Professional Documents
Culture Documents
Analysis of Agrochemical
Companies
English Version
CAC Group
Feb. 2016
Corporate Background
UPL Limited, formerly known as United Phosphorous Ltd is a publicly listed company on both the Stock
National Stock Exchange of India (NSE) and the Bombay Stock Exchange (BSE). Until December 2015 UPL had
been a Crop Protection and Specialty and Industrial Chemical manufacturer and supplier. It had held 48.44% of
the Indian listed seed company Advanta. In December 2015 UPL Limited merged with Advanta creating a
company that focuses on:
The promotors continued to hold 29.8% of the stock of UPL Ltd at the time of the merger with Advanta.
Crop Protection
Seeds
Source: Wire Services, UPL and Advanta websites and Benco Analysis
Based upon 2014 Pro Forma sales for UPL and Advanta the new UPL limited will have total sales of US$ 2000
million of which US$1755 will be Crop Protection sales.
UPL operates 88 subsidiaries and has operations in 123 countries. They have 28 manufacturing facilities in 9
countries. The majority of manufacturing is in India where there are 10 plants, with France (4), Argentina (3),
and Spain (2) being the other key manufacturing countries.
UPL Crop Protection sales have grown very strongly and continuously over the last 10 years. UPL growth rates
have significantly outperformed the Crop Protection industry averages throughout the decade as indicated in
Table 1 below. Much of this growth has been generated by acquisitions throughout the decade, especially the
2006 acquisition of Cerexagri which increased UPL turnover from US$333m by US$250m to US$583m.
Page 1
Segment and Geographical Footprint
Chart 2: UPL Sales by Segment 2014
Herbicide
Insecticide
Fungicide
Other
UPL has a very large and balanced portfolio between Herbicides, Insecticides and Fungicides. Insecticides had
been the traditional strength of UPL, built from its strong manufacturing base in organophosphates and
expansion into manufacturing pyrethroids. The fungicide position evolved with the acquisition of Cerexagri and
its EDBC products. Herbicides have grown to be the biggest selling segment in the last few years.
UPL have many products and mixtures registered across its global activities, however a majority of the
products listed above in Table 2 are sourced from third parties.
The majority of the UPL herbicide range was developed through acquisition of the core molecule positions,
with subsequent expansion of registrations to new regions. There has also been a focus on developing value
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added formulations and mixtures built around the base product positions. UPL has acquired the following
herbicide product positions:
Other herbicide positions, mainly country or regional registrations were acquired with company acquisitions,
including Metamitron, Desmedipham, Phenmedipham, Clorpropham and Ethofumesate. Most of the other
herbicide products have been developed via local registrations and are not strategic products for the group. In
2015 UPL launched its internally manufactured and developed Glufosinate with immediate success and have
very high expectations of this product.
UPL was built from an Insecticide base and although Herbicides have recently become a larger segment,
Insecticide sales remain very strong at 31% of all sales and are no doubt a very highly profitable segment for
UPL given their backward integrated manufacturing position in the organophosphates and synthetic
pyrethroids. UPL has built upon its strong organophosphate base through acquisitions from Bayer of
Oxydemeton and Trichlorfonin 2007, and Isoxathion from Sankyo in 2008. The Cerexagri acquisition brought in
new microencapsulated technology for organophosphates and UPL has used this well to develop value added
formulations of many of its key insecticides.
UPL also has an extensive range of pyrethroid insecticides, most of them produced in their own Indian plants.
They also acquired a position in miticides with the Cerexagri acquisition and subsequently acquired the
Fenbutin Oxide business from DuPont including the Vendex brand in 2007, making them the biggest organotin
supplier globally.
UPL has been in the neonicatinoid business from 2003/4 in India and subsequently other regions with
Imidacloprid and Thiamethoxam. UPL also has a distribution contract with Nisso for Acetamiprid in the USA
that came with Cerexagri.
The UPL fungicide business has been growing strongly in recent years. Prior to the Cerexagri acquisition the
UPL fungicide business consisted mainly of the grain protectant products Aluminium Phosphide and
Magnesium Phosphide. The Cerexagri acquisition brought the majority of the fungicide business into the
company with the EBDC products Mancozeb and Maneb and the Copper and Sulphur products. The EBDC
position was further enhanced with the 2010 acquisition of DuPont’s EBDC mixtures business. Mancozeb has
grown in recent years as it has become more widely used as resistance management tool, both stand alone
and in mixtures. The organotin products are also important products for UPL and this position was enhanced
by the 2007 acquisition of The DuPont Tin business including the brand “Supertin”. UPL inherited a
Thiophanate methyl distribution contract with Nisso in the USA with Cerexagri and this contract continues.
Other fungicide positions have come with local company acquisitions and are largely local/regional
registrations.
UPL also has a post harvest business, Decco, which came with Cerexagri. This business is focused on the post
harvest treatment of fruit and vegetables with waxes, coatings and fungicides. These products are sold to
packing houses with the business focused on southern Europe, USA and Chile.
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Chart 3 UPL Sales by Region 2014
NA
SA
EUMEA
Asia
UPL, as United Phosphorous had been an Indian manufacturer with a strong domestic presence and some
exports until the late 1990’s. It then set of on a path of growth by acquisition through until the present time.
This was initially focused on a few product and small company acquisitions which gave it a foothold in Europe.
This growth was turbocharged with the 2006 acquisition of Cerexagri which greatly enhanced its European
position and brought United Phosphorous to the USA with the Cerexagri positions. Since then the company has
focused very hard on maintaining adequate growth rates in Europe, NAFTA and Asia whilst investing heavily in
South America, especially Brazil. Once again acquisition has been a key driver of this growth as South America
has grown to be the biggest global region for the company.
In 2011 UPL acquired 50% of Sipcam do Brazil (later divested to Sipcam) and later that year acquired a stake in
DVA. In 2015 they took their ownership in DVA to 100% and this has been rebranded UPL Do Brazil. In 2015
they also acquired a 40% stake in the Brazilian distributor Sinagro. Turnover on Brazil is estimated to have
reached US$300 million in 2014. The South America presence had started in 2005 with the acquisition of
Reposo in Argentina followed 2 years later by the addition of Icona, also in Argentina. They acquired the
Evofarms group in Colombia in 2008. The real growth driver in Latin America has been Brazil and UPL appears
well positioned to continue growing in Brazil as key commodity prices recover.
North America is the smallest region with 20% of sales. Growth has been slow but the introduction of the
herbicide Glufosinate has seen good sales and the continued growth of this product should underpin future
sales growth in the region.
Asia comprises 26% of global sales and the Indian domestic market is by far the largest business in the Asia
region for the company. UPL has a strong brand and a domestic sales network of over 5000 retailers. The key
products are the Organophosphate and Pyrethroid insecticides, grain fumigants and Paraquat and Diuron
herbicides. UPL has a close relationship with the Japanese company ISK where UPL manufacture some ISK
actives and UPL distribute ISK products in India and Australia.
Europe and Africa sales make up 23% of the companies turnover. The European business was basically built via
the acquisitions of Cequisa in 2005 and Cerexagri in 2006. The fungicide position is strong, especially in the
fruits, vines and vegetables segments with Copper, Sulphur, Mancozeb and Maneb, and has recently been
complimented by the introduction of cereal fungicides such as Tebuconazole. The company has also build a
strong herbicide portfolio in Sugar beets with the products Desmedipham and Phenmedipham. African
positions were gained with the staged acquisition of CropServe in South Africa (2004 and 2006). This brought
registrations in South Africa, Zambia and Malawi. UPL has a small equity (11%) in Villa Crop protection, the
largest independent distributor in South Africa.
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Research and Development Capacity and Direction
UPL had a R&D expenditure of $55 million in 2014 which represented 3.1% of its crop protection sales. The
company operates 3 research facilities in India. These facilities focus on the manufacturing and core dossier
development of key new active ingredients. Regional facilities in France, USA, Netherlands and Brazil focus on
local efficacy and residue trials and local registration development, especially of regional formulations. UPL is
spending significant amounts (estimate $30m) to develop its R&D capacity in Campinas Brazil.
As well as focusing on the development of new off patent molecules, the company is focusing increasing
efforts on formulation development, both of unique value added formulations for their core chemistries, but
also mixture products of their core chemistries and regionally accessed or registered third party molecules.
Financial Performance
Source: www.Money.rediff.com
Page 5
Key Executives
R.D Schroff Chairman
J.R.Schroff CEO
V.S.Kaushik COO
A.K.Vora CFO
Ramachandra Bhat VP Business Development
N.A.Kolhatkar VP Finance
Source: UPL Website
Strategy
UPL has pursued an aggressive growth strategy based on both acquisition and organic growth. The twin thrusts
of both the organic growth and acquisitive growth has been portfolio and geographic expansion.
Until around 2000 the then United Phosphorous had been an Indian based producer and exporter of generic
products, especially organophosphate insecticides and phosphate based grain protectant products. A series of
company and product acquisitions saw the grow quickly. The company acquisitions were largely designed to
bring local portfolio and provide UPL a rapid market entry position in the target country/region. Cequisa,
Reposo, Icona, Evofarms, and DVA were all acquired to provide market access platforms and local
registrations. Cerexagri was a company changing acquisition that brought a major strategic position in the
EBDC fungicides plus distribution platforms in Europe and North America.
Product acquisitions have been used to strengthen strategic product positions and to provide key strategic
products to feed into the regional businesses once they were established.
This strategy has been very successful for UPL. It appears the acquisitions have slowed and more of the focus is
shifting to organic growth. The development of Glufosinate and the focus on formulation technology is
demonstrative of this shift in growth focus.
The recent acquisition of 100% of the seed company Advanta indicates another shift in strategy as UPL seeks
to position themselves as a “integrated” chemical and seed company much like Monsanto , Syngenta , Bayer ,
Dow and DuPont. Advanta with sales of US$125 million lacks critical scale against some of the other
integrated players so UPL may use its proven acquisition growth strategy in the seeds segment going forward
to build the Advanta position.
Page 6
Corporate Background
Sumitomo Chemical Company was established in 1913 as a fertilizer company based upon sulphur mining and
technology. The company has continued for 102 years and currently has 5 operating divisions. Sumitomo
Chemical Company is listed on the Tokyo Stock Exchange (SOMMY) with a market capitalisation of JPY 998.23
Billion at 1/2/2016.
* Discontinued businesses
Sumitomo derives 40% of its consolidated revenues from Japan and 60% from its international operations.
Business Sector Sales JPY Billion Operating Income JPY Billion Return On Assets %
Basic Chemicals 312 (0.4) (0.1)
Petrochemicals 806 21.2 3.3
IT Related Chemicals 405 32.4 8.6
Health & Crop Sciences 362 56.9 12.1
Pharmaceuticals 404 29.0 3.9
Source: Sumitomo Chemical Company 2014/2015 Annual Financial Report
The Health and CropSciences sector incorporates businesses in crop protection chemicals, feed additives,
fertilizers, household and public hygiene insecticides and some pharmaceutical intermediates. The Health and
CropSciences sector makes up 15.2% of SCC total revenues (2014). Crop protection was 57.1% of the total
Health and CropSciences sector revenues.
As indicated in Table 1 the Health and CropSciences sector is the largest contributor in Operating Income to
the company and it is also the highest in Return on Assets being significantly more efficient than any other
operating sector. Given the importance of the division to SCC it is likely SCC will be prioritizing building the
capacity and strength within the Health and CropScience division, and they will be actively seeking
opportunities for both company and product acquisitions during the current round of industry restructuring.
Crop protection is an extremely important component of the total business of Sumitomo Chemical Company.
Chart 2 Global Crop Protection Industry Post FMC and Arysta Consolidations
Global Crop Protection Industry Pro Forma FMC and Arysta 2014
14000
12000
10000
US$ million
8000
6000
4000
2000
0
The recently announced merger of Dow and DuPont will change the outlook for total agricultural inputs (crop
protection + seed and traits) and for the crop protection segment. The following Charts demonstrate the scale
of total industry inputs change (Chart 3) and the change in the crop protection segment (Chart 4)
Chart 3 Total Industry Inputs (Crop Protection + Seed and Traits) Pro Forma
Dow+DuPont Merger
Dow+Dupont Industry Pro Forma
20000
Sales US$m
15000
10000
5000
Crop Protection
0
Seeds & Traits
Chart 4 Crop protection Industry Sales Pro Forma Dow + DuPont Merger
14000
Crop Protection Global Sales
12000
10000
US$ million
8000
6000
4000
2000
0
Page 2
The change in total input industry dynamics should be of concern to Sumitomo as it will result in two
companies , Monsanto and the newly merged Dow + DuPont (NewcoDD) dominating the industry when
viewed from the perspective of an integrated inputs platform into the key crops of Corn and Soybean.
Chart 5 Global Corn and Soybean Seed and Trait Sales Pro Forma Dow + DuPont
US$million
2000
US$million
6000
4000 1500
1000
2000 500
0 0
The dominance of the two integrated seed and trait and crop protection companies will give them significant
leverage in supplying a comprehensive package of inputs to growers based on their ability to influence the
growers’ first critical production decision – what crop to grow and what hybrid or variety of that crop to plant.
Corn is the largest integrated crop in total inputs with seeds and traits inputs of US$11487 million and crop
protection expenditures of US$6364 million. Soybean is the number two crop for total inputs with seed and
trait expenditures of US$6167 million and crop protection expenditures of US$7695 million.
Sumitomo has a strong relationship with Monsanto in the US and Brazil based on Monsanto distributing
Sumitomo’s flagship herbicide product Flumioxazin in the Monsanto Roundup Rewards program. Sumitomo
will be seeking to consolidate this relationship with Monsanto in the America’s soybean markets.
Sumitomo has slightly underperformed industry growth over the 10 year period 2004-2014. The performance
measured over the last 5 years has been above global averages driven by strong growth in Flumioxazin in the
US and Brazil, and continued solid sales of Clothianidin. Flumioxazin sales in the US benefited strongly in the
last 5 years from inclusion in the Monsanto Roundup Rewards program in 2010. This relationship has been
extended to Brazil and Argentina. The Valent BioSciences business has also grown strongly in the last 5 years as
its market leading portfolio of biorational products has benefited from the growth in the segment.
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Segment and Geographical Footprint
Chart 6 Sumitomo Sales by Region 2014
Sumitomo sales have traditionally been strongly focused on Asia, predominantly the domestic Japanese
business. Japan sales currently make up 28.2% of total global crop protection sales. Sumitomo holds the
number 1 position in the Japanese market. Asia remains the largest global market for the company; however
both North America and Latin America have been growing faster than Asia over the last 5 years and will likely
continue to do so in the foreseeable future. North America has been the fastest growing region driven by the
success of the Valent businesses, both Valent Crop Protection and Valent BioScience. The Flumioxazin
arrangement with Monsanto has been a major success. Clethodim has also been a successful product for the
company in Soybean in the region.
Sumitomo’s business in Latin America has grown strongly in the last 5 years as the Nufarm distribution
platform has been leveraged in Brazil to increase the sales of key products such as Procimiodone,
Esfenvalerate, Ethoboxam and Flumioxazin. The company also distributes in Brazil via Iharabras and has
recently implemented a Flumioxazin distribution agreement with Monsanto. Sumitomo has a direct
distribution platform in Chile based on the acquisition of Moviagro from Monsanto.
Is Asia the company has focused on growing outside Japan with initial focus on Taiwan and Korea with
subsequent investments in Australia, India, China and South East Asian countries? The company is putting a
strong focus into India as a key growth driver into the future. In China the company has a subsidiary Sumitomo
Chemical Shanghai.
In Europe the Sumitomo business has been under significant pressure with sales decreasing over the last 5
years. Much of this decrease has been on the back of sales moratoriums on Clothianidin (a Neonicatanoid
insecticide) and Flumioxazin. These were significant products for the company in Europe. Sumitomo has gone
to market in Europe through a mix of arrangements. The company has direct to market arrangements in
France (Philagro), Spain (Kenogard), UK (Interfarm) and Italy. In the rest of Europe they have a number of
distribution partners including Arysta, Sumitomo Corporation and increasingly Nufarm. Philagro in France is a
joint venture in which Sumitomo has 60%, with Nissan having 30% and Nihon Nohyaku 10%. France is the most
important sales country in Europe for Sumitomo. In Spain Kenogard is also a joint venture with Nissan. The
company has recently completed a distribution arrangement whereby Nufarm will become the company’s
distributor in the UK. Sumitomo also has an important presence in South Africa through its Philagro subsidiary
and it operates a business in Tanzania servicing eastern Africa.
Page 4
Chart 7 Sumitomo Sales by Key Product Segment 2014
Sumitomo Segment sales 2014
Herbicide
Insecticide
Fungicide
Others
Insecticides have traditionally been the major product segment for Sumitomo driven by the company’s original
strong positions in Organophosphates and especially its early entry position into Pyrethroids. Insecticides
remain the largest product segment globally but many of the products are off patent and under pressure from
newer classes of insecticides. The introduction of new insecticides has slowed with Spinetoram introduced in
Japan (SCC only has rights in Japan) in 2011, and before that Pyridalyl in 2004. The fastest growing product
segment for the last decade has been herbicides, driven by the strong growth of Flumioxazin and the
resurgence of Clethodim. Both products are part of Monsanto’s Roundup Rewards program and have
benefited significantly from the association. Both products are off patent and Clethodim is truly generic with
multiple market entries whist Flumioxazin is only recently off patent. The company introduce Propyrisulfuron
in Japan in 2009. This is a rice herbicide with strong control of some Sulfonyl Urea tolerant weeds. The product
has since been launched in Korea and will be introduced into other Asian paddy rice markets in the future.
With Flumioxazin still growing solidly and Propyrisulfuron still early in its life cycle the herbicide segment can
be expected to continue to grow and become the largest product segment for the company.
The fungicide product segment is the smallest for Sumitomo with older products such as Procymidone and
Validamycin still being the largest selling products. Isotianil was introduced in Korea and Japan in 2010 and
2011. This is a rice fungicide co developed with Bayer. It would appear to have limited applications even within
the rice crop. Sumitomo does have further new fungicides in development that are scheduled for
commercialisation post 2020.
Sumitomo has a significant presence in the “other” products segment due to its Valent Biosciences unit, which
hold the global number one position in the biorational products segment. The majority of these products were
acquired in 2000 with Abbott. This is an important segment for Sumitomo, being very profitable and in a
market leading position that can be scaled up.
Page 5
Core Product Positions
Table 3 Key Sumitomo Products
The company has a new strobilurin fungicide, Mandestrobin (S 2200) at the commercialisation stage and this
will be launched into specific segments such as turf for dollar spot control and into OSR in Europe. The
company also has a late stage insecticide, Fluhexafon (S 1871) that will be launched into the non crop
segment.
Sumitomo has three very promising fungicides in the latter stages of development that will be launched post
2020. The products are still coded:
As well as the above the company has been partnering with a number of specialist research entities
specialising in biorational product segments.
Page 6
Manufacturing and Formulation Facilities
Sumitomo undertakes the majority of its core product synthesis in Japan. The major exception to this is key
biorational products which are manufactured in Osage, Iowa in the United States. The company has five major
production facilities in Japan:
In the regions the company uses partners and external tollers to undertake local formulation. The company
has invested heavily in expanding the Oita facility to increase Flumioxazin production in the recent past.
Financial Performance
Table 4 Sumitomo Income Statement – Last Five Years.
Source: www.Sumitomo-chem.co.jp
Sumitomo has been growing its Revenue and Operating Income slowly over the last three years. EPS has
recovered strongly over this period. The Health and Science sector has been the major contributor to this
improvement. The sector contributes 15.2% of corporate Revenues and 45% of corporate operating Income.
Page 7
Over this period the company has also put a strong focus on improving their balance sheet, improving cash
flow and decreasing debt ratios.
Chart 8 Sumitomo Chemical Company Five Year Share price, 1/2/2016 (JPY)
Source: Morningstar.com
Key Executives
Executive Chairman Osamu Ishitobi
President Masakuza Tokura
Senior Managing Executive Officer Health and Science Ray Nishimoto
Executive Officer Health and Science Kazayuki Nuki
Executive Officer Planning and Coordination Keiichi Sakata
General Manager Crop Protection Domestic Toshihiko Yano
General Manager Crop Protection International Kimitoshi Umeda
President Valent Andy Lee
Crop Protection Head of Europe Andrea Barella
Strategy
The Sumitomo strategy is driven by its commitment to discovering, developing and commercialising products
from its own R&D program. The company has a focus across all areas of crop protection, but very significantly
looks to further leverage its R&D by also focusing on the non crop market, specifically amenities and public
health and also downstream markets such as fruit protection and processing through its Pace subsidiary. This
taken in concert with its strong position in biorationals via Valent Bioscience gives the company a very broad
platform of markets to access. The company has strong access in the North America and Asia regions, but
relies strongly on partners to gain market access in South America and most of Europe. This lack of strong
market access in South America has limited the growth and presence of Sumitomo in the fastest growing crop
protection market in the world despite having a very good portfolio for those markets. Similarly in northern
and eastern European markets the company has not grown as quickly as the markets.
Sumitomo has identified two strategic partners in the crop protection segment, Monsanto and Nufarm.
Monsanto is a partner to provide key product access to Soybean markets in the America’s. This has worked
very well in North America and has recently been replicated in South America where the success should be
repeated, perhaps on a smaller scale.
Page 8
Sumitomo has a strategic shareholding in Nufarm (23%) and this is to give Sumitomo a partner that can
provide them with incremental market access in key regions. This strategy has seen some success in Brazil,
Canada, Australia, Indonesia and parts of Europe.
Sumitomo’s new fungicide products in the later stages of development should give the company a significant
lift in the years 2020-2030. They may look to further strengthen access in the key markets for these new
products, namely South America and Europe. The current consolidation in the crop protection and seeds and
traits industry may accelerate some of the timing of these strategic moves.
Sumitomo would be a good strategic partner for Monsanto and Sumitomo has already benefited significantly
from the access that Monsanto and its seeds portfolio can provide. It is unlikely that Sumitomo chemical
Company would consider selling their most profitable business. A joint venture of some description with
Monsanto may be possible. This would have significant impact on Nufarm as any merged Sumitomo +
Monsanto would provide a powerful market access platform for many of Nufarm’s off patent products.
Page 9
Corporate Background
Nihon Nohyaku Co Ltd was established in 1928 with its head office in Osaka. The company claims to be the first
specialist Agricultural chemical manufacturing company in Japan. The company has always had as its core
purpose “Protecting Food and Foliage”. The company continues to have agrochemicals as its core business but
has also expanded its focus to include wood preservatives, pharmaceuticals and veterinary medicines.
Agricultural chemicals make up 91% of the total turnover of the company.
Nihon Nohyaku Co Ltd is a public company listed on the Tokyo Stock Exchange (4997:TYO).
th
The company has 1270 employees. The market capitalisation of the company at 10 February 2016 was 45.87
billion Japanese Yen. As indicated in Chart 1 below the company has significantly underperformed the Nikkei
index over the last year with the company share price being down approximately 50%.
Source: www.Infinancials.com
Nihon Nohyaku has marginally underperformed the global industry in terms of sales growth over both the five
year and 10 year period. The company did record higher than industry growth in 2013/2014 on the back of
excellent insecticide sales. Flubendiamide sales in Brazil by Bayer were very strong in response to the
Helicoverpa pest infection. It is reasonable to assume that these sales will not be as strong when the company
reports its 2014/2015 sales as the Helicoverpa pressure in Brazil was significantly lower as well as the global
market being generally down on lower commodity pricing.
Page 1
Chart 2: Nihon Nohyaku Global Structure
Nihon Nohyaku
Co Ltd
Domestic International
R&D Manufacturing Equity Positions
Commercial Offices
Sipcam Europe
Fukushima Nichino Europe
20%
Philagro France
Kashima Bangkok
10%
Sipcam Pacific
Osaka Nichino America
6%
Hyderabad
Nichino Shanghai
Chemicals Ltd
Co
74%
Agricultural
Chemicals
Malaysia
Nichino Brazil
NA
LA
EMEA
Asia
US$486 million
Nihon Nohyaku obtains 49.2% of its crop protection sales from the Japanese domestic market. The Japanese
business distributes products developed internally and also a significant number of in licensed and distribution
products from third parties resulting in the Japanese business having a large portfolio. Sales in the rest of Asia
take the total Asian sales to US$307 million. Europe is the second most important region with sales of US$104
million with access to market through several partnerships, mainly the newly created Sipcam Europe in Italy,
Page 2
Spain, Portugal, Greece, UK and Benelux. In France the company is a partner in Philagro whist in other parts of
Europe the company has distribution arrangements in place with Fienchemie and Certis Europe. North
America has sales of US$65 million with most sales managed by the company’s wholly owned subsidiary
Nichino America Inc. The company has very small sales in Latin America but has initiated actions to improve
this position with its recent acquisition of a 50% stake in the Sipcam-Nichino JV in Brazil.
Herbicide
Insecticide
Fungicide
Other
US$486 million
Insecticides is by far the largest product segment for Nihon Nohyaku driven by the number of key products
they have in this segment plus the fact that their biggest product by far, Flubendiamide is an insecticide. This
product is distributed in most regions by Bayer as Belt. Global sales to distribution are in excess of US$400
million, but would likely be in the order of US$200 million to Nihon Nohyaku. Buprofezin, sold as Applaud is
the second most important product with sales of approximately US$40 million. Both of the companies most
recently launched new products are also insecticides, Metaflumazone and Pyrifluquinazon.
The company has traditionally not had a strong herbicide portfolio and has only one internally developed
herbicide product, Pyrifluthrin Ethyl. The company bolstered its herbicide range with the acquisition of
Orthosulfamuron from ISEM in 2013. This product supports the company’s position in Rice and Fruit and
Vegetable segments.
The fungicide products are all small sales products with specific segment fits.
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Table 2: Nihon Nohyaku Key Products, Brands and Registered Crops
Insecticides
Buprofezin Applaud Fruit, vegetables, rice
Chlorfenapyr Kotetsu Fruit, vegetables
Fenpyroximate Danitron Pome, citrus, vegetable, ornamentals
Flubendiamide Pheonix, Belt, Takumi Soy, cotton, tea, vegetables, preplant, cereals
Metaflumazone Axel Vegetables, potato
Pyrifluquinazon Colt Fruit, vegetables, tea
Tebufenpyrad Pyranica Fruit, vegetables, ornamentals
Tolfenpyrad Hachi Hachi Fruit, vegetables
Fungicides
Fenoxanil Achi Bu Rice
Flutolanil Moncut Rice, potato
Isoprothiolane Fuji One Rice
Tiadinil V jet Rice
Source: www.nichino.co.jp
The company currently has 3 products advanced in the pipeline. Pyrazaflumid is fungicide targeted at a broad
range of pathogens in rice, fruit and vegetables. It is targeted for first launch in Japan in 2018. Pryriprole is an
insecticide acquired with the acquisition of Agrimart in Japan in 2014 and is mainly a non crop product that
may have some applications in rice. Pyflubumide is a pyrazole insecticide was launched in Japan in 2015 into
fruits and vegetables, tea and ornamentals.
Page 4
Financial Performance
Income Statement Million JPY
Source: www.markets.ft.com
Nihon Nohyaku Income Statement shows a slow upwards trend in sales and a steady increase in the gross
margin over the last three years. The company’s gross margin at 45.67% is very strong and is what affords the
company the ability to invest in new molecule research and discovery.
Source: www.markets.ft.com
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Balance Sheet(continued) Million JPY
Source: www.markets.ft.com
The balance Sheet has seen total debt grow by 9,000 Million Yen as the company acquired 74% of the equity in
Hyderabad chemicals during the year. The company has taken a considerable strategic step in raising debt to
purchase the equity in an Indian company. The company has always been very conservatively geared with a
ratio of total debt to total equity at less than 10%. This has increased to 24.9%, indicating a new aggressive
approach to international growth by the company.
Page 6
Key Executives
Chairman Yohichi Koyama
President Yasuke Tomoi
Senior Managing Executive Officer Sumitaka Kose
Managing Executive Officer Takamachi Konno
Managing Executive Officer Hideji Hosoda
Senior Executive Officer Shin Sakuma
Senior Executive Officer Hirohisa Yano
The key executive associated with the management of the agricultural business international is Hideji Hosoda.
Strategy
Nihon Nohyaku embarked upon a strategy of international expansion in 1992 with opening of an office in
London that would become Nichino Europe Co Ltd. The company subsequently opened offices in Taiwan, USA
and Malaysia in the 1990’s. In 2012 the company made continued growth of its international business a key
plank of its new intermediate business plan. The company has continued to expand its direct international
presence with the establishment of businesses in China, Brazil, Vietnam and India. The company’s biggest
international expansion occurred when it acquired 74% of Hyderabad Chemicals in 2015. Nihon Nohyaku also
holds equity positions in Philagro France (10%), Sipcam Australia (6%) and Sipcam Europe (20%), and Sipcam
Nichino Brazil (50%).
Nihon Nohyaku has established a close strategic relationship with Sipcam, having invested in equity in Sipcam
subsidiaries in Europe and Australia and entering a 50:50 JV with that company in Brazil.
Nihon Nohyaku also has a close distribution relationship with Bayer, who is the major global distributor of
Flubendiamide, Nihon Nohyaku’s largest selling product.
Nihon Nohyaku can be expected to continue to focus on international expansion; both stand alone in in
partnership as it seeks to benefit from the downstream value created by its high margin internally developed
products. The company’s largest selling product, Flubendiamide is coming off patent in the near future and this
will be a major test for the company.
Page 7
Corporate Background
Sipcam was founded in 1946 in Milan Italy to formulate and distribute agricultural chemicals in Italy. Oxon was
founded in 1970 by Giorgio Gagliardini to synthesize post patent agricultural active ingredients in Italy. Sipcam
and Oxon are separate companies run by one integrated management team still based in Milan Italy. Both
companies remain in the ownership of the founding families, the Gagliardini and Ciocca families.
Sipcam is focused on formulation and distribution whilst Oxon is focused on synthesis of active ingredients.
The group is still strongly focused on agricultural chemicals which make up 98.4% of turnover in 2014. The
remaining 1.6% is in industrial chemicals.
th
Group turnover in 2014 was Euro 416 million, which was US$552 million making the group the 15 largest
company in the crop protection business globally.
Group Structure
Sipcam S.p.A and Oxon Italia S.p.A are separate entities with the same private family ownership and shared
executive management. Each company has its own operating structure as shown in Chart 1 below.
Sipcam Netherland
Sipcam Europe Skyanide Chemicals
Holdings
Intermediates
Morocco
Sipcam Italia Sipcam Inagra Algeria
Sipcam Advan USA
Sipcam Advan
Sipcam Benelux Sipcam Nichino Brazil Mexico
(50% JV)
* Minority
Page 1
Table 1: Sipcam-Oxon Sales Growth Rates v Industry Averages
Sipcam-Oxon has underperformed industry average growth for the majority of the last 10 years. Only in the
2014 year did the group exceed average industry growth. The relatively small position in South America
compared too key rivals would explain some of the lower longer term comparative growth rates. The private
company structure may also limit some funding options. In 2014 the group did raise Euro 15 million in bonds
to fund growth. The low R&D expenditure also limits the ability of the group to introduce new off patent
molecules. The group’s high exposure to Europe also requires significant investment in defence of key
European molecule registrations during renewal of Annexe 2 and Annexe 3 registrations.
NA
SA
EUMEA
Asia/ROW
Sipcam-Oxon group has 56% of its total sales in its home region of Europe. It has almost 25% of its total sales in
Italy. I Europe the group has direct sales with its own organisation into Italy, Spain, Portugal, Benelux, UK and
Greece. In other parts of Europe, especially central and eastern European countries it markets its products
through the local platforms of its JV partner Sumitomo Corporation. Sumi Agro Ltd operates in Poland,
Romania, Bulgaria, Hungary, Czech and Slovak Republics and France and Germany. The group also maintains a
special relationship with the French distributor PhytoEurope. Sipcam and Sumitomo Corporation also have
Nihon Nohyaku as a joint venture partner in European distribution operations.
In North America Sipcam Advan is a 100% owned subsidiary operating out of Raleigh NC. Sipcam Advan
operates in the agriculture sector and in the non crop segment in North America. In 2015 Sipcam Advan
reached a major agreement to distribute Rotam products into non crop markets.
In South America the key country for the group is Brazil where they operate a 50:50 joint venture with Nihon
Nohyaku. In 2014 the Sipcam-Nichino do Brazil company had revenues of approximately BRL 323 million,
down slightly from 2013. Sipcam has a wholly owned subsidiary in Argentina (Agromax).
The remainder of Sipcam-Oxon group turnover (7%) is mainly from Australia and China.
Page 2
Core Product Positions
Chart 3: Sipcam-Oxon Group Core Product Positions
Herbicide
Insecticide
Fungicide
Other
Herbicides are the largest product category for the group. The largest and most important category in the
Triazine herbicides where Oxon manufacture technical active ingredients in Pavia Italy. The group has a full
range of Triazine herbicides as indicated in Table 3 below.
The group has recently developed Clomazone in South America with the product having been launched in
Argentina and being developed for Brazil.
The group’s second most important category by sales is Fungicides. The most important products are
Chlorothalonil and Cymoxanil which have been long term products for the group. Chlorothalonil is without
doubt the flagship fungicide of the group and the strategy is focused on developing key mixtures with
Chlorothalonil in the key regions. Sipcam has recently introduced Azoxystrobin to its core fungicide range in
partnership with Taizhou Bailly Chemical Co Ltd, its Chinese manufacturing partner. The group has gone on to
develop three Azoxystrobin based mixtures for sale into the China market, one of which is Cymoxinal based.
Page 3
The group intends to introduce Azoxystrobin in other key global markets. A further example of the group’s
formulation development initiatives is the 2013 introduction of Chlorothalonil + Cymoxinal into the US market.
Iprodione and Fosetyl Aluminium have been introduced into southern European countries since 2012 to
reinforce the group’s positions in F&V in these markets.
The core insecticide product of the group is Lambda Cyhalothrin which they are developing in their key
countries. The products have been launched in Argentina and Italy to date with more roll outs in Europe and
South America to come.
An estimated half of group revenues come from products sourced from outside the group. Core relationships
are with several Japanese companies (see below Table 2), the Italian company Isagro, Chinese partners and the
UK company Eden Research who the group works with to introduce and grow a bio rational portfolio of
products focused on key European markets.
Financial Performance
As Sipcam-Oxon are privately held companies there is no openly published financial data at a group level. The
group did issue a Euro 15 million bond in 2014 to raise funds for growth.
Key Executives
Chairman of the Board Giorgio Gagliardini
President Sipcam - Oxon Nadia Gagliardini
CEO Sipcam-Oxon group Giovanni Affaba
President Sipcam Spain and Portugal Giancalo Oliva
Managing Director Sipcam Nichino Fernando Rotondo
Managing Director Sipcam Pacific Damien Ryan
Strategy
Sipcam draws and estimated half of its products sold from internal Oxon production and its Chinese partners,
the other half from third parties. The company maintains a core portfolio of key products that it develops and
registers full dossiers for the key markets. The major products for the company are also supported by strong
internal product synthesis and formulation capacity and expertise. Some of the synthesis is transferring to key
partners in China but much is still undertaken by Oxon at its Pavia synthesis plant in Italy.
The key internally manufactured and defended products are the Triazine herbicides, Chlorothalonil and
Cymoxinal. More recently developed products such as Tebuconazole, Clomazone, Lambda Cyholothrin,
Iprodione and Fosetyl Aluminium have been developed with active ingredients sourced externally but the
registration dossier developed and owned by Sipcam-Oxon.
The strategy of owning core dossiers has allowed the group to attract complimentary products for distribution
in key markets and countries from partners. This has given the group extra revenue but also extra market
relevance in key markets such as Italy, Spain, USA and Australia.
The group’s low R&D expenditure may negatively impact growth going forward as it seeks to defend key
registrations in Europe and USA whilst developing new products for its key European markets, Brazil and USA.
The group would be vulnerable to any further restrictions on Triazole herbicides, especially Atrazine
restrictions in key corn markets in USA and South America.
Page 5
Corporate Background
Rotam CropSciences Ltd is a wholly owned subsidiary of Rotam Global AgroSciences Ltd. All of the financial
data in this report is for the listed company whilst the product, market and strategy analysis is for the Rotam
CropSciences operating entity.
Rotam Global AgroSciences Ltd is listed on the Taiwan stock exchange, (Ticker 4141TW). It was publically listed
in 2012, prior to then it was privately held by the Lu family. The Luo family still holds equity in the listed entity
as do the staff and some professional investors.
Crop Science
Animal Health – Veterinary products
Public Health
Source: WWW.Rotam.com
Total shares on issue is 159.83 million of which 83.04 million is free float implying the founding investors and
associates still control 76.79 million shares, representing 48% of the issued stock.
In February 2015 Rotam Global AgroSciences Ltd issues 11 million new shares at TW$50 each to raise growth
capital. In 2014 Rotam had taken on more debt to fund its growth.
Page 1
Chart 2 Rotam Global AgroSciences Share Price
Rotam Global AgroSciences stock price has eroded significantly over the last year. This would appear to be
based on the general decrease in global agriculture stocks in this period driven by lower commodity pricing.
Rotam Global AgroSciences also took on significantly increased debt significantly in the 2015 year whilst key
operating ratios deteriorated even in the face of increased revenue and operating profits. (See financial
analysis section)
Rotam CropSciences
Rotam CropScience had revenue of US$353 million in 2014 giving it the number 24 ranking in the global crop
protection industry.
Rotam revenue grew strongly in 2014 (+20.9%) and this has been consistent for the last 5 years with revenues
growing at 24.3% CAGR. The average industry growth rate through these 5 years was 7.1% CAGR, so Rotam has
grown its sales revenue very quickly. Rotam has grown sales on the back of good steady growth in China and
very strong growth in South America, especially in its Brazil business unit.
Herbicide
Insecticide
Fungicide
Other
Page 2
Table 1 Rotam CropScience Key Products
Of the above products it is thought that Rotam manufacture in house approximately 25 products and source
the balance from partners.
Rotam’s largest product segment is Insecticides with sales of US$156 million (2014). The largest single welling
product is Methomyl with sales of approximately US$60 million. Methomyl is produced in Jiangyin in China.
Other very important insecticides are Imidacloprid and Abamectin, both of which Rotam are registering in
multiple jurisdictions and also investing heavily in new formulations and mixture products containing these
core active ingredients. The company also has a range of pyrethroid products, notably Lambda Cyhalothrin and
Deltamethrin, both produced in Tianjin. Imidacloprid is produced in Nantong.
Fungicide sales reached US$105 million in 2014 with the major product being Tebuconazole which has
achieved registrations in Europe, USA, South America and Asia. Rotam have concentrated on developing value
added mixtures based on Tebuconazole in Brazil (Tebuconazole + Carbendazim) and Argentina (Tebuconazole
+ Azoxystrobin).
Herbicides sales are US$74 million with the key products being Sulfonyl Ureas manufactured in Taiwan. Rotam
distributes Pendimethalin for BASF in China and this has been a very successful relationship for them. In 2012
the company introduced Dicamba in the USA and since then has also achieved registrations in Europe.
The company also has the plant growth regulator Mepiquat registered in a number of markets.
NA
SA
EUMEA
Asia
Page 3
South America is Rotam’s major operating region with 46% of total sales. China is the biggest single country
with 29.2% of total sales. Brazil is growing quickly and it is expected to become the biggest single sales country
in the near future.
ROTAM CROP
SCIENCES
Venezuela
Korea UK & North Europe Paraguay
Ecuador
London
Peru
Vietnam
Maghreb Chile
Alger
Turkey
Istanbul
Kenya
Nairobi
In Asia China is the key market as well as being the biggest single country globally. The focus is on rice, fruit
and vegetable segments. The company accesses more third party products in China than most other regions to
round out its portfolio offer. Rotam are currently directly present in Indonesia, Philippines, India, and most
recently Vietnam. They have announced an intention to establish direct business in Thailand, Laos, Malaysia
and Myanmar. In Asia they have a product access alliance with the Italian company Isagro for most of the
region.
In South America Rotam have grown strongly in the period 2012-2014 driven mainly by Brazil and also
Argentina. In Argentina sales have grown 50% following the launch of the key fungicide product Ykatu
(Azoxystrobin + Tebuconazole). Insecticide sales in Argentina have also been strong. In Brazil the focus is on
Corn, Soybean and Sugar Cane and Rotam has a strong focus on developing its Brazilian business. In 2014 they
launched Fipronil in Brazil successfully. They have also completed a deal with Indofil to access Mancozeb in
Brazil. In the LAN region Rotam have started to differentiate their portfolio from generics by launching a series
of mixture products, Mixtan (Dimethomorph + Chlorothalonil), Yuma (Metalaxyl + Propamocarb), and Zibo (A
Glufosinate based herbicide).
Page 4
In Chile Rotam acquired 15 unspecified product labels from the Chilean company Mabruk for an undisclosed
amount. This is a very interesting move as registrations in Chile are very slow and expensive and the margins in
Chile are the highest in South America. A review of Mabruk registrations shows products based upon
Glyphosate, Quizalofop, Methamidaphos, Carbaryl, Mancozeb, Kresoxim Methyl, Iprodione, Thiophanate
Methyl, Tebuconazole, Propamocarb, Triadimefon and Mepiquat.
In North America Rotam has focused on its insecticides, especially its Abamectin range. The initial straight
products have been followed up with efforts to diversify with the recent addition of Obelisk (Abamectin +
Imidacloprid) and the introduction of Arbormectin (Emamectin Benzoate). Rotam has launched Dicamba and
see this as a major growth driver in the next decade as Dicamba tolerant crops are launched.
In EUMEA Rotam is strongly focused on its Abamectin range of products and is also heavily focused on Sulfonyl
Urea herbicides, especially in northern Europe. Many of the EAMA sub regions are also based in the companies
Lyon headquarters location.
To support both its active ingredient and formulation development and registration activities Rotam operates
its own internal chemistry and ecotoxicology facilities and has registration resources in place in all of its key
operating regions. Process Chemistry laboratories are located in Kunshan Jiangsu and Udaipur India. The
Ecotox laboratories are in Shanghai.
Page 5
Financial Performance
Rotam has continued to grow its sales revenues strongly and has been able to achieve Gross Margins
consistently higher than other post patent companies over the last 3 years.
The Operating ratios (Operating Income divided by sales revenue) achieved have also been acceptable when
compared to industry benchmarks without being outstanding. Comparable industry peers are UPL (15%),
Adama (10%), Rallis (13%), Dow (9%), BASF (10%) and Syngenta (14%)
When capital efficiency is measured using either ROFE (Ebit/Total Capital) or ROA (Ebit/Total Assets) the
performance is not so strong. In the below analysis Operating Income has been substituted for Ebit as it is
difficult to reconcile Ebit in the above Income Statement. This will likely result in an above actual ratio for both
ROFE and ROA but it will be a good indication.
Page 6
Table 2 Rotam Financial Ratio’s (based on Financial reports in Taiwan $)
Comparable industry peer ROFE ratios are Adama (9%), Nufarm (7%), UPL (18%), Dow (12%), BASF (18%), and
Syngenta (16%). The relatively poor ROFE and ROA ratios indicate that Rotam is not a good user of capital and
is investing too much capital to generate what has been excellent revenue and margin growth.
Key Executives
Chairman Changgeg Luo
CEO James Bristow
COO Jean Michel Duhamel
CFO Xinze Yuan
Senior VP Human Resources Annie Yang
Corporate VP Agricultural Excellence and Solutions Antonio Carlos Damaceno
Executive President China Changyen Luo
Asia-Pacific Head Dr Bakthan
Latin America North Head Alok Kumar
Brazil Head Ronaldo Pereira
Europe ???????
North America GM Tom Chavez
Source: Rotam websites
Rotam has not been an acquisitive company since its listing, preferring to grow via organic means. The
acquisition of registrations in Chile in 2014 was the first move outside the organic growth strategy.
The Rotam strategy to forward integrate will be an expensive strategy to continue to implement but if
successful the revenue growth and gross margins generated will continue to be above industry peer averages.
The strategy will continue to require capital and shareholders may need to continue to subscribe to new share
issues (as in February 2015) or be diluted. Rotam may also seek to fund growth via taking on more debt as they
did in 2014.
Page 7
Nutrichem
Beijing Nutrichem Company
1. Company structure
Huabang
Herui Jiaye Jiang Kangwei Wang Rong Li Chengxue
Nutrichem
3.53% 3.17% 3.17% 0.15%
89.98%
Beijing Nutrichem
Company Limited
2. Holding company:
It is the wholly owned company, manufacture and sell TC. Products are
Tebuconazole, Oxyfluorfen,Mesotrione,Azoxystrobine. Revenue is RMB800M
in 2014, profit is RMB85M.
Ningxia Nutrichem is the joint venture founded in April, 2014. The registered capital is
RMB50M, proportion of total investment is 51% by Beijing Nutrichem, 49% by Inner
Mongolia Ziguang Chemical Limited.
Ziguang Nutrichem is the joint venture founded in May, 2014. The registered capital is
RMB100M, proportion of total investment is 49% by Beijing Nutrichem, 51% by Inner
Mongolia Ziguang Chemical Limited.
During Jan-May, 2015, Qingfeng import and export’s key customers are Willowood
limited HONGKONG, CHINA CHEMICAL INDUSTRIAL & RESEARCH COMPAN,
Taiwan Sinon Limited.
Shangyu Nutrichem’s customers are DOW, Zejing yingxin chemical Limited, Jiangsu
agricultural hormone engineering technology Lab. limited.
Hangzhou Nutrichem’s customers are DAI COMPANY LTD、ALBAUGH INC、
CRYSTAL CROP PROTECTION PVT LTD, Fujian funong nongzi group limited.
3. The history of acquisition and spin-off
Via capital increase in the period of Dec 2010 ~Feb 2014, Nutrichem holds 33.32%
Heyi Chemical share, products of Heyi chemical are sulfentrazone, ethirimol,
dithianon, cyromazine, copper oxychloride, iprodione, dimethachlon, procymidone TC,
intermidate and formulations.
4. Business Structures
TC 88% vs FP 12%
12%
88%
Before2014, top 5 customers’ sales is 47% of total, very concentrated. Nutrichem
focus on branded products of the big customer. Nutrichem and ADAMA keeps good
strategic cooperation relationship in long term, also work closely with Albaugh and
Tacoma. Quena plant protection, Dow and Arysta are the key customers as well.
Mainly export is herbicide, fungicide and insecticide are not too much, but there is
diverse range of products with average percentage distribution. Top 10 export
products is 59% of total export sales.
Nutrichem built OECDGLP Lab in 2006, which is the first OECDGLP lab in China. In
2012, it is the fourth time as qualified GLP lab by Belgium Public Health Agency,
Environmental behavior test and residual test are added in the certificate, which
become the unique OECD GLP lab with function of environmental behavior test and
residual test in China.
R&D cost is around RMB60M in 2014, 1.9% of sales. In recent years, R&D done and
on-going projects including Phocarb, Bifenazate, Azoxystrobin , Isoxaflutole,
quinmerac
5.Strategy
(2)Internationalization。
Rainbow
Rainbow
1. Overview
Rainbow Chemical is established in July 2005 and it’s a private company. Up to the end of
2013, the annul sales jumped to over 2.7 billion RMB, 3.1 billion in 2014. The amount of
exports of pesticides has continually ranked in Chinese top 3 for five years. The company
has a good capability of TC synthesis and formulation for a variety of crop protection
products, such as herbicides, fungicides, insecticides, etc. Wherein the processing
capability of some high-end formulations, like granules is one of the leading company in
China.
Rainbow has six bases. Rainbow Jinan is its operations center. There 5 manufacturing
bases in Weifang, Qingdao, Ningxia, Panama and Argentina. Meanwhile in Hong Kong
Rainbow established a platform for international operations.
From 2010 to 2014, the turnover of Rainbow has increased from 1.07 billion RMB to 3.1
billion RMB. The compound annual growth rate of was 29%. The growth rate far exceeds
others (average rate 7.1%).
3.1
2.77
2.04
Unit:billion(RMB)
1.41
1.7
Domestic sales
Rainbow hasn’t domestic brand sales, and its main business rely on exports. According
to statistics, the operation revenue of Rainbow from January to September in 2015 is
229,594.49 yuan, in which overseas business income is 224,111.2 yuan (98% of the total
business).
Because Rainbow is a private company, there are no public financial data for our
reference. Therefore the analysis of Rainbow’s business mainly based on the export data
of its main products. The export data don’t represent all the sales because of the
incomplete customs statistics and other added value.
Export Business
Area
5%
6%
南美 亚洲
7%
Latin America Asia
12%
大洋洲 非洲
56%
Oceania Africa
14%
北美 欧洲
North America Europe
According to customs statistics, the total exports in 2014 is 345 million US dollars (2.25
billion yuan), accounting for 73% of sales volume. Most of which are exported to Latin
American countries, accounting for 56%, Asia and Oceania accounted for 14% and 12%.
Export to North America, Africa and Europe is relatively small.
Overseas Registration:
According to the public information, Rainbow holds 1429 registrations. 61% of
registrations are in Latin America, 31% are in Asia-Pacific, 8% are in Africa, North America
and Europe. Obviously, the main model of overseas expansion is through some Latin
American countries such as Panama (158) and Argentina, and Australia (166) of Oceania.
Oversea Registration
2%
6%
latin America
Asia Pacific
31% Africa
61% North America
European
We can see that the distribution of the registration is in proportion to the export sales.
Registration Products:
NO of labels
Abamectin 25
Diuron 29
Ametryn 29
Paraquat 29
Chlorothalonil 30
Carbendazim 31
Imidacloprid 32
Atrazine 48
Glyphosate 72
2,4‐D 101
This table shows the top 10 registration products. They are 2,4D, Glyphosate, Atrazine,
Imidacloprid, Carbendazim, CTN, Paraquat, Amertryn, Diuron and Abamectin.
Products
FP vsTC
In 2014, the most export sales were FPs, about 75%, TC accounted for just a very small
part.
25%
原药 制剂
TC FP
75%
Product Structure
Among the export products, the most of them are herbicides (95%). Fungicides and
pesticides account for a very small part, respectively, 3% and 2%.
Product Structure
3%
2%
除草剂
Herbicide
杀虫剂
95% Pesticide
杀菌剂
Fungicide
Top 10 products
According to the export data of 2014, the top 10 products accounted for 85% of the total
export sales.
Top 10 Products, Total 85%
特丁津 1%
Terbuthylazine
Diuron 敌草隆 2%
Dicamba 麦草畏 3%
Clethodim 烯草酮 3%
Haloxyfop‐methyl 高效氟吡甲禾灵 3%
Ametryn 莠灭净 3%
Paraquat 百草枯 5%
Atrazine 莠去津 6%
2, 4‐D 2,4‐D 12%
Glyphosate 草甘膦 46%
Glyphosate
The sales volume of Glyphosate accounted for 46% of the total business. They are
mainly FPs, accounted for 37%, TC export just accounted for 9%. The main export
markets are Brazil, Argentina, Thailand, Australia and South Africa. The export volume of
these 5 countries accounted for 62% of the total volume.
Rainbow has produced glyphosate for many years. Although it is said it was already
discontinued, the sales volume of glyphosate still accounted for the half of the total
business. The main reason is that Rainbow holds many registrations of glyphosate over
the world. It’s a very typical market-driven product.
2,4‐D
The export volume of 2,4d is the biggest in China. In 2014, the TC export volume was
11,000T, which accounted for 20% of the total volume. The main markets are Argentina,
Southeast Asia and South Africa, etc. The export volume benefits from the overseas
registrations.
2. Strategy
On 29th June 2015, Rainbow and the shareholder of Green Crop (Argentina) signed an
agreement to purchase the stock and establish the joint venture. Recently Rainbow has
completed the transfer of shares and became the major shareholder of Green Crop.
Rainbow gained more than 20 registrations through acquisition. Meanwhile, Rainbow got
its own FP plant(Dicopack)in order to offer the local companies FP services. The plant is
located in Gualeguaychu, where can easily export the products to Uruguay, Paraguay and
Brazil.
In May 2015, Rainbow and Bvco New Material signed an agreement to purchase 73%
stock of Ningxia Grenada. The acquisition has not only enriched the portfolio, but also
made the strategic layout more reasonable and strategic stockpile more sufficient for the
future.
Rainbow has build a new plan and distribution centers in Panama in April 2015. The latest
advanced equipment will offer a good platform for new custom products and innovative
formulations and become a good promotion method for the Latin American market.
Platform strategy: In the overseas market, especially in Latin America, Asian-Pacific
region, Africa and Eastern Europe region, Rainbow does a huge amount of registrations,
and offers customers a comprehensive service to enter the market as soon as possible.
Currently, the R&D focus on the optimized formula of some patent AIs, product
customization and quick entrance of the new market with the registrations, etc.
Yangnong Chemical
Yangnong Chemical Group CO.,LTD.
Corporate Background
Jiangsu Yangnong Chemical Group CO.,ltd. was established as a pyrethroids section of
the Jiangsu Yangnong Chemical Group (National owned company), it was reconstructed
to Jiangsu Yangnong Chemical CO.,ltd. in December,1999. A subsidiary named Youth
Chemical CO.,ltd. was established in December,2003 and the major products were
pyrethroids products for agricultural use and glyphosate. Another subsidiary of YOUJIA
Chemical CO.,ltd. was established in January of 2013, main products were dicamba,
bifenthrin, fluazinam and plant growth avtivator(trinexapac-ethyl).
The Sales of Yangnong was 2.82 billion RMB in 2014 which is the seventh biggest in
Chinese TC manufactors. The core business for the company is agrochemicals and the
high valued fine chemicals and new materials are also evolved as the strategic business
as well. In the agrochemical industry, the company is in the first group both in sales and
R&D in China. Meanwhile, in the field of pyrethroids, it is in the leading 2014 in the
industry.
Fuhua Wy
ZhongshanYan Sa Jinf Rai Re Nut nca
Lianhe Tech
gno non and nbo d riC
ng da a w Su
he
n
m
Jiangsu Yangnong Chemical CO.,ltd became public in the Chinese Mainland Stock
Exchange Market (Shanghai A Shares Market) in April, 2002(600486).The majority
shareholder is Jiangsu Yangnong Chemical Group CO.,ltd. which was actual holding by
ChinaChem after the share transaction between ChinaChem and China Jin Mao Group
Co., Ltd. in May,2014. (ChinaChem is now holding 40.59% of Jiangsu Yangnong
Chemical Group CO.,ltd.)
4% 4%
According to the data from Shanghai Pesticide Research Institute(SPRI), the market
of pyrethroid insecticides have kept growing since 2003. The sales for pyrethroid
insecticides have raise from $1.30 billion 2003 to $2.55 billion 2011. There were 11
products from the pyrethroids which reached $1000M sales in the world market,
meanwhile, 9 products from the pyrethroids kept an average growth rate over 10%/a in
the last 5 years. It is clear that pyrethroids was developing very fast.
Yangnong and Sumitomo are two oligarchs in the field of pyrethroid insecticides. The
second biggest pyrethroids manufacturer, RedSun, owns a capacity of 1800T/A which is
much smaller than Yangnong. Meanwhile,Yangnong is the only manufacturer of
pyrethroids in China who starts from basic chemical manufacturing (Chlor-Alkali
Industry).The company has the producing capacity of key intermediates for pyrethroids
manufacturing, 4-Pentenoic acid, 3,3-dimethyl- methyl ester and
3-(2,2-Dichlorovinyl)-2,2-dimethylcyclopropanecarbonyl chloride. The integrated industry
chain brought Yangnong competitive cost and reliable raw material supplement, which
made Yangnong a strong player in pyrethroids. The steady growth of pyrethroids market
also builds up the foundation of a relatively sustained business developmen.
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Yangnong also kept its own brands for pyrethroids in Chinese Market, Moju and
Youth. Moju has won a price for “Famous Brand in Jiangsu Province” for several years
and is rewarded as “The Most Competitive Brand” in Jiangsu. Both of Moju and Youth are
rewarded as “China Famous Trade Mark”.
The Others section contains fungicides, plant growth activator and key intermediates.
Facility capacity of 600T/a for fluazinam was built in 2014 in Nantong, meanwhile, the
construction of 1200T/a of trinexapac-ethyl is in the 2nd phase construction plan. The key
intermediates for pyrethroids production are classified as fine chemical products.
Core Product
Insecticides
Pyrethroids insecticides, the product can be divided into Agro-use and Nonagro-use.
Nonagro-use is mainly used in mosquito-repellent incense, key products contains
meperfluthrin, tetramethrin, Allethrin, prallethrin,etc.
Agro-use products contains cypermethrin,cyhalothrin, deltamethrin, bifenthrin, etc.
Herbicides
Glyphosate, producing in Youth Chemical Co.,ltd.
Dicamba, producing in Youjia Chemical Co.,ltd.
Fungicides
Fluazinam, producing in Youjia Chemical Co.,ltd.
Others
Trinexapac-ethyl
Research and Development Capacity and Direction
The R&D strategy for Yangnong is a combination of off-patent and self-owned patent
strategy. Most of Yangnong’s product are off-patent products. However, Yangnong has 4
patented products. By the end of June 2015, Yangnong owns 70 domestic patents, 5
international patents, whilst 140 domestic patent applications and 6 Patent Cooperation
Treaty applications.
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Financial Performance
In 2013, the annual sales reached the top of 3 billion RMB and it is infected by the
drop of glyphosate price and lowered to 2.828 billion RMB in 2014. According to the data
from Jan to Jun,2015, the prediction for the revenue in 2015 will be slightly higher than
2014. After became public, CAGR of revenue for the last 12 years is 20.50%。
After the IPO in 2002, the net profit of the company kept growing and peaked in 2008.
Afterwards, due to the infection of economic crisis, the net profit declined in 2009 and
2010. The trend was back to upward in 2011 and kept rising in the next 4 years. In 2014,
the net profit is 450 million RMB. The CAGR of NP for last 12 years is 27.67%, higher than
CAGR of revenue.
In the first 3 quarters of 2015, the revenue was 2.34 billion RMB, the YoY growth rate
is 12.01%. Net profit was 320 million, with a YoY growth rate of 0.79%. Weighted average
ROE is 11.12%. It is worth mentioning that the growth is achieved while other big
glyphosate players (Jiangshan Agrochemical& Chemicals and Wynca) are facing a
significant decline due to the tremendous decrease of the price of glyphosate in 2015. The
major reason for this condition is the 1st phase construction of Youjia factory is under
continuous operation, the production of dicamba helped to fulfil the bad condition of
glyphosate.
Financial Performance of Subsidiary from January to June, 2015
Net Asset Revenue Net Profit
Subsidiary
(Billion RMB) (Billion RMB) (Million RMB)
Youth Chemical 1.16 Approx. 1 105
Youjia Chemical 0.66 0.35 76.52
Strategy
The cost advantage provided by the highly integrated upper and downstream industry is
the core competitiveness of Yangnong. Keeping this advantage, enhancing the leading
position in the pyrethroids industry will be the first priority of their insecticide business. In
Chinese market, a steady self-owned brand development strategy is predictable. It is
unlikely that Yangnong would raise the brand strategy to a core business.
For glyphosate, due to the weak market and the excess capacity, Yangnong suspended
their plan for the capacity expansion. However, once the balance between supply and
demand gets better, as the first group who passed the environmental verification, there is
still big chance for them to build new capacity. On the other hand, the market of dicamba
is growing due to the promotion of transgenic glyphosate-dicamba resistant seeds by
Monsanto. Therefore Yangnong is already planning to build up new capacity of dicamba in
Youjia Site. The new capacity for fluazinam illustrates the ambition of Yangnong to cover
all fields in agrochemicals. The 2nd phase construction of Youjia Chemical contains
3550T/a insecticides, 25000T/a herbicides and 1200T/a trinexapac-ethyl and the plan of
2nd phase is from 2016 to 2017. To summarize, base on the existing capacity of raw
material and intermediates with technical advantage, select big product with big market
and seek for large scale production to get relatively low cost is the main strategy of
Yangnong. Due to this strategy, Yangnong will be extremely cautious on the selection of
new product, therefore unlikely to turn to a new product in a short period, while it will be
likely for Yangnong to expand the capacity of products with advantage and herby to
enhance the domination.