Arysta LifeSciences acknowledged that it is "highly leveraged", with payments on its "substantial" debts contributing to a series of annual losses, as the agrichemicals giant took a big step towards a stockmarket flotation.

The Irish-based company, owned by private equity firm Permira, revealed that it had $1.9bn in debts as of the end of June, a level of borrowings which "will restrict our operations".

Besides limiting the group's "flexibility in planning", such debts will "place us at a competitive disadvantage with relative to our competitors" and "expose us to the risk of increased rates", an outcome which investors view as likely within the next year in the US, at least.

The statement, which tallies with an assessment by ratings agency Moody's earlier in the year that Arysta has "high leverage", came in a document filed with US regulators "relating to the proposed initial public offering of ordinary shares" which has been mooted since March.

The filing offers the first public insight into Arysta's finances since the group – formed in 2001 as a merger of the agrichemical interests of Japan-based trading companies Tomen Corp and Nichimen Corp - was bought by Permira in 2008 for E1.95bn ($2.2bn).

Strength in soybeans

The filings show that Arysta raised sales, before discounts and other adjustments, by 3.3% to $1.58bn in calendar 2013, led by the Latin American market, where takings rose 12.8% to $624.3m.

The Latin America increase reflected the introduction of 25 new products, besides growing acreage, particularly in soybeans, a crop in which the region has seen increased infestation of pests such as the Helicoverpa moth caterpillar, the so-called "corn" earworm which in fact attacks a range of plants.

"Increased insect infestation over a diversified mix of crops, including soybeans and cotton, and across both large and small growers, has contributed to increased sales of acephate and other insecticides," Arysta said.

Indeed, soybeans, which the group believes account for 15-20% of sales, represent one of the few markets – by crop or by geography – to which the group is particularly exposed, with Arysta noting that no single customer accounts for more than 2% of sales.

Bee minus, and plus

However, sales in Africa and Western Europe, the company's second biggest regional division, eased 0.1% to $300.8m, thanks to exchange rate movements, and despite "strong demand for fungicides" in Europe, where the group also flagged the launch of its Select herbicide in the UK.

Sales in North America dropped 6.7% to $187.8m, reflecting a shift away from commodity agrichemical segments to higher value markets, a trend reflected in higher margins, with divisional profits rising 26% to $39.1m.

While sales in central Europe were hurt by EU restrictions on sales of neonicotinoid-based insecticides, curbs introduced in a drive to protect bees, Arysta saw its sales at its LifeSciences division, which is lumped in with Asia and China, boosted by  products to help bees.

"The expansion of our Life Sciences business was due almost exclusively to an increase in the volume of our honey bee health products, including Apivar, a miticide directly targeting Varroa mites," the group said.

Losses drop

Nonetheless, the rise in revenues was insufficient to take the group into the black in 2013, although it reduced losses by 39% to $93.4m.

This result included a one-off impairment charge of $49.1m and interest payments on its debts of $134.6m.

Arysta has been touted as gaining a valuation of some $4bn, including debt, at a stockmarket flotation, which has been reported as potentially raising about $500m, and likely later this year.]

 

agrimoney