Oct. 16, 2018
Editor's Note: Recently, AgroPages published the listing of 2017 Top 20 Global Agrochemical Companies and the sales performance of relevant companies of the last six years (During 20122017 year). 2017 was a key "turning year" for the agricultural inputs industry, and was more of a milestone year, with historical significance. In that year, the majority of the global first-tier and second-tier multinationals participated in different levels of mergers and acquisitions (M&As), which assisted in the industry restructuring to reach a peak. The M&As consequently kicked off a new pattern of global agricultural inputs industry, as all large agrochemical companies moved into a new stage of development.
Looking at the 2017 Top 20, there was a change in the first six companies on the list: Dow Chemical and DuPont, after being brought together, ranked 4th in the new name of DowDuPont. Because of this, ADAMA rose to sixth. So far as business performance is concerned, except Syngenta, Bayer and DowDuPont, all other companies achieved growth to a certain degree in 2017. Among the top 20, 11 companies achieved double-digit growth. The most distinctive growth was achieved by Chinese companies, as five of the six in the top 20 achieved more than 30% growth. The total sales of the 2017 top 20 reached $55.19 billion, an increase of 5.2% year on year. The entry level to the top 20 went back to the $500 million mark of 2015, with total sales of the new top five accounting for 62% of the total of top 20.
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Large-scale M&As concluded, signs of industry rebound showing
According to the census conducted by Phillips McDougall, as calculated at the distributor level, global crop-oriented pesticide sales were $54.219 billion in 2017, up 2.5% year on year. After the consecutive 2-year downturn (2015:-9.6%; 2016:-2.5%), the global agrochemical industry warmed up slowly, which is fully reflected by the top 20 of 2017.
After the 2-year downturn occurring with all companies, the original top six finally embraced a good turn in 2017. Among them, BASF and Monsanto achieved growth, while Syngenta, Bayer Crop Science and DowDuPont had only a slight decline. This proves that there is finally a slow recovery in the agrochemical industry, after falling on hard times.
In 2017, with the successful merger between ADAMA and Sanonda, ADAMA rose to sixth place in the global top 20, as its pesticide sales increased 5.7% over last year, mainly attributable to the effort made by the company on development of differentiated products and richer product portfolios, resulting in a good performance in all regions. It is worth noting that over the last 20 years, ADAMA’s business growth has tripled the average of the industry. While the merged company has consolidated with more depth, its comprehensive advantages are increasingly emerging, as strongly supported by its enriched and differentiated product portfolio and the unique business mode of “based upon China, connecting the world”.
The rank 7 - 11 second-tier companies experienced changes in rankings, except Sumitomo Chemical. Among them, three companies achieved double-digit growth, including FMC, ranking seventh, UPL ranking ninth, and Nufarm ranking tenth, of which FMC achieved dramatic growth, both in ranking and sales growth. Its rank jumped from ninth place in 2016 to seventh place in 2017. Its sales increased significantly by 11.5% (2016: +0.8%). In 2017, FMC acquired part of the crop protection businesses of the former DuPont, which facilitated a significant growth of sales of FMC. In the fourth quarter of 2017, the acquired businesses brought FMC an additional sales value of $193 million, which is an increase of 40% year on year, while the company’s sales growth in the fourth quarter in its history is about 9%, and yearly sales growth is about 3%.
In the 2017 fiscal year, UPL’s pesticide sales, calculated in USD, increased 11.9%, mainly attributable to the positive performance of its key products glufosinate, mancozeb and the launch of new varieties. It is worth noting that UPL is continually launching new products. For instance, in just the 2017 fiscal year, UPL launched 101 products, with 19% being innovative products, which was the highest over the last five years. In July 2018, UPL announced the acquisition of Arysta LifeScience at a cost of $4.2 billion, thus shaping a super-strong agricultural solution platform comprising both patented and generic products.
In the 2017 fiscal year, pesticide sales of Nufarm, calculated in USD, increased 15%, or 11.1% if calculated in AUD. With the exception of Europe, where Nufarm suffered a 2% decline, the company achieved double-digit growth in all other regions.
In the 2017 fiscal year, the pesticide sales of Sumitomo Chemical increased 5% in USD, mainly attributable to the good performance of its insecticides in Brazil and India, as well as due to the growth brought by the successive acquisitions of the Indian pesticide company Excel Crop Care and the Australian pyrethroid insecticide company Botanical Resources. In 2017, the sales of Arysta Life Science increased 4.5%, having reached $1.897 billion. Just before the M&As wave came to an end, Arysta was acquired by India UPL from Platform Specialty Products (PSP), which acquired Arysta 3 years ago.
Among the nine third-tier companies ranking 12 – 20, six are Chinese companies, which stand out strikingly with doubledigit growth calculated in USD. The five companies - Nutrichem, Shandong Rainbow, Nanjing Red Sun, Jiangsu Yangnong and Zhejiang Wynca, could even achieve a breakthrough of 30% growth. Sichuan Leshan Fuhua Tongda Agro-chemical Technology reported a 15.8% growth calculated in USD in 2017. The surge in growth of Chinese companies has primarily benefited by the industry policy brought by the environmental regulating actions in China, which is typically beneficial to industry leaders. As driven by the environmental policies, Chinese pesticide prices rose significantly, which led to a growing prosperity in the industry. The pesticide technical supply and demand situation has changed, where demand for some product varieties exceeded supply, resulting in price rises of pesticide technical. For this reason, it is natural that Chinese agrochemical companies could achieve such a superior performance. The other three are, respectively, Kumiai Chemical ranking 15th, Sipcam Oxon ranking 19th and Nissan Chemical Industries ranking 20th.
The 12th ranking Nutrichem reported a dramatic growth of 31.3%, calculated in USD, mainly attributable to its strengthened long-term cooperation with clients, as supported by its increased capacity of supply and growing market share.
Shandong Rainbow continued its global strategy of being a “fast market access platform” and the “independent brand development approach”. Furthermore, its enriched product portfolio and satisfactory technical service, as well as the continued localization operation, significantly contributed to its growth. All these elements played a part in its pesticide sales growth of 32.4%, calculated in USD in 2017, which led to its rise from 15th place in 2016 to 13th place in 2017.
Nanjing Red Sun rose from 17th in 2016 to 14th in 2017. Its sales, calculated in USD, increased 35% in 2017 after a consecutive two-year decline. Its prime products, pyridine, 3-picoline, VB3, paraquat, diquat, paraquat glue and chlorpyrifos, have now had a strong influence in the international market, which helped to improve the international presence of the company and increase its product pricing power. During the year, the company achieved significant growth.
The 16th Jiangsu Yangnong reported a sharp sales growth of 49.2% (2016: -10.9%), which was the highest growth among the top 20. It is further reported that the sales of all prime products of the company have increased in 2017. While its subsidiary, Jiangsu Youjia Crop Protection Ltd began registration and market deployment, dicamba has become Yangnong’s second single product with sales of over 10,000 tons. Pyrethroid products and dicamba are running ahead of others in the industry, which has further promoted the growth of sales and increase in profits of Yangnong to a historic high level.
As impacted by environmental regulating actions in China, the supply of glyphosate
has been seriously reduced. Under the current short supplies, the price of glyphosate keeps rising. Zhejiang Wynca, ranking 18th, is a prime supplier of glyphosate, as benefited by the industry policy, its pesticide sales, calculated in USD, increased 37.2%. Fuhua Tongda has been working on strategic transformation in recent years, having grown from a pesticide technical production and marketing company into a global formulations dealer. This is the key element for its continued business growth, which led to a 15.8% sales growth, calculated in USD, in 2017.
Post-M&As period full of challenges, the development of scale and differentiation are advancing hand in hand
In July 2018, UPL announced spending $4.2 billion to acquire Arysta Life Science. To this end, the nearly five-year industry M&As, initiated by FMC in 2014, is expected to come to an end. During the five years, both first-tier and second-tier agrochemical companies have participated in M&As to a different extent, which consequently brought about a new agrochemical industry pattern, new structure, new opportunities, new challenges and the founding of new agrochemical enterprises. In 2018, the first-tier and secondtier companies were ranked as Bayer-Monsanto, ChemChina-Syngenta, DowDuPont, BASF, UPL-Arysta, FMC, ADAMA, Sumitomo Chemical and Nufarm. This round of M&As may reserve more spaces for the third-tier companies (2017: 9 seats; 2018: 12 seats expected), where Chinese companies would have greater opportunities.
At present, most of the companies have completed the M&As, and have been making the consolidation and optimization of assets after closing. The maximized synergistic effect expected from the mergers depends, to a great extent, on the effectiveness of new business operation modes or future business planning, which still remains to be a challenge to many companies. In August 2018, Platform Specialty Products Corp (PSP), within just 3 years after acquiring Arysta, transferred Arysta quickly and unexpectedly to UPL. In the eyes of industry experts, this action may be understood as an indication of PSP’s failure in its strategic transformation. This implies that effective consolidation is the key issue required to be handled correctly after acquisition.
Moreover, the Matthew Effect, which is brought by largescale M&As in the agrochemical industry, is expected to emerge while consolidation is progressing. Meanwhile, small and medium enterprises that are unable to make rapid expansion of market shares in a short time, may be subjected to more serious impacts. How to survive in the fiercely competitive market or achieve continued growth? This is a question for all companies to think about. Under this situation, it is especially important for a company to make clear its advantages in development and create the correct market positioning.
What is different from the expansion of an international presence of large companies, is that small and medium enterprises are focusing on in-depth and differentiated development, rather than mergers, as noted from the business growth of small and medium enterprises over recent years. Their successful development modes usually include the following: 1) avoiding direct competition with large companies and concentrating on vertical market segments to make the most of market segments; 2) maintaining constant innovation and the proactive concept of development towards the future; 3) using a technology which others do not have or a higher technology than others to ally with large companies utilizing the advantage of the distribution channel of large companies to speed the commercialization of technology or product; 4) cooperating with large companies at the beginning of product development to utilize their advantages in financing, technology, people and distribution channels to speed up the launch of products to the market.
As shown presently, large companies are conducting large scale M&As, using their industry influence and leadership to continuously improve their brand image. However, with market demand becoming advanced and diversified, large companies will also consider movement into some in-depth and differentiated industry sectors. On the other side, small and medium enterprises that are concentrating on a differentiated development strategy would want to take a ride on the fast train of large companies to speed up their process of launch of products to the market. As farming is becoming increasingly complicated, the depth and broadness of industry integration between small, medium and large companies are expected to grow further.
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