remediation costs that may be incurred in the future for environmental damage that has occurred at sites currently in operation
and having no present obligation for environmental damage remediation, no provisions have been made. This is 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 upon their eventual closure.
In the USA, Syngenta and/or its indemnitors or indemnitees, have 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 sellers 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.
Provisions for legal and product liability settlements include the settlement fund discussed under the VIPTERA™ heading below. Other provisions
for legal and product liability settlements, all of which are individually immaterial, relate to various legal proceedings incidental to the normal
conduct of Syngenta’s business, including proceedings involving product liability claims, commercial claims, employment and wrongful termination
claims, patent infringement claims, competition law claims, tax assessment claims, regulatory compliance claims, waste disposal claims and tort
claims relating to the release of chemicals into the environment.
Other provisions mainly comprise provisions for long-term contractual obligations under license and other agreements.
53
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
Movements in provisions for the year ended December 31, 2018 are as follows:
($m)
Restructuring provisions:
Employee termination costs
Other third party costs
Employee benefits:
Pensions
Other post-retirement benefits
Other long-term employee benefits
Environmental provisions
Provisions for legal and product liability
settlements
Other provisions
Total
January 1
Charged to
income
Release of
provisions
credited to
income
Actuarial
(gains)/
losses
Payments
Transfers
offset in
defined
benefit
pension
assets
Currency
translation
effects/
other
December
31
51
19
564
21
61
184
1,659
55
2,614
51
28
129
1
1
5
17
55
287
(1)
‐
(2)
(2)
‐
(2)
(13)
(9)
(29)
(72)
(1)
(229)
1
(4)
(12)
(459)
(28)
(804)
‐
‐
(14)
(1)
‐
‐
‐
‐
(15)
‐
‐
(3)
5
(13)
(14)
‐
‐
‐
‐
‐
(13)
(2)
(1)
(2)
6
(8)
26
51
421
18
57
173
1,210
65
(19)
2,021
Provisions for employee termination costs include severance, pension and other costs directly related to affected employees.
Provisions for other third party costs principally include payments for early termination of contracts with third parties related to redundant activities.
Commitments
Minimum future lease payments at December 31, 2018 for finance leases are $63 million (2017: $57 million), of which $19 million is due within one
year (2017: $16 million), $37 million after more than one but less than five years (2017: $32 million) and $7 million thereafter (2017: $9 million).
Fixed-term, non-cancelable operating lease commitments total $241 million at December 31, 2018 (2017: $209 million) of which $68 million is due
within one year (2017: $72 million), $126 million after more than one and less than five years (2017: $120 million) and $47 million thereafter (2017:
$17 million). Operating lease payments relate to leases of buildings, office equipment and vehicles. Operating lease expense in 2018 is $88 million
(2017: $99 million).
Commitments for the purchase of property, plant and equipment at December 31, 2018 are $112 million (2017: $104 million).
At December 31, 2018 and 2017, Syngenta had entered into long-term commitments to purchase minimum quantities of certain raw materials,
long-term research agreements with various institutions to fund various research projects, and other commitments. The estimated timing of
minimum future committed payments is as follows:
($m)
Within one year
From one to two years
From two to three years
From three to four years
From four to five years
After more than five years
Total
2018
2017
Materials purchases
Other
Materials purchases
Other
1,090
301
163
66
72
1
1,693
70
16
7
5
4
2
104
1,089
273
226
107
25
23
1,743
70
22
13
4
4
8
121
Syngenta has no material contingent liabilities related to associates and joint ventures.
Syngenta’s sales are made subject to normal warranties, which cover product technical specifications and, in some cases, products’ performance
effect on grower crop yields. Certain license agreements indemnify the other party against liabilities arising from claims related to the intellectual
property licensed to or by Syngenta. Leases may require indemnification for liabilities Syngenta’s actions may create for the lessor or lessee.
Syngenta has also issued warranties to purchasers of businesses or product lines relating to events that arose before the sales. It is not possible to
predict the maximum future payments possible under these or similar provisions because it is not possible to predict whether any of these
contingencies will occur.
Syngenta has obtained licenses from others for 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.
54
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
Contingencies
Litigation matters
Litigation is subject to many uncertainties, and the outcome of individual matters cannot be predicted with certainty. Consequently, it is reasonably
possible that the final resolution of some of these matters could require Syngenta to make expenditures in excess of the established provisions
that are reported above. Further, the range of amounts involved, as well as the period of time over which many of these expenditures may be
made, cannot be reasonably estimated.
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 relation to Syngenta’s businesses and the risks to which it is
subject.
Significant recent or on-going legal proceedings are described below.
VIPTERA™
Beginning on September 12, 2014, several thousand lawsuits were filed against Syngenta in state and federal courts in the United States by
plaintiffs seeking damages from Syngenta for commercializing its AGRISURE VIPTERA® (MIR162) and DURACADE™ corn seed in the United
States without having obtained import approval from China for those products. Many of these lawsuits were filed by individual plaintiffs (including
growers, grain elevators and exporters such as Cargill, Archer Daniels Midland (“ADM”) and Louis Dreyfus), and approximately 107 by putative
classes of growers and others allegedly affected, including ethanol plants, on the theory that China’s 2013 rejection of U.S. corn based on the
alleged presence of MIR162 caused increased costs and U.S. commodity prices to drop. The cases were pending in multiple jurisdictions,
including (1) cases that were initially filed in federal court that were consolidated for pre-trial proceedings in a federal multi-district litigation (“MDL”)
action in the District of Kansas; (2) a consolidated state court proceeding in Hennepin County, Minnesota; (3) federal court in the Southern District
of Illinois; and (4) various state courts in Illinois, Indiana, Iowa, Louisiana, Nebraska, Michigan, and Ohio. In September 2016, the federal MDL
court certified a nationwide class of corn growers alleging violations of the Lanham Act and eight statewide classes of corn growers, and in
November 2016, the court presiding over the Minnesota state court consolidated proceedings certified a class of Minnesota corn growers. In April
2017, the federal MDL court granted significant portions of Syngenta’s motion for summary judgment, including by dismissing plaintiffs’ Lanham
Act claim and thereby eliminating the sole basis for a nationwide class, while allowing plaintiffs’ state-law negligence claims to proceed. In
September 2017 plaintiffs and Syngenta reached a pending settlement to resolve all claims on behalf of all U.S. non-Viptera and Viptera producers
as well as grain elevators and ethanol plants. On April 10, 2018, preliminary court approval was granted in respect of the pending settlement, and
the establishment of a Qualified Settlement Fund of $1.51 billion was granted for the submission of claims by eligible claimants who contracted to
price corn or DDGs (distillers dried grains with solubles) after September 2013. Syngenta was directed to make the first and second installments of
$200 million each into an escrow account (at December 31, 2017, Syngenta reported $400 million in current provisions and $1.1 billion in non-
current provisions; the latter are due for payment on April 1, 2019 and as such are classified in current provisions at December 31, 2018). Final
approval of the settlement was provided by court order dated December 7, 2018, dismissing the claims of producers, grain elevators, and ethanol
plants on a class wide basis except for sixteen individual producers and one ethanol plant that timely and validly opted out of the settlement.
Objectors to the settlement have appealed the court’s final approval order. That appeal is pending.
The settlement of the producer cases does not cover claims of the exporter plaintiffs such as Cargill, ADM, Louis Dreyfus, Trans Coastal Supply
Company, Inc. and Agribase International, Inc. ADM and Syngenta reached in December 2017 a settlement of the Viptera litigation that ADM had
brought against Syngenta in Louisiana Court, which was paid during 2018. Syngenta is continuing to defend against the claims of the other
exporters. The (rescheduled) presumptive trial date for the Cargill lawsuit pending in Louisiana Court is April 2019. The court ordered several
mediation sessions in 2018 and 2019. Expert reports quantifying damages were submitted but cannot be disclosed under the applicable protective
order. However, Cargill claims to have suffered alleged damages relating to delayed, rejected and re-routed shipments of U.S. corn to China of
over $90 million and additional lost profits. The Louis Dreyfus case is at the discovery stage, and the presiding Kansas federal court has set a trial
date of September 2019. The Louis Dreyfus lawsuit refers to damages of $71.5 million. Syngenta believes that the claims in these cases are
without merit and will defend the lawsuits.
In December 2015, a claim was filed in Ontario, Canada by a proposed representative plaintiff on behalf of a putative class comprising all farmers
in Canada against Syngenta Canada Inc. and Syngenta AG seeking damages from Syngenta for commercializing its AGRISURE VIPTERA®
(MIR162) and DURACADE™ corn seed in the North American corn market without having obtained import approval from China for those
products. The causes of action referred to in the lawsuit include negligence and negligent misrepresentations. The allegations include claims that
Syngenta actively misled farmers about the importance of the Chinese market, the timing and substance of the application for approval in China,
its ability to channel VIPTERA™ corn into non-Chinese markets and its ability to contain the infiltration of VIPTERA™ corn to the North American
corn supply. The proposed representative plaintiff is seeking on behalf of the putative class general and special damages of 300 million Canadian
dollars ($220 million at December 31, 2018 exchange rates), punitive and aggravated damages of 100 million Canadian dollars ($73 million at
December 31, 2018 exchange rates), the costs of distributing all monies awarded to class members, pre-judgment interest, and costs on a
substantial indemnity basis. Syngenta’s motion to strike this action was argued in April 2018, and on November 28, 2018, the judge dismissed the
plaintiff’s action in its entirety. The plaintiff has appealed this decision. The appeal will likely be heard in the second half of 2019. Syngenta
believes that the claims in this action are without merit and will oppose the appeal.
On February 14, 2017, a similar action was filed in Quebec against Syngenta Canada Inc. and Syngenta AG. The Petitioners are seeking
essentially the same relief as in the Ontario action on behalf of all corn producers conducting business in Quebec who sold corn for commercial
purposes after November 18, 2013. They allege that Syngenta was negligent and engaged in illegal commercial practices, contrary to the
Competition Act and the Civil Code of Quebec, and that damages (amount unspecified) will continue to accrue until the corn business between
North America and China is re-established at the levels that existed before Syngenta’s negligence occurred. Punitive damages, pre-judgment
interest and costs are also claimed. Syngenta has entered an appearance in the action. No other steps have been taken. Syngenta believes that
the claims in this action are without merit and will defend it.
55
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
Canada beekeeper lawsuits
In September 2014, a claim was filed in Ontario, Canada by two proposed representative members on behalf of a putative class comprising all
beekeepers who have owned or continue to own and operate honey producing, pollinating, and/or queen bee rearing businesses in Canada since
January 1, 2006, against a number of Syngenta legal entities together with certain entities of a second manufacturer of neonicotinoid insecticides.
Plaintiffs allege negligence through the sale by that manufacturer and by Syngenta of products containing such insecticides in the knowledge that
they would be injurious to bees and by virtue of misrepresentations and concealment relating thereto. Plaintiffs claim 400 million Canadian dollars
($294 million at December 31, 2018 exchange rates) general and 50 million Canadian dollars ($37 million at December 31, 2018 exchange rates)
punitive damages. The pleadings in the Ontario proceedings were subsequently amended by plaintiffs’ counsel to add waiver of tort and unlawful
conspiracy to the single cause of action, negligence, which was previously pleaded. Both of the additional causes of action are ancillary to and
largely dependent on the negligence claim. The class has not yet been authorized.
In October 2014, a Motion for Authorization was filed by the same firm of plaintiffs’ counsel in Montréal, Quebec seeking permission to bring a
similar class proceeding in that province. The proposed representative plaintiff operates a family business specialized in the breeding of queen
bees. The Quebec litigation closely resembles the original Ontario lawsuit claiming negligence except that, rather than a nationwide class, it
alleges a class limited to Quebec. At this early stage damages are unspecified. The Motion for Authorization was argued in November 2017. The
Quebec class has been authorized on August 20, 2018, and notices have been sent to potential class members.
Syngenta will defend these lawsuits, the claims in which are without foundation.
Atrazine related litigation
In August 2013, a personal injury complaint relating to atrazine was filed under seal in St. Clair County, Illinois state court, on behalf of a minor and
his parents against Syngenta Crop Protection LLC, Syngenta AG, a third party distributor, and three local dealers. The Court granted the minor
permission to proceed in the public record under the fictitious name “James Doe” - and for his parents to use the names “Jane Doe” and “John
Doe”. The lawsuit alleges that James Doe’s congenital birth defect, hypospadias, was caused by his mother consuming atrazine-contaminated
drinking water while she was pregnant. The Complaint alleges public nuisance, strict liability and negligence, and seeks unspecified damages
together with the costs of suit. Answers and Affirmative Defenses were filed on behalf of the defendants in January and February 2014. Fact
discovery in the litigation started in early 2014 and is continuing. No trial date has been fixed to date. No further claims have been filed. Syngenta
believes that the claims are without merit and is defending against the action.
Paraquat Parkinson’s disease litigation
In early 2016, the law firm which is prosecuting the atrazine personal injury litigation notified Syngenta Crop Protection, LLC that they intended to
file suit on behalf of numerous plaintiffs who allege that the herbicide paraquat caused them to develop Parkinson’s disease. Counsel for Syngenta
spoke with and, in one instance, met with that law firm regarding the firm’s allegations, its proposal for litigating them, and its purported clients. No
agreements with the firm were reached. In September 2017, a complaint was filed in St. Clair County, Illinois state court on behalf of plaintiffs
Thomas Hoffman and Diana Hoffman against Syngenta Crop Protection, LLC, Syngenta AG, and Growmark, Inc. The complaint alleges that Mr.
Hoffman suffers from Parkinson’s disease caused by chronic exposure to paraquat while working as a farmer in Illinois. On October 6, 2017 an
amended complaint was filed in the same court on behalf of 12 plaintiffs (7 men who are said to have been diagnosed with Parkinson’s disease
and 5 of their wives), including Mr. and Mrs. Hoffman who were named in the initial complaint, against Syngenta Crop Protection, LLC, Syngenta
AG, Chevron Phillips Chemical Company, and Growmark, Inc. The amended complaint alleges the following counts: (1) Strict Liability - Design
Defect; (2) Strict Liability - Failure to Warn; (3) Negligence; (4) Public Nuisance; (5) Consumer Fraud & Deceptive Business Practices Act; and (6)
Breach of Implied Warranty of Merchantability. Syngenta’s Motion to Dismiss was denied in July 2018. Syngenta filed its answer to the amended
complaint in October 2018. In that case, the parties are now engaged in discovery. On December 13, 2018, the same counsel filed a further
complaint in St. Clair County, Illinois state court on behalf of plaintiffs Marvin Wendler and his wife against Syngenta Crop Protection, LLC,
Syngenta AG, and various third parties. Syngenta Crop Protection, LLC agreed to accept service and the parties are negotiating a responsive
pleading date. An additional complaint was filed by the same counsel in St. Clair County, Illinois state court on December 21, 2018, on behalf of
plaintiffs Lloyd Pulcher and his wife against Syngenta AG and Growmark, Inc. These new complaints assert the same claims as the Hoffman
complaint. Syngenta AG has not yet been served with either of the two new complaints. Syngenta believes that all of these claims are without
merit and will defend the lawsuits.
Tax matters
Significant management judgment is required to estimate the tax provisions related to the eventual outcome of reviews and audits by tax
authorities of tax returns filed by Syngenta’s subsidiaries. Tax returns filed by many of Syngenta’s subsidiaries during the past several years are
either currently under examination by tax authorities or are open for future examination until expiry under statutes of limitation. Syngenta is also
subject to certain tax claims pending before the judiciary. See Note 2 “Uncertain tax positions” for detail regarding two on-going transfer pricing
disputes in Brazil. In Syngenta’s opinion, the likelihood is remote that a material amount in excess of recorded provisions will result from the
resolution of any such examination or case. However, it is reasonably possible that actual outcomes and settlements may differ significantly from
the estimated liabilities shown in the consolidated balance sheet for income taxes and in Note 18 for other taxes.
Contingencies summary
Given the inherent difficulties in estimating liabilities relating to litigation, tax, environmental and certain other matters due to uncertainty concerning
both the amount and timing of future expenditures, it is reasonably possible that additional costs may be incurred materially in excess of provisions
recorded for such liabilities. Such expenditures, in excess of established provisions, could have a material effect on Syngenta’s consolidated
operating results and cash flows for a particular reporting period, but management does not believe they will have a materially adverse effect on
Syngenta’s consolidated financial position or liquidity, although there can be no assurances in this regard.
56
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
21. Notes to the consolidated cash flow statement
Non-cash and other reconciling items included in income before taxes
The following table analyzes non-cash and other reconciling items included in income before taxes for the years ended December 31, 2018 and
2017:
($m)
Depreciation, amortization and impairment of:
Property, plant and equipment
Intangible assets
Financial assets
Deferred revenue and other gains and losses
Gains on disposal of non-current assets
Charges in respect of share based compensation
Charges in respect of pension provisions (Note 20)
Charges in respect of other provisions (Note 20)
Financial expense, net
Losses/(gains) on hedges reported in operating income
Income from associates and joint ventures
Total
2018
2017
347
330
(5)
2
(444)
‐
127
131
353
44
(2)
883
341
204
6
1
(33)
95
69
1,652
178
(8)
(8)
2,497
See Note 3 for a description of the change in accounting treatment of share based payment arrangements.
Change in liabilities arising from financing activities
Movements in assets and liabilities arising from financing activities for the year ended December 31, 2018 are as follows:
2018 ($m)
Current financial debt (Note 17)
Non-current financial debt (Note 19)
Total financial debt
Bond hedges net liability
Margin deposit liability (Note 25)
Margin deposit asset (Note 25)
Net liabilities arising from financing activities
January 1
1,022
Cash flows
(396)
2,860
3,882
49
25
(118)
3,838
4,727
4,331
‐
19
7
4,357
Changes in
fair value
‐
(6)
(6)
74
‐
‐
68
Non-cash changes
Currency
translation
effects
(70)
(68)
(138)
7
‐
‐
(131)
Other
369
(335)
34
(35)
‐
‐
(1)
December 31
925
7,178
8,103
95
44
(111)
8,131
Movements in assets and liabilities arising from financing activities for the year ended December 31, 2017 are as follows:
2017 ($m)
January 1
Cash flows
Current financial debt (Note 17)
Non-current financial debt (Note 19)
Total financial debt
Bond hedges net liability
Margin deposit liability
Margin deposit asset
Net liabilities arising from financing activities
767
2,854
3,621
251
9
(349)
3,532
(55)
‐
(55)
(49)
16
231
143
Non-cash changes
Changes in fair
value
‐
(15)
(15)
(127)
‐
‐
(142)
Other
169
(156)
13
(34)
‐
‐
(21)
Currency
translation
effects
December 31
141
177
318
8
‐
‐
326
1,022
2,860
3,882
49
25
(118)
3,838
57
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
See Note 25 for a description of bond hedges and margin deposits. Bond hedges are presented in the consolidated balance sheet as follows: non-
current assets of $30 million (2017: $54 million) are included within “Financial and other non-current assets”, current liabilities of $35 million (2017:
$nil) are included within “Current financial debt and other financial liabilities” and non-current liabilities of $90 million (2017: $103 million) are
included within “Financial debt and other non-current liabilities”.
Margin deposit liabilities are included within “Current financial debt and other financial liabilities”, and margin deposit assets are included within
“Derivative and other financial assets”.
Cash flows are presented in the consolidated cash flow statement as follows:
($m)
Increases in third party interest-bearing debt
Repayment of third party interest-bearing debt
Net
22. Post-employment benefits
2018
4,936
(579)
4,357
2017
872
(729)
143
Syngenta has, apart from legally required social security arrangements, numerous independent pension plans, which are either “defined
contribution” plans where company contributions and resulting benefit costs are a set percentage of employees’ pay or “defined benefit” plans
where benefits are generally based on employees’ length of service and pensionable pay. Syngenta’s contributions to defined contribution plans
were $54 million for the year ended December 31, 2018 (2017: $51 million). Approximately 33 percent of Syngenta’s employees are members of
defined benefit plans and a significant proportion of these are members of both defined benefit and defined contribution plans. All of Syngenta’s
major defined benefit plans are funded through legally separate trustee administered funds. The cash funding of these plans, which may from time
to time involve special payments, is designed to ensure that present and future contributions should be sufficient to meet future liabilities.
Syngenta’s main defined benefit pension plans are in the UK, Switzerland and the USA.
UK
In accordance with its rules, Syngenta’s UK Pension Fund (the UK Fund) is governed by a company (the Trustee) that is controlled by a publicly
listed independent professional trustee corporation. That corporation appoints the Trustee’s directors, including its own representative, Syngenta
nominated and member nominated directors. The Trustee manages the UK Fund and appoints professional advisers independently to assist it in
doing so. The UK Fund is subject to UK pensions legislation, is regulated by the UK Pensions Regulator and is exempt from most UK taxation
through its registered status. The defined benefit section of the UK Fund has been closed to new members since 2002. New employees since
2002 instead joined a defined contribution pension plan also within the UK Fund. This was open to new members until August 31, 2013. After that
date, new employees join a separate defined contribution plan. The defined benefit section of the UK Fund is open to future accrual for employees
who were members before 2002; however, effective January 1, 2016, pensionable pay for these employees has been frozen, as described in
Note 2. At retirement date, defined benefit members have the right to take up to 25 percent of the value of their benefits as a lump sum, with the
balance being paid as an annuity. Alternatively, after taking appropriate advice, members may transfer their defined benefits to a different
authorized pension arrangement.
The Trustee is required by the UK Fund’s rules to increase pensions in payment and accrued deferred pension rights each year by the lower of 5
percent and price inflation, as measured by the UK Retail Price Index (RPI) or Consumer Price Index (CPI), as applicable. An independent actuary
is required to value the UK Fund’s liabilities in accordance with UK pension regulations and certify the required contributions, both for future service
and elimination of any deficit, at least every three years. Following each such valuation, employer contribution amounts must be formally agreed
between Syngenta and the Trustee, subject to review by the Pensions Regulator, and remain binding until re-assessed in the following valuation.
The solvency of the UK Fund, defined as its ability to pay benefits as they fall due, is guaranteed by the sponsoring subsidiary, Syngenta Ltd., and
by Syngenta AG. In addition, certain benefits under the UK Fund are guaranteed by the UK Pension Protection Fund.
The Trustee agrees the investment strategy for the UK Fund’s assets and implements it through an investment sub-committee (the UK Investment
Committee) it appoints from among the Trustee directors. The investment objectives are to ensure the assets are appropriately diversified and
liquid to generate sufficient returns to meet the benefit liability and control the long term costs of the UK Fund. These objectives are achieved
through appointing and monitoring a number of third party investment managers, each with specific investment mandates that collectively cover a
wide range of investment classes and geographical markets and utilize both asset liability matching and return seeking strategies. Asset liability
matching is achieved both through underlying investment class selection (e.g. fixed interest) and through using derivatives to limit the potential
impact of changes in interest rates, price inflation and foreign currency exchange rates on the benefits payable by and assets of the UK Fund.
Switzerland
The Swiss federal law on occupational old age, survivors’ and disability pensions (“BVG”) sets minimum standards for occupational pension plans,
which Syngenta’s Swiss pension fund (the Swiss Fund) exceeds. All employees having had an employment contract for more than three months
with any of Syngenta’s Swiss subsidiaries or with its CIMO joint venture entity (see Note 15) and whose age and income exceed the minimum
stipulated by BVG are automatically insured in the Swiss Fund. The benefits payable on retirement are calculated according to the capital sums
that each member accumulates through transfer of benefits from previous employments, employer and employee contributions during service with
Syngenta or with CIMO, interest and member voluntary contributions. Disability and survivors’ death in service benefits are defined on the basis of
the member’s insured remuneration. Leavers before retirement are required to transfer their accumulated retirement and capital savings to the
occupational pension plan of their new employment. The Swiss Fund is governed by a twelve member Board of Trustees. Six members, including
58
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
the President, are nominated by Syngenta (five members) and CIMO (one member), and six are elected by insured plan members from among
the employees. Its decisions regarding certain items, including rates of retirement credits for service and interest credits, conversion rates on
retirement and plan asset investment strategy require a two-thirds majority vote. Legal conformity of the Swiss Fund’s regulations is verified by the
Swiss Pension Inspectorate. Syngenta’s legal obligations, including required employer contributions, are defined in the pension fund rules which
are agreed by the Board of Trustees.
Employer and employee contributions are payable according to an age related scale of percentages of pay. Under BVG, the Swiss Fund
guarantees the vested benefit amount as confirmed annually to members. Interest may be added to member balances at the discretion of the
Board of Trustees. Members have the right to take their retirement benefit as a lump sum, an annuity or part as a lump sum with the balance
converted to a fixed annuity at the rates defined in the Fund’s rules. The Board of Trustees may increase the annuity at their discretion subject to
the Swiss Fund’s funded status including sufficient free funds as determined according to Swiss statutory valuation rules. Syngenta accounts for
the Swiss Fund as a defined benefit pension plan.
An actuarial balance sheet is usually drawn up annually by the Swiss Fund’s actuary. If the balance sheet reveals a deficit, the Board of Trustees
defines appropriate measures to eliminate the deficit. If necessary, and after consultation with the actuary, the contributions payable by employees
and by Syngenta may be increased or the benefits, including current pensions, may be adjusted to the funds available. The Board of Trustees
manages the Swiss Fund’s assets in conformity with the investment policy rules laid down by Swiss law, with the objectives of achieving
investment that is secure, produces an appropriate yield and meets the liquidity needs of the Swiss Fund. This is implemented through an
investment sub-committee similar to the UK Investment Committee mentioned above.
In March 2017, in order to secure the financial stability of the Swiss Fund, the Board of Trustees of the Syngenta Pension Fund adopted revised
rules. These changes were communicated to the employees in May 2017. The principal changes effective from January 1, 2018 were to reduce
the technical interest rate (discount rate) applied on savings belonging to the retirees from 2.5 per cent to 2.0 per cent and to reduce the annuity
conversion rates applicable from age 60 onwards. The conversion rates at retirement reduce gradually from 6.1 per cent (age 65) in 2017 to 5.3
per cent (age 65) in 2021. To mitigate the impact of these changes, Syngenta made a one - off contribution to active member balances within the
Fund of $34 million in January 2018. Syngenta has accounted for these changes as a plan amendment. Based on an actuarial valuation at the
date of the change, Syngenta recognized a past service gain of $34 million in full within General and administrative for 2017.
USA
Syngenta’s main US defined benefit pension plan (the US Plan) is a non-contributory defined benefit pension plan subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended (ERISA) and the US Internal Revenue Code of 1986, as amended (Code). In
addition, certain benefits under the US Plan are guaranteed by the US Pension Benefit Guaranty Corporation. The US Plan was closed to new
members effective January 1, 2009. Employees joining Syngenta after that date participate in a defined contribution pension plan. The defined
benefits of existing members of the US Plan were not affected by this change. The US Plan offers members the choice of taking their retirement
benefits, which are generally based on their age, pay and years of service, as a full lump sum at retirement date or as a fixed annuity. In these
financial statements, the benefit obligation has been valued assuming that 90% of current eligible members will take the lump sum option at
normal retirement or other permissible commencement dates. This assumption is consistent with historical and expected future member choices.
US plan assets are held in a separate trust with State Street Bank and Trust Company as trustee and custodian. The assets must generally
remain in the trust until all pension benefits are paid. An Investment Committee of Syngenta employees (the US Investment Committee),
appointed by the Board of Directors of Syngenta Corporation, a wholly owned subsidiary of Syngenta AG, oversees the investment of the plan
assets, either directly or through the appointment of investment managers. The US Investment Committee develops and implements an
investment strategy that takes into account the liability profile of the US Plan. Asset classes are selected that include equities, fixed income and
alternative assets. Interest rate derivatives may be used to hedge the interest rate risk of the US Plan. The Plan’s key risks include interest rate risk
that impacts the value of the liability and the fixed income assets of the US Plan, investment performance volatility, and to a lesser degree inflation
and longevity risk. An actuarial valuation is required each year and is used to determine the valuation and characteristics of the liability of the
US Plan.
Syngenta Corporation’s funding policy is to contribute to the US Plan amounts necessary on an actuarial basis to at least satisfy the minimum
funding requirements of the Code. Additional discretionary contributions above the minimum funding requirements can be made and are generally
based on the annual administrative expense of the plan, along with an adjustment for any over/under funding.
In December 2017, the Board of Syngenta Corporation Pension Plan announced amendments to the US plan. Benefits under the plan were
frozen effective December 31, 2018, and no participants shall accrue additional benefits after that date. Syngenta has accounted for this change
as a plan amendment. Based on an actuarial valuation at the date of the change, Syngenta recognized a past service gain of $41 million in full
within General and administrative for 2017.
59
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
Defined benefit plan disclosures
The status of Syngenta’s defined benefit plans at December 31, 2018 and 2017 using actuarial assumptions determined in accordance with
IAS 19 is summarized below. The following tables provide reconciliations of benefit obligations, plan assets and funded status of the defined
benefit pension plans to the amounts recognized in the consolidated balance sheet at December 31, 2018 and 2017:
($m)
Benefit obligations
January 1
Current service cost
Past service gain
Employee contributions
Interest cost
Actuarial losses/(gains):
From changes in demographic assumptions
From changes in financial assumptions
From actual experience compared to assumptions
Benefit payments
Currency translation effects and other
December 31
Of which arising from:
Funded plans
Wholly unfunded plans
($m)
Plan assets at fair value
At January 1
Actual return on plan assets
Employer contributions
Employee contributions
Benefit payments
Currency translation effects and other
December 31
Actual return on plan assets can be analyzed as follows:
($m)
Interest on plan assets
Actuarial (losses)/gains
Total
Funded status
Effect of asset ceiling
Net accrued benefit liability
Amounts recognized in the balance sheet:
Prepaid benefit costs (Note 14)
Accrued benefit liability
Net amount recognized
2018
2017
6,451
121
‐
35
112
(43)
(275)
57
(436)
(196)
5,826
5,666
160
6,222
130
(75)
37
128
(76)
87
51
(456)
403
6,451
6,275
176
2018
2017
5,933
5,399
(92)
241
35
(436)
(185)
5,496
2018
106
(198)
(92)
(330)
(91)
(421)
‐
(421)
(421)
442
166
37
(456)
345
5,933
2017
112
330
442
(518)
(46)
(564)
13
(577)
(564)
All material changes in the amount shown for the asset ceiling arose from the effect of applying the ceiling at each period end. Changes in the
asset ceiling amount due to interest and foreign currency translation during 2018 and 2017 were immaterial.
Of the accrued benefit liability for pensions of $421 million at December 31, 2018, $421 million is included in Note 20 as pension provisions (2017:
$564 million as pension provisions; $13 million as restructuring provisions).
60
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
The following table shows the estimated undiscounted future defined benefit payments that are projected to occur within ten years from the
balance sheet date. Actual payments may differ from those shown because of uncertain future events, including members’ choice of benefit
options as described above.
($m)
2019
2020
2021
2022
2023
Years 2024-2028
Total 2019-2028
267
259
271
282
269
1,398
2,746
Syngenta’s estimate of employer contributions to be paid to defined benefit plans in 2019 is $130 million, excluding restructuring costs. Actual
payments could differ materially from this estimate if any new funding regulations or laws are enacted or due to business and market conditions,
which may result in Syngenta prepaying contributions. Additional contributions, the amount and timing of which are uncertain, may also be
required as Syngenta’s restructuring programs are implemented.
In accordance with UK pension regulations, during the 2015 valuation Syngenta agreed with the Trustee to pay fixed contributions of $34 million
per year from 2017 to 2019 and $32 million in 2020 to meet the valuation deficit at March 31, 2015, administration costs and part of the costs of
employee service in those years. The balance of the costs of employee service is payable as a percentage of pensionable pay in those years. In
2018 and 2017, $95 million and $34 million of fixed contributions were paid respectively. On November 30, 2017, and subsequently on October 4,
2018 during the 2018 valuation, Syngenta agreed revised pension funding arrangements with the Trustee. Under these arrangements, as long as
the Fund is in deficit on a UK statutory basis, in addition to future service contributions, the fixed contributions required to repair the deficit in the
Fund are $34 million per annum from April 1, 2017 until March 31, 2024, and two additional payments of $62 million by January 31, 2018 and $39
million by December 31, 2020. This agreement will apply until March 30, 2021.
61
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
The fair values of assets and liabilities of the major defined benefit pension plans, together with aggregated data for other defined benefit plans, are
as follows. Unquoted investments represent investments in pooled funds in which the underlying investments are unquoted or those where the
pooled fund does not have liquidity on at least a weekly basis:
%
17
6
34
3
6
7
6
18
3
100
At December 31, 2018
Switzerland
UK
USA
Other plans
Total
Investments quoted in active markets:
Fair value ($m, except assumptions)
Equities
Real estate funds
Bonds
Other assets
Unquoted investments:
Equities
Real estate
Bonds
Other assets
Cash and cash equivalents
Fair value of assets
Benefit obligation
of which:
Active members
Deferred members
579
305
834
57
61
37
‐
358
41
2,272
(2,456)
(1,277)
n/a
259
‐
632
78
247
340
331
489
153
2,529
(2,532)
(378)
(559)
Pensioners and dependants
(1,179)
(1,595)
Funded status
Effect of asset ceiling
Net pension liability
Net periodic benefit cost
Significant actuarial assumptions:
Discount rate (%)
Inflation (RPI) (%)
Pensionable pay increase (%)
Pension increase (%)
Interest credit rate (%)
Remaining life expectancy (years)
male aged 63 in 2018
female aged 63 in 2018
male aged 63 in 2038
female aged 63 in 2038
Weighted average duration of benefit
obligation (years)
(184)
‐
(184)
75
0.8
n/a
1.4
n/a
1.0
24.4
26.5
26.3
28.4
16
(3)
(72)
(75)
25
2.8
3.2
‐
3.2
n/a
25.3
26.8
26.7
28.3
16
67
‐
374
‐
30
‐
‐
147
14
632
16
‐
32
14
‐
‐
‐
1
‐
63
(642)
(196)
921
305
1,872
149
338
377
331
995
208
5,496
(5,826)
(133)
(14)
(147)
13
(330)
(91)
(421)
127
-
1.8
(347)
(78)
(217)
(10)
(5)
(15)
14
4.3
n/a
‐
n/a
n/a
22.4
24.5
24.1
26.1
14
62
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
%
20
5
31
3
8
5
6
18
4
100
At December 31, 2017
Switzerland
UK
USA
Other plans
Total
Investments quoted in active markets:
Fair value ($m, except assumptions)
19
‐
30
15
‐
‐
‐
1
3
68
(215)
(147)
(12)
(159)
9
1,188
292
1,815
192
470
282
385
1,069
240
5,933
(6,451)
(518)
(46)
(564)
71
‐
1.9
Equities
Real estate funds
Bonds
Other assets
Unquoted investments:
Equities
Real estate
Bonds
Other assets
Cash and cash equivalents
Fair value of assets
Benefit obligation
of which:
Active members
Deferred members
664
292
837
61
50
37
‐
367
72
2,380
(2,531)
(1,373)
n/a
368
‐
615
116
390
245
385
503
131
2,753
(2,978)
(719)
(690)
Pensioners and dependants
(1,158)
(1,569)
Funded status
Effect of asset ceiling
Net pension liability
Net periodic benefit cost
Significant actuarial assumptions:
Discount rate (%)
Inflation (RPI) (%)
Pensionable pay increase (%)
Pension increase (%)
Interest credit rate (%)
Remaining life expectancy (years)
male aged 63 in 2017
female aged 63 in 2017
male aged 63 in 2037
female aged 63 in 2037
Weighted average duration of benefit
obligation (years)
(151)
‐
(151)
45
0.7
n/a
1.4
‐
1.0
24.3
26.4
26.2
28.3
16
(225)
(20)
(245)
34
2.4
3.2
‐
3.2
n/a
26.0
27.5
27.7
29.3
18
137
‐
333
‐
30
‐
‐
198
34
732
(727)
(401)
(89)
(237)
5
(14)
(9)
(17)
3.6
n/a
4.0
n/a
n/a
22.4
24.4
24.0
26.1
15
Other assets include investments in private equity funds, diversified hedge funds, infrastructure funds, insurance funds and inflation, interest rate
and foreign currency derivatives.
The following table provides an analysis of the benefit costs recorded in the consolidated income statement for the defined benefit pension plans
for the years ended December 31, 2018 and 2017:
($m)
Current service cost
Past service gain
Interest on the net defined benefit liability
Net periodic benefit cost
2018
121
‐
6
127
2017
130
(75)
16
71
63
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
Amounts recognized in OCI were as follows for the years ended December 31, 2018 and 2017:
($m)
Actuarial gains
Effect of asset ceiling
2018
(63)
46
2017
(268)
36
The sensitivity of the benefit obligation to the significant actuarial assumptions is discussed in the “Critical accounting estimates” section of Note 2.
Other post-retirement benefits
Syngenta’s most significant other post-retirement benefit plan is the retiree medical plan in the USA. The plan is self-insured and the principal
benefit for the majority of eligible participants is a subsidy of their medical insurance premiums after retirement. The subsidy amount varies based
on age and service at retirement. Retirees who are eligible for Medicare enroll in individual Medicare plans available in the open market or public
exchange, and are responsible for paying the full cost of coverage in excess of the subsidy. The assumed healthcare cost trend rate for this plan at
December 31, 2018 was 6.75 percent, decreasing in each successive year from 2018 onwards, to reach an ultimate rate of 5.0 percent in 2026
(December 31, 2017: 7.0 percent decreasing to 5.0 percent in 2026).
In December 2017, Syngenta announced amendments to the plan. Effective January 1, 2018 any increases in dollar amount of the premium cost
will be the responsibility of the eligible participant. Syngenta accounted for this change as a plan amendment. Based on an actuarial valuation at
the date of the change, Syngenta recognized a past service gain of $14 million in full within General and administrative for 2017.
Syngenta had a net benefit asset for other post-retirement benefits at December 31, 2018 of $54 million (2017: $54 million) reported within Defined
benefit post-employment benefit asset in Note 14 and a net benefit liability of $18 million (2017: $21 million) reported within Other post-retirement
benefits provision in Note 20. Actuarial gains recognized in OCI for the period were $nil (2017: $24 million). Expense recognized in the
consolidated income statement, contributions to the other post-retirement benefit plans and benefit payments by the plans were not material for
2018 and 2017.
23. Employee share participation plans
Following the completion of the ChemChina Tender Offer as disclosed in Note 3, all awards under Syngenta employee share participation plans
have been settled and Syngenta no longer has share participation plans. During 2017 until settlement, the following employee share participation
plans were in existence.
Syngenta Long-Term Incentive Plans (LTI)
The Syngenta LTI plans provided selected executive and key employees of Syngenta with the opportunity to obtain the right to purchase shares of
Syngenta AG, or the equivalent American Depository shares (ADS) that were offered to selected executives and key employees in the USA. The
grant of share options for Syngenta shares was at the discretion of the Compensation Committee of Syngenta’s Board of Directors
(“Compensation Committee”), whose members are appointed by the Board of Directors of Syngenta (”Board”).
In 2015, Syngenta created a new LTI plan for members of the Syngenta Executive Committee (“Executive Committee”). The Syngenta LTI plan
and the Syngenta LTI plan for members of the Executive Committee had substantially the same terms, except that awards under the Executive
Plan were subject to additional performance conditions, as well as a required three year service period. The Compensation Committee set the
performance conditions before the grant date of the awards. The performance achieved during the three year performance period was to
determine the number of share options that vest, subject to the approval of the Compensation Committee.
Until the 2012 award, the exercise prices were equal to either the weighted average share price on the SIX for the five business days preceding
the grant date, or the share price on the SIX at the grant date, with the Compensation Committee having determined which of the two exercise
prices were used for each grant year. For subsequent awards, the closing share price on the SIX at the grant date was used to set the equity
grant value and exercise price. Options over ADSs were converted to US dollars at the exchange rate at the grant date, which may have varied
from the exchange rate at the exercise date. Standard options vested in full and became exercisable after completion of three years service and
terminated after 10 years from the grant date, except for early vesting and exercise upon redundancy or retirement, and all outstanding options
vested and were exercised on settlement of the ChemChina Offer. Except for the Executive LTI plan, none of the options vested on a pro rata
basis during the vesting period.
For share option awards to Executive Committee members, for the purposes of cash settlement on completion of the ChemChina Tender Offer,
performance was deemed to have been at target.
No grants of share options were made in 2017. The normal vesting date of share options awarded in 2014, of which 260,051 were outstanding at
January 1, 2017, was in February 2017, which was before the ChemChina Tender Offer was completed. These awards therefore vested in the
normal way to participants who had met the vesting condition. 1,180,935 share options were exercised, including 1,099,166 options exercised on
settlement of the ChemChina offer and 41,150 share options were forfeited or expired.
At January 1, 2017, 1,222,636 share options were outstanding and were accounted for on a cash-settled basis. Share options outstanding at
January 1, 2017, of which 480,197 were fully vested and exercisable, had a weighted average exercise price of $352 per share. The amount paid
to settle these options on completion of the ChemChina Tender Offer was $143 million.
64
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
The Long-Term Incentive Plan also granted selected executives and key employees of Syngenta restricted share units (RSUs) (or equivalent
restricted ADSs for relevant Syngenta employees in the USA). RSUs (or equivalent restricted ADSs) were rights to receive the equivalent number
of Syngenta AG shares for no payment at the end of a three year vesting period. RSUs did not carry rights to dividends and the grant date fair
value was reduced to reflect this. None of the RSUs or equivalent ADSs vested on a pro rata basis during the vesting period.
The Long-Term Incentive Plan 2015 for Executive Committee members granted Syngenta performance share units (PSUs). PSUs were rights to
receive the equivalent number of Syngenta AG shares for no payment at the end of a three-year vesting period, depending on achievement of
defined targets for four specified long term metrics relating to financial and non-financial performance, each of which carried equal weighting for on
target performance. In 2016, a variant of this plan was introduced, under which 50 percent of PSU awards granted in 2016 were subject to the
ranking of Syngenta TSR compared to a comparator group of companies and the remaining 50 percent were subject to achievement of Syngenta
performance targets for the four financial and non-financial metrics. For the purposes of cash settlement on completion of the ChemChina Tender
Offer, performance was deemed to be at target.
The normal vesting date of RSUs awarded in 2014, of which 74,076 were outstanding at January 1, 2016, was in February 2017, before the
ChemChina Tender Offer completed. These awards vested as equity in the normal way to participants. In 2017, 204,406 RSUs and PSUs were
distributed and no RSUs and PSUs were granted. 223,109 RSUs and PSUs awarded in 2015 and 2016 were outstanding at January 1, 2017, and
were accounted for on a cash-settled basis. The amount paid to settle these awards on completion of the ChemChina Tender Offer was $96
million.
Syngenta Deferred Share Plan
The Syngenta Deferred Share Plan provided selected senior executives with an opportunity to obtain shares of Syngenta AG. The plan entitled
participants to defer part of their annual short term incentive awards in favor of Syngenta shares and, subject to service throughout the three year
deferral period, additionally received one matching share for each deferred share held at the end of that period. Deferred and matching shares did
not carry rights to dividends during the deferral period and their grant date fair value was reduced to reflect this. A mandatory part of the short-term
incentive was allocated as deferred shares. Additional voluntary deferrals within the limits of the plan were made at the discretion of the
participants. None of the shares vested on a pro rata basis during the vesting period.
The normal release date of deferred shares and vesting date of matching shares awarded in 2014, of which 2,054 were outstanding at January 1,
2017, was in February 2017, before the ChemChina Tender Offer completed. The deferred shares awarded were released, and the matching
shares awarded vested as equity, in the normal way, to participants who had met the vesting condition. In 2017, 71,462 deferred and matching
shares were distributed, no deferred and matching shares were granted and 90 matching shares were forfeited.
41,757 matching shares awarded in 2015 and 2016 were outstanding at January 1, 2017, and were accounted for on a cash-settled basis. The
amount paid to settle these awards on completion of the ChemChina Tender Offer was $34 million.
Employee share purchase plans
Syngenta had employee share purchase plans in various countries, which entitled employees to subscribe for shares in Syngenta AG with the
benefit of either discounts from market value varying between 33 percent and 50 percent or a matching share. Shares issued under the plans
vested immediately and were subject to blocking periods of between two and three years, with the exception of the UK plan, for which completion
of three years’ service was required before vesting. Maximum annual subscription amounts per employee varied between $500 and $3,000. In
2017, 766 shares were subscribed under these plans.
Other information regarding the plans
Weighted average share price at exercise date for options exercised during year (CHF per option)
Weighted average share price at exercise date for options exercised during year ($ equivalent per option1)
Cash received from exercise of options and subscription for shares ($m)
1 At the exercise date average exchange rate for the month
Compensation expense
2017
449.3
461.8
24
Syngenta recognized the fair value of awards under the plans as compensation expense over the period from grant until vesting, or immediately
on grant for awards with no vesting period. To reflect vesting conditions unrelated to Syngenta’s share price, Syngenta estimated the shares and
options expected to vest and adjusted this subsequently in line with actual vesting. Fair value was measured for equity-settled awards at grant
date only, but was additionally remeasured at each reporting date for cash-settled awards so that the cumulative expense equaled the amount
paid on settlement. Fair value of grants of Syngenta AG ordinary shares was measured at their market value, less amounts payable by the
employee and dividends to which the employee was not entitled. Fair value of options over Syngenta AG ordinary shares was measured using the
Black-Scholes-Merton formula. Awards subject to a Syngenta total share return condition were measured using the Monte Carlo method.
65
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
The compensation expense associated with employee share participation plans, which was measured indirectly by reference to the fair value of
the equity instruments granted, was as follows for the year ended December 31, 2017:
($m)
Long-Term Incentive Plan
Deferred Share Plan
Total
of which:
($m)
Accounted for as equity-settled
Accounted for as cash-settled
Total
2017
85
10
95
2017
3
92
95
24. Principal currency translation rates
Year end rates used for the consolidated balance sheets at December 31, to translate the following currencies into $, are:
Swiss franc
British pound sterling
Euro
Brazilian real
Argentine peso
Russian ruble
Ukrainian hryvnia
2018 per $
0.98
0.78
0.87
3.87
37.60
69.61
27.69
2017 per $
0.98
0.74
0.83
3.31
18.77
57.69
28.07
Average rates during the years ended December 31, used for the consolidated income and cash flow statements, to translate the following
currencies into $, are:
Swiss franc
British pound sterling
Euro
Brazilian real
Argentine peso
Russian ruble
Ukrainian hryvnia
2018 per $
2017 per $
0.98
0.75
0.85
3.65
28.03
62.01
27.32
0.99
0.78
0.89
3.19
16.56
58.51
26.59
25. Risk management of financial risks
Risk management framework
The nature of Syngenta’s business and its global presence exposes it to a range of financial risks. These risks include (i) market risks, which
include potential unfavorable changes in foreign exchange rates, interest rates, commodity prices and other market prices (equities, credit spreads
etc.), (ii) counterparty risk and (iii) liquidity and refinancing risk.
A financial risk management framework is in place in the form of a Treasury policy approved by the Board of Directors. 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 Syngenta. In accordance with its Treasury policy, Syngenta actively monitors and manages financial risk with the
objectives of reducing fluctuations in reported earnings and cash flows from these risks and providing economic protection against cost increases.
These objectives are achieved through (a) a monthly assessment of the impact of market risks against defined risk limits (see following section),
which take into account the risk appetite of Syngenta and (b) the use of a variety of derivative and non-derivative financial instruments.
Financial instruments available for use to mitigate these risks are selected by Syngenta according to the nature of the underlying risk. These
instruments are designed to economically hedge underlying risks arising from operational activities and from funding and investment positions.
Syngenta does not enter into any speculative financial transactions.
66
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
The fair values and the volumes of the derivatives (including the time periods being hedged) used to manage financial market risks are below,
classified by accounting treatment: CF and FV indicate derivatives where cash flow hedge and fair value hedge accounting is applied, respectively;
and M2M indicates derivatives that are marked to market through profit or loss and hedge accounting is not specifically required. The transactions
are managed to minimize the potential adverse movement for the entire portfolio of the net transactional flows, rather than on an individual
currency basis. As such, for some derivatives there is no single average strike or price of the derivatives.
Fair value of
outstanding derivatives1
Accounting
treatment
Quantity
Assets
$m
Liabilities
$m
0-90
days
Maturity profile in $m
90-days
-1 year
1-5
years
>5 years
2018
Risk
Foreign exchange risk ($m)
Trading transaction – committed
Trading transaction – uncommitted
Trading transaction – uncommitted
Issued financial debt and interest
Interest rate risk
Commodity price risk
Gas2
Soft commodities3
Soft commodities4
Total
2017
Risk
Foreign exchange risk ($m)
Trading transaction – committed
Trading transaction – uncommitted
Trading transaction – uncommitted
Issued financial debt and interest
M2M
CF
M2M
CF
FV
CF
M2M
CF
10,400
1,012
0
1,890
500
10
149
84
14,045
75
11
-
25
6
2
-
10
129
(53)
(6)
-
(126)
-
-
(21)
-
(206)
Fair value of
outstanding derivatives1
Accounting
treatment
Quantity
Assets
$m
Liabilities
$m
M2M
CF
M2M
CF
FV
7,230
1,034
-
1,890
500
44
5
-
44
11
(45)
(22)
-
(103)
-
4
2
-
-
-
-
(2)
3
7
0-90
days
6
(13)
-
-
-
-
3
5
1
18
3
-
(36)
-
1
(9)
7
(16)
-
-
-
(66)
6
1
(3)
-
(62)
-
-
-
1
-
-
(7)
-
(6)
Maturity profile in $m
90-days
-1 year
1-5
years
>5 years
(7)
(4)
-
-
-
-
1
1
(9)
-
-
-
(81)
11
-
-
-
(70)
-
-
-
22
-
-
-
-
22
Interest rate risk
Commodity price risk
Gas2
Soft commodities3
Soft commodities4
Total
1 The fair values of derivatives are reported in the consolidated Balance Sheet as shown in Note 26
2 3,460,000 million (2017: 2,410,000 million) British thermal units
3 Mainly 112,469,001 lbs (2017: 117,165,485 lbs) of coffee
4 6,105,000 bushels (2017: 8,185,000 bushels) of soybean and 7,160,000 bushels (2017: 11,005,000 bushels) of corn
4
147
120
10,925
-
-
(1)
(171)
-
4
7
115
CF
M2M
CF
Of the derivatives listed in the table above, hedge accounting is applied wherever possible. Exceptions to this are derivatives where the fair value
movements of the hedges and the retranslation of the underlying exposures are largely offset in profit or loss (hedging foreign exchange risk of
committed monetary items); or derivatives placed, which do not fulfil the specific requirements of the accounting standard to achieve hedge
accounting (hedging foreign exchange risk of uncommitted forecast transactions; commodity price risk: soft commodities, principally Brazil coffee
purchases as part of barter programs).
For those transactions which are not designated for hedge accounting purposes where the transactions do not fulfil the specific requirements of
the accounting standard to achieve hedge accounting, the gains and losses on those hedging instruments for the year 2018 were as follows:
Foreign currency forward contracts that are effective economic hedges of forecast cash flows arising from anticipated sales and purchases
between Syngenta affiliates and third parties. The amount recorded in profit or loss in 2018 is a loss of $17 million (2017: gain of $11
million).
Commodity derivative contracts that are effective economic hedges of the anticipated purchases of raw materials or purchases, principally
purchases related to corn and soybean in North America and Latin America, and the resale of various crops in barter arrangements. The
amount recorded in profit or loss in respect of these derivatives in 2018 is a gain of $11 million (2017: gain of $6 million). The profit or loss
impact from the corresponding forecasted transactions occurs when the related finished product inventories are sold, which is generally in
the year following recognition of the gain or loss on the hedge.
67
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
Assessment of the impact of market risks
The impact of market risks is assessed using a variety of Value-at-Risk (VaR) and Earnings-at-Risk (EaR) methods. These methods are adjusted
to reflect the nature of the exposures and the impact of the exposures on profit or loss of the financial year. The specific methods used to assess
the impact of financial risks are described below:
Risk
Foreign exchange risk
Trading transaction – committed
Trading transaction – uncommitted
Issued financial debt and interest
Translation
Interest rate risk
Commodity price risk
Method
Exposure (financial statement item)
Time horizon (months)
VaR
EaR
VaR
VaR
EaR
EaR
Monetary asset and liability carrying amounts
Operating income
Monetary liability carrying amounts
Cumulative translation adjustment in OCI
Interest expense
Operating income
1
12
1
1
12
12
VaR and EaR calculations are risk management tools designed to statistically estimate with a pre-set probability the maximum amount of potential
losses in value (VaR) or earnings (EaR) over a specific (holding) time period given current and forecast positions and possible movements in
market prices. The VaR and EaR methods used by Syngenta estimate the gross impact on the consolidated financial statements if the underlying
items were not hedged and the net impact of the combined underlying hedged items and the related hedging instruments. VaR and EaR
calculations attempt to recognize that holding different assets and liabilities or incurring different future cash flow exposures may reduce portfolio
risk through diversification. Such diversification effects are captured within the calculations, which aim to present the risk based on Syngenta’s
currency exposure as a whole, rather than the sum of the exposures to the individual currency pairs within the portfolio of exposures. Using
historical data, the VaR and EaR calculations are designed to predict possible changes in the markets in the future at a 99 percent confidence
level, with a 1 percent probability that actual results will be worse than calculated. The time horizon used to calculate the VaR figures for each risk
is determined by the time period over which management forecasts and monitors changes in the risk and in Syngenta’s exposure to it and takes
mitigating actions in response to those changes.
The assessment of the impact of market risks is performed monthly and the results are compared against annually defined risk limits. In cases
where the net impact is higher than a risk limit, Syngenta enters into derivative financial instrument transactions in order to stay within the risk limits
approved in the risk management policy. Breaches of risk limits, should they occur, are immediately reported to senior management.
Syngenta cannot predict future movements in risk variables precisely, therefore calculations of the impact of market risks neither represent actual
losses nor consider the effects of potential favorable movements in underlying risk variables. Accordingly, these calculations may only be an
indication of future movements to the extent the historic market patterns repeat in the future.
Foreign exchange risk
Operating worldwide exposes Syngenta to foreign exchange transaction and translation risk at both the Group and subsidiary level. Syngenta’s
policy is to hedge the effect of foreign exchange translation risk on shareholders’ equity only in specific circumstances, for example to protect the
value of temporary excess foreign currency denominated cash positions.
Foreign exchange transaction risk – committed
Syngenta’s individual subsidiaries predominantly transact their operational activities in their respective functional currencies. However, the globally
integrated nature of Syngenta’s business results in its subsidiaries bearing some amount of transactional balance sheet risk, because some
monetary items (including financial liabilities) are denominated in foreign currencies.
Such committed foreign currency exposures are largely generated by the routing of products from Syngenta’s central manufacturing sites to its
foreign locations. The risk management strategy is to ensure that these committed exposures are fully hedged, unless otherwise approved by
Group Treasury, for example where not deemed cost-effective or where there is no forward market for a specific currency.
The derivative instruments that Syngenta’s risk management policy allows to be used to manage the risk are foreign exchange forward contracts
and cross currency swaps with the same risk (foreign exchange currency index), where the fair value movements of the hedges and the
retranslation of the underlying committed exposures are largely offset in profit or loss.
The derivative instruments are placed with the same maturity as the expected cash flows of the hedged transactions so that the timing of the cash
flows of the items within the hedged exposure effectively matches the timing of the cash flows of the derivative instrument.
68
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
Net committed transactional currency exposures are identified and reported on a monthly basis by business units. The impact of the hedging
program can be illustrated in the VaR calculations for committed exposures, which 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.
($m, except risk reduction %)
Underlying currency (1-month holding period)
Swiss franc
Brazilian real
British pound sterling
Russian ruble
Argentine peso
Rest of world
Total undiversified
Diversification
Net VaR
December 31, 2018
Value-at-Risk
Net
impact
4
1
0
0
4
13
22
(15)
7
Gross
impact
229
6
27
40
11
101
414
(151)
263
Risk
reduction
98%
83%
100%
100%
64%
87%
95%
90%
97%
December 31, 2017
Value-at-Risk
Gross
impact
166
6
23
41
2
95
333
(179)
154
Net
impact
8
1
-
-
1
22
32
(27)
5
Risk
reduction
95%
83%
99%
99%
38%
79%
90%
85%
97%
At December 31, 2018, the Value-at-Risk for a one month holding period, after hedges, at a 99 percent confidence level was $7 million (December
31, 2017: $5 million).
The largest exposures arise in Swiss franc, Russian ruble and British pound sterling. Switzerland and Great Britain house large research and
manufacturing sites.
Foreign exchange transaction risk – uncommitted
Uncommitted transactions are expected, highly probable future transactions for which Syngenta does not yet have a contractual right or obligation
(mainly sales and costs).
The US dollar represents the biggest single currency for both sales and costs. However, currency mismatches arise from Syngenta having
a centralized cost base, denominated mainly in Swiss francs, British pounds and US dollars, against a local selling base, denominated mainly in
US dollars, Euros and various other currencies, including those in emerging markets. In addition, due to the seasonality of Syngenta’s business,
the majority of sales occur during the first half of the year whereas costs tend to occur more linearly throughout the year.
The risk management objective is to minimize the impact of changes in foreign exchange rates on the operating income forecasted to result from
these transactions. Syngenta considers hedging this exposure unless it can reliably expect that operating income could, without significant adverse
economic impact, be protected by adjusting the pricing of forecast transactions for changes in foreign exchange rates before those transactions
occur. Hedging transactions are managed to minimize the potential adverse movement for the entire portfolio of the net transactional flows, rather
than on an individual currency basis. Transactions in a specific calendar year are managed cumulatively in separate portfolios.
The cumulative diversified risk of the whole portfolio can be reduced by entering into derivative transactions for a portion or the full amount of the
individual transactions so that the remaining risk of the whole portfolio is at acceptable levels within clearly defined risk limits. The risk management
objective is applicable for transactions in the following 24 months. Currently transactions for the next 12 month period are being hedged.
The derivative instruments that Syngenta’s risk management policy allows to be used to manage the risk are:
foreign exchange forward contracts and net purchased currency options with the same risk (foreign exchange currency index) which are
eliminating or reducing the uncertainty in the cash flows.
placed mainly with the same or (to a lesser extent) with shorter maturity than the timing of the cash flows being hedged so that the timing of
the cash flows of the hedged transactions effectively matches the timing of the cash flows of the derivative instrument.
69
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
The impact of the hedging program on operating income can be illustrated in the Earnings-at-Risk calculation performed for anticipated net
transactional currency flows for the following year taking into account related currency hedges.
($m, except risk reduction %)
Underlying currency (12-month holding period)
Swiss franc
Argentine peso
Brazilian real
Russian ruble
Euro
British pound sterling
Rest of world
Total undiversified
Diversification
Net EaR
December 31, 2018
Earnings-at-Risk
Net
impact
43
35
72
14
26
15
154
359
(234)
125
Gross
impact
76
35
72
16
27
20
164
410
(257)
153
Risk
reduction
43%
-
-
13%
4%
25%
6%
12%
9%
18%
December 31, 2017
Earnings-at-Risk
Net
impact
67
48
67
8
40
24
154
408
(289)
119
Gross
impact
116
48
67
13
37
30
168
479
(331)
148
Risk
reduction
42%
-
-
38%
(8)%
20%
8%
15%
13%
20%
At December 31, 2018, the total potential adverse movement for 2019 net transactional flows after hedges relative to year-end, at a 99 percent
confidence level, was $125 million (December 31, 2017: $119 million).
The largest exposures are to the Swiss franc, where Syngenta has a significant cost base in Switzerland with no material offsetting sales, and the
Brazilian real, where a significant cost base is only partially offset by sales because sales in Brazil are largely dollarized.
Foreign exchange transaction risk – issued financial debt and interest
Syngenta has a funding strategy which involves securing a diversification of funding sources in different markets and maintaining an optimal
currency mix of debt.
This additional foreign currency exposure arises from the debt issuances in Euro and in Swiss franc under the Euro Medium Term Note (EMTN)
program. The risk management objective is to minimize the impact of changes in foreign exchange rates on these foreign currency denominated
debt interest and principal repayments.
The foreign exchange risk on the foreign currency denominated debt is managed mostly by derivative instruments, and to a lesser extent within a
portfolio of other committed transactions, so that no material foreign currency risk remains as a result of the foreign currency denominated debt.
The derivative instruments which Syngenta’s risk management policy allows to be used to manage the risk are:
cross currency swaps designated as hedges of foreign exchange risk of future interest and principal payments on foreign currency
financial debt which are eliminating or reducing the uncertainty in the cash flows.
placed mainly with the same terms as the items being hedged so that the timing of the interest and principal repayments of the hedged
transactions effectively matches the timing of the cash flows of the derivative instrument.
Foreign exchange translation risk
Translation exposure arises from the consolidation of foreign currency denominated financial statements of Syngenta’s subsidiaries. This is
reported as currency translation effects in OCI.
Translation risk can be significant; however, Syngenta regards its equity base to be of sufficient magnitude generally to absorb the short- to
medium-term impact of exchange rate movements.
Syngenta can use both foreign currency denominated debt and net investment hedging to manage this exposure. The latter incorporates specific
actions to protect the value of temporary excess foreign currency denominated cash positions. No hedging was undertaken for exposures of this
type during the years ended December 31, 2018 or 2017. The exposure is deemed to be mitigated by the large net asset base of Syngenta and
consequently no additional management of the exposure was undertaken in 2018 or 2017.
70
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
The table below presents the 1-month translation Value-at-Risk:
($m)
Currency of net investment in subsidiary (1-month holding period)
Brazilian real
Swiss franc
Euro
British pound sterling
Rest of world
Total undiversified
Diversification
Net VaR
December 31, 2018
Value-at-Risk
December 31, 2017
Value-at-Risk
Gross impact
168
113
46
42
126
495
(293)
202
Gross impact
156
213
38
50
109
566
(174)
392
At December 31, 2018, the Value-at-Risk for a one month holding period at a 99 percent confidence level was $202 million (December 31, 2017:
$392 million). In 2018 due to the $4.71 billion dividend payment, the Swiss franc exposure changed, resulting in lower risk.
The two largest single currency exposures arise in the Brazilian real and Swiss franc, driven by the large operations and investments in facilities in
Switzerland and Brazil.
Interest rate risk
Syngenta is exposed to fluctuations in interest rates on its borrowings (including forecasted borrowings) and excess cash. While the majority of
Syngenta’s borrowings have fixed interest rates, portions of Syngenta’s net borrowings, including its short-term commercial paper program,
drawings under the syndicated credit facility 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. The risk
management strategy involves ensuring an efficient fixed/floating mix of total debt within approved interest rate limits.
The risk can be managed by the use of interest rate derivatives relating to future interest payments of financial debt liabilities. The derivative
instruments are placed with the same maturity as the expected cash flows of the hedged transactions so that the timing of the cash flows of the
hedged transactions effectively matches the timing of the cash flows of the derivative instrument.
At December 31, 2018, the net amount of Earnings-at-Risk on floating rate debt due to potential changes in interest rates (a parallel shift of 100
bps was applied) was $22 million (2017: $7 million). The net amount of Earnings-at-Risk on net debt, as defined under “Capital structure” below,
due to potential changes in interest rates was immaterial at December 31, 2018 and 2017.
Commodity price risks
Operating in the agribusiness sector, changes in certain commodity prices affect Syngenta’s reported operating results and cash flows. On a
limited basis, Syngenta enters into derivative transactions to hedge the exposure of its cost base to commodity prices. This activity comprises oil
and natural gas hedging in the UK and USA, as well as soft commodity hedging for corn and soybean purchases by the Seeds business in the
USA, Canada, Brazil and Argentina, where Syngenta contracts to purchase various seed crops from growers and hedges the cost of the
purchases. In barter arrangements where Syngenta sells products in exchange for receiving a certain amount of a commodity crop, Syngenta
hedges the value of the crop. At December 31, 2018 and 2017, there were no material open hedging transactions for Brazil and Argentina corn
and soybean price risk.
Syngenta has indirect exposure to oil price fluctuations mainly through the impact of oil prices on the cost of both raw materials, especially
chemical intermediates in the Crop Protection business, and distribution activities. At December 31, 2018, there were 3 million barrels of long call
options on oil for 2019 outstanding (December 31, 2017: no hedge protection in place for oil). As the exposure to oil is indirect, Syngenta does not
calculate the Earnings-at-Risk due to potential changes in oil prices.
Natural gas exposure occurs in Syngenta’s primary manufacturing sites and Syngenta is managing the exposure by hedging the main risk
component, which is the natural gas market price, contractually linked to the NYMEX natural gas benchmark price. The other risk components
within the exposure are immaterial.
The main objective of managing commodity price risk is to reduce the impact of commodity price changes on operating income and to provide
economic protection against future cost increases. Syngenta uses fixed price contracts and derivatives (both Over-the-Counter (OTC) and
exchange traded instruments, including commodity option and futures contracts) to achieve this objective. The derivative instruments are placed
with the same maturity as the expected cash flows of the hedged transactions so that the timing of the cash flows of the hedged transactions
effectively matches the timing of the cash flows of the derivative instrument.
At December 31, 2018, the net amount of Earnings-at-Risk due to potential changes in natural gas prices was not material. Earnings-at-Risk due
to potential changes in prices of soft commodities, principally corn and soybean, assuming a 12-month holding period are presented below.
($m, except risk reduction %)
December 31, 2018
Earnings-at-Risk
December 31, 2017
Earnings-at-Risk
Soft commodities
Total undiversified1
1 As the main soft commodities are largely correlated to each other, the impact of diversification is immaterial
Gross impact
31
Net impact
5
Risk reduction
84%
Gross impact
31
Net impact
3
Risk reduction
88%
The Earnings-at-Risk of soft commodities is driven by their high price volatility compared to other asset classes. The hedging program reduces
overall 12-month Earnings-at-Risk at December 31, 2018 to $5 million (December 31, 2017: $3 million).
71
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
Derivatives and hedge accounting
Syngenta seeks to apply, wherever possible, hedge accounting to present its financial statements in accordance with the economic purpose of the
hedging activity. Hedges for which hedge accounting is not adopted either (a) do not meet the requirements for hedge accounting treatment under
IFRS or (b) when combined with the accounting for the underlying hedged items, impact the financial statements in a manner aligned with the
economic purpose of the hedging transaction without the need to adopt hedge accounting treatment, for example hedges of monetary items
denominated in foreign currency.
Syngenta determines the economic relationship between the hedged items and the hedging instruments by reviewing the critical terms of the
hedged items and the hedging instruments. As a result Syngenta concludes that the risk being hedged for the hedged items and risk inherent in
the hedging instruments are sufficiently aligned, there is no inherent mismatch in the hedging relationship and a 100 percent hedge ratio applies
both for the actual quantities hedged and for the hedge accounting, except as described below. The impact of the critical terms is also assessed
using historical scenario analysis supported by statistical methods (regression analysis).
For the hedging of foreign currency risk of uncommitted forecasted trading transactions, because the exposures are largely generated by the
routing of products from Syngenta’s central manufacturing sites to its foreign locations, the profit or loss impact from the corresponding
transactions occurs when the related finished product inventories are sold to third parties. When entering into derivative hedging contracts,
Syngenta selects maturity dates based on the forecast period for which Syngenta holds inventories of its products for each commercial market by
hedged currency exposure. Limited variability in the holding period occurs mainly due to timing of the third party sales transactions (“inventory
holding period mismatch”).
For the hedging of commodity price risk of soy and corn, there is variability between the index being hedged (CBOT) and the drivers of the actual
exposures (local soy elevator prices based on CBOT and Syngenta seeds production and selling prices based on CBOT). The variability is,
however, limited to individual transactions within the group of transactions in this hedging program – and a hedge ratio of 100 percent is observed
for the whole group of transactions.
The following table summarizes the accounting treatment, sources of ineffectiveness and the effectiveness assessment method for the identified
financial market risks:
Risk
Foreign exchange risk:
Accounting
treatment
Potential sources of ineffectiveness
Method
Frequency
Effectiveness assessment
Trading transaction – uncommitted
Issued financial debt and interest
Interest rate risk
Commodity price risk:
Gas
Soft commodities
CF
CF
FV
CF
CF
Lower volume of hedged items;
inventory holding period mismatch Critical terms match
Lower volume of hedged items Critical terms match
Lower volume of hedged items Critical terms match
Quarterly
Quarterly
Quarterly
Lower volume of hedged items Critical terms match
Lower volume of hedged items;
Semi-annually
index mismatch Regression analysis
Quarterly
Ineffectiveness is recognized in the consolidated income statement in Other general and administrative for hedges of uncommitted foreign
currency forecast transactions, in Financial expense, net for hedges of committed foreign currency monetary items, in Financial expense, net for
hedges of interest rate risk and in Cost of goods sold for hedges of commodity price risk. For the years ended December 31, 2018 and 2017 none
of the above potential sources of ineffectiveness, individually or collectively, resulted in material amounts of actual ineffectiveness being reported
for any hedge accounting relationships.
Fair Value Hedge Accounting
The amounts being reported in the statement of financial position for the fair value hedging relationships at December 31, 2018 and 2017 are as
follows:
Risk ($m)
Interest rate risk – for continuing hedging relationships
Interest rate risk – for hedged items that have ceased to be adjusted
Total
Carrying amount
of hedged item
Liabilities
Accumulated amount
of fair value adjustment
Liabilities
2018
501
39
540
2017
506
40
546
2018
(2)
(2)
(4)
2017
(7)
(3)
(10)
The carrying amounts of the hedged items, including the fair value adjustments to the hedged items, are reported under Current financial debt and
other financial liabilities and Financial debt and other non-current liabilities.
The change in the value of the hedged items during the period for hedge effectiveness purposes was $6 million (2017: $10 million).
72
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
Cash flow hedges
The gains/(losses) on derivative instruments recognized in and classified out of the cash flow hedge reserve during the years ended December 31,
2018 and 2017 were as follows. The amounts shown exclude related income tax effects, which are disclosed in Note 7.
Continuing hedging relationships
Hedge accounting no
longer applied
2018 ($m)
Opening balance
(Losses)/gains recognized in OCI:
on hedges as designated
Transferred directly to assets or
liabilities
Reclassifications to profit or loss:
Losses/(gains) on hedges as
designated:
Cost of goods sold
General and administrative
Financial expense, net
Closing balance
2017 ($m)
TotaOpening balance
Losses/(gains) recognized in OCI:
on hedges as designated
Transferred directly to assets or
liabilities
Reclassifications to profit or loss:
(Losses)/gains on hedges as
designated:
Cost of goods sold
General and administrative
Financial expense, net
Closing balance
Foreign exchange risk
Trading
transaction –
uncommitted
Issued financial
debt and
interest
48
Commodity price risk
(17)
(28)
-
-
50
-
5
(77)
-
-
-
89
60
Continuing hedging relationships
Foreign exchange risk
Commodity price risk
Trading
transaction –
uncommitted
(23)
Issued
financial
debt and
interest
69
Soft
commodities
Gas
(13)
(171)
-
-
-
19
-
(17)
-
-
150
48
Soft
commodities
1
(5)
5
1
-
-
2
3
(2)
8
(8)
-
-
1
Foreign
exchange risk –
translation
(70)
1
-
-
-
-
(69)
Subtotal
32
(110)
5
1
50
89
67
Hedge accounting no
longer applied
Foreign exchange
risk – translation
(68)
(2)
-
-
-
-
(70)
Subtotal
49
(186)
8
(8)
19
150
32
Total
(38)
(109)
5
1
50
89
(2)
Total
(19)
(188)
8
(8)
19
150
(38)
Gas
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Amounts reclassified from the cash flow hedge reserve into profit or loss are recognized in the consolidated income statement in Other general
and administrative for hedges of uncommitted foreign currency forecast transactions, in Financial expense, net for hedges of committed foreign
currency monetary items and for hedges of interest rate risk and in Cost of goods sold for hedges of commodity price risk.
Credit risk
Credit risk arises from the possibility that counterparties involved in transactions with Syngenta may default on their obligation, resulting in financial
losses to Syngenta. Credit risk relates both to financial assets (including derivatives, marketable securities and money market contracts) as well as
to operational assets managed by Syngenta’s businesses (such as trade receivables).
Syngenta’s maximum exposure to credit risk is the carrying values of its financial assets and receivables, including derivatives with positive market
values. These amounts are disclosed in Note 26.
Syngenta has policies and operating guidelines in place to ensure that financial instrument transactions are only entered into with high credit
quality banks and financial institutions. These include limits in respect of counterparties to ensure that there are no significant concentrations of
credit risk. Syngenta continuously monitors the creditworthiness of its counterparties based on credit ratings and credit default swap data.
At December 31, 2018, Syngenta had no treasury or derivative transactions representing a significant concentration of credit risk. No credit losses
have been incurred from investments in derivative financial instruments during the years ended December 31, 2018 and 2017.
To minimize its exposure to derivative positions, Syngenta enters into netting agreements under an International Swaps and Derivatives
Association (ISDA) master agreement with its respective counterparties. In addition, for almost all derivative positions, Syngenta has entered into
Credit Support Annex contracts (CSAs) under which cash is exchanged as collateral. The CSA contracts cumulatively limit either Syngenta’s or
the counterparty’s aggregate credit risk exposure to no more than $1 million per counterparty on a weekly settlement basis for the positions for
73
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
which CSA contracts have been agreed. There are no constraints on the cash exchanged and held between counterparties and the collateral can
be used as part of operations. At December 31, 2018, an asset amounting to $111 million (2017: $118 million), and a liability amounting to $44
million (2017: $25 million) were recorded representing cash paid and received by Syngenta as collateral under these CSAs.
The impact of credit risk on the fair value of derivatives is considered through market observable credit default swap spreads for Syngenta and its
counterparties. The impact on the fair value of Syngenta’s derivative positions at December 31, 2018 and 2017 of the risk of default by financial
counterparties was not material.
The credit risk to operational assets is managed through the use of credit limits and is partially mitigated through commercial activities, which
include barter operations, cash sales incentives and obtaining other security from customers where appropriate.
The following tables show the effect of set off rights that apply to financial assets and liabilities under the above ISDA and CSA agreements at
December 31, 2018 and 2017. Syngenta’s rights under these arrangements would become enforceable in the event of a future default of the
respective counterparty.
($m)
Gross recognized derivative financial instrument fair values (Note 26)
Amounts offset in consolidated balance sheet
Net amounts per consolidated balance sheet
Amounts subject to conditional set-off rights but not offset in consolidated
balance sheet:
ISDA Master netting agreements for derivative financial instruments
Collateral (received) / paid by Syngenta under CSA agreements
Net amounts in the event that all conditional set-off rights are applied
2018
2017
Assets
129
-
129
Liabilities
(206)
-
(206)
Assets
127
-
127
Liabilities
(183)
-
(183)
(46)
(32)
51
46
105
(55)
(65)
(25)
37
65
118
-
Liquidity risk and refinancing risk
Within Syngenta’s risk management framework, liquidity risk is defined as the risk of being unable to raise funds to meet payment obligations when
they fall due.
Refinancing or funding risk is defined as the risk of being unable, on an ongoing basis, to borrow in the market to fund actual or proposed
commitments. Syngenta mitigates its liquidity and refinancing risk by maintaining: a committed unsecured funding facility; ongoing discussions with
its core banks to best monitor its funding capacity; simulations; and diversification of its debt portfolio.
Syngenta’s liquidity risk policy is to maintain at all times sufficient liquidity reserves both at Group and subsidiary level in order to meet payment
obligations as they become due and also to maintain an adequate liquidity margin. The planning and supervision of liquidity is the responsibility of
the subsidiaries and Group Treasury. Liquidity requirements are forecasted on a weekly basis. Syngenta operates regional or country cash pools
to allow efficient use of its liquidity reserves.
Short-term liquidity
Two of Syngenta’s largest markets are Europe, Africa and the Middle East and North America. Both sales and operating profit in these two regions
are seasonal and are weighted towards the first half of the calendar year, reflecting the northern hemisphere planting and growing cycle. Latin
America is another large market for Syngenta and sales and operating profit there are weighted towards the second half of the calendar year,
reflecting the southern hemisphere planting and growing cycle. This seasonal operating activity results in seasonal working capital requirements.
Syngenta’s principal source of liquidity consists of cash generated from operations. Working capital fluctuations due to the seasonality of the
business are supported by short-term funding available from a $2.5 billion Global Commercial Paper program and a $3 billion committed,
revolving, multi-currency syndicated credit facility. In 2018, the credit facility was extended by one year and will now mature in 2023. It provides the
possibility to extend in 2019 by one further year, until 2024. In May 2017, the existing syndicated credit facility was increased, extended and
amended following the change of control related to the ChemChina take over. The amount drawn under the syndicated credit facility at December
31, 2018 was $150 million (2017: $200 million). The average outstanding balance under the syndicated credit facility for the year 2018 was $564
million (2017: $7 million).The amount drawn under the Global Commercial Paper program at December 31, 2018 was $80 million (2017: $473
million). The average outstanding balance under the Global Commercial Paper program for the year 2018 was $570 million (2017: $1,388 million).
The maturity analyses for Syngenta’s current financial liabilities other than short-term derivative liabilities are presented in Notes 16 to 18.
The maturities of short term derivative liabilities are as follows:
($m)
2018
2017
Total
116
79
0–90
days
55
55
90–180
days
19
20
180 days–
1 year
42
4
Long-term financing
Long-term capital employed is currently financed through thirteen unsecured bonds and three unsecured notes issued under the Note Purchase
Agreement in the US Private Placement market. During 2017, $147 million of the US Private Placement notes were repaid as a consequence of
the change of control.
74
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
In April 2018, $4.75 billion of Rule 144/Regulation S under the U.S. Securities Act of 1933 notes were issued. In May 2018, Syngenta AG paid
$4.71 billion of the proceeds of those notes to its shareholder as a dividend, allowing CNAC Saturn (NL) BV to pay back its outstanding acquisition
debt.
The following table shows Syngenta’s contractually agreed (undiscounted) interest and principal repayments on long-term financing-related
non-derivative financial liabilities and the related derivatives held at December 31, 2018 and 2017. Non-derivative financial liabilities are recorded
at amortized cost (less related issuance costs) unless subject to fair value hedge accounting, in which case the liability is adjusted for the change in
fair value of the hedged risk to the extent the hedge relationship is effective. Derivative financial liabilities are recorded at fair value. The table
therefore shows the total carrying amount of Syngenta’s financial debt adjusted for the effect, if any, of applying fair value hedge accounting.
2018 ($m)
Less than 1 year
1-3 years
3-5 years
5-10 years
More than 10 years
Total payments
Net carrying amount
Non-derivative financial liabilities
(Unsecured bonds and notes)
Principal
repayment
356
2,110
1,500
2,631
914
7,511
Variable rate
interest
-
-
-
-
-
-
Fixed rate
interest
278
522
396
587
728
2,511
Derivative financial liabilities
(Interest rate and cross-currency swaps)
Fixed rate
interest
(52)
(36)
(22)
(28)
(4)
(142)
Variable rate
interest Repayment1
(40)
(82)
-
(29)
(17)
(168)
-
-
-
-
-
-
Total
634
2,632
1,896
3,218
1,642
10,022
7,485
Derivative financial liabilities
(Interest rate and cross-currency swaps)
Variable rate
2017 ($m)
Less than 1 year
1-3 years
3-5 years
5-10 years
More than 10 years
Total payments
Net carrying amount
1 The repayments above (and the net carrying amount of the derivative financial liabilities) do not include the amounts paid as collateral
Total
61
515
1,200
1,039
591
3,406
2,833
Non-derivative financial liabilities
(Unsecured bonds and notes)
Principal
Variable rate
repayment
interest
-
-
396
-
1,099
-
910
-
-
415
2,820
-
Fixed rate
interest
61
119
101
129
176
586
Fixed rate
interest
26
44
29
34
8
141
interest Repayment1
-
37
63
26
16
142
-
-
-
-
-
-
Total
(92)
(118)
(22)
(57)
(21)
(310)
126
Total
26
81
92
60
24
283
104
Forecast data for liabilities that may be incurred in the future is not included in the table above. Amounts in foreign currency were translated to US
dollars at the closing rate at the reporting date. Variable payments at each year end arising from financial instruments were calculated based on
the forward interest rate yield curve and the spread that Syngenta pays on its outstanding debt and open derivatives at December 31, 2018 and
2017, respectively. Non-derivative financial liabilities, repayment of which can be demanded by the counterparty at any time, have been assigned
to the earliest repayment period.
Capital structure
Absent major acquisitions, Syngenta targets maintaining an investment grade credit rating, as recognized by major third-party rating agencies,
which it currently believes provides an optimal balance between financial flexibility and the cost of capital. At December 31, 2018, Syngenta’s credit
ratings were investment grade as follows: Fitch Ratings Ltd BBB/F-3; Standard & Poor's Rating Services BBB-/A-3; and Moody's Investors'
Services Limited Ba2/NP.
Syngenta manages capital by monitoring levels of net debt, as calculated below, and equity against targets. Syngenta defines net debt as
excluding financing-related derivatives and related collateral paid and received under CSA agreements as these balances offset each other.
Capital is returned to the shareholder primarily through dividend payments.
The net debt to equity ratio was 151% percent at December 31, 2018 (20 percent at December 31, 2017).
75
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
The components of net debt at December 31, 2018 and 2017 are as follows:
($m)
Current financial debt
Non-current financial debt
Cash and cash equivalents
Marketable securities1
Net debt at December 31
1 Included within ‘Derivative and other financial assets’ and ‘Financial and other non-current assets’
The movements in net debt are as follows:
($m)
Opening balance at January 1
Other non-cash items
Cash (received)/paid under CSAs, net
Cash paid on financing-related derivatives
Foreign exchange effect on net debt
Sale of treasury shares, net
Dividends paid
Free cash flow
Closing balance at December 31
2018
925
7,178
(1,563)
(214)
6,326
2018
1,621
28
(26)
-
(148)
-
4,707
144
6,326
2017
1,022
2,860
(2,253)
(8)
1,621
2017
2,281
(2)
(247)
49
313
(24)
470
(1,219)
1,621
Syngenta defines free cash flow as cash flow from operating and investing activities, excluding investments in and proceeds from marketable
securities, which are included in investing activities, excluding cash flows from and used for foreign exchange movements and settlement of
related hedges on inter-company loans, which are included in operating activities; and including cash flows from acquisitions of non-controlling
interests, which are included in financing activities.
76
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
26. Financial assets and liabilities
The following tables show the carrying amounts and fair values of financial assets and liabilities by category of financial instrument and
reconciliation to where they are presented in the balance sheet at December 31, 2018 and 2017. The fair value hierarchy level is shown for those
financial assets and liabilities that are carried at fair value in the balance sheet.
2018 ($m)
Cash and cash equivalents
Trade receivables, net:
At amortized cost
Mandatorily measured at fair value through profit or loss
Total
Other accounts receivable:
Financial assets
Non-financial assets
Total
Derivative and other financial assets:
Derivative financial assets4
Other current financial assets
Total
Financial and other non-current assets:
Loans, receivables and pooled investments
Equity investments at fair value through OCI
Other, not carried at fair value
Derivative financial assets4
Total
Trade accounts payable
Current financial debt and other financial liabilities:
Non-derivative financial liabilities
Derivative financial liabilities4
Total
Other current liabilities:
Financial liabilities
Non-financial liabilities
Total
Carrying amount (based on
measurement basis)
Amortized
cost
1,563
Fair value
level 1
-
Fair value
level 2
-
Fair value
level 31
-
Total
1,563
Comparison
fair value
1,5632
4,389
-
261
-
-
115
39
-
-
-
3,613
1,079
-
169
-
-
-
-
-
10
211
48
-
-
-
-
-
-
-
-
-
9
-
-
89
-
5
-
-
30
-
-
116
-
-
-
-
-
-
-
-
-
123
-
-
-
-
-
-
-
4,389
9
4,398
261
275
536
99
326
425
92
123
247
30
492
3,613
1,079
116
1,195
169
726
895
4,3892
9
4,398
2612
-3
99
3262
425
925
1231
-3
30
3,6132
1,0792
116
1,195
1692
-3
Financial debt and other non-current liabilities:
Non-derivative financial liabilities
Derivative financial liabilities4
Non-financial liabilities
Total
1 The main valuation input for these investments is the price from their most recent shareholder financing transactions. Where the most recent shareholder financing transactions are not
7,185
90
140
7,415
6,7786
90
-3
7,185
-
-
-
90
-
-
-
-
-
-
-
considered representative of fair value, pricing models are used.
2 Carrying amount approximates the estimated fair value due to the short-term nature of the financial instruments
3 Fair value is not required to be disclosed for non-financial assets and non-financial liabilities, including defined benefit pension assets
4 Derivative financial assets and liabilities are measured at fair value through profit or loss except that gains and losses on cash flow hedges of forecast transactions are not recognized in
profit or loss until the hedged transaction is recognized in profit or loss
5 Fair values of these receivables are measured by discounting their cash flows at interest rates derived using observable yields on government bonds with maturities and currencies that
match those of the respective receivable and the estimated credit risk of each receivable. The total fair value disclosed in respect of loans and receivables at amortized cost is due from
counterparties that have not issued traded bonds and represents a level 3 fair value measurement
6 Financial liabilities represent both exchange traded bonds and non-exchange traded private placement notes issued by Syngenta. The fair value disclosed consists of level 2 fair value
measurements derived from observable price quotations for these bonds, except for one private placement note with a fair value of $9 million, which is a level 3 measurement because
market interest rates and credit rates are not observable for the full period through to its maturity date in 2035
77
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
2017 ($m)
Cash and cash equivalents
Trade receivables, net:
At amortized cost
Mandatorily measured at fair value through profit or loss
Total
Other accounts receivable:
Financial assets
Non-financial assets
Total
Derivative and other financial assets:
Derivative financial assets4
Other current financial assets
Total
Financial and other non-current assets:
Loans, receivables and pooled investments
Equity investments at fair value through OCI
Other, not carried at fair value
Derivative financial assets4
Total
Trade accounts payable
Current financial debt and other financial liabilities:
Non-derivative financial liabilities
Derivative financial liabilities4
Total
Other current liabilities:
Financial liabilities
Non-financial liabilities
Total
Carrying amount (based on measurement basis)
Amortized
cost
2,253
Fair value
level 1
-
Fair value
level 2 1
-
Total
2,253
Comparison
fair value
2,2532
4,061
-
325
-
-
268
56
-
-
-
3,174
1,062
-
86
-
-
-
-
-
6
4
50
-
-
-
-
-
-
-
-
-
26
-
-
65
-
5
94
-
56
-
-
79
-
-
4,061
26
4,087
4,0612
26
4,087
325
511
836
71
272
343
111
94
289
56
550
3,174
1,062
79
1,141
86
687
773
3252
-3
71
2722
343
1115
941
-3
56
3,1742
1,0622
79
1,141
862
-3
Financial debt and other non-current liabilities:
Non-derivative financial liabilities
Derivative financial liabilities4
Non-financial liabilities
Total
1 The totals for equity investments at fair value through OCI include $94 million of level 3 investments, mainly within Syngenta’s venture business unit, presented in the level 2 column in
2,860
104
100
3,064
2,7276
104
-3
2,860
-
-
-
104
-
-
-
-
the table above. The main valuation input for these investments is the price from their most recent shareholder financing transactions.
2 Carrying amount approximates the estimated fair value due to the short-term nature of the financial instruments
3 Fair value is not required to be disclosed for non-financial assets and non-financial liabilities, including defined benefit pension assets
4 Derivative financial assets and liabilities are measured at fair value through profit or loss except that gains and losses on cash flow hedges of forecast transactions are not recognized in
profit or loss until the hedged transaction is recognized in profit or loss
5 Fair values of these receivables are measured by discounting their cash flows at interest rates derived using observable yields on government bonds with maturities and currencies that
match those of the respective receivable and the estimated credit risk of each receivable. The total fair value disclosed in respect of loans and receivables at amortized cost is due from
counterparties that have not issued traded bonds and represents a level 3 fair value measurement
6 Financial liabilities represent both exchange traded bonds and non-exchange traded private placement notes issued by Syngenta. The fair value disclosed consists of level 2 fair value
measurements derived from observable price quotations for these bonds, except for one private placement note with a fair value of $9 million, which is a level 3 measurement because
market interest rates and credit rates are not observable for the full period through to its maturity date in 2035
78
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
The levels of fair value hierarchy used above are defined as follows:
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the
asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based
on observable market data.
The fair values of equity shareholdings subject to a lock-up period where the underlying shares are actively traded on a stock exchange are
derived by applying a discount to the market price and are classified as level 2. They are reclassified as level 1 on expiry of the lock-up period. In
2018 and 2017, there were no transfers between level 1 and level 2 or into or out of level 3 of the fair value hierarchy or between the fair value and
amortized cost categories.
Movements in level 3 financial assets for the years ended December 31, 2018 and 2017 were as follows:
($m)
January 1
Unrealized gains recognized on equity instruments at fair value through OCI
Additions due to issues
Disposals due to sales
Currency translation effects and other
December 31
2018
2017
94
15
13
-
1
123
75
5
22
(11)
3
94
Income, expense, gains and losses relating to financial instruments recognized in profit or loss during the years ended December 31, 2018 and
2017 are as follows:
2018 ($m)
Recognized within Financial expense, net2:
Interest income
Interest expense
Currency gains/(losses), net
Recognized within Operating income:
Impairment charges
Total
2017 ($m)
Recognized within Financial expense, net2:
Interest income
Interest expense
Currency gains/(losses), net
Recognized within Operating income:
Impairment charges
Amortized cost
loans and
receivables1
Derivative
assets and
liabilities
Liabilities
carried at
amortized cost
147
-
-
(28)
119
-
(33)
(79)
-
(112)
-
(346)
-
-
(346)
Amortized cost
loans and
receivables1
Derivative
assets and
liabilities
Liabilities
carried at
amortized cost
155
-
-
(74)
81
-
(30)
(132)
-
(162)
-
(135)
-
-
(135)
Total
147
(379)
(79)
(28)
(339)
Total
155
(165)
(132)
(74)
(216)
Total
1 Includes immaterial amounts relating to financial assets classified as at fair value through profit or loss
2 Financial expense, net also includes $42 million of bank charges (2017: $36 million)
Reported gains recognized in OCI on revaluation of equity investments that were designated at fair value through OCI were $15 million and $5
million for the years ended December 31, 2018 and 2017, respectively.
27. New IFRSs and accounting policies
Adoption of IFRS 9 (July 2014)
Syngenta adopted IFRS 9 (July 2014) Financial Instruments, on January 1, 2018, having early adopted IFRS 9 (2013) with effect from January 1,
2014. IFRS 9 (July 2014) is the complete and final version of IFRS 9 and contains certain revisions to the financial asset classification and
measurement requirements in IFRS 9 (2013), the most important being the addition of a third business model for asset classification with
objectives of both collecting contractual cash flows from the assets and selling the assets. Assets classified in this model are measured at fair
79
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
value through OCI. Adoption of these revisions had no impact on these consolidated financial statements because Syngenta has not classified any
financial instruments within this third business model.
On adopting IFRS 9 (July 2014), Syngenta adopted the requirement to record allowances for expected credit losses on financial assets classified
at amortized cost. Previously, allowances were recorded when credit losses were incurred, considering only information about past events and
current conditions at the reporting date. Expected credit losses are estimated taking account of all available reasonable and supportable
information, including forward-looking information about business, financial and economic conditions. Adoption of the expected credit loss model
had no material impact on these consolidated financial statements. Syngenta’s largest category of financial assets is its trade receivables, which
with few exceptions have credit terms of less than 12 months. Syngenta estimated lifetime expected credit losses on trade receivables outstanding
at January 1, 2018 were estimated by applying the following loss matrix to net receivable balances after deducting collateral provided by
customers:
Not yet due 1%
Past due less than 90 days
20%
Past due between 90 and 180 days 75%
Past due more than 180 days 85%
This resulted in no material change to the provision for doubtful trade receivables at that date, and consequently Syngenta recognized no prior
period restatements or retained earnings adjustment on transition to IFRS 9 (July 2014). Movements on the provision for expected credit losses on
trade receivables for the year ended December 31, 2018 are set out in Note 9. Syngenta’s policies for credit risk management and estimating
expected credit losses are described below under “Trade and other accounts receivable”.
Other New IFRSs
Syngenta has early adopted the “Conceptual Framework for Financial Reporting” (the Framework) and “Amendments to References to the
Conceptual Framework in IFRS Standards” (the Amendments), issued in March 2018. The Framework replaces the previous Framework issued
in 2010. One of its purposes is to assist preparers of financial statements to develop consistent accounting policies when no IFRS applies to a
particular transaction or other event, or when an IFRS allows a choice of accounting policy; and to understand and interpret IFRSs. It does not
override the requirements of IFRSs. The Amendments update references to the Framework in certain IFRSs, their accompanying documents and
IFRS practice statements. Neither adoption of the Framework, nor early adoption of the Amendments, had any impact on these consolidated
financial statements.
Syngenta has also adopted the following revised IFRSs from January 1, 2018. These IFRSs have not been early adopted and their adoption had
no material impact on these consolidated financial statements:
“Classification and Measurement of Share Based Payment Transactions”. Syngenta’s accounting for its share based payments in these
financial statements was consistent with the amendments. Syngenta no longer has any share based payment plans or outstanding share
based payment transactions;
IFRIC 22 “Foreign Currency Transactions and Advance Consideration” requires most foreign currency transactions the consideration for
which is received or paid in advance, to be translated into the transacting entity’s functional currency using the exchange rate at the date(s)
on which this consideration is paid or received;
“Transfers of Investment Property”, Amendments to IAS 40; and
The Amendments to IAS 28 “Investments in Associates and Joint Ventures” included in “Annual Improvements to IFRS Standards” 2014-
2016 Cycle, which clarify financial statement disclosure requirements for investments in subsidiaries, joint ventures and associates that are
classified as held for sale.
The relevant new or revised IFRSs that Syngenta has not yet adopted are the following:
IFRS 16 “Leases”, was published in January 2016, and requires a lessee to account for all leases, unless exempt as described below, by
recognizing a lease asset (right of use asset) for the right to use the asset underlying the lease (underlying asset) and a corresponding
liability for lease payments during the lease term, which is defined as the non-cancellable period of the lease and any additional periods for
which the lessee has an option to use the asset that it is reasonably certain to exercise. Syngenta identifies such additional periods by
considering both the stated contractual terms of its leases and any lessee renewal rights conferred by applicable law. In assessing whether
it is reasonably certain to make use of lease periods which are at its sole option, Syngenta considers the length of the non-cancellable
lease period in each lease, contractual terms and conditions relating to the optional period(s) and to exercising the option(s), recent or
planned future leasehold improvements, the impact of terminating the lease on its operations and associated termination costs. Payments
for optional periods are included in the lease liability only if Syngenta is reasonably certain to continue unchanged all other terms in the
current lease, such as the area of land and buildings rented. No payments are included for renewal or additional periods which require
either the lessor’s consent for Syngenta’s continued use of the underlying asset during those periods or for which Syngenta and the lessor
have not agreed the lease payments and other terms for those periods. Payment for an option to purchase the underlying asset is included
if Syngenta is reasonably certain to exercise that option. Syngenta will apply the permitted expedient to include in the lease liability
payments for services associated with leases of cars, but not for leases of other assets. Syngenta will not apply IFRS 16 to leases of
intangible assets.
Syngenta will apply the permitted optional short term lease exemption to all leases with a term of less than one year on inception, and will
apply the permitted exemption for leases of low value items to all such items, which consist of personal computers and tablets, telephones,
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Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
small items of office furniture and similar items, which have a value when new of $5,000 or less, are not sub-leased and are not highly
dependent on other Syngenta assets for their use. Syngenta will account for short term and low value item leases in the same way as
operating leases under the current IAS 17, expensing costs on a straight-line basis over the lease term.
For leases which do not qualify for the above exemptions, Syngenta will recognize a liability at lease commencement equal to the present
value of payments required over the lease term for the use of the asset, excluding contingent payments, discounted at Syngenta’s
incremental borrowing rate (IBR). Syngenta’s IBR is comprised of a reference rate based on cash and swap curves for the currency and
maturity of the lease payments and a financing spread adjustment which differentiates between asset classes based on the value of the
collateral offered by the nature of the underlying asset, assuming that this value fully covers the debt throughout the lease term. For leases
of land and buildings, the IBR is equal to the reference rate of the corresponding currency without additional spreads. In the opinion of
Syngenta, the collateral represented by leases of mobile assets such as vehicles does not significantly reduce the interest rate that
Syngenta would have to pay a lender compared to the rate on unsecured finance with otherwise similar terms. Consequently, the IBR
additionally includes the Syngenta group spread to swap for group funding and a country risk premium. Syngenta will recognize a right of
use asset at lease commencement equal to the lease liability, adjusted by any lease payments made or incentives received before
commencement, and including where applicable Syngenta’s initial direct costs of obtaining the lease and an estimate of costs associated
with obligations to decommission or restore the underlying asset or the site where it is located.
After commencement, lease expense will be attributed to accounting periods in a similar way to finance leases under the current IAS 17.
Right of use assets will be amortized systematically over the lease term, subject to review for impairment, using the same policies as
Syngenta applies for depreciation and impairment of owned property, plant and equipment of the same class as the underlying asset. The
lease liability will be accounted for at amortized cost using the IBR at lease commencement, and the resulting interest cost will be
presented within Interest expense in the consolidated income statement. Where lease payments are indexed to a specified index or rate,
on each occasion that the lease payments change the lease liability is remeasured to include the revised payments, with a corresponding
adjustment to the right of use asset. However, if a lease is modified or Syngenta changes its assessment of the lease term or of a
purchase option in the lease, the lease liability will be remeasured by discounting the revised lease payments using a revised IBR
determined at the date of the change. Lease payments which are contingent on use of the underlying asset are not included in the lease
liability, and are expensed as incurred.
Syngenta will adopt IFRS 16 on January 1, 2019 using the modified retrospective application method, together with all applicable permitted
practical expedients. Under these transition methods:
Existing agreements at January 1, 2019 which are or contain a lease in accordance with the IAS 17 lease definition are
automatically treated as a lease for IFRS 16;
For each of approximately 6,000 IAS 17 operating leases with a remaining term of more than one year at January 1, 2019 that do
not qualify for the low value asset exemption, a lease liability will be recognized in accordance with IFRS 16, measured by
discounting the lease payments remaining at January 1, 2019 using Syngenta’s IBR at that date. A leased asset is recognized for
the same amount, ignoring Syngenta’s initial direct costs to obtain the lease;
Syngenta’s finance lease assets and liabilities in accordance with IAS 17 ($63 million and $61 million as per Notes 12 and 19
respectively) are not restated on transition;
Any change in net assets would be accounted for by making a one-time catch-up adjustment to retained earnings; however,
under the transition methods described above Syngenta expects there will be no adjustment to retained earnings, because on
transition to IFRS 16, equal asset and liability amounts will be recognized for leases that are accounted for as operating leases
under IAS 17.
Syngenta estimates that:
at January 1, 2019 it will recognize right of use assets and lease liabilities of approximately $193 million for IAS 17 operating
leases. The difference between this amount and the undiscounted amount of Syngenta’s minimum commitments under
operating leases disclosed in Note 20 is due to the effect of discounting and to the exemption for short term and low value item
leases, estimated annual payments for which are $35 million;
based on lease agreements that commenced on or before January 1, 2019, Syngenta estimates the overall net impact on its
consolidated income statement of applying IFRS 16 to those leases will not be materially different from the effect of applying IAS
17.
Approximately $55 million of lease payments for operating leases that commenced on or before January 1, 2019 will be
presented in the consolidated cash flow statement within cash flows used for financing activities. In 2018 and previous years,
lease payments on those leases were presented within cash flows from operating activities.
“Sale or Contribution of Assets between an Investor and its Associate or Joint Venture”, Amendments to IFRS 10 and IAS 28, was issued
in September 2014 and requires Syngenta to recognize gains and losses on such sales or contributions only to the extent they relate to the
interest in the Associate or Joint Venture that is held by investors other than Syngenta. In December 2015, the IASB postponed mandatory
application of the amendments indefinitely. Based on the associates and joint ventures in which it has investments at December 31, 2018,
Syngenta does not believe that the amendments will have a material impact on its consolidated financial statements.
IFRS 17 “Insurance Contracts” was issued in May 2017 and establishes principles for accounting and disclosure of insurance contracts
issued and reinsurance contracts held. Insurance contracts held as a policyholder are not within the scope of IFRS 17. The effective date
of IFRS 17 is January 1, 2021. Syngenta does not believe that IFRS 17 will have a material impact on its financial statements.
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Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
IFRIC 23 “Uncertainty over Income Tax Treatments”, was issued in June 2017 and must be applied with effect from January 1, 2019. The
interpretation contains options for either full retrospective application, or retrospective application by recognizing the cumulative impact in
retained earnings on initial adoption. IFRIC 23 clarifies that when income tax treatments are uncertain, Syngenta shall assume that income
tax authorities will exercise rights to examine its tax positions with full knowledge of all related information, and shall reflect the uncertainty
by using either the most likely method or the expected value method, whichever Syngenta expects to better predict the resolution of the
uncertainty, to determine taxable profit and income tax expense, assets and liabilities related to each uncertain tax treatment. Based on the
uncertain tax treatments it has identified at December 31, 2018, which are further discussed in Note 2, Syngenta believes its estimates are
consistent in principle with IFRIC 23 requirements and therefore does not believe the effect of IFRIC 23 on its financial statements will be
material.
“Long-term Interests in Associates and Joint Ventures”, Amendments to IAS 28, was issued in October 2017 and clarifies that long-term
interests in Associates and Joint Ventures, other than equity interests, are accounted for as financial assets in accordance with IFRS 9.
Syngenta must adopt the amendments by January 1, 2019 at the latest. Earlier application is permitted. Based on the associates and joint
ventures in which it has investments at December 31, 2017, Syngenta does not believe that the amendments will have a material impact
on its consolidated financial statements.
“Prepayment Features with Negative Compensation”, Amendments to IFRS 9, was issued in October 2017 and contains guidance for
classification of financial assets with prepayment options which could result in the holder receiving, rather than paying, compensation.
Syngenta must adopt the amendments on January 1, 2019. Based on the financial assets it has at December 31, 2018, Syngenta does
not believe that the amendments will have a material impact on its consolidated financial statements.
“Annual Improvements to IFRS Standards” 2015-2017 Cycle, was issued in December 2017 and clarifies accounting requirements for: the
acquisition of control or of joint control over joint arrangements in which the acquirer already holds an interest; the income tax
consequences of dividends payable; and which borrowings are used to determine the borrowing cost capitalization rate for assets under
construction. Syngenta must adopt the amendments on January 1, 2019. Syngenta does not believe that the amendments will have a
material impact on its consolidated financial statements.
“Plan Amendment, Curtailment or Settlement”, Amendments to IAS 19, was issued in February 2018 and clarifies how the direct
remeasurement impact of such an event on the net defined benefit asset and liability for post-employment plans recognized in profit or loss
interacts with the consequent indirect impact of the asset ceiling recognized in OCI, and that benefit expense for the period after such an
event is based on the actuarial assumptions used to remeasure the plan when the event occurs. Syngenta must adopt the amendments
on January 1, 2019. Syngenta’s accounting policy is already aligned with the amendments.
“Definition of a Business”, Amendments to IFRS 3, was issued in October 2018 and amends the definition of a business for the purpose of
determining whether business combination accounting should be applied to a transaction. It clarifies that a business must contain inputs
and a substantive process, and introduces a voluntary concentration test which allows purchases of assets the fair value of which is
concentrated in one asset to be identified as a set of assets and not a business, without the need to consider other features of the definition
of a business. Syngenta must adopt the amendments prospectively to transactions which occur on or after January 1, 2020. Earlier
application is permitted. The effect of the amendments, if any, on Syngenta’s consolidated financial statements will depend on the terms of
transactions entered into in future periods, which are unknown at present.
“Definition of Material”, Amendments to IAS 1 and IAS 8, was issued in October 2018 and clarifies existing guidance on materiality, adding
the concept that information is material if obscuring that information by using unclear language or presentation, including inappropriate
combination with dissimilar items or immaterial information or separation from similar items, could reasonably be expected to influence
decisions made by the primary users of financial statements. Syngenta must apply the amendments prospectively with effect from
January.1, 2020. Earlier application is permitted
New segment reporting
In 2018, Syngenta adopted revisions to its segment reporting to reflect changes in management structure, which followed on from the completion
of the takeover by ChemChina and the announcement of Syngenta’s new ambitions and priorities during 2017. There are six operating segments
consisting of five geographic regions which include the Crop Protection, Seeds and Controls businesses, and the global Flowers business.
Syngenta reports the China region and the Asia Pacific excluding China region as a single segment because of similar products, production and
distribution and similar economic characteristics. Syngenta combines the Flowers business together with sales and costs which are incidental to
Syngenta’s commercial strategies or are not directly attributable to an operating segment, such as global marketing and research and
development teams, corporate headquarter functions and some centrally provided support services in the finance, information systems, human
resources and procurement functions, under the heading ‘All other segments’ for materiality reasons. Until December 31, 2017, there were four
geographic regions which included the Crop Protection and Seeds businesses, and the Controls and Flowers businesses were reported together
in the global Lawn & Garden segment. The segment information presented in Note 4 for the year ended December 31, 2017 has been restated in
accordance with the new management structure.
Income and expense transactions have been attributed to the geographic regions based on the market destination to which they relate, rather than
on the region in which they originated.
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Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
Principles of consolidation
Subsidiaries
Subsidiaries are those entities which Syngenta controls. Syngenta controls all its subsidiaries through ownership of a majority of their voting rights.
Syngenta fully consolidates the income, expenses, assets, liabilities and cash flows of subsidiaries from the date it acquires control up to the date
control ceases. Intercompany transactions and balances are eliminated upon consolidation.
Associates and joint ventures
Syngenta has no interests in entities that it does not consolidate that would meet the definition of joint operations. Syngenta accounts for both
associates and joint ventures using the equity method.
Business combinations
Syngenta accounts for business combinations in accordance with IFRS 3 (revised January 2008), using the acquisition method. At the date it
acquires control of another business, Syngenta records the fair value of the agreed consideration payable, including the estimated fair value of any
contingent consideration and of any pre-existing ownership interest it holds in the acquired entity. Directly attributable acquisition transaction costs
are expensed as incurred. The assets and liabilities of acquired businesses are identified and recorded in the consolidated financial statements at
their acquisition date fair values, with certain exceptions as set out in IFRS 3. Acquired intangible assets are generally valued based on the income
approach: the relief from royalty method is generally used for brand names, the distributor method for customer relationships, and the residual
income method for product technology rights. Acquired land and buildings are valued based on the market approach and specialized plant and
equipment based on the cost approach. Non-controlling interests which either consist of actively traded financial instruments or which do not
represent a proportionate ownership interest in the acquired entity to which they relate are recorded at their fair value. All other non-controlling
interests are recorded at their proportionate share of the fair value of the acquired business’s net assets.
Other accounting policies
Foreign currencies and hyperinflation
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the rate prevailing at the balance
sheet date. Non-monetary assets and liabilities denominated in foreign currencies, stated at historical cost or fair value, are translated into the
functional currency at the foreign exchange rate prevailing at the date of the transaction or the date the fair value was determined, respectively.
Foreign currency transactions are translated into the relevant functional currency at the exchange rate prevailing at the date of the transaction.
With exceptions for certain regional supply centers, holding and finance subsidiaries, each Syngenta subsidiary uses the local currency of its
country of operations as its functional currency. Unrealized gains or losses related to equity loans, designated cash flow and net investment
hedging arrangements and gains and losses on remeasuring equity investments designated at fair value through OCI are recognized in OCI. All
other resulting foreign exchange transaction gains and losses are recognized in profit or loss. Equity loans are intercompany loans to subsidiaries
that are not expected to be repaid in the foreseeable future and therefore considered part of Syngenta’s net investment in the subsidiary.
Income, expense and cash flows of foreign operations are translated into US dollars using average exchange rates prevailing during the period.
Assets and liabilities of foreign operations are translated to US dollars using exchange rates prevailing at the balance sheet date. Foreign
exchange differences arising on these translations are recognized directly in OCI. Upon disposal or loss of control of a foreign subsidiary, the
cumulative currency translation difference relating to the subsidiary is reclassified from equity to profit or loss as part of the gain or loss on disposal.
The consolidated historical cost of inventories that have been transferred between Syngenta group entities since their initial purchase or
manufacture is measured by translating the currencies in which the costs of purchase or manufacture were incurred into US dollars at the
exchange rates prevailing at the date when those costs were incurred, and foreign exchange differences arising on retranslating these amounts to
US dollars at the rates at the balance sheet date or the date the inventories were sold, as applicable, are recognized in OCI.
Syngenta considers the economy of a country to be hyperinflationary if reliable statistical evidence indicates that its cumulative consumer price
inflation rate over the previous three years has exceeded 100% and is likely to continue to exceed 100% throughout the year following the balance
sheet date. Syngenta subsidiaries whose functional currency is the currency of a hyperinflationary economy are consolidated as follows: amounts
of non-monetary assets and liabilities and income and expense items in the subsidiaries’ financial statements are indexed to current price levels at
the balance sheet date using a recognized general consumer price index. The resulting financial statements, including income statement and cash
flows, are translated into US dollars at the rate prevailing at the balance sheet date.
Revenue
Syngenta early adopted IFRS 15 “Revenue from Contracts with Customers” with effect from January 1, 2017 using the cumulative effect transition
method. Under that method, Syngenta uses IFRS 15 to determine when revenue is recognized after January 1, 2017 for contracts with obligations
to supply products or provide services that had not been fulfilled by that date. Syngenta uses IAS 18 to account for changes after January 1, 2017
in estimates of the amount of revenue for contracts under which Syngenta had supplied or provided all required products and services before that
date.
Syngenta’s main source of revenue is product sales. Control of products passes to Syngenta’s customers, and revenue for product sales is
recognized, at a point in time which is usually upon delivery, subject to reasonable assurance of collectability. Delivery is defined based on the
terms of the sale contract. Syngenta also derives revenue from licensing the right to use its intellectual property (IP), principally its seeds
germplasm and traits. Each licensing contract Syngenta enters into has unique terms and certain licensing contracts may involve significant
upfront or milestone payments in addition to sales-based royalties.
Revenue is measured at the amount of consideration to which Syngenta expects to be entitled in exchange for the products or license rights it
transfers to customers. If the consideration is receivable more than 12 months after the transaction date and the effect of discounting is material,
the revenue amount recognized is discounted to its present value at the transaction date, using a discount rate which reflects customer risk, and
the unwinding of this discount is recognized as financial income over the period until the date the consideration is due. Revenue in contracts with
non-cash consideration is measured at the fair value of the consideration at contract inception.
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Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
The main forms of variable revenue for Syngenta are as follows and the judgments associated with estimating their amount are discussed in
Note 2:
cash incentive programs that provide rebates and discounts dependent on achievement of targets for purchase of Syngenta products, and
cash discounts for punctual or early payment of invoices. Syngenta recognizes sales minus an allowance for rebates, and a refund liability
presented within Trade accounts payable in the consolidated balance sheet. The allowance and liability are measured at the amount
expected to be refunded or credited to customers, estimated based on the programs’ terms, market conditions and historical experience.
sales returns, which arise both in markets where the customer has a legal or contractual right of return and in markets where customers do
not have such rights but Syngenta’s commercial practice is to accept returns. In either case, Syngenta recognizes sales minus an
allowance for expected returns, an estimated refund liability, and an asset for the right to recover its products corresponding to the
expected returns. The refund liability and the asset are presented within Trade accounts payable and Inventories respectively in the
consolidated balance sheet. The allowance and liability are measured at the amount expected to be refunded or credited to customers and
the asset is measured at the standard purchase or production cost of the underlying Syngenta products, minus allowances for
transportation and obsolescence where relevant.
in certain markets, sales terms allow customers to exchange purchased products at a later date for other Syngenta products of their
choice, to the same value. For these sales, Syngenta recognizes revenue upon delivery of the original products, minus a provision for
products expected to be exchanged. This provision is released, and the corresponding revenue is recorded, when the substitute products
are delivered or the customer’s right to exchange the products expires, whichever is earlier.
In licenses which grant the right to use Syngenta’s IP as it exists when the license is granted, and in which Syngenta receives revenue for
non-refundable lump sums and minimum guaranteed income amounts which can be reliably estimated and for which there are no related
future Syngenta performance obligations or contingencies other than the passage of time, Syngenta recognizes that revenue on signature
of or on the effective date of the license, whichever is later. Revenue for lump sum milestone payments which are contingent on product
regulatory approvals is recognized only when the competent regulatory authorities have granted the relevant approvals. Sales-based
royalty income is recognized in the period that the licensees make sales in respect of which the royalties are payable.
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 made during a defined period, if the customers still have the inventories on hand upon expiration 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 IFRS 15, revenue for these sales is recognized upon product delivery.
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.
For product sales which are qualifying purchases in customer loyalty incentive programs, Syngenta allocates revenue between its qualifying
product sales and the incentive awards of additional free or discounted products or services (“incentives”) based on the value of incentives to
which customers are expected to be entitled, the relative stand-alone selling prices of the respective product sales and incentives and, where
awards are subject to expiry, the extent to which customers are expected to redeem their rights based on historical experience of similar programs.
Syngenta recognizes estimated liabilities for the incentives in the period in which it recognizes the associated product sales, and presents these
liabilities as Contract liabilities in the consolidated balance sheet. In programs where the incentive is either a product normally sold by Syngenta, a
third party product which Syngenta is primarily responsible for supplying to customers or for which Syngenta bears inventory risk, or a service
provided to customers by a third party acting under Syngenta’s direction, Syngenta obtains control of the incentives before transferring them to
customers, and so supplies the incentives as a principal. For these programs, Syngenta recognizes the revenue allocated to the incentives when
customers receive them or redeem their right to an award. Revenue related to these programs is presented as part of Sales, and associated costs
are presented within Cost of goods sold or Marketing and distribution expense as appropriate. In other programs, Syngenta acts as agent for a
third party who supplies the incentives, and Syngenta recognizes any net income from supply of the incentive when the third party becomes
obliged to supply the awards.
Syngenta periodically enters into prepayment contracts with customers whereby it receives advance payments for products to be delivered in a
future period. These advance payments are recorded as liabilities and presented as part of Contract liabilities in the consolidated balance sheet.
Advance payment liabilities are released and revenues associated with such advance payment transactions are recognized when control of the
prepaid products passes to the customer.
Syngenta has not presented a separate line in the consolidated balance sheet for Contract assets because all material relevant assets are
presented either as Inventories or Trade receivables. Except for payments made to customers at inception of contracts which are recognized as
intangible assets and purchase and production costs recognized as inventories, Syngenta has no material incremental costs of obtaining contracts
or direct costs of fulfilling contracts that qualify for recognition as an asset.
For certain customers in certain markets, trade receivables are settled either with proceeds from sales by such customers of agricultural
commodities or by delivery of commodities to Syngenta by such customers. For these arrangements, Syngenta recognizes revenue when it has a
legally enforceable receivable, the amount of which is reliably measurable based on an agreed price for the Syngenta products. Where Syngenta
has a contract with the customer for physical delivery of a commodity at a fixed price which is hedged using derivative financial instruments, an
embedded derivative is recognized for the fair value of the contract until physical delivery. When Syngenta subsequently resells the commodity, it
classifies additional revenue as sales only to the extent that the original contract for the sale of Syngenta products included revenue that was
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Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
contingent upon the commodity sales proceeds. Any remaining gains or losses on the commodity sale are recorded in Marketing and distribution
expense in the consolidated income statement.
Research and development
Research expenses are charged to the consolidated income statement when incurred. Internal development costs are capitalized as intangible
assets only when there is an identifiable asset that can be completed and is expected to generate future economic benefits and when the cost of
such an asset can be measured reliably. Costs incurred internally to develop new chemical or biological crop protection products based on active
ingredients that have not yet obtained regulatory approval, or to develop new seed varieties which contain new traits that have not yet obtained
regulatory approval, are expensed as incurred because of the uncertainty inherent in the outcome of the regulatory approval process. Costs
incurred in the design, construction and testing of new or improved production processes that do not themselves require regulatory approval and
that can be applied to products which have already obtained approval are capitalized if the processes are technically feasible, Syngenta intends
and has sufficient resources to complete the development, the process will generate future economic benefits, and expenditure attributable to
developing the process can be measured reliably. Development expenses Syngenta incurs to develop technology on behalf of a third party under
a collaboration agreement are capitalized and amortized over the agreement term if Syngenta expects to recover the costs under the terms in that
agreement.
Costs of purchasing distribution rights, patent rights and licenses to use or sell products, or technology or registration data 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.
Expenses by function
Cost of goods sold includes costs of purchasing and producing inventories that have been sold to third parties, inbound and inter-site distribution
expenses, impairment of inventories, environmental remediation costs associated with ongoing Syngenta manufacturing sites, and general
overhead expenses of Syngenta’s Production and Supply function which are expensed as incurred. Marketing and distribution includes costs of
selling products, providing technical support for products sold, marketing and promotional expenses, distribution of finished products to third party
customers, and impairment of trade and other receivables. Research and development includes the expenses of Syngenta’s research sites and
third party research collaboration agreements, expenses incurred during the regulatory process for Syngenta products and the costs of Syngenta’s
global field trials organization. General and administrative includes expenses of general management, finance, human resources, information
systems, legal affairs and taxes, corporate affairs and communications, business planning and corporate development functions. Services
provided by these departments to the Production and Supply, Marketing and Distribution and Research and Development functions are allocated
to and included within those other functions. Gains and losses arising on routine asset disposals and gains and losses reclassified from OCI when
hedged forecast foreign currency trading transactions affect profit or loss are also reported within General and administrative. Restructuring is a
separate general and administrative function as it is managed through a project management office which is accountable to the Executive Team.
Impairment of property, plant and equipment that results from restructuring plans, rather than ongoing activities of the functions responsible for the
assets, is included in Restructuring. Impairment of goodwill and intangible assets is also included in Restructuring unless a specific function is
accountable for the impairment loss. Non-current asset depreciation and amortization are charged to the functions responsible for the related
assets.
Restructuring
Restructuring represents the effect on reported performance of initiating and enabling business changes that are considered major and that, 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 incremental costs of closing, restructuring or
relocating existing operations, and gains or losses from related asset disposals. Restructuring also includes the effects of analyzing and preparing
for potential industry consolidation transactions as well as completing and integrating significant business combinations and divestments, including
related transaction costs, gains and losses. Recurring costs of normal business operations and routine asset disposal gains and losses are
excluded.
Income taxes
Income taxes for the year comprise current and deferred taxes, calculated using rates enacted or substantively enacted at the balance sheet date.
Current tax is the expected tax payable on taxable income for the year and any adjustments to tax payable in respect of previous years. Deferred
tax is recognized using the liability method and thus is calculated on temporary differences between the tax bases of assets and liabilities and their
respective carrying amounts in the consolidated balance sheet.
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 liabilities are not recognized on the initial recognition of goodwill if the carrying amount of goodwill exceeds its tax base. Deferred tax assets,
including those related to unused tax losses, are recognized to the extent that it is probable that future taxable profit will be available against which
the assets can be utilized. Income tax expense, current and deferred, is recognized in profit or loss unless it relates to items recognized in OCI or
in equity in which case the tax expense is also recognized in OCI or equity, respectively.
Syngenta’s policy is to comply fully with applicable tax regulations in all jurisdictions in which Syngenta’s operations are subject to income taxes.
Syngenta’s estimates of current income tax expense and liabilities are calculated assuming that all tax computations filed by Syngenta’s
subsidiaries will be subject to review or audit by the relevant tax authorities. Syngenta and the relevant tax authorities may have different
interpretations of how regulations should be applied to actual transactions. Syngenta records provisions for taxes it estimates will ultimately be
payable when the reviews or audits have been completed, including allowances for any interest and penalties which may become payable.
Syngenta releases these provisions when the tax audit of the applicable year is completed or an Advance Pricing Agreement (APA) settlement is
reached that impacts previous years’ tax payments, or otherwise when the statute of limitations for the applicable year expires, unless there is
evident reason for earlier release.
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Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
Financial Instruments
Trade and other accounts receivable
Trade and other accounts receivable include invoiced amounts less adjustments for expected credit losses. Syngenta holds trade receivables to
collect their contractual cash flows, and classifies and measures them at amortized cost, except for certain foreign currency sales transactions in
which Syngenta offers to its customers a written exchange rate option embedded into the sales contract. Trade receivable/option contracts that
result from these foreign currency sales transactions are classified as at fair value through profit or loss. The fair value of these trade receivables is
measured by:
(a)
(b)
remeasuring the embedded exchange rate option at fair value;
retranslating the underlying trade receivable into the selling entity’s functional currency using closing spot exchange rates at the balance
sheet date; and
(c) adjusting the resulting carrying amount of the combined receivable contract to reflect changes in customer credit risk. Syngenta includes
this adjustment in the provision for doubtful receivables.
Factoring arrangements transferring substantially all economic risks and rewards associated with accounts receivable to a third party are
accounted for by derecognizing the accounts receivable upon receiving the cash proceeds of the factoring arrangement. Factoring arrangements
that transfer to a third party some, but not substantially all economic risks and rewards are accounted for by continuing to recognize Syngenta’s
continuing rights over the receivable and by recognizing any related obligation to the third party factor.
Credit risk management practices
Syngenta’s Corporate Financial Risk Group (CFFORG) monitors, proposes and coordinates country risk, credit management policies and
processes including credit limit setting for major customers, approval of credit exceeding 360 days and credit insurance and risk transfer
objectives. The CFFORG is supported by Regional, Territory and Country Trade Finance Credit Managers (TFCM) and Credit Committees (CC)
with defined authority levels. The CC defines risk mitigation programs at country and customer level such as barter, collateral policy, payment
terms, early payment rebates, and refinancing. The CC also defines the optimal credit risk level at customer and country level, approves customer
credit facilities, credit scoring and payment terms, defines and reviews collection strategies including credit hold and release processes, treatment
of critical customer cases and taking legal actions when collection efforts are insufficient to collect overdue balances, and sets yearly targets for
accounts receivable performance. The TFCM coordinates the CC and is responsible for risk analysis, executing trade financing programs,
collection negotiations and dispute resolution, and, where necessary, currency risk, export financing programs, documentary credits and
commercial bank guarantees and credit risk insurance. The TFCM is supported by a Credit Operations team responsible for collection and dispute
management.
Syngenta manages credit risk to operational assets through country and customer risk limits. Countries are assigned a risk rating based on
external analysis of their economic, business and political risk and internal analysis of agricultural risk. Country exposure limits and minimum
security requirements are applied in some defined high risk countries. A standardized credit scoring methodology is applied to all customers
generating a creditworthiness score computed using a points-based system which takes into consideration financial and non-financial attributes
and credit limits. Based on the total score achieved each customer is classified in a credit risk class which drives policy relating to sales order
release, collection process and credit limit. Each customer’s credit position is consolidated across all relevant systems to provide a total business
view of credit status and history.
Collateral is an important part of the risk mitigation strategy. Collateral is based on a list of locally accepted securities which may include cash,
other financial instruments, barter operations or third party credit enhancements such as guarantees or insurance, but normally excludes non-
financial assets. Collateral is validated based on its probability of and time to legal enforcement.
Receivable balances are written off only when there is no realistic prospect of their being collected, after completion of related legal actions and
permanent cessation of business activity with the defaulting customer. Write-offs are subject to defined authority levels and are not used to solve
small payment differences or valid commercial disputes with continuing customers.
Estimation of expected credit losses
To estimate expected credit losses, trade receivables are grouped into portfolios by credit risk class and country and a provision matrix method is
used. The principal inputs when determining matrix percentages are historical records of amounts written off in previous years, amounts currently
subject to insolvency proceedings and the likelihood of eventual write offs of those amounts, the average credit period, past due information and
historical experience. Assumptions are also made about forecast conditions for market credit, commodity price, currency and country risk,
competition and regulation over the remaining credit period of the trade receivables outstanding at the balance sheet date. These assumptions are
consistent with those used to prepare operational budgets for the following period. Rebate credits and validated collateral valued at its expected
value are deducted from outstanding receivable balances when determining the maximum exposure to credit loss to which matrix percentages are
applied. Expected recoveries under credit insurance policies which are not part of the agreement with the customer are accounted for separately
from the expected credit losses and are recognized as assets when the insurer has agreed the claim.
Expected credit losses on other receivables and amortized cost financial assets are generally estimated by assessing each receivable individually.
For balances reported as other receivables and current financial assets, lifetime expected credit losses are estimated. For balances reported as
non-current financial assets, 12-month expected credit losses are estimated unless the credit risk has increased significantly since the asset was
first recognized. Amounts more than 90 days past due are considered to be in default for this purpose.
Derivative and other financial instruments
Regular way purchases and sales of marketable securities are recognized at settlement date.
Financial assets and liabilities which have remaining contractual maturities of 12 months or less at the balance sheet date are presented within
Total current assets and Total current liabilities, respectively. Financial assets and liabilities which have remaining contractual maturities of more
than 12 months are presented within Financial and other non-current assets and Financial debt and other non-current liabilities, respectively.
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Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
Equity investments in other entities which are not subsidiaries, associates or joint ventures of Syngenta are included in Financial and other non-
current assets. They are classified and measured at fair value through OCI and are revalued to fair value at each reporting date, with all changes
in fair value recognized within OCI. In Syngenta’s opinion, presenting gains and losses on these investments in OCI is more consistent with
Syngenta’s strategic investment objectives than presenting those gains and losses within profit and loss. The fair value of equity investments
traded in active markets is measured at the quoted price at the balance sheet date, multiplied by the number of shares held by Syngenta. The fair
value of other equity investments is based on recent observable market transactions for equity shares in the investee company or, where there are
no recent transactions, on valuation multiples for equity shares in similar companies, which are traded.
Other non-current receivables represent royalty and license receivables, loans to employees and other third parties, and amounts recoverable
from third parties in reimbursement of environmental remediation and other costs. These receivables are stated at amortized cost, less provision
for impairment where appropriate.
Financial debt is recognized initially at its fair value less transaction costs, which represents the net proceeds from issuing the debt. Subsequently,
financial debt is stated at amortized cost using the effective interest method, except where subject to a fair value hedge relationship, in which case
the carrying amount of the debt is adjusted by the change in the fair value of the hedged exposure during the hedge relationship.
Derivative financial instruments are recorded initially at their fair value when Syngenta becomes a party to the instrument. They are revalued to fair
value at each reporting date and presented as financial assets when the fair value is positive and as financial liabilities when the fair value is
negative.
Fair values of publicly traded derivatives are based on quoted market prices of the specific instruments held at the balance sheet date.
Fair values of non-publicly traded derivatives are valued using accepted economic methodologies for pricing these financial instruments, such as
discounted cash flow analysis or option pricing models. The valuation models seek to make maximum use of market inputs existing at the balance
sheet date. The methods used to determine the fair value of specific types of non-publicly traded derivatives are as follows:
Interest rate and cross-currency swaps are calculated as the present value of the estimated future cash flows. The future cash flows are
determined using relevant market forward interest rates at the balance sheet date and are discounted using the zero-coupon rates with
equivalent maturities for AA rated entities at the balance sheet date, as adjusted for the counterparty’s credit risk. These discount rates
incorporate the impact of net credit risk present in those derivative instruments. For cross-currency swaps, the discount rates reflect the
impact of the currency basis on the future cash flows denominated in different currencies;
Forward contracts are determined using relevant market exchange rates at the balance sheet date;
Currency options are valued using the Black-Scholes-Merton option pricing model, which incorporates spot exchange rates, zero coupon
rates with equivalent maturities for entities with credit ratings which approximate Syngenta’s counterparty credit risk, and implied volatility in
the market forward exchange rates at the balance sheet date; and
Commodity options are valued using the Black-Scholes-Merton option pricing model, which incorporates future commodity price curves
with equivalent maturities and implied volatilities in the commodities markets at the balance sheet date, adjusted for counterparty credit
risk.
Realized gains and losses on disposal of amortized cost financial assets, revaluation gains and losses on derivatives not designated as
accounting hedges, and gains and losses corresponding to the ineffective portion of derivatives designated as accounting hedges are recorded
in profit or loss as they arise.
Syngenta applies hedge accounting as follows:
Fair value hedges
The designated hedging instruments are remeasured to fair value and the underlying hedged items are remeasured by the amount of change in
the fair value of the hedged risk. The resulting remeasurement gains or losses are recognized in profit or loss as they occur.
Cash flow hedges
For the effective portion of the hedge, gains and losses on remeasuring designated hedging instruments to fair value are recognized in OCI as part
of the cash flow hedge reserve. If the hedged transaction results in recognition of a non-financial asset such as inventories, the cumulative hedge
gain or loss is reclassified as part of the carrying amount of the related inventories. For other hedged transactions, the cumulative hedge gain or
loss is reclassified from OCI into profit or loss in the period (or periods) during which the underlying hedged cash flows affect profit or loss.
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 remains in equity until the underlying hedged item affects profit or loss. However, if a hedged
forecasted transaction is no longer expected to occur, the cumulative unrealized gain or loss on the hedging instrument is immediately reclassified
into profit or loss.
Time value of options
When Syngenta designates a derivative financial instrument that is, or contains, an option as a hedging instrument in a hedge accounting
relationship, the time value of the options as measured using the Black-Scholes-Merton option pricing model is excluded from the hedge
designation and accounted for as a cost of hedging, as follows. The change in the fair value of the option during its term is recognized in OCI to the
extent that the option terms are aligned with the attributes of the hedged exposure. If the hedged item is a transaction, the cumulative change in
time value is included in the initial carrying amount of any non-financial asset or liability recognized when the hedged transaction occurs, or
otherwise is recognized in profit and loss when the cash flows from the hedged transaction affect profit and loss. If the hedged item is a risk that
may affect profit or loss during the option term, the cumulative amount recognized in OCI is amortized into profit and loss on a straight line basis
over the option term.
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Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
Net working capital
For the purposes of presenting consolidated cash flows, the balance sheet items included in Net working capital are Inventories, Trade
receivables, Other accounts receivable, Trade accounts payable, Other current assets, Other current liabilities, and similar items due after more
than one year, such as minimum royalties from multi-year license agreements.
Inventories
Purchased products are recorded at acquisition cost while own-manufactured products are recorded at manufacturing cost including a share of
production overheads based on normal capacity. Cost of inventories is determined on a first-in-first-out basis. Allowances are made for inventories
with a net realizable value less than cost, or which are slow moving. Net realizable value is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and costs to sell. Costs to sell include direct marketing, selling and distribution costs. Unsaleable
inventories are fully written off.
Biological assets
Biological assets represent growing plants and cuttings in Syngenta’s Flowers business and sugar cane seedlings within its Sugar cane business.
In Flowers, young plants and cuttings are measured at fair value less costs to sell, with key inputs being current average third party net selling
prices, actual average selling costs and, for immature assets, estimated stage of growth relative to mature assets. Sugar cane seedlings are
measured at cost less impairment because fair value is not reliably measurable due to the nature of the asset not corresponding to traded assets
or products in the market. The carrying amount of current consumable biological assets measured using the cost model is tested for impairment by
comparing it with the assets’ net realizable value determined in accordance with IAS 2, “Inventories”. Syngenta classifies gains and losses from
remeasuring biological assets to fair value, and impairment losses for biological assets measured at cost less impairment, within Cost of goods
sold.
Property, plant and equipment
Property, plant and equipment are recorded at acquisition or production cost, less accumulated depreciation and any impairment losses. Eligible
borrowing costs are capitalized as part of the asset cost if construction is expected to take more than one year to complete. Capitalization ceases
when the asset is ready for its intended use. Depreciation is charged on a straight-line basis to the income statement, starting from the date the
asset is ready for use, over the following estimated useful lives:
Buildings
Machinery and equipment
Furniture and vehicles
Computer hardware
20 to 40 years
10 to 25 years
5 to 20 years
3 to 7 years
Land is recorded at acquisition cost and is not subject to depreciation. Bearer biological assets are accounted for as Property, plant and equipment
using the cost model and depreciated over their productive lives.
Expenditures made for existing property, plant and equipment that will provide future economic benefit are capitalized and depreciated over the
revised remaining useful life of the asset.
Leases
Property, plant and equipment financed by leases giving rights to use the leased assets as if they were owned by Syngenta are classified as
finance leases and therefore are capitalized at the lower of fair value and the present value of minimum lease payments at the inception of the
lease. Such leases are also embedded in contracts for goods or services provided by suppliers to Syngenta when the supplier can fulfil their
obligations only by using a specific asset to supply Syngenta and the contract price is neither fixed per unit of output nor represents a market price.
Finance lease assets and liabilities are recognized at the commencement of the lease, which is when the leased asset is ready for use and
Syngenta has the right to use it. Finance lease assets are depreciated over the shorter of the remaining lease term and the estimated useful life of
the leased asset. Leases that are not classified as finance leases are accounted for as operating leases. Operating lease payments are
recognized as lease expense on a straight-line basis over the lease term irrespective of the timing of the payments. The lease term is the non-
cancelable period according to the lease contract unless Syngenta has a right to extend the lease beyond the end of that period and believes it is
reasonably certain to exercise that right.
Intangible assets other than goodwill
Intangible assets, other than goodwill, are recorded at cost less accumulated amortization and any impairment losses. Currently, all such intangible
assets are assigned a finite estimated useful life. The cost of acquired intangible assets other than goodwill consists of the purchase price including
transaction costs. The cost of internally generated intangible assets consists of direct internal and external design, development, and testing costs
incurred to make the asset ready for use in the manner intended by management. Borrowing costs associated with internal software development
projects are capitalized if the project is expected to take more than one year to complete. Capitalization ceases when the software is ready for its
intended use.
Intangible assets are amortized starting from the date the asset is ready for use. In respect of product rights, this is when regulatory approval has
been obtained. Asset lives are reviewed annually. The straight-line method of amortization is used except where another systematic basis better
reflects the pattern of consumption of the economic benefits represented by the asset. Amortization is charged within the consolidated income
statement to the function responsible for the asset, or to General and administrative.
Useful lives assigned to acquired product rights are based on the period over which Syngenta expects economic benefit from the product rights.
Estimated lives assigned to most product rights upon acquisition are between 10 and 20 years and do not exceed 20 years for any asset.
Patents and trademarks are amortized over their estimated economic or legal life, whichever is shorter. Lives assigned are between 5 and
20 years.
Business combinations give Syngenta access to the distribution channels and customer relationships of the acquired business.
These relationships normally continue to generate economic benefit to Syngenta following the acquisition. The useful lives of customer
relationships are determined from management estimates of customer attrition rates. Estimated lives assigned are between 5 and 30 years.
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Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
Acquired in-process research and development (IPR&D), is valued at fair value at acquisition. It is assessed for impairment annually until it has
been successfully developed and is available for use at which time it begins being amortized over its estimated useful life. Lives assigned are
between 10 and 20 years.
Assets attributable to long-term supply agreements are amortized as part of cost of goods sold over the period of the supply agreements.
Premiums paid for land use rights are amortized over the period of the rights, which are between 30 and 50 years.
Purchased software licenses are amortized over their remaining license terms. Internally developed software is amortized from the date it is ready
for use until the sooner of its expected replacement date or the date significant costs are expected to be incurred to upgrade it. Lives assigned are
between 3 and 10 years.
Goodwill
Goodwill is the excess of the fair value of an acquired business over the fair value of its identifiable net assets at the acquisition date. 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.
Impairment
Property, plant and equipment, intangible assets and investments in associates and joint ventures are tested for impairment (“tested”) in
accordance with IAS 36 unless classified as held-for-sale. Goodwill and intangible assets not yet ready for use are tested annually and are also
reviewed at each interim and annual reporting date to determine whether conditions changed since the most recent review or annual test.
Individual other non-current assets are reviewed at each reporting date to determine whether events or changes in conditions indicate that the
carrying amount of each asset may not be recoverable. If any such indication exists, the asset is tested for impairment. Syngenta estimates an
asset’s recoverable amount as the higher of the asset’s fair value less selling costs and value in use, which is the present value of the cash flows
expected from the asset’s use and eventual disposal. An impairment loss is recorded in the consolidated income statement to the extent that the
carrying amount of the tested asset exceeds its recoverable amount. Impairment losses are not reversed for goodwill, but are reversed for other
assets if their recoverable amounts subsequently increase.
Non-current assets held-for-sale
Non-current assets and groups of assets are reclassified as held-for-sale when the assets are available for immediate sale in their present
condition and a sale within one year is highly probable. Property, plant and equipment and intangible assets held-for-sale are remeasured at the
lower of fair value less costs to sell or carrying amount at the date they meet the held-for-sale criteria at which time depreciation and amortization
also ceases. Any resulting impairment loss is recognized in profit or loss. Fair value is measured based on bids received from potential buyers of
the assets.
Provisions
A provision is recognized in the balance sheet when Syngenta has a legal or constructive obligation to a third party or parties as a result of a past
event, the amount of which can be reliably estimated and it is probable that an outflow of economic benefits will be required to settle the obligation.
The amount recognized as a provision is the best estimate of the expenditure required to settle the obligation at the balance sheet date. Syngenta
self-insures or uses a combination of insurance and self-insurance for certain risks. Provisions for these risks are estimated in part by considering
historical claims experience and other actuarial assumptions and, where necessary, counterparty risk.
Environmental provisions
Provisions for remediation costs are made when there is a present obligation, it is probable that expenditures for 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, and are discounted if
the impact is material and if cost estimates and timing are considered reasonably certain.
Syngenta’s restructuring programs have involved closure of several sites to date. Remediation liabilities recognized when site closures
are announced are accounted for as restructuring provisions.
Legal and product liability settlements
For claims for which, according to Syngenta’s assessment, it is not probable that a liability exists or that there will be a future cash outflow or other
sacrifice of economic benefits, Syngenta provides for the costs of defense only. For claims where an outcome unfavorable to Syngenta is
assessed as more likely than not, provision is made for the estimated amount of damages and settlement, including directly attributable legal
costs. No provision is made where the legal procedures are at too early a stage to estimate the outcome with any reliability.
Restructuring provisions and costs
Restructuring costs are accrued (charged to provisions) when Syngenta has approved a detailed and formal restructuring plan and the
restructuring has either commenced or been announced publicly and they qualify for recognition in accordance with IAS 37. Provisions for
severance payments and related employment termination costs that do not depend on future service, are made in full when employees are given
details of the restructuring plan and the termination benefits that will apply to individual employees should their contracts be terminated. Retention
and other payments that depend on future service are recognized over the required service period. Restructuring costs relating to ongoing
activities, such as relocation, training and information systems, do not qualify for provisioning under IAS 37 and are expensed when incurred.
Post-employment benefits
For defined benefit plans, plan assets are measured at fair value. The plans’ holdings in publicly quoted investments are valued at closing prices at
the balance sheet date. The plans’ holdings in pooled investment vehicles (PIVs) that are not publicly quoted are valued at the respective
investment managers’ current estimate of fair value, on a basis consistent with each PIV’s most recent audited financial statements. Derivative
contracts entered into directly by the pension plans are included within plan assets. Exchange traded derivatives are valued at quoted balance
sheet date bid prices for contracts which are assets, or offer prices for contracts which are liabilities, at the balance sheet date. Fair values of over
89
Notes to the Syngenta Group Consolidated Financial Statements
Financial Report 2018
the counter derivatives are measured using independent third party pricing services. The defined benefit obligations are measured at the present
value of future benefit payments attributable to employee service rendered up to the balance sheet date, according to the benefit formula set out in
the relevant pension plan rules and employment terms at the balance sheet date. Where a surplus of plan assets over the benefit obligation exists
at the balance sheet date or would arise upon payment of the minimum funding commitment applicable to the pension plan, Syngenta evaluates
the extent to which the surplus is realizable over time through refund rights and reductions in the present value of its future contributions to the
plan. To the extent that the surplus is not realizable, the net defined benefit asset is reduced and, where applicable, an additional liability for
minimum funding contributions is recognized. Benefit expense charged to profit or loss comprises current service cost, which is the cost to
Syngenta of the increase in benefits earned from employee service in the period, gains and losses arising from amendments to and settlements of
benefits that occurred during the period, and interest on the net defined benefit asset or liability, which is the change in the present value of that
asset or liability arising from the passage of time during the period, measured using the rate used to discount the defined benefit obligation at the
previous period end. The net interest cost is presented within Other general and administrative in the consolidated income statement. The benefit
obligation and cost are attributed to periods using the projected unit credit actuarial method and are measured using long-term assumptions about
expected future length of employee service, increases in pay and pensions, longevity, and for healthcare plans, medical costs. Assumptions are
reviewed annually. Gains and losses arising from variances between assumptions and actual outcomes, and from changes to assumptions, are
recognized in OCI in the period in which they arise.
Contributions to defined contribution pension plans are recognized as an expense in profit or loss when they are due.
Employee Incentive plans
Syngenta operates annual and long term cash incentive plans to reward employee performance. Under the long term plans, awards are subject to
Syngenta performance over a three year period. Syngenta accounts for annual and long term plans respectively as short-term and long-term
employee benefits in accordance with IAS 19. Syngenta no longer has share based payment plans. All awards outstanding under Syngenta’s
former share based payment plans were settled when ChemChina acquired control of Syngenta in 2017. The accounting for settlement of those
awards is described in Note 3 and 23.
Dividends and capital distributions
Dividends payable to shareholders of Syngenta AG are recorded as liabilities and as a reduction in shareholders’ equity when they are approved
by the shareholders of Syngenta AG and any conditions for payment are satisfied.
Treasury shares
Share capital includes the par value of treasury shares held by Syngenta that have not been canceled. Treasury shares are shown as a separate
component of shareholders’ equity and stated at the amount paid to acquire them. Differences between this amount and the amount received
upon their disposal are recorded as a movement in consolidated shareholders’ equity.
28. Subsequent events
On January 3, 2019, Syngenta divested certain crop protection products in India, pursuant to commitments given to the Indian antitrust authority
Competition Commission of India (CCI) relating to ChemChina’s acquisition of Syngenta. The gain on this disposal was $29 million. With this
transaction, Syngenta has completed all remedy divestments it committed to make in connection with ChemChina’s acquisition.
On January 3, 2019, Syngenta completed the sale and leaseback transaction for those buildings and land at its Basel site which were not
disposed of in 2018. The total gain on this 2019 disposal was $128 million, of which $85 million is recognized as a gain at the disposal date and
$43 million, corresponding to the value of the retained leaseback, will be deferred in accordance with IFRS 16 and amortized over the lease term.
On February 10, 2019, in a public vote, the population of the canton of Basel-Stadt has accepted the revision of the cantonal tax law. The
enactment of the new law by the government will cause a revaluation of Syngenta’s deferred tax positions in Switzerland leading to a favorable
one-time tax impact. Syngenta is currently assessing the impact which depends on the dates of enactment as well as interdependencies with the
revision of the federal tax laws, which is subject to public vote in May 2019. Syngenta does not expect any material impact on its ongoing Group
effective tax rate.
Approval of the Consolidated Financial Statements
These consolidated financial statements were approved by the Board of Directors on February 14, 2019.
90
KPMG AG
Audit
Viaduktstrasse 42
CH-4002 Basel
P.O. Box 3456
CH-4002 Basel
Telephone +41 58 249 91 91
Fax +41 58 249 91 23
Internet www.kpmg.ch
Statutory Auditor’s Report to the General Meeting of
Syngenta AG, Basel
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of Syngenta AG and its subsidiaries (the
Group), which comprise the consolidated balance sheet as at December 31, 2018 and the consolidated
income statement, consolidated statement of comprehensive income, consolidated cash flow
statement and consolidated statement of changes in equity for the year then ended, and notes to the
consolidated financial statements, including a summary of significant accounting policies.
In our opinion the accompanying consolidated financial statements give a true and fair view of the
consolidated financial position of the Group as at December 31, 2018, and its consolidated financial
performance and its consolidated cash flows for the year then ended in accordance with International
Financial Reporting Standards (IFRS) and comply with Swiss law.
Basis for Opinion
We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISAs)
and Swiss Auditing Standards. Our responsibilities under those provisions and standards are further
described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
section of our report. We are independent of the Group in accordance with the provisions of Swiss
law and the requirements of the Swiss audit profession, as well as the IESBA Code of Ethics for
Professional Accountants, and we have fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Responsibility of the Board of Directors for the Consolidated Financial Statements
The Board of Directors is responsible for the preparation of the consolidated financial statements that
give a true and fair view in accordance with IFRS and the provisions of Swiss law, and for such
internal control as the Board of Directors determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the consolidated financial statements, the Board of Directors is responsible for assessing
the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the Board of Directors either intends
to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
KPMG AG is a subsidiary of KPMG Holding AG, which is a member of the
KPMG network of independent firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved.
Syngenta AG, Basel
Statutory Auditor’s Report
on the Audit of the Consolidated Financial Statements
to the General Meeting
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Swiss law, ISAs and Swiss Auditing Standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these consolidated financial
statements.
As part of an audit in accordance with Swiss law, ISAs and Swiss Auditing Standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
— Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
— Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
— Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made.
— Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability to continue
as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the consolidated financial statements
or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the
audit evidence obtained up to the date of our auditor’s report. However, future events or
conditions may cause the Group to cease to continue as a going concern.
— Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.
— Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the Group audit.
We remain solely responsible for our audit opinion.
We communicate with the Board of Directors or its relevant committee regarding, among other
matters, the planned scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify during our audit.
Syngenta AG, Basel
Statutory Auditor’s Report
on the Audit of the Consolidated Financial Statements
to the General Meeting
Report on Other Legal and Regulatory Requirements
In accordance with article 728a para. 1 item 3 CO and Swiss Auditing Standard 890, we confirm that
an internal control system exists, which has been designed for the preparation of consolidated
financial statements according to the instructions of the Board of Directors.
We recommend that the consolidated financial statements submitted to you be approved.
KPMG AG
Michael Blume
Licensed Audit Expert
Auditor in Charge
Artem Chumakov
Director
Basel, Switzerland
February 14, 2019
Syngenta AG
P.O. Box
CH-4002 Basel
Switzerland
This publication is available on the Internet:
www.syngenta.com
© 2019 Syngenta.
All rights reserved.
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Editorial completion: February 2019
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similar expressions. Such statements may be subject
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