Investor relations section

FIRST QUARTER SALES EXCEED $1 BILLION FOR SECOND CONSECUTIVE YEAR


  • Q1 Sales of $1,006 million, slightly below last year’s best-ever, up 1.0% in constant currency terms
    • Strong growth from Latin America, India, Middle East and Africa, as well as China and new joiners Bonide and Anpon
    • Weather- and supply-related delays in North America, Europe and Asia-Pacific
    • Significant 4.8% price increase across all regions
    • Jingzhou old site, which impacted ability to fulfill demand in Q1, gradually resuming operation
  • Q1 Gross Profit of $344 million
    • Gross margin of 34.2%, in-line with Q1 2018
    • Price increases offsetting higher procurement costs and softer currencies
  • Q1 EBITDA of $187 million, in-line with last year (in RMB terms, EBITDA increased 5% year-on-year)
    • EBITDA margin of 18.6%, in-line with last year
    • Containment of overall operating expenses, while recording $11m idleness cost of Jingzhou old site
  • Q1 Net Income of $80 million, $4 million lower than last year (in RMB terms, Net income increased 1% year-on-year)
    • Net income margin of 8.0%, in-line with last year
  • Bonide and Anpon acquisitions concluded

BEIJING, CHINA and TEL AVIV, ISRAEL, April 29, 2019 – Leading global crop protection company ADAMA Ltd. (the “Company”) (SZSE 000553), today reported its financial results for the first quarter ended March 31, 2019.

 

Adjusted, US$ millions

 

Q1 2019

Q1 2018

 

%

Change

CER

%

Change

Revenues

 

1,006

1,022

 

+1.0%

-1.6%

Gross profit

 

344

352

 

 

-2.3%

Gross margin

 

34.2%

34.4%

 

 

 

Operating income (EBIT)

 

127

136

 

 

-6.7%

EBIT margin

 

12.6%

13.3%

 

 

 

Net income

 

80

84

 

 

-4.5%

Net income margin

 

8.0%

8.2%

 

 

 

EBITDA

 

187

190

 

 

-1.4%

EBITDA margin

 

18.6%

18.6%

 

 

 

Earnings per share    –    USD

 

0.0327

0.0343

 

 

 

                                    –    RMB

 

0.2207

0.2178

 

 

 

 

All income statement items contained in this release are presented on an adjusted basis. For a detailed description and analysis of the differences between the adjusted income statement items and the items as reported in the financial statements, see “Analysis of Gaps between Adjusted Income Statement and Income Statement in Financial Statements” in the appendix to this release.

Earnings per share are the same for basic and diluted. The number of shares used to calculate earnings per share is 2,446.6 million shares. Q1 2019 includes the results of both Bonide and Anpon following the competion of their acquisition by the Company during the quarter.

 

Commenting on the results, Yang Xingqiang, Chairman of ADAMA’s Board of Directors, said, “ADAMA continues to prove its ability to deliver strong levels of sales and profit, overcoming the challenging conditions in the market. This demonstrates the strength of the Company’s diversified and differentiated portfolio and its global commercial footprint. This start to the year positions ADAMA well to capitalize on its unique set of opportunities to drive further growth.”

Chen Lichtenstein, President and CEO of ADAMA, added, “Our resilient performance this quarter saw us overcome challenges that the industry is facing, including difficult weather in North America and Australia and tight supply conditions. Action of our China and global teams ensured that we were able to quickly resume operations at the old site in Jingzhou, mitigating the impact on supply going forward."

Performance in Context of Market Environment

Crop prices remain soft, with continued uncertainty surrounding the US-China trade tensions. These relatively low commodity prices remain challenging for farmer incomes in most regions, resulting in continued subdued demand for crop protection products.

Severe winter conditions in North America have caused a significant delay in planting, impacting crop protection application throughout the region. The season is now commencing, and the pace of temperature rise in the coming weeks will determine how much of the delay can still be captured.

The Company continues to exercise restraint of its manufacturing and other operating costs to mitigate the impact of continued shortages in certain raw materials and intermediates. The supply constrained environment, mostly owing to increased environmental focus in China, has seen procurement costs remain elevated compared to the first quarter of last year, while also contributing to overall stronger pricing of the Company’s products in its end-markets.

Financial Highlights

Revenues in the first quarter were $1,006 million, slightly below last year’s best-ever; increasing by 1.0% in constant currency terms.

This resilient performance was achieved despite the severe winter in North America and continued supply constraints globally. ADAMA delivered strong growth in Latin America and Brazil, in India, Middle East and Africa, as well as high double-digit growth in China excluding products of the Jingzhou old site.

Strong demand for ADAMA’s differentiated product portfolio facilitated price increases across all regions, which more than offset the impact of softer currencies.

This overall robust momentum together with joiners Bonide and Anpon, enabled the Company to overcome the lack of product to fulfill demand due to several weeks of production disruption at the Jingzhou old site, as well as the harsh winter in North America and continued supply constraints.

Gross profit in the quarter was $344 million (gross margin of 34.2%), compared to $352 million in the first quarter last year (gross margin of 34.4%). The Company succeeded in maintaining a stable gross margin mostly due to the strong performance in many geographies including China (excluding Jingzhou products) and significant price increases.

Operating expenses. Total operating expenses were $218 million (21.6% of sales) in the quarter compared to $217 million (21.2% of sales) in the first quarter last year. This reflects continued containment of overall expenses, while recording an $11 million charge for the idleness of the Jingzhou old site, which now gradually resumes operation, and adding of joiners Bonide and Anpon.

Sales and Marketing expenses in the quarter were $164 million (16.3% of sales), compared to $162 million (15.8% of sales) in the first quarter last year. The moderate increase reflects the inclusion of expenses of joiners.  

General and Administrative expenses in the quarter were $32 million (3.2% of sales) compared to $38 million (3.7% of sales) in the first quarter last year.

R&D expenses in the quarter were $14 million (1.4% of sales) compared to $13 million (1.2% of sales) in the first quarter last year.

Other operating expenses net, include the $11 million impact of idle production expenses due to the suspension of production at the Jingzhou old site.

Operating income in the quarter was $127 million (12.6% of sales), compared to $136 million (13.3% of sales) in the first quarter last year.

EBITDA in the quarter was $187 million, compared to $190 million in the first quarter last year, with the EBITDA margin of 18.6%, in-line with first quarter last year.

Financial expenses and investment income. Total net financial expenses and investment income in the quarter were $37 million compared to $34 million in the first quarter last year. This reflects somewhat higher debt levels, as well as the adoption of a new accounting standard leading to the capitalization of operating leases.

Tax expenses. Net tax expenses were $9 million in the quarter, compared to $18 million in the first quarter last year. The lower expenses were due to lower taxable income generated at the Jingzhou site as well as seasonally lower locally recorded pre-tax income in Brazil.

Net income in the quarter was $80 million (8.0% of sales) compared to $84 million (8.2% of sales) achieved in the first quarter last year.

Working capital at March 31, 2019 was $2,082 million, higher by $325 million compared to the same point last year. The higher level reflects higher trade receivables resulting from the Company’s strong growth in Q4 2018, inventory build-up at higher procurement costs to prepare for the expected growth in 2019 and mitigate supply shortages, the delayed season in North America and additions of joiners’ working capital.

Cash Flow. Operating cash flow of $191 million was consumed in the quarter, compared to $34 million consumed in the corresponding period last year, reflecting the higher working capital.

Net cash used in investing activities was $159 million in the quarter compared to a cash inflow of $7 million in the first quarter last year, with the higher 2019 level also reflecting the acquisition of Bonide, and the lower 2018 level affected by the one-time proceeds from the divestiture of several products in connection with the approval by the EU Commission of the acquisition of Syngenta by ChemChina last year, and payment of a lesser net amount for the transfer of a similar portfolio of products.

Investments in fixed assets, net of investment grants, amounted to $23 million in the quarter compared to $27 million in the first quarter last year.

Free cash flow of $355 million was consumed in the first quarter, compared to $31 million consumed in the first quarter last year, noting the exceptionally lower level in 2018 due to the receipt of an approximately $379 million one-time cash inflow from the divestiture of products in Europe in connection with the acquisition of Syngenta by ChemChina last year, and the lower cash amount paid for the similar portfolio of products transferred to the Company.

Leverage: Balance sheet net debt at the end of the quarter was $875 million compared to net debt of $513 million as of March 31, 2018, reflecting mostly the sum of the acquisition payment for Bonide, assumption of acquired Anpon’s debt and the dividend paid in 2018.

Jingzhou Old Site

The Jingzhou old site is gradually resuming operation, following its connection via pipeline to the state-of-the-art wastewater treatment facility installed at the new and already operational site. As a consequence of the disruption, the Company lacked sufficient product to fulfill first quarter demand, and incurred approximately $11 million of additional idleness cost, reflected in operating expenses. The impact of the suspension is expected to continue to some extent into the second quarter, and subside alongside the increase in output at the old site.

Regional Sales Performance

 

 

Q1 2019

$m

Q1 2018

$m

 

Change

CER

Change

USD

Europe

 

360

393

 

-11.1%

-8.3%

North America

 

180

194

 

-6.8%

-7.1%

Latin America

 

159

139

 

+25.9%

+14.6%

Asia Pacific

 

186

188

 

+2.9%

-1.4%

 Of which China

 

94

84

 

+14.3%

+11.2%

India, Middle East & Africa

 

121

108

 

+23.9%

+11.8%

Total

 

1,006

1,022

 

+1.0%

-1.6%

CER: Constant Exchange Rates

 

Europe: Sales in Europe were lower by 11.1% in the quarter in constant currency terms, compared to the first quarter last year. This is primarily due to tight supply conditions, especially in intermediates procured from China, which constrained sales in key countries across the region. The reduced sales were partially offset by price increases.

In Northern Europe, sales were also impacted by challenging credit conditions in Ukraine, with the Company proactively restricting sales to those customers with a proven ability to pay. In Southern Europe, sales were impacted by a reduction in herbicides due to lower oilseed rape planted areas.

In the quarter, ADAMA launched GIGANT® in Germany and PRIZM® in the UK, a distinctive fungicide mixture delivering long-lasting, broad-spectrum protection in wheat and barley. The Company obtained several new product registrations in the quarter, including MAVRIK JET®, an effective, fast-acting contact insecticide for the control of aphids in oilseed rape in France, as well as EMBRELIA®, a combination fungicide with dual mechanism of action for fruit in Portugal.

In US dollar terms, sales in Europe were lower by 8.3% in the quarter compared with the first quarter last year, with the Company successfully hedging its exposure to the European currencies which softened over the period.

North America: Sales in North America were lower by 6.8% in the quarter in constant currency terms, compared with the first quarter last year, with the impact of the severe winter being partially offset by increased prices.

The extremely cold and wet conditions have delayed the planting season and disrupted transportation lines, impacting sales in both crop and non-crop markets and slowing movement through distribution channels.

In the Consumer and Professional Solutions space, Bonide performed well in its first quarter since acquisition.

ADAMA launched BRAZEN®, a selective herbicide for grass control in spring wheat and barley in Canada.

In US dollar terms, sales in North America were lower by 7.1% in the quarter compared to the first quarter last year.

Latin America: Sales in Latin America grew by a significant 25.9% in the quarter in constant currency terms, compared with the first quarter last year, with robust business growth across the region, alongside higher prices in the face of continued constrained supply.

ADAMA saw noteworthy performances in Brazil, Argentina and Mexico. In Brazil, the strong growth was led by continued strong demand for the Company’s differentiated portfolio including CRONNOS®, as well as for NIMITZ® and ExpertGrow®, despite drought conditions in key regions. The Company also saw a strong performance of its cotton portfolio, benefiting from an increase in planted areas.

The Company continues to develop its differentiated portfolio in the region. In Brazil, ADAMA launched TRIVOR®, a differentiated insecticide combination providing rapid and extended control of white flies in several crops, and obtained registration for COMISSARIO®, an insecticide for controlling sucking pests in cotton. The Company also launched CRONNOS® in Bolivia and obtained registrations for the NIMITZ® suite of products in Peru.

In US dollar terms, sales in Latin America increased by 14.6% in the quarter compared with the first quarter last year, reflecting the softening of local currencies.

Asia-Pacific: Sales in the region grew by 2.9% in the quarter in constant currency terms, compared with the first quarter last year.

In China, ADAMA grew in the quarter by 14.3%, and continues to see strong demand for its differentiated, formulated and branded products, and prioritizes the sale of these products through its own channels by rapidly shifting away from selling unformulated, technical product to intermediaries, and in so doing benefiting from the full product positioning as well as end-to-end margin. Sales of these formulated, branded products grew strongly in the quarter by high double-digit percent excluding those of the suspended Jingzhou old site.

ADAMA continues to make significant portfolio advances in China, including bringing flagship ADAMA global brands to the country. The first quarter saw the launch of AGIL®, a systemic herbicide for selective weed control of a wide range of grasses in many broadleaf crops as well as GALIL®, a differentiated insecticide mixture for rice.

Anpon performed well in its first quarter since acquisition.

While the Company saw a strong performance in Thailand, the continued severe drought in Australia reduced summer crop production in the country by an estimated 30%, impacting sales in the quarter.

During the quarter, the Company obtained a number of new registrations for differentiated products, including AGROSY®, a herbicide for ryegrass and seed clover and APHIDEX®, an insecticide for aphid control in fruit, cereal and vegetable, both in New Zealand, as well as MANDATE XTRA®, a selective grass herbicide for cereals, and QUADRANT®, a four-way combination herbicide for broadleaf weeds in winter cereals, both in Australia.

In US dollar terms, sales were lower by 1.4% in the quarter compared to the first quarter last year, reflecting the impact of softer currencies in the region.

India, Middle East & Africa: Sales grew by a significant 23.9% in the quarter in constant currency terms, compared with the first quarter last year. This strong performance resulted from a combination of strong, double-digit business growth, alongside higher prices.

ADAMA delivered high growth in Turkey, where its business continues to gain significant market share. The Company continues to grow strongly in India, despite the lingering impact of the late 2018 drought conditions, while dry conditions in South Africa impacted sales in the country.

In US dollar terms, sales were higher by 11.8% in the quarter compared to the first quarter last year, reflecting the impact of softer currencies over the period.

Revenues by operating segment

First quarter sales

 

 

Q1 2019

USD(m)

%

 

Q1 2018

USD(m)

%

Crop Protection

 

910

90.4%

 

948

92.7%

Intermediates and Ingredients

 

97

9.6%

 

74

7.3%

Total

 

1,006

100%

 

1,022

100%

 

Further Information

All filings of the Company, together with a presentation of the key financial highlights of the period, can be accessed through the Company website at www.adama.com.

 

##

About ADAMA

ADAMA Ltd. is one of the world's leading crop protection companies. We strive to Create Simplicity in Agriculture – offering farmers effective products and services that simplify their lives and help them grow. With one of the most comprehensive and diversified portfolios of differentiated, quality products, our more than 7,000-strong team reaches farmers in over 100 countries, providing them with solutions to control weeds, insects and disease, and improve their yields. For more information, visit us at www.ADAMA.com and follow us on Twitter® at @ADAMAAgri.


Contact

Ben Cohen
Global Investor Relations
Email: ir@adama.com

Zhujun Wang
China Investor Relations
Email: irchina@adama.com

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