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
1. Status and Vision of the Health & Crop Sciences Sector
2. Growth Strategy for the AgroSolutions and the Environmental HealthBusiness(1) Launch of New Products and Business Collaboration throughEnhanced 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 Business3 . Conclusion* Basic Information about the Crop Protection Business (appendix)2

Consolidated Performance Trends ofHealth & Crop Sciences Sector

400（Consolidated net sales/ sales revenue）(Billions of yen)
OthersAgroSolutions and Environmental health90
Consolidated operating income/ core operating income
80

350

70

300

60

250

50

200

40

150

30

100

20

50

10

0

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.

3

Issues in 2050: Food Supply, Improvement of
Quality of Life
35% increase in population
Increased demand for high levelprotein sources due to increases
in the middle income class
2050

Urbanization
49 to 70%2014
7.2 billion
peopleIncreased
income indeveloping
countries

Necessary
to increase
food
production
by 70%

Over 9billionIncreased
demand for
healthy andpleasantlivingenvironments

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Sustainableagriculture
農業

Climate
気候変動
changeMission: 1. Contribute to further increased production of food, animal feed, textiles, andfuel using sustainable methods
2. Contribute to protection and improvement of living environments and quality of life4Long-Term Vision for the Health & Crop Sciences Sector

Food

Ensuring Public Healthand Hygiene

HealthSumitomo
Chemical

R&D

Increasing Food Production
Sustainable Agriculture
Safer Agricultural Produce

Improving QoL andthe 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 andBusiness 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

5

Status of the Health & Crop Sciences Sector
Long-term
VisionContribute 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 toand robust pipeline both in chemicals andthe competing majors
biorationals
 Need to strengthen global sales channels
 Differentiated technologies and products in nicheareas Products with high market share Alliances with major multi-national players
Strengths Weaknesses Offering total solutions in JapanS

 Increasing food demand due toW

Opportunities ThreatsO

the growing global population
 Growing agriculture-related businesses
 Opportunities in peripheral and downstream
businesses of the household insecticide business Tightening of the regulations on cropT

protection chemicals
 Increased competition with off-patentcrop protection chemicals
 Consolidation in the major
agrochemical companies
6Current State of the AgroSolutions
and Environmental Health Business
Others3,000

Biorationals

Insecticides

Sale by Region
FY2017

Sales by productcategory

2,500
Herbicides

Fungicides

2,000

1,500

1,000

500

0
Others

08

Asia

09

10

11

EuropeNorth 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
VisionContribute to business growth and portfolio
enhancement by providing value-added products andservices through technological innovation

Strategic Investments in Research and Development
Commercialization of the Development
Pipeline• Advancing market and productdevelopment• 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 excellence8Global Agrochemical Companies’ Investments
in R&D of Crop Protection Chemicals
2012 3648 2707
2
4
1

Number of
Patents Issued
Number of
New moleules Launched

2166
4

2310
2

10,00015.0%($ 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

0

676

652

541

Syngenta

Bayer

BASF

300
Dow

2,590
276

273

DuPontSumitomo
ChemicalSales revenue

0.0%

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 research9Our Robust Development Pipeline and
New Products
Compounds
Project B2020:
INDIFLIN™
PAVECTO™
ALLES™
Pyridaclomethyl

Project A2020:
Pipeline A
Pipeline B
Pipeline C
Pipeline D

UseAgricultural fungicide
Agricultural fungicide
Agricultural insecticide
Agricultural fungicide

Agricultural herbicide
Agricultural PGR
Botanical insecticide
Agricultural insecticide

New products:
Mixtures andnew formulations
Biorationals
Botanicals

Agricultural- andhousehold hygiene-

Evaluation

Full
Development

InRegistration

LaunchProgress in B2020 Pipeline Development
CompoundUse

INDIFLIN™
(inpyrfluxam)

Agricultural fungicide
Soybean rust etc.

PAVECTO™
(metyltetraprole)

Agricultural fungicide
Septoria etc.

ALLES™
(oxazosulfyl)

Agricultural insecticide
Major rice pests etc.

Product Name
Undecided

Agricultural fungicide
Vegetable diseases
etc.

(pyridaclomethyl)

Evaluation

Full
Development

In-Registration

 Completed  Submitted in2017 Completed

 Completed

 Submitted in2018 Plan to submit
in Q1 2019

 Completed
11

Commercialization of the New Fungicide Pipeline
New fungicide for soybeans
Features:

INDIFLIN™
(inpyrfluxam)

Highly effective against major diseases
such as soybean rust

Registration: Submitted in Japan, North and SouthAmerica in 2017.
Followed by submission in othercountries.

Global Fungicide Market
Cereals
Rice
TubersSoybeans
GrapesOther
2,853

June 2017: Collaboration with Bayer(developing its mixtures in Brazil)

To be launched in 2020 or later

New fungicide
PAVECTO™ Features:(metyltetraprole)

1. Highly effective against major plantdiseases
2. Also effective against strains
resistant to existing fungicides

Registration: Submitted in Japan and Europe

June 2017: Collaboration with BASF (co-developing globally)

5,618

2016

$13,578
million

838

2,203

1,056
1,010

(Source) Phillips McDougall,
Crop Section (Ex-Distributor)

To be launched in 2020 or later
12

Excellent Field Performance of INDIFLIN™ ProductIn the official trials in Brazil, INDIFLIN™
product showed excellent performanceagainst Asian soybean rust
It showed very good efficacy in conditions
where benchmark product was ineffective

INDIFLIN™

Benchmark

●●

●

●●
●

13

Excellent Field Performance of PAVECTO™
• PAVECTO™ has shown better field performance against wheat
Septoria than the commercial products in Europe

PAVECTO™

No Treatment

14

Expansion of Pipeline Portfolio - A2020 Projects

CompoundApplication

Evaluation

Full
Development

In-Registration

Pipeline A

Next Generation
Herbicide effective
against weeds having
resistance issue

Pipeline B

Agricultural
plant growth regulator

Full-developmentin progress

Pipeline C

Botanical insecticide for
agriculture and householdhygieneFull-developmentin progress

Pipeline D

Agricultural insecticide tocontrol resistant pests

 Full-development
startedEvaluation inprogress
15

Next Generation Herbicide
for control of Resistance Weed Species
Backgound

Sumitomo Chemical’s Goals• In the course of our strategic partnership for thesale of Flumioxazin, Sumitomo Chemical andBayer agreed to collaborate on the developmentof next-generation weed control solutions,
utilizing their technical strengths (Sumitomo
Chemical: the development of new herbicides,
Bayer: the creation of resistant crops) in thefield of development.

• Proactive support for next-generation GMOs and
PPO-resistant crops (Bayer)• Expand Sumitomo Chemical’s herbicide portfolio• Combine mutual insights to improve development
success rates, shorten development times, andreduce development costs

Timing for Applying the New Herbicide

Features of the New Herbicide

フルミオキサジンの生産能力拡大を決定• Broader herbicidal effect on grasses
compared to existing PPO herbicide
products• Effective at lower rate than other types ofherbicide• Fast action
Protoporphyrinogen Oxidase (PPO) is an enzyme
involved in the synthesis of chlorophyll, and PPOinhibitor herbicides cause plants to wither by inhibiting
the operation of PPO

2. Spraying during the growth ofstems and leaves(Resistant crops)

1. Pre-sowing treatment

Seeding Sprouting
16

Excellent Performance of Next Generation Herbicide
The new herbicide was highly effective
against weeds at lower rate thancommercial products. It also controlled
resistant weeds which becomes a serious
issue in several States.

No Treatment

Sumitomo Chemical’s New Herbicide

Commercial Products 17

Development of Biorational- New Plant Growth Regulators
The new plant growth regulator is derived from anatural product and showed high effectiveness infruit and leaf thinning for fruit trees, contributing tolabor saving in fruit and leaf thinning operations

Apples: Effect on Fruit ThinningHigh fruit
numbers,
lower
quality

Improvementin fruit sizeand quality

No Treatment

Treatment

18

Botanical Insecticides
Values• Solutions that meet the needs in organic
agriculture and natural-oriented
consumer market• Utilizing the Sumitomo Chemical Group’s
manufacturing technology• Broad business opportunities in the
agriculture and household/hygiene fields

Features of the New Botanical Insecticides• Effective against agricultural andhousehold pests that have developed
resistance to existing insecticides• Less residual and preferable profiles inenvironmental fate

19

Expansion of the Botanical BusinessIntegrating the Sumitomo Chemical Group’s product portfolio:
Traditional Chemical + Biorational ＋ Botanical (Plant-derived)
Household and public hygiene fields ⇒ Expansion to agricultural uses (USA,Europe, etc.)
Secured a stable production base and improvement in production efficiency
for pyrethrum products by acquisition of Botanical Resources Australia
Development of other botanical products

Crop Protection
Business
フルミオキサジンの生産能力拡大を決定
Household and PublicHygiene Business• Insect control solutions for
consumers who prefernatural products• Insect control solutions fororganic and sustainableagriculture

Botanical Technology• New Trait development ofpyrethrum• know-how relating to production
for natural products

20

Continued Development of Pipelines
To belaunched

2019～2021

2022～2024• Next Generation

Crop• Inpyrfluxam

Protection• Metyltetraprole

Herbicide for• Oxazosulfyl

resistant weed

• Pyridaclomethyl

control solutions

Chemicals

2025～• Next-generation
Insecticide to control
resistant pests• Next-generation
pipeline: 5 projects• Microbial pesticide

Biorationals• PGR• Botanical

Botanicals

insecticide• PGR• Botanicalinsecticide• Next-generation
pipeline:
More than 3 projects

Business Potential ：approx. ¥150-200 billions 21

Strengthening of Our Global R&D Capabilities
Global R&D Network
Chemistry Research Center (CRC) at
Health & Crop Sciences Research Laboratory

Biorational Research Center (BRC)
Completion: July 2018

Completion: May 2018

Alignment between research
and marketing & sales⇒ Enhanced biorational R&D
capabilities

MGK

Environmental
HealthPACE

Agrochemicals

Mycorrhizal
Agrochemicals
Applications

Philagro France
Agrochemicals

VBC

Consolidating organic synthesis research functions ranging
from new compound discovery to commercial processdevelopment⇒ more efficient andspeedier development ofagrochemicals andhousehold and publichygiene insecticides

Agrochemicals

New
Test Fields
圃場を新設
ValentAgrochemicals

Sumitomo
ChemicalCompletion:
September 2017

Agrochemicals
Environmental Health

Latin America Research Center

研究開発拠点を新設
New R&D Center
Completion: November 2016

R&D Center

Vector HealthInternational

Sumitomo Chemical
Enviro-Agro Asia PacificAgrochemicals
Environmental
HealthEnvironmental HealthFeed additives

Test fields

22

Opening of Chemistry Research Center (CRC)
at Health & Crop Sciences Research Laboratory•••

A global R&D base for the Health & Crop Science Sector.
Integration of organic chemistry functions from discovery to processdevelopment to accelerate development of crop protection chemicals
and household & public hygiene insecticides.
Research environment where researchers can enjoy open
communication and generate innovative ideas.

23

Opening of Biorational Research Center (BRC)at Valent BioSciences•••

A global R&D base for Biorationals such as microbial pesticides, andplant growth regulators
Broad range of R&D activities from basic to application and productdevelopment
Enhanced alignment with marketing and sales team, and accelerationof product development

24

Expand the Scope of the AgroSolutions Businesses

Seeds
種子

Seed treatment

種子処理

Cultivation/
pest control/
fertilizer
application

Crop Protection
Crop Protection
Seeds
Chemicals
Chemicals・Sunflower ・Insecticides
・Insecticides
・Fungicides
・Rapeseed ・Fungicides
・Herbicides
・Sorghum ・Nematicides
Product formulation Biorationals
・Rice
and application
・Microbial
technologies
・微生物農薬・Carrot
pesticides
・Insecticides
for・Other・Plantgrowth・植物成長調整剤
vegetables seed treatment
regulators
・Plant growth
regulators forseed treatment
・Seed treatment
technologies
・Biorational
rhizosphereFertilizers
・Fertilizer
coatings
Product
formulation
technology

Post-harvest

Expansion of targetedbusinesses
2020

Products•・殺菌剤
Fungicides•・鮮度保持剤
Freshnesspreservers
・コーティング剤• Coating agents• Plant growth
regulators¥80 billion

2017
Sales of targetedbusinesses¥38.5billion Rice
¥1.5 billion
Seed treatment

Services•・ポストハーベスト
Post-harvest
treatment
処理• Pre-shipment
treatment
・出荷前処理• Residue
analysis¥283
billion¥5 billion¥10 billion¥10 billion

Biorational¥25 billion¥45 billion

Post-harvest
Total sales ofcrop protection chemicals
billionbusiness¥15 billion¥7・Microcapsules
Targeted business areas for
expansion

25

Expansion of Our Biorational BusinessBusiness expansion throughM&A

Purchased microbial pesticides businessfrom Abbott laboratories⇒ Established Valent Biosciences (VBC)

Purchased Mycorrhizal
Applications

Purchased Pace International(entered postharvest solution
business)

2000

Market Size for Each Product

Expansion of biorational
facilities

Microbial
pesticides

PGR
Biorational
rhizosphereMarket size

VBC
products

For agricultural use: ¥50bil.
Of which BT products: ¥20bil.
For household and publichygiene:¥ 11.7bil.

Dipel,
Vectobacetc.

¥33 billion

AVG, GA3
ABA etc.

¥28 billion

Mycorrhizal
fungi,
Nematicides
etc.

2012

Signed a global
licensing agreement
and a development
and commercializationcooperationagreement

Purchased biorational
business from Kyowa
Hakko Bio2014 2015 2016

Built Valent Biosciences LLC,
Osage Plant (Iowa)

2017 2018
Built Biorational
Research Center

Acquisition and Development of
New Biorational Products (1)With the acquisition of Mycorrhizal
Applications LLC, we acquired thetechnology related to growth promotion
in soil and root.

Through long-term alliance with
Rizobacter, expanded rhizobium
technology (symbiotic bacteria that livein the roots of legume plants andprovide nitrogen-fixing)27

Acquisition and Development of
New Biorational Products (2)Expansion in Japanese Market
・Acquired plant growth regulator businessfrom Kyowa Hakko Bio
・Inherited sales of gibberellin andforchlorfenuron products that have effects
such as increasing the size of grapes andAsian pears and making grapes seedless

Developed and sell microbial
nematode products through
BioAg alliance programs
28

Expansion of the Value Chain(New Business Areas)

Seed
Treatment(Existing Business Areas)

Cultivation, Pest Control,
Fertilization

Market Size
US $6 billion, growing 10% per year
Business
Provide crop protection chemicals for seed coatingthat improve crop yields (seed germination rates) andhelp make farm work more efficient

Initiatives to Expand Business Scope・ Agreement with Corteva Agriscience™ tocollaborate on the development, registration andcommercialization of seed-application technologies
・Plan to expand sales in North and South Americas
and other areas

Post-harvest

Market size
US $400-500 million (as of 2013), growing 10%
per yearBusiness
Provide products and services that are used
after harvest to help maintain the quality ofcrops

Initiative to Expand Business Scope
Acquired Pace International, a U.S. postharvest solutions company, in December 2012

Expansion of Business Areas to Seed Treatment and Post-harvest

Collaboration with Corteva Agriscience™
on Seed Treatment Technologies
Background and Values of Collaboration with Corteva Agriscience™
November 2017: Agreement on global collaboration
Sumitomo Chemical(Valent U.S.A.)

Collaborate to take advantage ofboth companies’ strengths

Corteva
Agriscience™

Unique pipeline
portfolio ofconventional andbiological compounds

Accelerate the development,
registration andcommercialization of seed
Treatment technology for
major crops

Cutting-edge seedapplied technology
based on experience inthe seed and seed
processing business•

Sumitomo Chemical entered the seed treatment business in North America in 2009•

Since then, Sumitomo Chemical have expanded both our target regions and product portfolio•

Through the collaboration with Corteva Agriscience™, we will accelerate the development andcommercialization of advanced seed treatment technologies
30

Trends in the Crop Protection Market (by Region)●Growth in the crop protection market (excluding non-crop uses) through 2014 wasgreatest in Latin America, on a dollar basis●For the past 2-3 years, the crop protection market has shrunk, particularly in Latin
America and Europe – possible recovery in 2018?
18,00016,000

Sales ($m)

14,00012,000

NAFTA

10,000

LATAM

8,000

Europe

6,000

Asia

4,000

MEA

2,000
0

Source: Partially modified from Phillips McDougall, AgriService, 2016 Industry Overview

31

Global Footprint: Global Market Size andSumitomo Chemical’s Expansion
Size of the Crop Protection Market (Millions ofUSD) and Percentage of the Global Total

2017 (results)

Growth Rate (% per year)
2017
/2012

2022 (forecast)

2022
/2017

Sumitomo
Chemical’s Global
Footprint

1

Brazil

7,929

14%

8,521

13%

-3.1%

1.5%

2

USA

7,868

14%

8,178

13%

3.6%

0.8%

3

China

5,975

11%

7,407

12%

1.4%

4.4%

4

Japan

3,924

7%

3,362

5%

-5.6%

0.4%

5

Argentina

2,599

5%

2,974

5%

3.1%

2.7%

6

India

2,417

4%

2,988

5%

6.7%

4.3%

〇

7

France

2,320

4%

2,437

4%

-1.9%

1.0%

〇

8

Germany

1,722

3%

1,861

3%

-1.2%

1.6%

9

Australia

1,713

3%

1,818

3%

-1.3%

1.2%

10

Canada

1,709

3%

1,916

3%

0.4%

2.3%

11

Russia

1,459

3%

1,958

3%

9.7%

6.1%

12

Italy

1,132

2%

1,212

2%

1.4%

1.4%

〇

13

Spain

1,046

2%

1,153

2%

5.4%

2.0%

〇

14

Mexico

866

2%

1,038

2%

-2.4%

3.7%

〇

15

Vietnam

729

1%

884

1%

5.5%

3.9%

〇

16

UK

727

1%

757

1%

-1.7%

0.8%

17

South Korea

698

1%

736

1%

1.1%

1.1%

18

Poland

597

1%

712

1%

3.2%

3.6%

World

56,355

0.5%

2.5%

TTL

63,896〇〇〇(Source: AgbioCrop) 32

Enhancement of Our Global Footprint
Established direct sales channels inprioritized countries

Strengthened sales channels
through alliances with othercompanies

To date Initiatives
U.S. (2nd)Valent1998

Spain (13th)

Kenogard

1992

(7th)

Philagro

1993

Italy (12th)

SC Italia

2011

India (6th)SC India,
Excel Crop Care

2011/
2016

France・Investment in Nufarm (2010, 20%)・ Alliances with major agrochemicals
companies- Flumioxazin (Bayer)- Chlotianidin (Corteva Agriscience™)
etc.

33

Share Acquisition in an Indian Agrochemical
Company (Excel Crop Care Ltd.)
Share Acquisition Details
Acquired 65% of the shares of Excel Crop Care Ltd. (ECC), an Indian agrochemcial
company, and converted it to a consolidated subsidiary (October 2016)

Synergy Effects
 Improve agrochemical market share in India, where the market continues togrow (growing approx. 6% per annum, 6th largest market in the world) Developing mixtures with Sumitomo Chemical products,
utilizing ECC’s high brand recognition$M

Excel Crop Care Profile
Headquarters: Mumbai, Maharashtra,
India
Established: 2003 (Founded in 1941)
Sales revenue: INR 10.1 billion(approx. ¥19 billion, 5th largest in India)
Business: Development, manufactureand sale of agrochemicals

3500
3000

Trends of the Crop Protection
market in India

2500
2000
1500
1000
500
0
2010

2015

2017

2022

34

For the Growth of Our AgroSolutions Businessin IndiaOct. 2016: Converted ECC to a consolidated subsidiary
Aug. 2018: Decided a merger between ECC and SC India (SCIPL)

Aiming to be the largest player in the Indian crop protection market through future growth
2nd Largest When Combined (2016)

300
250

ECC

200

SC India

150

252

100

180

144

50
0

(millions of USD)SCIPL ＋
ECC '20

Syngenta

SCIPL ＋
ECC '16

UnitedPhosphorus

Dow

90

90

90

Dhanuka

Rallis

Bayer

72

72

72

72

Insecticides
India

Adama

DuPontMonsanto(Source: Phillips McDougalls)
35

Strengthening the Alliance with Nufarm

×
Pursuing Sales
Synergies‒

Distribution of products through eachother’s sales channels in 31 countries
including Europe, North, Central andSouth America‒‒

Agreed to extend businessalliance contract in the turf andornamental field in the US(through 2023)

Research and Development,
Manufacturing etc.
‒

Launch and distribution of mixturesof Sumitomo Chemical and Nufarm
products‒

Promotion of joint R&D in the field of
new treatments‒

Promotion of collaboration in otherfields, such as outsourcing
formulation

Agreed to collaboration on salesof new fungicides in Europe

36

Maximize the outcomes of the Alliance in a Variety of Fields

Development of Differentiated Businesses– Environmental Health Business
Development and Global Expansion of New ProductsHousehold insecticides

Public hygiene insecticides

Botanical products(pyrethrum, etc.)

Sprays, bait, mosquito nets
Consumer products
Development of unique(Outdoor insect
formulations and devices
repellent, etc.)

Shared technology platform andsynergy with Ag-related business

Biorationals
Crop protection chemicals
37

Integrated Vector Management

Long-lasting
Insecticidal Nets
Olyset Net
Olyset Plus
• Contributing to the elimination of diseases
such as malaria, dengue fever, West Nile,
Larvicide and Zika
Indoor
Biorationals • Broad technology portfolio
Residual SpraySumiShield
SLV0.5G, 2MR “Chemical, Biorational, Botanical”• Offering integrated products and solutions

Space Spray, Misting
Botanicals
SumiPro38

Development of New Productsin the Environmental Health Business
Launch year

2019～2021

2022～2024• 2 new devices• 2 new devices• Cockroach bait
• Ant bait
• Fly bait
• Surface sprays• Space sprays• Products for resistantpests• Bed bug products• Outdoor repellent
products• Products for foodfactories• Vector control products• Botanicalinsecticides• Botanicalinsecticides – new
uses

2025～

HouseholdPublic hygiene• Next-generation
pipeline: 4projects

Botanicals• Next-generation
botanicals

Business Potential: approx. ¥100-150 billions

39

Growth Strategy of the AgroSolutions
and Environmental Health Business- Conclusion -Research and DevelopmentCommercialization of pipeline products  Developing next-generation pipelinesEffective operation of global research and development facilities

Promoting Global Expansion

Expanding Business Areas

Further expansion of ourbiorational business
Expanded value chain for
products such as seed treatments
and post-harvest

Expansion of our global footprintStrategic M&A and licensing-in

Strengthening alliances with major
agrochemical companies

Developing Differentiated BusinessesExpansion of rice business

Expansion of Environmental Health Business40

Future Size of the AgroSolutions
and Environmental Health Business
Sales revenue:¥ 550 billion ～(ROS over 20%)
⑤

600

500

400

④
③

Sales revenue:
approx. ¥ 330 billion

②
①

300

2018

2021

2025-30① Sales expansion of existing products (PLCM)② Expanding business areas③ Launch and sales expansion of new products④ Expanding business in India⑤ M&A (companies/products)
41

Creative Hybrid ChemistryCautionary Statement
Statements made in this document with respect to Sumitomo Chemical’s current plans,estimates, strategies and beliefs that are not historical facts are forward-looking
statements about the future performance of Sumitomo Chemical. These statements are
based on management’s assumptions and beliefs in light of the information currently
available to it, and involve risks and uncertainties.
The important factors that could cause actual results to differ materially from those
discussed in the forward-looking statements include, but are not limited to, general
economic conditions in Sumitomo Chemical’s markets; demand for, and competitive
pricing pressure on, Sumitomo Chemical’s products in the marketplace; Sumitomo
Chemical’s ability to continue to win acceptance for its products in these highly
competitive markets; and movements of currency exchange rates.

Business Strategyof the Health & Crop Sciences Sector
Basic Information
about the Crop Protection Business

October 11, 2018

Basic Information
about the Crop Protection Business(1) Growth Rate by Region and Market Segment(2) Product Development Process(3) Regulatory Trends, Patents and Data Protection(4) Status of Competitors

45

Basic Information
about the Crop Protection Business(1) Growth Rate by Region and Market Segment(2) Product Development Process(3) Regulatory Trends, Patents and Data Protection(4) Status of Competitors46

World Population and Demand for Grain●The world population is expected to grow from the current 7.6 billion to 9.8 billion by 2050.
●Demand for grain is expected to increase by a factor of 2.2 from 1970 to 2.5 billion tons in 2020.

(Billions of people)

World population(left axis)
人口（左軸）(Millions of tons)

Demand for grains(right axis)
穀物需要（右軸）

10
100

4,000
40

80
8

32
3,200

60
6

2,400
24

4
40

1,600
16

20
2

8 800

0

0
1950

1960

1970

1980

1990

2000

2010

2020

2030

2040

(Source) FAO, “World agriculture: towards 2030/50”; UN Population Fund

2050

47

World Total Cultivated Area and Cultivated Area per
Person●The world‘s cultivated area has barely increased.
●Cultivated area per person has continued to decrease due to population growth
World total
cultivated area
農耕地面積
(left axis)(Millions of hectares)

1600(hectares per person)

Cultivable land per

一人当たりの耕地面積
person (right axis)

0.60

1400

0.55

1200

0.50

1000

0.45

800

0.40

600

0.35

400

0.30

200

0.25

0

0.20

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

48
(Source) FAOSTAT (http: //www.fao.org/faostat/en/#home)Grain Prices (2008～2017)◆Grain prices have been trending down since 2013
(Prices rose in 2008 due to speculative investment in grain due to the increase in oil prices)

Soybean

Rice

Wheat

Mize

Source: AgBioinvestor

49

Trends in the Crop Protection Market (by Region)●Growth in the crop protection market (excluding non-crop uses) through 2014 wasgreatest in Latin America, on a dollar basis●For the past 2-3 years, the crop protection market has shrunk, particularly in Latin
America and Europe – possible recovery in 2018?
18,00016,000

Sales ($m)

14,00012,000

NAFTA

10,000

LATAM

8,000

Europe

6,000

Asia

4,000

MEA

2,000
0

Source: Partially modified from Phillips McDougall, AgriService, 2016 Industry Overview

50Size of Crop Protection Market by Country
Size of Crop Protection Market (Millions ofUSD) and Percentage of the Global Total
2017 Results

Growth Rate (% per year)
2017
/2012

2022 Forecast

2022
/2017

1

Brazil

7,929

14%

8,521

13%

-3.1%

1.5%

2

USA

7,868

14%

8,178

13%

3.6%

0.8%

3

China

5,975

11%

7,407

12%

1.4%

4.4%

4

Japan

3,924

7%

3,362

5%

-5.6%

0.4%

5

Argentina

2,599

5%

2,974

5%

3.1%

2.7%

6

India

2,417

4%

2,988

5%

6.7%

4.3%

7

France

2,320

4%

2,437

4%

-1.9%

1.0%

8

Germany

1,722

3%

1,861

3%

-1.2%

1.6%

9

Australia

1,713

3%

1,818

3%

-1.3%

1.2%

10

Canada

1,709

3%

1,916

3%

0.4%

2.3%

11

Russia

1,459

3%

1,958

3%

9.7%

6.1%

12

Italy

1,132

2%

1,212

2%

1.4%

1.4%

13

Spain

1,046

2%

1,153

2%

5.4%

2.0%

14

Mexico

866

2%

1,038

2%

-2.4%

3.7%

15

Vietnam

729

1%

884

1%

5.5%

3.9%

16

UK

727

1%

757

1%

-1.7%

0.8%

17

South Korea

698

1%

736

1%

1.1%

1.1%

18

Poland

597

1%

712

1%

3.2%

3.6%

World

56,355

0.5%

2.5%

TTL

63,896(Source: AgbioCrop) 51

Expansion of the GM Seed Market

30,000

Sales ($m)

25,000Market Growth Rate (2001-2016)
Crop protection chemicals(Including non-crop uses)

3.8 % per year

GM seeds

13.3 % per year

20,00015,000Herbicides
10,000Insecticides
Fungicides

5,000

Other
GM Seeds

02000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: Phillips McDougall, AgriService 2016 Industry Overview (2017)52

Expansion of the Generic Crop protection Market●The market share of generic crop protection chemicals continues to expand(“Generic” is defined as off-patent crop protection chemicals, the market share of the companies that had
active ingredient patents is less than 90% of crop protection chemicals)

70

%

60
50

Generic

40

Off-Patent
Patented

30

20
10
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: Phillips McDougall, AgriFutura No.215, Sep. 201753

Decrease in New Active Ingredientsfor Crop protection
16
14

Number of Active Ingredients

12
10
8
6
4
2
0

Since 2000, the number of new active ingredients entering the market has
gradually fallen
Source: AgbioInvestor 54

Basic Information
about the Crop Protection Business(1) Growth Rate by Region and Market Segment(2) Product Development Process(3) Regulatory Trends, Patents and Data Protection(4) Status of Competitors

55

Development Process
for New Crop Protection Chemicals
Evaluation forpractical use
実用性評価

Screening

スクリーニング
X Ｘ年
years

Development and data collection forregistration application
開発・登録申請データ取得

Registration

３～５年
3-5 years

１～２年
2-4 years

2-3 years
２～３年
Basic toxicological &Greenhouse
温室試験
screening

●

●

New
chemical
新規化合物
compound

毒性、環境予備試験
Environmental studies

Chronic
toxicity studies
慢性毒性試験

Patentapplication
特許出願

Environmental
環境試験studies

Small-scale field
小規模圃場試験

Large-scale
field studies
大規模圃場試験

research

Efficacy,
harmful（効力、薬害）effects

収集
Collection

Search for a

製法ルート探索
manufacturing route
分子設計
Molecular
design製造・販売& sales

Evaluation
審 査

●

製 造
Manufacturing●

Launch上 市

Efficacy,
Phytotoxicity
効力、薬害、Crop residue,
作物残留、施用法

●

工場建設
Plant
construction

application methods
Formulation studies(preliminary)製剤初期検討

合成
Synthesis●

Manufacturing

登 録

Marketsurvey
市場調査

Formulation
studies
製剤処方検討Industrial process studies
工業的製法研究
Decision for commercial
開発決定
development

Registration
登録申請
submission

Data collection for registration application
1 billion yen (Japan) – 1.5 billion yen (US, Europe)
Development Expenses: 10～30 billion yen (1 of every 100,000～ chemical compounds)
Development Time: More than 10 years
56Basic Information
about the Crop Protection Business(1) Growth Rate by Region and Market Segment(2) Product Development Process(3) Regulatory Trends, Patents and Data Protection(4) Status of Competitors

57

Global Trends in Pesticide Regulation (1)Strict crop protection chemical regulation (Regulation 1107/2009, Effective inJune 2011)

Europe  Cancellations of registration due to hazard-based cut-off criteria Decrease in number of registered products, Strong tendency toward safer agrochemicals

Renewal of registration (Since 2010)
Political decision-making through voting by various countries, rather than scientific evaluations (e.g. glyphosate)Frequent proposals from EU committees for non-approval or the loss of existing product registration as part ofan anti-pesticide trend

Bee/Pollinator issue (Apr. 2018: Ban of outdoor use of neonicotinoids)
Unrealistic evaluations using not-authorized EFSA guidelines
Political attack organized by anti-pesticide NGOs

Endocrine disrupter evaluation (Beginning Nov. 2018)
Concerns over cancellations and reduction of registrations due to additional cut-off criteria

Revisions to the Agricultural Chemicals Control Act (June 2018) and
implementation of a reevaluation system (beginning 2021)

Japan Increased expenses due to additional crop residue tests, possibility of reduction of registrations
 Promotion of the registration of generics through equivalency of technical in agricultural chemicals

Implementation of worker exposure evaluations and expansion of ecologicalrisk assessments Increased expenses and possibility of cancellation or reduction of registrations due to additional registration
standards

Global Trends in Pesticide Regulation (2)Reregistration (Registration Review, since 2007)

U.S.

Data call-ins based on new data requirements (including nervous/immune system toxicity,
ecotoxicology and environmental fate)

Registration cancellation and use restrictions due to NGO
pressurePressure on EPA policy-making due to NGO lawsuits and public comments
Increase in lawsuits based on laws such as the Endangered Species Act

Bee/pollinator issueRequirement for a large amount of data, mainly on neonicotinoids
EPA policies not accepting expanded applications of neonicotinoids until reregistration is complete

Changes in trends under Trump (since 2017)
Expectation of flexible and realistic regulations from an industry perspective
Concerns of delays in evaluation and reductions of evaluation capabilities due to reductions in EPA
personnel and budget

BrazilNew draft regulations published for consultation (2018 Ministryof Health ANVISA Public Consultation)
 Proposed implementation of cut-off criteria stricter than in Europe
 Clarity about direction after the presidential election (October 7, 2018)?

Inefficient registration and approval system
 Long evaluation periods due to bureaucratic, compartmentalized authority and lack of resources (56 years needed for approval)
 Significant backlog of evaluations

Patents and Data Protection
EU

US

Japan

Patent Lifespan20 years from date of application

20 years from date ofapplication

20 years from date of application

Regulations
Governing Crop
Protection
Chemicals

Regulation 1107/2009

Federal Insecticide, Fungicide,and Rodenticide Act (FIFRA)

Agricultural Chemicals
Regulation Act

Data Protection
Period (Excluding
CBI)

10 years from registration
However, low risk chemicals are
13 years. Measures for extending
minor crop registrations by 2years

10 years from registration
However, there are measuresfor extending minor crop
registrations by 3 years.
Data compensation system:
Appropriate compensation isrequired for data after theprotection period has ended,
but less than 15 years from
submission.

15 years from registration
Requirements in equivalency ofactive ingredient materials used
for toxicity tests

Reevaluation
SystemIn general: 10 years
Low risk chemicals: 15 years
Candidate replacement
chemicals: 7 years

In general: 15 years(Advance publication ofrequired supplemental dataand evaluation schedule)

In general: 15 years

ChemicalEquivalence

Meaningful impurities: over 0.1%
However, relevant impurities with
toxicity concerns are subject toequivalency even if less than
0.1%

Unpublished

Meaningful impurities: over 0.1%.
However, relevant impurities with
toxicity concerns are subject toequivalency even if less than
0.1%

60

Basic Information
about the Crop Protection Business(1) Growth Rate by Region and Market Segment(2) Product Development Process(3) Regulatory Trends, Patents and Data Protection(4) Status of Competitors

61

Consolidation of major Agchem companies
By 2009, 13 major US and European Agrochemical companies had consolidated down to 6 companiesAgro.
Since 2017, the 6 companies had reorganized as the 4 companies of Bayer, Dow DuPont (Corteva Agriscience™), Syngenta,
and BASF.
1996

SandozChemChina

Novartis

Ciba-Geigy

2000

ISK-Biotech

1993
ZenecaICI

Syngenta

1998

Bayer

2002

Schering

Bayer

2006

201８

AgrEvo1994

Hoechst1999

AventisRhone-Poulenc

Monsanto
1989

Eli-Lilly

Dow-Elanco
2017

1997
Crop protection chemicals business 2001
Rohm & Haas

Dow Chemical2009

Dow DuPont(Corteva Agriscience™

Du Pont
Ciba

BASF
ACC

Crop protection chemicals business
2000
American Home Products
1994

2009

BASF
* As of August 2018
62

Crop Protection Products Salesby Major Agchem Companies
Crop Protection Products Sales by Major Agrochemical Companies (2017)
Merger

14.6(Billions of US dollars)
DuPont acquires FMC’s crop health and nutrition business
DuPont sells agrochemicals business to FMC

14.3

12.5

10.8

Seed & Trait Sales

6.4

Monsanto

Corteva

Syngenta

Agriscience™
(Dow + DuPont)

Agrochemical Sales

Bayer

BASF

3.5

2.9

2.5

2.5

2.5

1.9

1.3

ADAMA

UPL

FMC

Sumitomo

NufarmArystaAlbaugh

BASF acquired Bayer’s herbicide and seed businesses

Acquired European herbicide portfolio

ChemChina

Century portfolio acquired
Acquisition of Arysta by UPL (2018-19)

Crop Protection Products Sales by Major Agrochemicals Companies (2018, Estimate)
23.7

15.8

14.2

(Billions of US dollars)

8.1
Monsanto+
Bayer

ChemChina(Syngenta+ ADAMA)Dow +DuPont

BASF

4.7

4.3

2.9

2.5

1.6

1.3

1.2

UPL +
ArystaFMC

Sumitomo

NufarmVilmorin

Albaugh

KWS

Disparity in scale growing further due to industry reorganization(Source) 2017: AgbioCrop, 2018, Estimate: GRESHAM, SC’s numbers are internal estimatesCautionary Statement
Statements made in this document with respect to Sumitomo Chemical’s current plans,estimates, strategies and beliefs that are not historical facts are forward-looking
statements about the future performance of Sumitomo Chemical. These statements are
based on management’s assumptions and beliefs in light of the information currently
available to it, and involve risks and uncertainties.
The important factors that could cause actual results to differ materially from those
discussed in the forward-looking statements include, but are not limited to, general
economic conditions in Sumitomo Chemical’s markets; demand for, and competitive
pricing pressure on, Sumitomo Chemical’s products in the marketplace; Sumitomo
Chemical’s ability to continue to win acceptance for its products in these highly
competitive markets; and movements of currency exchange rates.