Vilmorin & Cie - Annual report 2017-2018

1 ANNUAL REPORT Vilmorin & Cie 45 2017-2018 Become a leader in all markets and for all strategic crops Vilmorin & Cie’s objective is to become a leader in all markets and for all major crops. Already firmly established in the most mature regions, Vilmorin & Cie has a strong ambition in emerging regions, first and foremost Asia. In addition to its strong foothold in Japan, Vilmorin & Cie’s strategy aims to significantly strengthen its presence on this continent (Southeast Asia, South Korea, China, etc.), through organic growth as well as through equity investments, acquisitions or partnerships, with the objective of accelerating its expansion there. The Company has therefore decided to dedicate specific resources to ensure its development in this high-potential area. In this respect, the acquisition of the Vietnamese company Tropdicorp, finalized during fiscal year 2014-2015, illustrates this objective, and enabled Vilmorin & Cie to strengthen its presence in Southeast Asia. Similarly, the creation of a research center in Thailand during fiscal year 2017-2018, benefiting from state-of-the-art equipment for greenhouse production, reflects Vilmorin & Cie's strategic ambition in Asia. This site, which aims to provide high-quality vegetable seeds that are perfectly adapted to the markets of Southeast Asia, is the main research center of the Business Unit HM.CLAUSE in this region. As for China, a zone where Vilmorin & Cie cannot afford to be absent, because of the high level of vegetable production, it nevertheless requires a gradual, careful approach because of the difficulties involved in protecting intellectual property. Vilmorin & Cie’s presence and development are the responsibility of breeding* stations and distribution networks for all the Vegetable Seeds Business Units, and through sales teams that will be combined to represent the Business Units Vilmorin-Mikado and HM.CLAUSE in order to address the Chinese market more effectively. Africa will also be a key development territory for Vilmorin & Cie. Its expansion on the continent will be based in particular on the Prime Seed Co International joint venture, created in 2016-2017 with Seed Co. Carried out as part of the partnership between the two companies (1) , this joint venture has been operationally established between the Business Unit HM.CLAUSE and Seed Co. HM.CLAUSE provides this structure with its know-how in terms of the development of new varieties while Seed Co provides it with its knowledge of distribution networks on the African continent. Prime Seed Co International will initiate, in the coming years, a vegetable breeding* program specific to Africa. Vilmorin & Cie will thus gradually enter the sub-Saharan African market, whose potential is very promising. 1.6.4.2. Corn seeds: become a global player As the largest seeds market in the world in terms of value, (more than 16 billion USD, or more than 40% of the global market for commercial seeds) and representing more than 190 million hectares in 2017 (grain corn and forage corn), corn is quite naturally a strategic crop for Vilmorin & Cie. In spite of a context that remains difficult for field seeds markets, due to the low level of prices for agricultural production, Vilmorin & Cie is pursuing the implementation of its strategic plan to become a global player for this crop. Its strategy is based on a combination between regional Business Units, something very specific to Vilmorin & Cie, and global functions – research and strategic marketing – to ensure coordination of these cross-cutting functions throughout the world. In this respect, the networking of genetic resources* for corn means their management can be optimized, so they can benefit from high levels of synergy. Therefore, the genetic resource* flows between the tropical and temperate zones of the world contribute to increased efficiency in research. Strengthening leading positions in Europe and North America Historically present on the corn market in Europe and North America, Vilmorin & Cie aims, in its strategy, to reinforce its leading positions in these major regions of the world. Vilmorin & Cie is the No. 4 player in Europe and No. 3 in North America (through AgReliant, its 50/50 joint venture with the German seed company KWS) for corn seeds. In Europe, Vilmorin & Cie needs both to consolidate its position as No. 2 on the forage corn segment by developing new varieties that offer improved qualities (yield, nutritional qualities) and, in a context where its competitive positions in corn are becoming more and more international, strengthen its presence on the grain corn segment, by bringing out new products. The world market for corn is divided between grain corn (more than 95% of world acreage) and forage corn, essentially a European crop. Research programs devoted to grain corn have been redeployed to extend the existing line-ups through innovations specifically developed for this segment, particularly for early to medium late grain corn, to better meet the needs of farmers (higher yields, resistances to diseases, etc.). Vilmorin & Cie is concentrating its efforts particularly on Eastern Europe (Ukraine and Russia), which today represents a very interesting market. In North America, AgReliant’s growth will continue to rest on its specific market approach, combining a seed offering of high added value and a differentiating sales policy. This information is presented in more detail on page 27. (1) On June 30, 2018, Vilmorin & Cie held 29.45% of the capital stock of Seed Co, the largest seed company in Africa. 1.6. Strategy and perspectives PRESENTATION of Vilmorin & Cie