EXEL industries - 2019 Universal Registration Document

Management report

Risk factors

government programs supporting the automotive industry. A slowdown in this sector over a long period of time may a ff ect SAMES KREMLIN’s sales. SAME KREMLIN’s high degree of internationalization and its presence in other business segments are genuine advantages in coping with demand volatility. On a consolidated basis, this risk is mitigated by the fact that it is a divided risk spread over four distinct business activities that do not depend on the same markets. Climate conditions and seasonality The seasonal purchase cycles of some of EXEL Industries’ products and climatic variations are liable to a ff ect its activities and results. The intensity of the impact of seasonality di ff ers according to EXEL Industries business areas. In addition, the geographical distribution of the activities helps to diversify and limit the concentration of the risk of climatic variations on a given region. Finally the Industrial Spraying activity which accounts for 24% of consolidated sales is not a ff ected either by seasonality or climate conditions. Laws and regulations EXEL Industries is subject to the laws and regulations of numerous national and international authorities notably in environmental and tax matters, aswell as commercial laws and regulations and employment law. These laws and regulations are complex, changeable and increasingly strict, especially regarding polluting emissions for diesel equipment or the use of products applied by our sprayers. EXEL Industries has a central Legal Department and uses local outside law fi rms to ensure that it is permanently in compliance with the applicable laws and regulations. EXEL Industries is a member of several professional federations (AXEMA, FIM, METI…) which informs politicians and lawmakers of the di ff erent challenges so that they can take decisions which are relevant in the long-term. 3.6.1.4 3.6.1.5

3.6.1.2 Distribution EXEL Industries mainly sells its Agricultural Spraying products to dealers who are often a ffi liated to full liner generalist manufacturers offering the full range of farming machinery: tractors, combine harvesters, sprayers, seed drills, plowing, haymaking tools… brands. The weight of these tractor brands which practice back end rebates and impose constraining contracts could gradually close EXEL Industries’ access to this distribution network. EXEL Industries strives to reinforce its direct link with the end customer notably through the use of digital technology, an increased presence of its brands on social networks and “open fi eld” customer demonstrations. The EXEL Industries group has developed other sales models such as direct sales (AGRIFAC) or sales through its own distribution subsidiaries ( e.g . ETWorks). A signi fi cant share of GardenWatering and Spraying sales are made through mass distribution where EXEL Industries is confronted with a strong concentration of customers who make European calls for tender. EXEL Industries tries to work with several store chains on this market or even to develop a di ff erentiated range of products for the customers. However Garden Watering and Spraying only accounts for 12% of total consolidated sales. Risk of dependence on certain markets In its Sugar Beet Harvesters business, EXEL Industries is very dependent on the sugar market. This market can go through periods of crisis that might affect the demand for sugar beet harvesters. HOLMER’s international presence and its diversi fi cation into large and medium capacity carriers allow it to partially limit its exposure to that risk. About 50% of sales made by Industrial Spraying are into the automotive industry. The strength of this industry is largely driven by innovation and macroeconomic factors such as the business cycle, access by companies to credit, their con fi dence index and Customer risks Given the wide dispersion of its customers across the world, and the Group’s diversi fi ed activities for di ff erent customers, EXEL Industries considers that it has little exposure to a signi fi cant counterparty risk. The fi ve largest customers account for 9.5% of consolidated sales for Agricultural Spraying compared to 10.8% last year, and the main customer represents 3.1%. The fi ve largest customers account for 17.3% of consolidated sales for the Sugar Beet Harvesters segment compared to 15.8% last year, of which the main customer represents 11.1%, the result of a major agreement in the CIS zone during this year as well as the sale of spare parts related to sales of machines in previous years. The fi ve largest customers account for 39.6% of consolidated sales for the Garden Watering and Spraying segment compared to 42.0% in 2018, and the main customer represents 20.1%. Finally, the fi ve largest customers account for 21.3% of consolidated sales for Industrial Spraying compared to 20.9% last year, and the main customer represents 10.9%. 3.6.1.3 3.6.2 Operational risks 3.6.2.1

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At Group level, the fi ve largest customers account for 9.9% of total consolidated sales and are divided over the four activities as well as di ff erent geographical areas.

3.6.2.2 Supplier risks Default by one or more of its suppliers, unplanned stock shortages, defective quality, strikes and other disruptions in supply could disrupt the Group’s production or engender additional costs. EXEL Industries group uses numerous suppliers in di ff erent countries for its supplies of raw materials and basic parts in order to divide the risk and to always have alternative solutions. The fi ve largest suppliers account for only 5.6% of the Group’s consolidated purchases compared to 6.8% in 2018, and the main supplier represents 1.2%. Furthermore, EXEL Industries ensures that it does not represent more than 30% of a third-party supplier’s activity.

EXEL Industries Group I 2019 Universal Registration Document

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