01 Syngenta Annual Review 2009 Strategic goals Drive land productivity through innovation Maximizing land productivity while conserving scarce resources such as water. Create new businesses Bringing together Syngenta Flowers and Professional Products to serve the specific needs of Lawn and Garden customers. Build leadership in plant performance Offering full crop programs and solutions to increase crop vigor and yield as well as control pests. Maintain cost efficiency Targeting annualized operational efficiency savings of $290 million by 2011 to enable continued investment in growth initiatives. Broad portfolio, global reach, local focus Through our world-class science, broad portfolio, leading crop solutions and strong presence in all agricultural markets, we are uniquely positioned to help growers around the world to grow more from less. Our approach Leading in research and development Conserving precious soil Providing high-quality seeds Capitalize on Seeds investment Expanding our sales of both genetically modified and conventional seeds to achieve a significant increase in Seeds profitability over the medium term. Outperform the industry Building on the breadth of our business, spanning Crop Protection, Seeds, Traits and Seed Care, to provide a unique offer of integrated crop technology. Expand in emerging markets Through significant investments in people, portfolio and supply chain. Financial and business performance 2009 Sales1 $11bn Earnings per share2 09 08 07 10.99 11.62 9.24 Crop Protection Syngenta offers a leading range of Crop Protection and Seed Care products that help growers control weeds, prevent disease and protect their crops from insects. Crop Protection sales decreased by 2 percent1 to $8.5 billion in 2009. Crop Protection sales1,5 09 08 07 8,491 9,231 7,285 +1% (CER) 09 08 07 15.76 16.26 11.45 $15.76 Free cash flow3 –3% 09 08 07 580 761 802 $8.5bn Seeds 6.00 6.00 –2% (CER) With a $1 billion annual investment in R&D, 5,000 people and a global network of R&D centers, Syngenta leverages scientific insights in plant physiology, chemistry and biotechnology to help address growers’ diverse needs. Syngenta products, such as herbicides, play a critical role in conserving soil. They reduce the need for tilling and thereby the risk of erosion through wind and rain. This is complemented by extensive training and stewardship programs to promote modern agricultural practice. Syngenta breeds high-quality seeds for corn, soybean, sunflower and other field crops, vegetables and flowers. We use conventional breeding techniques as well as modern biotechnology to provide growers with the best choice for high yields and quality. For more information, see page 18 $580m Dividend per share4 –24% 09 08 07 CHF6.00 4.80 Syngenta develops high-quality seeds that help growers boost yields and quality in a wide range of crops. Seeds sales in 2009 rose by 13 percent1 to $2.6 billion, and the EBITDA margin climbed to 9.5 percent. Seeds sales 0% $2.6bn 09 08 07 2,564 2,442 2,018 Protecting plants from the start Enhancing plant performance Benefits for customers and rural communities +13% (CER) For more information, see page 22 Lawn and Garden The new Lawn and Garden business offers a range of plant health solutions for consumers and professional growers. It comprises Professional Products and Flowers Seeds, which are reported under Crop Protection and Seeds, respectively. For more information, see page 26 1 Growth at constant exchange rates (CER) 2 Fully diluted excluding restructuring and impairment 3 For a definition of free cash flow, see page 44 4 Subject to shareholder approval at the Annual General Meeting on April 20, 2010 5 Including inter-segment sales With our world-leading seed care technology we give young plants the best start, enabling strong and healthy growth as the basis for high yields and superior quality. Coating seeds with our products protects them against insects and disease. Our broad range of safe and efficient crop protection products helps to drive yield 02 and improve quality. They protect crops from insects and disease and reduce competition from weeds for nutrients and water. They also improve plant vigor and can help to reduce yield losses in periods of drought. Highlights in 2009 Our innovations and technology provide Syngenta our customers with a broad range Annual Review 2009 of benefits. Consumers appreciate features such as better taste and healthier food. In rural communities we help to improve livelihoods through raising agricultural productivity, training and stewardship programs. 03 Syngenta Annual Review 2009 Robust performance in a challenging environment In 2009, we continued to strengthen our leading market positions in Crop Protection and increased profitability in our Seeds business. We engaged actively in the public debate on agriculture, and through innovation and technology we made an essential contribution to ensuring food security. Creating value in Crop Protection New markets, expanding use Preserving biodiversity Strengthening our portfolio Engaging in the debate Syngenta to boost pollinators Syngenta and Dow AgroSciences Advancing technology in cross license corn traits agriculture to ensure food security across Europe Throughout the year, we continued to roll-out our high-performing products in new markets, on additional crops and in new combinations, creating value for growers through higher crop yields and quality, and improved application. Following its successful introduction in vegetables in Asia, our broad-spectrum herbicide DURIVO® was launched in rice. We completed more than 1,000 large plot trials in the US for our seed treatment nematicide, AVICTA®, in preparation for expansion into corn in 2010. Syngenta and Dow AgroSciences agreed in April to cross license their respective corn traits for commercialization within their branded seed businesses. The agreement will allow both companies to maximize the value of their technologies and to bring greater choice and flexibility to growers. It also demonstrates the value of Syngenta’s proprietary technology in corn. Syngenta contributes actively to the public debate about global challenges such as food security, water and climate change. We seek to engage in an open dialogue with a broad range of stakeholders, including political leaders, NGOs and scientific experts. In 2009, we participated in numerous events such as the World Economic Forum as well as conferences organized by the US Department of Agriculture and the International Chamber of Commerce. In July, Syngenta announced a five-year program to provide 10,000 hectares of essential habitat and food sources for pollinating insects across Europe. OPERATION POLLINATOR® aims to boost the numbers of native pollinating insects across seven European countries and will enable growers to cultivate wild flora that are favored by pollinating insects on the edges or near fields of commercial farms. The program will be assessed annually by an independent scientific auditor. Expanding Seeds positions Acquisitions strengthen sunflower and vegetable seeds business Developing agriculture Technology and agronomic knowledge for African farmers Working in partnerships Collaboration with IRRI in rice and CIMMYT in wheat Broadening our offer New corn seed technologies approved in Latin America 06 Syngenta Annual Review 2009 07 Syngenta Annual Review 2009 In August, Syngenta acquired Monsanto’s global hybrid sunflower seeds activities, including germplasm, development and breeding, for a consideration of $160 million. This acquisition will further strengthen the leading position of Syngenta’s sunflower seeds business in Europe and Latin America. In November, we acquired two US-based lettuce seed companies, establishing a significant position in the North American lettuce market and broadening our lettuce development portfolio in Europe and Asia. Speaking at the Pan Africa Chemistry Network (PACN) Sustainable Water Conference in Nairobi, Kenya, in August, Syngenta CEO Mike Mack emphasized the important role of technology and agronomic knowledge for the development of productive agriculture in Africa, and expressed the Company’s commitment to supporting its advancement. The conference was hosted by the PACN, a partnership between the Royal Society of Chemistry and Syngenta. In September, Syngenta and the International Rice Research Institute (IRRI) announced a collaboration to support rice farmers in improving quality and yield in one of the world’s most important crops. Syngenta also entered into a public-private partnership with the International Maize and Wheat Improvement Center (CIMMYT) in Mexico to focus on genetic markers for use in breeding resistance against stem rust in wheat. In late 2009, Syngenta received full approval of its new genetically modified corn traits in Brazil and Argentina. The approval of these advanced technologies strengthens our comprehensive offer to growers in Latin America through increased productivity, higher grain quality and reduced production costs through combined insect resistance and herbicide tolerance. Chief Executive Officer’s letter “Throughout our business, the dedication and expertise of our people in addressing the global challenge of ensuring food security are making a substantial impact.” 2. with the International Rice Research Institute (IRRI), which will focus on advancing solutions for the rice industry to take account of changing agronomic conditions and population growth. The challenges that concern Syngenta on a daily basis – food security, climate change and the effective use of natural resources – are increasingly a focus for government attention and public debate. Coherence is now emerging with regard to the need to formulate a global response to these challenges. Shaping such a response for agriculture will of necessity be complex, taking into account the differing needs of some 2.5 billion people worldwide who are directly involved in farming for their livelihood. Syngenta’s role goes beyond our understanding of the challenges: it lies also in the multiplicity of the solutions we can offer. Our Company purpose is “Bringing plant potential to life”. We pursue it through broad-based investment in R&D which has created unique and global technology platforms. In the field, we adapt the output of our research to meet the needs of a myriad of customers across the world. Throughout our business, the dedication and expertise of our people in addressing the global challenge of ensuring food security are making a substantial impact. I extend on behalf of the Syngenta Board and the Executive Committee my thanks to all Syngenta employees worldwide for their contribution to our business and to agriculture. 1. We began 2009 in a climate of uncertainty and in the course of the year confronted a number of challenges including lower crop prices, planting delays and reduced pest pressure. Furthermore emerging markets, an important part of our business, were inevitably affected in the first half of the year by the credit crisis and currency instability. In this context, I am proud that Syngenta has been able to report earnings close to the record level of 2008, and this in the face of currency and raw material headwinds. Our performance reflects price discipline – enabled by the quality of our portfolio – and attention to costs. The careful management of risk in emerging markets limited sales but ensured that the quality of our balance sheet was maintained. Substantial free cash flow further attested to the ongoing strength of our business. Syngenta’s future is inextricably linked to the fundamental drivers of agriculture, which remain unchanged. Population growth and dietary change are concentrated in the emerging markets, where we are seeing a structural shift towards the modernization of agriculture. In Asia, investment in crop protection and seeds continued almost unabated in 2009, amidst growing awareness of the need to secure supply of staple foods, notably rice. The recent endorsement of genetically modified traits for food by the Chinese and Indian authorities is just one example of the readiness to adopt new technologies. In Latin America, the market rebounded after a difficult start to the year as the region’s vast agricultural potential led to increased investment by both government and the private sector. Further technology progress is vital to meet the evolving needs of growers and to respond to agronomic and climate challenges. In 2009 we maintained our commitment to research and development (R&D) with a spend of almost $1 billion. The capacity expansion program in Crop Protection is now nearing completion and will allow us significantly to increase sales of AMISTAR®, the world’s leading fungicide, and ACTARA®/ CRUISER®, a broad spectrum insecticide and seed treatment. And we continue to make selective acquisitions in Seeds with a view to expanding our germplasm pool and technology platforms. 1. Speaking at the ICC’s 6th World Chambers Congress on June 4, 2009, in Kuala Lumpur, Malaysia. 2. Visiting the Kenya Cuttings site with Oded Kunik, Site Manager, and his team. The farm covers 45 hectares, has 27 greenhouses and some 900 permanent employees. 3. Touring a cassava field with Parveen Kathuria, Head of Syngenta Seeds Thailand and his team. Cassava (tapioca) is one of Thailand’s most important commercial crops. Acquisitions supplemented double-digit growth1 in Seeds, with a strong performance across product lines. A marked improvement in profitability for the business as a whole reflected in particular the roll-out of our proprietary corn traits in the USA. We are firmly on track to meet our target of a 15 percent EBITDA margin in 2011, and the R&D investments of recent years have resulted in a competitive and differentiated pipeline which will generate growth beyond that date. Our investments are already being leveraged through the introduction of traits in additional countries, with the registration of double stacked corn in Brazil and Argentina and of VIPTERA™ for broad-spectrum insect control in Brazil, and through a number of trait out-licensing agreements. In Crop Protection, we have led the industry in raising prices and remain committed to a pricing strategy that reflects the value of our products in increasing yields. The scope for adding further value is expanding as we develop the potential of our portfolio for crop enhancement – yield advantages that go beyond pest control. Meanwhile, the performance of our new products in the difficult market conditions of 2009 – with sales up by more than 30 percent – testifies to the ongoing power of innovation. This is apparent in developed as well as emerging markets, with our new products making significant gains in both North America and Western Europe. Looking ahead, we see significant further potential with the launch in the USA of AVICTA®, a new category for nematode control on corn. Syngenta is building on its global reach and broad business portfolio to develop an increasingly integrated approach to crop management. Our global technology platforms allow us to leverage our capabilities and thus maximize the impact of our outstanding science. We are expanding our in-house research into drought tolerance and nitrogen efficiency in field crops with the opening of a new research center in Beijing and the establishment there of new partnerships. Increasing recognition of the role we are playing in the long-term growth of agriculture 08 is enabling us to enter into a broader range of technology partnerships globally. One example is our collaboration Michael Mack Chief Executive Officer 3. Syngenta Annual Review 2009 09 Syngenta Annual Review 2009 1 Growth at constant exchange rates Global challenges What is needed to ensure food security for 9 billion people by 2050? Experts around the world are actively engaged in the debate about how to feed a growing and increasingly prosperous population. Balancing changing dietary demands with environmental, social and economic factors is critical. Closing the yield gap The combined effect of population growth, continued income growth and urbanization is expected to result in almost the doubling of demand for food, feed and fiber in 2050. Agricultural output has to significantly increase to meet demand. There is currently a significant “yield gap” in the industry, meaning many farms produce less food than they are capable of. Enhanced farming techniques and new technologies could be tapped to boost production by improving the efficiency in farmers’ use of agricultural inputs, developing adapted crop varieties and investing in agricultural research and development. Most of the necessary gains in production will be met by increasing yield growth and cropping intensity on existing farmlands rather than by increasing the amount of land brought under agricultural production. Success requires farmers having access to information and financial incentives, strong extension services and the possibility to acquire necessary skills. Agriculture must become more productive if it is to feed a much larger population while responding to the daunting environmental challenges ahead. They call for increased investments and partnerships to find long-term solutions, which are vital for a step-change in farm productivity and resource efficiency, in order to meet the growing global demand in a responsible way. A green revolution for the 21st century A Green Revolution for the 21st century with a capital G. Up to 25 percent of world food production may become “lost” during this century as a result of climate change, water scarcity, invasive pests and land degradation. This could continue to make food prices more volatile and expensive in a world of six billion rising to over nine billion by 2050, unless production and consumption become more sustainable. Increasing food energy efficiency is essential to allow a significant growth in food supply without compromising environmental sustainability. There is a strong link between the state of the natural environment and food production. Agriculture needs healthy ecosystems. The natural environment comprises the entire basis for food production through water, nutrients, soils, climate, weather and biodiversity. Increasing production simply by expanding croplands would result in accelerated loss of forests and other natural ecosystems, with subsequent costs to biodiversity and accelerated climate change. We need a new green revolution based on traditional knowledge; an ecosystem approach and modern, safe science and technology – supporting farmers in developing sustainable agriculture – if we are to balance the need for food with the need to maintain and enhance the environment and its multi-trillion dollar services. Policy change and investments in agriculture and nutrition The food crisis in 2008, combined with growing energy demand and emerging climate-change issues, threatens the livelihoods of millions of poor people as well as the economic, ecological, and political situation in many developing countries. Decades of shrinking global investment in agricultural research have affected agricultural productivity, and the financial crisis has constrained agricultural growth. Now, all three components of food security – availability of food, access to food, and direct nutrition action – need to be addressed simultaneously at scale. Addressing these challenges will require the world to develop a more productive and sustainable food and agricultural system. Joachim von Braun Director General (2002–2009) International Food Policy Research Institute IFPRI, Washington DC, USA Partnering for food security We are faced with growing food insecurity across the world. 75 percent of the world’s poor are rural, and most are dependent on agriculture for their livelihoods. What is more, the most recent estimates from FAO are that – for the first time in human history – over a billion people are chronically malnourished. The World Bank Group, working in partnership with the global community, continues to respond. In April 2009, we raised the ceiling of the Global Food Crisis Response Program from $1.2 billion to $2 billion. More recently, Implementing Agriculture for Development: World Bank Group Agriculture Juergen Voegele Director, Agriculture and Rural Development, The World Bank Group Washington DC, USA Investment in agriculture and related, research-based innovations must be accelerated to achieve this and must be combined with food-policy reform, improved trade, and enhanced access to knowledge and inputs by farmers in developing countries. Substantial investment in agriculture and related innovation will accelerate sustainable increases in productivity and in the production of healthy food by and for the poor. It will help conserve and enhance biodiversity, and encourage sustainable use of natural resources. Programs aimed at providing access and sufficient availability of food to the poor must be complemented by nutrition programs focused on children. Action Plan FY2010–2012 outlines the new phase of our commitment to agriculture. It projects an increase in support from an average $4.1 billion annually for the fiscal years 2006–2008 to between $6.2 and $8.3 billion annually over the next three years. This would be between 13 and 17 percent of total projected commitments of the International Development Association and the International Bank for Reconstruction and Development. It will require the dedication and innovation of all in the development community to spread the message of agriculture’s critical contribution to poverty reduction, economic growth, and environmental sustainability – including agriculture’s critical role in combating climate change. Our collective action will continue to be central to long-term food security in poor countries. Alexander Müller Assistant Director-General Food and Agriculture Organization of the UN FAO, Rome, Italy Achim Steiner Executive Director United Nations Environment Programme UNEP, Nairobi, Kenya www.blacksunplc.com © Black Sun Plc 2011 39
