The global agriculture situation is weighing down the returns of companies allied to the industry, yet at BASF the crop protection business is not slowing down its investment in research and development; and may be on the lookout to pick up products as a result of industry mergers and acquisitions. That's the takeaway message after the company's global press event held in Ludwigshafen, Germany this week.
During the conference, Markus Heldt, president, BASF Crop Protection Division, looks at the last 10 years of corporate performance and notes the 75% increase in sales. However, 2016 has been soft. "In 2016, overall there has been no fundamental improvement in our business environment," he notes, pointing out that Latin America has been a challenge, yet adds that the company will focus on sales to customers in a more demanding environment.
The result of the challenging market? "Our target is to achieve last year's financial performance, which is a stretch, but that is our commitment," Heldt says. The market pressures continue to be strong, and for the first half of 2016, BASF saw a sales slump. However, he also added that the company is investing in several areas where it sees promise, many in new technologies farmers will have available in a few years.
While the company is seeing a near-term slump in sales demand, Heldt looks to new products and how they could add to the bottom line over time. He points to a first wave of new products that between 2015 and 2020 are expected to add about $2.25 billion to sales, and a second wave of new products between 2020 and 2025 that could add $1.15 billion in sales.
"We're maintaining a constant investment in research and development at 9% of sales," he reports. "We're working to bring solutions as fast as possible to the market."
Some highlights of future products
As a traditional crop protection company, BASF R&D expense includes work with conventional chemistries in new formulations and even new molecules, that offer promise. In addition, the company has invested in research in the biological arena as well, which it calls functional crop products, that included the acquisition of Becker Underwood a few years ago.
In traditional chemistry, there are two products nearing market that BASF discussed in greater detail during its annual media event. The first is Engenia, a new formulation of dicamba, which will work in concert with the Roundup Ready 2 Xtend genetic trait to offer farmers a new way to beat herbicide resistant weeds.
"Engenia has multiple patents and properties with improved features to address volatility for cotton and soybeans, and it will be rolled out globally to take care of resistant weeds," Heldt says.
The second product, is a new fungicide called Revysol, which is a new triazole fungicide that's new formulation that shows activity on diseases that are resistant to current forms of triazole fungicides. This product, which is a new molecule design, "is a very exciting, proprietary triazole" Heldt says that will be available by 2018 or 2019.
The company is also working on a new PPO herbicide to help against resistant weeds, which Heldt says could put 10 modes of action into a farmer's toolbox. In addition, BASF is working on new insecticides, a market the company reentered in 2003, and more new products are on the way there.
Mergers, acquisitions and opportunity
In the past 10 years, BASF has grown sales 75% from to about $6 billion. Around the company, other major players are talking merger or acquisition, where does that leave this German crop protection product maker? From Heldt's perspective there are opportunities.
He states that the company would be willing to be an acquirer of technologies that merged companies may not be able to keep in light of anti-trust reviews. The Dow Dupont merger is going under increased scrutiny by the European Commission, which may mean products from that marriage could be available to buyers. The potential merger of Bayer and Monsanto may create similar opportunities.
Heldt talked to U.S. media about this later and notes that the company would be looking at areas in the portfolio with the greatest opportunity. "Insecticides is one area for us, and another is herbicides, if we can add another mode of action," he says.
During the main press conference, in response to the question, Heldt says the price BASF is willing to pay for those technologies depends on the target and whether it makes "strategic and financial sense...if it's a big opportunity we would pay big." He adds this would be to support growing the business profitably, and every acquisition target would go through the same analysis process.
In the past, BASF acquired companies or key products from companies in a similar fashion.
The future of the crop protection business is solid. Heldt told U.S. journalists that the long term demand picture for food isn't changing, which offers potential growth for the future.