Investment appraisal in action A Syngenta case study
Page 1: Introduction
Food is one of the essentials for life. Farming is therefore an industry on which everyone depends. Globally, the farming industry already faces a great challenge to produce food for the seven billion people now living on this planet. By 2050 the global population will be over nine billion. To feed this population, the United Nations estimates that food production will need to increase by 70%.
This will be a huge task. Most of the world’s cultivable land is already used for farming. Global warming may reduce the overall amount of arable land. To avoid widespread hunger, more food will need to be produced from the land currently being farmed. It is not surprising then that agricultural productivity is high on the global agenda.
Meeting the challenge
The challenge is to increase productivity through sustainable agriculture that does not compromise the world’s natural resources for future generations. This will require improved processes and techniques and inputs from companies like Syngenta . Formed in 2000 by combining the agrochemical divisions of Zeneca and Novartis, Syngenta is one of the world’s leading suppliers of seeds and crop protection systems. A multinational company, Syngenta employs 26,000 people across 90 countries. In 2010, its sales exceeded $11 billion.
Syngenta’s mission is ‘bringing plant potential to life’. It uses the latest science and technology to develop products that help its customers improve crop productivity. Syngenta’s products are used by farmers to protect crops against weeds, pests and fungal diseases. The company’s herbicides, pesticides and fungicides are usually based on complex chemicals. To develop products that can improve farm output without damaging the natural environment requires intensive research and development (R&D). To protect its investment, Syngenta obtains patents for its new products.
One of Syngenta’s best-selling products is Amistar. This is the world’s leading fungicide. This product is so popular that demand has outstripped supply in the past. This case study looks at how in 2008 Syngenta proposed an investment in new manufacturing capacity that would allow it to increase production of Amistar. It reviews the analyses that helped the company decide whether to proceed with this investment.