Vilmorin & Cie - Annual report 2017-2018

PRESENTATION of Vilmorin & Cie 1 ANNUAL REPORT Vilmorin & Cie 62 2017-2018 had not been used.This credit facility is accompanied with the commitment to respect two consolidated financial ratios (net financial debt/EBITDA (1) , EBITDA (1) /net financial charges); on June 30, 2018, Vilmorin & Cie complied fully with this commitment. Further information on the debt and interest rates is presented in Note 27, section 2.2 “Information on bond loans”, and in section 2.3 “Information on bank loans” in the notes to the consolidated financial statements. As far as the potential impact of the volatility of certain agricultural raw material prices is concerned, it should be emphasized that the network of seed multiplication farmers*, to which Vilmorin & Cie entrusts the production of its seeds, meets very strict specifications, one of the main points being that the purchasing price of the seed is fixed in advance. These specifications comprise fixed or variable prices which are not structurally indexed on the evolution of the prices of agricultural raw materials. Therefore, the contractual system set up allows Vilmorin & Cie to preserve considerable economic independence. Vilmorin & Cie does not systematically use hedging instruments to hedge the price of agricultural raw materials, except for its North American subsidiary in corn and soybean seeds – AgReliant. These positions, which translate into forward buying positions on corn and soybeans on the Chicago market, allow it to control the potential volatility of its supply costs. 1.7.5. Provisions for crisis management As part of its activities, Vilmorin & Cie may be confronted with crisis situations that may impact its reputation. A crisis management system has been in place for several years and is managed by the Governance, Risk and Compliance Department. It involves different functions in the company and is deployed in the Business Units. This system is based on dedicated tools, and in particular on crisis management and communication rules distributed to all Vilmorin & Cie entities. During fiscal year 2017-2018, several events justified the mobilization of the Group crisis unit and crisis units within the Business Units concerned. These minor events were successfully managed, leading to the detection of areas for improvement. A crisis simulation exercise focusing on communication was also run during this past fiscal year. Lessons learned from the various events experienced and the crisis simulation exercise were used to further improve internal crisis management processes. 1.7.6. Insurance Vilmorin & Cie has a policy of global cover concerning different operating risks, and makes use of different insurance schemes available on the world market, depending on their availability and local regulations. Insurance programs are negotiated and managed by Vilmorin & Cie for its subsidiaries with leading international or national insurance companies. These programs concern, in particular, risks of damage to property and operating losses, civil liability, damage to goods in transit and insurance for the automobile fleet. For risks of damage to property, operating losses and civil liability, the cover is “all risks except” on the basis of the widest guarantees that exist on the market, combined with deductible that varies according to activity. 97% of Vilmorin & Cie’s entities, representing 100% of consolidated sales, are guaranteed by the Group Civil Liability program with the widest possible guarantees. Most of Vilmorin & Cie’s entities are covered by the Property Damage program, or by policies underwritten locally with reputable insurers. Compensation limits, fixed on the basis of worst-case scenarios and of capacities proposed by the insurance markets, stand at 300 million euros per claim for consequential and operating loss, and at 80 million euros per claim and per year for general public liability and product liability. Insurance programs for special risks which are potentially significant and require centralized management, such as the responsibility of corporate officers, environmental risks, or cyber risks, are negotiated according to capacities available on the markets. Management of these programs is entrusted to brokers and professional insurers under the supervision of Vilmorin & Cie. These programs were renewed on July 1, 2017, for another duration of one year. Vilmorin & Cie is gradually standardizing its cover policy and deploying its insurance programs internationally. (1) EBITDA is defined as the operating income plus depreciation, amortization and impairment. 1.7. Risk factors