Syngenta Annual Review 2015 Annual Review 2015

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Annual Review2015

iSyngenta Annual Review 2015ii-09Strategic overviewii At a glance01 Bringing plant potential to life02 Chairman’s statementContents10-1314-25Research andDevelopmentCrops in focus10 The industry’s most productiveinnovation engine16 Corn14 Cereals17 Diverse fi ld crops04 Chief Executive Officer’sstatement18 Rice06 Our business model21 Specialty crops08 Our strategy23 Sugar cane20 Soybean23 Vegetables24 Lawn and Garden26-3536-45The Good Growth PlanOperationalperformance37 People38 Sustainable operations42 Business integrity27 Make crops more efficient31 Empower smallholders28 Rescue more farmland32 Help people stay safe30 Help biodiversity flourish34 Look after every worker46-6364-67Performance data46 Regional performance47 Product line performance48 Financial information44 Public debates63 Independent Assurance Reporton the Syngenta Non-financialReporting55 Non-financial informationAbout the Syngenta Annual ReportThe full print edition of Syngenta’s Annual Report 2015 comprises:the Annual Review 2015, summarizing both financialand non-fi ancial performance the Financial Report 2015the Corporate Governance Report and CompensationReport 2015.The Annual Review includes quantitative and qualitativeinformation on strategies, policies and actions taken regardingour business and corporate responsibility goals.Corporateinformation64 Board of Directors65 Executive Committee66 Shareholder informationFor further information, including the Form 20-F,the Our Industry publication and a section withanswers to many “Questions about Syngenta”,visit our corporate website: www.syngenta.comSyngenta’s Annual Report also serves as ourannual Communication on Progress (COP) forthe United Nations Global Compact.You can find our online Annual Report 2015

iiSyngenta Annual Review 2015At a glanceGroup performanceOur focus has been on improving profitabilitywhile continuing to support our customersin a volatile economic environment.Financial performanceGroup salesCrop Protection sales2 13.4bn 10.0bn 1% (CER1)2015201415.13201314.69Cash flow returnon investment411%Research andDevelopment investment 17.78-1% (CER1)13.412015Earnings per share3 1.4bn-8%10.002015201411.38201310.92-3% .38Seeds salesDividend per share5EBITDA 2.8bnCHF11.00 2.8bn 5% (CER1)0% 16% 90Non-financial performancePeople trainedon safe useSeed supply farms inour fair labor program6Recordable illnessand injury rate7Smallholders 17.220144.7201453%20140.37201413.820132.820130.411 Growth at constant exchange rates (CER)2 Including sales of Crop Protection productsto Seeds3 Fully diluted excluding restructuring and impairment4 For a definition of cash flow return on investment,see page 545 2015 dividend is subject to shareholder approval atthe Annual General Meeting on April 26, 20166 2014 value was estimated and not assured7 Per 200,000 hours, according to US OSHA definition8 Through salesCrop performanceWe are using our deep understanding of cropsto develop integrated offers, which increasinglybring together genetics and chemistry. ead more about “Crops”Ron pages 14–25 Read more about “Non-financial information”on pages 55–62Crop sales m1Cereals 1,686mCorn 3,161mDiversefield crops 1,105mRice 588m1 Crop sales are based on Syngenta estimates ead more about “Financial information”Ron pages 48–54Soybean 2,515mSpecialty crops 1,882mSugar cane 271mVegetables 1,540mLawn and Garden 648m

iiiSyngenta Annual Review 2015At a glanceBusiness highlightsThroughout 2015, we continued to strengthen our offerthrough market-leading innovation and collaboration.Here are some highlights from the year.Breakthrough corn herbicideNew high-performance fungicidesR&D Days: unparalleled pipelineSyngenta received US EPA approval forACURON , providing a step change intechnology to address herbicide resistance.ORONDIS and SOLATENOL receivedUS EPA approval, expanding Syngenta’smarket-leading fungicide portfolio.We demonstrated that our R&D is the mostproductive in the industry and set out apipeline of unparalleled innovation acrosschemistry, seeds and traits. Read more on page 17 Read more on pages 11 and 15 Read more on pages 10–13Corn traits licensing agreementSyngenta and DSM partnershipThe Good Growth PlanOur licensing collaboration with KWS andLimagrain is further affirmation of the valueof Syngenta’s innovative GM traits portfolio.The companies will develop and jointlycommercialize microbial-based agriculturalsolutions, including bio-controls, biopesticides and bio-stimulants.We made significant progress and, withthe Open Data Institute, published data toenable the unlocking of environmental, socialand economic value. Read more on page 16 Read more on page 12Our global reachOur teams around the world combine their local knowledgewith our global assets and expertise, tailoring solutionsthat create value for growers.NorthAmericaEurope, Africaand Middle East Read more on pages 26–35Europe, Africa and Middle EastSales 1 mEmployees 2,33,88413,047Research and Development sites47Production and Supply sites42North AmericaSales 1 m3,410Employees 24,335Research and Development sites34Production and Supply sites35Latin AmericaSales 1 m3,632Employees 24,962Research and Development sites13Production and Supply sites12Asia PacificLatinAmericaAsiaPacificSales 1 m1,837Employees 26,360Research and Development sites25Production and Supply sites231 Excluding Lawn and Garden2 Permanent full-time equivalent (FTE) as of September 30, 20153 Including headquarters (Switzerland)4 Including six multi-functional production sitesCountries90Production andSupply sites 4112Research andDevelopmentsites119Employees28,704

Syngenta Annual Review 2015Research andDevelopmentCropsin focusWe apply world-class scienceand the most productive researchand development in the industryto achieve a step changein agricultural productivity.In more than 90 countriesaround the world, we enablemillions of farmers to improveglobal food security by makingbetter, more sustainable useof available resources.StrategicoverviewBringing plant potential to life01The GoodGrowth information

02Syngenta Annual Review 2015Chairman’s statementExtraordinarycircumstances,impressive resilienceand a promising future“Preliminary data suggest that the Company managed to gainmarket share on a global basis, while posting an improvementin margin. In these extraordinary circumstances, the Board isproud of what our Company has achieved.”Michel DemaréChairman2015 was a challenging year on anumber of fronts, but one during whichSyngenta demonstrated its resilience,outperformance and excellence. Inagricultural markets, crop prices remainedsubdued and impacted the willingnessof growers to invest in technology.Nevertheless, preliminary data suggestthat the Company managed to gainmarket share on a global basis, whileposting an improvement in margin. Inthese extraordinary circumstances, theBoard is proud of what our Companyhas achieved.Economic uncertainty in emergingmarkets, which represent over 50 percentof our sales, led to significant currencyweakness, notably in Brazil and the CIS.These devaluations restricted our salesgrowth, but our teams managed to copewith the turbulence through a number ofactions in the field – leveraging the qualityof our offer – which enabled us toprogressively increase prices.While profit growth was curtailed bydifficult agricultural markets and currencyheadwinds, profitability improved drivenby the Accelerating Operational Leverageprogram which, in its second year,delivered more than the targeted savings.The program is really gaining momentumin the organization, and I am confidentthat our 2018 savings target of 1 billionwill be achieved and result in clearprofitability and cash flow leadership.

Chairman’s statementSyngenta Annual Review 201503StrategicoverviewMichel DemaréChairmanCorporateinformation2015 witnessed much speculationabout industry consolidation, and amerger was announced towards theend of the year between two of ourUS-based competitors. This was partlydriven by challenging market conditionsand diminishing returns on R&D, whileinvestors expect greater and fasterreturns from the industry as a whole.As the structure of the industry startedto show irrevocable signs of profoundchanges, it was important for theCompany to remain agile and assumeno status-quo.Finally, I should particularly like to thankall the employees of Syngenta for theirdedication, hard work and commitment tothe Company. The volatility created by themarkets and by the industry consolidationdiscussions have not caused them to losefocus. On the contrary, they start 2016with the same determination and pridein what Syngenta has to offer to farmersaround the world. I am confident they willdeliver again, whatever the circumstances.PerformancedataMike was succeeded by John Ramsay,who has a long and distinguished trackrecord of leadership in the Company.John is currently acting in an ad interimcapacity, while a full internal and externalsearch is conducted. The Company isin solid hands, which allows a disciplinedprocess to take place to select ourfuture leader.I should like to thank my Board colleaguesfor their judgment and support duringthis process, and for their guidance duringthe year.OperationalperformanceIn October, Chief Executive OfficerMike Mack informed the Board of hisdecision to step down from his role aftereight years. Mike led the Company withpassion and dynamism, developing aninnovative integrated strategy, drivingsignificant growth in sales and creatinga new relationship with society throughThe Good Growth Plan. On behalf ofthe Board of Directors, I should like tothank Mike for his immense contributionto Syngenta.The GoodGrowth PlanIn addition, 2015 was the first year inwhich we achieved audit level ofassurance for The Good Growth Plan.This is unique in the industry – and veryrare in any industrial sector – anddemonstrates the rigorous nature ofThe Good Growth Plan and the real,quantifiable and tangible benefits thatit brings to society and the environment.Finally, we became the first agriculturecompany to receive accreditation bythe Fair Labor Association (FLA) forour program in India. Building on thisstrong foundation, we are now workingwith the FLA on accreditation for ourglobal program.The Good Growth Plan and the SyngentaFoundation for Sustainable Agriculture,which continued its excellent job insupporting smallholders across the world,really place Syngenta at the forefront ofsustainability in our industry and make,in my opinion, a real difference.In that context, I was very pleasedto announce on February 3, 2016,a transaction with ChemChina thatI firmly believe is in the best interests ofshareholders and all other stakeholdersin Syngenta, including our employees,our customers and our communities.It is a transaction for growth and longterm investment, and one whichrecognizes the tremendous value of ourCompany – our innovation, our broad anddeep market presence and the excellenceof our people. Moreover, the governancestructure agreed in the transaction reflectsthe high standards that have guided theCompany since its inception in 2000 –Syngenta remains Syngenta, and willcontinue its ambitious standalone strategysupported by an ambitious owner. Evenbetter, growers around the world willcontinue to have a choice.Cropsin focusExcellent progress was made duringthe year with The Good Growth Plan.Each target within our six commitmentswas achieved, and we remain on track tomeet our 2020 goals. We also increasedthe number of reference farms in ournetwork to over 1,000 globally, givingus extensive and rich data. We reinforcedour transparent approach by publishingthese data in partnership with theOpen Data Institute, so that interestedstakeholders can analyze and workwith our results.We also made significant progressin developing a clear framework formeasuring and tracking the sustainabilityof our own operations. These arecentered on five areas – energy, water,waste, suppliers and logistics – and themajority of associated actions will becompleted by the end of 2016.Research andDevelopmentOur industry-leading Research andDevelopment productivity and innovationpipeline was showcased at our R&Ddays, attended by more than 570 investors,customers, stakeholders and employeesover three days in September. With unrivaledbreadth and depth of technologies acrosschemicals, seeds and biotech traits,Syngenta is in a very strong position todrive future growth. The ongoing successof the new fungicide ELATUS in Brazil,the launch of the novel herbicideACURON in the USA and the expansionof our corn traits licensing – evidencedby the license agreement concluded withKWS/Limagrain in October – demonstratenot just our innovation power, but also ourability to create significant value fromthat innovation.

04Syngenta Annual Review 2015Chief Executive Officer’s statementClear goals are keyto our objectiveof outperformanceAs shareholders in an agriculturecompany, you are familiar with theimpact – positive or negative – thatcommodity prices can have on ourbusiness. The evolution of commodityprices is determined by multiple factors,including notably the weather. However,over the last two years, geopoliticaland economic events have also hada significant influence on our business.“I remain convinced that the emerging markets, which todayare experiencing such turmoil, continue to represent themajor growth driver for our industry in the future. I amequally convinced that Syngenta has the necessary skillsand experience, as well as the right portfolio, to succeedin these markets.”Managing currency volatilityJohn RamsayChief Executive OfficerAd interimThe 2014 events in Russia and Ukrainehad continuing implications in 2015because of the massive currencydevaluations in those two countries.I am pleased to say that we weresuccessful in offsetting these devaluationsthrough price increases. While higherprices had some impact on sales ofseeds, where local alternatives wereavailable, our crop protection businesswas virtually unscathed. This shows theimportance of high-value chemistry tocustomers in these countries and thestrength of our market positions.In January 2015, the Swiss National Bankremoved the Swiss franc peg againstthe Euro, resulting in a rapid appreciationof the franc. With some 13 percent ofour costs in Swiss francs comparedwith less than 1 percent of our saleswe, like many other Swiss companies,stood to be adversely affected by thismove. However, thanks to our wellestablished hedging program wewere able to minimize the impact.

Chief Executive Officer’s statementSyngenta Annual Review 201505StrategicoverviewOperationalperformanceR&D excellenceJohn RamsayChief Executive OfficerAd interimCorporateinformationAt our R&D Days in September, wedemonstrated that Syngenta has themost productive R&D engine in theindustry, with every dollar spent generating 10.70 in sales over the last ten years.We also explained that investment inR&D is not just about invention – it mustalso enable products to be successfullybrought to market. With regulatoryhurdles becoming steeper, our expertiseand foresight in this area are increasinglyimportant – Syngenta has a 100 percentsuccess rate in bringing products fromdevelopment to launch. We have nowput in place the platforms that will enableus further to increase R&D productivity,while continuing to excel at the inventionand the development of new products.PerformancedataDuring my career of over 30 years atSyngenta and its legacy companies,I have spent extended periods in bothLatin America and Asia Pacific. I remainconvinced that the emerging markets,which today are experiencing suchturmoil, continue to represent the majorgrowth driver for our industry in the future.I am equally convinced that Syngentahas the necessary skills and experience,as well as the right portfolio, to succeedin these markets.As part of our commitment to improvedprofitability, we have undertaken a reviewof all our seeds businesses, which will beconcluded at the end of the first quarterof 2016. We will assess the profitabilitypotential of each asset as well as itsimportance in the context of anintegrated offer.I have been deeply impressed by theloyalty and determination of our peopleduring the last year, which has broughtconsiderable challenges. This gives methe utmost conviction that we canachieve our goals and deliver onSyngenta’s immense promise.The GoodGrowth PlanOngoing promiseof emerging marketsI am conscious that in recent years ourprofitability has fallen short of our ownand our shareholders’ expectations. I amtherefore pleased that in 2015, despite lowcommodity prices and currency volatility,we were able to increase profitability.In the current environment, the need forefficiency improvements has emergedas a prevalent industry theme. Syngentatook early action in this respect, havingannounced our Accelerating OperationalLeverage (AOL) program in February2014. The program has three pillars –global operations, commercial and R&D –with targeted savings of 1 billion in 2018.We delivered savings ahead of targetat 300 million in 2015 and are firmlyon track to deliver the 2016 target.I took over as the CEO ad interim ofSyngenta at the end of October. Oneof my first moves has been to align theorganization behind clear goals whichare key to our objective of outperformance.The goals comprise: meeting or exceedingour financial commitments; furtherimproving the customer experience inorder to maintain and grow market share;and driving simplification in everythingwe do to increase our speed and impact.I am confident that we have the frameworkin place to achieve these goals, all of whichare underpinned by the AOL program.Our strength in innovation, which hasbeen amply demonstrated in the courseof 2015, will be a further driver in termsof the customer experience.Cropsin focusOverall I am proud of the way we havenavigated through this period of currencyinstability. Currency movements reducedour sales by 1.8 billion in 2015 and yetthe impact on EBITDA was containedat around 100 million.Managing for profitabilityResearch andDevelopmentThe next currency challenge was therapid devaluation of the Brazilian real,which accelerated during the summer –just as the planting season was gettingunderway. With growers confrontedwith severe liquidity constraints, it hasnot been possible immediately to raiseprices in response to the movement inthe currency. In the coming season,however, we will begin to do so, buildingon our experience in the CIS countries.In the meantime, our focus has beenon helping our customers through thisperiod of economic difficulty, whilesafeguarding our balance sheetthrough rigorous risk management.

06Syngenta Annual Review 2015Our business modelCreating valuethrough innovationOur business enables growers to meet ever-growing demandfor food and other plant-based resources such as biofuels.Demand is rising: both for greater quantity, driven primarilyby population growth, and for higher quality, driven by risingaffluence and changing diets.These needs must be met without putting further pressureon resources that are already overstretched. We help farmersrise to the challenge through innovation rooted in our deepunderstanding of crops and the needs of growers worldwide.Uniquely equipped to succeedNo competitor comes close to ourrange of experience: in biosciences andbreeding; in chemistry; across a hugevariety of crops; and across geographiesand climate zones worldwide.This enhances the scope and pace ofour innovation, enabling us to transfertechnologies between crops andaddress challenges with holisticsolutions that integrate both seedand crop protection sc

the Our Industry publication and a section with answers to many “Questions about Syngenta”, visit our corporate website: Syngenta’s Annual Report also serves as our annual Communication on Progress (COP) for the United Nations Global Compact. You can find our online Annual Report 2015 on: ii-09

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