AstraZeneca mulls agrochemicals sale ochemicals sale

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The Independent Online
ASTRAZENECA, the UK's third largest pharmaceuticals company, is considering the disposal of its agrochemicals business, which is responsible for its controversial research into genetically modified foods. The pounds 40bn company said it was reviewing all options for the division after global crop prices had sunk to historic lows.

The company said the restructuring of the business, valued at more than $6bn (pounds 3.8bn), had nothing to do with public anxiety over GM food.

"We do not make long-term decisions on the basis of short-term upsets," said Michael Pragnell, agrochemicals chief executive. He was as confident as ever about GM.

Although the division is not expected to produce a commercial genetically modified product until the middle of next decade, the company has "commercially tested" a puree based on GM tomatoes, available in Safeways. The puree accounts for a fraction of 1 per cent of divisional sales, which were pounds 1.7bn when it was part of Zeneca before it merged with Astra of Sweden in April. A quarter of the division's $240m research and development budget is spent on GM.

The business employs more than 8,000 people worldwide, half in Britain. It represents 16 per cent of group sales. Interim results posted yesterday revealed a 5 per cent drop in agrochemicals sales and a 19 per cent fall in its underlying operating profits. Whilst other agribusinesses have recently posted double-digit falls in sales, AstraZeneca was supported by strong sales of its Amistar fungicide, expected to be the world's leading fungicide by the end of the year.

In March, Mr Pragnell warned that the division was struggling as US farmers were cutting back on the use of AstraZeneca's high-margin herbicides, fungicides and chemicals which improve the yield on crops. Since then, the economic crisis in Brazil has taken its toll on the business. The division's full-year margins are expected to fall from 12.9 per cent to just over 10 per cent, compared to an expected 24 per cent in the pharmaceuticals business.

The top 10 agribusinesses account for over 80 per cent of global sales, so selling the business to a major life sciences company, such as Novartis, would be likely to raise competition concerns. Tom McKillop, group chief executive, declined to be drawn on options. "Nothing is ruled in or out," he said.

"What will make or break this company is the pharmaceuticals business. There ... isn't the management resource to devote to everything," said Sir David Barnes, executive deputy chairman. Meanwhile, the group posted as-expected results for its pharmaceuticals division. In what is AstraZeneca's first results since the merger earlier this year the company reported first-half sales of $9.66bn ($8.77bn), pre-tax profits were $1.34bn ($1.97bn). A dividend of 23c a share (14.2p) is proposed.

The firm forecast annual earnings and sales growth of at least 10 per cent for the arm. Cost savings from its merger should hit $1.1bn. The group also intends to return $2bn to shareholders following the recent sale of its specialties business for $2.1bn to US venture capitalists.

Outlook, page 15

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