Business strategy of sumitomo chemical’s health crop sciences sector growth strategy for the agrosolutions and environmental healt business

Business Strategy of the Health & Crop Sciences Sector Growth Strategy for the AgroSolutions and Environmental Health Business Ray Nishimoto Representative Director & Senior Managing Executive Officer October 11, 2018 Contents Status and Vision of the Health & Crop Sciences Sector Growth Strategy for the AgroSolutions and the Environmental Health Business (1) Launch of New Products and Business Collaboration through Enhanced Research and Development (1) Pipeline Under Development (Chemical, Biorational & Botanical) (2) Strengthening of Our Global R&D Network (2) Expansion of Business Areas in AgroSolutions Biorationals, Seed treatment, Post-harvest (3) Enhancement of Our Global Footprint AgroSolutions Business in India, Promoting the Alliance with Nufarm (4) Development of Our Differentiated Businesses - Environmental Health Business Conclusion * Basic Information about the Crop Protection Business (appendix) Consolidated Performance Trends of Health & Crop Sciences Sector 400 （Consolidated net sales/ sales revenue） (Billions of yen) Others AgroSolutions and Environmental health 90 Consolidated operating income/ core operating income 80 350 70 300 60 250 50 200 40 150 30 100 20 50 10 0 (Billions of yen) 450 FY2013 USD＝ ¥ 100.2 FY2014 ¥ 109.8 FY2015 ¥ 120.2 FY2016 ¥ 108.4 FY2017 ¥ 110.9 FY2018 ¥110.0 (Forecast) * J-GAAP used through FY2016, IFRS adopted from FY2017 Issues in 2050: Food Supply, Improvement of Quality of Life 35% increase in population Increased demand for high level protein sources due to increases in the middle income class 2050 Urbanization 49 to 70% 2014 7.2 billion people Increased income in developing countries Necessary to increase food production by 70% Over billion Increased demand for healthy and pleasant living environments 53% will be middle income by 2025 Increased 虫、菌、草の pesticide 抵抗性増大 resistance issue Strict 登録規制の registration 強化 regulations 持続可能な Sustainable agriculture 農業 Climate 気候変動 change Mission: Contribute to further increased production of food, animal feed, textiles, and fuel using sustainable methods Contribute to protection and improvement of living environments and quality of life Long-Term Vision for the Health & Crop Sciences Sector Food Ensuring Public Health and Hygiene Health Sumitomo Chemical R&D Increasing Food Production Sustainable Agriculture Safer Agricultural Produce Improving QoL and the Environment Environment Strengthen high-profitability businesses Expand business globally Ensure compliance & maintain safe operations Differentiation Differentiate our business from multinational and generic competitors Expand brand-name products business/Expand into downstream and Business Creation related areas/Expand sales area to Central Europe and South America Innovation R&D of compounds in pipeline/Expand sales of new products/Accelerate launch of new products/Strengthen intellectual property strategy/Establish a global research system/Establish global optimum production systems/Reduce SCM and all other costs/Improve asset efficiency Status of the Health & Crop Sciences Sector Long-term Vision Contribute to solving global issues related to food, health, hygiene, and the environment by leveraging our excellent research and development capabilities Status of the Major Businesses         Excellent research and development capabilities  Relatively small business size compared to and robust pipeline both in chemicals and the competing majors biorationals  Need to strengthen global sales channels Differentiated technologies and products in niche areas Products with high market share Alliances with major multi-national players Strengths Weaknesses Offering total solutions in Japan S Opportunities Threats Increasing food demand due to the growing global population Growing agriculture-related businesses Opportunities in peripheral and downstream businesses of the household insecticide business O W  Tightening of the regulations on crop protection chemicals Increased competition with off-patent crop protection chemicals Consolidation in the major agrochemical companies T   Current State of the AgroSolutions and Environmental Health Business Others 3,000 Biorationals Insecticides Sale by Region FY2017 Sales by product category 2,500 Herbicides Fungicides 2,000 1,500 1,000 500 Others 08 Asia 09 Europe 10 11 North America 12 13 14 15 16 17 Japan * Including environmental health products Calendar year until 2011, April–March fiscal year after 2012 Research and Development Strategy of the Health & Crop Sciences Sector Long-term Vision Contribute to business growth and portfolio enhancement by providing value-added products and services through technological innovation Strategic Investments in Research and Development Commercialization of the Development Pipeline • Advancing market and product development • Product lifecycle management Creation of Next-Generation Pipelines • Crop protection chemicals • Biorationals ・Botanicals Development of Next-generation Technologies • Precision agriculture • Utilization of Biotech and IoT Global Research and Development Network • Enhancing infrastructure • Operational excellence Global Agrochemical Companies’ Investments in R&D of Crop Protection Chemicals 2012 3648 2707 Number of Patents Issued Number of New moleules Launched 2166 2310 10,000 15.0% ($ Millions) 6.8% 5,000 9,948 6.9% 8.8% 10.0% 6.5% 9.7% 9,468 10.5% 5.0% 6,160 4,636 2,855 676 Syngenta 652 Bayer 541 BASF 300 Dow 2,590 276 DuPont Sales revenue 273 0.0% Sumitomo Chemical Research and development expenses Research and development expenses ratio to sales revenue (Source) Sales revenue, research and development expenses: AgbioInvestor(2016) Number of patents issued (2010-2017): Derwent World Patent Index Number of new molecules launched (2012-2015): internal Sumitomo Chemical research Our Robust Development Pipeline and New Products Compounds Project B2020: INDIFLIN™ PAVECTO™ ALLES™ Pyridaclomethyl Project A2020: Pipeline A Pipeline B Pipeline C Pipeline D Use Agricultural fungicide Agricultural fungicide Agricultural insecticide Agricultural fungicide Agricultural herbicide Agricultural PGR Botanical insecticide Agricultural insecticide New products: Mixtures and new formulations Biorationals Botanicals Agricultural- and household hygiene- Evaluation Full Development InRegistration Launch ...Contents Status and Vision of the Health & Crop Sciences Sector Growth Strategy for the AgroSolutions and the Environmental Health Business (1) Launch of New Products and Business Collaboration... Information about the Crop Protection Business (appendix) Consolidated Performance Trends of Health & Crop Sciences Sector 400 （Consolidated net sales/ sales revenue） (Billions of yen) Others AgroSolutions. .. living environments and quality of life Long-Term Vision for the Health & Crop Sciences Sector Food Ensuring Public Health and Hygiene Health Sumitomo Chemical R&D Increasing Food Production Sustainable