Rebounding into Australia’s agricultural markets with ambitious plans to lift sales at least 100 per cent and launch a raft of new products, chemical giant, BASF, is also keeping an eye on new acquisition options.
The chemical conglomerate ranks as the third biggest crop protection product business in the world, but in Australia it is a relative newcomer.
A busy season this year has convinced BASF it has strong farm chemical market growth opportunities in Australia and in its expanding biological or functional crop care range.
“Agriculture is one of the highest growth areas of the BASF business,” said senior vice president of the company’s agricultural business in the Asia Pacific, Gustavo Palerosi Carneiro.
“We are open to acquisitions if they add to our geographic and market penetration.”
Mr Carneiro said while BASF’s plans for 25-plus new products and a doubling in its mainstream chemical sales in Australia within five years, it also looked to grow its biological business via acquisitions and increased sales.
Local acquisition opportunities would be on the radar “if they added something new to the business”.
“We are open for merger and acquisition in all geographies and categories, but we already have significant innovation and capabilities or our own, too,” he said.
“We’re a 150-year-old company with a lot of experience for our agricultural business to draw on.”
BASF is spending $1 million expanding production at its Somersby biological inoculant plant in NSW to include the bio-insecticide, Velifer, made from a soil-borne fungus.
Velifer, already proven in the South African glasshouse horticulture market, will be sold locally and overseas.
Another fungal, insect and slug control product, Serifel, made from Bacillus amyloliquefaciens is due for release in Australia in 2018.
Singapore-based Mr Carneiro, who visited Somersby last week, confirmed BASF had been part of the past year’s back room talks which ultimately led to recent major merger moves between the likes of Monsanto, Bayer, Syngenta and ChemChina.
Although full-scale acquisition options had proven an unworkable return on investment proposition for BASF, it was still talking to all the players about potentially picking up portions of its newly merged competitors which had to be divested for them to avoid breaching antitrust laws in the US and elsewhere.
Ideally, its interest was in innovative products or new generation production facilities, but Mr Carneiro said BASF may look to acquire generic product lines offloaded after the merger frenzy settled down.
Crop protection is one of 13 business units in BASF’s global business, but it generates a healthy 24pc earnings before interest tax and amortisation (EBITDA) for the giant and is the focus of more than $1m a day in research spending - equivalent to a quarter of the company’s entire research budget.
“We’re very focused on agriculture. It generates 8.3pc of the entire company’s sales,” Mr Carneiro said.
“We’re growing from a low base in Australia, but we see this market as a big opportunity which will be the focus of a high amount of investment and growing support resources.”
Although keen to convince farmers and its supply chain network it is “here for the long haul”, BASF has had an unusually light farm business footprint in Australia until now.
Unlike New Zealand where it was selling and trialling products for 60 years, BASF only became active locally for a few years before drought and internal restructuring forced its withdrawal last decade.
It returned in 2014 to re-build a sales force and product range, and last year opened a research farm at Tamworth to trial new products.
“We’re committed to working closely with the industry to provide innovative and sustainable solutions,” Mr Carneiro said.
“We’re very pleased with the strong distribution relationships the team has built in the past two years and internally there is a lot of passion needed to ensure our sales do grow to be two times what they are today by 2020.”
That growth target has received a strong boost this year after widespread rain across the grainbelt generated big demand for BASF’s pulse crop inoculant, Nodulaid, and new cereal fungicidal seed treatment, Systiva, which extends resistance to foliar disease well into the crop’s development.
“This year has really consolidated us in the market,” said Australia and NZ agriculture head, Gavin Jackson,
“It’s been a really good year for us to prove our ability to deliver high value products like Systiva, (new broadleaf herbicide) Sharpen and (vine and tree crop fungicide) Sercadis.
“Systiva has enabled crops to deliver on their genetic potential and it provided peace of mind for farmers when the season got too wet at times.”
“It’s good to see customers smiling again.”