Our Industry 2016 - Syngenta

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Our industry2016

Syngenta at a glanceIntroductionWe need to grow more with lessOur global challengeAgricultural production will need to increase substantiallywith limited natural resources The UN estimates that by 2030 the world willneed 30% more fresh water and 50% moreenergy; by 2050 we will need 70% more foodGlobal grain demandPopulation growth and greater economic prosperity in emergingmarkets will drive future demand for food and feed production Population is growing: by 2050, globalpopulation will grow to greater than ninebillion, more than two billion additionalpeople compared to todayDiets are changing: demand for meatand dairy is growing, especially inemerging marketsGlobal demand of major grains*bn tons, CAGR (% per annum) 1.2-1.6%CAGR3Fuel2Feed1Food01980199020002015* Corn, soybean, wheat and riceSources: USDA; FAPRI; Syngenta analysisLimited natural resourcesAgriculture must meet rising demand for food, feed and fuel whileprotecting the planet’s natural resources Expanding farmland increases environmental sustainability challengesUrbanization continues: by 2050, three billion more people are expected to be living in cities,with urban sprawl further reducing arable land and putting biodiversity resources under stressWater scarcity: agriculture uses 70% of the world’s fresh water2027

1Contents01 Global challengesGlobal agriculture: growing more from lessDemandEnvironmental stress05 Technology in agriculture451002 Sustainableagricultural systemsSustainable intensification of agricultureImproving productivityReducing agriculture’s environmental footprintBuilding rural prosperity1920242503 Regions in focusIntroductionAsia-PacificEurope, Africa and Middle EastLatin AmericaNorth America65666768697071727375777906 Lawn and Garden293034404404 Crops in iverse field cropsSugar caneSpecialty cropsEvolution of the industryThe role of crop protectionCrop protection: market overviewCrop protection productsBeyond traditional crop protectionR&D in crop protectionSeeds: market overviewPlant breeding historyBenefits of hybridizationBiotechnologyResearch, development and regulatoryenvironment for biotech cropsInnovation and intellectual property495254565859606263Market overviewFlowers, home and garden solutionsProfessional market and products82828207 Syngenta key financialinformation and ratiosSyngenta 5-year financial summaryRegional 5-year financial summary5-year sales summary2015 sales by cropBalance sheetCash flowSignificant acquisitionsReference sourcesCautionary statement858687888990919293

2Syngenta at a glanceFinancial highlights 932.90 .99-10%1514131.842.031.941514130.650.690.69US 13.4bnEBITDAUS 2.8bnEBITDA margin20.7%Earnings per share2US 17.78Free cash flowUS 0.8bnDividend per share, 2015 proposedCHF 11.00Regional sales 20151Europe, Africa and Middle EastUS 3.9bnNorth AmericaUS 3.4bnLatin AmericaUS 3.6bnAsia PacificUS 1.8bnLawn and Garden sales 20151US 0.6bn12–7%For further explanation of financial information, see Section 7, Syngenta key financial information and ratiosFully diluted excluding restructuring and impairment

Global challenges01

401 Global challengesGlobal agriculture: growing more from lessOur global challenge:increase agriculturalproductivity by at least70% in 40 years withlimited natural resourcesThe ability of our planet to sustain life is fragile and under increasing stress. Despitesignificant growth in food production over the past 50 years, 805 million people in theworld still suffer from hunger and even more are malnourished. By 2050, the globalfood requirement will increase significantly, driven by a population increase to morethan nine billion and a demand for improved diets, particularly in emerging markets.Agriculture is receiving increasing attention worldwide as government andnon‑government authorities recognize a need to accelerate productivity in order toensure food security and improved nutrition to a growing population. Farmers willneed to produce around 1.4% more grain every year, representing an increase ofapproximately 30% by 2030 and around 70% by 2050.At the same time, responding to changes in climate, using the limited naturalresources in a sustainable way and respecting biodiversity pose additional challengesto achieving increased farm productivity at the required speed.Agriculture holds the key role to tackling these challenges and achieving food securitytoday and in the future. The World Food Summit of 1996 explained that food securityexists when “all people, at all times have access to sufficient, safe, nutritious food tomaintain a healthy and active life”. But reaching this goal will not be easy.Undernourished population in 2014 805millionpeopleAsia and the PacificSub-Saharan AfricaLatin America and the CaribbeanNear East and North AfricaDeveloped countriesSource: FAOmillions of people505214373315

Global challenges 015DemandSince 1980, demand for field crops has increased almost 90%, from 1.2 billion toalmost 2.7 billion tons, with the increased demand for food and feed the key driver.In addition, biofuels have increasingly played a role to meet our energy needs inways that mitigate the growing problem of green house emissions.Global demand of major grains*bn tons, CAGR (% per annum)2014 Use of major grains* 1.2-1.6%CAGR3Fuel2BiofuelsFeedFoodFeed5%37%58%* Corn, soybean, wheat and riceSource: USDA1Food019801990200020152027* Corn, soybean, wheat and riceSources: USDA; FAPRI; Syngenta analysisDemand for grain hasincreased almost 90%since 1980 and willcontinue to increaseat an average rate ofaround 1.4% per yearGrain demand is expected to increase 30% by 2025 – an additional 600 milliontons. This demand will not only be driven by population growth but also by greatereconomic prosperity in emerging markets, as well as biofuels expansion. Around30% of this additional demand will come from changes in consumer diets asopposed to population hTotal1964 to 1980 1.7% 1.9% 0.0% 3.6%1980 to 1997 1.4% 0.5% 0.0% 1.9%1997 to 20141.1% 0.7% 0.4% 2.1%Sources: USDA; SyngentaDemand drivers for the next 10 years (to 2025)BiofuelsFeedFood* Corn, soybean, wheat and riceSource: Syngenta analysis 10% 60% 30%

601 Global challengesDemandThe global population is expected to rise from around seven billion today to morethan nine billion by 2050. Most of this population growth will occur in developingcountries, where the populations are projected to reach around eight billion in 2050,an increase of almost 40%. In contrast, the population of the more developed regionsis expected to increase at a much slower rate, to around 1.3 billion.World populationbillions of peopleYear-on-year growth%1.0%CAGR82.5World populationis growing at a rateof around 80 millionadditional people per year– a trend that is forecastto continue until .001960197019801990200020102020EYear-on-year absolute change (in millions)Source: FAO, CAGR 2012–2020For the first time in history, more people worldwide are living in cities than in thecountryside. By 2050, around three billion more people are expected to be living inurban areas. In China 52% of the population now live in cities. Given that their spendper capita on food is 270% higher than that of their rural counterparts, the pressureon achieving food security becomes increasingly challenging.Urban and rural population of the worldin billions98765432101950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030World total populationWorld urban populationWorld rural populationSource: United Nations Department of Economic and Social AffairsToday 52% of thepopulation in Chinalive in cities, comparedwith 17% in 1961

Global challenges 017DemandIn parallel, a greater number of people will experience increased wealth and higherpurchasing power, and as a result will increase consumption of processed food,meat, dairy and fish. A Goldman Sachs study estimates that the world’s middleclass – people earning between US 6,000 and US 30,000 a year – will expandby two billion people by 2030. In China alone, the McKinsey Global Institute hasforecasted that the middle class will grow to be 76% of the population by 2025.That means not only more people to feed, but also feeding each person with ahigher calorie and protein diet thereby impacting significantly demand for feed.Since 2005, global meat demand is expected to increase by 40% by 2025. The typeof meat consumed affects the amount of grain demand: one kilogram of beefrequires seven kilograms of grain, whereas pork requires four kilograms and poultrytwo kilograms.Global meat consumptionIndex 1971 100By 2025 global meatdemand to rise 40%;an increase of around100 million tonsSource: er capita consumption20062014PopulationSource: USDASince 2010 global energy demands are expected to increase by approximately 40%by 2030 and energy from biofuels produced from plants is increasingly playing amore important role as an alternative.2014 biofuel production estimate: 29 billion gallonsbillions of gallonsGlobal energy demandsexpected to increase by 40% by ources: US Energy Information Administration (EIA)(1 gallon 3,8 litres)1.12.5Rest ofworld 1.8 1.7Biofuels representaround 5% of globalroad transport fuels

801 Global challengesDemandThe US and Brazil have invested heavily in this area, producing 70% of the world’sbiofuels today.As the US ethanol industry has expanded, the amount of corn used for ethanolproduction has increased. The Energy Policy Act of 2005 established the first-everRenewable Fuels Standard (RFS) in federal law, requiring increasing volumes ofethanol and biodiesel to be blended with the United States fuel supply between2006 and 2012. The Energy Independence and Security Act of 2007 amended andincreased the RFS, requiring 13.2 billion gallons of renewable fuel use in 2012,stepping up to 36 billion gallons by 2022. Under the modified RFS, corn‑basedethanol is essentially capped at 15 billion gallons by 2015, while the balance must bederived from advanced biofuels such as cellulosic and non‑corn‑based ethanol.While the future of the RFS remains a political uncertainty in the US, the developmentof new biofuel markets remain promising for the ethanol industry at-large. The lowerprice point and octane benefits of E15 from American motorists and recentcommitments from some 200 countries for GHG reduction at COP21 in Paris signalstrong demand for ethanol globally in years to come.The US Renewable Fuels Standard; bioethanol production billions of gallons15105019992000200120022003Source: Renewable Fuels Association(1 gallon 3,8 litres)20042005200620072008200920102015EUnited States FederalGovernment ethanolmandate: 15 billiongallons by 2015

Global challenges 019DemandSince December 2011 the tax credit on ethanol production (46 cents/gallon) as wellas US import tariffs on foreign bioethanol (54 cents/gallon) have been discontinued.However the US ethanol production and demand have remained resilient. While thefigures in the previous graph are correct at time of publication, the current overallbudget discussions in the United States may result in changes to the RFScommitments and requirements.In Brazil, ethanol from sugar cane produces 35% of the world’s bioethanol and hasreplaced 35% of the gasoline used in light vehicles in the country. Sugar caneethanol represents a low carbon and cost efficient fuel option in comparison to manyother biofuels.Sugar cane: low carbon and cost-efficient fuel optionCO2 balance%Crude oil equivalentUS per barrel10018080150US 100 per barreloil price11012885404510Oil based gasolineCorn ethanolOilseed rape1010PalmCelluloseSugar caneBrazil sugar caneUS cornMalaysia palmOne ton of sugar caneproduces 80 litersof ethanol comparedto 38 liters fromone ton of cornEU wheatUS soybeanEU oilseed rapeCO2 output fromsugarcane bioethanolis 90% lower thanoil-based gasolineSources: Farrell et aI, Science January 2006; GTZ; SyngentaThe Brazilian government continues to strongly support the bioethanol industry andhas returned to the mandatory blend of 25% in May 2013 (after two consecutiveyears of poor sugar cane yields the mandate was temporarily reduced to 20%).Around 60% of the country’s automobile fleet is composed of flex-fuel cars.The EU Renewable Energy Directive in 2009 established a target of a minimum of10% renewables in transport for 2020 and requested national action plans for eachmember state to outline a path for meeting the target. More recently, an increasingpublic debate on competition between food and fuel, aggravated by high crop prices,triggered the European Commission to submit a draft biofuels policy limitingfood-crop based biofuels to 5% of EU transport fuel consumption. The draft stillneeds to be approved by the EU governments.Brazil mandatory biofuelsblend rate planned toreturn to 25% as sugarcane production showssigns of recovery

1001 Global challengesEnvironmental stressAs demand for increased quantity and quality of crops grows, agriculture mustevolve in order to meet these demands in a sustainable way. Changes in climatewill further stress the availability of water, land, and biodiversity necessary forproductive agriculture.Limited land for agriculture2014 crop area:approximately 1.6 billionhectares globally;12% of land surfaceWithin the 13 billion hectares of total land, only 1.6 billion is under farmlandproduction; 36% of that land is in Europe, the Middle East and Africa, 39% inAsia Pacific, 15% in North America and the remaining 10% in Latin America.Global land use and agricultural landbillion hectares4.913.03.3Potential areafor agriculturalexpansion4.03.0Total plantedarea 1.6 billion ricultural Permanent Permanent MajormeadowscropscropsUndefinedSources: FAO; World Bank; WWF; Syngenta analysisnLatiricaeAmSources: FAO; Syngenta estimatesAmer13%18%6%8%11%20%10%5%5%4%NorthEastern EuropeAfricaWestern Europe, Middle EastChinaIndiaRest of Asia PacificUnited States of AmericaRest of North AmericaBrazilRest of LATAMaEurope, 1.6 billionhectaresAsia -Pa cificAthe Middle Eastandcafriic2014 crop areas

Global challenges 0111Environmental stressIn the last 50 years, there has been only a gradual expansion in agricultural areasbecause yield has increased at a much faster pace as farmers have adopted moretechnology, keeping pace with the rising demand for grain.Yield and acreage trend (corn, soybean, wheat, rice)Index: 1960 100)300280Productivity levelsare steadily increasing,average grain yields perhectare almost doublingin the past 40 90200020102015YieldSource: USDA* Corn, soybean, wheat and riceUntil now demand has been met primarily through yield improvement. However, theimprovement rate of yields in the major grains has been slowing down and will not besufficient to fulfill increasing demand.Rolling 10 year average growth in crop yield (corn, soybean, rice, wheat)%4%3%2%1%0%1970Source: USDAIn the 1980s one hectareof arable land produced2.3 tons of grain*annually; today itproduces 3.6 tons19801990200020102015Yield improvementslowing down inmajor crops

1201 Global challengesEnvironmental stressTo meet future global grain demand, the FAO estimates suggest that 80% of cropproduction growth by 2050 is expected to come from higher yields, but land availablefor farming will also have to expand by approximately 120 million hectares in developingcountries, mainly Sub-Saharan Africa and Latin America. These 120 million hectaresshould come primarily from a change in land use, for example pastures to arable landwhich will require significant investment, knowledge transfer and education. However,the area suitable for agriculture is only available in limited geographies.Brazil represents about 60% of this opportunity, with approximately 70–85 millionhectares that could be brought into production in the future without impacting naturalecosystems such as the rainforest.To produce the sameamount of food todaywith yield levels from50 years ago would requireadditional land equivalentin size to the USAAgriculture must meetrising demand for food,feed and fuel withoutstressing natural habitatsBrazil uses of landmillions of hectares100% Total land area8507% Farmed land 6025% Cattle raising 21049% Amazon & Atlantic forest, rivers4209% Cities, roads, infrastructure75 10% Potential additional area for cultivation70 – 85Sources: FAO; WWF; SyngentaThe challenge going forward is to meet demand without stressing natural resources.Number of people fed per hectare of planted land5. billion4.4 billion6.0 billion7.5 billionSource: FAOSTATIn 2020 one hectare willbe required to feed morethan five people comparedto 1960 when it onlyhad to feed two people

Global challenges 0113Environmental stressClimate variability and agricultural riskEvery year, some part of the world suffers from drought which can hamper thegrowth of crops and significantly reduce the level of grain harvested. Today, some80 countries are already suffering from water shortages, and the problem is notconfined to the arid regions of the world. Nations like Brazil, Canada, Colombia,Indonesia, and Russia are all teeming with fresh water – but even they sometimesexperience severe drought.Average yield of corn, soybean and cerealstons per hectare (t/ha)2005-20142014201201Source: USDA23456Water stress is alreadylimiting productivity:around US 40 billionin crop losses in 2012due to drought

1401 Global challengesEnvironmental stressCommodity price evolution since Jan 2014Index @ Jan 2014 ul-14Oct-14Jan-15RiceSource: CBOT/BloombergThe impact of cyclical weather variability, which varies in intensity and character yearby year, has seen some fundamental changes in the climatic patterns over the lastdecades. The most visible ones were:1) widespread global temperature increase, 2) change in precipitation patterns(increased in some regions and decreased in others) and 3) change of frequencyand intensity of some extreme weather events.Fundamental changes in the patterns of temperature and precipitation could possiblyshift production seasons, pest and disease patterns, and modify the types of cropsgrown in certain areas. A potential decrease in productivity due to hotter and morevariable weather may lead to more erratic production patterns overall. Although therewill be gains in some crops in some regions of the world, the overall impact onagriculture may be negative.Simulations using greenhouse gas emissions models suggest by 2100 an increaseof global average temperature of up to 2.5 C, with more and stronger extremeevents. These changes are expected to drive a further increase in water stress, theacidification of oceans and potentially the risk of extinction of 20–30% of assessedplant and animal species.Drought conditionsfrequently observedin regions with nowater scarcity

Global challenges 0115Environmental stressWater scarcityGlobal water scarcity has a critical impact on food security and health. Only about3% of the Earth’s water is fresh, and less than a third of that is economicallyaccessible for human use in an environmentally responsible way – making waterone of the biggest limiting factors in the world’s ability to feed a growing population.Even though global fresh water resources are sufficient, they are unevenly distributedwith water scarcity in some locations already reaching alarming levels. China andIndia, with one-third of the world’s peop

2016 Our industry 2016. Food Feed Fuel 3 2 1 0 1.2-1.6% CAGR 1980 1990 2000 2015 2027 . Sources: USDA; FAPRI; Syngenta analysis Syngenta at a glance Introduction. Contents 01 Global challenges Global agriculture: growing more from less 4 Demand 5 Environmental stress 10 02 Sustainable

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