ADAMA Reports First Quarter 2024 ResultsImprovement in the quality of the business in the first quarter of 2024 with theCompany achieving significant improvement in cash flow and in its gross
margin, despite a decline in sales;Transformation plan being implemented throughout Company, benefits to be
seen over a period of three yearsFirst Quarter 2024 Highlights:
? Sales down 16% to $1,057 million (-13% in RMB terms; -14% in CER
terms), mainly reflecting a10% decrease in prices and a 5% decrease in volumes? Gross profit amounted to $288m (margin of 27.2%) vs $340m (margin of 27.0%) in Q1 2023? Adjusted EBITDA amounted to $132 million vs. $165 million in Q1 2023? Adjusted net loss of $10 million; Reported net loss of $32 million? Improvement of $322 million in operating cash flow; -$103 million in Q1 2024 vs -$425 million inQ1 2023
? Improvement of $348 million in free cash flow; -$194 million in Q1 2024 vs -$542 million in Q12023
BEIJING, CHINA and TEL AVIV, ISRAEL, April 25, 2024 – ADAMA Ltd. (the “Company”) (SZSE000553), today reported its financial results for the first quarter ended March 31, 2024.Steve Hawkins, President and CEO of ADAMA, said, "As market conditions continue to be sluggishin the first quarter of 2024, the Company is focusing on the implementation of a cross-companytransformation plan aimed at improving the quality of the business and repositioning ADAMA as a keyplayer in the Value Innovation customer segment. This plan, the outcome of hundreds of employee-based initiatives, has a clear roadmap, deliverables and is focused on delivering profit and cashtargets to be achieved over the period of the coming three years."While we expect the benefits of this plan to be gradual, we are continuing to respond to the currentmarket situation. In the first quarter of 2024 the Company presented an improvement in the quality ofthe business, succeeding in improving its gross margin, despite a decline in sales, achieved throughthe positive impact of new inventory sold, priced at market levels and an improvement in the sales mixof higher margin products. The Company also continued to put strong focus on cash generation,presenting a significant improvement in cash flow, which is typically negative in the first quarter dueto seasonality."
CER – Constant Exchange Rates
Table 1. Financial Performance Summary
| USD (m) | As Reported | Adjustments | Adjusted | |||||||
| Q1 2024 | Q1 2023 | % Change | Q1 2024 | Q1 2023 | Q1 2024 | Q1 2023 | % Change | |||
Revenues
| Revenues | 1,057 | 1,259 | (16%) | - | - | 1,057 | 1,259 | (16%) | |||
| Gross profit | 256 | 310 | (17%) | 32 | 30 | 288 | 340 | (15%) | |||
| % of sales | 24.2% | 24.6% | 27.2% | 27.0% | |||||||
| Operating income (EBIT) | 51 | 92 | (45%) | 21 | 10 | 72 | 102 | (30%) | |||
| % of sales | 4.8% | 7.3% | 6.8% | 8.1% | |||||||
| Income (loss) before taxes | (21) | 10 | 23 | 10 | 2 | 20 | (91%) | ||||
| % of sales | (2.0%) | 0.8% | (0.2%) | 1.6% | |||||||
| Net income (loss) | (32) | 12 | 22 | 9 | (10) | 22 | |||||
| % of sales | (3.0%) | 1.0% | (0.9%) | 1.7% | |||||||
| EPS | |||||||||||
| - USD | (0.0138) | 0.0052 | (0.0042) | 0.0093 | |||||||
| - RMB | (0.0977) | 0.0357 | (0.0297) | 0.0633 | |||||||
| EBITDA | 120 | 166 | (27%) | 12 | (1) | 132 | 165 | (20%) | |||
| % of sales | 11.4% | 13.2% | 12.5% | 13.1% |
Notes:
? “As Reported” denotes the Company’s financial statements according to the Accounting Standards for Business Enterprises and theimplementation guidance, interpretations and other relevant provisions issued or revised subsequently by the Chinese Ministry ofFinance (the “MoF) (collectively referred to as “ASBE”). Note that in the reported financial statements, according to the ASBE guidelines[IAS 37], certain items (specifically certain transportation costs and certain idleness charges) are classified under COGS. Please seethe 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 transitory or non-cash/non-operational nature that do not impact the ongoing performance of the business, and reflect the way theCompany’s management and the Board of Directors view the performance of the Company internally. The Company believes thatexcluding the effects of these items from its operating results allows management and investors to effectively compare the trueunderlying financial performance of its business from period to period and against its global peers. A detailed summary of theseadjustments appears in the appendix below.? The number of shares used to calculate both basic and diluted earnings per share in both Q1 4202 and 2023 is 2,329.8 million shares.? In this table and all tables in this release numbers may not sum due to rounding.
The General Crop Protection (CP) Market Environment
Key commodity crop prices continued to decline in the first months of 2024 and global supplycontinued to improve. Crop prices remain above average historical levels but the current price levelhas a negative impact on farmer income compared to previous years. Despite this, farmer demand isexpected to remain stable under the current conditions. The channel inventory situation is easing up,but there still remains above average inventories in several geographies, including Brazil. In addition,the high interest rate environment, continue to drive a just-in-time purchasing approach by the channel.Active ingredient prices from China remained low during Q1 with some molecules even experiencingfurther price declines, on one hand reducing input costs but on the other creating pricing pressure oncrop protection products and supporting a "wait and see" approach in the market.
Sources: CCPIA (China Crop Protection Industry Association), BAIINFO, FocusEconomics, peer quarterly financial reports, internal
sources
Update on the War Situation in IsraelADAMA is headquartered in Israel and has three manufacturing sites in the country. Following October
th, 2023, the Company continued the production in its global manufacturing sites and in Israel, withcertain non-significant restrictions (which have been lifted in February 2024). This situation did nothave a material impact on the Company's ability to support its markets or on ADAMA’s consolidatedfinancial results.On the 14
thof April, Israel was under an attack from Iran, with no consequences to the Company'songoing activities.Update on Impact of Shipping ObstructionsIn January 2024 some major shipping lines announced that they will suspend shipping to Israelthrough Israeli ports and through the Suez Canal due to tensions in the Red Sea. This has led tolonger transportation times, with shipping lines being diverted around Africa.As of the date of publication of this report, shipping time and costs have increased significantly, mainlyin the Asia-Pacific Israel route in comparison to before January 2024. These cost increases impactonly a small portion of the Company's overall shipping costs and ADAMA has been ordering relevantmaterials ahead of time to ensure timely supply. Currently, the Company does not anticipate this tohave a significant impact on its financial results or on the ongoing supply of materials to its productionfacilities, although this situation might impact the company's ability to respond quickly to changingmarket demand.Transformation Plan – UpdateAs announced in the Company's full year 2023 financial results report, it initiated a plan in the firstquarter of 2024 to revalue ADAMA through improving the quality of the business to turnaround theCompany. The Company-wide transformation plan is aimed at gradually delivering profit and cashtargets over a period of 3 years (2024-2026).Main aspects of the plan include:
? Commercial excellence? Operational efficiency? Cash generationBuilding our sustainable structure focused on:
? Leadership team structure: redesign to focus on performance excellence
o Streamlining senior leadership teamo Organizational changes to R&D marketing, commercial and operations? Market and customer focus: anchor on core marketso Focus on strategic crop segments within the Value Innovation customer segment with high-value differentiated formulations
? Tailored portfolio: refocus our portfolio to win in value innovationo Increase the portion of high margin products out of the sales supporting the quality of thebusiness and the gross margin (continuing the improvement in sales mix of higher marginproducts achieved during the full year of 2023 and first quarter of 2024)o Transitioning out certain productso Strong Pipeline – continuing to invest in differentiated products that provide the customer
added value? Network optimization: Adjust production footprint to match market realitieso Revisiting operational model including procurement vs manufacturing as well as supply chainoptimization? Support functions redesign to fit the business needs
o Enhancing the operating model to better serve ADAMA’s markets
Portfolio Development UpdateProduct Launches, Registrations & Formulation Mastery Update:
During the first quarter of 2024 ADAMA continued to register and launch multiple new products inmarkets across the globe, adding on to its differentiated product portfolio. New Product Introductions(NPI) percentage out of the full year sales of 2023 reached 22%, referring to products launched overthe past 5 years. Differentiated products include products that are based on recently off-patentedactive ingredients (AI's) that have been classified as high commercial potential – "Core Leap" AI's,and products that are based on unique proprietary formulation mastery, products with more than onemode of action, and biologicals.Select launches of differentiated products during the first quarter of 2024 include:
? Launch of Prothioconazole based products, part of ADAMA's comprehensive portfolio of
innovative solutions for cereal fungicides, including:
o Soratel
?
, Forapro
?, Maganic
? in Serbia, powered by ADAMA’s proprietary Asorbital
?
Formulation Technology
o Maxentis
?
in Serbia and Canada, a dual mode broad spectrum fungicide? Launch in Canada of triple mixtures MCPA & Fluroxypyr based herbicides, Outshine All
In?, Forcefighter All In? with dual mode of action and Esteem All In?, focusing onbroadleaf weeds for use in cereals.? Launch of Sonavio
?
in Italy, a unique PPO herbicide (inhibiting the enzymeprotoporphyrinogen oxidase) for use in additional vegetables based on proprietary activeingredient Bifenox.? Launch of Goltix? 700 SC, a unique Metamitron based product, in the US states of Nebraskaand Colorado, having received a FIFRA Section 18, emergency exemption during 2024 fromthe US Environmental Protection Agency following the pressing need for a herbicide solutionfor Sugar Beet to control glyphosate-tolerant Palmer amaranth (Amaranthus palmeri).
Selected registrations of differentiated products during the first quarter of 2024 include:
? Registration of Prothioconazole based products, part of ADAMA's comprehensive portfolio of
innovative solutions for cereal fungicides in Europe, including:
o Avastel
? in Malta, Turkey and Lithuania, powered by ADAMA’s proprietary Asorbital
?
Formulation Technologyo Forapro
?
in France, powered by ADAMA’s proprietary Asorbital
?
Formulation
Technologyo Soratel
? in Czech Republic and Greece, powered by ADAMA’s proprietary Asorbital
?
Formulation Technologyo Maganic
?
in Poland and Latvia, powered by ADAMA’s proprietary Asorbital
?
Formulation Technologyo Maxentis
?
in UK, France, Northen Ireland and Morocco, a dual mode broad spectrum
fungicide? Registration of Chrome
?in UK a triple mode-of-action herbicide for use in winter cereal crops? Registration of Highcard? in Italy, a dual mode-of-action herbicide for use with the with the
RiceTec Max-Ace? Rice Cropping SolutionFinancial Highlights
Revenues in the first quarter declined by approximately 16% (-13% in RMB terms; -14% in CERterms) to $1,057 million, presenting a decrease of 10% in prices and a decrease of 5% in volumes.The lower sales reflect lower market prices and lower demand, attributed to the market dynamics ofpricing pressure in the crop protection market and in active ingredients from China, high competitionand a "wait and see" approach mainly in commoditized products as well as unfavorable weatherconditions in some regions and the channel opting to hold lower levels of inventory and purchasecloser to the season in light of higher interest rates.
Table 2. Regional Sales Performance
Notes:
CER: Constant Exchange RatesNumbers may not sum due to rounding
| Q1 2024 $m | Q1 2023 $m | Change USD | Change CER |
Europe, Africa & Middle East*
| Europe, Africa & Middle East* | 368 | 430 | (15%) | (10%) |
North America
| North America | 191 | 211 | (9%) | (9%) |
Latin America
| Latin America | 191 | 233 | (18%) | (21%) |
Asia Pacific*
| Asia Pacific* | 307 | 384 | (20%) | (18%) |
Of which China
| Of which China | 154 | 182 | (16%) | (13%) |
Total
| Total | 1,057 | 1,259 | (16%) | (14%) |
Europe, Africa & Middle East (EAME):
Sales in EAME decreased in the first quarter of 2024 led by a contraction in the overall Europeancrop protection market mainly from low demand following channel destocking, erratic springseason causing just-in-time purchasing patterns and lower famer demand in areas impacted bylower grain market prices. This market also experienced pricing pressure, mainly in commoditizedproducts.North America: Consumer & Professional Solutions – Sales were lower impacted by prices,in light of declining active ingredient prices from China, as demand from the end-users in both theconsumer and professional markets recovered during the first quarter. Declining active ingredientprices from China also supported "just-in-time" purchasing patterns.In the US Ag market sales in the first quarter of 2024 were lower reflecting weak pricing, lowerdemand and strong competition. The overall pricing was lower in the first quarter of 2024 than inthe first quarter of 2023, as market prices began to decline only during the second quarter of 2023.While channel inventory levels are steadily declining, demand is being impacted by sales beingpushed closer to season application, with the channel opting to hold lower inventory levels due tohigh interest rates.ADAMA's sales in Canada declined in the first quarter in light of a "wait and see" approach in themarket, high fungicide channel inventories, as well as strong competition particularly incommoditized products.Latin America: Brazil – the Company's sales in the first quarter following the overall challengingcrop protection market due to unfavorable weather conditions, a "wait and see" approach" in themarket and softer pricing impacted by strong competition, particularly in commoditized products.Despite this, the Company's differentiated products continued to be well received includingfungicides Almada
? and Armero
?
and herbicide Apresa
?
for use in soybean.In the rest of LATAM sales in the first quarter reflected the overall challenging crop protectionmarket due to unfavorable weather conditions in Northern LATAM and "wait and see" purchasingpatterns combined with softer pricing in commoditized products. Despite this, the Company'sdifferentiated products in key strategic crop segment continued to be well received in the marketincluding fungicide Armero
?, herbicide Apresa
?
, insecticides Plethora
?
and Trivor
?
andbiologicals such as Actavan
?
.Asia-Pacific (APAC):
In China, the branded formulations achieved business growth in constant exchange rates drivenby bio-formulation new launches and a positive spring season while the Company also focusedon improving the quality of the business with differentiated products despite that the market is stillexperiencing high channel inventories and pricing pressure especially in commodities. Marketpricing in the non-ag business began normalizing from heights seen in recent years and the techsales were mainly impacted by a "wait and see" approach in the market.In the Pacific region, sales in the first quarter were impacted by softer pricing following declineof active ingredients prices from China as well as overall high channel inventories. This wasdespite better weather conditions than anticipated in Australia.Sales in India were impacted by softer pricing, exceptionally dry and hot weather, high channelinventories as well as "wait-and-see" purchasing behaviour mainly in commoditized products.Sales in the wider APAC region continued to experience pricing pressure following intensecompetition from China, particularly in commoditized products, while dry weather and higherchannel inventories impacted demand.
Gross Profit reported in the first quarter reached $256 million (gross margin of 24.2%) compared to$310 million (gross margin of 24.6%) in the same quarter last year.Adjustments to reported results: The adjusted gross profit includes reclassification of allinventory impairment, taxes and surcharge and excludes certain transportation costs(classified under operating expenses).Adjusted gross profit in the first quarter reached $288 million (gross margin of 27.2%) compared to$340 million (gross margin of 27.0%) in the same quarter last year.Despite the decline in the gross profit in the first quarter of 2024, the Company improved the grossmargin following the positive impact of new inventory sold, priced at market levels and themanagement focus on the quality of business which led to an improvement in the sales mix of highermargin products and this is despite the lower sales impacted by the decrease in prices and volumes.In the first quarter of 2024, exchange rates had a negative impact.Operating expenses reported in the first quarter of 2024 were $206 million (19.4% of sales),compared to $218 million (17.3% of sales) in the corresponding period last year.Adjustments to reported results: please refer to the explanation regarding adjustments to the grossprofit in respect to certain transportation costs, taxes and surcharges and inventory impairment.Additionally, the Company recorded certain non-operational items within its reportedoperating expenses amounting to $19 million in Q1 2024 in comparison to $10 million inQ1 2023 These include mainly (i) measures to improve efficiencies, (ii) non-cashamortization charges in respect of Transfer Assets received from Syngenta related to the2017 ChemChina-Syngenta acquisition, (iii) charges related to the non-cash amortizationof intangible assets created as part of the Purchase Price Allocation (PPA) on acquisitions,with no impact on the ongoing performance of the companies acquired,. For further detailson these non-operational items, please see the appendix to this release.Adjusted operating expenses in the first quarter were $216 million (20.5% of sales), compared to$238 million (18.9% of sales) in the corresponding period last year, respectively.The operating expenses were lower in the first quarter of 2024, following undertaking tight OPEXmanagement measures, lower transportation and logistics costs and the positive impact of exchangerates.Operating income reported in the first quarter amounted to $51 million (4.8% of sales) compared to$92 million (7.3% of sales) in the first quarter of 2023.Adjusted operating income in the first quarter reached $72 million (6.8% of sales) compared to $102million (8.1% of sales) in the same quarter last year.EBITDA reported in the first quarter amounted to $120 million (11.4% of sales) compared to $166million (13.2% of sales) in the same quarter last year.Adjusted EBITDA in the first quarter amounted to $132 million (12.5% of sales) compared to $165million (13.1% of sales) in the same quarter last year.Adjusted financial expenses amounted to $70 million in the first quarter, compared to $81 million inthe corresponding quarter last year.The lower financial expenses in the quarter were mainly due to the net effect of lower Israeli CPI onthe ILS-denominated, CPI-linked bonds as well as steps taken by the Company's management tooptimize the Company's financing structure. The Company took advantage of the high interest rateenvironment to increase interest received from weekly bank deposits designated to support workingcapital, as well as improved financing terms and leveraged group funding possibilities by taking long-
term loans in China at attractive rates, which minimized the increase in bank interest expenses paidin the first quarter of 2024.Adjusted taxes on income in the first quarter amounted to tax expenses of $12 million, compared toa tax income of $1 million in the corresponding quarter last year.Despite reaching losses before tax, the Company recorded tax expenses in the quarter mainlybecause the losses were primarily incurred by subsidiaries with relatively lower tax rates, while someof them did not create deferred tax assets on the losses. On the other hand, the subsidiaries thatgenerated profit have a higher tax rate.In the first quarter of 2024 the company recorded tax expenses due to the non-cash impact of theweakness of the BRL compared with tax income due to stronger BRL in the first quarter of 2023.Net loss reported in the first quarter was $32 million, compared to a net income of $12 million in thecorresponding quarter last year, respectively.Adjusted net loss in the first quarter was $10 million, compared to a net income of $22 million, in thecorresponding quarter last year, respectively.Trade working capital as of March 31, 2024, was $2,583 million compared to $3,148 million as ofMarch 31, 2023. Inventory held by the Company reached $1,807 million as of March 31, 2024, incomparison to $2,512 million as of March 31, 2023. The decrease in working capital was following theCompany's implementation of selective procurement practices, which already began in 2023, andwhich led to lower trade payables and a decrease in the level of inventory held by the Company. Thedecrease in receivables reflected the intensive collections as well as the lower sales.Cash Flow: Operating cash flow of $103 million was consumed in the first quarter of 2024, comparedto $425 million in the first quarter of 2023. The negative operating cash flow, which is seasonally typicalfor ADAMA in the first quarter was significantly improved due to a decrease in the procurement ofgoods as well as intensive collection.Net cash used in investing activities was $67 million in the first quarter in 2024, compared to $93million in the first quarter of 2023. The lower cash used in investing activities in the first quarter of 2024reflected the prioritization of investments, part of the actions taken by the Company to improve its cashflow. The Company invested in fixed assets including in its manufacturing capabilities in Israel andinvestments in intangible assets relating to ADAMA's global registrations of the Company's productsdescribed in the Product Registration section. In the first quarter of 2023 the company completed theacquisition of AgriNova New Zealand.Free cash flow of $194 million was consumed in the first quarter of 2024 compared to $542 millionconsumed in the first quarter of 2023, reflecting the aforementioned operating and investing cash flowdynamics.
Table 3. Revenues by operating segment
Sales by segment
| Q1 2024 USD (m) | % | Q1 2023 USD (m) | % |
Crop Protection
| Crop Protection | 961 | 90.9% | 1,146 | 91.1% |
Intermediates and Ingredients
| Intermediates and Ingredients | 96 | 9.1% | 112 | 8.9% |
Total
| Total | 1,057 | 100% | 1,259 | 100% |
Sales by product category
| Q1 2024 USD (m) | % | Q1 2023 USD (m) | % |
Herbicides
| Herbicides | 454 | 43.0% | 575 | 45.7% |
Insecticides
| Insecticides | 290 | 27.4% | 334 | 26.5% |
Fungicides
| Fungicides | 217 | 20.5% | 237 | 18.9% |
Intermediates and Ingredients
| Intermediates and Ingredients | 96 | 9.1% | 112 | 8.9% |
Total
| Total | 1,057 | 100% | 1,259 | 100% |
Notes:
The sales split by product category is provided for convenience purposes only and is not representative of the way the Company ismanaged or in which it makes its operational decisions.Numbers may not sum due to rounding.
Further InformationAll 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 ADAMAADAMA Ltd. is a global leader in crop protection, providing practical solutions to farmers across theworld to combat weeds, insects and disease. Our culture empowers ADAMA's people to actively listento farmers and ideate from the field. ADAMA's diverse portfolio of existing active ingredients, coupledwith its leading formulation capabilities and proprietary formulation technology platforms, uniquelyposition the company to develop high-quality, innovative and sustainable products, to address themany challenges farmers and customers face today. ADAMA serves customers in over 100 countriesglobally. For more information, visit us at www.ADAMA.com and follow us on Twitter? at@ADAMAAgri.
ContactRivka Neufeld Zhujun WangGlobal Investor Relations China Investor RelationsEmail: ir@adama.com Email: irchina@adama.com
Abridged Adjusted Consolidated Financial Statements
The following abridged consolidated financial statements and notes have been prepared as described in Note 1 in thisappendix. While prepared based on the principles of Chinese Accounting Standards (ASBE), they do not contain all of theinformation which either ASBE or IFRS would require for a complete set of financial statements, and should be read inconjunction with the consolidated financial statements of both ADAMA Ltd. and Adama Agricultural Solutions Ltd. as filedwith the Shenzhen and Tel Aviv Stock Exchanges, respectively.Relevant income statement items contained in this release are also presented on an “Adjusted” basis, which exclude itemsthat are of a one-time or non-cash/non-operational nature that do not impact the ongoing performance of the business, andreflect 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 investorsto effectively compare the true underlying financial performance of its business from period to period and against its globalpeers.Abridged Consolidated Income Statement for the First Quarter
| Adjusted3 | Q1 2024 USD (m) | Q1 2023 USD (m) | Q1 2024 RMB (m) | Q1 2023 RMB (m) |
Revenues
| Revenues | 1,057 | 1,259 | 7,509 | 8,611 |
Cost of Sales
| Cost of Sales | 767 | 909 | 5,450 | 6,218 |
Other costs
| Other costs | 2 | 10 | 13 | 68 |
Gross profit
| Gross profit | 288 | 340 | 2,046 | 2,325 |
% of revenue
| % of revenue | 27.2% | 27.0% | 27.2% | 27.0% |
Selling & Distribution expenses
| Selling & Distribution expenses | 169 | 186 | 1,198 | 1,270 |
General & Administrative expenses
| General & Administrative expenses | 36 | 39 | 254 | 267 |
Research & Development expenses
| Research & Development expenses | 16 | 20 | 112 | 135 |
Other operating expenses
| Other operating expenses | (4) | (6) | (26) | (43) |
Total operating expenses
| Total operating expenses | 216 | 238 | 1,538 | 1,630 |
% of revenue
| % of revenue | 20.5% | 18.9% | 20.5% | 18.9% |
Operating income (EBIT)
| Operating income (EBIT) | 72 | 102 | 508 | 696 |
% of revenue
| % of revenue | 6.8% | 8.1% | 6.8% | 8.1% |
Financial expenses
| Financial expenses | 70 | 81 | 495 | 555 |
Income before taxes
| Income before taxes | 2 | 20 | 13 | 140 |
Taxes on Income
| Taxes on Income | 12 | (1) | 82 | (7) |
Net Income (loss)
| Net Income (loss) | (10) | 22 | (69) | 148 |
% of revenue
| % of revenue | (0.9%) | 1.7% | (0.9%) | 1.7% |
Adjustments
| Adjustments | 22 | 9 | 158 | 64 |
Reported Net income (loss)
| Reported Net income (loss) | (32) | 12 | (228) | 83 |
% of revenue
| % of revenue | (3.0%) | 1.0% | (3.0%) | 1.0% |
Adjusted EBITDA
| Adjusted EBITDA | 132 | 165 | 938 | 1,131 |
% of revenue
| % of revenue | 12.5% | 13.1% | 12.5% | 13.1% |
Adjusted EPS
– Basic
| Adjusted EPS4 – Basic | (0.0042) | 0.0093 | (0.0297) | 0.0633 |
– Diluted
| – Diluted | (0.0042) | 0.0093 | (0.0297) | 0.0633 |
Reported EPS
– Basic
| Reported EPS5 – Basic | (0.0138) | 0.0052 | (0.0977) | 0.0357 |
– Diluted
| – Diluted | (0.0138) | 0.0052 | (0.0977) | 0.0357 |
For an analysis of the differences between the adjusted income statement items and the income statement items as reported in the financial
statements, see below “Analysis of Gaps between Adjusted Income Statement and Income Statement in Financial Statements”.
The number of shares used to calculate both basic and diluted earnings per share in both Q1 2024 and 2023 is 2,329.8 million shares.
Abridged Consolidated Balance Sheet
| March 31 2024 USD (m) | March 31 2023 USD (m) | March 31 2024 RMB (m) | March 31 2023 RMB (m) |
Assets
| Assets |
Current assets:
| Current assets: |
Cash at bank and on hand
| Cash at bank and on hand | 523 | 514 | 3,710 | 3,529 |
Bills and accounts receivable
| Bills and accounts receivable | 1,521 | 1,637 | 10,789 | 11,246 |
Inventories
| Inventories | 1,807 | 2,512 | 12,824 | 17,265 |
Other current assets, receivables andprepaid expenses
| Other current assets, receivables and prepaid expenses | 230 | 285 | 1,663 | 1,961 |
Total current assets
| Total current assets | 4,081 | 4,948 | 28,955 | 34,001 |
Non-current assets:
| Non-current assets: |
Fixed assets, net
| Fixed assets, net | 1,767 | 1,749 | 12,533 | 12,022 |
Rights of use assets
| Rights of use assets | 86 | 80 | 607 | 547 |
Intangible assets, net
| Intangible assets, net | 1,447 | 1,479 | 10,267 | 10,163 |
Deferred tax assets
| Deferred tax assets | 223 | 217 | 1,585 | 1,490 |
Other non-current assets
| Other non-current assets | 106 | 115 | 755 | 788 |
Total non-current assets
| Total non-current assets | 3,629 | 3,640 | 25,747 | 25,010 |
Total assets
| Total assets | 7,710 | 8,588 | 54,703 | 59,011 |
Liabilities
| Liabilities |
Current liabilities:
| Current liabilities: |
Loans and credit from banks and otherlenders
| Loans and credit from banks and other lenders | 1,039 | 1,319 | 7,369 | 9,067 |
Bills and accounts payable
| Bills and accounts payable | 754 | 1,009 | 5,350 | 6,934 |
Other current liabilities
| Other current liabilities | 749 | 905 | 5,312 | 6,220 |
Total current liabilities
| Total current liabilities | 2,541 | 3,234 | 18,031 | 22,221 |
Long-term liabilities:
| Long-term liabilities: |
Loans and credit from banks and otherlenders
| Loans and credit from banks and other lenders | 476 | 512 | 3,374 | 3,521 |
Debentures
| Debentures | 965 | 1,039 | 6,848 | 7,142 |
Deferred tax liabilities
| Deferred tax liabilities | 41 | 45 | 294 | 311 |
Employee benefits
| Employee benefits | 97 | 116 | 687 | 799 |
Other long-term liabilities
| Other long-term liabilities | 536 | 302 | 3,806 | 2,074 |
Total long-term liabilities
| Total long-term liabilities | 2,115 | 2,015 | 15,009 | 13,847 |
Total liabilities
| Total liabilities | 4,657 | 5,249 | 33,040 | 36,068 |
Equity
| Equity |
Total equity
| Total equity | 3,035 | 3,339 | 21,663 | 22,943 |
Total liabilities and equity
| Total liabilities and equity | 7,710 | 8,588 | 54,703 | 59,011 |
Abridged Consolidated Cash Flow Statement for the First Quarter
| Q1 2024 USD (m) | Q1 2023 USD (m) | Q1 2024 RMB (m) | Q1 2023 RMB (m) | |
| Cash flow from operating activities: | ||||
| Cash flow used for operating activities | (103) | (425) | (735) | (2,905) |
| Cash flow used for operating activities | (103) | (425) | (735) | (2,905) |
| Investing activities: | ||||
| Acquisitions of fixed and intangible assets | (66) | (85) | (468) | (580) |
| Proceeds from disposal of fixed and intangible assets | 1 | 4 | 4 | 26 |
| Acquisition of subsidiary | 0 | (22) | 0 | (148) |
| Other investing activities | (1) | 9 | (8) | 63 |
| Cash flow used for investing activities | (67) | (93) | (473) | (639) |
| Financing activities: | ||||
| Receipt of loans from banks and other lenders | 172 | 525 | 1,218 | 3,595 |
| Repayment of loans from banks and other lenders | (195) | (29) | (1,383) | (200) |
| Interest payment and other | (24) | (26) | (168) | (179) |
| Other financing activities | 49 | (53) | 349 | (365) |
| Cash flow from financing activities | 2 | 417 | 17 | 2,851 |
| Effects of exchange rate movement on cash and cash equivalents | 0 | 1 | 13 | (53) |
| Net change in cash and cash equivalents | (167) | (100) | (1,178) | (747) |
| Cash and cash equivalents at the beginning of the period | 686 | 607 | 4,857 | 4,225 |
| Cash and cash equivalents at the end of the period | 519 | 506 | 3,679 | 3,479 |
| Free Cash Flow | (194) | (542) | (1,376) | (3,710) |
Notes to Abridged Consolidated Financial Statements
Note 1: Basis of preparationBasis of presentation and accounting policies: The abridged consolidated financial statements for thequarters ended March 31, 2024 and 2023 incorporate the financial statements of ADAMA Ltd. and of all of itssubsidiaries (the “Company”), including Adama Agricultural Solutions Ltd. (“Solutions”) and its subsidiaries.The Company has adopted the Accounting Standards for Business Enterprises (ASBE) issued by the Ministryof Finance (the "MoF") and the implementation guidance, interpretations and other relevant provisions issuedor revised subsequently by the MoF (collectively referred to as “ASBE”).The abridged consolidated financial statements contained in this release are presented in both ChineseRenminbi (RMB), as the Company’s shares are traded on the Shenzhen Stock Exchange, as well as in UnitedStates dollars ($) as this is the major currency in which the Company’s business is conducted. For the purposesof this release, a customary convenience translation has been used for the translation from RMB to US dollars,with Income Statement and Cash Flow items being translated using the quarterly average exchange rate, andBalance Sheet items being translated using the exchange rate at the end of the period.The preparation of financial statements requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of thefinancial statements, and the reported amounts of revenues and expenses during the reporting period. Actualresults could differ from those estimated.Note 2: Abridged Financial StatementsFor ease of use, the financial statements shown in this release have been abridged as follows:
Abridged Consolidated Income Statement:
? “Gross profit” in this release is revenue less costs of goods sold, taxes and surcharges, inventoryimpairment and other idleness charges (in addition to those already included in costs of goods sold);part of the idleness charges is removed in the Adjusted financial statements? “Other operating expenses” includes impairment losses (not including inventory impairment); gain (loss)from disposal of assets and non-operating income and expenses? “Operating expenses” in this release differ from those in the formally reported financial statements inthat certain transportation costs have been reclassified from COGS to Operating Expenses.? “Financial expenses” includes net financing expenses and gains/losses from changes in fair value.
Abridged Consolidated Balance Sheet:
? “Other current assets, receivables and prepaid expenses” includes financial assets held for trading;
financial assets in respect of derivatives; prepayments; other receivables; and other current assets? “Fixed assets, net” includes fixed assets and construction in progress? “Intangible assets, net” includes intangible assets and goodwill? “Other non-current assets” includes other equity investments; long-term equity investments; long-termreceivables; investment property; and other non-current assets? “Loans and credit from banks and other lenders” includes short-term loans and non-current liabilitiesdue within one year? “Other current liabilities” includes financial liabilities in respect of derivatives; payables for employeebenefits, taxes, interest, dividends and others; advances from customers and other current liabilities? “Other long-term liabilities” includes long-term payables, provisions, deferred income and other non-current liabilities
Income Statement Adjustments
| Q1 2024 USD (m) | Q1 2023 USD (m) | Q1 2024 RMB (m) | Q1 2023 RMB (m) |
Reported Net Income (Loss)
| Reported Net Income (Loss) | (32) | 12 | (228) | 83 |
Adjustments to COGS & Operating Expenses:
| Adjustments to COGS & Operating Expenses: |
1. Amortization of acquisition-related PPA and other acquisition related costs
| 1. Amortization of acquisition-related PPA and other acquisition related costs | 4 | 4 | 26 | 29 |
2. Amortization of Transfer assets received and written-up due to 2017 ChemChina-
Syngenta transaction (non-cash)
| 2. Amortization of Transfer assets received and written-up due to 2017 ChemChina-Syngenta transaction (non-cash) | 5 | 6 | 36 | 42 |
3. Upgrade & Relocation related costs
| 3. Upgrade & Relocation related costs | 1 | 1 | 6 | 5 |
4. Incentive plans
| 4. Incentive plans | 0 | (1) | 0 | (6) |
| 5. ASBEs classifications COGS impact | (30) | (30) | (214) | (203) |
6. ASBEs classifications OPEX impact
| 6. ASBEs classifications OPEX impact | 30 | 30 | 214 | 203 |
7. Measures to improve efficiencies
| 7. Measures to improve efficiencies | 11 | 0 | 80 | 0 |
Total Adjustments to Operating Income (EBIT)
| Total Adjustments to Operating Income (EBIT) | 21 | 10 | 148 | 69 |
Total Adjustments to EBITDA
| Total Adjustments to EBITDA | 12 | (1) | 82 | (4) |
Adjustments to Financing Expenses:
| Adjustments to Financing Expenses: |
Other financing expenses
| Other financing expenses | 2 | 0 | 17 | 0 |
Adjustments to Taxes:
| Adjustments to Taxes: |
Taxes impact
| Taxes impact | 1 | 1 | 6 | 5 |
Total adjustments to Net Income
| Total adjustments to Net Income | 22 | 9 | 158 | 64 |
Adjusted Net Income (Loss)
| Adjusted Net Income (Loss) | (10) | 22 | (69) | 148 |
Notes:
1. Amortization of acquisition-related PPA and other acquisition related costs:
a. Amortization of Legacy PPA of 2011 acquisition of Solutions (non-cash): Under ASBE, since the third combined reporting for Q3 2017,the Company has inherited the historical “legacy” amortization charge that ChemChina previously was incurring in respect of its acquisitionof Solutions in 2011. This amortization is done in a linear manner on a quarterly basis, most of which will have been completed by the endof 2020.b. Amortization of acquisition-related PPA (non-cash) and other acquisition-related costs: Related mainly to the non-cash amortizationof intangible assets created as part of the Purchase Price Allocation (PPA) on acquisitions, with no impact on the ongoing performance ofthe companies acquired, as well as other M&A-related costs.
2. Amortization of Transfer assets received and written-up due to 2017 ChemChina-Syngenta transaction (non-cash): The proceeds fromthe Divestment of crop protection products in connection with the approval by the EU Commission of the acquisition of Syngenta by ChemChina,net of taxes and transaction expenses, were paid to Syngenta in return for the transfer of a portfolio of products in Europe of similar nature andeconomic value. Since the products acquired from Syngenta are of the same nature and with the same net economic value as those divested,and since in 2018 the Company adjusted for the one-time gain that it made on the divested products, the additional amortization charge incurreddue to the written-up value of the acquired assets is also adjusted to present a consistent view of Divestment and Transfer transactions, whichhad no net impact on the underlying economic performance of the Company. These additional amortization charges will continue until 2032 butat a reducing rate, yet will still be at a meaningful level until 2028.
3. Upgrade & manufacturing facilities relocation-related costs: These charges all relate to Upgrade & Relocation programs in China and Israel.As part of this program, production assets located in the old production sites in Huai’An and Beer-Sheva were in a relocation process to newsites in 2023, 2024 and in the coming years. Since some of the older production assets may not be able to be relocated, some of these assetswhich are no longer operational are being written off (or impaired), while for others, their economic life has been shortened and therefore will bedepreciated over a shorter period. Since these are older assets that were built many years ago and will be replaced by newer production facilitiesat the new sites, and since the ongoing operations of the business will not be impacted thereby, the Company adjusts for the impact of all chargesrelated to Upgrade & Relocated programs, which include mainly accelerate depreciation.
4. Incentive plans: ADAMA granted certain of its employees, a long-term incentive (LTI) in the form of 'phantom' awards linked to the Company’s
share price. As such, the Company records an expense, or recognizes income, depending on the fluctuation in the Company’s share price,regardless of award exercises. To neutralize the impact of such share price movements on the measurement of the Company’s performanceand expected employee compensation and to reflect the existing phantom awards, in the Company’s adjusted financial performance, the LTI ispresented on an equity-settled basis in accordance with the value of the existing plan at the grant date.
5. ASBEs classifications COGS impact: according to the ASBE guidelines [IAS 37], certain items (specifically certain transportation costs) are
classified under COGS.
6. ASBEs classifications OPEX impact: according to the ASBE guidelines [IAS 37], certain items (specifically certain transportation costs) are
classified under COGS.
7. Measures to improve efficiencies – ADAMA recorded costs due to certain measures initiated to improve efficiencies mainly personnel changes
Exchange Rate Data for the Company's Principal Functional Currencies
| March 31 | Q1 Average | |||||||
| 2024 | 2023 | Change | 2024 | 2023 | Change | |||
| EUR/USD | 1.081 | 1.088 | (0.6%) | 1.086 | 1.073 | 1.2% | ||
| USD/BRL | 4.996 | 5.080 | 1.7% | 4.953 | 5.195 | 4.7% | ||
| USD/PLN | 3.989 | 4.293 | 7.1% | 3.992 | 4.392 | 9.1% | ||
| USD/ZAR | 18.87 | 17.83 | (5.8%) | 18.896 | 17.735 | (6.5%) | ||
| AUD/USD | 0.651 | 0.668 | (2.6%) | 0.658 | 0.684 | (3.8%) | ||
| GBP/USD | 1.264 | 1.236 | 2.3% | 1.268 | 1.214 | 4.5% | ||
| USD/ILS | 3.681 | 3.615 | (1.8%) | 3.660 | 3.538 | (3.4%) | ||
| USD L 3M | 5.30% | 5.19% | 11 bp | 5.32% | 4.92% | 40 bp | ||
| March 31 | Q1 Average | |||||||
| 2024 | 2023 | Change | 2024 | 2023 | Change | |||
| USD/RMB | 7.095 | 6.872 | 3.2% | 7.103 | 6.842 | 3.8% | ||
| EUR/RMB | 7.670 | 7.474 | 2.6% | 7.678 | 7.338 | 4.6% | ||
| RMB/BRL | 0.704 | 0.739 | 4.8% | 0.697 | 0.759 | 8.2% | ||
| RMB/PLN | 0.704 | 0.625 | (12.7%) | 0.562 | 0.642 | 12.4% | ||
| RMB/ZAR | 2.659 | 2.594 | (2.5%) | 2.660 | 2.592 | (2.6%) | ||
| AUD/RMB | 4.619 | 4.573 | 1.0% | 4.672 | 4.679 | (0.1%) | ||
| GBP/RMB | 0.562 | 8.491 | (93.4%) | 8.969 | 8.307 | 8.0% | ||
| RMB/ILS | 0.519 | 0.526 | 1.4% | 0.515 | 0.517 | 0.4% | ||
| RMB Shibor 3M | 2.157% | 2.476% | (32 bp) | 2.284% | 2.413% | (13 bp) | ||