EXEL Industries // 2020 Universal registration document

Management report

Risk factors

3.5.1 Risks related to the business sector

Restrictions on using phytosanitary (plant health) products

Risk related to changes in the sugar beet market

3.5.1.1

3.5.1.2

Description of the risk The products applied by EXEL Industries agricultural sprayers are natural or synthetic phytosanitary products. They notably include herbicides, insecticides, fungicides, and liquid fertilizers. In France and in some other Western European countries, these increasingly controversial products are subject to strict regulations and in some cases are doomed to disappear ( e.g. glyphosate, neonicotinoids) and to be replaced by alternative products. Risk management Agricultural Spraying represents 44% of consolidated sales, and Western Europe accounts for 40% of that business’s revenue. The challenge facing agriculture is to feed the planet’s increasing population (10 billion by 2050) whilst respecting the environment. In order to help achieve this dual target, EXEL Industries’ research and innovations are increasingly directed towards more precision sprayers to enable doses of chemical or natural origin products to be reduced by 30-80% whilst increasing yields. Research and innovation combined with visual recognition, drone and GPS mapping technologies and the use of data are the ways forward for a productive and environmentally-friendly agriculture. EXEL Industries has been engaged for years in the research and development of smart technical solutions aimed at drastically reducing the quantities of phytosanitary products used in treating crops. To accelerate support for the agroecological transition and position itself as a major player in the agriculture of tomorrow, EXEL Industries has grouped its research centers into centers of excellence dedicated to certain products. The pooling and specialization of research makes it possible to be more e ffi cient and faster in the development of new technologies. Likewise, production units in Europe and the United States have specialized by product type, and can nowproduce for di ff erent brands based on a platform policy that will be phased in during the coming years. This streamlining makes it possible to make productivity gains and consolidate purchases more e ff ectively. In November 2019, EXEL Industries created EXXACT Robotics, a company specializing in precision agricultural technologies using arti fi cial intelligence, robotics, electronics and agronomy. After a year of existence, EXXACT Robotics continues to ramp up and will o ff er its fi rst products in the next 18 months. This newcompany and these reorganizations are spurring innovation, the development of new product lines and the mastery of new technologies such as precision farming, electronics, robotization, con fi ned spraying and arti fi cial intelligence to detect the plants to be treated, and more. EXEL Industries therefore means to be fully involved in the challenge of healthily feeding a growing global population, while ensuring competitive, productive farming that respects the environment. The only development likely to jeopardize our activity would be a ban on agricultural spraying, which does not seem possible at this time.

Description of the risk 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. Indeed, sugar production is dependent on agricultural land and yields, and beet sugar accounts for only 20% of global production, the rest coming from sugar cane. Global sugar consumption continues to grow as a result of demographic change, but global production can vary signi fi cantly due to variations in surface area, weather patterns, diseases, and the use of sugarcane or sugar beet (sugar/alcohol mix), dependent on demand and market prices. The resilience of beet growers is linked on the one hand to the price paid by sugar producers and on the other hand to agricultural yields subject to strong variations due to weather conditions and the ability to treat the plant’s environmental stressors. Risk management HOLMER’s international presence and its diversi fi cation into large and medium-capacity carrier devices allow it to partially limit its exposure to that risk. After the boom in European areas under sugar beet in 2017 (end of the sugar quota regime), HOLMER reduced its breakeven point and continued its diversi fi cation, in particular for the development of sales of vehicles for transporting and spreading by- products from livestock breeding and methanization. Description of the risk In Agricultural Spraying, EXEL Industries mainly sells its products to dealers that are often a ffi liatedwith full-liner manufacturers that o ff er the full range of agricultural machinery by brand: tractors, combine harvesters, sprayers, seed drills, tillage tools, haymaking, etc. The weight of these tractors brands, which practice back-end rebates and impose constraining contracts, could gradually close EXEL Industries’ access to this distribution network. 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. However, online sales are growing rapidly and constitute a new marketing channel in addition to physical sales in stores. Risk management 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). For garden spraying and watering, EXEL Industries strives to work with several brands, even if it means developing a range of products di ff erentiated by customer groups. However Garden Watering and Spraying only accounts for 16% of total consolidated sales. 3.5.1.3 Distribution

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EXEL Industries group I 2020 Universal Registration Document

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