The Rules of the Game are Changing

Transcription

1 The Rules of the Game are Changing EREZ VIGODMAN PRESIDENT & CEO MAKHTESHIM AGAN JUNE 2013

2 This is the age of Revolution 2

3 Billions Changing demographic landscape Developing Countries Developed Countries Urban Population Source: UN Population Division

4 Changing consumer landscape World population Billion people 1 Below consuming class Consuming class Share of population in consuming class (%) < Source: McKinsey Global Institute Cityscope 2.0

5 Consumer landscape is changing dramatically Thousands of $Billions B6 China, India, Russia, Brazil, Mexico, South Korea G6 U.S., Japan, Germany, England, France, Italy 24,799 20,565 13,106 7,

6 Real consumption growth in 2012 China India UAE Russia Ukraine Saudi Arabia Vietnam Indonesia Thailand Malaysia Colombia Chile Argentina Brazil Mexico South Africa US Korea Japan Poland Egypt Turkey UK Eurozone Czech Republic Source: Oxford Economics

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8 Major leap is needed in the next two decades in the supply of scarce global natural resources Growth rate needed between in relation to the growth rate of these natural resources between Energy Metals (Steel) Water Arable Land (food) +32% +57% +139% +249%

9 Resource price volatility is at all-time high, with the exception of energy in the 1970s Annual price volatility % Energy Food Metals Agricultural materials Note: Calculated as the standard deviation of the commodity sub index divided by average of the sub index over the period Source: Grill and Yang; Pfalfenzeller; World Bank; IMF; OECD statistics; FAO; UN Comtrade; McKinsey analysis

10 Commodity prices have increased sharply since 2000, erasing all the declines of the 20th century MGI Commodity Price Index (years = 100) WWI Postwar Depression WWII Great Depression 1970s Oil Shock Forecast Source: Grill and Yang; Pfalfenzeller; World Bank; IMF; OECD statistics; FAO; UN Comtrade; McKinsey analysis

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12 The world is changing at an accelerating pace GDP per capita (1990 dollars) Now X years ago Source: J. Bradford De Long 12

13 THE RULES OF THE GAME ARE CHANGING INDUSTRY AFTER INDUSTRY 13

14 How the Business in Changing in the Agricultural Universe

15 Grain stocks have been decreasing and therefore crop prices are increasing Average grain prices and stock-to-use ratio USD/bushel and months of stock to use ratio Stock to use ratio (months) 8.0 Average grain price (log scale) Source: USDA, Datastream, Nomura research,

16 Commodity and food prices are increasing Crop Prices Cotton Corn Soybean Wheat FAO Food Price index Source: Phillips McDougall, September

17 Average annual yield increase of major crops 2.2% 2.0% 1.7% 1.4% 1.2% 1960s 1970s 1980s 1990s 2000s Source: FAO, USDA 17

18 Rethinking agriculture Adding new crop land (reducing land degradation recycling urban waste water and improving irrigation techniques) Developed countries large scale farms: Increasing yield through innovation (mechanization, genetic variety, farming practicesincluding precision farming) Reducing Food Waste Developing countries smallholder farms: Boosting productivity through transfer of technology and best farming practices 18

19 Israel as a dynamic lab for agriculture lack of water and arable land as well as a variety of climates as a catalyst for innovation A few facts about innovation in Israeli agriculture: Desert Agriculture Aquaculture High efficiency of water use Irrigation & Recycled water Unique seed cultivation Greenhouse Technologies Seed treatment through the use of biotechnology Israel is driving its six decade quest to coax more from the soil, water, air, and sunlight than do most other nations on earth Israel leads the world by recycling 70% of its wastewater, three times the figure for No.2 Spain. Business Week, 2009

20 The Role of Crop Protection

21 Steady agriculture demand cannot be met without crop protection 100% 90% Potential yield loss with no crop protection 80% 70% 60% 74% 49% 82% 68% 77% 60% 50% 40% 30% 20% 10% 26% 51% 18% 32% 23% 40% 0% Potato Wheat Cotton Maize Rice Soybean Source: Crop losses to pests; E-C Oerke, Journal of Agricultural Science (2006),

22 Nemotode Nematode contamination Healthy 22

23 Diseased potato fields 23

24 Corn earworm Corn Earworm will destroy more than 90% of the sweet corn yields And it's just one of 10,000 species of plant-eating insects 24

25 Monilinia Fructicola fungus The Monilinia Fructicola fungus will lead to a loss of 75% of the peach yields 25

26 Portulaca Oleracea Portulaca Oleracea will demolish 70% of the Carrot Yields Zero weed competition Season long weed competition 26

27 Seed dressing 27

28 Environmental Solution Products enable healthy animals by eliminating fleas, ticks, and chewing lice 28

29 The Rules of the Game are CHANGING Also in Our Industry 29 29

30 Crop protection average volume growth is expected to continue Crop prices are close to all-time highs A gradual technology adoption in emerging Asia and Russia Acceleration in North American-driven fungicide adoption Continued growth in Latin America GMO substitution is over Source: Philips Mc Dougal, Nomura estimates 30

31 Never has the pace of change been greater Emerging role of generics and intensifying generic competition Shifting economic centers Emerging role of Chinese AgChem producers The role of seeds and traits Rising cost of innovation Increase in regulatory scrutiny Increasing distribution consolidation 31

32 The emerging role of generics and intensifying generic competition Crop Protection Market Share by Product 55.0 Proprietary Proprietary Off-Patent Generic Off-patent products have gained a total of 15.4% in market share since Source: Phillips McDougall 32

33 Blurring boundaries between generic and innovative companies Ranking 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% #1 #2 #3 #4 #5 #6 34% 66% 44% 56% 31% 69% Syngenta Bayer BASF Dow Monsanto DuPont 24% 76% 2% 98% 18% 82% Proprietary off-patent and generic products Patented sales MAI #7 Others Syngenta Bayer Monsanto Dow DuPont Illustrative. Source: Phillips McDougal BASF FMC Sumitomo 33

34 The emerging role of the Chinese chemical industry Volume of Chinese AgChem exports* *Formulated products Source: Phillips McDougall, February

35 $/ ton All rights reserved to Makhteshim Agan The emerging role of the Chinese chemical industry AgChem products* export prices, China India Israel USA France Switzerland Germany Japan Insecticides Fungicides Herbicides *Formulated products Source: Phillips McDougall, Dec

36 Makhteshim Agan who we are 36

37 Very Compelling Growth Story $B $B CAGR 3% Crop Protection Market CAGR 13% MA Industries Crop Protection $B Source: Philips McDougal, MAI analysis 37

38 MAI Sales Spread Sales by Product Group Regional Spread Fungicides Non Agro 17% 7% Latin America 22.7% 17.6% North America Insecticides 23% 53% Herbicides Europe 38.5% 17.5% 3.7% Israel Asia Pacific and Africa 2012 Total Sales - $2,83 mm 38

39 MAI Market Share and Position (2011) Off-patent market share Off-patent position Total sector market share Total sector position Europe 25% 1 st Europe 7.5% 5 th NAFTA 12% 2 nd NAFTA 4.8% 8 th LATM 19% 1 st LATM 7.0% 7 th APAC & Africa 4% 5 th APAC & Africa 2.4% 10 th total 12% 1 st total 4.7% 7 th Sources: Phillips McDougall; MAI analysis 39

40 Our Unparalleled Off-patent Global Footprint Sales in over 120 countries More than 50 subsidiaries in close to 45 countries HQ Subsidiary Sales 40

41 Global Development & Registration Network Germany US Switzerland Israel Israel India Colombia India Brazil Development and registration center Chemical R&D center 7 development and registration hubs, 2 chemistry R&D centers Development capabilities in all regions Local registration capabilities in over 100 countries Full registration dossier building capabilities 41

42 MAI s global manufacturing footprint US (Bold-Tifton) Poland (MAAP) US (CSI-Houston) US (Bold-Ocilla) Spain (Aragro) Greece (Alfa) South Korea (JK) Mexico (Bravo) Italy (Kollant) Israel (Agan) India (Gujarat) Columbia (Proficol) Israel (Makhteshim) Brazil (Milenia Londrina) Brazil (Milenia Taquari) Synthesis Formulation 42

43 Our current business model Product Quality & High Level Service One Stop Vendor: For Unparalleled Solution Offering Product Distinctiveness Innovative Products Advanced Formulations and Mixtures 43

44 Looking Reality In the EYE 44

45 Looking reality in the eye 40% 38% % 34% % 30% % % 24% Sales GM

46 MAI key challenges (January 2010) Cost structure of AI s and products Global supply chain effectiveness Brazilian operation U.S Ag Chem penetration Business model (in an ever changing industry) New vision, purpose and clear direction 46

47 What We Have Done Since

48 Laying the foundation that will support differentiation Driving Organic growth Fixing the foundation (operational enhancement measures) 48

49 financial figure highlights CAGR: 9% CAGR: 16% CAGR: 26% CAGR: 33% CAGR: 55% 49

50 Strong focus on gross margin 40% 38% % 34% % 30% % % 24% Sales GM

51 Laying the foundation that will support differentiation Laying the foundation for a new future Driving Organic growth Fixing the foundation (operational enhancement measures) 51

52 Laying the foundation for a new future Innovation culture Crystal? Novel Agricultural Technologies Division new frontiers Ground preparation for a global brand launch From products orientation to market orientation enhancing our marketing capabilities in conjunction with a better understanding of farmers needs Enhancing product portfolio differentiation Business combination with ChemChina Core Values: Creating Simplicity, Empowering People, Passion, Get it Done Core Purpose: Creating Simplicity in Agriculture Visionary goal: creating a new business model, 52

53 Business Combination with ChemChina

54 The importance of food security in China China is 20% of the world s population, 7% of the world s arable land and 6.6% of global freshwater resources Promoting Agricultural Technology Increasing Arable Land Promoting safer and more efficient Agrochemicals China Food Security Adopting high quality seeds 54

55 Reverse merger transaction with ChemChina IDB ChemChina 40% 60% MAI Acquiring and integrating selected AgChem operations of ChemChina and additional Chinese businesses 55

56 Five pillars to be built in China (a leap in implementing our new business model Developing a leading seeds and traits business Distribution leadership in a fast growing market Complementary R&D resources and capabilities Our Customers Strong domestic supply chain capabilities (sourcing, formulation platform) Strong cost position of specific AIs 56

57 Project Crystal - Crystallizing Our Strategic Direction

58 Our Core Purpose Creating SIMPLICITY In Agriculture 58

59 Our Values Creating Simplicity Get it Done Empowering People Passion 59

60 Quest blueprint Make the most of a game changing transaction Business model transformation Connecting purpose, values and vision to foster change 60

61 Thank you