Investor relations section

ADAMA Reports First Quarter 2021 Results

Robust business growth yields increased profits in the first quarter

  • Sales grew by 14% to a Q1 record-high of $1,109 million, driven by continued robust 15% volume growth
  • Adjusted EBITDA higher by 2%, reaching $157 million
  • Reported net income of $23 million (Q1 2020: loss of $2 million)
  • Adjusted net income up 25% to $52 million

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

Downloads