Seeds of Change

The CFO of Syngenta on his investor-friendly growth formula.

Business in America’s corn belt hasn’t looked this good in a long while. Demand is booming, and so are the farmers’ incomes — at $4 a bushel, the price of corn recently hit a ten-year high, double the price of just a few years ago. It’s not surprising that researchers at the University of Iowa just announced that American farmers planted some 4m more hectares of corn this spring than the previous year. And the good times are set to continue. Helped by President George Bush’s recent proposal for a fourfold increase in alternative fuels — including bioethanol fuel made from corn — prices are expected to stay above $3 a bushel for the next three to five years. But even with prices at historical highs, there are questions over whether supply will be able to meet demand.

This is where a CFO thousands of kilometres away, in Basel, comes in. Swiss agricultural-chemicals company Syngenta generates annual sales of $8 billion by selling not only the seeds, but also the fungicides, pesticides and other products that help farmers grow even more corn, as well as wheat, soybean, rice and other field crops. (See “Cream of the Crop,” below.)

And with the booming demand, “the ‘agchem’ theme is getting picked up by a number of investors,” says a clearly pleased Domenico Scala, Syngenta’s 42-year-old CFO. Shares in the number one crop-protection company (according to global sales) have been rising steadily, and lately comfortably outperforming its peers in the chemicals sector. As the US corn market booms, business has also been boosted by divisional restructurings, an expanding product portfolio, strong cash flows and a string of cost-reduction programmes.

But in an industry whose fortunes are ruled by unpredictable weather, global politics, billion-dollar subsidy packages and fickle consumers, Scala can’t rest easy. He needs to make sure those good times last well after today’s corn bubble bursts. After all, he says, isn’t that every CFO’s mission?

Indeed it is. In preliminary results from a survey of more than 350 senior executives conducted last month by CFO Research Services, 60% of respondents felt that CFOs need to spend more time and attention on group-wide strategy development. At the moment, there are few better examples of a CFO diving head-first into a strategy overhaul than Scala at Syngenta.

The View from Outside

Ever since Scala left his job as treasurer at Swiss pharma Roche to become Syngenta’s finance chief in 2003, the hallmark of his work has been a wholehearted embrace of value-based management. First and foremost, this has meant overhauling how strategy is developed across the group, making it much more shareholder-focused while also directly addressing how Syngenta competes against Monsanto, DuPont, BASF, Bayer and other rivals.

It’s a tall order. According to Richard Kibble, a managing partner at strategy consultant Marakon Associates in London, companies that have succeeded in value-based-management programmes such as Syngenta’s are few and far between. “Only an extremely small group of high-performing companies have delivered the unusual combination of simultaneous returns and growth,” he says. BMW, Heineken and Tesco are among the handful of companies cited by Kibble’s fellow Marakon consultants, Ken Favaro and Dominic Dodd, in their book The Three Tensions (Wiley, 2007). These companies, they write, are among the elite which balance profitability and growth, long-term and short-term performance, and business unit performance and group performance, all of which leads to better decision-making.

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