Vilmorin & Cie - Annual report 2017-2018

PRESENTATION of Vilmorin & Cie 1 ANNUAL REPORT Vilmorin & Cie 46 2017-2018 Developing business in new regions: South America, Asia and Africa Vilmorin & Cie can exploit these strong positions in Europe and North America to branch out toward a wider market. Capitalizing on its expertise in field seeds and on the proven solidity of its development model, in 2010 Vilmorin & Cie set itself a strong ambition: to become a top international player in corn. This objective implies rapid internationalization of its positions in corn on new, fast-growing markets, and to set up business here sustainably: South America, with Brazil in particular, Asia (India, China and Southeast Asia), and Africa. This internationalization enables Vilmorin & Cie to aim for a much more significant share of this market for corn: by integrating South America, Asia and Africa, Vilmorin & Cie is now targeting potentially around 90% of the world acreage for corn, as opposed to about 30%, with presence exclusively in Europe and North America. Conquering new frontiers is also an opportunity to approach corn with a more comprehensive vision of the crop. It enables Vilmorin & Cie to enrich its research process, gain access to complementary genetic resources*, particularly for tropical corn, and to work in extremely varied climatic environments with different objectives in the use of corn. The first stages in this ambitious action plan were to set up Business Units on these different markets in order to form development platforms. Acquisitions and research partnerships have been achieved over several years in order to establish the right conditions and best advantages for the deployment of these activities. Today, Vilmorin & Cie’s set-up in these new zones is structured in terms of research, production and commercial organization, and the Company is pursuing its development, even though sales dropped during the course of 2017-2018, after extremely strong growth in 2016-2017. This information is presented on page 29. South America Historically, South America provided Vilmorin & Cie with the opportunity to reinforce its capacity to produce counter-season seeds, to extend the period when products are available in the northern hemisphere. As a complement to this strategic advantage, this continent, and particularly Brazil, now represents a key development focus for field seeds. Corn is a widely grown cereal here, and the use of genetically modified varieties is very widespread: Brazil has become the second largest world market in terms of GM* corn acreage. In a country where soybean is a major crop, in 2015-2016 the Company extended its commercial line-up, and now offers soybean seed varieties to Brazilian farmers. It thus has a further advantage to approach this market and optimize its cover. Vilmorin & Cie prefers a gradual approach to its development in South America, with the initial aim of reinforcing its presence on the key market of Brazil, while developing its research activities on the Argentinian market, the fourth largest field seeds market in the world, and whose temperate corn germplasm provides synergies with the genetic resources* of Europe, North America and southern Africa. Asia In Asia, the largest geographical continent for corn acreage, with around 57 million hectares in 2017 (Source: USDA) , Vilmorin & Cie has defined priority zones for action and investments: India, China, and Southeast Asia. Vilmorin & Cie’s long-term growth in these areas means extending its present number of sites through new partnerships or acquisitions. Access to local genetic resources*, just like in other regions for development, is an essential step. An increase in the Field Seeds business in Asia will initially require selling high added-value conventional corn seeds, and possibly at a later stage, the introduction of GM* varieties that will better respond to the need to improve yields. To date, only the Philippines and Vietnam have adopted GM* corn in Asia. In India, Vilmorin & Cie, which has a market share of around 6% in corn seeds, has set the objective of extending its cover and continuing to win market shares in the corn sector. After taking full control of Bisco Bio Sciences in 2013, one of the top Indian players in corn seeds, Vilmorin & Cie created a facility for research and production, reinforced through an extensive distribution network. Furthermore, Vilmorin & Cie today benefits from a hybrid* rice program in India, which means it can complete its product portfolio for this essential crop on the market. In China, Vilmorin & Cie has adopted a specific development policy. In this key country, Vilmorin & Cie has to develop business growth in conditions that guarantee protection of intellectual property and its values, particularly in terms of management and organization model. In addition, since the participation of foreign companies in the capital stock of Chinese seed companies is currently limited by law to minority positions, access to, and conditions of use of genetic resources* must be assessed very precisely before any investment is made. In this context, direct locations and partnerships with major local seed companies remain the two main focuses of Vilmorin & Cie's development policy in this area. Vilmorin & Cie’s commercial presence in China is ensured by Hengji Limagrain Seeds, a joint venture in which Vilmorin & Cie holds 45% of the capital stock, and which is dedicated to the production and distribution of corn seeds, with the company Anhui Hengji Seeds. Vilmorin & Cie also has a network of research centers located according to different types of corn, which means it can breed seeds adapted to local agronomic conditions. 1.6. Strategy and perspectives