BEIJING, CHINA and TEL AVIV, ISRAEL, April 28
, 2021 –
ADAMA Ltd. (the “Company”) (SZSE 000553), today reported its financial
results for the first quarter ended March 31, 2021.
Ignacio Dominguez, President and CEO of ADAMA
, said, “In the first quarter, we continued our strong growth to achieve
another Q1 record high sales performance, with robust demand for our crop
protection products supported by generally higher crop prices. Although our
growth was somewhat mitigated by a softer pricing environment in many
regions, and further offset by higher procurement costs and a growth-driven
increase in operating expenses, we nevertheless were able to deliver a
pleasing improvement in our bottom line. Our strong Q1 performance reflects
our continued ability to weather the ongoing pandemic-related challenges,
and to provide much needed crop protection solutions to growers around the
world.”
Financial Performance Summary
USD (m)
|
As Reported
|
Adjustments
|
Adjusted
|
Q1
2021
|
Q1
2020
|
% Change
|
Q1
2021
|
Q1
2020
|
Q1
2021
|
Q1
2020
|
% Change
|
Revenues
|
1,109
|
973
|
+14%
|
-
|
-
|
1,109
|
973
|
+14%
|
Gross profit
|
305
|
277
|
+10%
|
17
|
19
|
322
|
296
|
+9%
|
% of sales
|
27.5%
|
28.5%
|
|
|
|
29.0%
|
30.5%
|
|
Operating income (EBIT)
|
65
|
51
|
+29%
|
33
|
47
|
98
|
97
|
+1%
|
% of sales
|
5.9%
|
5.2%
|
|
|
|
8.9%
|
10.0%
|
|
Income before taxes
|
29
|
20
|
+47%
|
33
|
47
|
62
|
66
|
-7%
|
% of sales
|
2.6%
|
2.0%
|
|
|
|
5.6%
|
6.8%
|
|
Net income attributable to the shareholders of the
company
|
23
|
-2
|
|
29
|
44
|
52
|
42
|
+25%
|
% of sales
|
2.1%
|
-0.2%
|
|
|
|
4.7%
|
4.3%
|
|
EPS
|
|
|
|
|
|
|
|
|
- USD
|
0.0098
|
-0.0010
|
|
|
|
0.0223
|
0.0170
|
+31%
|
- RMB
|
0.0639
|
-0.0068
|
|
|
|
0.1447
|
0.1182
|
+22%
|
EBITDA
|
138
|
133
|
+3%
|
19
|
20
|
157
|
153
|
+2%
|
% of sales
|
12.4%
|
13.7%
|
|
|
|
14.2%
|
15.8%
|
|
Notes:
“As Reported” denotes the Company’s financial statements according to
the Accounting Standards for Business Enterprises and the
implementation guidance, interpretations and other relevant provisions
issued or revised subsequently by the
Chinese
Ministry
of Finance (the “MoF) (collectively referred to as “ASBE”). Please see
the appendix to this release for further information.
Relevant income statement items contained in this release are also
presented on an “Adjusted” basis, which exclude items that are of a
one-time or non-cash/non-operational nature that do not impact the
ongoing performance of the business, and reflect the way the Company’s
management and the Board of Directors view the performance of the
Company internally. The Company believes that excluding the effects of
these items from its operating results allows management and investors
to effectively compare the true underlying financial performance of its
business from period to period and against its global peers
.
A detailed summary of these adjustments appears in the appendix below.
The Q1 2020 Adjusted Income Statement has been amended from that
presented at the time to include additional adjustments in order to
consistently reflect largely the treatment of China Relocation &
Upgrade Program-related costs amongst other adjustments that the
Company has deemed non-operational and one-time in nature, as well as
to reflect a change in allocation of certain costs between those
impacting Operating Expenses and those impacting Gross Profit.
The number of shares used to calculate both basic and diluted earnings
per share in 2020 is 2,446.6 million shares. The number of shares used
to calculate both basic and diluted earnings per share in 2021 is
2,329.8 million shares, reflecting the buyback and cancellation of
102.4 million shares from CNAC in July 2020 and repurchase of 14.3
million B shares during the second half of 2020.
The general crop protection market environment
In the first quarter of 2021, commodity crop prices continued to
increase as global demand remained strong, fueled by pandemic-related
food security concerns, a recovery in biofuel demand and higher feed
demand, especially from China. Weather-related agricultural supply
challenges also contributed to the high crop prices, which are expected
to remain elevated throughout the rest of the year. The positive crop
price environment, along with associated expectations of higher planted
areas, are combining to drive global demand for crop protection
products.
During the quarter, prices of intermediates and active ingredients sourced
from China increased compared to the same period last year, due in part to
the recovery of oil prices alongside higher raw material costs and stronger
demand.
As global economies start to reopen following pandemic-related shutdowns
over the past year, global trade markets are experiencing scarcity of
transportation resources leading to higher freight costs, a situation that
has been exacerbated by the recent Suez Canal incident and other port
congestions all over the globe.
The Company actively manages its procurement and supply chain activities in
order to mitigate these higher procurement and logistics costs, and
endeavors to adjust its pricing wherever possible to compensate.
Financial Highlights
Revenues
grew 14% (+6% in RMB terms) to hit a first quarter record-high of $1,109
million, driven by a robust 15% increase in volumes. This strong
volume-driven growth was somewhat mitigated by a softer pricing environment
in a number of key regions.
ADAMA delivered particularly strong performances in the Asia Pacific and
India, Middle-East & Africa regions, benefiting from strong demand and
favorable seasonal conditions. The Company also grew strongly in North
America, driven by its Consumer and Professional business, as well as in
Latin America. Sales in Europe were somewhat lower due to a slow start to
the season in the northern and eastern parts of the region.
Gross Profit
in the first quarter was $305 million (27.5% of sales), up 10% compared to
$277 million (28.5% of sales) reported in the corresponding period last
year.
The Company recorded certain extraordinary charges within its reported cost
of goods sold, totaling approximately $17 million in the first quarter (Q1
2020: $19 million). These charges were largely related to its Relocation
& Upgrade program, and include mainly (i) excess procurement costs
incurred as the Company continued to fulfill demand for its products in
order to protect its market position, through replacement sourcing at
significantly higher costs from third-party suppliers, and (ii) elevated
idleness charges largely related to suspensions at the facilities being
relocated as well as to the temporary suspension of the Jingzhou site in Q1
2020 at the outbreak of COVID-19 in Hubei Province. For further details on
these extraordinary charges, please see the appendix to this release.
Excluding the impact of the abovementioned extraordinary items, adjusted
gross profit in the quarter was $322 million (29.0% of sales), up 9%
compared to $296 million (30.5% of sales) in the corresponding period last
year. The higher gross profit was driven by the strong volume growth
alongside positive seasonal changes in product offering, more than
offsetting the impacts of the generally softer prices and higher
procurement and logistics costs.
Operating expenses
in the first quarter were $239 million (21.6% of sales), compared to $226
million (23.3% of sales) reported in the corresponding period last year.
The Company recorded certain non-operational, mostly non-cash, charges
within its reported operating expenses, totaling approximately $16 million
in the first quarter (Q1 2020: $27 million). These charges include mainly
(i) $8 million in Q1 2021 (Q1 2020: $8 million) in non-cash amortization
charges in respect of Transfer assets received from Syngenta related to the
2017 ChemChina-Syngenta acquisition, (ii) $4 million in Q1 2021 (Q1 2020:
$1 million) in non-cash charges related to incentive plans, and (iii) $4
million in Q1 2021 (Q1 2020: $3 million) in charges related mainly to the
non-cash amortization of intangible assets created as part of the Purchase
Price Allocation (PPA) on acquisitions, with no impact on the ongoing
performance of the companies acquired, as well as other M&A-related
costs. The higher aggregate amount of non-operational charges in Q1 2020
also included $11 million in non-cash amortization charges related to the
legacy PPA of the 2011 acquisition of Adama Agricultural Solutions, which
have now largely finished, and $9 million in respect of early retirement
expenses. For further details on these non-operational charges, please see
the appendix to this release.
Excluding the impact of the abovementioned non-operational charges,
adjusted operating expenses in the quarter were $223 million (20.1% of
sales), compared to $199 million (20.5% of sales) in the corresponding
period last year.
The higher operating expenses reflect primarily an increase in sales and
marketing teams in growing geographies to drive and support the strong
sales growth, higher transportation and logistics costs driven by both an
increase in freight costs and the increased volumes being moved, as well as
the inclusion of recent acquisitions in Greece, Paraguay and China. Despite
the higher operating expenses in absolute terms, the Company continued to
improve its expense-to-sales ratio.
Operating income
in the first quarter was $65 million (5.9% of sales), compared to $51
million (5.2% of sales) reported in the corresponding period last year.
Excluding the impact of the abovementioned extraordinary and
non-operational charges, adjusted operating income in the quarter was $98
million (8.9% of sales), compared to $97 million (10.0% of sales) in the
corresponding period last year. The slightly higher operating income in the
quarter was driven by the higher gross profit, but reflects also the
growth-driven increase in operating expenses.
EBITDA
in the first quarter was $138 million (12.4% of sales), up 3.5% compared to
$133 million (13.7% of sales) reported in the corresponding period last
year. Excluding the impact of the abovementioned extraordinary and
non-operational charges, adjusted EBITDA in the quarter was $157 million
(14.2% of sales), up 2.4% compared to $153 million (15.8% of sales) in the
first quarter of 2020.
Financial expenses and investment income
in the first quarter were $36 million, compared to $31 million in the
corresponding period last year. The higher financial expenses were mainly
due to an increase in financing costs on the NIS-denominated, CPI-linked
bonds due to a higher CPI in Israel.
Taxes on income
reported in the first quarter were $6 million, compared to $22 million
reported in the corresponding period last year. The first quarter is
generally characterized by a low effective tax rate compared to the
effective tax rate of the Company over the full year. This is mainly due to
the generation of profits by subsidiary companies within ADAMA whose tax
rates are lower relative to the Company’s aggregate effective tax rate, as
well as to the method of calculation of tax assets related to unrealized
profits. However, in Q1 2020, the Company recorded higher tax expenses
largely due to the impact of the significant weakening of currencies in
that quarter against the US dollar, most notably that of the Brazilian
Real, driving higher non-cash tax expenses due to differences between the
functional (US dollar) and tax (local) currencies regarding the value of
non-monetary assets.
Net income attributable to the shareholders of the company
in the first quarter was $23 million (2.1% of sales), compared to a loss of
$2 million reported in the corresponding period last year. Excluding the
impact of the abovementioned extraordinary and non-operational charges,
adjusted net income in the quarter was $52 million (4.7% of sales), up 25%
compared to $42 million (4.3% of sales) achieved in the corresponding
period last year.
The improvement in net income in the quarter was driven by the slightly
higher operating income and lower taxes, which were partially offset by the
higher financial expenses.
Trade working capital
at March 31, 2021 was $2,604 million compared to $2,178 million at the same
point last year. The Company is holding higher inventory levels due mainly
to a shift in geographic and portfolio sales mix, as well as due to the
anticipation of further volume growth in coming quarters. The Company also
saw an increase in trade receivables, driven largely by its strong growth
over recent quarters in emerging markets, most notably in Latin America and
Brazil, where customer credit terms are generally longer, as well as the
stretching of credit terms in certain countries most impacted by COVID-19
related challenges. These increases were partially offset by higher trade
payables.
Cash Flow:
Operating cash flow of $129 million was consumed in the quarter, compared
to $55 million consumed in the corresponding period last year. The negative
operating cash flow, which is seasonally typical for ADAMA in the first
quarter, also reflects the higher build-up of working capital in the first
quarter compared to the parallel quarter last year.
Net cash used in investing activities was $109 million in the quarter,
compared to $54 million in the corresponding period last year. The higher
level of cash used in investing activities in the quarter largely reflects
an increase in investments in fixed assets, mainly driven by the upgrading
and relocation of manufacturing facilities in China and Israel, the
acquisition of a majority stake in Jiangsu Huifeng’s domestic commercial
crop protection business, as well as investments in the advancement of the
Company’s differentiated product portfolio.
Free cash flow of $248 million was consumed in the first quarter compared
to $116 million consumed in the corresponding period last year, reflecting
the aforementioned operating and investing cash flow dynamics.
Portfolio Development Update
In the first quarter, ADAMA continued to advance the development of its
differentiated product portfolio. The Company obtained multiple new product
registrations in the quarter, including VERITAS®, a unique
broad-spectrum fungicide for control of foliar disease in Australia, as
well as HEYDAY®, a herbicide for control of broadleaf and grass
weeds in Thailand.
New product launches in the quarter included BARROZ®, a uniquely
convenient granular solution for rice growers to gain effective control of
stemborer in India, as well as EMPHASIS™, an innovative
herbicide co-pack that provides a versatile and effective pre-seed burn-off
solution in Canada.
Regional Sales Performance Review
|
|
Q1 2021
$m
|
Q1 2020
$m
|
Change
USD
|
Change
CER
|
Europe
|
|
344
|
357
|
-3.5%
|
-4.1%
|
North America
|
|
189
|
168
|
+12.4%
|
+11.8%
|
Latin America
|
|
177
|
159
|
+11.3%
|
+22.1%
|
Asia Pacific
|
|
241
|
158
|
+52.7%
|
+39.3%
|
Of which, China
|
|
124
|
68
|
+81.6%
|
+71.0%
|
India, Middle East & Africa
|
|
158
|
131
|
+20.4%
|
+23.0%
|
Total
|
|
1,109
|
973
|
+14.0%
|
+13.6%
|
CER: Constant Exchange Rates
Europe:
Sales were lower by 4.1% in the first quarter, in CER terms, compared with
the corresponding period last year.
Growth in the southern part of the region, where favorable market
conditions drove good demand, was outweighed by a slow start to the season
in the northern and eastern parts of the region, especially when compared
to Q1 2020 which then saw strong orders from distribution in anticipation
of the COVID-related shutdowns that soon followed.
In US dollar terms, sales in Europe were lower by 3.5% in the quarter,
compared to the corresponding period last year.
North America
: Sales grew by 11.8% in the quarter, in CER terms, compared with the
corresponding period last year.
Growth in the region was driven by a strong performance from the Company’s
Consumer and Professional business, benefiting from the reopening of the
economy after COVID-19 related restrictions in 2020. This more than offset
a somewhat softer performance in the US crop protection business.
In US dollar terms, sales in North America grew by 12.4% in the quarter,
compared to the corresponding period last year, reflecting a moderate
strengthening of the Canadian Dollar in the quarter.
Latin America:
Sales grew by a robust 22.1% in the quarter, in CER terms, compared to the
corresponding period last year.
The Company continues its growth trajectory in Latin America, driven by
solid volume growth and good performance from recent product launches in
the region.
In US dollar terms, sales in Latin America grew by 11.3% in the quarter,
compared to the corresponding period last year, as the robust business
growth was partially offset by weaker currencies in the region, in
particular the Brazilian Real.
Asia-Pacific:
Sales grew by 39.3% in the quarter, in CER terms, compared to the
corresponding period last year.
The strong growth in the Asia-Pacific region was seen both in China and
beyond. In China, ADAMA saw significant growth in the quarter both from
its branded, formulated portfolio, which was driven by higher cereal
demand due to an increase in field crop planted areas and an early
start to the Q2 season, as well as from its sales of raw materials and
intermediates. Sales in the country were further bolstered by the
inclusion of the Company’s recent acquisition of Jiangsu Huifeng’s
domestic commercial crop protection business.
In the rest of Asia-Pacific, the Company benefited from favorable seasonal
conditions and delivered strong growth, despite a slower recovery from
COVID-19 challenges in Asia.
In US dollar terms, sales in Asia-Pacific grew by 52.7% in the quarter,
compared to the corresponding period last year, reflecting mainly the
strengthening of the Chinese Renminbi and the Australian dollar against the
US dollar.
India, Middle East & Africa:
Sales grew by 23.0% in the quarter, in CER terms, compared to the
corresponding period last year,
driven by strong volume growth alongside price increases amid
continued positive weather conditions.
During the quarter, ADAMA launched a new pilot formulation R&D facility
in India, complementing the Company’s leading formulation development
capabilities in its main R&D hubs in Israel, China and India. The new
facility, equipped with state-of-the-art technologies, will bridge the path
from the R&D lab to commercial stage production, developing processes
for the scale-up of liquid and solid formulation.
In US dollar terms, sales in the India, Middle East & Africa region
grew by 20.4% in the quarter, compared to the corresponding period last
year, reflecting mainly the weaker level of the Turkish Lira, partially
offset by a stronger Israeli Shekel.
Table 3. Revenues by operating segment
First quarter sales by segment
|
Q1 2021
USD (m)
|
%
|
|
Q1 2020
USD (m)
|
%
|
Crop Protection
|
1,007
|
90.8%
|
|
885
|
91.0%
|
Intermediates and Ingredients
|
102
|
9.2%
|
|
88
|
9.0%
|
Total
|
1,109
|
100.0%
|
|
973
|
100.0%
|
First quarter sales by product category
|
Q1 2021
USD (m)
|
%
|
|
Q1 2020
USD (m)
|
%
|
Herbicides
|
477
|
43.0%
|
|
441
|
45.3%
|
Insecticides
|
314
|
28.3%
|
|
217
|
22.3%
|
Fungicides
|
216
|
19.5%
|
|
227
|
23.3%
|
Intermediates and Ingredients
|
102
|
9.2%
|
|
88
|
9.0%
|
Total
|
1,109
|
100.0%
|
|
973
|
100.0%
|
Note: the sales split by product category is provided for convenience
purposes only and is not representative of the way the Company is
managed or in which it makes its operational decisions.
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 a global leader in crop protection, providing solutions to
farmers across the world to combat weeds, insects and disease. ADAMA has
one of the widest and most diverse portfolios of active ingredients in the
world, state-of-the art R&D, manufacturing and formulation facilities,
together with a culture that empowers our people in markets around the
world to listen to farmers and ideate from the field. This uniquely
positions ADAMA to offer a vast array of distinctive mixtures, formulations
and high-quality differentiated products, delivering solutions that meet
local farmer and customer needs in over 100 countries globally. For more
information, visit us at www.ADAMA.com
and follow us on Twitter® at @ADAMAAgri.
Contact
Ben Cohen Zhujun Wang
Global Investor Relations China Investor Relations
Email: ir@adama.com Email: irchina@adama.com