Tensions between China and the USA are weighing on the company

At 65, Erik Fyrwald would be the perfect age to quit as a top manager. Almost a year ago, at the end of October 2023, the Basel agrochemical group Syngenta also announced that its then CEO would “retire” at the end of the year.

Long faces at Syngenta

But Fyrwald remained without a chief position for just five weeks. On February 6, 2024, he took over management of the American heavyweight flavor and fragrance manufacturer, International Flavors & Fragrances (IFF).

The rapid change still causes long faces at Syngenta to this day. The agrochemical company, which supplies farmers with its crop protection products and seeds, and the IFF company, whose customers, in addition to food companies, are primarily manufacturers of cosmetics, are not in direct competition. However, it was planned that Fyrwald, with his many years of industry experience and his international network, would not only remain at Syngenta as a member of the board of directors. The company also agreed with him that he would be available as an advisor to President Li Fanrong, who comes from China and is mainly connected there.

Lightning start at IFF

Fyrwald has remained a member of the Syngenta Board of Directors to this day, even though he will have little time for it due to his new management role. However, Fyrwald resigned as advisor to the Syngenta president at the same time as he moved to IFF.

The American got off to a flying start with his new employer. He returned the company, which had previously been bogged down in an aggressive acquisition strategy, back to growth and also improved profitability in the first half of the year.

This has not gone unnoticed by investors: compared to last year’s closing level, IFF’s share price has recovered by 28 percent.

Chinese authorities prevent IPO

For Fyrwald, the good performance on the stock exchange should be a great satisfaction, because he had previously had a completely different experience at Syngenta: despite three years of preparation, he was not allowed to return the company, which has been owned by the Chinese state since 2017, to the stock exchange lead.

Regulatory authorities in China continually imposed new requirements on Syngenta with regard to the planned listing. When his departure as CEO was announced in October 2023, Fyrwald probably suspected that the IPO would not work. Syngenta officially pulled the ripcord on March 29, 2024, this year’s Good Friday.

Sharp decline in sales and earnings

On the same day, Syngenta announced poor annual results. Sales fell by 4 percent to $32.2 billion in 2023 compared to the previous year. The operating result before depreciation (Ebitda) fell disproportionately by 18 percent to $4.6 billion.

 

However, this did not mean the end of the weak phase for the world’s largest supplier of crop protection products, on the contrary. In the first half of the current year, the decline in sales accelerated to 17 percent. Ebitda fell by a further 36 percent.

Syngenta is suffering from farmers’ lack of income due to the sharp fall in grain prices. Many people switch to cheaper imitation products, and some even forego spraying altogether, especially when using fungicides.

In addition, the warehouses of farmers and traders are still well filled in many places. As in other industries, supply bottlenecks in the agrochemicals business caused considerable uncertainty during the pandemic. Customers ordered extra large quantities that are still waiting to be used.

Job cuts in Basel are only a small part

All of these problems also plague Syngenta’s competitors such as Bayer, BASF and the American provider Corteva. In the case of the Basel company, however, it is also the case that, seduced by several peak years in agriculture and with a view to going public, it built oversized structures. In total, the group created almost 10,000 additional jobs in just a few years. This allowed the workforce to increase to the current number of around 60,000 employees.

The legally required consultation process with employee representatives on the planned reduction of 150 jobs at the Basel headquarters has been running since the beginning of this week. But this is only a small step within a large-scale restructuring that the new CEO Jeff Rowe, like Fyrwald an American, must now carry out. There is talk within the company that the huge personnel expansion of the last few years has to be more or less reversed.

The Israel-based subsidiary Adama is also affected by this. The company, which offers its own formulations based on crop protection products that are no longer protected by patents, enjoyed a lot of independence within the group for a long time. However, the strong global price pressure in the agrochemical generics business and the Middle East war, which has made transport from Israel significantly more expensive, have caused its result to slide deep into the red.

Castling in management

A new managing director, Frenchman Gaël Hili, is to implement a comprehensive cost-cutting program at Adama from October 1st. His predecessor, the Canadian Steve Hawkins, was recalled to the headquarters in Basel to fill the vacant position of head of the company’s crop protection products division. Rowe had managed this division until his promotion to CEO. Hawkins will also be in great demand from day one. The business with crop protection products suffered the biggest slump of all divisions in the first half of the year at 21 percent.

 

The challenges facing Syngenta are not just business, but also geopolitical. If tensions between China and the US continue to escalate, it is likely to put the relationship between Chinese ownership and the still Western-dominated management to a severe test.

What next in Russia?

The company is already struggling with the fact that because of the pandemic, ties between employees in China and those at Western locations were broken or could not be formed at all. Added to this is the war in Ukraine and the different ways in which it is classified within the company.

Syngenta has continued to do business in Russia, thereby continuing to pay taxes to the Kremlin and benefiting its war machine. Out of consideration for Russian and Chinese sensitivities, the war against Ukraine is still referred to within the company as a “conflict”.