PARADIGM SHIFT IN AGRI-INDUSTRYAhmed Al Qahtani, GM- Business Strategy & Investments

September 7, 2016

RECENT CHANGES

No. 2

PRICES OF KEY FERTILIZERS DECLINED SHARPLY

Price development 2012 – 2016 FC

Indexed (2012 =100)

Oversupply

• Urea: 77% Util. Rate

• DAP: 67% Util. Rate

20

30

40

50

60

70

80

90

100

2012 2013 2014 2015 2016

G. Urea AG FOB DAP FOB Morocco

MOP FOB Baltic Sea

- 50%

- 30%

- 40%

China export in Urea

• 2012: 7 mmt

• 2015: 15 mmt

Source: CRU, Ferticon, SABIC

Lower coal and gas prices have pulled down the floor price for N

No. 3

WHEAT AND FARMER INCOME DECLINED

Wheat price development and Farmer Income USA 2012 – 2016 FC

Indexed (2012 =100)

20

40

60

80

100

120

2012 2013 2014 2015 2016

US Farmer Profit Wheat Price

- 41%

- 50%

Fertilizer make up to 20%

of the total farmers `s

costs in field crops

Decline in Farmers’ profit is not supportive of fertilizer prices

Source: CRU, Ferticon, SABIC

No. 4

KEY N IMPORTERS ARE TARGETING SELF RELIANCE

New Capacities by 2020

(in mmt)

Source: CRU , SABIC analysis

1.2

1.3

5.1

Brazil

India

US

0.7

0.8

1.8

2.6

2.8

Malaysia

Egypt

Algeria

Nigeria

Russia

Exports from selected countries

(in mmt)

No. 5

CONSOLIDATION CONTINUES

Global Market Share of top 5 Players per Agro-Industry Segment

62% 60%

35%

19%10%

Seeds Ag-Chemicals Ag Machinery Fertilizers Fert. Dist.

Consolidation

Game

Grain traders limiting

to core business

Fertilizer companies

integrate downstream

in distribution

Source: SABIC analysis

FUTURE CHALLENGES

No. 7

OVERSUPPLY WILL CONTINUE

UREA and DAP Global capacity , damand and utilization development (2013 – 2025)

in mmt and %

Source: SABIC, Fertecon

212

164

279

205

Cap. 2013 Prod. 2013 Cap. 2025 Prod. 2025

Util. rate 77% 73%

+67

+41

UREA

54

34

60

39

Cap. 2013 Prod. 2013 Cap. 2025 Prod. 2025

63% 65%

+6+5

DAPDONE

No. 8

WATER SCARCITY AND SOIL DEGRADATION WOULD NEED DIFFERENT SOLUTIONS

Water scarcity and Micronutrients Deficit

More water soluble fertilizers and micronutrients enhanced base

fertilizers

Source: SABIC, FAO

20% of total arable land

suffer from water scarcity

25 % of the earth’s lands

are degraded

41% of earth surface

consists of high salinity

soils

20% of North American

soils have a S- deficit

85% of the cereal growing

area is affected by low Zn

in India

No. 9

SUSTAINABILITY – ADDRESS ENVIRONMENTAL AND HUMAN HEALTH CONCERNS

Sustainability

Source: Agrotain International, Koch, SABIC

More than 30% of applied

nitrogen can be lost due

to ammonia volatilization,

nitrate leaching and

denitrification

Retaining nitrogen in the

soil to nourish the crop

By applying “control

release” and “slow

release” Urea or NPKs

Consumers would

demand healthy products

Need to provide micro-essentials such as B, Cu, Zn, Se proactively

besides affordable slow/control release fertilizers

No. 10

NEW ENHANCED EFFICIENCY FERTILIZERS NEED A CLEAR COST-BENEFIT CASE

Cost Benefit

Cost +

Application Know

How

New Equipment

Increased Income

Less Intensive

Less Waste

Source: SABIC analysis

No. 11

CHINA – REMAINS A KEY INFLUENCER ?

• Greater reduction in emissions, phasing out old plants

• New coal-fired power plants to be “ultra low emissions”

• Focus on High yielding and cost efficient crop production

• Zero growth in use of pesticide and chemical fertilizers

• Fast in developing and selling new fertilizer solutions

Source: Chinese New 5 Year China economic plan, SABIC assessment

No. 12

“PRECISION FARMING” WILL GAIN IMPORTANCE

Solution for farmer to utilize “big data”

Source: Company reports, SABIC

Site Specific/ crop specific balance dosing of Fertilizers

Data Collection

Crop Yield Monitors

GPS Equipped

Combines

Variable Rate

Technology Seeders

Multi/Hyper

Spectral Satellite

Imagery

Unmanned Aerial

Vehicles

No. 13

SUPPLY MODELS WOULD EVOLVE

Value Chain Integration Fertilizers

Production

Basic

fertilizers

Compound,

Fertilizers)

Distribution/

Trading/ Gov.

inst.

Whole-

salesRetail Farm

Source: SABIC

Existing

Fertilizer

supply

models

New

Fertilizer

models

No. 14

IMPLICATIONS ON GCC PRODUCERS

Major Changes in Fertilizer Supplier Model

Source: SABIC

Indicative FutureExisting

• Commodity portfolio• Commodity plus Value added

Products

• Selling large bulk vessels• Selling solutions, Combine shipments

and flexible/smaller vessels

• Partnership, cooperation's and M&A

• Standard cash management cycle • Value Chain integration and risk

management

• Stand alone business model

• Transactional Model • Partnership Model

THANK YOU