Vilmorin & Cie - Annual report 2017-2018

1 ANNUAL REPORT Vilmorin & Cie 47 2017-2018 Southeast Asia is another area of the highest potential, and Vilmorin & Cie began doing business here in 2014 when it acquired the company Seed Asia (Thailand) specialized in hybrid* tropical corn. Besides a commercial presence which is being gradually extended in Southeast Asia, this operation provided Vilmorin & Cie with access to the highest quality genetic resources*, also adapted to other regions of the world (India, Brazil, southern China and Africa) and which therefore enrich its genetic heritage in tropical corn. Africa As a new corn seed development zone for Vilmorin & Cie, Africa ultimately has considerable potential for growth. About 38 million hectares of corn were grown there in 2017, representing about 21% of world acreage for grain corn (Source: ISAAA 2018) . Vilmorin & Cie first set up business on this continent in fiscal year 2012-2013, through the acquisition of the seed company Link Seed in South Africa. In 2013-2014, Vilmorin & Cie purchased a minority stake in Seed Co, the largest seed company in Africa; on June 30, 2018, this participation stood at 29.45% of Seed Co’s capital stock. Seed Co, which owns an extensive base of infrastructures (six production factories and nine research stations) spread out over the continent, holds leading positions in several countries in southern Africa (Zimbabwe, Zambia, Malawi, etc.), and aims to develop in other regions in Africa. Vilmorin & Cie continues to accompany Seed Co in its development projects. In August 2018 (1) , Seed Co decided to reorganize its activities through a partial demerger, resulting in the separate listing of its holding Seed Co International (SCIL), based in Botswana, which groups all its international activities (except for Zimbabwe); the objective is to ensure its continuous expansion over the continent, particularly through access to new financial resources. Consequently, Vilmorin & Cie participated in the reserved capital stock increase of Seed Co International, which is now listed on the Stock Exchanges of Gaborone (Botswana) and Harare (Zimbabwe). Vilmorin & Cie, now the main shareholder of Seed Co International, is working closely with Seed Co, through a shareholders’ agreement, in the definition of the strategic ambitions of the new structure and in their implementation. Through this operation, Vilmorin & Cie is demonstrating its desire to significantly accelerate its expansion in Africa. This information is presented in detail on page 30. In addition, the creation of a dedicated entity in West Africa is planned, in partnership with Seed Co, to specifically address this part of the continent, on the white corn segment but also on the yellow corn segment, which is experiencing strong growth in West Africa. Vilmorin & Cie is thus continuing its gradual establishment on the African market. Pursuing innovation in plant breeding and developing a proprietary line-up of genetically modified varieties With an adoption rate of 32% of world acreage in 2017 (Source: ISAAA 2018) , the market for genetically modified corn seeds today represents more than 11 billion USD (Source: Phillips McDougall 2018) and is characterized by more and more complex products, often stacking several traits* in the same variety. In this context, Vilmorin & Cie aims to take up position among the few technology providers in the world, and to develop a proprietary line-up of transgenic corn varieties. With this objective in mind, Vilmorin & Cie is counting on a number of complementary focuses: As a complement to GM* traits* for corn currently being licensed in, Vilmorin & Cie is working on the development of corn seed varieties integrating its own technologies. This research is being conducted through Genective, a 50/50 joint venture between Vilmorin & Cie and the German seed company KWS in order to develop proprietary GM* traits* for corn. Vilmorin & Cie and KWS confirmed their collaboration through the programs led by Genective. Genective is continuing its progress and is targeting the American markets (North and South America) as well as, in the longer term, other potential GMO* markets (Asia and Africa). At the same time Vilmorin & Cie is continuing to exploit the long-term license agreements signed with Syngenta in October 2015, concerning GM* traits* for corn. These agreements provide Vilmorin & Cie with the authorization to use, for commercial purposes, present and future GM* traits* for corn developed and sold by Syngenta. These agreements also provide for the combination of these traits* with those developed by Genective; they also include AgReliant (2) for North American markets. These agreements significantly supplement and strengthen Vilmorin & Cie’s technological platform. Indeed, the possibility of combining its proprietary genetic resources* with a wider range of highly competitive traits* – including those developed by Genective – will make it possible to offer farmers throughout the world a greater number of options and corn seed varieties that are extremely competitive in meeting their needs. The first sales of corn seeds incorporating Syngenta's technologies were initiated during the fiscal year in Brazil; representing a very limited portion of sales to date, they are expected to grow gradually over the coming years. (1) The decision was approved by Seed Co’s Annual General Meeting held on August 9, 2018. (2) A 50/50 joint venture created in July 2000 with the German seed group KWS. 1.6. Strategy and perspectives PRESENTATION of Vilmorin & Cie