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Crop Protection Regional Sales

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Europe, Africa & Middle East

Sales in the 2nd quarter grew by 6.8%, a trend continuing from the previous quarter with herbicides for spring cereals, oilseeds and maize/corn in Europe and South Africa; from insecticide sales in Africa/Middle-East. DuPont’s rynaxypyr-based products, methomyl and oxamyl for foliar and soil application boosted performance in the region. DuPont’s sales also improved with the rouble strengthening. Africa and Middle-East remain strong niche markets for floriculture and horticulture applications.

The H1 2017 period sales grew by 5.6% as the season started well. However, with increasing drought conditions with high temperatures, the outlook for the H2 season looks weak.

North America

Sales grew strongly by 15% in Q2, mainly from a mix of corn & cereal herbicides, with insecticide seed-treatments for their seeds business. Herbicides with their proprietary FeXapan™ dicamba-based formulation for XtendiMax™ soybeans, corn licensed in from Monsanto contributed to growth as well. Other herbicides in Canada for canola, orchards and pre-plant applications also contributed to growth in the region. Generic sulfonylureas continue to compete severely with DuPont brands and this has also impacted their performance in North America.

H1 2017 sales also grew strongly by 11% with higher demand for their herbicides and seed treatment products for corn, soybean, sunflower and spring wheat at the start of the season. DuPont has formally received approval for the sale of its lucrative rynaxypyr, cyazypyr and indoxacarb-based insecticides and cereal herbicides business to FMC, which is expected to be completed during H2. This would have a significant negative impact on the performance of the Dow-DuPont agricultural business spin-off in 2018.

The outlook for the rest of the year is positive with single-digit growth.

Latin America

Sales increased by 13% during the 2nd quarter, a considerable improvement over the past four quarters, due to a buoyant safrinha season between March and May. DuPont also launched their new oxathiapiprolin fungicide Zorvec™ which has a broad range of applications for resistance management against Oomycete fungi which are responsible for serious diseases like potato late blight, seedling rot, downy mildew in cucumbers etc.

They also launched the fungicide Vessarya™ (picoxystrobin + benzovindiflupyr) a combination product with the latter AI licensed in from Syngenta. After raising prices locally, the Real strengthened which helped reduce further losses in sales. The improved pricing and credit control also contributed to a more solid performance.

The H1 2017 period showed a growth of 3.9% thanks to Q2 sales. Outlook for H2 remains positive with strong growth expected for the main South American season.

Asia-Pacific

Sales in the region grew by 4.7%in Q2, with advance sales for the monsoon season in the Indian subcontinent, SE Asia and Australia. An additional boost was provided with the launch of Zorvec™ fungicide in China. The performance in H1 2017 was also positive with 3.6% growth with the onset of the monsoon in June.

The outlook for the H2 period is strongly positive with the continuing summer/monsoon season in Q3 and the start of the irrigated winter crops in Q4.

Inter-segment sales

Increased usage in North & Latin American seed farms where their newer stacked trait hybrids LEPTRA™ are being produced, using the VIP traits licensed in from Syngenta. Their inter-segment transfers are mainly insecticides, seed treatments and herbicides towards Pioneer™ seed production. Projected to increase in H2 2017 as future demand for their corn hybrids is expected to grow.

Crop Protection Segment

Sales grew strongly by 10.4% – volumes +10%, price (1%) and currency +1%. For the H1 2017 period, sales grew 6.5% with volumes +8% and prices (1.5%). Sales growth was driven by sales of insecticides in North America, EAME and Asia-Pacific regions. Launch of fungicides in Canada, Latin America, China and Australia also helped growth.

The company has now recovered from the stoppage of carbamate insecticides, which are again contributing to sales. The merger with Dow is now confirmed, and could provide synergies in the product range with DuPont’s ageing range of herbicides and Dow’s ageing insecticides. However, as mentioned below (see Insecticides section) the company has confirmed the sale of its key insecticide and cereal herbicide business to FMC to be closed end-2017, which could have negative impact of $850m-$1050m in 2018 sales.

The new entity is expected to be spun off as a new stand-alone ag-business at the end of 2017 to mid-2018 financial year optimising and utilising its merged portfolio in a manner better suited to global market demands, rather than depending on their strengths in the US market alone, which today contributes over 55% of sales. Increasing sales in Latin America, China, India and Europe will help balance their performance and presence in the global market.

The outlook for H2 2017 sales is slightly positive with the Q3 & Q4 seasons in Latin America and Asia-pacific expected to perform strongly. Also with the current drought and the dry weather in spring this year having affected the winter and spring cereal crop conditions in North America and Europe, we expect the winter (fall) planting in Q3/Q4 2017 to be much higher with a corresponding increase in herbicides and seed-treatment sales.

Crop Protection Product Sales

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Herbicides

Sales of herbicides in Q2 2017 increased 7.2% with the main corn, soybean season in North America, canola and cereals in Canada, spring cereals, oilseeds and corn in Europe. The launch of FleXapan™ dicamba-based herbicide for the dicamba-tolerant varieties of soybean licensed in from Monsanto, also helped to drive growth. with dry weather in Europe, Asia and excess rain in North America.

The launch of Pioneer™ new hybrids in corn and varieties in soybean, bearing the XtendPlus™ system traits, certainly provided a boost in Q2-H1 2017 for the new dicamba-based formulations launch. DuPont has confirmed divesting of their cereal herbicides and key insecticides post-merger with Dow, as already announced in the deal with FMC, in order to facilitate anti-trust requirements and more wisely focusing on the newer range of products that are manufactured by Dow.

Outlook for the rest of the year is positive as the fall/winter planting of cereals in North America, Europe and Asia-Pacific is expected to be higher in H2, as is the corn and soybean crop in Latin America.

Fungicides

Fungicides sales grew strongly by 12.7% for the quarter and 4.4% for the H1 period. Growth was largely due to the launch of Vessarya™ (picoxystrobin + benzovindiflupyr) against Asian Soybean Rust in Brazil and sales of their newest fungicide based on oxathiapiprolin (Zorvec® Enicade®). The low growth in H1 2017 sales was partly due to divestiture of their inorganic range particularly in Europe and California and the dry weather prevailing in the cereal markets of Europe.

The ASR market in Brazil was also reduced this year due to dryness and excess rainfall in different geographical areas. A similar situation in North America impacted the cereal fungicides market. Regaining share will be a steep climb for DuPont as well as the combined DowDuPont as both are weak in this segment.

The outlook for H2 2017 is positive as the fall/winter planting season is expected to be better than last year.

Insecticides

Insecticides sales grew strongly in Q2 by 12% and by 9.5% during H1 2017. (Seed treatment component shown separately below). Growth came from their older products like methomyl (Lannate™) and oxamyl (Vydate™) on several crops as well as the newer ones based on indoxacarb, chlorantraniliprole (Rynaxypyr™) and cyantraniliprole (Cyazypyr™) in the Americas, EAME and Asia-Pacific.

Currency strengthening helped offset the Latin America decline. DuPont reports that their latest price increase has helped offset weaker performance in Eastern Europe and in Latin America. Since DuPont announced the planned sale of its insecticides and cereal herbicides to FMC, earlier this year, this would have a significant impact from 2018 as the merged Dow-DuPont would not have this key insecticide.

There are a couple of issues here:

(1) Although FMC would benefit greatly from the addition to its portfolio, Cropnosis has heard that the active, which was outsourced from China, is already being produced in small quantities by generic producers. That could imply faster competitor entry into the markets for FMC;

(2) Strategically, the merged ag businesses of DowDuPont could make a bid for FMC, to utilise the smaller companies superior distribution network in Latin America and Asia-Pacific.

(3) With more activity and the growing ambitions of ChemChina’s competitors within China, there could be another bid for acquisition by one of these competitors, such as Sinochem.

Crop Protection Segment

Sales grew strongly by 10.4% – volumes +10%, price (1%) and currency +1%. For the H1 2017 period, sales grew 6.5% with volumes +8% and prices (1.5%). Sales growth was driven by sales of insecticides in North America, EAME and Asia-Pacific regions. Launch of fungicides in Canada, Latin America, China and Australia also helped growth.

The company has now recovered from the stoppage of carbamate insecticides, which are again contributing to sales. The merger with Dow is now confirmed, and could provide synergies in the product range with DuPont’s ageing range of herbicides and Dow’s ageing insecticides. However, as mentioned below (see Insecticides section) the company has confirmed the sale of its key insecticide and cereal herbicide business to FMC to be closed end-2017, which could have negative impact of $850m-$1050m in 2018 sales.

The new entity is expected to be spun off as a new stand-alone ag-business at the end of 2017 to mid-2018 financial year optimising and utilising its merged portfolio in a manner better suited to global market demands, rather than depending on their strengths in the US market alone, which today contributes over 55% of sales. Increasing sales in Latin America, China, India and Europe will help balance their performance and presence in the global market.

The outlook for H2 2017 sales is slightly positive with the Q3 & Q4 seasons in Latin America and Asia-pacific expected to perform strongly. Also with the current drought and the dry weather in spring this year having affected the winter and spring cereal crop conditions in North America and Europe , we expect the winter (fall) planting in Q3/Q4 2017 to be much higher with a corresponding increase in herbicides and seed-treatment sales.