ADAMA Ltd. Annual Report 2019
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ADAMA LTD.ANNUAL REPORT 2019
ADAMA Ltd. is a global leader in crop protection, providing solutions to farmers across theworld to combat weeds, insects and disease. ADAMA has one of the widest and mostdiverse portfolios of active ingredients in the world, state-of-the art R&D, manufacturing andformulation facilities, together with a culture that empowers our people in markets aroundthe world to listen to farmers and ideate from the field. This uniquely positions ADAMA tooffer a vast array of distinctive mixtures, formulations and high-quality differentiatedproducts, delivering solutions that meet local farmer and customer needs in over 100countries globally.For further important additional information and details, please refer to the Annex tothe Company’s Announcement on the 2019 Full-Year Financial Preview dated March31, 2020 (announcement no. 2020-19), (available at www.cninfo.com.cn).
April 2020
ADAMA Ltd. Annual Report 2019
Section I - Important Notice, Table of Contents and Definitions
? The Company’s Board of Directors, Board of Supervisors, directors, supervisors and senior managers confirmthat the content of the Report is true, accurate and complete and contains no false statements, misleadingpresentations or material omissions, and assume joint and several legal liability arising therefrom.
? Ignacio Dominguez, the person leading the Company (President and Chief Executive Officer) as well as its legalrepresentative, and Aviram Lahav, the person leading the accounting function (Chief Financial Officer & DeputyChief Executive Officer), hereby assert and confirm the truthfulness, accuracy and completeness of the FinancialReport.
? All of the Company’s directors attended the board meeting for the review of this Report.
? The forward looking information described in the Report, such as future plans, development strategy etc., doesnot constitute, in any manner whatsoever, a substantial commitment of the Company to investors. Investors andother relevant people are cautioned to be sufficiently mindful of investment risks as well as the differencebetween plans, forecasts and commitments.
? The Company has described its future development strategies, work plan for 2020 and possible risks in “IX.Outlook of future development of the Company” in Section IV.
? The pre-plan of the dividend distribution approved by the meeting of the Board of Directors on April 27, 2020refers to the total outstanding 2,446,553,582 shares of the Company as of February 28, 2020 as the basis for thedistribution of RMB 0.12 (including tax) as cash dividend per 10 shares, to all the shareholders of the Company.No shares will be distributed as share dividend, and no reserve will be transferred to equity capital.
? This Report and its abstract have been prepared in both Chinese and English. Should there be any
discrepancies between the two versions, the Chinese version shall prevail.
ADAMA Ltd. Annual Report 2019
Table of Contents
Section I - Important Notice, Table of Contents and Definitions ...... 2
Section II - Corporate Profile and Financial Results ...... 5
Section III - Business Profile ...... 10
Section IV - Performance Discussion and Analysis ...... 14
Section V - Significant Events ...... 51
Section VI. - Change in Shares & Shareholders ............................................................................ 83
Section VII. - Preferred stock .......................................................................................................... 94Section VIII. - Directors, Members of the Supervisory Board, Senior Management Staff &Employees ...... 95
Section IX. - Corporate Governance ............................................................................................ 105
Section X - Corporate Bonds ...... 113
Section XI - Financial Report ...... 114
Section XII - Documents Available for Reference ...... 248
ADAMA Ltd. Annual Report 2019
Definitions
In this Report, the following terms have the meaning appearing alongside them, unless otherwise specified:
| General Terms | Definition |
| Company, the Company | ADAMA Ltd. |
| Adama Solutions | Adama Agricultural Solutions Ltd., a wholly-owned subsidiary of the Company, incorporated in Israel according to its laws |
| Anpon, ADAMA Anpon | ADAMA Anpon (Jiangsu) Ltd. (previously named Jiangsu Anpon Electrochemical Co., Ltd.), a wholly-owned subsidiary of the Company |
| Board of Directors/Board | The Board of Directors of the Company |
| Board of Supervisors | The Board of Supervisors of the Company |
| Articles of Association / AOA | The Articles of Association of the Company |
| Group, the Group, ADAMA | The Company, including all its subsidiaries, unless expressly stated otherwise |
| ChemChina | China National Chemical Co., Ltd. |
| ChemChina-Syngenta Transaction | The acquisition of Syngenta AG by ChemChina in 2017 |
| CNAC | China National Agrochemical Co., Ltd., the controlling shareholder of the Company, a wholly-owned subsidiary of ChemChina |
| CSRC | China Securities Regulatory Commission |
| SZSE | Shenzhen Stock Exchange |
| SASAC | State Assets Supervision and Administration Commission of China |
| Syngenta Group | Syngenta Group Co., Ltd,, a newly-formed agriculture industry leader, registered in Shanghai and owned by ChemChina, being created through the bringing together of the agricultural businesses of ChemChina and Sinochem, as announced on January 2020 by ChemChina and Sinochem. |
| Report | This 2019 Annual Report |
| Financial Report | The Financial Reports for the year 2019, as contained in this Report |
| Reporting Period, this Period, Current Year | Year 2019 |
| The Combination Transaction, the Major Assets Restructuring | In July 2017, the Company acquired 100% of the shares of Adama Solutions from CNAC in exchange for the issuance and allotment of 1,810,883,039 new A-shares of the Company to CNAC. In addition, the Company issued 104,697,982 new A-shares to selected investors in an A-Share Private Placement conducted as Supporting Finance for the transaction. |
| Company Law | Company Law of the People’s Republic of China |
| Securities Law | Securities Law of the People’s Republic of China |
| Listing Rules | Listing Rules of the SZSE |
ADAMA Ltd. Annual Report 2019
Section II - Corporate Profile and Financial Results
I. Corporate information
| Stock name | ADAMA A, ADAMA B | Stock code | 000553, 200553 |
| Stock exchange | Shenzhen Stock Exchange | ||
| Company name in Chinese | 安道麦股份有限公司 | ||
| Abbr. | 安道麦 | ||
| Company name in English (if any) | ADAMA Ltd. | ||
| Abbr. (if any) | ADAMA | ||
| Legal representative | Ignacio Dominguez (*) | ||
| Registered address | No. 93, East Beijing Road, Jingzhou, Hubei | ||
| Zip code | 434001 | ||
| Office address | No. 93, East Beijing Road, Jingzhou, Hubei | ||
| Zip code | 434001 | ||
| Company website | www.adama.com | ||
| irchina@adama.com | |||
| Board Secretary | Securities Affairs Representative | Investor Relations Manager | |
| Name | Li Zhongxi | Liang Jiqin | Wang Zhujun |
| Address | 6/F, No.7 Office Building, No.10 Courtyard, Chaoyang Park South Road, Chaoyang District, Beijing | ||
| Tel. | 010-56718110 | 010-56718110 | 010-56718110 |
| Fax | 010-59246173 | 010-59246173 | 010-59246173 |
| irchina@adama.com | irchina@adama.com | irchina@adama.com | |
ADAMA Ltd. Annual Report 2019
III. Information disclosure
| Newspapers designated by the Company for information disclosure | China Securities Journal Securities Times Kung Pao |
| Website designated by the CSRC for the publication of this Report | http://www.cninfo.com.cn |
| Place where this Report is kept | Securities office of the Company |
| Credibility code | 91420000706962287Q |
| Changes in main business activities of the Company after going public (if any) | None in the reporting period. |
| Changes of controlling shareholder (if any) | None in the reporting period. |
| Company’s Auditors | Name | Deloitte Touche Tohmatsu Certified Public Accountants LLP |
| Office address | 30/F, Bund Center, 222 Yan An Road East, Shanghai PRC | |
| Signing Certified Public Accountant | Hu Ke and Ma Renjie |
| Name of Financial Advisor | Address | Names of the Sponsors | Period for the Continuous Supervision |
| Guotai Junan Securities Co., Ltd. | No. 618 of Shangcheng Road, Free Trade Area, Shanghai, China | Zhu Wenchuan, Tang Weijie | From Aug 2, 2017 to Dec 31, 2019 |
ADAMA Ltd. Annual Report 2019
VI. Main accounting and financial results
Whether the Company performed any retroactive adjustments to or restatement of its accounting data
√ Yes □ No
| 2019 | 2018 | +/- (%) | 2017 | |||
| Before adjustments | After adjustments | Before adjustments | After adjustments | |||
| Operating revenue (RMB’000) | 27,563,239 | 25,615,119 | 26,867,308 | 2.59% | 23,819,568 | 25,463,024 |
| Net profit attributable to the shareholders (RMB’000) | 277,041 | 2,402,462 | 2,447,876 | -88.68% | 1,545,879 | 1,581,202 |
| Net profit attributable to the shareholders, excluding non-recurring profit and loss (RMB’000) | 610,059 | 859,448 | 859,448 | -29.02% | 382,275 | 382,275 |
| Net cash flows from operating activities (RMB’000) | 843,487 | 2,002,139 | 2,299,153 | -63.31% | 3,958,389 | 4,291,976 |
| Basic EPS (RMB/share) | 0.1132 | 0.9820 | 1.0005 | -88.69% | 0.6601 | 0.6463 |
| Diluted EPS (RMB/share) | N/A | N/A | N/A | N/A | N/A | N/A |
| Weighted average return on equity | 1.23% | 11.68% | 11.66% | -10.43% | 9.05% | 8.67% |
| 31.12.2019 | 31.12.2018 | +/- (%) | 31.12.2017 | |||
| Before adjustments | After adjustments | Before adjustments | After Adjustments | |||
| Total assets (RMB’000) | 45,288,940 | 42,812,505 | 44,135,063 | 2.61% | 39,613,922 | 41,164,689 |
| Net assets attributable to the shareholders (RMB’000) | 22,371,665 | 22,280,126 | 22,744,862 | -1.64% | 18,778,013 | 19,272,227 |
ADAMA Ltd. Annual Report 2019
3. Explanation on the differences in accounting data
□ Applicable √ Not applicable
VIII. Main Financial results by quarter
Unit: RMB’000
| Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | |
| Operating revenue | 6,787,751 | 6,828,281 | 6,666,043 | 7,281,164 |
| Net profit attributable to the shareholders | 366,756 | 221,882 | 206,095 | -517,692 |
| Net profit attributable to the shareholders excluding non-recurring profit and loss | 285,087 | 145,183 | 192,235 | -12,446 |
| Net cash flows from operating activities | -1,289,484 | 984,534 | 399,211 | 749,226 |
| Item | 2019 | 2018 | 2017 | Note |
| Gains/losses on the disposal of non-current assets (including the offset part of asset impairment provisions) | 127,073 | 1,959,005 | -3,000 | 2018 amount is mainly from divestment in Europe, related to the ChemChina-Syngenta Transaction. |
| Government grants charged to the profit/loss for the Reporting Period (except for the government grants closely related to the business of the Company and given at a fixed quota or amount in accordance with the State’s uniform standards) | 27,410 | 21,089 | 14,628 | |
| Profit or loss of subsidiaries generated before combination date of a business combination involving enterprises under common control | 38,027 | 45,414 | 1,183,120 | 2017 includes the acquisition of Solutions as well as Anpon. 2018-2019 relates only to Anpon. |
| Profit or loss arising from contingencies other than those related to normal operating business | -45,989 | - | -15,671 | |
| Recovery or reversal of provision for bad debts which is assessed individually during the years | 25,821 | 17,303 | 22,204 | |
| Other non-operating income and expenses other than the above | -40,992 | -11,719 | 4,036 | |
| Other profit or loss that meets the definition of non-recurring profit or loss | -574,500 | - | - | Mainly asset impairment and severance charges due to plant relocations in Jingzhou and Huai’an. |
| Less: Income tax effects | -110,132 | 442,664 | 6,390 | |
| NCI (after tax) | - | - | - | |
| Total | -333,018 | 1,588,428 | 1,198,927 |
ADAMA Ltd. Annual Report 2019
Explanation whether the Company has classified an item as exceptional profit/loss according to the definition in theExplanatory Announcement No. 1 on Information Disclosure for Companies Offering their Securities to thePublic-Non-Recurring Profit and Loss, and reclassified any non-recurring profit/loss item given as an example in the saidexplanatory announcement to recurrent profit/loss
□ Applicable √ Not applicable
No such cases during the Reporting Period.
ADAMA Ltd. Annual Report 2019
Section III - Business Profile
I. Main business of the Company during the Reporting PeriodIs the Company required to abide by disclosure requirements specific to the industry in which it operates?No
The Company is a corporation incorporated in the People's Republic of China.The Group engages in the development, manufacturing and commercialization of crop protection products, that arelargely off-patent, and is one of the leading companies in the world in this field. The Group provides solutions to farmers inapproximately 100 countries, through approximately 60 subsidiary companies throughout the world.The Group's business model integrates end-customer access, regulatory expertise, global R&D and productioncapabilities, thereby providing the Group a significant competitive edge and allowing it to launch new and differentiatedproducts that address farmers’ needs in key markets.The Group's primary operations are global, spanning activities in Europe, North America, Latin America, Asia-Pacific(including China) and India, the Middle-East and Africa. In aggregate, the Group sells its products in approximately 100countries across the globe.The Group is focused on the development, manufacturing and commercialization of largely off-patent crop protectionproducts, which are generally herbicides, insecticides and fungicides, which protect agricultural and other crops againstweeds, insects and disease, respectively. The Group also utilizes its expertise to adapt such products also for thedevelopment, manufacturing and commercialization of similar products for non-agricultural purposes (Consumer andProfessional Solutions).In addition, the Group leverages its core capabilities in the agricultural and chemical fields and operates in several othernon-agricultural areas, none of which, individually, is material for the Group. These activities, collectively reported asIntermediates and Ingredients , include primarily, (a) the manufacturing and marketing of dietary supplements, food colors,texture and flavor enhancers, and food fortification ingredients; (b) fragrance products for the perfume, cosmetics, bodycare and detergents industries; (c) the manufacturing of industrial products and (d) other non-material activities.Trends, events and key developments in the Group's macro-economic environment may have a material impact on itsbusiness results and development. The influence of these factors may differ depending on the geographic region and thedifferent products of the Group. Since the Group maintains a wide product portfolio and since it is active in manygeographic regions, the aggregate effect of these factors in any given year, and during the course thereof, is not uniformand may sometimes be mitigated by counterbalancing influences. The activities and results of the Group are furthersubject to, and affected by, certain global, localized and other factors, such as: demographic changes; economic growthand rising standards of living; agricultural commodity prices; significant fluctuations in raw material costs and global energyprices; development of new crop protection technologies; patent expiries and growth in volumes of off-patent products; theglobal agricultural markets and volatile weather conditions; regulatory changes; government policies; world ports,international monetary policies and the financial markets.Syngenta GroupIn January 2020, ChemChina and Sinochem (also a major economic conglomerate controlled by the Chinese Government,whose chairman, Mr. Frank Ning, also serves as the chairman of the ChemChina group) announced the formation of theSyngenta Group, a newly-formed ag-industry leader, registered in Shanghai and owned by ChemChina, being created
ADAMA Ltd. Annual Report 2019
through the bringing together of the agricultural businesses of ChemChina and Sinochem (the “Syngenta Group” - asdefined above). Syngenta Group is expected to become one of the world’s leading agriculture inputs companies, spanningcrop protection, seeds, fertilizers, additional agricultural and digital technologies, as well as an advanced distributionnetwork in China, reaching farmers nationwide.Syngenta Group is expected to further bolster the coordination between the Syngenta Group’s member companies,including the Company, and capitalize the value creation and business opportunities including by the Company. In thiscontext, the Syngenta Group companies are exploring various initiatives to capitalize their synergies and have significantlyadvanced and strengthened their collaboration over the last year, generating meaningful additional revenue through, butnot limited to, the potential provision of reciprocal access to certain products in specific territories, as well as exploitingopportunities aimed at optimizing the utilization of the companies’ operational facilities benefiting from procurement andoperational savings.For further important additional information and details, please refer to the Annex to the Company’sAnnouncement on the 2019 Full-Year Financial Preview dated March 31, 2020 (announcement no. 2020-19),(available at www.cninfo.com.cn).
II. Significant changes to main assets
1. Significant changes to main assets
| Main Assets | Significant Change |
| Stock rights/Equity assets | No significant change |
| Fixed assets | No significant change |
| Intangible assets | No significant change |
| Construction in progress | CIP transferred to fixed assets |
| Specific contents of the assets | Reason | Scale (Amount) of the assets (RMB’000) | Location | Operation /Management mode | Control measures to guarantee safety of the assets | Net Profit of the assets (RMB’000) | Proportion of overseas assets out of total net assets (%) | Significant impairment risk? |
| Equity investment in Adama Solutions | Acquired through Major Assets Restructuring | 19,675,633 | Israel and globally | Corporate Governance | Corporate Governance | 797,763 | 88% | No |
| Other explanations | ||||||||
ADAMA Ltd. Annual Report 2019
offerings, giving it the ability to provide efficient, value-added solutions to farmers of every major crop around theworld. Moreover, the breadth of the Group’s product portfolio, with no single active ingredient constituting morethan 5% of its sales in 2019, combined with its extensive geographic reach, provide effective diversification andenhanced stability. The Group strives to continue to gain market share, building on its leading role in the market,farmer-centric focus and broad product portfolio. Furthermore, the Group’s addressable market continues toexpand as the crop protection market globally continues to shift towards off-patent products, the segment of themarket on which the Group focuses. This shift is the result of significant increases in the costs and risks ofdiscovering and developing novel and effective Active Ingredients (AIs), which has led to significantly fewerintroductions of new molecules each year by the Company’s Research-Based Company (RBC) competitors. TheGroup believes that its strength in the off-patent market provides it with a competitive advantage relative to RBCs,as it is able, with its research, technology and know-how, to access off-patent crop protection productsdeveloped by all of the various major RBCs. This allows the Group to enhance existing crop protection productsand introduce unique mixtures, formulations and applications. In parallel, the Group’s global scale, registrationexpertise and manufacturing footprint are competitive advantages in comparison to many of its off-patent peers.? Global Reach and Strength in Emerging Markets. The Group has an industry leading global footprint withextensive market presence. The Group enjoys broad geographic diversification by selling in over 100 countrieswith a balanced regional split, as evidenced by its 2019 revenue breakdown of approximately 26% in bothEurope and Latin America, 20% in North America, 16% in Asia Pacific, and 13% in India, the Middle East andAfrica. This balance enhances the Group’s growth profile and provides diversification across different countries,climates, crops and planting seasons. The Group has a particularly strong presence in emerging markets, wheregrowth is expected to outpace developed markets, and from which it derived more than half of its 2019 sales.? Unique Positioning and Access to China. The Group believes that the foundation provided by the integration
of Adama Solutions with the operational and commercial infrastructure of the Company in China, together with itsunique relationship with its controlling shareholder, ChemChina, provides it with a clear advantage in penetratingthe Chinese market, one of the largest and fastest growing agricultural markets in the world. Following theconsummation of the Combination Transaction, the Group is one of the only global crop protection providers witha significant integrated commercial and operational infrastructure within China. The Group intends to leveragethis infrastructure to pursue a leading position in the Chinese crop protection market and capitalize on thegrowing importance of high-quality global brands in China. As part of the ChemChina group, the Group believesit is uniquely positioned to capitalize on the trend toward consolidation within the high-growth, highly fragmentedChinese crop protection market. In addition to helping it become a leader in the Chinese crop protection market,the integration of the Company’s China-based manufacturing facilities into the Group’s global manufacturingoperations provides it with the ability to more effectively develop and commercialize advanced, differentiatedproducts, as well as benefit from improved cost positions in key molecules, enhance the optimization of its globalsupply chain over time, drive greater efficiency throughout the organization, and secure both revenue growth aswell as increased profitability.? Collaborations with members of the Syngenta Group.
The Group is working together with the other companies within the Syngenta Group to create value for itself andthe Syngenta Group through increasing the Group’s sales, reducing costs and improving processes. Such effortsinclude various collaboration agreements and initiatives for the sale and distribution of finished products, rawmaterials supply and procurement, logistics and supply chain, as well as in the R&D and products’ registrationfields.? Vertically Integrated Business with Global Scale. The Group is one of the few off-patent crop protectionproviders that is active across virtually the entire value chain, from worldwide marketing, sales and distribution, to
ADAMA Ltd. Annual Report 2019
registration, production and R&D. As a result, the Group is able to efficiently manage its product portfolio andoperations in response to the dynamic needs of farmers, changing weather conditions, government policies andregulations, and capture value at each point in the value chain. Approximately 80% of the Group’s products areproduced, formulated or both in its world-class, well-invested facilities across the globe. Having deep knowledge,expertise and experience in all aspects of the development process, integrated chemical synthesis andformulation production and control over the entire supply chain, provides the Group with cost and controladvantages, and the agility to address market challenges and capture value. Further, its global registrationnetwork, providing local registration capabilities in over 100 countries, enables the Group to efficiently introducenew products in all major markets and provide farmers with a comprehensive portfolio of crop protectionsolutions. In the last five years, the Group’s registration network of highly-skilled professionals has obtainedapproximately 1,100 new product registrations. These capabilities are increasingly important as regulatoryrequirements continue to increase globally. The Group’s sales and marketing infrastructure is characterized by itslocal sales forces in each of its strategic markets, who build strong relationships with local distributors and withthe end users, the farmers, to better understand their needs. This drives demand at the wholesale, retail andfarmer level and provides the Group with valuable market insight and understanding.? Extensive, Differentiated Offering. The Group offers farmers a hybrid portfolio of increasingly differentiatedproducts and solutions that are tailored to the specific needs of each geographic region and each type of crop.The Group utilizes an integrated, solutions-based approach to its entire offering in order to meet the uniquedemands of its global customer base. The Group strives to offer farmers a branded portfolio that is comprised ofboth high-value differentiated products as well as high-volume off-patent products, alongside an increasingnumber of unique mixtures and formulations and novel, innovative products and services, aimed to providesolutions to farmers in nearly every region, and for all major crops. The Group’s extensive portfolio is composedof over 200 centrally managed AIs and over 1,400 mixtures and formulations.? Experienced and Empowered Management Team. With a deep understanding of the crop protection industry
and firm focus on sustaining the Group’s leadership and financial strength, its management team is a cohesiveand integrated team that has the knowledge, skills and experience required to guide the Group on its path toachieving its ambition of global leadership. The Group believes in empowering its teams and creating leadersfrom its strongest performers, with the result that its management team is composed of the people who havesuccessfully managed its business, and developed and executed its strategy over the last few years, continuingits track record of consistent, profitable growth.
ADAMA Ltd. Annual Report 2019
Section IV - Performance Discussion and AnalysisI. Overview
| Item | Reporting Period (000’RMB) | Same period of last year as previously reported (000’RMB) | +/-% | Same period of last year as restated (000’RMB) | +/-% |
| Revenues | 27,563,239 | 25,615,119 | 7.61% | 26,867,308 | 2.59% |
| Gross profit | 8,799,324 | 8,439,682 | 4.26% | 8,713,685 | 0.98% |
| Gross margin | 32% | 33% | - | 32% | - |
| Pre-Tax Profits | 451,572 | 3,235,708 | -86.04% | 3,299,137 | -86.31% |
| Pre-tax profit margin | 2% | 13% | - | 12% | - |
| Net income | 277,041 | 2,402,462 | -88.47% | 2,447,876 | -88.68% |
| Net income margin | 1% | 9% | - | 9% | - |
| EBITDA | 4,195,328 | 6,236,972 | -32.73% | 6,428,734 | -34.74% |
| EBITDA margin | 15% | 24% | - | 24% | - |
| Item | Reporting Period (000’USD) | Same period of last year as previously reported (000’USD) | +/-% | Same period of last year as restated (000’USD) | +/-% |
| Revenues | 3,996,773 | 3,880,783 | 2.98% | 4,070,289 | -1.81% |
| Gross profit | 1,277,011 | 1,279,882 | -0.01% | 1,321,303 | -3.35% |
| Gross margin | 32% | 33% | - | 32% | - |
| Pre-Tax Profits | 68,337 | 507,372 | -86.53% | 517,090 | -86.78% |
| Pre-tax profit margin | 2% | 13% | - | 13% | - |
| Net income | 42,790 | 377,617 | -88.66% | 384,607 | -88.87% |
| Net income margin | 1% | 10% | - | 9% | - |
| EBITDA | 610,440 | 959,408 | -36.37% | 988,527 | -38.25% |
| EBITDA margin | 15% | 25% | - | 24% | - |
ADAMA Ltd. Annual Report 2019
The Company continues to maintain cost discipline and raise prices wherever demand allows, mitigating to the extentpossible the continued impact of shortages in certain raw materials and intermediates mostly owing to increasedenvironmental focus in China. While some production capacity returned to the market in the second half of 2019,procurement costs remained generally elevated compared to the prior year.Corporate DevelopmentDuring 2019, ADAMA executed a number of acquisitions and investments in support of its growth strategy. In the fourthquarter, the Group acquired two companies: the Peruvian crop protection company AgroKlinge, providing a leadingcommercial platform countrywide as well as a comprehensive portfolio of solutions for Peruvian farmers; the French-Swisscompany SFP, strengthening ADAMA’s PGR (plant growth regulator) and fungicide franchises in Europe. In addition, theCompany acquired a minority stake in Agricover SA, one of Romania’s leading distributors of agricultural inputs.These follow two acquisitions performed by ADAMA earlier in the year: in the first quarter, the Group acquired BonideProducts Inc., a US provider of pest-control solutions for the consumer Home & Garden market, as well as Jiangsu AnponElectrochemical Co., Ltd., a backward-integrated manufacturer of key active ingredients used in crop protection marketsworldwide.Innovation, Development, Research and RegistrationsIn 2019, the Company made significant progress in the development of its advanced product portfolio, complementing itsexisting offering and strengthening its position in global crop protection markets.Highlights include:
? ARMERO
?
, a broad-spectrum systemic fungicide containing Prothioconazole and Mancozeb, launched inParaguay, the first market globally where ADAMA is launching a product containing Prothioconazole;? BRAZEN
?
, a herbicide for the protection of spring wheat and barley, launched in Canada as the world’s firstalternative Pinoxaden herbicide; Pinoxaden is one of the world’s leading post-emergence grassyweed-herbicides for spring wheat and barley, and prior to its launch by ADAMA had only been available from onesource;? BARAZIDE
?
, a differentiated combination insecticide for the treatment of lepidoptera in multiple crops, launchedin India, and PLEMAX
?
, a broad-spectrum mixture insecticide launched in Turkey; both products containADAMA’s own proprietary active ingredient Novaluron, now in unique combinations with other complementaryactive ingredients, providing dual modes of action and increased breadth of coverage;? COMISSARIO
?
, a dual mixture insecticide developed for use in cotton plantations, launched in Brazil;? FOLPAN
?
, ADAMA’s proprietary fungicide, launched in Germany as a solution for resistant Septoria leaf blotch inwheat;? MERPLUS
?
, a differentiated fungicide controlling apple scab in pome fruits, launched in Europe; and? EXELGROW?, a unique seaweed-based biostimulant promoting plant growth, launched in Europe.During the fourth quarter, ADAMA and Tel Aviv University announced the launch of ‘The ADAMA Center for Novel CropProtection Delivery Systems’, a unique research and teaching center for the development of innovative delivery systemsfor crop protection products, combining the worlds of industry and academia. This initiative is tied to ADAMA’s vision forthe next generation of differentiated, advanced formulations and delivery systems.China Facilities Upgrade and Relocation UpdateADAMA continues to progress the upgrade and relocation of its production and environmental facilities at both itsJingzhou (Hubei Province) and Huai’An (Jiangsu Province) sites.
ADAMA Ltd. Annual Report 2019
The Company expects to realize significant operational efficiencies from upgrading of processes and technology at thesites, including automated control and data systems, machinery and laboratory equipment, as well as the termination ofless profitable production lines. As the Company is reaching the final stages of relocation of the old sites, and expecting tocommence production of the relocated products at the new Jingzhou site in the second half of 2020, in its fourth quarter2019 financial reports the Company has recorded a one-time, non-cash asset impairment charge related to terminatedfacilities at the old sites in both Jingzhou and Huai’An, together with related implementation costs, of approximately $50million. In addition, the upgraded sites and their level of automation will allow for a more skilled, smaller workforce, aprocess which is expected to be largely completed by the end of 2020. As such, the Company has recorded a one-timeprovision for employee severance costs of approximately $35 million in the fourth quarter of 2019.Going forward, these actions are expected to deliver ongoing annual savings of up to $34-47 million per year,commencing in 2020, including the elimination of most idleness charges, which were approximately $42 million in 2019.ADAMA is aiming to complete most of the relocations and be operational with improved cost and efficiency at its new sitesat Jingzhou by year-end 2020 and at Huai’An by mid-2021. The transformed new sites are designed to be more profitablethan the old ones, and ready to accommodate additional new molecules emerging from the Company’s strongdevelopment pipeline.Over the longer term, the Company is working towards the commercialization of all its vacated old sites, subject to receiptof the required approvals. As a result, the Company aims to be able to recover the remainder of its upgrade and relocationinvestments, with the anticipated gains from the realization of this significant value expected to be included in theCompany’s reported net income in the coming years.COVID-19 ImpactThe ramp-up of production at the Jingzhou site was temporarily interrupted from late January to the end of February 2020due to the COVID-19 novel coronavirus outbreak in Hubei province in the first few months of the year. Although theramp-up of production at the site has since resumed, the Company will nevertheless see related idleness costs reflectingthe temporary interruption. Although logistics in Hubei province are starting to open up, certain restrictions remain,impacting the free transport of goods to the ports.The Company’s operations at its Huai’An, Jiangsu site have continued without material interruption during 2020. Relevantsupply and transport lines are open.As a result of the COVID-19 outbreak, the Company is again seeing some renewed tightening of supply of raw materialsand intermediates sourced from third parties in China and sold through the Company’s global channels.The Company is actively managing its response to the outbreak in order to ensure the safety of its employees and limit theimpact on the performance of the Company. Actions being taken include extending and strengthening distributionchannels, use of expedited transport options where possible, working collaboratively with supply chain partners, andraising prices wherever possible to accommodate the increased logistics costs.ADAMA becoming part of the Syngenta GroupADAMA announced in January 2020 that it is becoming a distinctive member of the Syngenta Group, a newly-formedag-industry leader being created through the bringing together of the agricultural businesses of ChemChina andSinochem. The Syngenta Group, comprising ADAMA, Syngenta AG and Sinochem’s agriculture-related activities, isexpected to become one of the world’s leading agriculture inputs companies, spanning crop protection, seeds, fertilizers,additional agricultural and digital technologies, as well as an advanced distribution network in China, reaching farmersnationwide.
ADAMA Ltd. Annual Report 2019
ADAMA is joining this new industry leader through the contribution of the stake that ChemChina currently owns in ADAMAinto the Syngenta Group, which will also be owned by ChemChina. As such, there is no change in the Company’s ultimatecontrolling shareholder. ADAMA will continue to be headquartered in Israel, and remain traded on the Shenzhen StockExchange, as well as maintain its unique brand and positioning.Chen Lichtenstein, former President and CEO of ADAMA, has taken up the position of CFO of Syngenta Group, withresponsibility also for Strategy and Integration. Frank Ning, Chairman of ChemChina and Sinochem, is the Chairman ofthe new Syngenta Group. In this context, and following the Company’s shareholders’ approval, as of April 2020, ErikFyrwald, CEO of the new Syngenta Group, has replaced Yang Xingqiang as Chairman of the board of directors of theCompany and Chen Lichtenstein will remain on ADAMA’s board of directors.The various companies within the Syngenta Group have made significant advances in their intra-Group collaboration overthe last year, generating meaningful additional revenue through cross-sales and benefiting from procurement andoperational savings. The forming of the Syngenta Group will further bolster the alignment between the companies andcapitalize on the value creation and synergy opportunities identified.
II. Main business analysis
1. Overview
See details on the relevant contents of “I. Overview” of “Section IV. Performance Discussion and Analysis”.
2. Revenues and costs
(1) Operating revenues
Unit: RMB’000
| 2019 | 2018 (Restated) | YoY +/-% | |||
| Amount | Ratio of the operating revenue | Amount | Ratio of the operating revenue | ||
| Total operating revenue | 27,563,239 | 100% | 26,867,308 | 100% | 2.6% |
| Classified by industries | |||||
| Manufacture of chemical raw materials and chemical products | 27,563,239 | 100% | 26,867,308 | 100% | 2.6% |
| Classified by products | |||||
| Herbicides | 11,848,417 | 42.99% | 11,859,646 | 44.14% | -0.1% |
| Fungicides | 5,189,971 | 18.83% | 4,859,715 | 18.09% | 6.8% |
| Insecticides | 7,867,286 | 28.54% | 7,414,994 | 27.60% | 6.1% |
| Ingredients and Intermediates (Formerly referred to as Non-Agro) | 2,657,565 | 9.64% | 2,732,953 | 10.17% | -2.8% |
| Classified by regions | |||||
| Europe | 7,078,409 | 25.68% | 6,983,002 | 25.99% | 1.4% |
| North America | 5,418,509 | 6619.% | 5,038,834 | 18.75% | 7.5% |
| Latin America | 7,085,817 | 25.71% | 6,172,800 | 22.98% | 14.8% |
| Asia-Pacific | 4,351,929 | 15.79% | 5,057,860 | 18.83% | -14.0% |
| India, Middle East and Africa | 3,628,575 | 13.16% | 3,614,812 | 13.45% | 0.4% |
ADAMA Ltd. Annual Report 2019
Unit: USD’000
| 2019 | 2018 (Restated) | YoY +/-% | |||
| Amount | Ratio of the operating revenue | Amount | Ratio of the operating revenue | ||
| Total operating revenue | 3,996,773 | 100% | 4,070,289 | 100% | -1.8% |
| Classified by industries | |||||
| Manufacture of chemical raw materials and chemical products | 3,996,773 | 100% | 4,070,289 | 100% | -1.8% |
| Classified by products | |||||
| Herbicides | 1,719,666 | 43.03% | 1,796,577 | 44.14% | -4.3% |
| Fungicides | 751,752 | 18.81% | 736,263 | 18.09% | 2.1% |
| Insecticides | 1,139,961 | 28.52% | 1,123,397 | 27.60% | 1.5% |
| Ingredients and Intermediates (Non-Agro) | 385,394 | 9.64% | 414,052 | 10.17% | -6.9% |
| Classified by regions | |||||
| Europe | 1,030,551 | 25.78% | 1,057,898 | 25.99% | -2.6% |
| North America | 785,519 | 19.65% | 763,363 | 18.75% | 2.9% |
| Latin America | 1,021,819 | 25.57% | 935,154 | 22.98% | 9.3% |
| Asia-Pacific | 632,542 | 15.83% | 766,245 | 18.83% | -17.4% |
| India, Middle East and Africa | 526,342 | 13.17% | 547,629 | 13.45% | -3.9% |
ADAMA Ltd. Annual Report 2019
launched two more herbicides for winter wheat in the quarter, bringing a total of 14 new product launches for 2019 in China.The Company saw robust growth in the full year in New Zealand, Indonesia and Japan, benefiting from favorable weatherconditions, while a resilient performance was recorded in Australia, recovering from extreme weather conditions seenthroughout the year.India, Middle East & Africa: The Company was impacted in the full year by shortages of key products produced at theJingzhou old site.Over the full year, ADAMA saw another year of strong growth in both its branded activities in India as well as in Turkey,offsetting the impact of the missing sales of Jingzhou old site products. The Company enjoyed a strong contribution from itsrecently launched differentiated products, including the NIMITZ
? suite of products, as well as TAKAF
? and ZOHAR
TM, twodifferentiated mixture insecticides in India.
(2) List of the industries, products or regions exceed 10% of the operating revenues or operatingprofits of the Company
√ Applicable □ Not applicable
Unit: RMB’000
| Operating revenues | Operating cost | Gross margin | YoY increase/decrease of the operating revenues | YoY increase/decrease of the operating cost | YoY increase/decrease of the gross margin | |
| Classified by industries | ||||||
| Manufacture of chemical raw materials and chemical products | 27,563,239 | 18,679,512 | 32.23% | 2.59% | 3.07% | -0.96% |
| Classified by products | ||||||
| Crop Protection (formerly referred to as Agro) | 24,905,674 | 16,602,484 | 33.34% | 3.20% | 3.62% | -0.80% |
| Ingredients and Intermediates (formerly referred to as Non-Agro) | 2,657,565 | 2,077,028 | 21.84% | -2.76% | -1.13% | -5.6% |
| Classified by regions | ||||||
| -- | -- | -- | -- | -- | -- | |
| Industries | Items | Units | 2019 | 2018 | YoY +/-% |
| Crop Protection (formerly referred to as Agro) | Sales volume | Ton | 662,752 | 629,310 | +5.3% |
| Production | Ton | 405,518 | 495,680 | -18.2% | |
| Inventory | Ton | 213,387 | 216,895 | -1.6% |
ADAMA Ltd. Annual Report 2019
Reasons for any over -30% YoY movement of the data above:
□ Applicable √ Not applicable
(4) Execution of the significant sales contracts signed by the Company up to the ReportingPeriod
□ Applicable √ Not applicable
(5) Composition of Operating Costs
Category of the industries
Unit: RMB’000
| Industries | Items | 2019 | 2018 | YoY +/-% | ||
| Amount | Ratio of the operating costs | Amount | Ratio of the operating costs | |||
| Industry of manufacturing chemical raw materials and chemical products | Cost of materials (procurement costs) | 15,463,150 | 84.3% | 14,702,340 | 81.5% | 4.9% |
| Industry of manufacturing chemical raw materials and chemical products | Labor cost | 1,105,014 | 5.9% | 1,073,544 | 5.9% | 2.9% |
| Industry of manufacturing chemical raw materials and chemical products | Depreciation expense | 660,812 | 3.5% | 753,762 | 4.2% | -12.3% |
ADAMA Ltd. Annual Report 2019
(7) List of significant changes or adjustment of the industries, products or services of theCompany during the reporting period
□ Applicable √ Not applicable
(8) List of major trade debtors and major suppliers
List of the major trade debtors of the Company
| Total sales to top 5 customers (RMB’000) | 2,188,754 |
| Ratio of total sales to top 5 customers to annual total sales | 7.9% |
| Ratio of total sales to related parties (within top 5 customers) to annual total sales | 2.11% |
| Customers | Sales Amount (RMB’000) | Ratio of the sales to this customer to the annual total sales | |
| 1 | A | 580,992 | 2.11% |
| 2 | B | 480,618 | 1.74% |
| 3 | C | 419,667 | 1.52% |
| 4 | D | 409,356 | 1.49% |
| 5 | E | 298,121 | 1.08% |
| Aggregated | 2,188,754 | 7.9% |
| Total purchase to top 5 suppliers (RMB’000) | 3,227,888 |
| Ratio of total purchase to top 5 suppliers to annual total purchase | 21.9% |
| Ratio of total purchase from related parties (within top 5 suppliers) to annual total purchase | 12.2% |
| Suppliers | Purchase Amount (RMB’000) | Ratio of the purchases to this supplier to the annual total sales | |
| 1 | A | 1,111,309 | 7.54% |
| 2 | B | 733,199 | 4.98% |
| 3 | C | 685,063 | 4.65% |
| 4 | D | 405,317 | 2.75% |
| 5 | E | 293,000 | 1.99% |
| Aggregated | 3,227,888 | 21.9% |
ADAMA Ltd. Annual Report 2019
3. Expenses
| In RMB ’000 | In USD ’000 | |||||
| 2019 | 2018 | YoY +/-% | 2019 | 2018 | YoY +/-% | |
| Sales and Marketing expenses | 4,873,256 | 4,701,936 | 3.64% | 707,156 | 710,909 | -0.53% |
| General and Administrative expenses | 1,562,317 | 998,133 | 56.52% | 225,707 | 151,259 | 49.22% |
| Financial (income) / expenses | 1,665,885 | 570,392 | 192.06% | 242,331 | 87,600 | 176.63% |
| R&D expenses | 436,325 | 442,253 | -1.34% | 63,230 | 66,163 | -4.43% |
ADAMA Ltd. Annual Report 2019
Company’s production and environmental facilities at both the Jingzhou (Hubei Province) and Huai’An (JiangsuProvince) sites, which are reaching the final stage of relocation and upgrading, and will allow for a more skilled andsmaller workforce;Despite the above, the Company continued its strong containment of expenses, and managed to effectively reduce thebalance of its general and administrative expenses, which also benefited from strengthening of the US Dollar.
(3) Financial expenses
Financial Expenses alone mainly reflect interest payments on corporate bonds and bank loans as well as foreignexchange gains/losses on the bonds and other monetary assets and liabilities before the Company carries out anyhedging. The impact of Financial Expenses (before hedging) is RMB 1,666 million (USD 242 million) for the full yearof 2019 compared with RMB 570 million (USD 88 million) for 2018. The increase mostly reflects the negative impactof currency translations on balance sheet positions (before hedging), mainly due to the effect of the appreciation ofthe Israeli Shekel against the US Dollar on Solutions’ debentures, as well as the higher interest expenses on ahigher borrowing base.Given the global nature of its operational activities and the composition of its assets and liabilities, the Company, inthe ordinary course of its business, uses foreign currency derivatives (forwards and options) to hedge the cash flowrisks associated with existing monetary assets and liabilities that may be affected by exchange rate fluctuations. Netgains/losses from hedging of those positions, are recorded in “Gains/Losses from Changes in Fair Value”, and arethen transferred to “Investment Income” upon realization. The combined impact of Gains/Losses from Changes inFair Value and Investment Income (excluding income from investment in associates and joint venture) is a net gainof RMB 574 million (USD 84 million) in 2019 compared with RMB -358 million (USD -53 million) in 2018.The aggregate of Financial Expenses, Gains/Losses from Changes in Fair Value and Investment Income(hereinafter as “Total Net Financial Expenses and Investment Income”), which more comprehensively reflects thefinancial expenses of the Company in supporting its main business and protecting its monetary assets/liabilities,amounts to RMB 1,092 million (USD 158 million) in 2019 compared with RMB 928 million (USD 141 million) in 2018.Higher Total Net Financial Expenses and Investment Income over the full year reflect higher interest payment out ofthe higher borrowing base, the effect on balance sheet positions of a moderate weakening of the RMB in 2019compared to its more marked weakening during 2018, as well as the impact of accounting changes related to IFRS16 / ASBE 21, offset to some extent by the reduction in financing costs on the NIS-denominated, CPI-linked bondsdue to a lower CPI in Israel.
4. R&D Investment
√ Applicable □ Not applicable
In order to capitalize on future opportunities in the agrochemical market, the Group has intensified its efforts to develop aleading pipeline of crop protection products aimed at providing value-added solutions to farmers around the world, basedon AIs that are expected to come off-patent in the coming years. These newly off-patent AIs will be developed into newmixtures and formulations, in combination with new formulation and delivery technologies that provide more efficient waysto deliver the products into the plants, thereby creating truly unique and differentiated, value-added solutions to farmers. Inthis way, the Group strives to achieve a double competitive advantage – to be the first to market launching new productsafter the expiry of the patent on the AI, and to capitalize on cost leadership through increased backward integrationthrough the Group’s global operations capabilities.
ADAMA Ltd. Annual Report 2019
List of the R&D investment of the Group
| 2019 | 2018 | Change (%) | |
| R&D headcount personnel (person) | 269 | 254 | 5.91% |
| R&D headcount as % of total headcount | 3.47% | 3.84% | -0.37% |
| R&D Investment (RMB’000) | 437,802 | 442,253 | -1.01% |
| Ratio of R&D investment to operating income | 1.59% | 1.65% | -0.06% |
| Amount of capitalized R&D investment (RMB’000) | - | - | - |
| Ratio of capitalized R&D investment to total R&D investment | - | - | - |
| Item | 2019 | 2018 (Restated) | YoY +/-% |
| Subtotal of cash inflows from operating activities | 25,613,708 | 25,316,658 | 1.17% |
| Subtotal of cash outflows from operating activities | 24,770,221 | 23,017,505 | 7.61% |
| Net cash flows from operating activities | 843,487 | 2,299,153 | -63.31% |
| Subtotal of cash inflows from investing activities | 263,924 | 2,473,130 | -89.33% |
| Subtotal of cash outflows from investing activities | 2,942,447 | 3,397,934 | -13.40% |
| Net cash flows from investing activities | -2,678,523 | -924,804 | 189.63% |
| Subtotal of cash inflows from financing activities | 3,212,045 | 912,246 | 252.10% |
| Subtotal of cash outflows from financing activities | 3,424,071 | 4,087,906 | -16.24% |
| Net cash flows from financing activities | -212,026 | -3,175,660 | -93.32% |
| Net increase in cash and cash equivalents | -2,026,289 | -1,633,306 | 24.06% |
ADAMA Ltd. Annual Report 2019
√ Applicable □ Not applicable
Please refer to the notes provided above under this item.
III. Analysis of the non-core business
√ Applicable □ Not applicable
Unit: RMB’000
| Amount | % of total profit | Explanation | Existence of Recurring | |
| Investment income | -231,205 | -51.20% | Please refer to explanation to Financial expenses as above | No |
| Gain/loss from change of FV | 825,512 | 182.81% | Mainly foreign currency effect on financial assets and liabilities. Please refer to explanation to Financial expenses as above | No |
| Impairment of asset | -413,816 | -91.64% | Mainly impairment in Jingzhou and Huai’an operation assets, due to relocation. | No |
| Gain from disposal of assets | 127,073 | 28.14% | Gain from the expropriation of land in Israel. | No |
| Non-operating income | 25,726 | 5.70% | No | |
| Non-operating loss | 103,854 | 23.00% | No |
| Item | As at 31 Dec. 2019 | As at 1 Jan. 2019 | % change | Explanation for any major change | ||
| Amount | % of total assets | Amount | % of total assets | |||
| Cash at bank and on hand | 4,348,588 | 9.60% | 6,400,190 | 14.34% | -4.74% | |
| Accounts receivable | 8,004,157 | 17.67% | 6,573,100 | 14.72% | 2.95% | |
| Inventories | 9,932,654 | 21.93% | 9,433,876 | 21.13% | 0.80% | |
| Investment property | 3,771 | 0.01% | 4,094 | 0.01% | 0.00% | |
| Long term equity investments | 133,098 | 0.29% | 108,350 | 0.24% | 0.05% | |
| Fixed assets | 6,939,610 | 15.32% | 7,256,949 | 16.26% | -0.94% | |
| Construction in progress | 788,386 | 1.74% | 487,204 | 1.09% | 0.65% | |
| Short-term loans | 2,009,882 | 4.44% | 1,122,774 | 2.52% | 1.92% | |
| Long-term loans | 927,159 | 2.05% | 235,819 | 0.53% | 1.52% | |
ADAMA Ltd. Annual Report 2019
2. Assets and liabilities measured at fair value
√ Applicable □ Not applicable
Unit: RMB’000
| Item | Opening balance | Fair value change recognized in P&L | Fair value change recognized in equity | Impairment recognized | Purchase | Sale | Closing balance |
| Financial assets | |||||||
| 1. Financial assets measured at FVTPL (excluding derivative financial assets) | 46,095 | - | - | - | - | -16,585 | 29,510 |
| 2. Derivative financial assets | 517,726 | -57,972 | -157,576 | - | 260,557 | -54,030 | 508,705 |
| 3. Other equity investments | 91,559 | - | 6,018 | - | 67,781 | -10,296 | 155,062 |
| Total financial assets | 655,380 | -57,972 | -151,558 | - | 328,338 | -80,911 | 693,277 |
| Others | 106,104 | 14,962 | - | - | 13,927 | -8,181 | 126,812 |
| Total of above | 761,484 | -43,010 | -151,558 | - | 342,265 | -89,092 | 820,089 |
| Financial liabilities | 1,451,670 | -734,613 | - | - | - | - | 717,057 |
| Investment during the Reporting Period (RMB'000) | Investment during the Same Period Last Year (RMB'000) | +/-% YoY |
| 36,425,306 | 36,640,029 | -1% |
ADAMA Ltd. Annual Report 2019
(2) Investment in derivative financial instruments
√ Applicable □ Not applicable
Unit: RMB’000
| The party that operates the investment | Relation with the Company | Related party transaction or not? | Type | Initial investment amount | Starting date | Expiring date | Investment amount at beginning of the period | Amount purchased during the Reporting Period | Amount sold during the Reporting Period | Impairment accrued (if any) | Investment amount at end of the period | Percentage of investment amount divided by net asset at end of the period | Gain/loss during the Reporting Period |
| Banks | No | No | Option | 3,362,968 | 19/11/2019 | 17/2/2020 | 3,362,968 | 2,776,528 | -4,060,588 | No | 2,078,908 | 9.29% | 225,744 |
| Banks | No | No | Forward | 11,634,236 | 10/9/2019 | 12/5/2020 | 11,634,236 | 34,186,571 | -26,698,167 | No | 19,122,640 | 85.50% | 526,736 |
| Total | 14,997,204 | -- | -- | 14,997,204 | 36,963,099 | -30,758,755 | -- | 21,201,548 | 94.79% | 752,480 | |||
| Source of fund for the investment | Internal. | ||||||||||||
| Litigation-related situations (if applicable) | N/A | ||||||||||||
| Date of disclosure of Board approval (if any) | December 30, 2017 | ||||||||||||
| Date of disclosure of Shareholders’ approval (if any) | N/A | ||||||||||||
| Risk and control analysis for the Reporting Period (including but not limited to market risk, liquidity risk, credit risk, operational risk, legal risk, etc.) | The aforesaid refers to short term hedging currency transactions made with banks. The Group’s transactions are not traded in the market. The Transactions are between the applicable company in the Group and the applicable bank until the expiration date of the transaction, therefore no market risk is involved. Regarding credit and liquidity risk, the Group is working with large and substantial banks only and with some of them the Group has ISDA agreements. | ||||||||||||
ADAMA Ltd. Annual Report 2019
| As to operational risk, the Group is working with relevant software, which is its back office for all transactions. No legal risk is involved. The actions taken in order to further reduce risks are: ? The relevant subsidiaries have specific guidelines, under the Group’s policy, which were approved by the subsidiaries' financial statements committee of the board, which specifies, inter alia, the hedging policy, the persons that have the authorization to deal with hedging, the tools, ranges etc. The only subsidiary that has hedging positions in the Group in the period was Solutions and its subsidiaries. ? The relevant subsidiaries apply management designed procedures and controls, which among other things, monitor the working process and the controls of the hedging transactions and are quarterly reviewed and annually audited. ? The controllers of the relevant subsidiaries are involved in the process and are monitoring the hedging accounting treatment. ? Every 2-3 years the internal audit of the relevant subsidiaries’ department is auditing the entire procedure. | |
| Market price or fair value change of investments during the Reporting Period. Specific methodology and assumptions should be disclosed in the analysis of fair value of the investments | The aforesaid refers to short time hedging currency transactions made by the relevant subsidiary with banks. Segregation of duties as follows: For the fair value evaluation, the relevant subsidiary is usually using external experts. The relevant subsidiary hedges currencies only; the relevant transactions are simple (Options and forwards) for short terms. For fair value methodology see section XI of this report, note IX. Fair Value. The exchange rates are provided by the accounting department of the relevant subsidiary and all other parameters are provided by the experts. |
| Explanation for any significant changes in accounting policies and principles, compared with last reporting period | N/A |
| Independent Directors’ opinion on the investment in derivative financial instruments and related risk controls | The derivative investments carried by the Company are for hedging and narrowing down the risk of market fluctuations. The investments respond to the Company’s routine business demands and are in accordance with the relevant laws and regulations. Additionally, the Company has adopted Currency Risk Hedging Policy to strengthen the risk management and control which benefit the Company’s ability to protect against market risk. The derivative investments do not harm the interests of the Company and its shareholders. |
ADAMA Ltd. Annual Report 2019
5. Use of raised funds
√ Applicable □ Not applicable
(1) Overall Situation of Use of the Funds Raised
√ Applicable □ Not applicable
RMB’0000
| Year of Raising | Type of Raising | Total Amount Raised | Total Amount Used during the Reporting Period | Accumulated Amount Used | Total Amount of Fund with Purpose Being Changed during the Reporting Period | Accumulated Amount of Fund with Purpose Being Changed | Proportion of Accumulated Amount of Fund with Purpose Being Changed against Total Amount Raised | Total Amount Not Used Yet | Usage and Destination of Funds Not Used Yet | Amount of Funds Being Idle for over Two Years |
| 2017 | Non-public offering of shares | 155,999.99 | 40,008 | 71,737 | 40,008 | 40,008 | 25.65% | 88,361 | Deposited in the special account of the raised funds. | 88,361(Note) |
| Total | -- | 155,999.99 | 40,008 | 71,737 | 40,008 | 40,008 | 25.65% | 88,361 | -- | 88,361 |
| General Summary of Use of Raised Funds | ||||||||||
| The Company received the raised funds on December 27, 2017. More details of the usage of the raised funds can be founded in the annual Special Reports on the Deposit and Actual Usage of the Raised Funds disclosed by the Company on March 29, 2018, March 21, 2019 and April 28, 2020; Special Reports on the Deposit and Actual Usage of the Raised Funds in the First-Half Year disclosed by the Company on August 28, 2018 and August 22, 2019. | ||||||||||
| Note: The 25th meeting of the 8th session of the Board of Directors of the Company approved a Proposal on Terminating the Use of Raised Funds on Certain Designated Projects Included in the Project of Share Issuance for Assets Purchase and Supporting Finance. After further approval by the shareholders of the Company, the remaining raised funds will not be used for certain designated projects. For details, please see the Announcement on Terminating the Use of Raised Funds for Certain Designated Projects published by the Company on April 28, 2020. | ||||||||||
ADAMA Ltd. Annual Report 2019
(2) The Status of Designated Projects of Raised Funds
√ Applicable □ Not applicable
RMB’0000
| Designated Projects and Investment of Extra Funds Raised | Any Project Change (Including Partial Change) | Total Investment Committed | Total Investment after Adjustment (1) | Amount Invested during the Reporting Period | Accumulated Invested Amount by the End of the Reporting Period (2) | Investment Progress by the End of the Reporting Period (3)＝(2)/(1) | Date by which the Project Can be Put into Use as Planned | Benefits Realized during the Reporting Period | Expected Benefits Reached or Not | Any Material Change to Project Feasibility |
| Designated Projects | ||||||||||
| Consideration of the acquisition of Anpon | No | - | 40,008 | 40,008 | 40,008 | 100% | 2019 | Not applicable | Not applicable | No |
| The project of Huai’an Pesticide Formulation Center | Yes | 24,980 | - | 0 | 0 | 0.00% | Not applicable | Not applicable | Not applicable | Yes |
| The projects of project development and registration | No | 93,507 | 93,507 | 0 | 13,103 | 14% | 2019 | Not applicable | Not applicable | Yes |
| Fixed-asset Investment of ADAMA | Yes | 66,204 | 51,176 | 0 | 5,913 | 12% | 2019 | Not applicable | Not applicable | Yes |
| Fees for the intermediary agencies and transaction taxes | No | 13,600 | 13,600 | 0 | 12,713 (Note 1) | 93% | Not applicable | Not applicable | Not applicable | |
| Sub-total of Designated Projects | -- | 198,291 (Note 2) | 198,291 (Note 2) | 40,008 | 71,737 | -- | -- | -- | -- | |
| Investment of Extra Funds Raised | ||||||||||
| Not Applicable | ||||||||||
| How and why the planned progress or expected income is not met (per project) | 1. Project of the Construction of Huai’an Pesticide Formulation Center Since Adama Pesticide (Jiangsu) Co., Ltd., a subsidiary company of the third-tier subsidiary of Solutions, is the entity to implement the construction project of Huai’an Pesticide Formulation Center, the Company needs to increase the capital of Solutions first, and then increase the capital of the subsidiaries by Solutions. The time and process required for the relevant approval process, such as funds entry and exist, is complicated. In order to avoid delays of the project, the Company invested its own capital on the project. With the approval of 2018 Annual Shareholders Meeting, this project had been replaced by the project of Anpon acquisition. | |||||||||
ADAMA Ltd. Annual Report 2019
| Designated Projects and Investment of Extra Funds Raised | Any Project Change (Including Partial Change) | Total Investment Committed | Total Investment after Adjustment (1) | Amount Invested during the Reporting Period | Accumulated Invested Amount by the End of the Reporting Period (2) | Investment Progress by the End of the Reporting Period (3)＝(2)/(1) | Date by which the Project Can be Put into Use as Planned | Benefits Realized during the Reporting Period | Expected Benefits Reached or Not | Any Material Change to Project Feasibility |
| Designated Projects | ||||||||||
| 2. Project of Development and Registration Since ADAMA Makhteshim Ltd., ADAMA Agan Ltd., and ADAMA Brazil S/A, the subsidiaries of Solutions, are the entity to implement the projects of products development and registration, this project also involves in the approval procedures for funds outbound. In order to avoid delays of this project, the Company invested its own capital on the project. 3. ADAMA Fixed-Assets Investment (1) Capacity Expansion Project for Pesticide Product A Since Product A is the Company’s newly developed product, it takes time to develop the market. In view of this, the management made changes to the time schedule of original expansion plan and suspended the investment in the second phase after careful deliberation. While adjusting the capacity expansion of the first stage in accordance with the needs of the market, the process is optimized to further enhance the product’s market advantage. Based on the changes in the market environment and in order to reduce the investment risk of raised funds, the Company decided to complete its replacement of the raised funds in 2017 (RMB 6.84 million). The follow-up investment of this project will be carried out by the Company with its own capital. (2) Equipment Investment for Fungicide product B for Brazilian market & Project on Capacity Expansion Investment for New Fragrance Ingredient Product C The above two projects started in 2017. Both projects involve cross-border investment by the Company, while the local approval process for cross-border investment might take some time. In order to meet the increasing demand of the market for Fungicide product B and New Fragrance Ingredient Product C as soon as possible, the Company decided that its overseas subsidiaries shall be responsible for meeting project investment needs through their own funds and local financing. The fungicide project for Brazilian market was carried out in accordance with the original investment plan and officially delivered for use in January 2020, and the fragrance ingredient product project is expected to be completed in May 2020. (3) Project on the Investment of the Equipment of Liquid Product Packaging The project aims to increase liquid packaging capacity to cope with expected future incremental demand and make inventory management more flexible and effective. However, due to the continuous climate change in Europe and North America in the past two years, there has been some changes in the incremental demand of the market. Based on the principle of prudence, the Company | ||||||||||
ADAMA Ltd. Annual Report 2019
| Designated Projects and Investment of Extra Funds Raised | Any Project Change (Including Partial Change) | Total Investment Committed | Total Investment after Adjustment (1) | Amount Invested during the Reporting Period | Accumulated Invested Amount by the End of the Reporting Period (2) | Investment Progress by the End of the Reporting Period (3)＝(2)/(1) | Date by which the Project Can be Put into Use as Planned | Benefits Realized during the Reporting Period | Expected Benefits Reached or Not | Any Material Change to Project Feasibility |
| Designated Projects | ||||||||||
| postponed the investment progress of the project and planned not to use raised funds on the project. (4) Investment for the Relocation of Beer Shava Plant and Its Integration with NeotHovav Plant in Israel The purpose of this project is to improve the overall production efficiency and product quality through the integration and optimization of the two plants in production and operation. Since the integration of the plants involves a wide range, it will take a long time to carry out master planning procedures in Israel. At present, the project is in the planning and design stage. The Company believes that there will be some differences in the implementation time of the project and the schedule of use of raised funds. Therefore, the Company intends to terminate the use of raised funds on this project. The proposal on terminating the above projects has been approved by the 25th meeting of the 8th session of the Board of Directors of the Company, pending further approval by the shareholders of the Company. For details, please see the Announcement on Terminating the Use of Raised Funds on Certain Designated Projects on April 28, 2020. | ||||||||||
| Explanation on material change to project feasibility | Please see the above the reasons why planned progress is not met. | |||||||||
| Amount, purpose of use and progress of extra funds raised | Not applicable | |||||||||
| Change of location of designated projects | Not applicable | |||||||||
| Adjustment to way of execution of designated projects | Not applicable | |||||||||
ADAMA Ltd. Annual Report 2019
| Designated Projects and Investment of Extra Funds Raised | Any Project Change (Including Partial Change) | Total Investment Committed | Total Investment after Adjustment (1) | Amount Invested during the Reporting Period | Accumulated Invested Amount by the End of the Reporting Period (2) | Investment Progress by the End of the Reporting Period (3)＝(2)/(1) | Date by which the Project Can be Put into Use as Planned | Benefits Realized during the Reporting Period | Expected Benefits Reached or Not | Any Material Change to Project Feasibility |
| Designated Projects | ||||||||||
| Advance investment in designated projects and replacement of funds | Applicable; The fifth meeting of the 8th session of the Board of Directors approved the utilization of RMB 276,530,000 of the Raised Funds for replacing capital previously invested in the Designated Projects on June 25, 2018. The Company completed the replacement in 2018. Please refer to the “Announcement on Utilization of Part of the Raised Funds for Replacing Capital Previously Invested in the Designated Projects” published on June 26, 2018 (announcement number 2018-32). | |||||||||
| Temporary supplement to working capital with idle raised funds | Not applicable | |||||||||
| Amount of surplus funds out of projects and causes | Not applicable | |||||||||
| Usage and destination of funds that have not been used | The unused funds have been kept in the special deposit account for further investment of the designated projects. The Company will actively deliberate new investment projects to use the remaining raised funds. Under the premises of ensuring the good market prospects of new investment projects and being able to effectively manage investment risks, the Company will perform the corresponding approval procedures for use of the remaining raised funds in accordance with relevant laws and regulations | |||||||||
| Problems or other issues in the use raised funds and disclosure | Not applicable | |||||||||
ADAMA Ltd. Annual Report 2019
(3) Change to the Designated Projects of Raised Funds
√ Applicable □ Not applicable
Unit: RMB ’0000
| New Committed Project | Original Committed Projects | Total committed investment amount (1) | Investment amount for the current period | Accumulated investment amount as at the end of the current period (2) | Investment progress as at the end of period (%) (3) = (2)/ (1) | Date of projects reaching intended useable condition | Realized benefits of the current period | Whether the expected benefits are achieved | Whether the feasibility of the project has changed significantly |
| Consideration of the acquisition of Anpon | Huai’an pesticide formulation center project | 40,008 | 40,008 | 40,008 | 100% | 2019 | N/A | N/A | No |
| ADAMA fixed asset investment project | |||||||||
| Total | - | 40,008 | 40,008 | 40,008 | - | - | - | - | - |
| The reason for changes, decision-making procedures, and disclosure of information | 1. Project of the Construction of Huai’an Pesticide Formulation Center Since Adama Pesticide (Jiangsu) Co., Ltd., a subsidiary company of the third-tier subsidiary of Solutions, is the entity to implement the construction project of Huai’an Pesticide Formulation Center, the Company needs to increase the capital of Solutions first, and then increase the capital of the subsidiaries by Solutions. The time and process required for the relevant approval process, such as funds entry and exist, is complicated. In order to avoid delays of the project, the Company invested its own capital into the project. 2. Fixed Assets Investment-Product A 600t/a The project also needs to be carried out through the Company's capital increase for its subsidiaries, involving the relevant approval process for funds exit, which takes a long time. Product A is an innovative product. The market needs to accept innovative products for a certain period. Additionally, due to the extreme weather in the European market, the project has been delayed. Therefore, the Company replaced this original designated project. Decision-making Procedures: The matter on change of fund use was approved by the 12th Meeting of the 8th BOD and 2018 Annual Shareholder meeting. The Company’s independent directors, the Board of Supervisors and the agency for continuous supervision have provided clear consent on this matter. Information Disclosure: Please refer to the Announcement on the Change of Certain Designated Projects disclosed on March 21st, 2019 at www.cninfo.com.cn | ||||||||
| Situations failing to meet the | N/A | ||||||||
ADAMA Ltd. Annual Report 2019
| New Committed Project | Original Committed Projects | Total committed investment amount (1) | Investment amount for the current period | Accumulated investment amount as at the end of the current period (2) | Investment progress as at the end of period (%) (3) = (2)/ (1) | Date of projects reaching intended useable condition | Realized benefits of the current period | Whether the expected benefits are achieved | Whether the feasibility of the project has changed significantly |
| planned schedule or achieve expected benefits and the reasons | |||||||||
| Explanation of the new committed project whose feasibility changed significantly | N/A | ||||||||
ADAMA Ltd. Annual Report 2019
VI. Sale of significant assets and equities
1. Sale of significant assets
□ Applicable √ Not applicable
No selling of significant assets occurred during the reporting period.
2. Sale of significant equities
□ Applicable √ Not applicable
VII. Analysis of major controlling and stock-participating companies
√ Applicable □ Not applicable
List of stock-participating companies responsible for over 10% of the net profits of the Company:
Unit: RMB’000
| Name | Type | Main services | Registered capital | Total assets | Net assets | Operating revenues | Operating profit | Net profit |
| Adama Solutions | Subsidiary | Development, manufacturing and marketing of agrochemicals, intermediate materials for other industries, food additives and synthetic aromatic products, mainly for export. | 720,085 | 37,586,112 | 16,621,007 | 25,430,808 | 1,381,918 | 1,059,962 |
| Company Name | Way of Acquirement or Disposal | Impact on the Business Operation and Performance of the Company |
| ADAMA Anpon (Jiangsu) Co., Ltd. | Purchase of Share Equity | ADAMA Anpon's main business has a high degree of synergy with the Group's main business. Significant synergies are generated by selling ADAMA Anpon's AgChem products through ADAMA's China domestic distribution channels as well as Group's broad global network. |
| Bonide Products, Inc. (“Bonide”) | Purchase of Share Equity | Bonide is a US provider of pest-control solutions for the consumer Home & Garden market. The acquisition allows the Group to bring its advanced technologies and differentiated portfolio of pest-control and turf solutions directly to the benefit of the consumer. |
ADAMA Ltd. Annual Report 2019
VIII. List of the structured main entities controlled by the Company
□ Applicable √ Not applicable
IX. Outlook of the Company’s future development(I) Industry structure and trends
1. The competitive structure of crop protection industry
(1) The competitive structure of the global crop protection industryThe global crop protection market is dominated by seven multinational companies, four of which are originatorcompanies with annual revenues exceeding USD six billion in the crop protection segment (excluding seeds activities). Inrecent years, a number of mergers and acquisitions were completed among the largest players in the crop protectionindustry – the merger between Dow and DuPont to create Corteva; the acquisition of Monsanto by Bayer; the acquisitionof a large part of DuPont’s crop protection portfolio, including products under development and R&D infrastructure, byFMC; the acquisition of Arysta by UPL, and the acquisition of Syngenta by ChemChina. Nonetheless, the crop protectionindustry as a whole is relatively decentralized, with a number of local manufacturers competing in each country againstthe global multinational companies. The Group believes that entry barriers for the crop protection market are relativelyhigh, although they vary from region to region.The Company is a leading company (in sales terms) among the crop-protection companies that focus on off-patentcrop protection solutions. The Group’s global crop protection market share was approximately 5.5% in 2019, based onAgBio Investor’s preliminary estimation of the global agrochemical industry in 2019.
The Group's competitors are multinational Originator Companies that continue producing and marketing their originalproducts after their patent expiry (“Originator Companies”), as well as other crop protection companies. In the Group'sexperience, in most cases the Originator Company’s market share in a particular product falls to approximately 60% - 70%within a number of years following the expiry of the relevant patent, leaving the remaining market share open tocompetition among off-patent crop protection companies, in addition to their competition with the Originator Company(which continues manufacturing the product and even leads its market prices and sales terms).The Group competes with Originator Companies and other international off-patent crop protection companies in allthe markets in which it operates, as these companies generally also have global marketing and distribution networks. Inaddition, there are several smaller Originator Companies that also compete with the Group. As a rule, other off-patentcrop protection companies that do not have international marketing and distribution networks compete with the Grouplocally in those geographical markets in which they operate.
(2) The competitive structure of the crop-protection industry in China
The chemicals industry in China, which the Company believes to be the largest in the world, as well as theagrochemicals industry, includes thousands of companies who have invested in manufacturing infrastructure, of whichmost of their production capacity is currently aimed at exports, intended for sale through small and large companiesacross the world, including the Group and its competitors. The growth in production capacity, on one hand, and the pricelevels and competitiveness of the products produced in China on the other, affect the structure of competition in the entireindustry. However, price levels of the products manufactured in China have risen in recent years, mainly in light of thetrend of rising manufacturing costs in China. This trend mainly stems from the increase in costs relating to environmentalprotection, as well as from increased regulatory activity in China, including by way of limited granting of production permits,shutting down of plants, fines, etc. Due to the shutting down of some of the plants and the suspension of production inothers in the years 2018-2019, shortages of agrochemicals products, including those of the Group’s products, were
ADAMA Ltd. Annual Report 2019
created. The Company estimates that high price level and the decrease in availability of products are expected to continueinto 2020.
2. The development trends of the crop-protection industry
In the last few years, some new emerging trends that may affect the nature of competition in this sector can beidentified: (1) The market share of products whose patents have expired continues to rise relative to that of patentedoriginal products, primarily due to the fact that the rate of patent expiry exceeds that of new patent registration; (2) A trendof some off-patent companies expanding and becoming stronger (inter alia, as a result of corporate mergers andacquisitions as well as product acquisitions), which may lead to them competing with the Group in geographic markets inwhich they have not operated up to now; (3) Smaller companies have begun operating, in limited scale, in certain marketswith relatively low entry barriers; (4) Improvement of the agrochemicals industry in China inter alia, increasing marketentry barriers; (5) Price competition in certain markets by multinational Originator Companies and/or increasing the creditdays to its customers; and (6) Mergers and Acquisitions among leading companies in the sector.
The Group believes that in view of the industry's development trends, the following are critical success factors: (i)reputation, branding, expertise and accumulated knowledge in the sector in the various countries and among customersand suppliers; (ii) financial strength and resilience combined with consistent growth, allowing the Group to realize acorporate development strategy including the potential for mergers and acquisitions with other companies in the sphere,and being able to respond efficiently to attractive business opportunities in order to expand its product portfolio and thescale of its operations; and (iii) access to funding sources and reasonable funding terms allowing the Group to makeinvestments that earn a positive return.(II) Development strategy of the Company
The Group strives to be a global leader in the Crop Protection industry, and intends to achieve this aim by executionof the following strategies:
? Utilize the Group’s Differentiated Offering to Strengthen and Grow its Market Position. The Group intends tocontinue to drive the growth of its business through effective commercialization of differentiated, high quality productsthat meet farmers’ needs efficiently. To that end, the Group will leverage its extensive R&D and registration capabilitiesto continue to provide unique yet simple solutions to farmers. In addition, the Group adds value by enhancing thefunctionality and efficacy of the industry’s most successful and commercially proven molecules, by developing new andunique mixtures and advanced formulations. These innovative products are designed to provide farmers with bettersolutions to the challenges they face, including weeds, insects and disease, increasing resistance and insufficient pestcontrol related to the use of genetically modified seeds.Aiming to provide distinct benefit to farmers and enhance the sustainability of the business, in addition to the ongoingefforts to expand existing product registrations to additional crops and regions, a key portion of the Group’s strategyinvolves the deliberate shift of its product offering towards more innovative and value-added solutions. Such solutionsinclude higher-margin, higher-value complex off-patent products, unique mixtures and formulations as well as innovative,novel products that are protected by patents and other intellectual property rights. As evidence of this effort, the Grouphas significantly increased the proportion of unique mixtures and formulations in its R&D pipeline over the last severalyears. Over the coming years, as this shift in the pipeline towards more differentiated and innovative solutions starts tobe reflected in the Group’s commercial offering, it is expected to be a significant driver of growth, both in revenues and inprofitability. In this respect, and in order to capitalize on future opportunities in the agrochemical market, the Group hasintensified its efforts to develop a leading pipeline of crop protection products aimed at providing value-added solutionsto farmers around the world, based on AIs that are expected to come off-patent in the coming years. These newlyoff-patent AIs will be developed into new mixtures and formulations, in combination with new formulation and deliverytechnologies that provide more efficient ways to deliver the products into the plants, thereby creating truly unique anddifferentiated, value-added solutions to farmers. In this way, the Group strives to achieve a double competitive
ADAMA Ltd. Annual Report 2019
advantage – to be the first to market launching new products after the expiry of the patent on the AI, and to capitalize oncost leadership through increased backward integration through the Group’s global operations capabilities.? Bridge China and the World. The Group is striving to become a leading global crop protection company in China, both
commercially and operationally, and in so doing, to drive its global growth in the future.China is currently the third largest, and one of the fastest growing, agricultural markets in the world. Furthermore, theGroup believes that, over the long term, China has the potential to grow into the world’s largest crop protection market.Also, as the Chinese domestic market is highly fragmented, with limited penetration by the global agrochemicalcompanies, the Group believes that there is a unique opportunity for it to capitalize on the significant untapped potentialof the Chinese market and to gain market share. Moreover, in recent decades, China has become the leadingmanufacturing center for the global crop protection industry - from the sourcing of raw materials and chemicalintermediates to the synthesizing of active ingredients and the formulation of finished products.The Group intends to capitalize on its status in China and its relationship with ChemChina, as well as the combinationwith Solutions, to increase its commercial activity in the country, where it is already building additional infrastructure. TheGroup’s commercial teams are working closely together. Through the commercial collaborations, the Group has anoperational infrastructure and commercial foundation upon which a leading Chinese domestic distribution network hasbeen built, and which the Group believes will make it one of the only global crop protection providers with significantintegrated commercial and operational infrastructures both within and outside of China.Through the establishment of a significant operational presence in China and the combination with Solutions, the Groupintends to achieve cost savings and improved margins and efficiencies through the vertical integration of manufacturingand formulation together with the Group’s global supply chain and logistics capabilities. In particular, the Group’s globalR&D efforts are being complemented by a new R&D center in Nanjing to service the Group’s expanded productdevelopment needs and enable the introduction of advanced technologies into China and globally. The Group expectsto drive significant demand for its products by launching new and advanced active ingredients and intermediates withhigher R&D content. In addition, the advanced formulation center in Jiangsu Province will serve as a platform tointroduce cost-advantaged crop protection solutions into China and globally.The Group expects that its unique positioning and profile in China, including the relationship with ChemChina, shouldestablish it as a partner of choice for companies outside China seeking to access its domestic market, as well as forChinese companies looking to expand their global footprint. In addition to the combination and the commercialcollaboration, the Group is assessing strategic joint ventures and selected acquisitions to further bolster its commercialand operational platform in China.? Collaboration of the Company with Syngenta and Sinochem as members of the Syngenta Group. The Companyengaged with Syngenta in collaboration agreements for sale and distribution of finished products, raw materials supply,joint ventures in the fields of procurement, logistics, production and supply chain as well as in the R&D and products’registration fields, in order to reduce costs, to improve processes and to increase the Company’s sales.? Continue to Strengthen Position in Emerging Markets. In addition to developing its China platform, the Group enjoys
strong and leading positions in key emerging agricultural markets such as Latin America, India, Asia and EasternEurope, with around half of its global sales achieved in these emerging markets. Over the last several years, in order toestablish direct market access and distribution capabilities in these markets, the Group has successfully integratedacquisitions in Colombia, Chile, Poland, Serbia, Romania, the Czech Republic, Slovakia, and South Korea. Similarly,the Group has implemented a direct go-to-market strategy in many high-growth markets including India, Turkey,Indonesia, Vietnam and South Africa, leveraging a direct sales force and driving demand at the retail and farmer level.The Group intends to continue to invest in its growth in the key emerging markets with high growth potential. TheGroup’s strong global platform and leading commercial infrastructure in such markets will allow it to capitalize onworldwide growth opportunities, and continue to drive its profitable growth.
ADAMA Ltd. Annual Report 2019
? Grow Revenues and Increase Profitability. The Group believes that it has the capacity and operational leverage toincrease profitability through focused execution of its strategy within the framework of prudent working capitalmanagement. The Group is aiming to increase its revenues and margins consistently over time as it shifts to a moredifferentiated, higher-margin product portfolio and continues to strengthen its product pipeline with significant number ofhigher-value products, based on AIs which patent protection has just expired, unique mixtures and formulations, as wellas innovative and, in some cases, patent-protected products. Similarly, the Group intends to drive revenue growththrough increased penetration of high-growth markets including China, Brazil and other key markets in Latin America,Asia-Pacific and eastern Europe. The Group believes that its investment in developing an operational footprint in Chinawill lower costs and improve manufacturing efficiency and distribution logistics and reduce inventory requirements inmany markets worldwide.In recent years, the Group has focused on growing and improving its business, infrastructure and brand. Other thaninvestments in the further development of its China operations, the Group believes that its existing global infrastructureis largely of sufficient scale to support higher revenues, allowing it to enjoy economies of scale and continually improveprofitability over time.? Continue to Capitalize on the Global Portfolio Integration and Rebranding Initiative. In 2014 the ADAMA brandwas launched, integrating dozens of legacy brands across the globe to form a single, streamlined sales and distributionentity under a unified brand name. In 2019, following extensive farmer and customer research in 13 major markets, theCompany further evolved its brand, creating a unique and compelling brand story that elevates ADAMA’s distinctentrepreneurial and agile culture; increases its relevance to its customers (channel partners and growers); and furtherdifferentiates the Company from key competitors. The evolved brand positioning focuses on a process of listening tocustomer needs, bringing insights from the field and combining them with the extensive know-how and experience in theCompany; and delivering solutions that meet local farmer and customer pain points. The Core Leap strategy discussedabove provides the platform needed to create distinct mixtures and formulations based on farmer needs. With this newbrand positioning the Company is investing in platforms to ensure ongoing and intimate farmer and customerinteractions which will provide the source for future product and solution ideation.? Strategically Pursue Acquisitions to Enhance Market Access and Strengthen the Product Portfolio. Throughoutits history, the Group has successfully completed and integrated several add-on acquisitions across the globe. TheGroup intends to continue to pursue acquisitions, in-licensing agreements and joint ventures that offer attractiveopportunities to enhance its market access and position, as well as strengthen and further differentiate its productportfolio. The Group plans to focus these efforts largely in high-growth geographies, particularly in emerging marketswhere it aims to gain market share, as well as access to selected sources of innovation. The Group continues with itstrack record of making and integrating selective.(III) 2020 Business plan
In 2020, the Company is expecting moderate growth, despite continued subdued crop commodity prices whichcontinue to challenge farmer profitability levels. Overall, the Group is expecting to see revenue growth emanating fromboth volume growth and, potentially, generally stronger pricing, driven by an improved product offering mix andcontinued launch of new products. The overall strengthening of pricing is expected to be only moderate, since theCompany is expecting continued pressure on selling prices in Brazil and other markets of Latin America, where majorplayers attempt to defend their positions.The generally stronger price environment is expected to compensate somewhat for the continued high ActiveIngredient (AI) procurement costs resulting from continued tight supply conditions that have driven increases in the costsof raw materials and AIs.The Group will continue to exercise discipline in management of its operating expenses, while focusing on continuedimprovement in working capital efficiency and quality of business.
ADAMA Ltd. Annual Report 2019
In 2020, the Group will continue to pursue its comprehensive portfolio development strategy, driven by furthermomentum and investment in Innovation, Research and Development, and focusing on all aspects of development of itsportfolio – product development, obtaining of registrations, development of advanced formulations and innovativedelivery technologies, as well as differentiated mixtures, alongside further investments in chemical R&D.During 2020, the Group will remain focused on the ongoing optimization and implementation of its global AI synthesislayout transformation, a long-term initiative that seeks to align the Group’s AI synthesis layout with the Group’s identifiedpipeline opportunities.
Furthermore, in the coming year the Group will continue to focus on the upgrading and relocation of the productionfacilities in Jingzhou and Huai’An, as well as the continued build-up of its commercial and operational presence in China,including potential acquisitions it intends to make in the near future.The Group is continuing to invest in the upgrading and expansion of its IT capabilities, including the implementation of itsERP project in the production facilities in Israel and China.
Note: The business plan described above does not constitute a commitment to investors on the Company'sperformance, and the Company suggests that investors should maintain adequate risk awareness therefor, andunderstand the difference between the Company’s business plan and a performance commitment.(IV) Company’s financing and credit
The Group finances its business activities by means of its equity as well as credit from external sources. The primaryexternal financing is by means of long term bonds issued by Solutions.
The Group has additional sources of external funding from: (1) long-term bank credit; (2) short-term bank credit aswell as non-tradable commercial securities; and (3) supplier credit. In addition, the Group has significant cash balances aswell as unused set bank credit lines.(V) Risk factors and countermeasures
The Group is exposed to several major risk factors, resulting from its economic environment, the industry and theGroup's unique characteristics, as follows (the order below does not indicate priority):
Exchange rate fluctuationsAlthough the Company reports its consolidated financial statements in RMB, the Company’s material subsidiary Solutionsreports its consolidated financial statements in US dollars, which is its functional currency, while its operations, sales andpurchases of raw materials are carried out in various currencies. Therefore, fluctuations in the exchange rate of the sellingcurrency against the purchasing currency impact the Company’s results. The Group's most significant exposures are tothe Euro, the Israeli Shekel and the Brazilian Real. The Group has lesser exposures to other currencies. Thestrengthening of the US dollar against other currencies in which the Company operates reduces the dollar value of suchsales and vice versa.On an annual perspective, approximately 26% of the Group’s sales are to the European market and therefore the impactof long-term trends on the Euro may affect the Company's results and profitability.Concentration of currency exposure from foreign currency exchange rate fluctuations against assets, including inventoryof finished products in countries of sale, liabilities and cash flow denominated in foreign currencies are done constantly.High volatility of the exchange rates of these currencies could increase the costs of transactions to hedge againstcurrency exposure, thereby increasing the Company's financing costs.The Group uses commonly accepted financial instruments to hedge most of its substantial net balance sheet exposure toany particular currency. Nonetheless, since as part of these operations the Group hedges against most of its balancesheet exposure and only against part of its economic exposure, exchange rate volatility might impact the Group’s resultsand profitability. As of the date of approval of the financial statements, the Group has hedged most of its balance sheetexposure for 2019 as it is on the date of publication of this report.
ADAMA Ltd. Annual Report 2019
In addition, as the Company’s product sales depend directly on the cyclical nature of the agricultural seasons, thereforethe Company’s income and its exposure to the various currencies is not evenly distributed over the year. Countries in thenorthern hemisphere have similar agricultural seasons and therefore, in these countries, the highest sales are usuallyduring the first half of the calendar year. During this period, the Company is most exposed to the Euro and the Polish Zloty.In the southern hemisphere, the seasons are opposite and most of the local sales are carried out during the second half ofthe year. During these months, most of the Company's exposure pertains to the Brazilian Real. The Company has moresales in markets in the northern hemisphere and therefore, the Company's sales volume during the first half of the year ishigher than the sales volume during the second half of the year.Exposure to Interest rate, Israel CPI and NIS exchange rate fluctuationsThe debentures issued by Solutions, the material subsidiary of the Company, are Israeli Shekel based and linked to theIsrael Consumer Price Index (CPI) and therefore an increase in the CPI and an appreciation of the shekel rate against thedollar might lead to a significant increase in its financing expenses. As of the date of approval of the financial statements,Solutions hedged most of its exposure to these risks on an ongoing basis, through CPI hedging and USD-ILS exchangerate hedging transactions.The Group is exposed to changes in the US dollar LIBOR interest rate as the Group has dollar denominated liabilities,which bear variable LIBOR interest. The Group prepares a quarterly summary of its exposure to changes in the LIBORinterest rate and periodically examines hedging the variable interest rate by converting it to a fixed rate. As of the date ofapproval of the financial statements, the Group has not carried out hedging for such exposure, since US dollar interestrates have been relatively stable.Business operations in emerging marketsThe Group conducts business – mainly product sales and raw material procurement – inter alia, in emerging markets suchas Latin America (particularly in Brazil, the largest market, country wise, in which the Group operates), Eastern Europe,South East Asia and Africa. The Group's activity in emerging markets is exposed to risks typical of those markets,including: political and regulatory instability; volatile exchange rates; economic and fiscal instability and frequent revisionsof economic legislation; relatively high inflation and interest rates; terrorism or war; restrictions on import and trade;differing business cultures; uncertainty as to the ability to enforce contractual and intellectual property rights; foreigncurrency controls; governmental price controls; restrictions on the withdrawal of money from the country; barter deals andpotential entry of international competitors and accelerated consolidations by large-scale competitors in these markets.Developments in these regions may have a significant effect on the Group's operations. Distress to the economies ofthese markets could impair the ability of the Group's customers to purchase its products or the ability to market them atinternational market prices, as well as harm the Group's ability to collect customer debts, in a way that could have asignificant adverse effect on the Group's operating results.The Group’s operations in multiple regions allows for the diversification of such risks and for the reduction of itsdependency on particular economies. In addition, changes in registration requirements or customers' preferences indeveloped western countries, which may limit the use of raw materials purchased from emerging economies, may requireredeployment of the Group's procurement organization, which might negatively affect its profitability for a certain period.Operating in a competitive marketThe crop protection products industry is highly competitive. Currently, the industry's global market is shared by sevenglobal companies, five of which are Originator Companies that control 60% of the global market with annual sales of overUSD six billions in the crop protection field (not including the seeds activity), these being Corteva, Bayer, BASF Syngentaand FMC, which develop, manufacture and market both patent-protected as well as off-patent products. The Groupcompetes with the original products with the aim of maintaining and increasing its market share.
ADAMA Ltd. Annual Report 2019
The Originator Companies possess resources enabling them to compete aggressively, in the short-to-medium term, onprice and profit margins, so as to protect their market share. Loss of market share or inability to acquire additional marketshare from the Originator Companies can affect the Group's position in the market and adversely affect its financial results.For details regarding the Group’s competitive advantages see section III - subsection III. Core competitiveness analysisabove.Similarly, the Group also competes in the more decentralized off-patent market, with other off-patent companies andsmaller-scale Originator Companies, which have significantly grown in number in recent years and are materiallychanging the face of the crop protection products industry, the majority of whom have not yet deployed global distributionnetworks, and are only active locally. These companies price their products aggressively and at times have lower profitmargins than the Group, which may harm the volume of the Group's sales and product prices. The Group's ability tomaintain its revenues and profitability from a specific product in the long term is affected by the number of companiesproducing and selling comparable off-patent products and the time of their entrance to the relevant market.Any delay in developing or obtaining registrations for products and/or delayed penetration into markets and/or growth ofcompetitors that focus on off-patent active ingredients (whether by the expansion of their product portfolio, grantingregistrations to other manufacturers (including manufacturers in China and India) to operate in additional markets,transforming their distribution network to a global scale or increasing the competition for distribution access), and/ordifficulty in purchasing low cost raw materials, may harm the Group’s sales volumes in this sector, affect its global positionand lead to price erosion.Decline in scope of agricultural activities; exceptional changes in weather conditionsThe scope of agricultural activities may be negatively affected by many exogenous factors, such as extreme weatherconditions, natural disasters, a significant decrease in agricultural commodity prices, government policies and theeconomic condition of farmers. A decline in the scope of agricultural activities necessarily would cause a decline in thedemand for the Group’s products, erosion of its prices and collection difficulties, which may have a significant adverseeffect on the Group's results. Extreme weather conditions as well as damages caused by nature have an impact on thedemand for the Group's products. The Group believes that, should a number of such bad seasons occur in succession,without favorable seasons in the interim, its results may sustain significant harm.Environmental, health and safety legislation, standards, regulation and exposureMany aspects of the Group's operations are strictly regulated, including in relation to production and trading, andparticularly in relation to the storage, treatment, manufacturing, transport, usage and disposal of its products, theiringredients and byproducts, some of which are considered hazardous. The Group's activities involve hazardous materials.Defective storage or handling of hazardous materials may cause harm to human life or to the environment in which theGroup operates. The regulatory requirements regarding the environment, health and safety could, inter alia, include soiland groundwater clean-up requirements; as well as restrictions on the volume and type of emissions the Group ispermitted to release into the air, water and soil.The regulatory requirements applicable to the Group vary from product to product and from market to market, and tend tobecome stricter with time. In recent years, both government authorities and environmental protection organizations havebeen applying growing pressure, including through investigations and indictments as well as increasingly stricterlegislative proposals and class action suits related to companies and products that may potentially pollute the environment.Compliance with the foregoing legislative and regulatory requirements and protection against such legal actions requiresthe Group to spend considerable financial resources (both in terms of substantial ongoing costs and in terms of materialone-time investments) as well as human resources in order to meet mandatory environmental standards. In someinstances, this may result in delaying the introduction of products into new markets or in adverse effects on the Group’sprofitability. In addition, the toughening, material alteration or revocation of environmental licenses or permits, or theirstipulations, or the inability to obtain such licenses and permits, may significantly affect the Group's ability to operate its
ADAMA Ltd. Annual Report 2019
production facilities, which in turn may have a material adverse effect on the financial and business results of the Group.The Group may be required to bear significant civil liability (including due to class actions) or criminal liability (includinghigh penalties and/or high compensation payments and/or costs of environmental monitoring and rehabilitation), resultingfrom violation of environmental, health and safety regulations, while some of the existing legislation may imposeobligations on the Group for strict liability, regardless of proof of negligence or malice.While the Group invests material sums in adapting its facilities and in constructing special facilities in accordance withenvironmental requirements, it is currently unable to assess with any certainty whether these investments (current andfuture) and their outcomes may satisfy or meet future requirements, should these be significantly increased or adjusted. Inaddition, the Group is unable to predict with any certainty the extent of future costs and investments it may incur so as tomeet the requirements of the environmental authorities in the relevant countries in which it operates since, inter alia, theGroup is unable to estimate the extent of potential pollutions, their length, the extent of the measures required to be takenby the Group in handling them, the division of responsibility among other parties and the amounts recoverable from thirdparties.Furthermore, the Group may be the target of bodily injury claims and property damage claims caused by exposure tohazardous materials, which are predominantly covered under the Group’s insurance policies.Legislative, standard and regulatory changes in product registrationThe majority of the substances and products marketed by the Group require registration at various stages of theirdevelopment, production, import, utilization and marketing, and are also subject to strict regulatory supervision by theregulatory authorities in each country. Compliance with the registration requirements that vary from country to country andwhich are becoming more stringent with time, involves significant time and costs, and rigorous compliance with individualregistration requirements for each product. Noncompliance with these regulatory requirements might materially adverselyaffect the scope of the Group’s expenses, cost structure and profit margins, as well as penetration of its products in therelevant market, and may even lead to suspension of sales of the relevant product, and recall of those products alreadysold, or to legal action. Moreover, to the extent new regulatory requirements are imposed on existing registered products(requiring additional investment or leading to the existing registration's revocation) and/or the Group is required tocompensate another company for its use of the latter's product registration data, these might amount to significant sums,considerably increasing the Group's costs and adversely affecting its results and reputation. In recent years the industry issuffering from revocation of registration for many products around the world. This trend is particularly evident in Europeancountries as well as in other countries, including India.Nevertheless, the Group believes that, in countries where the Group maintains a competitive edge, any toughening ofregistration requirements may actually increase this edge, since this will make it difficult for its competitors to penetrate thesame market, whereas in countries in which the Group possesses a small market share, if any, such toughening maymake further penetration of the Group's products into that market more difficult.Product liabilityProduct and producer liability present a risk factor to the Group. Regardless of their prospects or actual results, productliability lawsuits might involve considerable costs as well as tarnish the Group's reputation, thus impacting its profits. TheGroup has a third-party and defective product liability insurance cover. However, there is no certainty that the scope ofinsurance cover is sufficient. Any future product liability lawsuit or series of lawsuits could materially affect the Group’soperations and results, should the Group lose the lawsuit or should its insurance cover not suffice or apply in a particularinstance. In addition, while currently the Group has not encountered any difficulty renewing such insurance policy, it ispossible that it will encounter future difficulties in renewing an insurance policy for third party liability and defectiveproducts on terms acceptable to the Group.
ADAMA Ltd. Annual Report 2019
Successful market penetration and product diversificationThe Group’s growth and profit margins are affected, inter alia, by the extent of its success in developing differentiatedproducts and obtaining registrations for them, so as to enable it to gain market share at the expense of its competitors.Usually, being the first to launch a certain off-patent product affords the Group continuing advantage, even after othercompetitors penetrate the same market. Thus, the Group's revenues and profit margins from a certain product could bematerially affected by its ability to launch such product ahead of the launch of a comparable product by its competitors.Should new products fail to meet registration requirements in the different countries or should it take a long period of timeto obtain such registrations, the Group's ability to successfully introduce a new product to the market in question in thefuture would be affected, since entry into the market prior to other competitors is important for successful marketpenetration. Furthermore, successful market penetration involves, inter alia, product diversification in order to suit eachmarket's changing needs. Therefore, if the Group fails to adapt its product mix by developing new products and obtainingthe required regulatory approvals, its future ability to penetrate that market and to maintain its existing market share couldbe affected. Failure to introduce new products to given markets and meet Group objectives (given the considerable timeand resources invested in their development and registration) might affect the sales of the product in question in therelevant market, the Group’s results and margins.Intellectual property rights of the Group and of third partiesThe Group's ability to develop off-patent products is dependent, inter alia, on its ability to oppose patents of an OriginatorCompany or other third parties, or to develop products that do not otherwise infringe intellectual property rights in amanner that may involve significant legal and other costs. Originator Companies tend to vigorously defend their productsand may attempt to delay the launch of competing off-patent products by registering patents on slightly different versionsof products for which the original patent protection is about to expire or has expired, with the aim of competing against theoff-patent versions of the original product. The Originator Companies may also change the branding and marketingmethod of their products. Such actions may increase the Group's costs and the risk it entails, and harm or even prevent itsability to launch new products.The Group is also exposed to legal claims that its products or production processes infringe on third-party intellectualproperty rights. Such claims may involve time, costs, substantial damages and management resources, impair the valueof the Group's brands and its sales and adversely affect its results. To the best of the Group’s current knowledge, suchlawsuits that were concluded involved non-material amounts.Furthermore, the Group protects its brands and trade secrets with patents, trademarks and other methods of intellectualproperty protection, however these protective means may not be sufficient for safeguarding its intellectual property. Anyunlawful or other unauthorized use of the Group's intellectual property rights could adversely affect the value of itsintellectual property and goodwill. In addition, the Group may be required to take legal action involving financial costs andresources to safeguard its intellectual property rights.Fluctuations in raw material inputs and prices, and in sales costsSignificant percentage of the cost of the Groups’ sales derives from raw material costs. Hence, significant increases ordecreases in raw material cost affect the cost of goods sold, which is generally expressed a number of months followingsuch cost fluctuation. Most of the Group's raw materials are distant derivatives of oil prices and therefore, extremeincrease or decrease in oil prices may affect the costs of raw materials, yet only partially.To reduce exposure to fluctuations in the prices of raw materials, the Group customarily engages in long-term purchasecontracts for key raw materials, wherever possible. Similarly, the Group acts to adjust its sales prices, if possible, to reflectthe changes in the costs of raw materials.As of the date of approval of the financial statements, the Group has not engaged in any hedging transactions againstincreases in oil and other raw material costs.
ADAMA Ltd. Annual Report 2019
Exposure due to recent developments in the genetically modified seeds marketAny further significant development in the market of genetically modified seeds for agricultural crops, including as a resultof regulatory changes in certain countries currently prohibiting the use of genetically modified seeds, and/or any significantincrease in the sales of genetically modified seeds or Glyphosate and/or to the extent new crop protection products aredeveloped for further crops that would be widely used (substituting traditional products), will affect demand for cropprotection products, requiring the Group to respond by adapting its product portfolio to the new demand structure.Consequently, to the extent that the Group fails to adapt its product mix accordingly, this may reduce demand for itsproducts, erode their sales price and necessarily affect the Group’s results and market share.Nevertheless, the fact that the Group itself markets Glyphosate acts to mitigate this exposure (albeit only in terms ofmarketing margins).In addition, natural and/or biological substances that attack weeds, pests and diseases are potential alternatives for theCompany’s products, though as of the date of the report, their efficiency is limited and they are commercialized in arelatively small volumes.Operational risksThe Group’s operations, including its manufacturing activities, rely, inter alia, on state-of-the-art computer systems. TheGroup continually invests in upgrading and protecting these systems. Any unexpected failure of these systems, as well asthe integration of new systems, could involve substantial costs and adversely affect the Group's operations untilcompletion of the repair or integration. The potential occurrence of a substantial failure that cannot be repaired within areasonable time frame may also affect the Group's operations and its results. Currently, the Group has a property andloss-of-profit insurance policy.Data protection and cyberDuring its activity, the Group may be exposed to risks and threats, related to the stability of its information technologiessystems, data protection and cyber, which could appear in many different forms (such as service denial, misleadingemployees, malfunction, encryption or data erasing and other cyber-attacks via E-mail or malicious software). An attackon such computerized systems, mainly network based systems may cause the group material damages and expensesand even partial suspension and disruption of their proper functioning. In order to minimize the abovementioned risks, thegroup invests resources in its technological strength and in proper protection of its systems.Raw material supply and/or shipping and port services disruptionsLack of raw materials or other inputs utilized in the manufacture of Group products may prevent the Group from supplyingits products or significantly increase production costs. Moreover, the Group imports raw materials to its productionfacilities worldwide, from where it exports the products to its subsidiaries around the world for formulation and/orcommercialization purposes. Disruptions in the supply of raw materials from regular suppliers may adversely affectoperations until an alternative supplier is engaged. If any of the Group's suppliers are unable to supply raw materials for aprolonged period, including due to ongoing disruptions and/or prolonged strikes and/or infrastructure defects in theoperating of a relevant port, and the Group is unable to engage with an alternative supplier at similar terms and inaccordance with product registration requirements, this may adversely affect the Group's results, significantly affect itsability to obtain raw materials in general, or obtain them at reasonable prices, as well as limit its ability to supply productsand/or meet customer supply deadlines. These might negatively affect the Group, its finances and operating results. Inorder to reduce this risk, it is the Group's practice to occasionally adjust the volume of its product inventories and at timesutilize air freight.Failed mergers and acquisitions; difficulties in integrating acquired operationsThe Group's strategy includes growth through mergers, acquisitions, investments and collaborations designed, in acalculated manner, to expand its product portfolio and deepen its presence in certain geographical markets.
ADAMA Ltd. Annual Report 2019
Growth through mergers and acquisitions requires assimilation of acquired operations and their effective integration in theGroup, including realization of certain forecasts, profitability, market conditions and competition.Failure to successfully implement the above and/or non-realization of the said forecasts may result in not achieving theadditional value forecasted, losing customers, exposure to unexpected liabilities, reduced value of the intangible assetsincluded in the merger or acquisition as well as the loss of professional and skilled human resources.Production concentration in limited plantsA large portion of the Group’s production operations is concentrated in a small number of locations. Natural disasters,hostilities, labor disputes, substantial operational malfunction or any other material damage might significantly affectGroup operations, as a result of the difficulty, the time and investment required for relocating the production operation orany other activity.International taxationMost of the Group’s sales are global, through its consolidated subsidiaries worldwide. These individual companies areassessed in accordance with the tax laws effective in each respective location. The Group’s effective tax rate could besignificantly affected by different classification or attribution of the profits arise from the share of value earned of thecompanies in the Group in the various countries, as shall be recognized in each tax jurisdiction; changes in thecharacteristics (including regarding the location of control and management) of these companies; changes in thebreakdown of the Group's profits into regions where differing tax rates apply; changes in statutory tax rates and otherlegislative changes; changes in assessment of the Group's deferred tax assets or deferred tax liabilities; changes indetermining the areas in which the Group is taxed; and potential changes in the Group's organizational structure.Changes in tax regulations and the manner of their implementation, including with regard to the implementation of BEPS,may lead to a substantial increase in the Group's applicable tax rates and have a material adverse effect on its financialstate, results and cash flows.The Group’s Financial Statements do not include a material provision for exposure for international taxation, as statedabove.Risks arising from the Group’s debtThe Group finances its business operations by means of its own equity and loans from external sources (primarilydebentures issued by Solutions and bank credit). The Group's main source for servicing the debt and its operatingexpenses is by means of the profits from the Group companies’ operations. Restrictions applying to the Group companiesregarding distribution of dividends to the Group, or the tax rate applicable on these dividends, may affect the Group'sability to finance its operations and service its debt.In addition, the Group's Finance Documents require it to meet certain Financial Covenants. Failure to meet thesecovenants due to an exogenous event or non-materialization of Group forecasts, and insofar as the financing partiesrefuse to extend or update these Financial Covenants as per the Group’s capabilities, may lead the financing parties todemand the immediate payment of these liabilities (or part thereof).Exposure to customer credit risksThe Group’s sales to customers usually involve customer credit as is customary in each market. A portion of these creditlines are insured, while the remainder are exposed to risk, particularly during economic slowdowns in the relevant markets.The Group’s aggregate credit, however, is diversified among many customers in multiple countries, mitigating this risk. Inaddition, in certain regions, particularly in South America, credit days are particularly long (compared to those extended tocustomers in regions such as Europe), and on occasion, inter alia, owing to agricultural seasons or economic downturnsin those countries, the Group may encounter difficulty in collection of customer debts, with the collection period beingextended over several years.
ADAMA Ltd. Annual Report 2019
Generally, such issues arise more often in developing countries where the Group is less familiar with its customers, thecollaterals might be in double until actual repayment and the insurance cover of these customers is likely to be limited.Credit default by any of the customers may negatively impact the Group's cash flow and financial results.The Group’s working capital and cash flow needsSimilar to other companies operating in the crop protection industry, the Group has substantial cash flow and workingcapital requirements in the ordinary course of operations. In view of the Group's growth and considering its primary growthregions, the Group’s broad product portfolio and the Group’s investments in manufacturing infrastructures, the Group hassignificant financing and investment needs. The Group acts continually to improve the state and management of itsworking capital. While currently the Group is in compliance with all its financial covenants, significant deterioration of itsoperating results may in the future lead the Group to fail to comply with its financial covenants and fail to meet its financialneeds. As a result, the Group's ability to meet its goals and growth plans, and its ability to meet its financial obligations,may be harmed.Contagious disease outbreakOutbreak of a contagious disease, or other adverse public health developments, in territories where significant productionactivity is taking place or from which raw materials are supplied to a significant extent, might have a material adverseeffect on the Company’s activity, such that the Company might encounter difficulties with procurement of raw materialsand intermediates, experience a certain decrease of activity within its production facilities due to governmentalinstructions, and to be constrained with respect to its logistics and supply lines. In addition, the Company sales could bepotentially impacted by temporary demand’s decrease of its products, as well as by temporary disruption of theCompany’s ability to sell and distribute products as mentioned above.X. Information regarding communication with investors
1. Particulars about researches, visits and interviews received in this Reporting Period
√ Applicable □ Not applicable
| Reception time | Reception mode | Type of reception object | Index of investigation information |
| January 10, 2019 | Online Roadshow | Institutional/Retail | Introduction of the whole situation, future development plan and recent M&A of the company |
| January 14, 2019 | Roadshow | Institutional | Introduction of recent M&A and future development plan of the company |
| January 15, 2019 | Sell-side conference | Institutional | Introduction of recent M&A and future development plan of the company |
| January 16, 2019 | Sell-side conference | Institutional | Introduction of the whole situation, future development plan and recent M&A of the company and answered the questions which investors concerned |
| January 17, 2019 | Roadshow | Institutional | Introduction of the whole situation, future development plan and recent M&A of the company and answered the questions which investors concerned |
ADAMA Ltd. Annual Report 2019
| Reception time | Reception mode | Type of reception object | Index of investigation information |
| January 28-31, 2019 | Roadshow | Institutional | Introduction of the whole situation, future development plan and recent M&A of the company and answered the questions which investors concerned |
| February 12, 2019 | Roadshow | Institutional | Introduction of the whole situation, future development plan and recent M&A of the company and the trend of the global industry |
| February 13, 2019 | Roadshow | Institutional | Introduction of recent M&A and future development plan of the company and the market outlook in 2019 |
| February 13, 2019 | Phone Call | Retail | The impact of suspended production of Sanonda old plants as well as when to resume production |
| March 19，2019 | Phone Call | Retail | Answer the question about how to deal with the B share of the company |
| March 20，2019 | Phone Call | Institutional | Introduction of the full-year and Q4 results in 2018 |
| March 20，2019 | Phone Call | Retail | Answered the questions related to the full-year and Q4 results in 2018 |
| March 26，2019 | Roadshow | Institutional | Introduction of the full-year and Q4 results in 2018 |
| March 27，2019 | Roadshow | Institutional | Introduction of the full-year and Q4 results in 2018 |
| April 3, 2019 | Phone Call | Institutional | Introduction of the current situation of the company |
| May 7, 2019 | Sell-side conference | Institutional | Introduction of 2019 Q1 results |
| May 9, 2019 | Field Trip | Institutional | Field trip of investors to production and research facilities of the company |
| May 14, 2019 | Roadshow | Institutional | Introduction of 2019 Q1 results |
| May 16, 2019 | Roadshow | Institutional | Introduction of 2019 Q1 results |
| May 27-30, 2019 | Roadshow | Institutional | Introduction of 2019 Q1 results |
| June 4-6, 2019 | Roadshow | Institutional | Introduction of 2019 Q1 results |
| June 10, 2019 | Field Trip | Institutional | Introduction of the current situation of the company |
| June 12, 2019 | Sell-side conference | Institutional | Introduction of 2019 Q1 results |
| June 13, 2019 | Investor Day | Retail/Institutional | Answer the questions that investors |
ADAMA Ltd. Annual Report 2019
| Reception time | Reception mode | Type of reception object | Index of investigation information | |
| concerned online | ||||
| June 19, 2019 | Sell-side conference | Institutional | Introduction of 2019 Q1 results | |
| June 25, 2019 | Sell-side conference | Institutional | Introduction of the current situation of the company, global industry outlook and its impact | |
| July 4, 2019 | Sell-side conference | Institutional | Introduction of 2019 Q1 results and answer the questions that investors concerned | |
| July 8-9, 2019 | Field Trip | Institutional | The outlook of the global industry, introduction of some major market of the company, as well as the registration business | |
| August 13, 2019 | Phone Call | Institutional | Answer the questions that related to the company business by the investors | |
| August 21, 2019 | Phone Call | Institutional | Introduction of 2019 semi-annual results | |
| September 3, 2019 | Roadshow | Institutional | Introduction of 2019 semi-annual results | |
| September 18, 2019 | Field Trip | Institutional | Introduction of the global business of the company | |
| October 30, 2019 | Phone Call | Institutional | Introduction of 2019 Q3 results after the announcement | |
| November 4, 2019 | Roadshow | Institutional | Introduction of 2019 Q3 results after the announcement | |
| November 27-29, 2019 | Roadshow | Institutional | Introduction of 2019 Q3 results after the announcement and updated the company operation | |
| Times of reception | 35 | |||
| The number of agencies in reception | 33 | |||
| The number of individuals in reception | 5 | |||
| The number of other objects in reception | 0 | |||
| Whether undisclosed significant information is disclosed, revealed or divulged? | No | |||
ADAMA Ltd Annual Report 2019
Section V - Significant Events
I. Dividend distribution of Company’s securities and turning capital reserve intoshare capital of the CompanyDividend distribution policies, especially the formulation, execution or the adjustment of the cash dividend policies duringthe Reporting Period
√ Applicable □ Not applicable
The Company did not revise its dividend distribution policy over the Reporting Period. The 2nd Interim ShareholdersMeeting of the Company in 2019 which was held on May 30, 2019 approved the dividend distribution plan for the year2018. The Company accordingly published an Announcement of Dividend Distribution for the Year 2018 on July 17,2019 (announcement No.2019-40).
| Special explanation of the cash dividend policy | |
| Whether conformed with the regulations of the Articles of association or the requirements of the resolutions of the shareholders’ meeting: | Yes |
| Whether the dividend standard and the proportion were definite and clear: | Yes |
| Whether the relevant decision-making process and the system were complete: | Yes |
| Whether the independent director acted dutifully and exerted the proper function: | Yes |
| Whether the medium and small shareholders had the chances to fully express their suggestions and appeals, of which their legal interest had gained fully protection: | Yes |
| Whether the conditions and the process met the regulations and was transparent of the adjustment or altered of the cash dividend policy: | Not Applicable |
ADAMA Ltd Annual Report 2019
Unit: RMB
| Dividend year | Amount of cash dividend (including tax) | Net profit belonging to shareholders of the listed company in consolidated statement of dividend year | The ratio of the cash dividends accounting in net profit which belongs to shareholders of the listed company in consolidated statement | Amount of the cash dividend by other methods (such as share buyback) | Ratio of the cash dividend by other methods accounting in net profit which belongs to shareholders of the listed company in consolidated statement | Total amount of cash dividend (including other ways) | The ratio of total amount of cash dividend (including other ways) accounting in net profit which belongs to shareholders of the listed company in consolidated statement |
| 2019 | 29,358,642.98 | 277,041,000 | 10.6% | 0.00 | 0.00% | 29,358,642.98 | 10.6% |
| 2018 | 237,315,697.45 | 2,402,462,000 | 9.88% | 0.00 | 0.00% | 237,315,697.45 | 9.88% |
| 2017 | 154,132,875.67 | 1,545,879,000 | 9.97% | 0.00 | 0.00% | 154,132,875.67 | 9.97% |
| Bonus shares for every 10-share (Share) | Not Applicable. |
| Dividends for every 10-share (RMB) (Tax included) | 0.12 |
| Every 10-share increased the shares’ number | 0 |
| Equity base of distribution plan (Share) | 2,446,553,582 |
| Cash dividend (RMB) (Tax included) | 29,358,642.98 |
| Amount of the cash dividend by other methods (e.g. share buyback) | 0 |
| Total cash dividend (RMB) (Tax included) | 29,358,642.98 |
| Distributable profits (RMB) | 277,041,000 |
| Ratio of the Cash dividend (including the amount to be distributed in other ways) accounting in the total amount of the distributed dividend | 100% |
| Cash dividends of This Time | |
ADAMA Ltd Annual Report 2019
| If the development phase of the Company was the mature period with significant funds expenditures arrangement, the proportion of the cash dividend should at least reach 40% of the total profit distribution. |
| Detailed Description on the Pre-Plan for Profit Allocation or Turning Capital Reserve into Share Capital |
| As audited by Deloitte Touche Tohmatsu Certified Public Accountants LLP, the net profit attributable to shareholders of the Company is RMB 277,041,000. As there is no transfer to statutory surplus reserve (10% of the net profit on a standalone basis of the Reporting Period is RMB 0), profit available for distribution for the year 2019 is RMB 277,041,000. The proposal for profit distribution for the year 2019 is a distribution of 10% of the total profit available for distribution, calculated as follows with no transfer of reserves into equity: Taking the total outstanding 2,446,553,582 shares of the Company dated February 28, 2020 as the basis, to distribute RMB 0.12 (including tax) per 10 shares as cash dividend to all shareholders, resulting in a total cash dividend of RMB 29,358,642.98 (including tax), and zero shares as share dividend, as well as no reserve transferred to equity capital. |
ADAMA Ltd Annual Report 2019
III. Performance of commitments
1. Commitments completed by the Company, the shareholders, the actual controllers, the purchasers, the Directors, the Supervisors and the SeniorExecutives or the other related parties during the Reporting Period and those hadn’t been completed execution up to the period-end
√ Applicable □ Not applicable
| Commitment | Commitment maker | Commitment type | Contents | Time of making commitment | Period of commitment | Fulfillment |
| Commitment on share reform | ||||||
| Commitment in the acquisition report or the report on equity changes | ChemChina | Commitments on the horizontal competition | 1. The business of the ChemChina’s subsidiaries - Jiangsu Anpon Electrochemical Co., Ltd., Anhui Petroleum Chemical Group Co., Ltd., Shangdong Dacheng Agrochemical Co., Ltd. and Jiamusi Heilong Agrochemicals Co., Ltd., and Hunan Haohua Chemical Co., Ltd. and its subsidiary had the same or similar situations with the main business of ADAMA, and aimed at the domestic horizontal competition, ChemChina committed to gradually eliminate such kind of horizontal competition in the future and to fight for the internal assets reconstruction, to adjust the industrial plan and business structure, to transform technology and to upgrade products, to divide the market so as to make each corporation differ in the products and its ultimate users according to the securities laws and regulations and industry policy within 7 years, thus to eliminate the current domestic horizontal competition between ChemChina’s controlling subsidiaries and ADAMA. 2. Excepting the competition situation disclosed in the offer | September 7, 2013 | Regarding commitment 1, September 6, 2020 (According to the commitments made by ChemChina on October 12, 2016, the date to eliminate the domestic horizontal competition between the Company and Jiangsu Anpon Electrochemical | On-going. The committed parties comply with the commitments:(1) ChemChina had transferred its shares in Anpon to ADAMA; (2) ChemChina had transferred its shares in Jiamusi Heilong to a third party. Jiangmusi Heilong is no longer a subsidiary of ChemChina; (3) Shangdong |
ADAMA Ltd Annual Report 2019
| Commitment | Commitment maker | Commitment type | Contents | Time of making commitment | Period of commitment | Fulfillment |
| acquisition report, ChemChina takes effective measures to avoid itself and its controlling subsidiaries (excepting Commitments respectively made in acquisition report by Celsius Property B.V. and MAI)’ new increased business engaged in the same or similar business with ADAMA, Ltd. within the territory in future. 3. If ChemChina or its controlling subsidiaries (excepting Commitments respectively made in acquisition report by Celsius Property B.V. and MAI) domestically conduct related business which form horizontal competition with ADAMA, Ltd. in future, ChemChina will actively take steps, gradually eliminate the competition, the concrete measures including but not limited to fight for internal assets reconstruction, (including putting the business into ADAMA, Ltd. or operated through ADAMA, Ltd.) to adjust the industrial plan and business structure, to transform technology and to upgrade products, to divide the market so as to make each corporation differ in the products and its ultimate users, thus to avoid and eliminate the current domestic horizontal competition between ChemChina’s controlling subsidiaries and ADAMA. | Co., Ltd., Anhui Petroleum Chemical Group Co., Ltd., and Jiamusi Heilong Agrochemicals Co., Ltd., is January 4, 2022). Regarding commitments 2 and 3, long term effective. | Dacheng is not a subsidiary of CNAC and doesn’t carry out agrochemical business; (4) ChemChina is not the actual controller of Haohua. | ||||
| ChemChina | Commitments on the independence of the Company and the related- party transaction | ChemChina will comply with laws, regulations and other regulatory documents to avoid and reduce related-party transactions with ADAMA. However, for related-party transactions that are inevitable or based on reasonable grounds, ChemChina will follow the market principles of just, fairness and openness, enter into agreement(s) legally and go through lawful procedures. ChemChina will honor its disclosure obligations and apply for relevant approvals according to the AoA of ADAMA, | September 7, 2013 and January 7, 2020 | Long term effective | On-going. The committed parties comply with the commitments. |
ADAMA Ltd Annual Report 2019
| Commitment | Commitment maker | Commitment type | Contents | Time of making commitment | Period of commitment | Fulfillment |
| rules regarding related-party transactions and relevant regulations, not damaging the lawful rights and interest of ADAMA and its shareholders by related-party transactions.50177 159163 After completion of this transaction, ADAMA will continue to keep complete procurement, production and sales systems and to possess independent intellectual properties. ChemChina and its affiliated parties will be completely independent from ADAMA in terms of staff, assets, finance, business and organization. ADAMA will have full capacity of operation in Chinese agricultural chemical market. ChemChina will continue to follow the Company Law and Securities Law so as to avoid any business operation that may impact the independence of ADAMA. | ||||||
| ChemChina | Commitments on the horizontal competition | ChemChina will keep taking appropriate measures to resolve the same issue between ADAMA and Anhui Petrochemical Co., Ltd. within four years after ADAMA buys 100% shares of ADAMA Solutions through the issuance of shares to CNAC and finishes the raising of supporting finance in accordance with the original commitments as well as various the requirements of securities laws and regulations and industry policies. | January 7, 2020 | January 4, 2022 | On-going. The committed parties comply with the commitments. Note: On January 4, 2018, ADAMA completed the purchase of the shares of ADAMA Agricultural Solutions Ltd. and the raising of supporting finance. |
ADAMA Ltd Annual Report 2019
| Commitment | Commitment maker | Commitment type | Contents | Time of making commitment | Period of commitment | Fulfillment |
| Based on a preliminary review, ChemChina believes that Syngenta A.G. and ADAMA may have peer competition to some extent. It will further analyze, confirm and specify if the two companies share the same or similar businesses and products in terms of business content, suppliers and customers, product substitution, processes and core technologies and distribution channels, etc. If the result shows positive, ChemChina will gradually solve the issue within 5 years after the issuance of this Letter by taking appropriate measures, including but not limited to internal asset restructuring, industrial planning and business structure adjustment, technology transformation and product upgrading, market segmentation or other feasible solutions in accordance with the requirements of securities laws and regulations and industry policies. | January 7, 2020 | January 7, 2025 | On-going. The committed parties comply with the commitments. | |||
| Once Sinofert and Sinochem Agriculture are the subsidiaries of ChemChina, ChemChina will analyze if there are identical or similar businesses among the three subsidiaries. If the result shows positive, ChemChina will then propose corresponding solutions for any business or product that constitutes competition in accordance with the requirements of applicable laws, regulations and regulations to solve the issue of peer competition. | January 7, 2020 | Long term effective | On-going. The committed parties comply with the commitments. | |||
| ChemChina will continue to take effective measures to prevent itself and its other subsidiaries from adding new businesses in the future that are the same as or similar to those of ADAMA. If ChemChina or any of its other subsidiaries develops related businesses that constitutes peer competition against the domestic business of ADAMA in the future, it | January 7, 2020 | Long term effective | On-going. The committed parties comply with the commitments. |
ADAMA Ltd Annual Report 2019
| Commitment | Commitment maker | Commitment type | Contents | Time of making commitment | Period of commitment | Fulfillment |
| will actively take relevant measures, including but not limited to asset restructuring, adjustment of industrial planning and business structure, technological transformation and Product upgrades, market segmentation and other feasible solutions, so that each enterprise will be different in their portfolio and end users and avoid and eliminate the peer competition against ADAMA. | ||||||
| From the effective date of this Letter, if ChemChina violates the above commitments, it should compensate ADAMA for the losses or expenses suffered or incurred by the violation. | January 7, 2020 | Long term effective | On-going. The committed parties comply with the commitments. | |||
| Commitments made at the time of assets reorganization | ChemChina | Commitments on the horizontal competition | The subsidiaries controlled by ChemChina, namely Anpon, HH, Maidao, Anhui Petrochemical and Heilong as well as their subsidiaries are in similar or the same business as ADAMA. For the horizontal competition in China, ChemChina commits itself to take appropriate actions to solve the horizontal competition between its subsidiaries and ADAMA step-by-step in an appropriate way within 4 years after completion of the reorganization, in accordance with securities laws, regulations and sector/industrial policies. The means by which ChemChina addresses the horizontal competition include but are not limited to the following, ADAMA acquires crop protection-related assets under ChemChina. ADAMA holds or controls other crop protection-related assets of ChemChina in line with national laws and by reasonable commercial means such as entrusted operation. ChemChina divests other | October 12, 2016 | January 4, 2022 | On-going. The committed parties comply with the commitments: (1) the reorganization, i.e. the issuance of shares to CNACA for purchasing assets and implementation of private placement, completed on January 4, 2018; (2) Anpon absorbed Maidao and ChemChina’s |
ADAMA Ltd Annual Report 2019
| Commitment | Commitment maker | Commitment type | Contents | Time of making commitment | Period of commitment | Fulfillment |
| crop protection-related assets or transfers the control power of such subsidiaries to external parties. ChemChina reorganizes internal assets, adjusts sector planning and business structure, upgrades technologies and products and makes market segmentation so that each company will differentiate its products and end users to eliminate horizontal competition between the subsidiaries controlled by ChemChina and ADAMA. | shares in Anpon had been transferred to ADAMA; (3) ChemChina had transferred its shares in Heilong to a third party. Heilong is no longer a subsidiary of ChemChina; (4) HH withdrew from the agrochemical business. | |||||
| ChemChina | Commitments on Potential Horizontal Competition | ChemChina will take effective actions to avoid adding new business in China same or similar to ADAMA by itself and its controlled subsidiaries. If ChemChina or its controlled subsidiaries are in the future engaged in the business in China that constitute horizontal competition against ADAMA, ChemChina will take active actions, including but not limited to reorganizing internal assets, adjusting sector planning and business structure, upgrading technologies and products and making market segmentation so that each company will differentiate its products and end users to avoid and eliminate horizontal competition between the subsidiaries controlled by ChemChina and ADAMA. | October 12, 2016 | Long term effective | On-going. The committed parties comply with the commitments. | |
| ChemChina | Commitment to reduce and standardize | ChemChina will, as required by law, regulation and other specifications, avoid and reduce connected transactions with ADAMA; however, for the connected transactions | August 4, 2016 | Long term effective | On-going. The committed parties comply |
ADAMA Ltd Annual Report 2019
| Commitment | Commitment maker | Commitment type | Contents | Time of making commitment | Period of commitment | Fulfillment |
| related-party transactions | that are inevitable or based on reasonable grounds, ChemChina will follow the just, fairness and open principles in market, legally enter into agreement(s) by law, go through lawful procedures, and perform its disclosure obligations and approving procedures as required by related systems and regulations. ChemChina warrants that no connected transaction will be done to impair lawful rights and interest of ADAMA and its shareholders. | with the commitments. | ||||
| ChemChina | Commitment to maintain independence of the listed company | After completion of this acquisition transaction, ADAMA will continue to keep complete procurement, production and sales systems and to possess independent intellectual properties, and ChemChina and its affiliated party will be completely independent from ADAMA in terms of staff, assets, finance, business and organization, and ADAMA will have full capacity of operation in Chinese agricultural chemical market. ChemChina will follow related regulations in Company Law and Securities Law, and avoid engagement in any action that impairs the operating independence of ADAMA. | August 4, 2016 | Long term effective | On-going. The committed parties comply with the commitments. | |
| CNAC /Syngenta Group | Commitment on share lock-up | All new shares purchased and held by share issuance for assets purchase shall be prohibited from transfer in whatever forms within 36 months after date of listing, including but not limited to public transfer via securities market or transfer by agreements and will not have such shares of the listed company managed by any other person entrusted, except such transfer is required and made between ChemChina and its subsidiaries as a result of state-owned assets reorganization, consolidation or free transfer of stock equity, in which | October 12, 2016 and January 7, 2020 | August 2, 2020 | On-going. The committed party complies with the commitments.. |
ADAMA Ltd Annual Report 2019
| Commitment | Commitment maker | Commitment type | Contents | Time of making commitment | Period of commitment | Fulfillment |
| case the transferee must keep such shares obtained locked up until the lock-up period expires. According to regulations in Article 48 of the Administrative Measures for the Material Asset Reorganizations of Listed Companies, if within a period of 6 months after completion of this transaction, the closing price of the listed company is lower than the offering price in any continuous 20 trading days, or if within a period of 6 months after completion of this transaction, the closing price at the end of such 6-month period is lower than the offering price, then the lock-up period of shares held will be extended automatically by at least 6 months. Upon expiry of the lock-up period, such shares shall be subject to applicable laws, regulations and CSRC and SZSE rules. | ||||||
| CNAC /Syngenta Group | Commitments on performance compensation | CNAC /Syngenta Group shall fulfill the performance compensation obligations in the transaction in accordance with Performance Compensation Agreement signed with the listed company and relevant laws and regulations. In the event that a performance compensation obligation takes place, CNAC /Syngenta Group shall first fulfill the obligation of compensation with the shares of ADAMA and the deficient portion (if any) shall be made up in cash. CNAC /Syngenta Group commits that the net profits of ADAMA attributable to the parent company after deducting non-recurring gains and losses shall not be less than USD 147,675,000, USD 173,321,900 and USD 222,416,800 respectively in 2017, 2018, 2019. After the expiry of the profit compensation period, if the impairment amount is larger than compensated amount by CNAC during the profit | September 13, 2016 and January 7, 2020 | December 31, 2019 | On-going. The committed party complies with the commitments. Please refer to the announcement disclosed by the Company on April 28, 2020. |
ADAMA Ltd Annual Report 2019
| Commitment | Commitment maker | Commitment type | Contents | Time of making commitment | Period of commitment | Fulfillment |
| compensation period, then CNAC/Syngenta Group shall compensate ADAMA. | ||||||
| China Cinda Asset Management Co., Ltd., CCB Principle Asset Management Co., Ltd., Aegon-industrial Fund Co., Ltd., Penghua Fund Management Co., Ltd., China Structural Reform Fund Co. ,Ltd., Caitong Fund Management Co., Ltd. | Commitment on share lock-up | The new shares issued in the non-public offering to raise supporting fund shall not be transferred in any manner within 12 months after the initial trading day of the new issued shares. | December 25, 2017 | January 18, 2019 | The committed parties performed the commitments during the Reporting Period. The shares have been unlocked on January 21, 2019. |
ADAMA Ltd Annual Report 2019
2. Assets or projects with profit forecast, still relevant for forecast period
√ Applicable □ Not applicable
| Assets or project with profit forecasted | Start of period | End of period | Current forecast performance (in USD’0000) | Current actual performance (in USD’0000) | Reasons for failure to achieve the forecast number (if applicable) | Disclosure date for former prediction | Index |
| Solutions | Jan 1, 2017 | Dec 31, 2019 | 54,341.37 | 51,267.56 | This shortfall was caused entirely by the impact of the Divestment & Transfer of several products that Solutions implemented to facilitate the approval by the EU Commission of the acquisition of Syngenta by ChemChina, which caused an aggregate of $66 million in incremental non-cash amortization charges related to the written-up value of the assets received from Syngenta. Absent these non-cash amortization charges, Solutions would have exceeded the profit commitment by around $35 million. | July 5, 2017 | www.cninfo.com.cn Report of ADAMA, Ltd. on Share Issuance for Assets Purchase and Supporting Funds Raise & Related Party Transactions |
ADAMA Ltd Annual Report 2019
quired to compensate the Company either through shares or cash according to a predetermined formula. The aggregatenet profit commitment for the 2017-2019 period, as agreed to by CNAC, was an amount of $543.41 million. DespiteADAMA Solutions’ strong performance during the three-year period, due to exogenous reasons, the calculated net profitof ADAMA Solutions for this period has now been determined to be approximately $512.68 million, implying a completionrate of 94.34% and a shortfall of approximately $31 million. This shortfall was caused entirely by the impact of the Di-vestment & Transfer of several products that ADAMA Solutions implemented to facilitate the approval by the EU Com-mission of the acquisition of Syngenta by ChemChina, which caused an aggregate of $66 million in incremental non-cashamortization charges related to the written-up value of the assets received from Syngenta. Absent these non-cash amor-tization charges, ADAMA Solutions would have exceeded the profit commitment by around $35 million.As a result, CNAC shall return to the Company at 1 RMB 102,432,280 out of the 1,810,883,039 shares it received in theCompany in exchange for the transfer of 100% of Solutions to the Company, and return approximately RMB 17.62 million(approximately $2.5 million) in dividends it received in respect of such shares. Following their receipt, these shares will becanceled by the Company. As a result, the total number of shares in issue will be reduced to 2,344,121,302, and CNAC’sownership (directly and indirectly) in the Company will go from 78.9% to 78.0%.Additionally, according to the Impairment Test Report of Solutions due to the Expiration of the Compensation Period ofMajor Assets Restructuring Project issued by Deloitte, there was no impairment of Solutions on December 31, 2019.In view of CNAC is transferring the shares directly held by it in the Company to the Syngenta Group, CNAC and SyngentaGroup will compensate the Company. For details, please refer to the Announcement on the Overall Achievement of theCommitted Performance in the Major Assets Restructuring and the Planned Compensations to the Company by theObligors disclosed by the Company on April28, 2020 on the website www.cninfo.com.cn.Fulfillment of committed profit and its impact to goodwill impairment testPlease see above paragraph for the fulfillment of the commitment. The Company performed the annual goodwillimpairment test according to ASBE 8 Asset Impairment. As of December 31, 2019, the fair value of the cash generatingunits to which the goodwill relates exceeds its carrying amount. As such, no goodwill impairment was needed.
IV. Inadequate use of Company’s capital by the controlling shareholder or by itsrelated parties for non-operating purposes
□ Applicable √ Not applicable
No such situation occurred during the Reporting Period.
V. Explanation by the Board of Directors and the Supervisory Board regarding“non-standard audit report” issued by Company’s auditor for the Reporting Period
□ Applicable √ Not applicable
VI. Changes in accounting standards, accounting estimates and accountingmethods compared to last financial report
√ Applicable □ Not applicable
The changes of the accounting standards of the Group are as follows:
The Group began to adopt revised Accounting Standards for Business Enterprises 21 Leases (“ASBE 21”), promulgatedby Ministry of Finance in 2018, from January 1, 2019.
ADAMA Ltd Annual Report 2019
Group prepare annual financial statements according to the Notice on Revising the Format of 2019 Financial Statementsfor General Enterprises (CaiKuai [2019] No.6, hereinafter “CaiKuai No.6”) promulgated by Ministry of Finance on April 30,2019. CaiKuai No.6 revised accounts in balance sheets, income statements, statements of cash flows and statements ofchanges in shareholders’ equity, including:
- “Notes and accounts receivable” is split into “Notes receivable” and “Accounts receivable”;- “Notes and accounts payable” is split into “Notes payable” and “Accounts payable”;- Newly added “Receivables financing” and “Special reserve”;- Make clear or revise the contents presented within the accounts of “Other receivables”, “Non-current assets duewithin one year”, “Other payables”, “Deferred income”, “Other equity instruments”, “Research and Developmentexpenses”, “Interest income” and “Interest expenses” as subitems of “Finance expenses”, “Other income”,“Non-operating income”, “Non-operating expenses”, and “Capital injected by holders of other equity instruments”.- Added disclosure requirements for provision of loss allowance, for loan commitments and financial guaranteecontracts;- Added “Gain from derecognition of financial assets at amortized cost” as a subitem of “Investment income”;- Adjusted the sequence of some items within the income statements;- Make clear of the items in the cash flow statements, for the cash flows related to government grants.The above modifications were retrospectively adjusted for comparative numbers. There is no significant impact to theCompany’s financial statements from implementation Caikuai No.6.VII. Financial re-statement during the Reporting Period
□ Applicable √ Not applicable
No such cases during the Reporting Period.VIII. Change of the consolidation scope as compared with the financial reporting oflast year
√ Applicable □ Not applicable
During the reporting period, the Group acquired Jiangsu Anpon Electrochemical co. LTD. through business combinationunder common control, Bonide Products INC., Agro Klinge S.A., and SFP through business combination not undercommon control.IX. Engagement of Company’s Auditor
Auditor engaged at present
| Name of domestic Auditor | Deloitte Touche Tohmatsu Certified Public Accountants LLP |
| Remuneration for domestic Auditor for the Reporting Period (RMB Ten Thousand Yuan) | 290 |
| Consecutive years of the audit services provided by domestic Auditor | 3 |
ADAMA Ltd Annual Report 2019
| Name of domestic accountants | Hu Ke, and Ma Renjie |
| Consecutive years of the audit services provided by the domestic accountants | 2 |
| Name of overseas Auditor | Not applicable |
| Remuneration for overseas Auditor for the Reporting Period (RMB Ten Thousand Yuan) | -- |
| Consecutive years of the audit services provided by overseas Auditor | -- |
| Name of overseas accountants | -- |
| Consecutive years of the audit services provided by the overseas accountants | -- |
ADAMA Ltd Annual Report 2019
XIII. Punishment and rectification
√ Applicable □ Not applicable
| Company name | Person punished | Reason | Type of the punishment | Conclusion made by the authority | Disclosure date | Index of the disclosure |
| ADAMA Ltd. | ADAMA Ltd. | On January 30 and 31, 2019, the Provincial Environmental Inspection Team, together with personnel from its municipal branch, conducted an inspection at the Jingzhou old production site. During such inspection, the inspectors took several samples, some of which showed elevated levels of water pollutant, in excess of discharge standards prescribed by the State in the production process. | Punished by the environmental protection authority. | (1) An administrative penalty of a fine of one million RMB yuan for the Company’s wastewater discharge that exceeded the maximum allowable emission limit. (2) Stop production at the Jingzhou old production site and take corrective measures. | February 13, 2019; April 2, 2019 | Announcement on Receiving a Notice Prior to Administrative Punishment (Hearing) and Decision Notice of Production Suspension and Rectification (announcement number 2019-9); Announcement on the Resumption of Production at the Old Site in Jingzhou (announcement number 2019-25). Both published in the website of www.cninfo.com.cn |
ADAMA Ltd Annual Report 2019
its controlling shareholders and/or actual controller failed to perform or pay off.XV. Stock incentive plans, ESOPs or other employee incentives
□ Applicable √ Not applicable
To the date of the report, the Company does not have stock incentive plans, ESOP or other staff incentives. It shall benoted, that Adama Solutions approved in December 2017 and in February 2019 long-term incentive plans and grantedlong-term cash rewards to executive officers and employees, which are based on the performance of the Company'sshares (phantom cash incentives). In September 2019, the cash rewards granted according to the 2017 plan werereplaced by cash rewards granted according to an approved replacement plan. Adama Solutions has further adoptedan incentive plan linked to the increase in the Syngenta Group EBITDA.
XVI. Significant related-party transactions
1. Related-party transactions in the ordinary course of business
□ Applicable √Not applicable
(1) Please see item 5 below for information on the related party transactions made in 2019 in the ordinary course of
business.
(2) Item X of Section XI “Financial Report” sets out the related parties and the related-party transactions of the Company.
2. Related-party transactions arising from asset acquisition or sale
□ Applicable √ Not applicable
On March 29, 2019 the Company purchased 100% of the equity interests in Jiangsu Anpon Electrochemical Co., Ltd.which was a related-party transaction and announced timely during the Reporting Period. Please refer to the below Item 5“Other significant related-party transactions”.
3. Related-party transitions with joint investments
□ Applicable √ Not applicable
The Company was not involved in any significant related-party transaction with joint investments during the ReportingPeriod.
4. Credits and liabilities with related parties
√ Applicable □ Not applicable
Whether there was non-operating credit and liability with related parties
□ Yes √ No
The Company was not involved in any non-operating credit and liability with related parties.
ADAMA Ltd Annual Report 2019
5. Other material related-party transactions
√ Applicable □ Not applicable
(1) The 1
st Interim Shareholders Meeting and the 2
nd
Interim Shareholders Meeting separately approved theexpected related-party transactions in the ordinary business course of the Company in 2019 and the newexpected related-party transactions in the ordinary course of business in 2019. Please refer to Item X of SectionXI “Financial Report” for details of the related-party transactions in the ordinary business course.
(2) The 12
th meeting of the 8
thsession of the BOD approved the Company to purchase 100% of the equity interestsin Jiangsu Anpon Electrochemical Co., Ltd.
(3) The 2018 Annual Shareholders Meeting approved a guarantee provided by the Company’s subsidiary JiangsuAnpon Electrochemical Co., Ltd. in favor of Jiangsu Huaihe Chemicals Co., Ltd., a related party of the Company.
(4) The 2
ndInterim Shareholders Meeting approved the Company to sign a Supplemental Financial ServicesAgreement with ChemChina Finance Co., Ltd.in a related-party transaction.
(5) The 17
thmeeting of the BOD approved to sign an Extended Agreement for Engineering, Procurement andConstruction with BlueStar Engineering Co., Ltd.
The website to disclose the interim announcements on significant related-party transactions:
| Name of the interim announcement | Disclosure date of the interim announcement | Website to disclose the interim announcement |
| Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2019 (announcement no. 2019-11) | February 22, 2019 | www.cninfo.com.cn |
| Announcement on the New Expected Related-Party Transactions in the Ordinary Course of Business in 2019 (announcement no. 2019-31) | April 30, 2019 | www.cninfo.com.cn |
| Preliminary Announcement on the Intended Acquisition of 100% of the Equity Interests in Jiangsu Anpon Electrochemical Co., Ltd., in a Related-Party Transaction (announcement no. 2019-1) | January 3, 2019 | www.cninfo.com.cn |
| Announcement on the Acquisition of 100% of the Equity Interests in Jiangsu Anpon Electrochemical Co., Ltd., in a Related-Party Transaction (announcement no. 2019-16) | March 21, 2019 | www.cninfo.com.cn |
| Announcement on an External Guarantee in a Related Party Transaction (announcement no. 2019-22) | March 30, 2019 | www.cninfo.com.cn |
| Progress Announcement on the Acquisition of 100% of the Equity Interests in Jiangsu Anpon Electrochemical Co., Ltd., in a Related-Party Transaction (announcement no. 2019-24) | March 30, 2019 | www.cninfo.com.cn |
| Announcement on the Signing of Supplemental Financial Services Agreement in a Related-Party Transaction with ChemChina Finance Co., Ltd. (announcement no. 2019-32) | April 30, 2019 | www.cninfo.com.cn |
| Announcement on Signing an Extended Agreement for Engineering, Procurement and Construction (EPC) Between ADAMA Ltd. and Its Related Party Bluestar Engineering Co., Ltd. (announcement no. 2019-51) | October 31, 2019 | www.cninfo.com.cn |
ADAMA Ltd Annual Report 2019
XVII. Particulars regarding material contracts and execution thereof
1. Particulars about trusteeship, contract and lease
(1) Trusteeship
□ Applicable √ Not applicable
There was no trusteeship of the Company in the reporting period.
(2) Contract Operation
□ Applicable √ Not applicable
There was no contract operation of the Company in the reporting period.
(3) Lease
□ Applicable √Not applicable
There is no major lease in the reporting period..
The lease whose profits reaching more than 10% of the total profits of the Company in the Reporting Period
□ Applicable √ Not applicable
There was no lease whose profits reaching more than 10% of the total profits of the Company in the Reporting Period.
2. Significant guarantees
□ Applicable √ Not applicable
Unless otherwise specified, the unit hereunder is RMB ‘0000
| Guarantees provided by the Company in favor of third parties (excluding subsidiaries) | |||||||||||
| Guaranteed party | Disclosure date of the announcement | Planned guarantee amount | Actual occurrence date | Actual guarantee amount | Type of guarantee | Period of guarantee | expired or not | Guarantee for a related party or not | |||
| Jiangsu Huaihe Chemicals Co., Ltd. | March 10, 2019 | 5,000 | April 10, 2019 | 5,000 | joint and several liability | Two months | expired | Yes | |||
| Total guarantee line approved in favor of third parties (excluding subsidiaries) during the reporting period (A1) | 5,000 | Total amount of the occurred guarantee in favor of third parties (excluding subsidiaries) during the reporting period (A2) | 5,000 | ||||||||
| Aggregated guarantee line in favor of third parties (excluding subsidiaries) that has been approved by the end of the reporting period (A3) | 5,000 | Total guarantee balance in favor of third parties (excluding subsidiaries) by the end of the reporting period (A4) | 0 | ||||||||
ADAMA Ltd Annual Report 2019
| Guarantees provided by the Company in favor of its subsidiaries | ||||||||
| Guaranteed party | Disclosure date of the announcement | Planned guarantee amount | Actual occurrence date | Actual guarantee amount | Type of guarantee | Period of guarantee | expired or not | Guarantee for a related party or not |
| ADAMA Anpon (Jiangsu) Ltd. | May 18, 2019 | 80,000 | November 13, 2019 | 5,000 | joint and several liability | Two years after the loan matures | No | No |
| ADAMA Anpon (Jiangsu) Ltd. | August 22, 2019 | 63,000 | November 19, 2019 | 5,000 | joint and several liability | Two years after the loan matures | No | No |
| December 10, 2019 | 5,000 | joint and several liability | Two years after the loan matures | No | No | |||
| December 26, 2019 | 5,000 | joint and several liability | Two years after the loan matures | No | No | |||
| October 10, 2019 | 4,000 | Joint liability and several liability | Two years after the loan matures | No | No | |||
| December 2, 2019 | 2,000 | Joint liability and several liability | Two years after the loan matures | No | No | |||
| Total guarantee line approved in favor of the subsidiaries during the reporting period (B1) | 143,000 | Total amount of the occurred guarantee in favor of the subsidiaries during the reporting period (B2) | 26,000 | |||||
| Aggregated guarantee line that has been approved in favor of the subsidiaries by the end of the reporting period (B3) | 143,000 | Total guarantee balance in favor of the subsidiaries by the end of the reporting period (B4) | 26,000 | |||||
| Guarantees provided by subsidiaries in favor of subsidiaries (USD ’0000) | ||||||||
| Guaranteed party | Disclosure date of the announcement | Planned guarantee amount | Actual occurrence date | Actual guarantee amount | Type of guarantee | Period of guarantee | expired or not | Guarantee for a related party or not |
| Control Solutions, Inc. | October 31, 2018 | 1,300 | October 30, 2018 | 1,300 | joint and several liability | Generally 7 years (subject to the overseas laws) | No | No |
ADAMA Ltd Annual Report 2019
| Control Solutions, Inc. | January 10, 2019 | 4,000 | January 9, 2019 | 4,000 | joint and several liability | The loan term (5 years) and any applica-ble statute of limitations period (gen-erally 7 years). | No | No |
| ADAMA Brazil | Not applicable | 27399.55 | The guarantee existed before the company was consolidated into the financial statements of the Company. | 7,314.05 | joint and several liability | Valid until cancelled | No | No |
| Adama India Private Ltd. | Not applicable | 9,019.2 | The guarantee existed before the company was consolidated into the financial statements of the Company. | 5,163.9 | joint and several liability | Valid until cancelled | No | No |
| ADAMA (Beijing) Agricultural Technology Company Limited | Not applicable | 2,500 | The guarantee existed before the company was consolidated into the financial statements of the Company. | 0 | joint and several liability | Valid until cancellation | No | No |
| ADAMA Turkey Tar?m Sanayi ve Ticaret Limited ?irketi | Not applicable | 3,850 | The guarantee existed before the company was consolidated into the financial statements of the Company. | TRY 48,354.9k (approximately USD 810.91) | joint and several liability | Valid until cancelled | No | No |
| Adama Makhteshim | Not applicable | unlimited | The guarantee existed before the company was consolidated into the financial | 5,315.6 | joint and several liability | Valid until cancelled | No | No |
ADAMA Ltd Annual Report 2019
| statements of the Company. | |||||||||
| Adama Agan | Not applicable | unlimited | The guarantee existed before the company was consolidated into the financial statements of the Company. | 6,091.6 | joint and several liability | Valid until cancelled | No | No | |
| ADAMA Agricultural Solutions UK Ltd. | Not applicable | 365.64 | The guarantee existed before the company was consolidated into the financial statements of the Company. | 0 | joint and several liability | Valid until cancelled | No | No | |
| ADAMA CELSIUS BV, Curacao branch, & ADAMA Fahrenheit BV, Curacao Branch | Not applicable | 4,500 | The guarantee existed before the company was consolidated into the financial statements of the Company. | 106.06 | joint and several liability | Valid until cancelled | No | No | |
| ADAMA Ukraine LLC | Not applicable | 2,500 | The guarantee existed before the company was consolidated into the financial statements of the Company. | 1,080.8 | joint and several liability | Valid until cancelled | No | No | |
| Total guarantee line approved in favor of the subsidiaries during the reporting period (C1) | Not applicable | Total amount of the guarantee in favor of the subsidiaries occurred during the reporting period (C2) | USD 31,182.92 (approximately RMB 217,538.29) | ||||||
| Aggregated guarantee line that has been approved in favor of the subsidiaries by the end of the reporting period (C3) | USD 55,434.39(approximately RMB 386,721.39) | Total guarantee balance in favor of the subsidiaries by the end of the reporting period (C4) | USD 31,182.92 (approximately RMB 217,538.29) | ||||||
| Total guarantee amount provided by the Company (total of the above-mentioned three kinds of guarantees) | |||||||||
| Total guarantee line approved | 14,800 | Total actual occurred amount of | 248,538.29 | ||||||
ADAMA Ltd Annual Report 2019
| during the reporting period (A1+B1+C1) | guarantee during the reporting period (A2+B2+C2) | ||
| Total guarantee line that has been approved at the end of the reporting period (A3+B3+C3) | 534,721.39 | Total actual guarantee balance at the end of the reporting period (A4+B4+C4) | 243,538.29 |
| Proportion of total guarantee amount (A4+B4+C4) to the net assets of the Company | 10.89% | ||
| Of which: | |||
| The balance of the guarantee provided in favor of the controlling shareholder and related party. | 0 | ||
| Amount of debt guarantee provided for the guaranteed party whose asset-liability ratio is not less than 70% directly or indirectly (E) | 31,657 | ||
| The amount of the guarantee that exceeds 50% of the net assets | 0 | ||
| Total amount of the above three guarantees (D+E+F) | 31,657 | ||
| As for undue guarantee, liability to guarantee has happened or joint liquidated liability may be undertaken during this Reporting Period (if existing) | -- | ||
| Regulated procedures are violated to offer guarantee (if existing) | -- | ||
ADAMA Ltd Annual Report 2019
XVIII. Social responsibilities
1. Perform social responsibilities
The values of corporate social responsibility are woven throughout the Company’s culture. The Company holds itself to ahigh standard of integrity, fairness, reliability and responsibility, and believes that this is essential for the Company’s longterm success. The Company has made a strong commitment, to education, safety, and protection of the environment, andthe development of its employees.The Company insists on the policy “safety, quality, environmental protection, efficiency”, carries out production andoperation in strict accordance with OHSAS18001 occupational health and safety management system, ISO14001environment management system, ISO9001 quality management system and national cleaning production standards,carries forward the construction of SHE system, technically reforms production devices, technologies and tail gastreatment, enhances the safety of production devices, carries forward lean production, reduces the consumption of energyand materials and carries forward energy conservation and emission reduction. For output value per ten thousand yuan,the overall energy consumption and water consumption decrease year by year. The Company will invest more inenvironmental protection, carry forward comprehensive treatment on environment and persistently improve theperformance of environmental protection.The Company relates high promotion of education in agriculture, chemistry, sustainability and other related areas asintegral part of its mission. The Company is dedicated to the nurturing of the next generation of scientist and to strengthenand invest in the communities in which it operates.Every two years,, the Group publishes a Corporate Social Responsibility report. Please refer them on the Company’swebsite www.adama.com.
2. Perform the social responsibility of targeted poverty alleviation
(1) Targeted Poverty Alleviation Planning
The Company actively implements targeted poverty alleviation according to relevant instructions from Jingzhou LeadingGroup and ChemChina on Poverty Alleviation.
(2) Annual Overview
The Company’s one-on-one poverty alleviation subject is Sanzhou Village of Guanyindang Township. On March 3, 2019,certain employees of the Company visited the Sanzhou Village and donated RMB 6,000 to the poverty alleviation fund. InMay 2019, the Company donated RMB 50,000 to support the Sanzhou Village to develop a "rice and shrimp nesting"project. And in October 2019, according to the opinions of the government of Jingzhou Development Zone, the Companydonated RMB 20,000 to help Tanqiao Town to improve its infrastructure and donated RMB 1,000 to a poor family in YuediVillage, Tanqiao Town.In response to the call of ChemChina, the Company purchased RMB 686,500 goods produced by Gulang County, adesignated poverty alleviation county.
(3) Results of Targeted Poverty Alleviation
| Indicator | Unit | Quantity/ Progress |
| I. Overview | 10,000RMB | 76.35 |
| Of which, 1. funds | 10,000RMB | 7.7 |
| II. Input Breakdown | —— | 68.65 |
| 1. Sector development | —— | —— |
ADAMA Ltd Annual Report 2019
| Indicator | Unit | Quantity/ Progress |
| Of which, 1.1 Sector of Project | —— | |
| 1.2 Number of Project | Project | |
| 1.3 Inputs | 10,000RMB | |
| 1.4 No. of people out of poverty | Person | |
| 2. Employment transfer | —— | —— |
| 3. Movement and relocation | —— | —— |
| 4. Education | —— | —— |
| 5. Health | —— | —— |
| 6. Ecological conservation | —— | —— |
| 7. Subsistence support | —— | —— |
| 8. Social activities a) Investment on East and West Part of China Poverty Alleviation b) Investment on On-site Poverty Alleviation | 10,000RMB | 74.25 |
| 10,000RMB | 68.65 | |
| 10,000RMB | 5.6 | |
| 9. Others | —— | 2.1 |
| III. Awards | —— | —— |
ADAMA Ltd Annual Report 2019
3. Environmental Protection
Is the Company listed as key polluting entities by environmental protection agencies?Yes
| Company name | Main pollutants and special pollutants | Way of emission | Number of emission points | Layout of emission points | Concentration | Pollution standards applied | Total amount emitted/ discharged | Total amount approved | Exceeding limit |
| ADAMA | COD | Continuous | 2 | Centralized discharge point | Within limit | (1) for the old site: Comprehensive Standard on Discharge of Waste Water (GB8978-2002)，COD<100mg/L; (2) for the new site: Discharge Standards for Pollutants from Urban Sewage Treatment Plant (GB 18918 – 2002), COD <50mg/L | 147 | 391.3 | No |
| ADAMA | Ammonia nitrogen | Continuous | 2 | Centralized discharge point | Within limit | (1) for the old site: Comprehensive Standard on Discharge of Waste Water (GB8978-2002), ammonia nitrogen<15mg/L; (2) for the new site: Discharge Standards for Pollutants from Urban Sewage Treatment Plant (GB 18918 – 2002), ammonia nitrogen<8mg/L; | 14.8 | 50 | No |
| ADAMA | Total Phosphorous | Continuous | 2 | Centralized Discharge Point | Within Limit | for the old site & new site: Discharge Standards for Pollutants from Urban Sewage Treatment Plant (GB 18918 – 2002), total phosphorous <0.5mg/L | N/A | N/A | The total phosphorous of the wastewater discharged by the old site of the Company |
ADAMA Ltd Annual Report 2019
| Company name | Main pollutants and special pollutants | Way of emission | Number of emission points | Layout of emission points | Concentration | Pollution standards applied | Total amount emitted/ discharged | Total amount approved | Exceeding limit |
| exceeded the maximum allowable emission in January. For details, please refer to the Announcement on Receiving a Notice Prior to Administrative Punishment (Hearing) and Decision Notice of Production Suspension and Rectification (announcement number 2019-9). | |||||||||
| ADAMA | NOx | Continuous | 1 | Power plant | Within limit | Standard on Air Pollution of Power Plant（GB13223-2011）NOx <200mg/m | 261.5 | 564.7 | No |
| ADAMA | SO2 | Continuous | 1 | Power plant | Within limit | Standard on Air Pollution of Power Plant（GB13223-2011）SO2<200mg/m3 | 151 | 380 | No |
| ADAMA | Fume and dust | Continuous | 1 | Power plant | Within limit | Standard on Air Pollution of Power Plant（GB13223-2011） | 22.25 | 80 | No |
| Anpon | COD | Continuous | 3 | Centralized Discharge Point | Within Limit | Comprehensive Standard on Discharge of Waste Water (GB8978-2002)，COD<100mg/L | 232.82 | 292.88 | None |
| Anpon | Ammonia Nitrogen | Continuous | 3 | Centralized Discharge | Within Limit | Water Quality Standard for Sewage Discharged into Urban Sewerage（GBT | 13.88 | 30.11 | None |
ADAMA Ltd Annual Report 2019
| Company name | Main pollutants and special pollutants | Way of emission | Number of emission points | Layout of emission points | Concentration | Pollution standards applied | Total amount emitted/ discharged | Total amount approved | Exceeding limit |
| Point | 31962-2015）, Ammonia Nitrogen <45mg/L | ||||||||
| Anpon | Total Phosphorous | Continuous | 3 | Centralized Discharge Point | Within Limit | For Anpon: Water Quality Standard for Sewage Discharged into Urban Sewerage （GBT 31962-2015）, total phosphorous <8mg/L; For Anpon’s branch Maidao: Agreement on Waste Water Discharge, total phosphorous <3mg/L; | N/A | N/A | None |
| Anpon | NOx | Continuous | 1 | Power Plant | Within Limit | Standard on Air Pollution of Power Plant（GB13223-2011）NOx <100mg/m3 | 98.86 | 447.366 | None |
| Anpon | SO2 | Continuous | 1 | Power Plant | Within Limit | Standard on Air Pollution of Power Plant（GB13223-2011）SO2<50mg/m3 | 44.67 | 447.366 | None |
| Anpon | Fume and Dust | Continuous | 1 | Power Plant | Within Limit | Standard on Air Pollution of Power Plant（GB13223-2011）Fume and Dust<20mg/m3 | 5.62 | 67.105 | None |
ADAMA Ltd Annual Report 2019
(1) Development and Operation of Environmental Facilities
1. Development and Operation of Waste Water Facilities
There are waste water treatment facilities in both the Company and Anpon with the designed capacity of 37,400 tons/dayand 11,000 tons/day, respectively. As all the facilities are operating well, COD, ammonia nitrogen, and total phosphorousdischarged after the treatment are within the limit.
2. Development and Operation of Waste Gas Facilities
The exhaust treatment facilities in the coal-based power plants of the Company and Anpon are running well. Therefore,SO2, Nitrogen oxide and fume and dust discharged after the treatment are within the limit.
3. The Company and Anpon disclose production and pollution information according the Interim Measures onEnvironmental Information Disclosure and transfers information of main waste water and air pollutants to the informationplatform of the local environmental bureau on a daily basis.
(2) EIA of construction projects and other environmental administrative permitsThe local authority has approved the environmental impact assessment for the relocation and upgrading project ofpesticide series products which is under construction in the new site of Jingzhou in the reporting period
(3) Contingency plan of environmental accidents
The Company and its relevant subsidiaries have formulated the Contingency Plan for Environmental Emergenciesaccording to their production facilities and industry features, and then submitted files to the local environmental protectionauthorities as record.
(4) Environment self-monitoring plan
ADAMA attributes great importance to protecting the environment, out of a sense of responsibility to society and theenvironment and strives to meet the relevant regulatory requirements and to even go beyond mere compliance, engagingin constant dialogue with stakeholders, including the authorities and the community.In order to improve the environmental management, track the discharge of various pollutants, evaluate the impact on thesurrounding environment, strengthen the discharge management of pollutants in the production process, accept thesupervision and inspection of environmental authorities and provide reference for pollution prevention and control, thecompany and its subsidiary Anpon have formulated a self-monitoring plan, which conducts regular tests in strictaccordance with the requirements.
The major monitored indicators and frequency of the Company and Anpon are as the following:
1. Monitored Indicators
Waste water: COD, NH3-N, PH, SS, Petroleum, TP.Air Pollutant: SO2, Nitrogen oxide, Fume and Dust.Noise: Noise at the Site Border
2. Frequency
Boiler emission and waste water discharged from the centralized point: continuous auto monitoringManual sampling: SS, Petroleum, TP, once a month.Noise: once a quarter.
ADAMA Ltd Annual Report 2019
ADAMA continually examines the implications of the environmental laws, taking actions to prevent or mitigate theenvironmental risks and to reduce the environmental effects that may result from its activities, and invests extensiveresources to fulfill those legal provisions that are, and are anticipated to, affect it. ADAMA’s plants are subject toatmospheric emissions regulations, whether by virtue of the stipulations provided in the business licenses or under theapplicable law. Hazardous materials are stored and utilized in the Company's plants, together with infrastructures andfacilities containing fuels and hazardous materials. ADAMA takes actions to prevent soil and water pollution by thesematerials and treats them, if revealed. ADAMA’s plants conduct various soil surveys, risk surveys and tests with regard totreatment of the soil or ground water at the plants.ADAMA intends to continue investing in environmental protection, to the extent required and beyond this, whether on itsown volition or in compliance with contractual commitments, regulatory or legal standards relating to environmentalprotection, so as to realize its best available policy and comply with any legal requirements.As part of its policy of ecological process improvement, ADAMA also invests in remediation, changes in productionprocesses, establishment of sewage facilities, as well as in byproduct storage and recycling.
(5) Other environmental information that should be disclosed
No.
(6) Other environmental information
At the end of January 2019, preceding the Spring Festival, the Company voluntarily suspended operations at Sanonda’sold site in Jingzhou, which is in the process of being relocated to a nearby advanced site, due to recording of higher thanpermitted levels of wastewater compounds. The Company was subsequently instructed by the local government not toresume operations before rectification. The Company rectified the discharge levels and resumed operations at the old siteat the beginning of April 2019. For details, please see the announcement published on www.cninfo.com.cn on February 13,2019.Following resumption of operations at the Jingzhou old site in late March, the Company is advancing the gradual ramp-upof production. The new state-of-the-art wastewater treatment facility is operational, and the upgradedbiological-decomposition systems are being acclimated to the improved wastewater quality. As this progresses, theCompany is experiencing constrained supply in key products manufactured at the site, especially impacting NorthAmerica, Latin-America, Asia-Pacific, China, India, Middle-East and Africa, and recorded approximately RMB 276 millionin related idleness costs during the whole year.In recent years, the Company has already invested $125 million in the relocation of the Jingzhou old site, and has installedadvanced production and environmental facilities at a new and already operational site, including an investment of $16million in a new, state-of-the-art wastewater facility, which is ready to commence operation.XIX. Other significant events
□ Applicable √ Not applicable
1. As mentioned in Section III above, in January 2020 the Company announced that it is becoming a distinctive member ofthe Syngenta Group.CNAC and Syngenta Group have signed a Share Transfer Agreement on January 5, 2020 to transfer the State-owned
74.02% shares of the Company directly held by CNAC to Syngenta Group Co., Ltd. which is also owned by ChemChina.The Company will maintain its unique brand and positioning.
2. In this context, Mr. Chen Lichtenstein ceased to serve as the President and CEO of the Company (while continuing to
ADAMA Ltd Annual Report 2019
serve as a director) effective as of March 1, 2020, following his nomination as CFO of Syngenta Group, with responsibilityalso for strategy and Integration; Mr. Ignacio Dominguez was appointed on February 26, 2020 as the President and CEOof the Company also acting as its legal representative, effective from March 1, 2020, after serving as the CCO of theCompany’s subsidiary - Adama Solutions for the last 6 years, and in other executive positions prior to that. Due to theimpact of the coronavirus pandemic, the Company will register Ignacio Dominguez as the legal representative in HubeiAdministration for Market Regulation Bureau when circumstance permits; Mr. Aviram Lahav, the CFO of the Companywas also appointed as Deputy CEO, concurrently with his appointment as Solutions’ CEO (on top of his role as Solution’sCFO).Additionally, on April 9, 2020, the shareholders meeting approved the nomination of Mr. Erik Fyrwald, the CEO ofSyngenta Group, CEO and Executive Director of Syngenta AG, as director and the Chairman of the Board of Directors ofthe Company, replacing Mr. Yang Xingqiang, and the continuous nomination of Mr. Chen Lichtenstein, CFO of theSyngenta Group and Syngenta AG, as a director of the Board of Directors of the Company. Concurrently, Mr. IgnacioDominguez was nominated as the Chairman of the board of directors of Adama Solutions, replacing Mr. Yang Xingqiang.XX. Significant events of subsidiaries
□ Applicable √ Not applicable
It shall be further noted that in January 2019, Solutions acquired Bonide Products Inc., a US provider of pest-controlsolutions for the consumer Home & Garden use, allowing Solutions to bring its advanced technologies and differentiatedportfolio of pest-control directly to the consumers.
ADAMA Ltd Annual Report 2019
Section VI. - Change in Shares & Shareholders
I. Changes in shares
Unit: share
| Before the change | Increase/decrease (+/-) | After the change | |||||||
| Amount | Proportion | Newly issue share | Bonus shares | Capitalization of public reserves | Other | Subtotal | Amount | Proportion | |
| I. Restricted shares | 1,915,585,521 | 78.30% | -- | -- | -- | -104,697,982 | -104,697,982 | 1,810,887,539 | 74.02% |
| a. State-owned legal person’s shares | 1,810,883,039 | 74.02% | -- | -- | -- | -- | -- | 1,810,883,039 | 74.02% |
| b. Shares held by domestic investors | 104,702,482 | 4.28% | -- | -- | -- | -104,697,982 | -104,697,982 | 4,500 | 0 |
| i. Shares held by domestic legal person | 104,697,982 | 4.28% | -- | -- | -- | -104,697,982 | -104,697,982 | 0 | 0 |
| ii. Shares held by domestic natural person | 4,500 | 0.00% | -- | -- | -- | -- | -- | 4,500 | 0.00% |
| II. Shares not subject to trading moratorium | 530,968,061 | 21.70% | -- | -- | -- | 104,697,982 | 104,697,982 | 635,666,043 | 25.98% |
| a. RMB ordinary shares | 363,918,720 | 14.87% | -- | -- | -- | 104,697,982 | 104,697,982 | 468,616,702 | 19.15% |
| b. Domestically listed foreign shares | 167,049,341 | 6.83% | 167,049,341 | 6.83% | |||||
| III. Total shares | 2,446,553,582 | 100.00% | -- | -- | -- | -- | -- | 2,446,553,582 | 100.00% |
ADAMA Ltd Annual Report 2019
The registered status for the change in shares
□Applicable √ Not applicable
Status of share buyback
□ Applicable √ Not applicable
Status of share buyback in the way of centralized bidding
□ Applicable √ Not applicable
Effects of the change in shares on the basic EPS, diluted EPS, net assets per share attributable to common shareholdersof the Company and other financial indexes over the last year and last period.
□ Applicable √ Not applicable
Other contents that the Company considered necessary or were required by the securities regulatory authorities todisclose
□ Applicable √ Not applicable
ADAMA Ltd Annual Report 2019
2. Changes in restricted shares
√ Applicable □ Not applicable
| Shareholders | Restricted shares at the opening of the Reporting Period | Shares released in the Reporting Period | Restricted shares increased in the Reporting Period | Ending shares restricted | Restricted reasons | Date for released |
| China Structural Reform Fund Co., Ltd. | 33,557,046 | 33,557,046 | 0 | 0 | Committed not to trade | Jan 21, 2019 |
| Industrial Bank Co., Ltd, Mixed Securities Investment Fund, Xingquan New Vision Investment | 4,026,800 | 4,026,800 | 0 | 0 | Committed not to trade | Jan 21, 2019 |
| Industrial Bank Co., Ltd, Mixed Securities Investment Fund, Aegon-Industrial Trend Investment (LOF) | 8,053,736 | 8,053,736 | 0 | 0 | Committed not to trade | Jan 21, 2019 |
| CCB Principal-ICBC-Avic Trust, Trust Plan of Pooled Funds of CCB Principal Private Placement Investment, Tianqi (2016) No. 293 of Avic Trust | 12,885,906 | 12,885,906 | 0 | 0 | Committed not to trade | Jan 21, 2019 |
| Caitong Fund Xiangyun No.2 Asset Management Plan | 536,912 | 536,912 | 0 | 0 | Committed not to trade | Jan 21, 2019 |
| Caitong Fund Fuchun Chuangyi Private Placement No.3 Asset Management Plan | 4,697,986 | 4,697,986 | 0 | 0 | Committed not to trade | Jan 21, 2019 |
| Penghua Fund-CCB-China | 4,697,990 | 4,697,990 | 0 | 0 | Committed not to trade | Jan 21, 2019 |
ADAMA Ltd Annual Report 2019
| Shareholders | Restricted shares at the opening of the Reporting Period | Shares released in the Reporting Period | Restricted shares increased in the Reporting Period | Ending shares restricted | Restricted reasons | Date for released |
| Life Insurance, Private Placement Portfolio of Penghua Fund Management Co., Ltd Entrusted by China Life Insurance (Group) Company | ||||||
| Penghua Fund-Pingan Bank—Huarun Shenguotou Trust-Huren Single Trust | 2,684,560 | 2,684,560 | 0 | 0 | Committed not to trade | Jan 21, 2019 |
| China Cinda Asset Management Co., Ltd. | 33,557,046 | 33,557,046 | 0 | 0 | Committed not to trade | Jan 21, 2019 |
| China National Agrochemical Co., Ltd. (Note) | 1,810,883,039 | 0 | 0 | 1,810,883,039 | Committed not to trade | August 2, 2020 |
| Jiang Chenggang | 4,500 | 0 | 0 | 4,500 | Shares held by a supervisor should be locked up. | six months after the expiration of the term |
| Total | 1,915,585,521 | 104,697,982 | 0 | 1,810,887,539 | -- | -- |
ADAMA Ltd Annual Report 2019
II. Issuance and listing of securities
1. Issuance of securities (excluding preferred stock) during the Reporting Period
□ Applicable √ Not applicable
2. Explanation on changes in share capital & the structure of shareholders, the structure ofassets and liabilities
□ Applicable √ Not applicable
3. Shares held by internal staffs of the Company as a measure of the reform of State-OwnedEnterprises
□ Applicable √ Not applicable
ADAMA Ltd Annual Report 2019
III. Particulars about the shareholders and actual controller
1. Total number of shareholders and their shareholding
Unit: share
| Total number of shareholders as of the end of the Reporting Period | 48,058 (the number of ordinary A share shareholders is 32,384; the number of B share shareholders is 15,674) | Total number of shareholders on the 30th trading day before the disclosure date of the annual report | 51,151 | Total number of preferred stockholder with vote right restored (if any) | 0 | Total number of preferred stockholder with vote right restored on the 30th trading day before the disclosure date of the annual report | 0 | |||||||
| Shareholding of shareholders holding more than 5% shares | ||||||||||||||
| Name of shareholder | Nature of shareholder | Holding percentage (%) | Number of shareholding at the end of the Reporting Period | Increase and decrease of shares during Reporting Period | Number of shares held subject to trading moratorium | Number of shares held not subject to trading moratorium | Pledged or frozen shares | |||||||
| Status of shares | Amount | |||||||||||||
| China National Agrochemical Co., Ltd. (Note) | State-owned legal person | 74.02% | 1,810,883,039 | -- | 1,810,883,039 | -- | -- | -- | ||||||
| Jingzhou Sanonda Holding Co., Ltd. | State-owned legal person | 4.89% | 119,687,202 | -- | -- | 119,687,202 | -- | -- | ||||||
| China Cinda Asset Management Co., Ltd. | State-owned legal person | 1.37% | 33,557,046 | -- | -- | 33,557,046 | -- | -- | ||||||
| China Structural Reform Fund Co., Ltd. | State-owned legal person | 1.37% | 33,557,046 | -- | -- | 33,557,046 | -- | -- | ||||||
| Portfolio No.503 of National Social Security Fund | Others | 0.88% | 21,500,097 | 15,300,176 | -- | 21,500,097 | -- | -- | ||||||
| CCB Principal-ICBC-Avic Trust, Trust Plan of Pooled Funds of CCB Principal | Others | 0.53% | 12,885,906 | - | - | 12,885,906 | -- | -- | ||||||
ADAMA Ltd Annual Report 2019
| Private Placement Investment, Tianqi (2016) No. 293 of Avic Trust | ||||||||||
| Zhu Shenglan | Domestic Individual | 0.35% | 8,527,200 | 7,150,900 | -- | 8,527,200 | -- | -- | ||
| Industrial Bank Co., Ltd, Mixed Securities Investment Fund, Aegon-Industrial Trend Investment (LOF) | Others | 0.22% | 5,420,337 | -2,633,399 | - | 5,420,337 | -- | -- | ||
| Caitong Fund Fuchun Chuangyi Private Placement No.3 Asset Management Plan | Others | 0.19% | 4,697,986 | -- | -- | 4,697,986 | -- | -- | ||
| GUOTAI JUNAN SECURITIES(HONGKONG) LIMITED | Overseas legal person | 0.18% | 4,399,572 | -514,572 | -- | 4,399,572 | -- | -- | ||
| Strategic investors or the general legal person due to the placement of new shares become the top 10 shareholders (if any) | Not applicable | |||||||||
| Explanation on associated relationship or/and persons | Jingzhou Sanonda Holdings Co., Ltd. and CNAC are related parties, and are acting-in-concert parties as prescribed in the Administrative Methods for Acquisition of Listed Companies. Sanonda Holding is a controlled subsidiary of CNAC. It is unknown whether the other shareholders are related parties or acting-in-concert parties as prescribed in the Administrative Methods for Acquisition of Listed Companies. | |||||||||
| Details of shares held by top 10 shareholders not subject to trading moratorium | ||||||||||
| Name of shareholder | Number of shares held not subject to trading moratorium at the end of the period | Type of share | ||||||||
| Type of share | Amount | |||||||||
| Jingzhou Sanonda Holding Co., Ltd. | 119,687,202 | RMB ordinary share | 119,687,202 | |||||||
| China Cinda Asset Management Co., Ltd. | 33,557,046 | RMB ordinary share | 33,557,046 | |||||||
| China Structural Reform Fund Co., Ltd. | 33,557,046 | RMB ordinary share | 33,557,046 | |||||||
| National Social Security Fund Portfolio 503 | 21,500,097 | RMB ordinary share | 21,500,097 | |||||||
| CCB Principal-ICBC-Avic Trust, Trust Plan of Pooled Funds of CCB Principal Private Placement Investment, Tianqi (2016) No. 293 of Avic Trust | 12,885,906 | RMB ordinary share | 12,885,906 | |||||||
| Zhu Shenglan | 8,527,200 | RMB ordinary share | 8,527,200 | |||||||
| Industrial Bank Co., Ltd, Mixed Securities Investment Fund, Aegon-Industrial Trend Investment (LOF) | 5,420,337 | RMB ordinary share | 5,420,337 | |||||||
| Caitong Fund Fuchun Chuangyi Private Placement No.3 Asset Management Plan | 4,697,986 | RMB ordinary share | 4,697,986 | |||||||
ADAMA Ltd Annual Report 2019
| GUOTAI JUNAN SECURITIES(HONGKONG) LIMITED | 4,399,572 | Domestically listed foreign share | 4,399,572 | |
| Qichun County State-owned Assets Administration | 4,169,266 | RMB ordinary share | 4,169,266 | |
| Explanation on associated relationship among the top ten shareholders of tradable share not subject to trading moratorium, as well as among the top ten shareholders of tradable share not subject to trading moratorium and top ten shareholders, or explanation on acting-in-concert | Qichun County Administration of State-Owned Assets held shares of the Company on behalf of the government. It is unknown whether the other shareholders are related parties or acting-in-concert parties as prescribed in the Administrative Methods for Acquisition of Listed Companies. | |||
| Particular about shareholder participate in the securities lending and borrowing business ( if any) | Shareholder Zhu Shenglan held 3,797,200 shares of the Company through a credit collateral securities trading account and held 4,730,000 shares of the Company through a common securities account, who thus held 8,527,200 shares of the Company in total. | |||
ADAMA Ltd Annual Report 2019
2. Particulars about the controlling shareholder
Nature of controlling shareholder: The central state-ownedType of controlling shareholder: legal person
By the end of the Reporting Period, the particulars of the Company’s controlling shareholder are as follows:
| Name of controlling shareholder | Legal representative / company principal | Date of establishment | Organization code | Business scope |
| China National Agrochemical Co., Ltd. | Chen Hongbo | Jan 21, 1992 | 91110000100011399Y | Agricultural chemicals and chemical products and chemical raw materials (except hazardous chemicals), electromechanical device, electrical equipment, control system, instrumentation, building materials, industrial salt, natural rubber and products, computer hardware and software, office automation equipment and textile materials purchasing and marketing; Chemical fertilizer sales; Storage of goods; Import and export business; Technical consultation and technical service; Technology development and technical testing; Production of genetically modified crop seeds (except for the six regions of Beijing Central City); Sale of crop seeds, grass seeds, edible fungi seeds (the enterprise independently selects and operates the project and carries out business activities; Projects subject to approval in accordance with the law shall conduct business activities in accordance with the approved content after approval by relevant departments; It shall not engage in the business activities of the municipal industrial policy prohibiting or restricting such projects. |
| Shares held by the controlling shareholder in other listed companies by holding or shareholding during the Reporting Period | By the end of the reporting period, CNAC held indirectly 46.25% equity shares of Cangzhou Dahua Co. Ltd. through Cangzhou Dahua Group Co. Ltd. | |||
ADAMA Ltd Annual Report 2019
3. Particulars regarding actual controller and the persons acting in concert
Nature of actual controller: State-owned Assets Supervision and Administration CommissionType of actual controller: Legal person
| Name of the actual controller | Legal representative / company principal | Date of establishment | Organization code | Business scope |
| State-owned Assets Supervision and Administration Commission of the State Council | Hao Peng | March 16, 2003 | - | - |
| Shares held by the actual controller in other listed companies by holding or shareholding during the reporting period | Not applicable | |||
State-owned Assets Supervision and Administration Commission of the State CouncilChina National Agrochemical Co., Ltd.
China National Agrochemical Co., Ltd.ADAMA Ltd.
ADAMA Ltd.Jingzhou Sanonda Holdings Co., Ltd.
Jingzhou Sanonda Holdings Co., Ltd.CNAC International Company Limited
CNAC International Company Limited100%
100%China National Chemical Co., Ltd.
China National Chemical Co., Ltd.100%
100%100%
100%100%
100%
74.02%
74.02%
4.89%
ADAMA Ltd Annual Report 2019
□ Applicable √ Not applicable
5. Particulars regarding restriction of reducing holding-shares of controlling shareholders,actual controller, restructuring parties and other commitment entities
□ Applicable √ Not applicable
ADAMA Ltd Annual Report 2019
Section VII. - Preferred stock
□ Applicable √ Not applicable
There was no preferred stock during Reporting Period.
ADAMA Ltd Annual Report 2019
Section VIII. - Directors, Members of the Supervisory Board,
Senior Management Staff & Employees
I. Changes in shareholding of directors, supervisors and senior executives
| Name | Position | Office Status | Gender | Age | Beginning date of office term | Ending date of office term | Shares held at the year-begin (share) | Amount of shares increased at the Reporting Period (share) | Amount of shares decreased at the Reporting Period (share) | Other changes increase/de crease | Shares held at the end of the Reporting Period (share) |
| Erik Fyrwald | Chairman of the BOD | In Office | Male | 61 | April 9, 2020 | 0 | 0 | 0 | 0 | 0 | |
| Chen Lichtenstein | Director | In Office | Male | 52 | Sep 29, 2017 | 0 | 0 | 0 | 0 | 0 | |
| An Liru | Director | In Office | Male | 50 | Apr 29, 2015 | 0 | 0 | 0 | 0 | 0 | |
| Tang Yunwei | Independent Director | In Office | Male | 75 | Dec 25, 2017 | 0 | 0 | 0 | 0 | 0 | |
| Xi Zhen | Independent Director | In Office | Male | 56 | Dec 25, 2017 | 0 | 0 | 0 | 0 | 0 | |
| Ignacio Dominguez | President & CEO | In Office | Male | 60 | March 1, 2020 | 0 | 0 | 0 | 0 | 0 | |
| Aviram Lahav | Chief Financial Officer & Deputy CEO | In Office | Male | 60 | Sep 29, 2017 (Deputy | 0 | 0 | 0 | 0 | 0 |
ADAMA Ltd Annual Report 2019
| Name | Position | Office Status | Gender | Age | Beginning date of office term | Ending date of office term | Shares held at the year-begin (share) | Amount of shares increased at the Reporting Period (share) | Amount of shares decreased at the Reporting Period (share) | Other changes increase/de crease | Shares held at the end of the Reporting Period (share) |
| CEO as of March 1, 2020) | |||||||||||
| Michal Arlosoroff | General Legal Counsel | In Office | Female | 61 | Sep 29, 2017 | 0 | 0 | 0 | 0 | 0 | |
| Jiang Chenggang | Chairman of the Supervisory Board | In Office | Male | 45 | Jan 6, 2013 | 6,000 | 0 | 0 | 0 | 6,000 | |
| Li Dejun | Member of the Supervisory Board | In Office | Male | 61 | March 19, 2018 | 0 | 0 | 0 | 0 | 0 | |
| Guo Zhi | Member of the Supervisory Board | In Office | Male | 43 | March 19, 2018 | 0 | 0 | 0 | 0 | 0 | |
| Li Zhongxi | Secretary of the BOD | In Office | Male | 49 | Feb 9, 2000 | 0 | 0 | 0 | 0 | 0 | |
| Yang Xingqiang | Chairman of the BOD | Demission | Male | 52 | Sep 29, 2017 | April 9, 2020 | 0 | 0 | 0 | 0 | 0 |
| Total | -- | -- | -- | -- | -- | 6,000 | 0 | 0 | 0 | 6,000 |
ADAMA Ltd Annual Report 2019
II. Particulars regarding changes of Directors, Supervisors and Senior Executives
□ Applicable √ Not applicable
Note: No director, supervisor or senior executive was replaced over the Reporting Period. From January 1, 2020 to thedisclosure date of this Report, the changes of director and senior executive are as follows.
| Name | Position | Type | Date | Reason |
| Yang Xingqiang | Chairman of the Board of Directors | Left the position | April 9, 2020 | Due to work arrangements by ChemChina. |
| Chen Lichtenstein | President & CEO | Left the position | March 1, 2020 | Nomination as the CFO of Syngenta Group responsible also for strategy alignment. |
ADAMA Ltd Annual Report 2019
Adama (Beijing) Agricultural Technology Co., Ltd., Chairman of Directors of Adama Agrochemical (Jiangsu) Co., Ltd.,Executive Director and General Manager of Jingzhou Hongxiang Chemical Co., Ltd.
Mr. Tang Yunwei, serves as an independent director of the Company. He holds a professor degree, a doctor ofeconomics degree, and he is an honorary member of Association of Chartered Certified Accountants, and is a ReturnedOverseas Student with Outstanding Contribution to Socialist Modernization Construction which was awarded by the StateEducation Commission and Ministry of Personnel. He had successively served as the associate professor and professorof Shanghai University of Finance and Economics (SUFE), the Executive Vice President of the SUFE, and the Presidentof SUFE. He used to be a member of Auditing Standards Committee of Chinese Institute of Certified Public Accountants,the legal representative of Accounting Society of Shanghai, and the partner of Ernst & Young. Mr. Tang has been amember of Accounting Standard Committee of Ministry of Finance of the PRC since October 1998. Mr. Tang is theindependent director of Universal Scientific Industrial (Shanghai) Co., Ltd.
Mr. Xi Zhen, serves as an independent director of the Company. He holds a professor degree and a doctor of BioorganicChemistry degree. Mr. Xi was Assistant Professor in Hubei Medical School which is currently the Wuhan University Schoolof Medicine from 1983 to 1985, was Engineer in Beijing Institute of Chemical Reagents from 1988 to 1990, was aResearch Associate in Department of Biological Chemistry and Molecular Pharmacology of Harvard Medical School from1997 to 2001. Mr. Xi is currently Cheung Kong Scholar of Pesticide Science of the Ministry of Education of the PRC,Chairman of Department of Chemical Biology, Professor of Chemistry and Chemical Biology, Fellow of the UniversityCommittee of Nankai University in China, and Director of National Pesticide Engineering Research Center (Tianjin). Mr. Xiis also a Committee Member of Chinese Chemical Society and Deputy Director of its Division of Chemical Biology, DeputyDirector of the Pesticide Science Division of Chinese Chemical Industry and Engineering Society. In addition, he is adirector of Suzhou Ribo Life Science Co., Ltd.
Mr. Ignacio Dominguez, Spanish, serves as the President & Chief Executive Officer of the Company. He was the CCO ofSolutions and has been with Solutions for more than a decade. Prior to joining Solutions, Ignacio held variousmanagement positions in companies such as Syngenta and American Cyanamid, boasting more than 20 years ofexperience in the agrochemical industry. He holds a master's degree in physics from Complutense University of Madrid.
Mr. Aviram Lahav, Israeli, serves as the Chief Financial Officer of the Company. Mr. Lahav also serves as the deputyChief Executive Officer of the Company, Chief Executive Officer and Chief Financial Officer of Solutions. Mr. Lahav holdsa Practical Engineering Degree in Mechanical Engineering from Tel Aviv University, Israel. Mr. Lahav has also a BA inEconomics and Finance from the Hebrew University in Jerusalem, Israel and graduated from the Advanced ManagementProgram at Harvard Business School. Before joining the Group, Mr. Lahav served as CEO of Synergy Cables, a publiclytraded manufacturing company. He had also served as CFO, COO and eventually CEO of Delta Galil Industries (Israel). In2000, he was awarded the title of “Israel’s CFO of the Year”.
Ms. Michal Arlosoroff, Israeli, serves as the Company’s General Legal Counsel. Ms. Arlosoroff also serves as SeniorVice President, General Legal Counsel, Company Secretary and CSR Officer of Solutions. Ms. Arlosoroff holds an LL.B.as well as a B.A. in Political Science and Labor Relations (cum laude) from Tel Aviv University, Israel. Ms. Arlosoroff alsograduated from the Advanced Management Program at Harvard Business School. Prior to joining the Group, Ms.Arlosoroff served for 22 years as full Partner and General Manager of the Tel Aviv branch at E.S. Shimron, I. Molho,Persky & Co., one of the most prominent, respected and established law firms in Israel.
ADAMA Ltd Annual Report 2019
Mr. Jiang Chenggang, serves as the Chairman of the Supervisory Board of the Company. He served as a DeputyDirector of the Office and Deputy Secretaries of the Discipline Inspection Commission of the Company.; acted as theChairman of the Labor Union, Supervisor, Deputy Director of the Office and Deputy Secretaries of the DisciplineInspection Commission of the Company from Jun. 2012 to Dec. 2012; has been acting as the Deputy Party CommitteeSecretary of Jingzhou Sanonda Holdings Co., Ltd. and Secretary of the Discipline Inspection Commission of the Companysince January 2017; and he has been the Chairman of the Labor Union, Supervisor and Secretaries of the DisciplineInspection Commission of the Company since Jan. 2013.
Mr. Li Dejun, serves as a member of the Supervisory Board of the Company. Mr. Li holds a Doctor degree. Hesuccessively acted as Chief Officer, Deputy Chief, Chief of CCNU and Research Institute of Wuhan Province Commissionfor Restructuring Economic System and Editor in Chief of Overview of Private Economy, Secretary General of ResearchInstitute of Hubei Province Commission for Restructuring Economic System and Hubei Province Culture and EconomyResearch Society, Chief of Hubei Regional Economic Development Research Center as well as Independent Director ofJ.S. Machine, Angel Yeast. From Jul. 2010 to December 2017, he was an independent director of the Company.
Mr. Guo Zhi, serves as a member of the Supervisory Board Supervisor of the Company. He is the China Legal Counsel ofADAMA (China) Investment Co., Ltd. Mr. Guo got his Master of Laws severally from Peking University and MelbourneUniversity. From 2004 to 2017, he practiced law in Commerce & Finance Law Offices (“C&F”) and had been a partner ofC&F for eight years. His practicing area covers IPO, M&A, and Foreign Investment.
Mr. Li Zhongxi, he has been the Secretary to the Board of Directors since Feb. 2000.
Positions in shareholder units
√ Applicable □ Not applicable
| Name of the person holding any post in any shareholder unit | Name of the shareholder unit | Position in the shareholder unit | Beginning date of office term | Ending date of office term | Receives payment from the shareholder unit? |
| Erik Fyrwald | Syngenta Group | CEO | January 2020 | -- | No |
| Syngenta AG | CEO and Executive Director | June 2016 | -- | Yes | |
| Chen Lichtenstein | Syngenta Group (*) | CFO | March, 2020 | -- | Yes |
| Syngenta AG | CFO | March, 2020 | -- | Yes | |
| An Liru | Jiangsu Anpon Electrochemical Co., Ltd. | Executive director | April 2015 | February 25, 2019 | No |
| Jiang Chenggang | Jingzhou Sanonda Holdings Co., Ltd. | Deputy Party Secretary, Secretary of the Discipline Inspection Commission | January 2017 | No |
ADAMA Ltd Annual Report 2019
Positions in other units
√ Applicable □ Not applicable
| Name of the person holding any post in any shareholder unit | Name of other unit | Position in other unit | Beginning date of office term | Ending date of office term | Receives payment from the other unit? |
| Erik Fyrwald | CropLife International | Director of the Board | 2016 | - | No |
| Swiss-American Chamber of Commerce | Director of the Board | 2016 | - | No | |
| Bunge Limited | Director of the Board | 2018 | - | Yes | |
| Eli Lilly & Co. | Director of the Board | 2005 | - | Yes | |
| Chen Lichtenstein | Solutions | Director | October 2017 | - | Yes (as of March 1, 2020) |
| Chen Lichtenstein | Solutions | President & CEO | October 2017 | March 2020 | Yes |
| Chen Lichtenstein | The Israeli democracy institute | Director of the Board | - | No | |
| Chen Lichtenstein | Friends of Tel Aviv University | Member of the Board of Trustees | - | No | |
| An Liru | Solutions | Director | February 2014 | - | Yes |
| An Liru | Solutions | Head of China Cluster | September 2017 | - | Yes |
| An Liru | Jiangsu Anpon Electrochemical Co., Ltd. | Executive director | April 2015 | February 2019 | No |
| An Liru | Adama (China) Investment Co., Ltd. | Director and General Manager | November 2018 | - | No |
| An Liru | Adama (Beijing) Agricultural Technology Co., Ltd. | Chairman of Directors | November 2018 | - | No |
| An Liru | Adama Agrochemical (Jiangsu) Co., Ltd. | Chairman of Directors | June 2017 | - | No |
| An Liru | Jingzhou Hongxiang Chemical Co., Ltd. | Executive Director and General Manager | December 2017 | - | No |
| Aviram Lahav | Solutions | CEO & CFO | October 2017 | - | Yes |
| Michal Arlosoroff | Solutions | SVP, General Counsel, Company Secretary & CSR Officer | October 2017 | - | Yes |
| Tang Yunwei | Universal Scientific Industrial (Shanghai) Co., Ltd. | Independent Director | April 2017 | - | Yes |
| Xi Zhen | Nankai University | Professor, Chairman of Department of Chemical Biology, Fellow of the University Committee | August 2002 | - | Yes |
| Xi Zhen | National Agrochemical Engineering Research Center (Tianjin) | Director | May 2014 | - | No |
ADAMA Ltd Annual Report 2019
| Name of the person holding any post in any shareholder unit | Name of other unit | Position in other unit | Beginning date of office term | Ending date of office term | Receives payment from the other unit? |
| Xi Zhen | Division of Chemical Biology of Chinese Chemical Society | Deputy Director | January 2015 | - | No |
| Xi Zhen | Agrochemical Science Division of Chinese Chemical Industry and Engineering Society | Deputy Director | November 2014 | - | No |
| Xi Zhen | Suzhou Ribo Life Science Co., Ltd. | Director | January 2007 | - | No |
| Li Dejun | The Economic System Reform Institute of Hubei Province | Secretary General | December 2009 | - | No |
| Li Dejun | J.S. Machine | Independent Director | October 2016 | - | Yes |
| Li Dejun | Angel Yeast Co., Ltd. | Independent Director | April 2013 | April 2019 | Yes |
ADAMA Ltd Annual Report 2019
Unit RMB’0000
| Name | Position | Gender | Age | Current/Former | Total before-tax remuneration gained from the Company | Whether gained remuneration from the related parties of the Company |
| Chen Lichtenstein | Director (former President & CEO) | Male | 52 | Current | No | |
| An Liru | Director | Male | 50 | Current | No | |
| Tang Yunwei | Independent Director | Male | 75 | Current | No | |
| Xi Zhen | Independent Director | Male | 56 | Current | No | |
| Aviram Lahav | Chief Financial Officer and Deputy CEO | Male | 60 | Current | No | |
| Michal Arlosoroff | General Legal Counsel | Female | 61 | Current | No | |
| Jiang Chenggang | Chairman of the Supervisory Board | Male | 45 | Current | No | |
| Li Dejun | Member of the Supervisory Board | Male | 61 | Current | No | |
| Guo Zhi | Member of the Supervisory Board | Male | 43 | Current | No | |
| Li Zhongxi | Secretary of the BOD | Male | 49 | Current | No | |
| Yang Xingqiang | Chairman of the BOD | Male | 52 | Former | Yes | |
| Total | 5,319.7 |
ADAMA Ltd Annual Report 2019
V. Particulars regarding Group’s employees
1. Number of employees, specialty structure and educational background
| The number of on-duty employees in ADAMA Ltd. (person) | 1,206 |
| The number of on-duty employees in main subsidiary companies (person) | 6,545 |
| The total number of on-duty employees of the Group (person) | 7,751 |
| The total number of employees of the Group who received salaries in the period (person) | 7,751 |
| The number of retired employees for whom ADAMA Ltd. and main subsidiary companies need to pay retirement expense. | 3,188 |
| Specialty classification | |
| Specialty category | Number |
| Production personnel | 2,894 |
| Sales personnel | 1,954 |
| Technicians | 1,920 |
| Financial personnel | 443 |
| Administrative personnel | 540 |
| Total | 7,751 |
| Education classification | |
| Education category | Number |
| Doctor | 1 |
| Master | 26 |
| Bachelor | 396 |
| College | 607 |
| Others | 1,265 |
| Total* | 7,751 |
ADAMA Ltd Annual Report 2019
The Company established an online and offline assessment model. Online assessment is carried out by SF system.Individual goals are set at the beginning of the year. At the end of the year, a total of 100 middle and senior managers andbackbones in Jingzhou Site entered SF system for online assessment in 2019. Employees who do not participate in onlineassessment will conduct offline performance assessment. In the future, the Company will gradually achieve full coverageof online assessment.
3. Employee’s training plan
The Group usually conducts seminars, trainings, exercises and refresh of procedures (including with respect to increasingsafety awareness) to its various employees in its various entities, as needed and/or required under its applicableprocedures.
4. Labor outsourcing
√ Applicable □ Not applicable
Details of ADAMA Ltd. on labor sourcing are as follows.
| Total number of hours of service outsourcing (hours) | 1,285,776 |
| Total remuneration paid for service outsourcing (RMB) | 20,227,262.27 |
Section IX. - Corporate Governance
I. Basic details of corporate governanceDuring the Reporting Period, the Company continuously improved the awareness of corporate governance and corporategovernance structure and perfected the corporate system as well as standardized the operation of the Company,promoted internal control activities, and constantly improve the Company's management levels stringently according torequirements of relevant laws and regulations like the Company Law, Securities Law, and Corporate GovernancePrinciple of Listed Company, as well as Rules for Listing Shares in Shenzhen Stock Exchange.
1. About Shareholders and the Shareholders’ meeting
During the Reporting Period, the Company has ensured that all shareholders, especially small and medium shareholders,are treated equal and able to fully exercise their rights. It held one annual general meeting of shareholders and two interimshareholders' meetings, during which 12 proposals in total were reviewed and approved. Lawyers were invited to attendall the meetings mentioned above for testimony and issuing legal opinions. Online voting has been applied during allabove-mentioned meetings to ensure that all shareholders, especially small and medium shareholders, enjoy equal statusand fully exercise their rights. Notices of shareholders' meeting, meeting proposals, discussion procedures, voting onproposals and information disclosure all meet the requirements. Every major decision of the Company has been decidedby the shareholders' meeting according to laws and regulations with lawyers as the witness to ensure that the right toknow, to participate and vote on major issues of all shareholders, especially the small and medium shareholders areproperly protected.
2. About Directors and the Board of Directors
During the Reporting Period, the number, composition and qualifications of the board of directors were in compliance withthe laws and regulations as well as the Articles of Association of the Company. All board members are diligent andresponsible for attending the board and shareholders’ meetings in accordance with the relevant provisions of theCompany Law and the Articles of Association. During the Reporting Period, the Company held 9 board meetings duringwhich 37 proposals were reviewed. The organizing, convening and formation of resolutions were carried out inaccordance with relevant provisions of the Articles of Association and the Rules of Procedure for the Board of Directors.The Company has established an independent director system in accordance with relevant regulations. Each of theindependent directors have expressed independent opinions on important business of the Company during the ReportingPeriod. The Company's board of directors consists of one strategy committee, one nomination committee, one auditcommittee and one remuneration and assessment committee, all of which are functioning with respective implementationrules to ensure the scientific and compliant decision-making by the board of directors.
3. About Supervisors and the Board of Supervisors
During the Reporting Period, the board of supervisors of the Company consisted of three supervisors, including anexternal one. The number, composition and qualifications of the Board of Supervisors were in compliance with laws andregulations as well as the Articles of Association of the Company. During the Reporting Period, four meetings were heldand 17 proposals were reviewed. All meetings were organized and convened in accordance with the procedures of theArticles of Association and the Rules of Procedure for the Board of Supervisors. All supervisors have earnestly performedtheir duties by reviewing the company's periodic reports and other matters and issuing verification opinions with a strongsense of responsibilities to the shareholders. All of them have effectively fulfilled their duties and safeguarded thelegitimate rights and interests of the Company and its shareholders
4. About Investors’ Relations
The Company communicates with investors through public announcements, consultations by telephone, interactiveplatforms, e-mails and other multiple media to enhance opinion exchange. It has been making various efforts ondeepening the understanding of investors about the Company's operation and development outlook and also maintaininggood relations with them. Meanwhile, it has been serious to receive investors' opinions and suggestions and encouragedthe interaction between investors and itself. During the Reporting Period, the Company has been patient to respondinvestors by answering calls and questions through all interactive platforms, which has guaranteed a sound and fairaccess for investors to obtain information.Whether there is any difference between the actual corporate governance situation of the Company and the provisions ofthe relevant rules of CSRC or not?
□ Yes √ No
There is no difference between the actual corporate governance situation of the Company and the provisions of therelevant rules of CSRC.
II. Particulars about the Company’s separation from the controlling shareholder inrespect of business, personnel, assets, organization and financial affairs
1. In respect of business: the Company had a complete business system and independent operation. There was nocompetition between the controlling shareholders.
2. In the respect of personnel: The Company and controlling shareholder are mutually independent in the labor, personneland salary management, the Company CEO and other senior management personnel get the salary in the Company, andnot perform administrative work in the controlling shareholder unit.
3. In respect of assets: The assets relationship between the Company and the controlling shareholder is clear. Thecompany has complete control over all its assets. There is no such thing as a free possession or usage by the controllingshareholder.
4. In respect of financing, the Company owned independent financial department, established independent accountingsystem and financial management system, opened independent bank account, paid tax in line with laws.
5. In respect of organization, the Company has set up the organization that was independent from the controllingshareholder completely, the Board of Directors, the Supervisory Committee and internal organization could operateindependently.III. Horizontal competition
√ Applicable □ Not applicable
| Type | Name of Controlling Shareholder | Nature of Controlling Shareholder | Cause of the problem | Solutions | Work-schedule and follow-up plan |
| Horizontal competition and related party transactions | ChemChina | State-owned enterprise | The subsidiaries controlled by ChemChina are in similar or the same business as the Company or the supplier or the client of the Company. | ChemChina commits itself to take appropriate actions to solve the horizontal competition and related party transactions between its subsidiaries and the Company. For details, please refer to III Performance of commitments of Section V of the Annual Report. | In process/ performance. |
IV. Particulars regarding the annual shareholders’ general meeting and specialshareholders’ general meetings held during the Reporting Period
1. Particulars regarding the shareholders’ general meeting during Reporting Period
| Session | Type | Proportion of investors' participation | Convening date | Disclosure date | Index to the disclosed |
| 1st Interim Shareholders Meeting in 2019 | Interim Shareholders Meeting | 3.84% | March 11, 2019 | March 12, 2019 |
| 2018 Annual Shareholders Meeting | Annual Shareholders Meeting | 75.42% | April 10, 2019 | April 11, 2019 | Announcement of the Annual Shareholders Meeting (Announcement Number:2019-26). Disclosed at the website CNINFO www.cninfo.com.cn |
| 2nd Interim Shareholders Meeting in 2019 | Interim Shareholders Meeting | 74.64% | May 30, 2019 | May 31, 2019 |
2. Special Shareholders’ General Meeting applied by the preferred stockholder with restitution ofvoting right
□ Applicable √ Not applicable
V. Performance of the Independent Directors
1. Particulars regarding independent directors’ attendance to board sessions and shareholders’general meetings
| 1. Details of the independent directors’ attendance to board sessions and shareholders’ meetings | |||||||
| Independent director | Sessions required to attend during the Reporting Period | On-Site Attendance | Attendance by way of communication | Entrusted presence (times) | Absence rate | Non-attendance in person for two consecutive times | Attendance to shareholder meetings |
| Tang Yunwei | 9 | 9 | No | 3 | |||
| Xi Zhen | 9 | 9 | No | 3 | |||
2. Particulars regarding independent directors’ objections
Whether independent directors objected to various events
□ Yes √ No
During the Reporting Period, no independent directors proposed any objection on relevant events of the Company.
3. Other explanations regarding the independent directors’ duty performance
Whether advices independent directors’ advice were adopted
√ Yes □ No
Explanation regarding advices of independent directors:
According to the Company Law, the Listed Corporate Governance Standards, "Articles of Association" and "Company ofthe Independent Director System”, the independent directors, in general, including during the Reporting Period, focusactively over Company’s operation, and independently performs their duties, render professional suggestions to theCompany's information disclosure and daily management decision-making, etc. issue independent and impartial advice toname change of the Company (when relevant), related-party transactions, engagement of auditors, guaranty matters,dividend distributions, accounting policy change, assets write-off, change of the use of the raised funds, deposit and usingof the raised funds, remunerations of the senior management, and other events which requires the independent directors’advice. The independent directors play a proper role in improving the supervision, and safeguard the legitimate rights andinterests of the Company and its shareholders. The independent directors especially pay attention (and paid attention -during the Reporting Period) to the Company’s operation state, dynamic state of the industry, public opinion and dynamicstate report of the Company. They actively and effectively perform the duties of independent directors and well maintainedoverall benefits of the Company and the legal interests of all shareholders, especially the middle and small shareholders.Their roll is required for positive, normal, stable and healthy development of the Company.VI. Performance of the Special Committees under the Board during the ReportingPeriod(I) Performance of the Audit Committee of the Board: According to regulations of CSRC and Shenzhen Stock Exchange,The Annual Work System of Independent Director and Detailed Rules for the Implementation of the Audit Committee ofthe Board of the Company, and based on the principle of compliance, the Company enables full and free authorization ofthe supervisory function during the Reporting Period. The Audit Committee carefully reviewed the periodical reports,considered the engaging of the auditors, change of accounting policy, guarantee, related party transaction, using of theraised funds, and other relevant events. Through communicating with the auditors, making annual audit plan andparticipating in and supervising the whole process, smooth annual audit work was guaranteed. This fully satisfied thefunction of examination and supervision.(II) Duty performance of the Remuneration & Appraisal Committee under the Board: During the reporting period, theRemuneration & Appraisal Committee of the Company reviewed the revisions of remunerations of the senior executivesand the payment of the bonus of the senior executives.VII. Performance of the Supervisory CommitteeHas the Supervisory Committee, during the Reporting Period, found a risk in the Company within its supervisory activity
□ Yes √ No
The Supervisory Committee had no objection on the supervised events during the Reporting Period.
VIII. Performance Evaluation and Incentive Mechanism for Senior Management
The performance evaluation and incentives of the senior executives of the Company are based on the RemunerationPolicy for Senior Executives. The remuneration of senior executives is composed of three parts: (i) base salary; (ii)variable components - medium and short-term incentives which includes annual bonuses based on results and contingentupon targets; (iii) long term incentives - Share-based cash reward and/or other long-term incentive in the form of cash.The Remuneration Policy establishes a fair and reasonable performance evaluation and incentives system, which helpsgiving full play to the ‘talents’ of the senior executives and promote the long-term and healthy development of theCompany. For details, please refer to the Remuneration Policy of Senior Executives published by the Company onFebruary 22, 2019 on the website www.cninfo.com.cn .
IX. Internal Control
1. Particulars regarding material deficiencies found in the internal control during the ReportingPeriod
□ Yes √ No
2. Self-assessment report on internal control
| Date of disclosure of self-assessment report on internal control | April 28, 2020 | ||
| Reference website of self-assessment report on internal control | www.cninfo.com.cn | ||
| Rate of total Assets of Units within the Assessment Scope Compared to Total Assets in the Consolidated Statements of the Company | 71.01% | ||
| Rate of total Operating Income of Units within the Assessment Scope Compared to Total Operating Income in the Consolidated Statements of the Company | 68.90% | ||
| Criteria of Deficiency | |||
| Categories | Internal control over financial reporting | Internal control not related to financial reporting | |
| Qualitative criteria | Material Deficiency: Resulting in an adverse opinion or disclaimer of opinion, by a CPA, on the Company’s financial statements; or resulting in a material correction of the Company’s publicly announced financial statements. Significant Deficiency: Resulting in a qualified opinion, by a CPA, on the Company’s financial statements; or resulting in an adverse opinion or disclaimer of opinion, by a CPA, on the Company’s material subsidiaries’ (i.e. Solutions) financial statements; or resulting in a significant correction of the Company’s material subsidiaries’ (i.e. Solutions) publicly announced financial statements. General Deficiency: Resulting in an unqualified opinion, with an explanatory paragraph, by a CPA, on the Company’s financial statements; or resulting in a qualified opinion, or unqualified opinion with an explanatory paragraph, by a CPA, on the Company’s subsidiaries’ financial statements. | Material Deficiency: 1) Fraud committed in the Company by any of its directors, supervisors and senior management personnel; 2) The Company materially violates material laws and regulations, resulting in a material effect on the Company's business; 3) Material design deficiencies in the Company's relevant management system; 4) The Company materially violates the decision-making process thereby causing a material negative impact on the Company's business (generally related to matters that need to be approved by the shareholders meeting or the board of directors). 5) Material impact to the Company’s reputation. Significant Deficiency: 1) Significant fraud committed by any department head of the Company; 2) Significant fraud committed by a head of any of the Company’s material subsidiaries; 3) The Company violates significant laws and | |
| regulations, resulting in significant fines as well as a significant effect on the Company's business; 4) Significant design deficiencies found in the Company's relevant management system; Material design deficiencies are found in the relevant management systems of subsidiaries; 5) The Company violates material decision-making procedures, resulting in a significant effect on the Company's business (generally referred to matters subject to senior management's decision); 6) Material Subsidiaries violate decision-making process, thereby causing a material negative impact on the Company's business (generally referred to matters that need to be decided by the shareholders’ meeting or the board of directors). 7) Significant impact to the Company’s reputation. General Deficiency: 1) Fraud committed by any other personnel in the Company; 2) Fraud committed by any other personnel in material subsidiaries; 3) The Company materially violates material internal regulations or non-materially violates material laws and regulations, resulting in negative feedback from regulatory authorities; 4) There are other violations of laws and regulations or internal regulations found in material subsidiaries. 5) There are general design deficiencies in the relevant management system of the Company; other design deficiencies exist in the relevant management system of the material subsidiaries; 6) The Company violates the decision-making process, resulting in a negative impact on the Company's business; 7) Material Subsidiaries violate decision-making process, resulting in a negative impact on the Company's business. | ||
| Quantitative criteria | Material Deficiency: Misstatement in Financial Report relates to an amount that is greater than or equal to RMB 100 million. Significant Deficiency: Misstatement in Financial Report relates to an amount that is greater than or equal to RMB 50 million, but less than RMB 100 million. General Deficiency: Resulting in other misstatement related amounts. | Material Deficiency: Asset Loss ≥ RMB 150 million Significant Deficiency: RMB 80 million ≤ Asset Loss < 150 million RMB General Deficiency: Asset Loss < 80 million RMB |
| Number of material | 0 | |
| deficiencies in internal control over financial reporting | |
| Number of material deficiencies in internal control not related to financial reporting | 0 |
| Number of significant deficiencies in internal control over financial reporting | 0 |
| Number of significant deficiencies in internal control not related to financial reporting | 0 |
| Audit opinion paragraph in the internal control audit report | |
| Disclosure of internal control audit report | Disclose |
| Date of disclosure of internal control audit report | April 28, 2020 |
| Reference website of internal control audit report | www.cninfo.com.cn |
| Type of audit opinion in the internal control audit report | Unqualified opinion. |
| Is there any material deficiencies in internal control not related to financial reporting | No. |
Section X - Corporate Bonds
Are there any corporate bonds publicly offered and listed on the stock exchange, which were undue before the approvaldate of this Report or were due but could not be redeemed in full?
□ Applicable √ Not applicable
Section XI - Financial ReportAuditor’s Report
| Type of auditor’s opinion | Standard Unqualified Opinion |
| Audit opinion signoff date | April 17, 2020 |
| Name of the auditor | Deloitte Touche Tohmatsu CPA LLP |
| Reference number of the audit report | De Shi Bao (Shen) Zi (10) No P00109 |
| Name of CPA | Hu Ke, Ma Renjie |
AUDITOR'S REPORT
De Shi Bao (Shen) Zi (20) No P00109
Page 1 of 7To the shareholders of ADAMA Ltd.：
I. Opinion
We have audited the financial statements of ADAMA Ltd. (hereinafter referred to as the "Company"), whichcomprise the consolidated and the Company's balance sheets as at 31 December 2019, and the consolidatedand the Company's income statements, the consolidated and the Company's statements of changes in equityand the consolidated and the Company's statements of cash flows for the year then ended, and notes to thefinancial statements.
In our opinion, the accompanying financial statements of the Group present fairly, in all material respects,the consolidated and the Company's financial position as of 31 December 2019, and the consolidated and theCompany's results of operations and cash flows for the year then ended in accordance with AccountingStandards for Business Enterprises.
II. Basis for Opinion
We conducted our audit in accordance with China Standards on Auditing. Our responsibilities under thosestandards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements sec-tion of our report. We are independent of the Company in accordance with the Code of Ethics for ChineseCertified Public Accountants (the "Code"), and we have fulfilled our other ethical responsibilities in accord-ance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to pro-vide a basis for our opinion.
III. Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our auditof the financial statements for the current year. These matters were addressed in the context of our audit ofthe financial statements as a whole, and in forming our opinion thereon, and we do not provide a separateopinion on these matters. The followings are key audit matters that we have determined to communicate inthe auditor's report.
AUDITOR'S REPORT - continued
De Shi Bao (Shen) Zi (20) No P00109
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III. Key Audit Matters - continued
1. Revenue recognition
Description
As stated in Note V, 42 of ADAMA Financial Statements, the revenue of 2019 was RMB27,563,239thousand,which was significant for the consolidated financial statements. ADAMA’s sales revenue mainly contributedby sales of products in about 100 countries all over the world. As stated in Note III, 24, the company recog-nises the revenue when the customer obtains control of the relevant commodities, and the company has a riskof overstating the revenue by late cutoffs. Therefore, we assessed the appropriateness of cutoffs for revenuerecognition and the correctness of accounting periods for revenue recognition as a key audit matter.
Audit response
Our procedures in relation to revenue recognition mainly included:
1、 Evaluating and assessing the design, implementation and operating effectiveness of internal controlsrelating to the cut-off of revenue recognition;
2、 Reviewing the contracts with key clients for the terms and conditions relating to the transfer of controlsof goods and services, and assessing whether the accounting treatments are proper under timeliness require-ments of accounting standards;
3、 Performing substantive analytic procedures and comparing whether there is abnormal fluctuation in thesales of the major sales regions in the current period and the previous period, and analysing whether there isany abnormality in the sales return of the products.
4、 Performing cut-off test by extracting the sales income ledger, checking the supporting documents suchas sales invoices and inventory transfer documents, and checking whether the income is recorded in the cor-rect accounting period.
AUDITOR'S REPORT - continued
De Shi Bao (Shen) Zi (20) No P00109
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III. Key Audit Matters - continued
2. Provision for impairment of inventories
Description
As stated in Note V, 9, the carrying amount of inventories net of provisions for impairment of the ADAMAGroup was RMB9,932,654 thousand as of 31 December 2019, which was significant for the consolidatedfinancial statements. As disclosed in Note III, 12.3 and 30.2, ADAMA measures inventories at the lower ofcost and net realisable value. Provisions for impairment of inventories are made when the net realisable val-ues are lower than the carrying amounts. The determination of the net realisable value of inventories requiresmanagement to estimate the expected selling prices of the inventories, the costs to be incurred when they arecompleted, the sales expenses, and the related taxes and fees, which involved management estimates andjudgements.
Audit response
Our procedures in relation to provision for impairment of inventories mainly included:
1、 Evaluating and assessing the design, implementation and operating effectiveness of internal controlsrelating to the provision for impairment of inventories;
2、 Evaluating the appropriateness and consistency of the methodology of the impairment test；
3、 Evaluating the inventory age and turnover conditions, and checking the management's identification ofthe damaged and slow moving inventories with the inventory monitoring procedures；
4、 Corroborating the key assumptions involved in management's determination of the net realisable valueof inventories, including：
? Testing the actual sales prices of the relevant inventories subsequent to end of the reporting period on asample basis;? For work in progress, according to their work progress and the actual costs of the relevant finishedgoods, assessing the costs to be incurred, on a sample basis;? Assessing the reasonableness of the estimated sales expenses and the related taxes and fees on a samplebasis based on the historical data of the Group.
5、 Testing the accuracy of the calculation in provisions for impairment of inventories.
AUDITOR'S REPORT - continued
De Shi Bao (Shen) Zi (20) No P00109
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IV. Other Information
Management of the Company is responsible for the other information. The other information comprises theinformation included in the 2019 annual report, but does not include the financial statements and our audi-tor's report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any formof assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other informationand, in doing so, consider whether the other information is materially inconsistent with the financial state-ments or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other in-formation; we are required to report that fact. We have nothing to report in this regard.
V. Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management of the Company is responsible for the preparation of the financial statements that give a trueand fair view in accordance with Accounting Standard for Business Enterprises, and for such internal controlas management determine is necessary to enable the preparation of financial statements that are free frommaterial misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company's ability to con-tinue as a going concern, disclosing, as applicable, matters related to going concern and using the goingconcern basis of accounting unless management either intends to liquidate the Company or to ceases opera-tions, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
AUDITOR'S REPORT - continued
De Shi Bao (Shen) Zi (20) No P00109
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VI. Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are freefrom material misstatement, whether due to fraud or error, and to issue an auditor's report that includes ouropinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted inaccordance with China Standards on Auditing will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,they could reasonably be expected to influence the economic decisions of users taken on the basis of thesefinancial statements.
As part of an audit in accordance with China Standards on Auditing, we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
(1) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud orerror, design and perform audit procedures responsive to those risks, and obtain audit evidence that is suffi-cient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, in-tentional omissions, misrepresentations, or the override of internal control.
(2) Obtain an understanding of internal control relevant to the audit in order to design audit procedures thatare appropriate in the circumstances.
(3) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimatesand related disclosures made by the management.
AUDITOR'S REPORT - continued
De Shi Bao (Shen) Zi (20) No P00109
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VI. Auditor's Responsibilities for the Audit of the Financial Statements - continued
(4) Conclude on the appropriateness of the management' use of the going concern basis of accounting and,based on the audit evidence obtained, whether a material uncertainty exists related to events or conditionsthat may cast significant doubt on the Company's ability to continue as a going concern. If we conclude thata material uncertainty exists, we are required to draw attention in our auditor's report to the related disclo-sures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclu-sions are based on the audit evidence obtained up to the date of our auditor's report. However, future eventsor conditions may cause the Company to cease to continue as a going concern.
(5) Evaluate the overall presentation, structure and content of the financial statements, including the disclo-sures, and whether the financial statements represent the underlying transactions and events in a manner thatachieves fair presentation.
(6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or businessactivities within the Company to express an opinion on the financial statements. We are responsible for thedirection, supervision and performance of the group audit. We remain solely responsible for our audit opin-ion.
We communicate with those charged with governance regarding, among other matters, the planned scope andtiming of the audit and significant audit findings, including any significant deficiencies in internal controlthat we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethicalrequirements regarding independence, and to communicate with them all relationships and other matters thatmay reasonably be thought to bear on our independence, and where applicable, related safeguards.
AUDITOR'S REPORT - continued
De Shi Bao (Shen) Zi (20) No P00109
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VI. Auditor's Responsibilities for the Audit of the Financial Statements - continued
From the matters communicated with those charged with governance, we determine those matters that wereof most significance in the audit of the financial statements of the current year and are therefore the key auditmatters. We describe these matters in our auditor's report unless law or regulation precludes public disclosureabout the matter or when, in extremely rare circumstances, we determine that a matter should not be com-municated in our report because the adverse consequences of doing so would reasonably be expected to out-weigh the public interest benefits of such communication.
Deloitte Touche Tohmatsu CPA LLP Chinese Certified Public Accountant
Shanghai China Hu Ke(Engagement Partner)
Chinese Certified Public AccountantMa Renjie
27 April 2020
This independent auditor's report of the financial statements and the accompanying financial statementsare English translations of the independent auditor's report and the financial statements prepared underaccounting principles and practices generally accepted in the People's Republic of China. These finan-cial statements are not intended to present the balance sheet and results of operations and cash flows inaccordance with accounting principles and practices generally accepted in other countries and jurisdic-tions. In case the English version does not conform to the Chinese version, the Chinese version prevails
ADAMA Ltd. Annual Report 2019
ADAMA Ltd.(Expressed in RMB '000)Consolidated Balance Sheet
| December 31 | December 31 | ||
| Notes | 2019 | 2018 (Restated) | |
| Current assets | |||
| Cash at bank and on hand | V.1 | 4,348,588 | 6,400,190 |
| Financial assets held for trading | V.2 | 29,510 | 46,095 |
| Derivative financial assets | V.3 | 490,113 | 517,726 |
| Bills receivable | V.4 | 26,000 | 40,569 |
| Accounts receivable | V.5 | 8,004,157 | 6,573,100 |
| Receivables financing | V.6 | 78,948 | 73,216 |
| Prepayments | V.7 | 377,808 | 410,506 |
| Other receivables | V.8 | 1,195,253 | 1,079,332 |
| Inventories | V.9 | 9,932,654 | 9,433,876 |
| Non-current assets due within one year | V.20 | - | 48 |
| Other current assets | V.10 | 659,195 | 660,806 |
| Total current assets | 25,142,226 | 25,235,464 | |
| Non-current assets | |||
| Long-term receivables | V.11 | 170,896 | 157,600 |
| Long-term equity investments | V.12 | 133,098 | 108,350 |
| Other equity investments | V.13 | 155,062 | 91,559 |
| Investment properties | 3,771 | 4,094 | |
| Fixed assets | V.14 | 6,939,610 | 7,263,866 |
| Construction in progress | V.15 | 788,386 | 487,204 |
| Right-of-use assets | V.16 | 536,034 | N/A |
| Intangible assets | V.17 | 5,835,785 | 5,741,962 |
| Goodwill | V.18 | 4,511,193 | 4,085,945 |
| Deferred tax assets | V.19 | 826,696 | 741,737 |
| Other non-current assets | V.20 | 246,183 | 217,282 |
| Total non-current assets | 20,146,714 | 18,899,599 | |
| Total assets | 45,288,940 | 44,135,063 | |
ADAMA Ltd. Annual Report 2019
ADAMA Ltd.(Expressed in RMB '000)Consolidated Balance Sheet (continued)
| December 31 | December 31 | ||
| Notes | 2019 | 2018 (Restated) | |
| Current liabilities | |||
| Short-term loans | V.21 | 2,009,882 | 1,122,774 |
| Derivative financial liabilities | V.22 | 691,475 | 1,451,670 |
| Bills payable | V.23 | 321,674 | 445,533 |
| Accounts payable | V.24 | 4,205,901 | 4,627,936 |
| Contract liabilities | V.25 | 664,228 | 848,402 |
| Employee benefits payable | V.26 | 1,211,713 | 944,175 |
| Taxes payable | V.27 | 369,038 | 616,780 |
| Other payables | V.28 | 1,049,594 | 1,197,579 |
| Non-current liabilities due within one year | V.29 | 1,066,243 | 301,814 |
| Other current liabilities | V.30 | 355,243 | 578,184 |
| Total current liabilities | 11,944,991 | 12,134,847 | |
| Non-current liabilities | |||
| Long-term loans | V.31 | 927,159 | 235,819 |
| Debentures payable | V.32 | 7,965,942 | 7,649,098 |
| Lease Liabilities | V.33 | 406,358 | N/A |
| Long-term payables | 29,021 | 25,106 | |
| Long-term employee benefits payable | V.34 | 738,854 | 620,646 |
| Provisions | V.35 | 176,822 | 132,351 |
| Deferred tax liabilities | V.19 | 323,304 | 392,404 |
| Other non-current liabilities | V.36 | 404,824 | 199,930 |
| Total non-current liabilities | 10,972,284 | 9,255,354 | |
| Total liabilities | 22,917,275 | 21,390,201 | |
| Shareholders' equity | |||
| Share capital | V.37 | 2,446,554 | 2,446,554 |
| Capital reserve | V.38 | 12,903,168 | 13,324,491 |
| Other comprehensive income | V.39 | 1,192,681 | 1,090,827 |
| Special reserves | 14,927 | 13,536 | |
| Surplus reserve | V.40 | 240,162 | 240,162 |
| Retained earnings | V.41 | 5,574,173 | 5,629,292 |
| Total shareholders’ equity | 22,371,665 | 22,744,862 | |
| Total liabilities and shareholders’ equity | 45,288,940 | 44,135,063 | |
| Ignacio DominguezChen Lichtenstein Legal representative | Aviram Lahav Chief of accounting work & Chief of accounting organ |
ADAMA Ltd. Annual Report 2019
ADAMA Ltd.(Expressed in RMB '000)Balance Sheet
| December 31 | December 31 | ||
| Notes | 2019 | 2018 (Restated) | |
| Current assets | |||
| Cash at bank and on hand | XV.1 | 1,423,051 | 2,058,253 |
| Accounts receivable | XV.2 | 349,109 | 692,199 |
| Receivables financing | XV.3 | 11,722 | 19,917 |
| Prepayments | 6,055 | 10,500 | |
| Other receivables | XV.4 | 14,051 | 31,748 |
| Inventories | 97,861 | 147,975 | |
| Other current assets | 19,117 | 1,343 | |
| Total current assets | 1,920,966 | 2,961,935 | |
| Non-current assets | |||
| Long-term equity investments | XV.5 | 16,371,411 | 15,939,826 |
| Other equity investments | 85,495 | 80,119 | |
| Investment properties | 3,771 | 4,094 | |
| Fixed assets | 777,476 | 1,012,674 | |
| Construction in progress | 504,936 | 188,020 | |
| Right-of-use assets | 486 | N/A | |
| Intangible assets | 170,053 | 174,997 | |
| Deferred tax assets | 84,950 | 48,103 | |
| Other non-current assets | 73,668 | 54,060 | |
| Total non-current assets | 18,072,246 | 17,501,893 | |
| Total assets | 19,993,212 | 20,463,828 | |
| Current liabilities | |||
| Short-term loans | 150,000 | 20,000 | |
| Bills payables | 90,190 | 209,700 | |
| Accounts payables | 124,228 | 182,110 | |
| Contract liabilities | 6,748 | 9,983 | |
| Employee benefits payable | 204,238 | 25,758 | |
| Taxes payable | 3,614 | 55,198 | |
| Other payables | 237,266 | 187,762 | |
| Non-current liabilities due within one year | 454 | 72,000 | |
| Total current liabilities | 816,738 | 762,511 | |
| Non-current liabilities | |||
| Long-term loans | 141,960 | - | |
| Lease Liabilities | 21 | - | |
| Long-term employee benefits payable | 96,826 | 100,144 | |
| Provisions | 43,238 | 16,454 | |
| Other non-current liabilities | 171,770 | 171,770 | |
| Total non-current liabilities | 453,815 | 288,368 | |
| Total liabilities | 1,270,553 | 1,050,879 | |
| Shareholders’ equity | |||
| Share capital | V.38 | 2,446,554 | 2,446,554 |
| Capital reserve | 15,449,878 | 15,414,429 | |
| Other comprehensive income | 41,308 | 43,167 | |
| Special reserves | 12,973 | 11,564 | |
| Surplus reserve | 240,162 | 240,162 | |
| Retained earnings | V.41 | 531,784 | 1,257,073 |
| Total shareholders’ equity | 18,722,659 | 19,412,949 | |
| Total liabilities and shareholders’ equity | 19,993,212 | 20,463,828 |
ADAMA Ltd.(Expressed in RMB '000)Consolidated Income Statement
| Year ended Decemer 31 | |||
| Notes | 2019 | 2018 (Restated) | |
| I. Operating income | V.42 | 27,563,239 | 26,867,308 |
| Less: Cost of sales | V.42 | 18,679,512 | 18,043,111 |
| Taxes and surcharges | V.43 | 84,403 | 110,512 |
| Selling and Distribution expenses | V.44 | 4,873,256 | 4,701,936 |
| General and administrative expenses | V.45 | 1,562,317 | 998,133 |
| Research and Development expenses | V.46 | 436,325 | 442,253 |
| Financial expenses | V.47 | 1,665,885 | 570,392 |
| Including: Interest expense | 694,350 | 570,464 | |
| Interest income | 81,190 | 81,578 | |
| Add: Investment income, net | V.48 | (231,205) | 628,257 |
| Including: Income from investment in associates and joint ventures | 19,861 | 7,001 | |
| Gain (loss) from changes in fair value | V.49 | 825,512 | (979,334) |
| Credit impairment loss | V.50 | (39,405) | (59,409) |
| Asset impairment losses | V.51 | (413,816) | (237,284) |
| Gain from disposal of assets | V.52 | 127,073 | 1,966,155 |
| II. Operating profit | 529,700 | 3,319,356 | |
| Add: Non-operating income | 25,726 | 16,741 | |
| Less: Non-operating expenses | V.53 | 103,854 | 36,960 |
| III. Total profit | 451,572 | 3,299,137 | |
| Less: Income tax expenses | V.54 | 174,531 | 851,261 |
| IV. Net profit | 277,041 | 2,447,876 | |
| (1). Classified by nature of operations | |||
| (1.1). Continuing operations | 277,041 | 2,447,876 | |
| (2). Classified by ownership | |||
| (2.1). Shareholders of the Company | 277,041 | 2,447,876 | |
| V. Other comprehensive income, net of tax | V. 39 | 106,365 | 1,194,875 |
| Other comprehensive income (net of tax) attributable to shareholders of the Company | 106,365 | 1,194,875 | |
| (1) Items that will not be reclassified to profit or loss: | (48,181) | 26,757 | |
| (1.1) Re-measurement of defined benefit plan liability | (50,771) | 26,757 | |
| (1.2) Fair Value changes in other equity investment | 2,590 | - | |
| (2) Items that were or will be reclassified to profit or loss | 154,546 | 1,168,118 | |
| (2.1) Effective portion of gains or loss of cash flow hedge | (138,917) | 354,335 | |
| (2.2) Translation differences of foreign financial statements | 293,463 | 813,783 | |
| VI. Total comprehensive income for the period attributable to Shareholders of the Company | 383,406 | 3,642,751 | |
| VII. Earnings per share | XIV.2 | ||
| (1) Basic earnings per share (Yuan/share) | 0.11 | 1.00 | |
| (2) Diluted earnings per share (Yuan/share) | N/A | N/A | |
ADAMA Ltd.(Expressed in RMB '000)Income Statement
| Year ended Decemer 31 | |||
| Notes | 2019 | 2018 | |
| I. Operating income | XV.6 | 1,405,709 | 3,112,153 |
| Less: Operating costs | XV.6 | 1,024,665 | 2,048,073 |
| Taxes and surcharges | 11,992 | 29,965 | |
| Selling and Distribution expenses | 58,172 | 179,097 | |
| General and administrative expenses | 632,515 | 205,669 | |
| Research and Development expenses | 53,447 | 121,307 | |
| Financial expenses (income) | (13,211) | (46,324) | |
| Including: Interest expense | 3,941 | 8,375 | |
| Interest income | 26,114 | 25,827 | |
| Add: Investment income, net | 2,583 | 1,808 | |
| Credit impairment loss | (2,018) | (116,171) | |
| Asset Impairment losses | (147,421) | (75,080) | |
| II. Operating Profit | (508,727) | 384,923 | |
| Add: Non-operating income | 6,726 | 1,872 | |
| Less: Non-operating expenses | 28,739 | 1,847 | |
| III. Total profit | (530,740) | 384,948 | |
| Less: Income tax expense (income) | (42,767) | 61,552 | |
| IV. Net profit | (487,973) | 323,396 | |
| Continuing operations | (487,973) | 323,396 | |
| V. Other comprehensive income, net of tax | (1,859) | (7,454) |
| (1) Items that will not be reclassified to profit or loss | (1,859) | (7,454) |
| (1.1) Re-measurement of defined benefit plan liability | 62 | (7,454) |
| (1.2) FV changes in other equity investment | (1,921) | - |
| VI. Total comprehensive income for the period | (489,832) | 315,942 |
ADAMA Ltd.(Expressed in RMB '000)Consolidated Cash Flow Statement
| Year ended Decemer 31 | |||
| Notes | 2019 | 2018 (Restated) | |
| I. Cash flows from operating activities: | |||
| Cash received from sale of goods and rendering of services | 24,860,829 | 24,538,058 | |
| Refund of taxes and surcharges | 88,042 | 41,766 | |
| Cash received relating to other operating activities | V.56(1) | 664,837 | 736,834 |
| Sub-total of cash inflows from operating activities | 25,613,708 | 25,316,658 | |
| Cash paid for goods and services | 17,877,786 | 16,266,684 | |
| Cash paid to and on behalf of employees | 3,408,818 | 3,272,940 | |
| Payments of taxes and surcharges | 683,477 | 656,195 | |
| Cash paid relating to other operating activities | V.56(2) | 2,800,140 | 2,821,686 |
| Sub-total of cash outflows from operating activities | 24,770,221 | 23,017,505 | |
| Net cash flows from operating activities | V.57(1)a | 843,487 | 2,299,153 |
| II. Cash flows from investing activities: | |||
| Cash received from disposal of investments | 63,685 | 11,500 | |
| Cash received from returns of investments | 8,424 | 8,354 | |
| Net cash received from disposal of fixed assets, intangible assets and other long-term assets | 186,607 | 2,452,866 | |
| Cash received relating to other investing activities | V.56(3) | 5,208 | 410 |
| Sub-total of cash inflows from investing activities | 263,924 | 2,473,130 | |
| Cash paid to acquire fixed assets, intangible assets and other long-term assets | 1,760,000 | 3,378,010 | |
| Cash paid for acquisition of investments | 60,500 | 6,566 | |
| Net cash paid to acquire subsidiaries or other business units | V.57(2) | 1,121,947 | 13,344 |
| Cash paid relating to other investing activities | - | 14 | |
| Sub-total of cash outflows from investing activities | 2,942,447 | 3,397,934 | |
| Net cash flows used in investing activities | (2,678,523) | (924,804) | |
| III. Cash flows from financing activities: | |||
| Cash received from borrowings | 3,032,134 | 912,246 | |
| Cash received from other financing activities | V.56(4) | 179,911 | - |
| Sub-total of cash inflows from financing activities | 3,212,045 | 912,246 | |
| Cash repayments of borrowings | 1,486,586 | 3,280,749 | |
| Cash payment for dividends, profit distributions and interest | 1,000,773 | 749,154 | |
| Including: Dividends paid to non-controlling interest | 43,043 | 28,703 | |
| Cash paid relating to other financing activities | V.56(5) | 936,712 | 58,003 |
| Sub-total of cash outflows from financing activities | 3,424,071 | 4,087,906 | |
| Net cash from financing activities | (212,026) | (3,175,660) | |
| IV. Effects of foreign exchange rate changes on cash and cash equiva-lents | 20,773 | 168,005 | |
| V. Net decrease in cash and cash equivalents | V.57(1)b | (2,026,289) | (1,633,306) |
| Add: Cash and cash equivalents at the beginning of the year | 6,346,196 | 7,979,502 | |
| I. VI. Cash and cash equivalents at the end of the period | V.57(3) | 4,319,907 | 6,346,196 |
ADAMA Ltd.(Expressed in RMB '000)Cash Flow Statement
| Year ended Decemer 31 | |||
| Notes | 2019 | 2018 | |
| I. Cash flows from operating activities: | |||
| Cash received from sale of goods and rendering of services | 1,634,256 | 2,625,527 | |
| Refund of taxes and surcharges | 54,483 | 12,981 | |
| Cash received relating to other operating activities | XV.7(1) | 33,582 | 31,675 |
| Sub-total of cash inflows from operating activities | 1,722,321 | 2,670,183 | |
| Cash paid for goods and services | 1,043,318 | 1,145,495 | |
| Cash paid to and on behalf of employees | 213,846 | 184,110 | |
| Payments of taxes and surcharges | 78,567 | 94,110 | |
| Cash paid relating to other operating activities | XV.7(2) | 164,778 | 172,885 |
| Sub-total of cash outflows from operating activities | 1,500,509 | 1,596,600 | |
| Net cash flows from operating activities | XV.8 | 221,812 | 1,073,583 |
| II. Cash flows from investing activities: | |||
| Cash received from returns of investments | 4,391 | - | |
| Sub-total of cash inflows from investing activities | 4,391 | - | |
| Cash paid to acquire fixed assets, intangible assets and other long-term assets | 400,366 | 133,531 | |
| Cash paid for acquisition of investments | 415,000 | - | |
| Sub-total of cash outflows from investing activities | 815,366 | 133,531 | |
| Net cash flows used in investing activities | (810,975) | (133,531) | |
| III.Cash flows from financing activities: | |||
| Cash received from borrowings | 292,000 | 20,000 | |
| Cash received relating to other financing activities | XV.7.(3) | 39,886 | - |
| Sub-total of cash inflows from financing activities | 331,886 | 20,000 | |
| Cash repayments of borrowings | 92,000 | 196,590 | |
| Cash payment for dividends, profit distributions or interest | 243,733 | 162,613 | |
| Cash paid relating to other financing activities | XV.7.(4) | 14,469 | 449,975 |
| Sub-total of cash outflows from financing activities | 350,202 | 809,178 | |
| Net cash flow used in financing activities | (18,316) | (789,178) | |
| IV. Effects of foreign exchange rate changes on cash and cash equivalents | (1,840) | (9,564) | |
| V. Net increase in cash and cash equivalents | (609,319) | 141,310 | |
| Add: Cash and cash equivalents at the beginning of the year | XV.1 | 2,005,313 | 1,864,003 |
| VI. Cash and cash equivalents at the end of the period | XV.1 | 1,395,994 | 2,005,313 |
ADAMA Ltd.(Expressed in RMB '000)Consolidated Statement of Changes in Shareholders’ Equity
For the year ended December 31, 2019
| Attributable to shareholders of the Company | |||||||
| Share capital | Capital reserve | Other comprehen-sive income | Special re-serves | Surplus reserve | Retained earnings | Total | |
| I. Balance at December 31, 2018 | 2,446,554 | 12,975,456 | 1,090,952 | 13,536 | 240,162 | 5,513,466 | 22,280,126 |
| Add: Business combination under common control* | - | 349,035 | (125) | - | - | 115,826 | 464,736 |
| II. Balance at January 1, 2019 | 2,446,554 | 13,324,491 | 1,090,827 | 13,536 | 240,162 | 5,629,292 | 22,744,862 |
| III. Changes in equity for the period | - | (421,323) | 101,854 | 1,391 | - | (55,119) | (373,197) |
| 1. Total comprehensive income | - | - | 106,365 | - | - | 277,041 | 383,406 |
| 2. Owner’s contributions and reduction | - | (421,323) | - | - | - | - | (421,323) |
| 2.1 Consideration for Business combination under common control | - | (415,000) | - | - | - | - | (415,000) |
| 2.2 Other | - | (6,323) | - | - | - | - | (6,323) |
| 3. Appropriation of profits | - | - | - | - | - | (336,671) | (336,671) |
| 3.1 Distribution to owners | - | - | - | - | - | (293,628) | (293,628) |
| 3.2 Distribution to non-controlling interest | - | - | - | - | - | (43,043) | (43,043) |
| 4. Transfers within owners’ equity | - | - | (4,511) | - | - | 4,511 | - |
| 4.1 Others | - | - | (4,511) | - | - | 4,511 | - |
| 5. Special reserve | - | - | - | 1,391 | - | - | 1,391 |
| 5.1 Transfer to special reserve | - | - | - | 19,675 | - | - | 19,675 |
| 5.2 Amount utilized | - | - | - | (18,284) | - | - | (18,284) |
| IV. Balance at December 31, 2019 | 2,446,554 | 12,903,168 | 1,192,681 | 14,927 | 240,162 | 5,574,173 | 22,371,665 |
ADAMA Ltd.(Expressed in RMB '000)Consolidated Statement of Changes in Shareholders’ Equity (continued)
For the year ended December 31, 2018
| Attributable to shareholders of the Company | |||||||
| Share capital | Capital reserve | Other comprehen-sive income | Special re-serves | Surplus reserve | Retained earnings | Total | |
| I. Balance at December 31, 2017 | 2,446,554 | 12,982,277 | (154,701) | 9,349 | 207,823 | 3,286,711 | 18,778,013 |
| Add: Changes in accounting policy | - | - | 50,621 | - | - | 39,481 | 90,102 |
| Business combination under common control* | - | 349,035 | 32 | - | - | 55,045 | 404,112 |
| II. Balance at January 1, 2018 | 2,446,554 | 13,331,312 | (104,048) | 9,349 | 207,823 | 3,381,237 | 19,272,227 |
| III. Changes in equity for the period | - | (6,821) | 1,194,875 | 4,187 | 32,339 | 2,248,055 | 3,472,635 |
| 1. Total comprehensive income | - | - | 1,194,875 | - | - | 2,447,876 | 3,642,751 |
| 2. Owner’s contributions and reduction | - | (6,821) | - | - | - | - | (6,821) |
| 2.1 Others | - | (6,821) | - | - | - | - | (6,821) |
| 3. Appropriation of profits | - | - | - | - | 32,339 | (199,821) | (167,482) |
| 3.1 Transfer to surplus reserve | - | - | - | - | 32,339 | (32,339) | - |
| 3.2 Distribution to owners | - | - | - | - | - | (154,133) | (154,133) |
| 3.3 Distribution to non-controlling interest | - | - | - | - | - | (28,715) | (28,715) |
| 3.4 Other | - | - | - | - | - | 15,366 | 15,366 |
| 4. Special reserve | - | - | - | 4,187 | - | - | 4,187 |
| 4.1 Transfer to special reserve | - | - | - | 22,200 | - | - | 22,200 |
| 4.2 Amount utilized | - | - | - | (18,013) | - | - | (18,013) |
| IV. Balance at December 31, 2018 | 2,446,554 | 13,324,491 | 1,090,827 | 13,536 | 240,162 | 5,629,292 | 22,744,862 |
Statement of Changes in Shareholders’ Equity
For the year ended December 31, 2019
| Attributable to shareholders of the Company | |||||||
| Share capital | Capital reserve | Other com-prehensive income | Special reserves | Surplus reserve | Retained earnings | Total | |
| I. Balance at December 31, 2018 | 2,446,554 | 15,414,429 | 43,167 | 11,564 | 240,162 | 1,257,073 | 19,412,949 |
| II. Changes in equity for the period | - | 35,449 | (1,859) | 1,409 | - | (725,289) | (690,290) |
| 1. Total comprehensive income | - | - | (1,859) | - | - | (487,973) | (489,832) |
| 2. Owner’s contributions and reduction | - | 35,449 | - | - | - | - | 35,449 |
| 2.1 Other | - | 35,449 | - | - | - | - | 35,449 |
| 3. Appropriation of profits | - | - | - | - | - | (237,316) | (237,316) |
| 3.1 Transfer to Distribution to shareholders | - | - | - | - | - | (237,316) | (237,316) |
| 4. Special reserve | - | - | - | 1,409 | - | - | 1,409 |
| 4.1 Transfer to special reserve | - | - | - | 10,924 | - | - | 10,924 |
| 4.2 Amount utilized | - | - | - | (9,515) | - | - | (9,515) |
| Ⅲ. Balance at December 31, 2019 | 2,446,554 | 15,449,878 | 41,308 | 12,973 | 240,162 | 531,784 | 18,722,659 |
| Attributable to shareholders of the Company | |||||||
| Share capital | Capital reserve | Other com-prehensive income | Special reserve | Surplus reserve | Retained earnings | Total | |
| Balance at December 31, 2017 | 2,446,554 | 15,423,034 | - | 10,040 | 207,823 | 1,110,649 | 19,198,100 |
| Add: Changes in accounting policy | - | - | 50,621 | - | - | 9,500 | 60,121 |
| I. Balance at January 1, 2018 | 2,446,554 | 15,423,034 | 50,621 | 10,040 | 207,823 | 1,120,149 | 19,258,221 |
| II. Changes in equity for the period | - | (8,605) | (7,454) | 1,524 | 32,339 | 136,924 | 154,728 |
| 1. Total comprehensive income | - | - | (7,454) | - | - | 323,396 | 315,942 |
| 2. Owner’s contributions and reduction | - | (8,605) | - | - | - | - | (8,605) |
| 2.1 Others | - | (8,605) | - | - | - | - | (8,605) |
| 3. Appropriation of profits | - | - | - | - | 32,339 | (186,472) | (154,133) |
| 3.1 Transfer to surplus reserve | - | - | - | - | 32,339 | (32,339) | - |
| 3.2 Dividend to Shareholders | - | - | - | - | - | (154,133) | (154,133) |
| 4. Special reserve | - | - | - | 1,524 | - | - | 1,524 |
| 4.1 Transfer to special reserve | - | - | - | 10,430 | - | - | 10,430 |
| 4.2 Amount utilized | - | - | - | (8,906) | - | - | (8,906) |
| Ⅲ. Balance at December 31, 2018 | 2,446,554 | 15,414,429 | 43,167 | 11,564 | 240,162 | 1,257,073 | 19,412,949 |
I BASIC CORPORATE INFORMATION
ADAMA Ltd (former name: Hubei Sanonda Co., Ltd., hereinafter the “Company” or the “Group”) is acompany limited by shares established in China with its head office located in Hubei Jingzhou.
During July 2017 a major assets restructuring was successfully completed, with the acquisition of AdamaAgricultural Solutions Ltd (hereinafter: "Solutions"), a wholly-owned subsidiary of China National Agro-chemical Corporation Limited (hereinafter: "CNAC").
Following the completion of the major assets restructuring, Solutions became a wholly owned subsidiaryof the Company. The combination was considered as a business combination under common control.
The Company's parent company is CNAC, and the ultimate holding company is China National ChemicalCorporation (hereinafter - “ChemChina”).
The principal activities of the Company and its subsidiaries (together referred to as the “Group”) are en-gaged in development, manufacturing and marketing of agrochemicals, intermediate materials for otherindustries, food additives and synthetic aromatic products, mainly for export. For information about thelargest subsidiaries of the Company, refer to Note VII.
The Company’s consolidated financial statements had been approved by the Board of Directors of theCompany on April 27, 2020.
Details of the scope of consolidated financial statements are set out in Note VII "Interest in other entities",whereas the changes of the scope of consolidation are set out in Note VI "Changes in consolidation scope".
II BASIS OF PREPARATION
1. Basis of preparation
The Group has adopted the Accounting Standards for Business Enterprises issued by the Ministry of Fi-nance (the "MoF"). In addition, the Group has disclosed relevant financial information in these financialstatements in accordance with Information Disclosure and Presentation Rules for Companies Offering Se-curities to the Public No. 15－General Provisions on Financial Reporting (revised by China SecuritiesRegulatory Commission (hereinafter "CSRC”) in 2014).
II BASIS OF PREPARATION - (cont’d)
2. Accrual basis and measurement principle
The Group has adopted the accrual basis of accounting. Except for certain financial instruments which aremeasured at fair value, deferred tax assets and liabilities, assets and liabilities relating to employee benefits,provisions, and investments in associated companies and joint ventures, the Group adopts the historicalcost as the principle of measurement in the financial statements. Where assets are impaired, provisions forasset impairment are made in accordance with relevant requirements.
In the historical cost measurement, assets obtained shall be measured at the amount of cash or cash equiv-alents or fair value of the consideration paid. Liabilities shall be measured at the actual amount of cash orassets received, or the contractual amount in a present obligation, or the prospective amount of cash orcash equivalents paid to discharge the liabilities.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledge-able, willing market participants in an arm’s length transaction at the measurement date. Fair value meas-ured and disclosed in the financial statements are determined on this basis whether it is observable or esti-mated by valuation techniques.
The following table provides an analysis, grouped into Levels 1 to 3 based on the degree to which the fairvalue input is observable and significant to the fair value measurement as a whole:
Level 1 - based on quoted prices (unadjusted) in active markets;
Level 2 - based on valuation techniques for which the lowest level input that is significant to the fair value
measurement is observable (other than quoted prices included within Level 1), either directly orindirectly;
Level 3 - based on valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable.
3. Going concern
The financial statements have been prepared on the going concern basis.
The Group has performed an assessment of the going concern for the following 12 months from December31, 2019 and have not identified any significant doubtful matter or event on the going concern, as such thefinancial statement have been prepared on the going concern basis.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES
1. Statement of compliance
These financial statements are in compliance with the Accounting Standards for Business Enterprises totruly and completely reflect consolidated and the Company's financial position as at December 31, 2019and consolidated and the Company's operating results, changes in shareholders' equity and cash flows forthe six months then ended.
2. Accounting period
The Group has adopted the calendar year as its accounting year, i.e. from 1 January to 31 December.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
3. Business cycle
The company takes the period from the acquisition of assets for processing to their realisation in cash orcash equivalents as a normal operating cycle. The operating cycle for the company is 12 months.
4. Reporting currency
The Company and its domestic subsidiaries choose Renminbi (hereinafter "RMB") as their functional cur-rency. Functional currencies of overseas subsidiaries are determined on the basis of the principal economicenvironment in which the overseas subsidiaries operate. The functional currency of the overseas subsidiar-ies is mainly the United States Dollar (hereinafter "USD"). The presentation currency of these financialstatements is Renminbi.
5. Business combinations
5.1 Business combinations involving enterprises under common control
A business combination involving enterprises under common control is a business combination in whichall of the combining enterprises are ultimately controlled by the same party or parties both before and afterthe combination, and that control is not transitory. Assets and liabilities obtained shall be measured at theirrespective carrying amounts as recorded by the combining entities at the date of the combination. The dif-ference between the carrying amount of the net assets obtained and the carrying amount of the considera-tion paid for the combination is adjusted to the share premium in capital reserve. If the share premium isnot sufficient to absorb the difference, any excess shall be adjusted against retained earnings. Costs that aredirectly attributable to the combination are charged to profit or loss in the period in which they are in-curred.
During March 2019, the acquisition of Jiangsu Anpon Electrochemical co. LTD. (Hereinafter – “Anpon”), awholly-owned subsidiary of CNAC, was successfully completed. Anpon became a wholly owned subsidiary ofthe Company. The combination was considered as a business combination under common control. OnMarch 29, 2019 the entire share capital of Anpon was transferred from CNAC to the Company - (See note VI.2– Business combinations under common control).
5.2 Business combinations not involving enterprises under common control and goodwill.
A business combination not involving enterprises under common control is a business combination inwhich all of the combining enterprises are not ultimately controlled by the same party or parties before andafter the combination.
The costs of business combination are the fair value of the assets paid, liabilities incurred or assumed andequity instruments issued by the acquirer for the purpose of achieving the control rights over the acquiree.
The intermediary costs such as audit, legal services and assessment consulting costs and other relatedmanagement costs that are directly attributable to the combination by the acquirer are charged to profit orloss in the period in which they are incurred. Direct capital issuance costs incurred in respect of equity in-struments or liabilities issued pursuant to the business combination should be charged to the respect equityinstruments or liabilities upon initial recognition of the underlying equity instruments or liabilities.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
5. Business combinations - (cont’d)
5.2 Business combinations not involving enterprises under common control and goodwill - (cont’d)
The acquiree’s identifiable assets, liabilities and contingent liabilities acquired by the acquirer in a businesscombination, that meet the recognition criteria shall be measured at fair value at the acquisition date.Where the cost of combination exceeds the acquirer’s interest in the fair value of the acquiree’s identifiablenet assets, the difference is treated as an asset and recognized as goodwill, which is measured at cost on in-itial recognition. Where the cost of combination is less than the acquirer’s interest in the fair value of theacquiree’s identifiable net assets, the remaining difference is recognized immediately in profit or loss forthe current year.
The goodwill raised because of the business combination should be separately disclosed in the consolidat-ed financial statement and measured by the initial amount less any accumulative impairment provision.
6. Basis for preparation of consolidated financial statements
The scope of consolidation in consolidated financial statements is determined on the basis of control. Con-trol is achieved when the Company has power over the investee; is exposed, or has rights, to variable re-turns from its involvement with the investee; and has the ability to use its power to affect its returns.
For a subsidiary disposed of by the Group, the operating results and cash flows before the date of disposal(the date when control is lost) are included in consolidated income statement and consolidated statement ofcash flows.
For a subsidiary acquired through a business combination not involving enterprises under common control,the operating results and cash flows from the acquisition date (the date when control is obtained) are in-cluded in consolidated income statement and consolidated statement of cash flows.
For a subsidiary acquired through a business combination involving enterprises under common control, itwill be fully consolidated into consolidated financial statements from the date on which the subsidiary wasultimately under common control by the same party or parties.
The significant accounting policies and accounting years adopted by the subsidiaries are determined basedon the uniform accounting policies and accounting years set out by the Company.
All significant intra-group balances, transactions and unrealized profits are eliminated on consolidation.
The portion of subsidiaries' equity that is not attributable to the Company is treated as non-controlling in-terests and presented as "non-controlling interests" in the shareholders’ equity in consolidated balancesheet. The portion of net profits or losses of subsidiaries for the period attributable to non-controlling in-terests is presented as "non-controlling interests" in consolidated income statement below the "net profit"line item. Total comprehensive income attributable to non-controlling shareholders is presented separatelyin the consolidated income statement below the total comprehensive income line item.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
6. Basis for preparation of consolidated financial statements - (cont’d)
When the amount of loss for the period attributable to the non-controlling shareholders of a subsidiary ex-ceeds the non-controlling shareholders' portion of the opening balance of owners' equity of the subsidiary,the excess amount is still allocated against non-controlling interests.
Acquisition of non-controlling interests or disposal of equity interest in a subsidiary that does not result inthe loss of control over the subsidiary is accounted for as equity transactions. The carrying amounts of theCompany's interests and non-controlling interests are adjusted to reflect the changes in their relative inter-ests in the subsidiary. The difference between the amount by which the non-controlling interests are ad-justed and the fair value of the consideration paid or received is adjusted to capital reserve under owners'equity. If the capital reserve is not sufficient to absorb the difference, the excess is adjusted against re-tained earnings. Other comprehensive income attributed to the non-controlling interest is reattributed to theshareholders of the company.
A put option issued by the Group to holders of non-controlling interests that is settled in cash or other fi-nancial instrument is recognized as a liability at the present value of the exercise price. The Group’s shareof a subsidiary’s profits includes the share of the holders of the non-controlling interests to which theGroup issued a put option.
When the Group loses control over a subsidiary due to disposal of certain equity interest or other reasons,any retained interest is re-measured at its fair value at the date when control is lost. The difference between(i) the aggregate of the consideration received on disposal and the fair value of any retained interest and (ii)the share of the former subsidiary's net assets cumulatively calculated from the acquisition date accordingto the original proportion of ownership interest is recognized as investment income in the period in whichcontrol is lost. Other comprehensive income associated with the disposed subsidiary is reclassified to in-vestment income in the period in which control is lost.
7. Classification and accounting methods of joint arrangement
Joint arrangement involves by two or more parties jointly control. Joint control is the contractually agreedsharing of control over an economic activity, and exists only when the strategic financial and operating de-cisions relating to the activity require the unanimous consent of the parties sharing control (the ventures).
The Group makes the classification of the joint arrangements according to the rights and obligations in thejoint arrangements to either joint operations or joint ventures.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement haverights to the net assets of the joint arrangement. Joint ventures are accounted for using the equity method.
8. Cash and cash equivalents
Cash comprises cash on hand and deposits that can be readily withdrawn on demand. Cash equivalents arethe Group's short-term, highly liquid investments that are readily convertible to known amounts of cashand which are subject to an insignificant risk of changes in value.
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
9. Translation of transactions and financial statements denominated in foreign currencies
9.1 Transactions denominated in foreign currencies
On initial recognition, foreign currency transactions are translated into functional currency using the spotexchange rate prevailing at the date of transaction.
At the balance sheet date, foreign currency monetary items are translated into functional currency using thespot exchange rates at the balance sheet date. Exchange differences arising from the differences betweenthe spot exchange rates prevailing at the balance sheet date and those on initial recognition or at the previ-ous balance sheet date are recognized in profit or loss for the period, except that (i) exchange differencesrelated to a specific-purpose borrowing denominated in foreign currency that qualify for capitalization arecapitalized as part of the cost of the qualifying asset during the capitalization period. (ii) exchange differ-ences related to hedging instruments for the purpose of hedging against foreign currency risks are ac-counted for using hedge accounting.
When preparing financial statements involving foreign operations, if there is any foreign currency mone-tary items, which in substance forms part of the net investment in the foreign operations, exchange differ-ences arising from the changes of foreign currency are recorded as other comprehensive income, and willbe reclassified to profit or loss upon disposal of the foreign operations.
Foreign currency non-monetary items measured at historical cost are translated to the amounts in function-al currency at the spot exchange rates on the dates of the transactions and the amounts in functional cur-rency remain unchanged.
9.2 Translation of financial statements denominated in foreign currency
For the purpose of preparing consolidated financial statements, financial statements of a foreign operationare translated from the foreign currency into RMB using the following method: assets and liabilities on thebalance sheet are translated at the spot exchange rate prevailing at the balance sheet date; shareholders' eq-uity items except for retained earnings are translated at the spot exchange rates at the dates on which suchitems arose; all items in the income statement as well as items reflecting the distribution of profits aretranslated at average rate or at the spot exchange rates on the dates of the transactions; the opening balanceof retained earnings is the translated closing balance of the previous year's retained earnings; the closingbalance of retained earnings is calculated and presented on the basis of each translated income statementand profit distribution item. The difference between the translated assets and the aggregate of liabilities andshareholders' equity items is recorded as other comprehensive income. Cash Flows arising from transactionin foreign currency and the cash flows of a foreign subsidiary are translated at the spot exchange rate onthe date of the cash flow, the effect of exchange rate changes on the cash and cash equivalents is regardedas a reconciling item and present separately in the statement “effect of foreign exchange rate changes onthe cash and cash equivalents".
The opening balances and the comparative figures of prior year are presented at the translated amounts inthe prior year's financial statements.
On disposal of the Group's entire equity interest in a foreign operation, or upon a loss of control over a for-eign operation due to disposal of certain equity interest in it or other reasons, the Group transfers the ac-cumulated translation differences, which are attributable to the owners' equity of the Company and pre-sented under other comprehensive income to profit or loss in the period in which the disposal occurs.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
9. Translation of transactions and financial statements denominated in foreign currencies - (cont’d)
9.2 Translation of financial statements denominated in foreign currency - (cont’d)
In case of a disposal or other reason that does not result in the Group losing control over a foreign opera-tion, the proportionate share of accumulated translation differences are re-attributed to non-controlling in-terests and are not recognized in profit and loss. For partial disposals of equity interest in foreign opera-tions, which are associates or joint ventures, the proportionate share of the accumulated translation differ-ences are reclassified to profit or loss.
10. Financial instruments
The Group recognizes a financial asset or a financial liability when it becomes a party to the contractualprovisions of the instrument. At initial recognition, the Group measures a financial asset or financial liabil-ity at its fair value plus or minus, in the case of a financial asset or financial liability not at fair valuethrough profit or loss, transaction costs that are directly attributable to the acquisition or issue of the finan-cial asset or financial liability. At initial recognition, an entity shall measure trade receivables at theirtransaction price if the trade receivables do not contain a significant financing component.
10.1 Classification and measurement of financial assets
After initial recognition, an entity shall measure a financial asset at: (a) amortised cost; (b) fair valuethrough other comprehensive income (“FVTOCI”); or (c) fair value through profit or loss (“FVTPL”).
10.1.1 Financial assets at amortised cost
A financial asset is measured at amortised cost if both of the following conditions are met:
(a) the financial asset is held within a business model whose objective is to hold financial assets in order tocollect contractual cash flows; and (b) the contractual terms of the financial asset give rise on specifieddates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Such financial assets are subsequently measured at amortised cost, using effective interest method. Gainsor losses upon impairment and derecognition are recognized in profit or loss.
10.1.1.1 Effective interest method and amortised cost
Effective interest method represents the method for calculating the amortized costs and interest income orexpense of each period in accordance with the effective interest rate of financial assets or financial liabili-ties (inclusive of a set of financial assets or financial liabilities). Effective interest rate represents the ratethat discounts the future cash flow over the expected subsisting period or shorter period, if appropriate, ofthe financial asset or financial liability to the current carrying value of such financial asset or financial lia-bility.
When calculating the effective interest rate, the Group will consider the anticipated future cash flow (notconsidering the future credit loss) on the basis of all contract clauses of financial assets or financial liabili-ties, as well as consider all kinds of charges which are an integral part of the effective interest rate, includ-ing transaction fees and discount or premium paid or received between both parties of financial asset or fi-nancial liability contract.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
10. Financial instruments - (cont’d)
10.1 Classification and measurement of financial assets - (cont’d)
10.1.2 Financial assets at FVTOCI
A financial asset is measured at fair value through other comprehensive income if both of the followingconditions are met: (a) the financial asset is held within a business model whose objective is achieved byboth collecting contractual cash flows and selling financial assets and (b) the contractual terms of the fi-nancial asset give rise on specified dates to cash flows that are solely payments of principal and interest onthe principal amount outstanding.
A gain or loss on a financial asset measured at fair value through other comprehensive income is recog-nized in other comprehensive income, except for impairment gains or losses, foreign exchange gains andlosses and interest calculated using the effective interest method, until the financial asset is derecognized orreclassified. When the financial asset is derecognized the cumulative gain or loss previously recognized inother comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment.
10.1.3 Financial assets at FVTPL
Financial assets at FVTPL are either those that are classified as financial assets at FVTPL or designated asfinancial assets at FVTPL.
A financial asset is measured at FVTPL unless it is measured at amortised cost or at FVTOCI.
The Group may, at initial recognition, irrevocably designate a financial asset as measured at FVTPL if do-ing so eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referredto as an ‘accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recog-nizing the gains and losses on them on different bases.
A gain or loss on a financial asset that is measured at FVTPL is recognized in profit or loss unless it is partof a hedging relationship. Dividends are recognized in profit or loss.
10.1.4 Designated financial assets at FVTOCI
At initial recognition, the Group makes an irrevocable election to designate to FVTOCI an investment in anequity instrument that is not held for trading.
When a non-trading equity instrument investment is designated as a financial asset that is measured at fairvalue through other comprehensive income, the changes in the fair value of the financial asset are recog-nised in other comprehensive income. Upon realization the accumulated gains or losses from other com-prehensive income are transferred from other comprehensive income and included in retained earnings.During the period in which the Group holds these non-trading investment instruments, the right to receivedividends in the Group has been established, and the economic benefits related to dividends are likely toflow into the Group, and when the amount of dividends can be reliably measured, the dividend income isrecognized in the current profit and loss.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
10. Financial instruments - (cont’d)
10.2 Impairment of financial assets
The Group recognizes a loss allowance for expected credit losses on financial assets that are classified toamortised cost and FVTOCI.
The Group always measures the loss allowance at an amount equal to lifetime expected credit losses fortrade receivables.
For financial assets other than trade receivables, the Group initially measure the loss allowance for that fi-nancial instrument at an amount equal to 12-month expected credit losses. At each balance sheet date, if thecredit risk on that financial instrument has increased significantly since initial recognition, the Groupmeasures the loss allowance for a financial instrument at an amount equal to the lifetime expected creditlosses. The Group recognizes in profit or loss, as an impairment gain or loss, the amount of expected creditlosses (or reversal) that is required to adjust the loss allowance to the amount that is required to be recog-nized.
10.2.1 Significant increases in credit risk
At each balance sheet date, the Group assesses whether the credit risk on a financial instrument has in-creased significantly since initial recognition.
The Group mainly considers the following list of information in assessing changes in credit risk:
(a) significant changes in internal price indicators of credit risk as a result of a change in credit risk sinceinception.(b) significant changes in external market indicators of credit risk for a particular financial instrument orsimilar financial instruments with the same expected life.(c) a significant change in the debtors’ ability to meet its debt obligations.(d) an actual or expected significant change in the operating results of the debtor.(e) significant increases in credit risk on other financial instruments of the same debtor.(f) an actual or expected significant adverse change in the regulatory, economic, or technological environ-ment of the debtor.(g) significant changes in the value of the collateral supporting the obligation or in the quality ofthird-party guarantees or credit enhancements, which are expected to reduce the debtor’s economicincentive to make scheduled contractual payments or to otherwise have an effect on the probabilityof a default occurring.(h) significant changes that are expected to reduce the receivable’s economic incentive to make
scheduled contractual payments.(i) significant changes in the expected performance and behaviour of the debtor.(j) past due information.
The Group assumes that the credit risk on a financial instrument has not increased significantly since initialrecognition if the financial instrument is determined to have low credit risk at the reporting date.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
10. Financial instruments - (cont’d)
10.2 Impairment of financial assets - (cont’d)
10.2.2 Credit-impaired financial asset
A financial asset is credit-impaired when one or more events that have a detrimental impact on the esti-mated future cash flows of that financial asset have occurred. Evidence that a financial asset is cred-it-impaired include observable data about the following events:
(a) significant financial difficulty of the issuer or the receivable;
(b) a breach of contract, such as a default or past due event;(c) the lender(s) of the receivable, for economic or contractual reasons relating to the receivable’s financialdifficulty, having granted to the receivable a concession(s) that the lender(s) would not otherwiseconsider;(d) it is becoming probable that the receivable will enter bankruptcy or other financial reorganization;
10.2.3 Recognition of expected credit losses
For the purpose of determining significant increases in credit risk and recognizing a loss allowance on acollective basis, financial instruments are grouped on the basis of shared credit risk. Examples of sharedcredit risk characteristics may include, but are not limited to, the:(a) instrument type; (b) credit risk ratings;(c) collateral type; (d) industry; (e) geographical location of the debtor; and (f) the value of collateral rela-tive to the financial asset if it has an impact on the probability of a default occurring.
Expected credit losses of financial instruments are determined as the present value of the difference be-tween: (a) the contractual cash flows that are due to an entity under the contract; and (b) the cash flows thatthe entity expects to receive.
For a financial asset that is credit-impaired at the reporting date, an entity shall measure the expected creditlosses as the difference between the asset’s gross carrying amount and the present value of estimated futurecash flows discounted at the financial asset’s original effective interest rate. Any adjustment is recognizedin profit or loss as an impairment gain or loss.
The Group measures expected credit losses of a financial instrument in a way that reflects:
(a) an unbiased and probability-weighted amount that is determined by evaluating a range of possible out-comes;(b) the time value of money; and(c) reasonable and supportable information that is available without undue cost or effort at the reportingdate about past events, current conditions and forecasts of future economic conditions.
10.2.4 Written-off of financial assets
The Group directly reduces the gross carrying amount of a financial asset when the entity has no reasonableexpectations of recovering a financial asset in its entirety or a portion thereof. A write-off constitutes a de-recognition event.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
10. Financial instruments - (cont’d)
10.3 Transfer of financial asset
The Group derecognizes a financial asset if one of the following conditions is satisfied: (i) the contractualrights to the cash flows from the financial asset expire; or (ii) the financial asset has been transferred andsubstantially all the risks and rewards of ownership of the financial asset is transferred to the transferee; or(iii) although the financial asset has been transferred, the Group neither transfers nor retains substantiallyall the risks and rewards of ownership of the financial asset but has not retained control of the financial as-set.
If the Group neither transfers nor retains substantially all the risks and rewards of ownership of a financialasset, and it retains control of the financial asset, it recognizes the financial asset to the extent of its contin-uing involvement in the transferred financial asset and recognizes an associated liability. The extent of theGroup’s continuing involvement in the transferred asset is the extent to which it is exposed to changes inthe value of the transferred asset.
When the company is derecognizing a financial asset in its entirety, except for equity instrument designatedto FVTOCI, the difference between (i) the carrying amount of the financial asset transferred; and (ii) thesum of the consideration received from the transfer is recognized in profit or loss.
10.4 Classification and measurement of financial liabilities
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with thesubstance of the contractual arrangements and the definitions of a financial liability and an equity instru-ment.
All financial liabilities are subsequently measured at FVTPL or other financial liabilities.
Financial liabilities are classified as at FVTPL when the financial liability is (i) held for trading or (ii) it isdesignated as at FVTPL. The financial liability other than derivative financial liabilities are stated as liabil-ities held for trading.
Other financial liabilities are subsequently measured at amortized cost by using effective interest method.Gain or loss arising from derecognition or amortization is recognized in current profit or loss.
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
10. Financial instruments - (cont’d)
10.5 Derecognition of financial liabilities
Financial liabilities are derecognized in full or in part only when the present obligation is discharged in fullor in part. An agreement entered into force between the Group (debtor) and a creditor to replace the originalfinancial liabilities with new financial liabilities with substantially different terms, derecognize the originalfinancial liabilities as well as recognize the new financial liabilities. When financial liabilities is derecog-nized in full or in part, the difference between the carrying amount of the financial liabilities derecognizedand the consideration paid (including transferred non-cash assets or new financial liability) is recognized inprofit or loss for the current period.
10.6 Derivatives
Derivative financial instruments include forward exchange contracts, currency swaps and foreign exchangeoptions, etc. Derivatives are initially measured at fair value at the date when the derivative contracts areentered into and are subsequently re-measured at fair value. The resulting gain or loss is recognized inprofit or loss unless the derivative is designated and highly effective as a hedging instrument, in which casethe timing of the recognition in profit or loss depends on the nature of the hedge relationship (Note III
28.1).
10.7 Offsetting financial assets and financial liabilities
Financial assets and financial liabilities shall be presented separately in the balance sheet and shall not beoffset, except for circumstances where the Group has a legal right that is currently enforceable to offset therecognized financial assets and financial liabilities, and intends either to settle on a net basis, or to realizethe financial asset and settle the financial liability simultaneously, a financial asset and a financial liabilityshall be offset and the net amount is presented in the balance sheet.
10.8 Equity instruments
The consideration received from the issuance of equity instruments net of transaction costs is recognized inshareholders’ equity. Consideration and transaction costs paid by the Company for repurchasing self-issuedequity instruments are deducted from shareholders’ equity.
When the Company repurchases its own shares, those shares are treated as treasury shares. All expendituresrelating to the repurchase are recorded in the cost of the treasury shares, with the transaction entering intothe share capital. Treasury shares are excluded from profit distributions and are stated as a deduction undershareholders’ equity in the balance sheet.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
11. Receivables
Receivables are assessed for impairment on a collective group and/or on an individual basis as follows:
Expected credit losses in respect of a receivable is measured at an amount equal to lifetime expected creditlosses. The assessment is made collectively for account receivables, where receivables share similar creditrisk characteristics based on geographical location, using the expected credit losses model including in-ter-alia aging analysis, historical loss experiences adjusted by the observable factors reflecting current andexpected future economic conditions. The ratio of the collective provision for non-overdue account re-ceivables is between 0%-1.4%.
When credit risk on a receivable has increased significantly since initial recognition, the group recordsspecific provision or collective provision, which is determined for groups of similar assets in countries inwhich there are large number of customers with immaterial balances.
In assessing whether the credit risk on a receivable has increased significantly since initial recognition, theGroup compares the risk of a default occurring on the receivable at the reporting date with the risk of a de-fault occurring on the receivable at the date of initial recognition and considers both quantitative and qual-itative information that is reasonable and supportable, including observable data that comes to the attentionof the Group about loss events such as a significant decline in the solvency of an individual debtor or theportfolio of debtors, and significant changes in the financial condition that have an adverse effect on thedebtor.
12. Inventories
12.1 Categories of inventories and initial measurement
The Group's inventories mainly include raw materials, work in progress, semi-finished goods, finishedgoods and reusable materials. Reusable materials include low-value consumables, packaging materials andother materials, which can be used repeatedly but do not meet the definition of fixed assets.
Inventories are initially measured at cost. Cost of inventories comprises all costs of purchase, costs ofconversion and other expenditures incurred in bringing the inventories to their present location and condi-tion including direct labor costs and an appropriate allocation of production overheads.
12.2 Valuation method of inventories upon delivery
The actual cost of inventories upon delivery is calculated using the weighted average method.
12.3 Basis for determining net realizable value of inventories and provision methods for decline in value of in-
ventories
At the balance sheet date, inventories are measured at the lower of cost and net realizable value. If the netrealizable value is below the cost of inventories, a provision for decline in value of inventories is made.Net realizable value is the estimated selling price in the ordinary course of business less the estimated costsof completion, the estimated costs necessary to make the sale and relevant taxes.
After the provision for decline in value of inventories is made, if the circumstances that previously causedinventories to be written down below cost no longer exist so that the net realizable value of inventories ishigher than their carrying amount, the original provision for decline in value is reversed and the reversal isincluded in profit or loss for the period.
12.4 The perpetual inventory system is maintained for stock system.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
13. Long-term equity investments
Long-term equity investments include investments in subsidiaries, joint ventures and associates.
Subsidiaries are the companies that are controlled by the Company. Associates are the companies overwhich the Group has significant influence. Joint ventures are joint arrangements over which the Group hasjoint control along with other investors and has rights to the net assets of the joint arrangement.
The Company accounts for the investment in subsidiaries at historical cost in the Company's financialstatements. Investments in associates and joint ventures are accounted for under equity method.
13.1 Determination of investment cost
For a long-term equity investment acquired through a business combination involving enterprises undercommon control, the investment cost of the long-term equity investment is the share of the carryingamount of the shareholders' equity of the acquiree attributable to the ultimate controlling party at the dateof combination. For a long-term equity investment acquired through business combination not involvingenterprises under common control, the investment cost of the long-term equity investment is the cost ofacquisition. For a business combination not involving enterprises under common control achieved in stagesthat involves multiple exchange transactions, the initial investment cost is carried at the aggregate of thecarrying amount of the acquirer’s previously held equity interest in the acquiree and the new investmentcost incurred on the acquisition date.
Regarding the long-term equity investment acquired otherwise than through a business combination, if thelong-term equity investment is acquired by cash, the historical cost is determined based on the amount ofcash paid and payable; if the long-term equity investment is acquired through the issuance of equity in-struments, the historical cost is determined based on the fair value of the equity instruments issued.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
13. Long-term equity investments - (cont’d)
13.2 Subsequent measurement and recognition of profit or loss
If the long-term equity investment is accounted for at cost, it should be measured at historical cost less ac-cumulated impairment losses. Dividend declared by the investee should be accounted for as investmentincome.
Under the equity method, where the initial investment cost of a long-term equity investment exceeds theGroup’s share of the fair value of the investee’s identifiable net assets at the time of acquisition, no ad-justment is made to the initial investment cost. Where the initial investment cost is less than the Group’sshare of the fair value of the investee’s identifiable net assets at the time of acquisition, the difference isrecognized in profit or loss for the period, and the cost of the long-term equity investment is adjusted ac-cordingly.
Under the equity method, the Group recognizes its share of the net profit or loss and other comprehensiveincome of the investee for the period as investment income or loss and other comprehensive income for theperiod. The Group recognizes its share of the investee’s net profit or loss based on the fair value of the in-vestee’s individual separately identifiable assets, etc. at the acquisition date after making appropriate ad-justments to be confirmed with the Group's accounting policies and accounting period. The Group discon-tinues recognizing its share of net losses of the investee after the carrying amount of the long-term equityinvestment together with any long-term interests that in substance form part of its net investment in the in-vestee is reduced to zero. If the Group has incurred obligations to assume additional losses of the investee,a provision is recognized according to the expected obligation, and recorded as investment loss for the pe-riod.
13.3 Basis for determining control, joint control and significant influence over investee
Control is achieved when the Company has power over the investee; is exposed, or has rights, to variablereturns from its involvement with the investee; and has the ability to use its power to affect its returns.
Joint control is the contractually agreed sharing of control over an economic activity, and exists only whenthe strategic financial and operating policy decisions relating to the activity require the unanimous consentof the parties sharing control.
Significant influence is the power to participate in the financial and operating policy decisions of the in-vestee but is not control or joint control over those policies.
When determining whether an investing enterprise is able to exercise control or significant influence overan investee, the effect of potential voting rights of the investee (for example, warrants and convertibledebts) held by the investing enterprises or other parties that are currently exercisable or convertible shall beconsidered.
13.4 Methods of impairment assessment and determining the provision for impairment loss
If the recoverable amounts of the investments to subsidiaries, joint ventures and associates are less thantheir carrying amounts, an impairment loss should be recognized to reduce the carrying amounts to the re-coverable amounts (Note III 20).
13.5 The disposal of long-term equity investment
On disposal of a long term equity investment, the difference between the proceeds actually received andreceivable and the carrying amount is recognized in profit or loss for the period.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
14. Investment properties
Investment property refers to real estate held to earn rentals or for capital appreciation, or both, includingleased land use rights, land use rights held and provided for transferring after appreciation and leased con-structions, etc.
Investment property is initially measured at cost. Subsequent expenditures related to an investment prop-erty shall be included in cost of investment property only when the economic benefits associated with theasset will likely flow to the Group and its cost can be measured reliably. All other subsequent expenditureson investment property shall be included in profit or loss for the current period when incurred.
The Group adopts cost method for subsequent measurement of investment property, which is depreciatedor amortized using the same policy as that for buildings and land use rights.
When an investment property is sold, transferred, retired or damaged, the amount of proceeds on disposalof the property net of the carrying amount and related taxes and surcharges is recognized in profit or lossfor the current period.
15. Fixed assets
15.1 Recognition criteria for fixed assets
Fixed assets include land owned by the Group and buildings, machinery and equipment, transportation ve-hicles, office equipment and others.
Fixed assets are tangible assets that are held for use in the production or supply of goods or for administra-tive purposes, and have useful lives of more than one accounting year. A fixed asset is recognized onlywhen it is probable that economic benefits associated with the asset will flow to the Group and the cost ofthe asset can be reliably measured. Purchased or constructed fixed assets are initially measured at costwhen acquired.
Subsequent expenditures incurred for the fixed asset are included in the cost of the fixed asset and if it isprobable that economic benefits associated with the asset will flow to the Group and the subsequent ex-penditures can be measured reliably. Other subsequent expenditures are recognized in profit or loss in theperiod in which they are incurred.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
15. Fixed assets - (cont’d)
15.2 Depreciation of each category of fixed assets
Fixed asset is depreciated based on the cost of fixed asset recognized less expected net residual value overits useful life using the straight-line method since the month subsequent to the one in which it is ready forintended use. Depreciation is calculated based on the carrying amount of the fixed asset after impairmentover the estimated remaining useful life of the asset.
The Group reviews the useful life and estimated net residual value of a fixed asset and the depreciationmethod applied at least once at each financial year-end, and account for any change as a change in an ac-counting estimate.
The estimated useful life, estimated net residual value and annual depreciation rate of each category offixed assets are as follows:
| Category | Depreciation | Useful life (years) | Residual value (%) | Annual deprecia-tion rate (%) |
| Buildings | the straight-line method | 15-50 | 0-4 | 1.9-6.7 |
| Machinery and equipment | the straight-line method | 3-22 | 0-4 | 4.4-33.3 |
| Office and other equipment | the straight-line method | 3-17 | 0-4 | 5.6-33.3 |
| Motor vehicles | the straight-line method | 5-9 | 0-2 | 10.9-20.0 |
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
17. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying asset arecapitalized when expenditures for such asset and borrowing costs are incurred and activities relating to theacquisition, construction or production of the asset that are necessary to prepare the asset for its intendeduse or sale have commenced. Capitalization of borrowing costs ceases when the qualifying asset being ac-quired, constructed or produced becomes ready for its intended use or sale. Borrowing costs incurred sub-sequently should be charged to profit or loss. Capitalization of borrowing costs is suspended during periodsin which the acquisition, construction or production of a qualifying asset is suspended abnormally andwhen the suspension is for a continuous period of more than 3 months. Capitalization is suspended untilthe acquisition, construction or production of the asset is resumed.
Where funds are borrowed under a specific-purpose borrowing, the amount of interest to be capitalized isthe actual interest expenses incurred on that borrowing for the period less any bank interest earned fromdepositing the borrowed funds before being used on the asset or any investment income on the temporaryinvestment of those funds.
Where funds are borrowed under general-purpose borrowings, the Group determines the amount of interestto be capitalized on such borrowings by applying a capitalization rate to the weighted average of the excessof cumulative expenditures on the asset over the amounts of specific-purpose borrowings. The capitaliza-tion rate is the weighted average of the interest rates applicable to the general-purpose borrowings.
During the capitalization period, exchange differences on foreign currency specific-purpose borrowing arefully capitalized whereas exchange differences on foreign currency general-purpose borrowing is chargedto profit or loss.
18. Intangible assets
18.1 Valuation methods, useful life, impairment test
The Group’s intangible assets include product registration assets, intangible assets upon purchase of prod-ucts, marketing rights and rights to use tradenames and trademarks, land use rights, software and customerrelations. Intangible assets are stated at the balance sheet at cost less accumulated amortization and im-pairment losses.
When an intangible asset with a finite useful life is available for use, its original cost less any accumulatedimpairment losses is amortized over its estimated useful life using the straight-line method. An intangibleasset with an indefinite useful life is not amortized.
For an intangible asset with a finite useful life, the Group reviews the useful life and amortization methodat the end of the year, and makes adjustments when necessary.
The respective amortization periods for such intangible assets are as follows:
| Item | Amortization period (years) | |
| Land use rights | 49-50 years | |
| Product registration | 8 years | |
| Intangible assets on purchase of products | 7-11, 20 years | |
| Marketing rights, tradename and trademarks | 4-10, 30 years | |
| Software | 3-5 years | |
| Customer relations | 5-10 years |
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
18. Intangible assets - (cont’d)
18.2 Research and development expenditure
Internal research and development project expenditures were classified into research expenditures and de-velopment expenditures depending on its nature and the greater uncertainty whether the research activitiesbecoming to intangible assets.
Expenditure during the research phase is recognized as an expense in the period in which it is incurred.Expenditure during the development phase that meets all of the following conditions at the same time isrecognized as intangible asset:
- It is technically feasible to complete the intangible asset so that it will be available for use or sale;- The Group has the intention to complete the intangible asset and use or sell it;- The Group can demonstrate the ways in which the intangible asset will generate economic benefits;- The availability of adequate technical, financial and other resources to complete the development and theability to use or sell the intangible asset;- The expenditure attributable to the intangible asset during its development phase can be reliably meas-ured.
Expenditures that do not meet all of the above conditions at the same time are recognized in profit or losswhen incurred. If the expenditures cannot be distinguished between the research phase and developmentphase, the Group recognizes all of them in profit or loss for the period. Expenditures that have previouslybeen recognized in the profit or loss would not be recognized as an asset in subsequent years. Those ex-penditures capitalized during the development stage are recognized as development costs incurred and willbe transferred to intangible asset when the underlying project is ready for an intended use.
19. Goodwill
The initial cost of goodwill represents the excess of cost of acquisition over the acquirer’s interest in thefair value of the identifiable net assets of the acquiree under a business combination not involving enter-prises under common control.
Goodwill is not amortized and is stated in the balance sheet at cost less accumulated impairment losses(see Note III 20 – Impairment of long-term assets). On disposal of an asset group
or a set of asset groups,any attributable goodwill is written off and included in the calculation of the profit or loss on disposal.
20. Impairment of long-term assets
The Company assesses at each balance sheet date whether there is any indication that the fixed assets, con-struction in progress, right of use assets, intangible assets with finite useful lives, investment propertiesmeasured at historical cost, investments in subsidiaries, joint ventures and associates may be impaired. Ifthere is any indication that such assets may be impaired, recoverable amounts are estimated for such assets.The recoverable amount of an asset is the higher of its fair value less costs to sell and the present value ofthe future cash flow estimated to be derived from the asset. The Group estimates the recoverable amount onan individual basis. If it is not possible to estimate the recoverable amount of the individual asset, theGroup determines the recoverable amount of the asset group to which the asset belongs. Identification of anasset group is based on whether major cash inflows generated by the asset group are largely independent ofthe cash inflows from other assets or asset groups.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
20. Impairment of long-term assets - (cont’d)
Goodwill arising from a business combination is tested for impairment at least at each year end, irrespec-tive of whether there is any indication that the asset may be impaired. For the purpose of impairment test-ing, the carrying amount of goodwill acquired in a business combination is allocated from the acquisitiondate on a reasonable basis to each of the related asset groups; if it is impossible to allocate to the relatedasset groups, it is allocated to each of the related set of asset groups. Each of the related asset groups or setof asset groups is an asset group or set of asset group that is able to benefit from the synergies of the busi-ness combination and shall not be larger than a reportable segment determined by the Group. If the carry-ing amount of the asset group or set of asset groups is higher than its recoverable amount, the amount ofthe impairment loss first reduced by the carrying amount of the goodwill allocated to the asset group or setof asset groups, and then the carrying amount of other assets (other than the goodwill) within the assetgroup or set of asset groups, pro rata based on the carrying amount of each asset.
Once the impairment loss of such assets is recognized, it will not be reversed in any subsequent period.
21. Employee benefits
21.1 Short-term employee benefits
Employee wages or salaries, bonuses, social security contributions, measured on a non-discounted basis,and the expense is recorded when the related service is provided. A provision for short-term employeebenefits in respect of cash bonuses is recognized in the amount expected to be paid where the Group has acurrent legal or constructive obligation to pay the said amount for services provided by the employee in thepast and the amount can be estimated reliably.
21.2 Post-employment benefits
Post-employment benefits are classified into defined contribution plans and defined benefit plans.
A defined contribution plan is a post-employment benefit plan under which the Group pays contributionsto a separate entity and has no legal or constructive obligation to pay further amounts. Obligations for con-tributions to defined contribution plans are recognized as an expense in profit or loss in the periods duringwhich related services are rendered by employees.
Defined benefit plans of the Group are post-employment benefit plans other than defined contributionplans. In accordance with the projected unit credit method, the Group measures the obligations under de-fined benefit plans using unbiased and mutually compatible actuarial assumptions to estimate related de-mographic variables and financial variables, and discount obligations under the defined benefit plans todetermine the present value of the defined benefit liability. The discount rate used is the yield on the re-porting date on highly-rated corporate debentures denominated in the same currency, that have maturitydates approximating the terms of the Group’s obligation.
The Group attributes benefit obligations under a defined benefit plan to periods of service provided by re-spective employees. Service cost and interest expense on the defined benefit liability are charged to profitor loss and remeasurements of the defined benefit liability are recognized in other comprehensive income.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
21. Employee benefits - (cont’d)
21.3 Termination benefits
When the Group terminates the employment with employees or provides compensation under an offer toencourage employees to accept voluntary redundancy, a provision is recognized with a corresponding ex-pense in profit or loss at the earlier of the following dates:
- When the Group cannot unilaterally withdraw the offer of termination benefits because of an employee
termination plan or a curtailment proposal.- When the Group has a formal detailed restructuring plan involving the payment of termination benefits
and has raised a valid expectation in those affected that it will carry out the restructuring by starting to
implement that plan or announcing its main features to those affected by it.
If the benefits are payable more than 12 months after the end of the reporting period, they are discounted totheir present value. The discount rate used is the yield on the reporting date on highly-rated corporate de-bentures denominated in the same currency, that have maturity dates approximating the terms of theGroup’s obligation.
21.4 Other long-term employee benefits
The Group’s net obligation for long-term employee benefits, which are not attributable topost-employment benefit plans, is for the amount of the future benefit to which employees are entitled forservices that were provided during the current and prior periods.
The amount of these benefits is discounted to its present value and the fair value of the assets related tothese obligations is deducted therefrom. The discount rate used is the yield on the reporting date on high-ly-rated corporate debentures denominated in the same currency, that have maturity dates approximatingthe terms of the Group’s obligation.
22. Share-based payment
Share-based payment refers to the transaction in order to acquire the service offered by the employees orother parties that grants equity instruments or liabilities on the basis of the equity instruments. Share-basedpayment classified into equity-settled share-based payment and cash-settled share-based payment.
22.1 Cash-settled share-based payment
The cash-settled share-based payment should be measured according to the fair value of the liabilities rec-ognized based on the shares or other equity instrument undertaken by the Company. For cash-settledshare-based payment made in return for the rendering of employee services that cannot be exercised untilthe services are fully provided during the vesting period or specified performance targets are met, on eachbalance sheet date within the vesting period, the services acquired in the current period shall, based on thebest estimate of the number of exercisable instruments, be recognized in relevant expenses and the corre-sponding liabilities at the fair value of the liability incurred by the Company.
On each balance sheet date and the settlement date before the settlement of the relevant liabilities, theCompany should re-measure the fair value of the liabilities and the changes should be included in the cur-rent period profit and loss.
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
23. Provisions
Provisions are recognized when the Group has a present obligation related to a contingency, it is probablethat an outflow of economic benefits will be required to settle the obligation, and the amount of the obliga-tion can be measured reliably.
The amount recognized as a provision is the best estimate of the consideration required to settle the presentobligation at the settlement date, taking into account factors pertaining to a contingency such as the risks,uncertainties and time value of money. Where the effect of the time value of money is material, the amountof the provision is determined by discounting the related future cash outflows. The increase in the provi-sion due to passage of time is recognized as interest expense.
If all or part of the provision settlements is reimbursed by third parties, when the realization of income isvirtually certain, then the related asset should be recognized. However, the amount of related asset recog-nized should not be exceeding the respective provision amount.
At the balance sheet date, the amount of provision should be re-assessed to reflect the best estimation then.
24. Revenue
Revenue of the Group is mainly from sale of goods.
The Group recognizes revenue when transferring goods to a customer, at the amount of the transactionprice. Goods are considered transferred when the customer obtains control of the goods. Transaction priceis the amount of consideration to which an entity expects to be entitled in exchange for transferring goodsto a customer, excluding amounts collected on behalf of third parties.
Significant financing component
For a contract with a significant financing component, the Group recognize revenue at an amount that re-flects the price that a customer would have paid for the goods if the customer had paid cash for those goodsat receipt. The difference between the amount of consideration and the cash selling price of the goods, isamortized in the contract period using effective interest rate. The Group does not adjust the amount of con-sideration for the effects of a significant financing component if the Group expects, at contract inception,that the period between when the entity transfers a good to a customer and when the customer pays for thatgood will be one year or less.
Sale with a right of return
For sale with a right of return, the Group recognizes revenue at the amount of consideration to which theGroup expects to be entitled (ie excluding the products expected to be returned). For any amounts received(or receivable) for which an entity does not expect to be entitled, the entity shall not recognize revenuewhen it transfers products to customers but shall recognize those amounts received (or receivable) as a re-fund liability. An asset recognized for the Group’s right to recover products from a customer on settling arefund liability shall initially be measured by reference to the former carrying amount of the product lessany expected costs to recover those products.
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
25. Government grants
Government grants are transfer of monetary assets and non-monetary assets from the government to theGroup at no consideration, including tax returns, financial subsidies and so on. A government grant is rec-ognized only when the Group can comply with the conditions attached to the grant and the Group will re-ceive the grant.
If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount receivedor receivable. If a government grant is in the form of a non-monetary asset, it is measured at fair value. Ifthe fair value cannot be reliably determined, it is measured at a nominal amount.
Government grants are either related to assets or income.
(1) The basis of judgment and accounting method of the government grants related to assets
Government grants obtained for acquiring long-term assets are government grants related to assets. A gov-ernment grant related to an asset is offset with the cost of the relevant asset.
(2) The basis of judgment and accounting method of the government grants related to income
For a government grant related to income, if the grant is a compensation for related expenses or losses tobe incurred in subsequent periods, the grant is recognized as deferred income, and recognized in profit orloss over the periods in which the related costs are recognized. If the grant is a compensation for relatedexpenses or losses already incurred, the grant is recognized immediately in profit or loss for the period.
Government grants related to the Group’s normal course of business are offset with related costs and ex-penses. Government grants related that are irrelevant with the Groups’s normal course of business are in-cluded in non-operating gains.
26. Current and deferred tax
The income tax expenses include current income tax and deferred income tax.
26.1 Current income tax
At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods aremeasured at the amount expected to be paid (or recovered) according to the requirements of tax laws.
26.2 Deferred tax assets and deferred tax liabilities
Temporary differences are differences between the carrying amounts of certain assets or liabilities andtheir tax base.
All taxable temporary differences are recognized as related deferred tax liabilities. Deferred tax assets arerecognized to the extent that it is probable that future taxable profits will be available against which thedeductible losses and tax credits can be utilized.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
26. Current and deferred tax - (cont’d)
26.2 Deferred tax assets and deferred tax liabilities - (cont’d)
For deductible losses and tax credits that can be carried forward, deferred tax assets are recognized to theextent that it is probable that future taxable profits will be available against which the deductible losses andtax credits can be utilized. However, for deductible temporary differences associated with the initial recog-nition of goodwill and the initial recognition of an asset or liability arising from a transaction (not a busi-ness combination) that affects neither the accounting profit nor taxable profits (or deductible losses) at thetime of transaction, no deferred tax asset or liability is recognized.
At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates, according to taxlaws, that are expected to apply in the period in which the asset is realized or the liability is settled.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments insubsidiaries and associates, and interests in joint ventures, except where the Group is able to control thetiming of the reversal of the temporary difference and it is probable that the temporary difference will notreverse in the foreseeable future.
The Group may be required to pay additional tax in case of distribution of dividends by the Group compa-nies. This additional tax was not included in the financial statements, since the policy of the Group is not todistribute in the foreseeable future a dividend which creates a significant additional tax liability.
Except for those current income tax and deferred tax charged to comprehensive income or shareholders’equity in respect of transactions or events which have been directly recognized in other comprehensive in-come or shareholders’ equity, and deferred tax recognized on business combinations, all other current in-come tax and deferred tax items are charged to profit or loss in the current period.
At the balance sheet date, the carrying amount of deferred tax assets is reviewed and reduced if it is nolonger probable that sufficient taxable profits will be available in the future to allow the benefit of deferredtax assets to be utilized. Such reduction is reversed when it becomes probable that sufficient taxable profitswill be available.
26.3 Offset of income tax
When the Group has a legal right to settle current tax assets and liabilities on a net basis, and tax assets andtax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entityor different taxable entities which intend to realize the assets and liabilities simultaneously, current tax as-sets and liabilities are offset and presented on a net basis.
When the Group has a legal right to settle deferred tax assets and liabilities on a net basis which relates toincome taxes levied by the same taxation authority, on either the same taxable entity or different taxableentities which intend either to settle current tax assets and liabilities on a net basis or to realize the assetsand liabilities simultaneously, in each future period in which significant amounts of deferred tax assets orliabilities are expected to be reversed, deferred tax assets and deferred tax liabilities are offset and present-ed on a net basis.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
27. Leases
Lease is a contract, that conveys the right to use an asset for a period of time in exchange for consideration.
27.1 Determining whether an arrangement contains a lease
On the inception date of the lease, the Group determines whether the arrangement is a lease or contains alease, while assessing if it conveys the right to control the use of an identified asset for a period of time inexchange for consideration. In its assessment of whether an arrangement conveys the right to control theuse of an identified asset, the Group assesses whether it has the following two rights throughout the leaseterm:
(a) The right to obtain substantially all the economic benefits from use of the identified asset; and(b) The right to direct the identified asset’s use.An arrangement does not contain a lease if an asset is leased for a period of less than 12 months, or to lease ofasset with low economic value.
27.2 Initial recognition of leased assets and lease liabilities
Upon initial recognition, the Group recognizes a liability at the present value of future lease payments (ex-clude certain variable lease payments, as detailed in note III 27.4), and concurrently the Group recognizes aright-of-use asset at the same amount, adjusted for any prepaid lease payments paid at the lease date or be-fore, plus initial direct costs incurred in respect of the lease.When the interest rate implicit in the lease is not readily determinable, the incremental borrowing rate ofthe lessee is used.The Group presents right-of-use assets separately from other assets in the balance sheet.
27.3 The lease term
The lease term is the non-cancellable period of the lease plus periods covered by an extension or termina-tion option, if it is reasonably certain that the lessee will exercise or not exercise the option, respectively.If there is a change in the lease term, or in the assessment of an option to purchase the underlying asset, theGroup remeasures the lease liability, on the basis of the revised lease term and the revised discount rateand adjust the right-of-use assets accordingly.
27.4 Variable lease payments
Variable lease payments that depend on an index or a rate, are initially measured using the index or rateexisting at the commencement of the lease. When the cash flows of future lease payments change as theresult of a change in an index or a rate, the balance of the liability is adjusted with a correspondencechange in the right-of-use asset.Other variable lease payments that are not included in the measurement of the lease liability are recognizedin profit or loss in the period in which the condition that triggers payment occurs.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
27. Leases (cont’d)
27.5 Subsequent measurement
After lease commencement, a right-of-use asset is measured on a cost basis less accumulated depreciationand accumulated impairment losses and is adjusted for re-measurements of the lease liability. The asset isdepreciated on a straight-line basis over the useful life or contractual lease period, whichever earlier.The Group applies ASBE8 Impairment of Assets, to determine whether the right-of-use asset is impairedand to account for any impairment loss identified.A lease liability is measured after the lease commencement date at amortized cost using the effective inter-est method.
28. Other significant accounting policies and accounting estimates
28.1 Hedging
The Group uses derivative financial instruments to hedge its risks related to foreign currency and inflationrisks and derivatives that are not used for hedging.
Hedge accounting
The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoingbasis, whether the hedge is expected to be effective in offsetting the changes in the fair value of cash flowsthat can be attributed to the hedged risk during the period for which the hedge is designated.
An effective hedge exists when all of the below conditions are met:
? There is an economic relationship between the hedged item and the hedging instrument;? the effect of credit risk does not dominate the value changes that result from that economic relationship;? the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedgeditem that the entity actually hedges and the quantity of the hedging instrument that the entity actuallyuses to hedge that quantity of hedged item.
On the commencement date of the accounting hedge, the Group formally documents the relationship betweenthe hedging instrument and hedged item, including the Group’s risk management objectives and strategy in ex-ecuting the hedge transaction, together with the methods that will be used by the Group to assess the effective-ness of the hedging relationship.
With respect to a cash-flow hedge, a forecasted transaction that constitutes a hedged item must be highlyprobable and must give rise to exposure to changes in cash flows that could ultimately affect profit or loss.
Measurement of derivative financial instruments
Derivative financial instruments are recognized initially at fair value; attributable transaction costs arerecognized in profit or loss as incurred.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
28. Other significant accounting policies and accounting estimates - (cont’d)
28.1 Hedging (cont’d)
Cash-flow hedges
Subsequent to the initial recognition, changes in the fair value of derivatives used to hedge cash flows arerecognized through other comprehensive income directly in a hedging reserve, with respect to the part ofthe hedge that is effective. Regarding the portion of the hedge that is not effective, the changes in fair valueare recognized in profit and loss. The amount accumulated in the hedging reserve is reclassified to profitand loss in the period in which the hedged cash flows impact profit or loss and is presented in the same lineitem in the statement of income as the hedged item.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminatedor exercised, the hedge accounting is discontinued. The cumulative gain or loss previously recognized in ahedging reserve through other comprehensive income remains in the reserve until the forecasted transac-tion occurs or is no longer expected to occur. If the forecasted transaction is no longer expected to occur,the cumulative gain or loss in respect of the hedging instrument in the hedging reserve is reclassified toprofit or loss.
Economic hedge
Hedge accounting is not applied with respect to derivative instruments used to economically hedge finan-cial assets and liabilities denominated in foreign currency or CPI linked. Changes in the fair value of suchderivatives are recognized in profit or loss as gain (loss) from changes in fair value or investment income.
Derivatives that are not used for hedging
Changes in the fair value of derivatives that are not used for hedging are recognized in profit or loss as gain(loss) from changes in fair value or investment income.
28.2 Securitization of assets
Details of the securitization of asset agreements and accounting policy are set out in Note V.5 - Accountreceivables
28.3 Segment reporting
Reportable segments are identified based on operating segments which are determined based on the struc-ture of the Group’s internal organization, management requirements and internal reporting system.
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
28. Other significant accounting policies and accounting estimates - (cont’d)
28.3 Segment reporting - (cont’d)
Two or more operating segments may be aggregated into a single operating segment if the segments havesimilar economic characteristics and are same or similar in respect of the nature of each product and service,the nature of production processes, the type or class of customers for the products and services, the meth-ods used to distribute the products or provide the services, and the nature of the regulatory environment.
Inter-segment revenues are measured on the basis of actual transaction price for such transactions for seg-ment reporting. Segment accounting policies are consistent with those for the consolidated financial state-ments.
28.4 Profit distributions to shareholders
Dividends which are approved after the balance sheet date are not recognized as a liability at the balancesheet date but are disclosed in the notes separately.
29. Changes in significant accounting policies and accounting estimates
29.1 Changes in significant accounting policies
| The contents and reasons for the changes of accounting policies | Process for management approval |
| The Group began to adopt revised Accounting Standards for Business Enterprises 21 Leases (“New lease standard”), promulgated by Ministry of Finance in 2018, from January 1, 2019. The revised accounting policies for leases are presents in Note III.27 For existing contracts at the initial application date, the Group elects not to re-assess whether they are, or contain leases. Contracts that are signed or modified after the date of initial application, the Group assess whether they are, or contain leases, according to the definition of lease in the new lease standards. The Group adjusts all relevant financial accounts at the initial application date, for the accumu-lated impact from the new lease standards, with no retrospective adjustments for comparative numbers. The Group elected to apply the transitional provision of recognizing a right-of-use asset at the same amount of the lease liability, adjusted for any prepaid or accrued lease pay-ments that were recognized as an asset or liability before the date of initial application, and therefore, the implementation of the standard does not affect retained earnings balance at the date of initial application. | The accounting policy change was approved by the board of directors meeting in 28.4.2019 |
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
29. Changes in significant accounting policies and accounting estimates - (cont’d)
29.1 Changes in significant accounting policies - (cont’d)
| The contents and reasons for the changes of accounting policies | Process for management approval |
| For operating leases before the initial application date, the Group adopts the simplifying ap-proaches below for each lease: - When determining lease liabilities, the same discount rate will be used for leases with similar characteristics; - For leases with options to extend or terminate, the Group determines the lease term based on the actual exercise of options before the initial application date and other most updated in-formation; - As a substitute of impairment test for right-of-use assets, the Group applies ASBE13 Contin-gencies, to assess if the contract containing a lease is a loss contract and adjust the right of-use assets based on the loss incurred at the initial application date. - For lease modifications before the initial application date, the Group makes accounting treatments based on the final lease arrangements after the lease modification. On January 1, 2019, as a result of the implementation of the standard, the lease liabilities in-creased by 506,863 thousands RMB, and right-of-use assets by 506,863 thousands RMB. For operating leases before the initial application date, the Group measures the lease liability at the present value of the lease payments, with the incremental borrowing rate as the discount rate. The borrowing rates are between 1.9% to 6.1%. | |
| In preparation of 2019 interim financial report, the Group began to adopt the Notice on Revising the Format of 2019 Financial Statements for General Enterprises (CaiKuai [2019] No.6, herein-after “CaiKuai No.6”) promulgated by Ministry of Finance on April 30, 2019. CaiKuai No.6 revised accounts in balance sheets, income statements, statements of cash flows and statements of changes in shareholders’ equity, including: - “Notes and accounts receivable” is split into “Notes receivable” and “Accounts receivable”; - “Notes and accounts payable” is split into “Notes payable” and “Accounts payable”; - Newly added “Receivables financing” and “Special reserve”; - Make clear or revise the contents presented within the accounts of “Other receivables”, “Non-current assets due within one year”, “Other payables”, “Deferred income”, “Other equity instruments”, “Research and Development expenses”, “Interest income” and “Interest expens-es” as subitems of “Finance expenses”, “Other income”, “Non-operating income”, “Non-operating expenses”, and “Capital injected by holders of other equity instruments”. - Added disclosure requirements for provision of loss allowance, for loan commitments and fi-nancial guarantee contracts; - Added “Gain from derecognition of financial assets at amortized cost” as a subitem of “In-vestment income”; - Adjusted the sequence of some items within the income statements; - Make clear of the items in the cash flow statements, for the cash flows related to government grants. The above modifications were retrospectively adjusted for comparative numbers. There is no significant impact to the Company’s financial statements from implementation Caikuai No.6. | The accounting policy change was approved by the board of directors meeting in 21.8.2019 |
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
29. Changes in significant accounting policies and accounting estimates - (cont’d)
29.1 Changes in significant accounting policies - (cont’d)
Summary of impacts to assets and liabilities from adoption of new lease standard, as at January 1, 2019:
| Items | December 31, 2018 | Impact from adoption of new leases standard | January 1, 2019 |
| Fixed assets | 7,263,866 | (6,917) | 7,256,949 |
| Right-of-use assets | N/A | 513,780 | 513,780 |
| Total non-current assets | 18,899,599 | 506,863 | 19,406,462 |
| Total assets | 44,135,063 | 506,863 | 44,641,926 |
| Non-current liabilities due within one year | 301,814 | 120,584 | 422,398 |
| Other payables | 1,197,579 | (4,327) | 1,193,252 |
| Total current liabilities | 12,134,847 | 116,257 | 12,251,104 |
| Lease liabilities | N/A | 390,606 | 390,606 |
| Total non-current liabilities | 9,255,354 | 390,606 | 9,645,960 |
| Total liabilities | 21,390,201 | 506,863 | 21,897,064 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
30. Significant accounting estimates and judgments
The preparation of the financial statements requires management to make estimates and assumptions thataffect the application of accounting policies and the reported amounts of assets, liabilities, income and ex-penses. Actual results may differ from these estimates. Estimates as well as underlying assumptions anduncertainties involved are reviewed on an ongoing basis. Revisions to accounting estimates are recognizedin the period in which the estimate is revised and in any future periods affected.
Notes V.34, Note VIII, Note IX and Note XIII contain information about the assumptions and their riskfactors relating to post-employment benefits – defined benefit plans, fair value of financial instruments andshare-based payments. Other key sources of estimation uncertainty are as follows:
30.1 Expected credit loss of trade receivables
As described in Note III.11, trade receivables are reviewed at each balance sheet date to determine whethercredit risk on a receivable has increased significantly since initial recognition, lifetime expected losses isaccrued for impairment provision. Evidence of impairment includes observable data that comes to the at-tention of the Group about loss events such as a significant decline in the solvency of an individual debtoror the portfolio of debtors, and significant changes in the financial condition that have an adverse effect onthe debtor. If there is objective evidence of a recovery in the value of receivables which can be related ob-jectively to an event occurring after the impairment was recognized, the previously recognized impairmentloss is reversed .
30.2 Provision for impairment of inventories
As described in Note III.12, the net realisable value of inventories is under management’s regular review,and as a result, provision for impairment of inventories is recognized for the excess of inventories’ carryingamounts over their net realisable value. When making estimates of net realisable value, the Group takes in-to consideration the use of inventories held on hand and other information available to form the underlyingassumptions, including the inventories’ market prices and the Group’s historical operating costs. The actualselling price, the costs of completion and the costs necessary to make the sale and relevant taxes may varybased on the changes in market conditions and product saleability, manufacturing technology and the actualuse of the inventories, resulting in the changes in provision for impairment of inventories. The net profit orloss may then be affected in the period when the impairment of inventories is adjusted.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
30. Significant accounting estimates and judgments - (cont’d)
30.3 Impairment of assets other than inventories and financial assets
As described in Note III.20, if impairment indication exists, assets other than inventories and financial as-sets are assessed at balance sheet date to determine whether the carrying amount exceeds the recoverableamount of the assets. If any such case exists, an impairment loss is recognized.
The recoverable amount of an asset (or an asset group) is the greater of its fair value less costs to sell andits present value of expected future cash flows. Since a market price of the asset (or the asset group) cannotbe obtained reliably, the fair value of the asset cannot be estimated reliably, the recoverable amount is cal-culated based on the present value of estimated future cash flows. In assessing the present value of esti-mated future cash flows, significant judgements are exercised over the asset’s production, selling price, re-lated operating expenses and discount rate to calculate the present value. All relevant materials which canbe obtained are used for estimation of the recoverable amount, including the estimation of the production,selling price and related operating expenses based on reasonable and supportable assumptions.
30.4 Depreciation and amortisation of assets such as fixed assets and intangible assets
As described in Note III.15 and III.18, assets such as fixed assets and intangible assets are depreciated andamortised over their useful lives after taking into account residual value. The estimated useful lives of theassets are regularly reviewed to determine the depreciation and amortisation costs charged in each reportingperiod. The useful lives of the assets are determined based on historical experience of similar assets and theestimated technical changes. If there have been significant changes in the factors used to determine the de-preciation or amortisation, the rate of depreciation or amortisation is revised prospectively.
30.5 Income taxes and deferred income tax
The Company and Group companies are assessed for income tax purposes in a large number of jurisdic-tions and, therefore, Company management is required to use considerable judgment in determining the to-tal provision for taxes and attribution of income.
When assessing whether there will be sufficient future taxable profits available against which the deducti-ble temporary differences can be utilised, the Group recognizes deferred tax assets to the extent that it isprobable that future taxable profits will be available against which the deductible temporary differences canbe utilised, using tax rates that would apply in the period when the asset would be utilised. In determiningthe amount of deferred tax assets, the Group makes reasonable judgements and estimates about the timingand amount of taxable profits to be utilised in the following periods, and of the tax rates applicable in thefuture according to the existing tax policies and other relevant regulations. If the actual timing and amountof future taxable profits or the actual applicable tax rates differ from the estimates made by management,the differences affect the amount of tax expenses.
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
30. Significant accounting estimates and judgments - (cont’d)
30.6 Contingent liabilities
When assessing the possible outcomes of legal claims filed against the Company and its investee compa-nies, the company positions are based on the opinions of their legal advisors. These assessments by the le-gal advisors are based on their professional judgment, considering the stage of the proceedings and the le-gal experience accumulated regarding the various matters. Since the results of the claims will be deter-mined by the courts, the outcomes could be different from the assessments.
In addition to the said claims, the Group is exposed to unasserted claims, inter alia, where there is doubt asto interpretation of the agreement and/or legal provision and/or the manner of their implementation. Thisexposure is brought to the Company’s attention in several ways, among others, by means of contacts madeto Company personnel. In assessing the risk deriving from the unasserted claims, the Company relies oninternal assessments by the parties dealing with these matters and by management, who weigh assessmentof the prospects of a claim being filed, and the chances of its success, if filed. The assessment is based onexperience gained with respect to the filing of claims and the analysis of the details of each claim. By theirnature, in view of the preliminary stage of the clarification of the legal claim, the actual outcome could bedifferent from the assessment made before the claim was filed.
30.7 Employee benefits
The Group’s liabilities for long-term post-employment and other benefits are calculated according to theestimated future amount of the benefit to which the employee will be entitled in consideration for his ser-vices during the current period and prior periods. The benefit is stated at present value net of the fair valueof the plan’s assets, based on actuarial assumptions. Changes in the actuarial assumptions could lead tomaterial changes in the book value of the liabilities and in the operating results.
30.8 Derivative financial instruments
The Group enters into transactions in derivative financial instruments for the purpose of hedging risks re-lated to foreign currency and inflationary risks. The derivatives are recorded at their fair value. The fairvalue of derivative financial instruments is based on quotes from financial institutions. The reasonablenessof the quotes is examined by discounting the future cash flows, based on the terms and length of the periodto maturity of each contract, while using market interest rates of a similar instrument as of the measurementdate. Changes in the assumptions and the calculation model could lead to material changes in the fair valueof the assets and liabilities and in the results.
IV. Taxation
1. Main types of taxes and corresponding tax rates:
The income tax rate in China is 25% (2018: 25%). The subsidiaries outside of China are assessed based onthe tax laws in the country of their residence.
Set forth below are the tax rates outside China relevant to the subsidiaries with significant sales to thirdparty:
| Name of subsidiary | Location | 2019 | ||
| ADAMA agriculture solutions Ltd. | Israel | 23.0% | ||
| ADAMA Makhteshim Ltd. | Israel | 7.5% | ||
| ADAMA Agan Ltd. | Israel | 16.0% | ||
| ADAMA Brasil S/A | Brazil | 34.0% | ||
| Makhteshim Agan of North America Inc. | U.S. | 24.7% | ||
| ADAMA India Private Ltd | India | 25.2% | ||
| ADAMA Deutschland GmbH | Germany | 32.5% | ||
| Control Solutions Inc. | U.S. | 24.0% | ||
| Adama Australia Pty Ltd | Australia | 30.0% | ||
| ADAMA France S.A.S | France | 31.0% | ||
| ADAMA Northern Europe B.V. | Netherlands | 25.0% | ||
| ADAMA Italia S.R.L. | Italy | 27.9% | ||
| Alligare Inc. | U.S. | 26.5% |
IV. Taxation - (cont’d)
1. Main types of taxes and corresponding tax rates - (cont’d)
(1) Benefits from Hi-Tech Certificate
The Company, was jointly approved as new and high-tech enterprise, by the Hubei Provincial Departmentof Science and Technology, Department of Finance of Hubei Province, Hubei Provincial Office of theState Administration of Taxation and Hubei Local Taxation Bureau, and the applicable income tax ratefrom 2017 to 2019 is 15%.
Jiangsu Anpon Electrochemical Co. Ltd, a subsidiary of the Company, was jointly approved as new andhigh-tech enterprise, by the Jiangsu Provincial Department of Science and Technology, Department of Fi-nance of Jiangsu Province, Jiangsu Provincial Office of the State Administration of Taxation, and the ap-plicable income tax rate from 2018 to 2020 is 15%.
(2) Benefits under the Law for the Encouragement of Capital Investments
Industrial enterprises of subsidiaries in Israel were granted “Approved Enterprise” or “Beneficiary Enter-prise” status under the Israeli Law for the Encouragement of Capital Investments, 1959. Should a dividendbe distributed from the retained earning produced in which the company was considered as an “ApprovedEnterprise” or “Beneficiary Enterprise”, the company may be liable for tax at the time of distribution.
On December 29, 2010 the Knesset approved the Economic Policy Law for 2011-2012, which includes anamendment to the Law for the Encouragement of Capital Investments - 1959 (hereinafter - “the Amend-ment”). The Amendment is effective from January 1, 2011 and its provisions apply to preferred incomederived or accrued in 2011 and thereafter by a preferred company, per the definition of these terms in theAmendment.
As of the date of the report, all subsidiaries in Israel adopted the amendment and the deferred taxes werecalculated accordingly.
The Amendment provides that only companies in Development Area A will be entitled to the grants trackand that they will be entitled to receive benefits under this track and under the tax benefits track at thesame time. The tax benefit tracks under the law are: a preferred enterprise and a special preferred enter-prise, which mainly provide a uniform and reduced tax rate for all the company’s income entitled to bene-fits. Tax rates on preferred income as from the 2017 tax year as follows: 7.5% for Development Area Aand 6% for the rest of the country.
The amendment further determined that no tax shall apply to dividend distributed out of preferred incometo shareholder who is Israel resident company.
On December 21, 2016 the Knesset plenum passed the second and third reading of the Economic Effi-ciency Law (Legislative Amendments for Achieving Budget Objectives in the Years 2017 and 2018) –2016 in which the Encouragement Law was also amended (hereinafter: “the Amendment”). The Amend-ment added new tax benefit tracks for a “preferred technological enterprise” and a “special preferred tech-nological enterprise” which award reduced tax rates to a technological industrial enterprise for the purposeof encouraging activity relating to the development of qualifying intangible assets.
The benefits will be awarded to a “preferred company” that has a “preferred technological enterprise” or a“special preferred technological enterprise” with respect to taxable “preferred technological income” perits definition in the Encouragement Law.
IV. Taxation - (cont’d)
1. Main types of taxes and corresponding tax rates - (cont’d)
Preferred technological income that meets the conditions required in the law, will be subject to a reducedcorporate tax rate of 12%, and if the preferred technological enterprise is located in Development Area Ato a tax rate of 7.5%. A company that owns a special preferred technological enterprise will be subject to areduced corporate tax rate of 6% regardless of the development area in which the enterprise is located. TheAmendment is effective as from January 1, 2017.
On May 16, 2017 the Knesset Finance Committee approved Encouragement of Capital Investment Regula-tions (Preferred Technological Income and Capital Gain of Technological Enterprise) – 2017 (hereinafter:
“the Regulations”), which provides rules for applying the “preferred technological enterprise” and “specialpreferred technological enterprise” tax benefit tracks including the Nexus formula that provides the mech-anism for allocating the technological income eligible for the benefits.
Solutions applied to the Tax Authority in order to be included under the applicability of the amended law.
(3) Benefits under the Law for the Encouragement of Industry (Taxes), 1969
Under the Israeli Law for the Encouragement of Industry (Taxes) 1969, Solutions is an Industrial HoldingCompany and some of the subsidiaries in Israel are “Industrial Companies”. The main benefit under thislaw is the filing of consolidated income tax returns (Solutions files a consolidated income tax return withAdama Makhteshim and submission of a consolidated report together with Adama Agan as of 2017) andamortization of know-how over 8 years, higher rates of depreciation.
V. Notes to the consolidated financial statements
1. Cash at Bank and On Hand
| December 31 | December 31 | ||
| 2019 | 2018 (Restated) | ||
| Cash on hand | 6,265 | 1,380 | |
| Deposits in banks | 4,313,642 | 6,344,816 | |
| Other cash and bank | 28,681 | 53,994 | |
| 4,348,588 | 6,400,190 | ||
| Including cash and bank placed outside China | 2,443,065 | 3,873,638 |
| December 31 | December 31 | ||
| 2019 | 2018 (Restated) | ||
| Debt instruments | 15,788 | 22,108 | |
| Other | 13,722 | 23,987 | |
| 29,510 | 46,095 |
| December 31 | December 31 | ||
| 2019 | 2018 (Restated) | ||
| Economic hedge | 436,201 | 389,068 | |
| Accounting hedge derivatives | 53,912 | 128,658 | |
| 490,113 | 517,726 |
| December 31 | December 31 | ||
| 2019 | 2018 (Restated) | ||
| Post-dated checks receivable | 13,757 | 31,935 | |
| Bank acceptance draft | 12,243 | 8,634 | |
| 26,000 | 40,569 |
V. Notes to the consolidated financial statements – (cont'd)
5. Accounts Receivable
a. By category
| December 31, 2019 | |||||
| Book value | Provision for expected credit losses | ||||
| Amount | Percentage (%) | Amount | Percentage (%) | Carrying amount | |
| Account receivables assessed individually for impairment | 534,532 | 6 | 299,267 | 56 | 235,265 |
| Account receivables assessed collectively for impairment | 7,868,077 | 94 | 99,185 | 1 | 7,768,892 |
| 8,402,609 | 100 | 398,452 | 5 | 8,004,157 | |
| December 31, 2018 (Restated) | |||||
| Book value | Provision for expected credit losses | ||||
| Amount | Percentage (%) | Amount | Percentage (%) | Carrying amount | |
| Account receivables assessed individually for impairment | 458,217 | 7 | 335,873 | 73 | 122,344 |
| Account receivables assessed collectively for impairment | 6,548,131 | 93 | 97,375 | 1 | 6,450,756 |
| 7,006,348 | 100 | 433,248 | 6 | 6,573,100 | |
| December 31, 2019 | |
| Within 1 year (inclusive) | 7,967,217 |
| Over 1 year but within 2 years | 170,380 |
| Over 2 years but within 3 years | 74,199 |
| Over 3 years but within 4 years | 31,407 |
| Over 4 years but within 5 years | 25,386 |
| Over 5 years | 134,020 |
| 8,402,609 |
V. Notes to the consolidated financial statements – (cont'd)
5. Accounts Receivable – (cont'd)
Main groups of account receivables assessed collectively for impairment based on geographical loca-tion:
Geographical location A:
Account receivables in geographical location A are grouped based on similar credit risk:
| December 31, 2019 | |||
| Book value | Provision for expected credit loss | Percentage (%) | |
| A | 1,470,749 | 6,717 | 0.05 - 0.97 |
| B | 607,056 | 9,740 | 1.60 |
| C | 290,753 | 15,963 | 5.49 |
| D | 52,875 | 2,022 | 3.83 |
| 2,421,433 | 34,442 | 1.42 | |
| December 31, 2019 | |||
| Book value | Provision for expected credit loss | Percentage (%) | |
| Accounts receivable that are not overdue | 535,591 | 4,759 | 0.9 |
| Debts overdue less than 60 days | 100,537 | 3,016 | 3.0 |
| Debts overdue less than 180 days but more than 60 days | 26,341 | 2,634 | 10.0 |
| Debts overdue above 180 days | 14,697 | 5,879 | 40.0 |
| Legal Debtors | 39,748 | 39,748 | 100.0 |
| 716,914 | 56,036 | 7.8 | |
| December 31, 2019 | |||
| Book value | Provision for expected credit loss | Percentage (%) | |
| Other account receivables assessed collectively for impairment | 4,729,730 | 8,707 | 0.0 - 2.2 |
V. Notes to the consolidated financial statements – (cont'd)
5. Accounts Receivable – (cont'd)
c. Addition, written-back and written-off of provision for expected credit losses during the period
Addition of provision for expected credit loss during the period
| Lifetime expected credit loss (credit losses has not occurred) | Lifetime expected credit loss (credit losses has occurred) | Total | |
| January 1, 2019 | 52,575 | 380,673 | 433,248 |
| First time consolidation | - | 26,446 | 26,446 |
| Addition during the period, net | - | 68,303 | 68,303 |
| Write back during the period | (5,384) | (23,596) | (28,980) |
| Write-off during the period | - | (95,495) | (95,495) |
| Exchange rate effect | 717 | (5,787) | (5,070) |
| Balance as of December 31, 2019 | 47,908 | 350,544 | 398,452 |
| Name | Closing balance | Proportion of Accounts receivable (%) | Allowance of expected credit losses |
| Party 1 | 152,779 | 2 | - |
| Party 2 | 98,818 | 1 | - |
| Party 3 | 94,011 | 1 | - |
| Party 4 | 79,808 | 1 | - |
| Party 5 | 54,624 | 1 | - |
| Total | 480,040 | 6 | - |
V. Notes to the consolidated financial statements – (cont'd)
5. Accounts Receivable – (cont'd)
e. Derecognition of accounts receivable due to transfer of financial assets - (cont'd)
The maximum scope of the securitization is adjusted for the seasonal changes in the scope of the Compa-ny’s activities, as follows: during the months March through June the maximum scope of the securitizationis $350 million (as of December 31, 2019 - 2,442 million RMB), during the months July through Septem-ber the maximum scope of the securitization is $300 million (as of December 31, 2019 - 2,093 millionRMB) and during the months October through February the maximum scope of the securitization is $250million (as of December 31, 2019 - 1,744 million RMB). The proceeds received from those customerswhose debts were sold are used for acquisition of new trade receivables.
The price at which the trade receivables debts are sold is the amount of the debt sold less a discount calcu-lated based on, among other things, the expected length of the period between the date of sale of the tradereceivable and its anticipated repayment date. In the month following acquisition of the debt, the AcquiringCompany pays in cash most of the debt while the remainder is recorded as a subordinated note that is paidafter collection of the debt sold. If the customer does not pay its debt on the anticipated repayment date, theCompany bears interest up to the earlier of the date on which the debt is actually repaid or the date onwhich debt collection is transferred to the insurance company (the actual costs are not significant and arenot expected to be significant).
The Acquiring Company bears 95% of the credit risk in respect of the customers whose debts were soldand will not have a right of recourse to the Company in respect of the amounts paid in cash, except regard-ing debts with respect to which a commercial dispute arises between the companies and their customers,that is, a dispute the source of which is a claim of non-fulfillment of an obligation of the seller in the sup-ply agreement covering the product, such as: a failure to supply the correct product, a defect in the product,delinquency in the supply date, and the like.
The Acquiring Company appointed a policy manager who will manage for it the credit risk involved withthe trade receivables sold, including an undertaking with an insurance company.
Pursuant to the Receivables Servicing Agreement, the Group subsidiaries handle collection of the trade re-ceivables as part of the Securitization Transaction for the benefit of the Acquiring Company.
As part of the agreement, Solutions is committed to comply with certain financial covenants, mainly theratio of the liabilities to equity and profit ratios. As of December 31, 2019, Solutions was in compliancewith the financial covenants.
The accounting treatment of sale of the trade receivables included as part of the Securitization Program is:
The Company is not controlling the Acquiring Company, therefore the Acquiring Company is not consoli-dated in the financial statements.
The Company continues to recognize the trade receivables included in the Securitization Program based onthe extent of its continuing involvement therein.
In respect of the part of the trade receivables included in the securitization Program with respect to whichcash proceeds were not yet received, however regarding which the Company has transferred the credit risk,a subordinated note is recorded.
The continuing involvement and subordinated note recorded in the balance sheet as part of the “other re-ceivables” line item.
V. Notes to the consolidated financial statements – (cont'd)
5. Accounts Receivable – (cont'd)
e. Derecognition of accounts receivable due to transfer of financial assets - (cont'd)
The loss from sale of the trade receivables is recorded at the time of sale in the statement of income in the“financing expenses” line item.
In the third quarter of 2019, a subsidiary in Brazil (hereinafter - “the subsidiary”) renewed a 3 years secu-ritization agreement with Rabobank Brazil for sale of trade receivables. Under the agreement, the subsidi-ary will sell its trade receivables to a securitization structure (hereinafter - “the entity”) that was formed forthis purpose where the subsidiary has subordinate rights of 5% of the entity's capital.
The maximum securitization scope amounts to BRL 300 million (as of December 31, 2019 - 520 millionRMB).
On the date of the sale of the trade receivables, the entity pays the full amount which is the debt amountsold net of discount calculated, among others, over the expected length of the period between the date ofsale of the customer receivable and its anticipated repayment date.
The entity bears 95% of the credit risk in respect of the customers whose debts were sold such that the en-tity has the right of recourse of 5% of the unpaid amount. The subsidiary should make a pledged depositequal to the amount the entity’s right of recourse.
The subsidiary handles the collection of receivables included in the securitization for the entity.
The subsidiary does not control the entity and therefore the entity is not consolidated in the group's finan-cial statements.
The subsidiary continues to recognize the trade receivables sold to the entity based on the extent of its con-tinuing involvement therein (5% right of recourse) and also recognizes an associated liability in the sameamount.
The loss from the sale of the trade receivables is recorded at the time of sale in the statement of income inthe “financing expenses” category.
| December 31 | December 31 | |
| 2019 | 2018 (Restated) | |
| Accounts receivables derecognized | 2,994,917 | 2,541,443 |
| Continuing involvement | 134,243 | 129,893 |
| Subordinated note in respect of trade receivables | 808,807 | 622,362 |
| Liability in respect of trade receivables | 26,370 | 35,572 |
| Year ended December 31 | ||
| 2019 | 2018 | |
| Loss in respect of sale of trade receivables | 91,006 | 79,060 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
V. Notes to the consolidated financial statements – (cont'd)
6. Receivables financing
| December 31 | December 31 | ||
| 2019 | 2018 (Restated) | ||
| Bank acceptance draft | 78,948 | 73,216 | |
| 78,948 | 73,216 |
| December 31 | December 31 | |||
| 2019 | 2018 (Restated) | |||
| Amount | Percentage(%) | Amount | Percentage(%) | |
| Within 1 year (inclusive) | 370,607 | 98 | 401,674 | 98 |
| Over 1 year but within 2 years (inclusive) | 3,691 | 1 | 3,810 | 1 |
| Over 2 years but within 3 years (inclusive) | 621 | - | 1,840 | - |
| Over 3 years | 2,889 | 1 | 3,182 | 1 |
| 377,808 | 100 | 410,506 | 100 | |
| Amount | Percentage of prepayments (%) | |
| December 31, 2019 | 142,017 | 38 |
V. Notes to the consolidated financial statements – (cont'd)
8. Other Receivables
(1) Other receivables by nature
| December 31 | December 31 | |
| 2019 | 2018 (Restated) | |
| Dividends receivable | - | 5,245 |
| Others | 1,195,253 | 1,074,087 |
| 1,195,253 | 1,079,332 |
| December 31 | December 31 | |
| 2019 | 2018 (Restated) | |
| Trade receivables as part of securitization transactions not yet eliminated | 134,243 | 129,893 |
| Subordinated note in respect of trade receivables | 808,807 | 622,362 |
| Financial institutions | 5,107 | 98,837 |
| Receivables in respect of disposal of fixed assets | 28,762 | 28,551 |
| Other | 233,238 | 214,512 |
| Sub total | 1,210,157 | 1,094,155 |
| Provision for expected credit losses - other receivables | (14,904) | (14,823) |
| 1,195,253 | 1,079,332 |
| December 31 | |
| 2019 | |
| Within 1 year (inclusive) | 1,178,555 |
| Over 1 year but within 2 years | 3,457 |
| Over 2 years but within 3 years | 3,103 |
| Over 3 years but within 4 years | 2,830 |
| Over 4 years but within 5 years | 15,640 |
| Over 5 years | 6,572 |
| 1,210,157 |
V. Notes to the consolidated financial statements – (cont'd)
8. Other Receivables - (cont'd)
(2) Additions, recovery or reversal and written-off of provision for expected credit losses during theperiod:
| Year ended | ||
| December 31, 2019 | ||
| Balance as of January 1 2019, | 14,823 | |
| Addition during the period | 532 | |
| Written back during the period | (450) | |
| Write-off during the period | (1) | |
| Balance as of December 31, 2019 | 14,904 |
| Name | Closing balance | Proportion of other re-ceivables (%) | Allowance of expected credit losses |
| Party 1 | 808,807 | 67 | - |
| Party 2 | 38,209 | 3 | - |
| Party 3 | 25,289 | 2 | - |
| Party 4 | 22,987 | 2 | - |
| Party 5 | 15,437 | 1 | - |
| Total | 910,729 | 75 | - |
| December 31, 2019 | |||
| Book value | Provision for impair-ment | Carrying amount | |
| Raw materials | 3,100,027 | 22,344 | 3,077,683 |
| Work in progress | 633,731 | 5,351 | 628,380 |
| Finished goods | 6,131,386 | 184,900 | 5,946,486 |
| Others | 288,794 | 8,689 | 280,105 |
| 10,153,938 | 221,284 | 9,932,654 | |
| December 31, 2018 | |||
| Book value | Provision for impair-ment | Carrying amount | |
| Raw materials | 3,321,193 | 20,232 | 3,300,961 |
| Work in progress | 577,964 | 1,576 | 576,388 |
| Finished goods | 5,452,653 | 158,053 | 5,294,600 |
| Others | 272,441 | 10,514 | 261,927 |
| 9,624,251 | 190,375 | 9,433,876 | |
V. Notes to the consolidated financial statements – (cont'd)
9. Inventories - (cont'd)
(2) Provision for impairment of inventories:
For the year ended December 31, 2019
| January 1, 2019 | Provision | Reversal or write-off | Other* | December 31, 2019 | |
| Raw material | 20,232 | 10,137 | (6,690) | (1,335) | 22,344 |
| Work in pro-gress | 1,576 | 1,514 | (331) | 2,592 | 5,351 |
| Finished goods | 158,053 | 84,610 | (69,601) | 11,838 | 184,900 |
| Others | 10,514 | 1,373 | (2,713) | (485) | 8,689 |
| 190,375 | 97,634 | (79,335) | 12,610 | 221,284 |
| December 31 | December 31 | |
| 2019 | 2018 (Restated) | |
| Deductible VAT | 459,209 | 476,706 |
| Current tax assets | 170,505 | 142,412 |
| Others | 29,481 | 41,688 |
| 659,195 | 660,806 |
| December 31 | December 31 | |
| 2019 | 2018 (Restated) | |
| Long term account receivables from sale of goods | 170,896 | 157,600 |
| 170,896 | 157,600 |
V. Notes to the consolidated financial statements – (cont'd)
12. Long-Term Equity Investments
(1) Long-term equity investments by category:
| December 31 | December 31 | |
| 2019 | 2018 (Restated) | |
| Investments in joint ventures | 92,695 | 68,584 |
| Investments in associates | 40,403 | 39,766 |
| 133,098 | 108,350 |
| December 31 2019 | December 31 2018 (Restated) | |
| Company A | 85,495 | 79,554 |
| Company B | 67,781 | - |
| Company C | 1,786 | 1,709 |
| Company D | - | 564 |
| Company E | - | 9,574 |
| Other | - | 158 |
| 155,062 | 91,559 |
| January 1 2019 | Investment income (loss) | Other Compre-hensive income | Declared dis-tribution of cash dividend | Other | Balance at the end of the period | |
| Joint ventures | ||||||
| Company A | 62,696 | 8,423 | (355) | - | 5,160 | 75,924 |
| Company B | 4,598 | 756 | 87 | - | - | 5,441 |
| Company C | 1,290 | - | (244) | - | - | 1,046 |
| Company D | - | 10,698 | (185) | (661) | 432 | 10,284 |
| Sub-total | 68,584 | 19,877 | (697) | (661) | 5,592 | 92,695 |
| Associates | ||||||
| Company E | 39,766 | (16) | 653 | - | - | 40,403 |
| Sub total Sub-total | 39,766 | (16) | 653 | - | - | 40,403 |
| 108,350 | 19,861 | (44) | (661) | 5,592 | 133,098 |
V. Notes to the consolidated financial statements – (cont'd)
14. Fixed assets
| Land & Buildings | Machinery & equipment | Motor vehicles | Office & other equipment | Total | |
| Cost | |||||
| Balance as at January 1, 2019 | 3,233,536 | 13,687,403 | 101,078 | 321,424 | 17,343,441 |
| Changes in accounting policy * | (9,855) | (1,221) | - | - | (11,076) |
| Purchases | 40,243 | 195,315 | 26,628 | 44,207 | 306,393 |
| Transfer from construction in progress | 75,246 | 342,457 | - | 1,503 | 419,206 |
| Disposals | (79,418) | (24,242) | (10,589) | (10,138) | (124,387) |
| Currency translation adjustment | 29,575 | 144,799 | 1,355 | 4,863 | 180,592 |
| First time consolidation | 88,206 | 39,231 | 1,428 | 3,939 | 132,804 |
| Balance as at December 31, 2019 | 3,377,533 | 14,383,742 | 119,900 | 365,798 | 18,246,973 |
| Accumulated depreciation | |||||
| Balance as at January 1, 2019 | (1,478,842) | (7,959,325) | (51,531) | (242,697) | (9,732,395) |
| Changes in accounting policy * | 3,198 | 961 | - | - | 4,159 |
| Charge for the period | (151,340) | (635,661) | (16,952) | (36,111) | (840,064) |
| Disposals | 16,589 | 28,048 | 9,100 | 10,000 | 63,737 |
| Currency translation adjustment | (16,231) | (94,799) | (301) | (3,822) | (115,153) |
| First time consolidation | (40,582) | (29,300) | (995) | (3,480) | (74,357) |
| Balance as at December 31, 2019 | (1,667,208) | (8,690,076) | (60,679) | (276,110) | (10,694,073) |
| Provision for impairment | |||||
| Balance as at January 1, 2019 | (68,702) | (278,223) | (8) | (247) | (347,180) |
| Charge for the period ** | (147,704) | (137,266) | (725) | - | (285,695) |
| Disposals | 20,307 | 753 | - | - | 21,060 |
| Currency translation adjustment | (196) | (1,275) | - | (4) | (1,475) |
| Balance as at December 31, 2019 | (196,295) | (416,011) | (733) | (251) | (613,290) |
| Carrying amounts | |||||
| As at December 31, 2019 | 1,514,030 | 5,277,655 | 58,488 | 89,437 | 6,939,610 |
| As at January 1, 2019 | 1,685,992 | 5,449,855 | 49,539 | 78,480 | 7,263,866 |
V. Notes to the consolidated financial statements - (cont'd)
15. Construction in Progress
(1) Construction in progress
| December 31 | December 31 | ||||
| 2019 | 2018 (Restated) | ||||
| Book value | Provision for impairment* | Carrying amount | Book value | Provision for impairment | Carrying amount |
| 814,126 | (25,740) | 788,386 | 493,181 | (5,977) | 487,204 |
| Budget | January 1, 2019 | Additions | Currency translation differences | Transfer to fixed assets | Provision for impairment | December 31, 2019 | Actual cost to budget (%) | Project progress (%) | Source of funds | |
| Project A | 1,509,420 | 120,412 | 256,584 | - | - | - | 376,996 | 25 | 25 | Bank loan |
| Project B | 505,643 | 1,220 | 11,844 | - | - | - | 13,064 | 3 | 3 | Internal finance |
| Project C | 172,055 | 58,177 | 15,559 | - | (29,563) | (25,740) | 18,433 | 43 | 43 | Internal finance |
| Project D | 80,924 | 42,476 | 1,876 | 721 | - | - | 45,073 | 56 | 56 | Internal finance |
| Project E | 32,000 | 16,593 | 15,319 | - | - | - | 31,912 | 100 | 100 | Bank loan |
| Project F | 44,760 | 13,818 | 6,181 | - | - | - | 19,999 | 45 | 45 | Bank loan |
| Project G | 138,000 | - | 8,256 | - | - | - | 8,256 | 6 | 6 | Internal finance |
| Project H | 34,374 | 31,358 | 1,085 | 171 | (32,614) | - | - | 94 | 100 | Internal finance |
| Project I | 75,622 | 2,457 | 43,910 | 764 | (47,131) | - | - | 62 | 62 | Internal finance |
V. Notes to the consolidated financial statements - (cont'd)
16. Right-of-use assets
| Land & Buildings | Machinery & equipment | Motor vehicles | Office & other equipment | Total | |
| Cost | |||||
| Balance as at January 1, 2019 * | 353,708 | 43,058 | 118,378 | 2,795 | 517,939 |
| Additions | 103,893 | 3,526 | 74,371 | 518 | 182,308 |
| Disposals | (6,002) | (618) | (16,759) | (176) | (23,555) |
| Currency translation adjustment | 5,384 | 748 | 2,412 | 50 | 8,594 |
| Balance as at December 31, 2019 | 456,983 | 46,714 | 178,402 | 3,187 | 685,286 |
| Accumulated depreciation | |||||
| Balance as at January 1, 2019 * | (3,198) | (961) | - | - | (4,159) |
| Charge for the period | (77,181) | (7,117) | (74,952) | (1,139) | (160,389) |
| Disposals | 4,012 | 351 | 12,446 | 155 | 16,964 |
| Currency translation adjustment | (829) | (93) | (732) | (14) | (1,668) |
| Balance as at December 31, 2019 | (77,196) | (7,820) | (63,238) | (998) | (149,252) |
| Provision for impairment | |||||
| Balance as at January 1, 2019 | - | - | - | - | - |
| Balance as at December 31, 2019 | - | - | - | - | - |
| Carrying amounts | |||||
| As at December 31, 2019 | 379,787 | 38,894 | 115,164 | 2,189 | 536,034 |
| As at January 1, 2019 | 350,510 | 42,097 | 118,378 | 2,795 | 513,780 |
ADAMA LTD.(Expressed in RMB '000)Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
17. Intangible Assets
(1) Include land parcel in Israel that has not yet been registered in the name of the Group subsidiaries at the Land Registry Office, mostly due to registration procedures or technical problems.
(2) Mainly non-compete.
| Product registra-tion | Intangible assets on Purchase of Products | Software | Marketing rights, trade-name and trademarks | Customers rela-tions | Land use rights (1) | Others(2) | Total | |
| Costs Balance as at January 1, 2019 | 9,721,455 | 4,121,559 | 648,478 | 460,640 | 192,177 | 346,967 | 307,692 | 15,798,968 |
| Purchases | 589,690 | - | 99,345 | 1,014 | - | 441 | 13,607 | 704,097 |
| Currency translation adjustment | 177,548 | 67,858 | 11,199 | 11,908 | 6,624 | 643 | 4,816 | 280,596 |
| Disposal | (172 ) | - | )2,034( | )297 ( | - | (3,134 ) | - | )5,637 ( |
| First time consolidation | 280,625 | - | 4,248 | 270,469 | 200,392 | - | - | 755,734 |
| Balance as at December 31, 2019 | 10,769,146 | 4,189,417 | 761,236 | 743,734 | 399,193 | 344,917 | 326,115 | 17,533,758 |
| Accumulated amortization | ||||||||
| Balance as at January 1, 2019 | (6,864,532) | (1,863,482) | (439,696) | (406,082) | (159,323) | (58,211) | (125,596) | (9,916,922) |
| Charge for the period | )784,036 ( | )379,821 ( | )63,442 ( | )28,559 ( | )33,956 ( | (7,820 ) | )37,077 ( | )1,334,711( |
| Currency translation adjustment | )122,221( | )35,068 ( | )7,670 ( | )7,013( | )3,179( | (295 ) | )2,171( | )177,617( |
| Disposal | - | - | 2,028 | 241 | - | 1,055 | - | 3,324 |
| First time consolidation | )102,397( | - | )4,248 ( | )174( | - | - | - | )106,819( |
| Balance as at December 31, 2019 | )7,873,186 ( | )2,278,371 ( | )513,028( | )441,587 ( | )196,458 ( | (65,271 ) | )164,844 ( | )11,532,745( |
| Provision for impairment | ||||||||
| Balance as at January 1, 2019 | (84,026) | (51,337) | - | - | - | - | (4,721) | (140,084) |
| Charge for the period | )22,407 ( | - | - | - | - | - | (445) | (22,852) |
| Currency translation adjustment | )1,642 ( | )845 ( | - | - | - | - | 195 | (2,292) |
| Disposal | - | - | - | - | - | - | - | - |
| Balance as at December 31, 2019 | )108,075( | )52,182 ( | - | - | - | - | )4,971 ( | )165,228( |
| Carrying amount | ||||||||
| As at December 31, 2019 | 2,787,885 | 1,858,864 | 248,208 | 302,147 | 202,735 | 279,646 | 156,300 | 5,835,785 |
| As at January 1, 2019 | 2,772,897 | 2,206,740 | 208,782 | 54,558 | 32,854 | 288,756 | 177,375 | 5,741,962 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
18. Goodwill
Changes in goodwill
The Group identified two cash generating units ("CGU "), Crop Protection (Agro) and Intermediates and ingre-dients (formerly known as “Other”) units. Operations are allocated into either one of the two cash generatingunits according to their business.
At the end of the year, or more frequently whether indicators for impairment exists, the Group estimates the re-coverable amount of Crop Protection and Intermediates and ingredients units, which are the cash generatingunits of the Group that contain goodwill.
For the purpose of evaluating the groups Goodwill, the Group used a comparable trading multiple as well as theDCF model analysis in order to benchmark each of its CGU’s valuation against that of the markets peer compa-nies.
As of December 31, 2019 the fair value of the cash generating units to which the goodwill relates exceeds itscarrying amount.
As at the reporting period, there were no indicators for impairment.
| January 1, 2019 | Additions | Currency translation adjustment | Balance at De-cember 31, 2019 | |
| Book value | 4,085,945 | 355,715 | 69,533 | 4,511,193 |
| Impairment provision | - | - | - | - |
| Carrying amount | 4,085,945 | 355,715 | 69,533 | 4,511,193 |
| December 31 | December 31 | |||
| 2019 | 2018 (Restated) | |||
| Deductible temporary differences | Deferred tax assets | Deductible temporary differences | Deferred tax assets | |
| Deferred tax assets | ||||
| Deferred tax assets in respect of carry forward losses | 611,496 | 136,594 | 576,498 | 82,516 |
| Deferred tax assets in respect of in-ventories | 1,552,766 | 413,713 | 1,651,046 | 442,237 |
| Deferred tax assets in respect of em-ployee benefits | 973,434 | 135,422 | 660,472 | 101,026 |
| Other deferred tax asset | 1,606,933 | 387,109 | 1,236,811 | 340,984 |
| 4,744,629 | 1,072,838 | 4,124,827 | 966,763 | |
V. Notes to the consolidated financial statements - (cont'd)
19. Deferred Tax Assets and Deferred Tax Liabilities - (cont’d)
(2) Deferred tax liabilities without taking into consideration of the offsetting of balances within the
same tax jurisdiction
| December 31 | December 31 | |||
| 2019 | 2018 (Restated) | |||
| Taxable tem-porary dif-ferences | Deferred tax liabilities | Taxable tem-porary differ-ences | Deferred tax liabilities | |
| Deferred tax liabilities | ||||
| Deferred tax liabilities in respect of fixed assets and intangible assets | 3,551,402 | 569,446 | 3,886,541 | 617,430 |
| 3,551,402 | 569,446 | 3,886,541 | 617,430 | |
| December 31 | December 31 | |||
| 2019 | 2018 (Restated) | |||
| The offset amount of de-ferred tax as-sets and liabili-ties | Deferred tax assets or liabili-ties after offset | The offset amount of deferred tax assets and liabili-ties | Deferred tax assets or liabilities after offset | |
| Presented as: | ||||
| Deferred tax assets | 246,142 | 826,696 | 225,026 | 741,737 |
| Deferred tax liabilities | 246,142 | 323,304 | 225,026 | 392,404 |
| December 31 | December 31 | |||
| 2019 | 2018 (Restated) | |||
| Deductible temporary differences | 515,589 | 82,886 | ||
| Deductible losses carry forward | 142,042 | 162,186 | ||
| 657,631 | 245,072 |
| December 31 | December 31 | |||
| 2019 | 2018 (Restated) | |||
| 2020 | 16,171 | 15,909 | ||
| 2021 | 13,031 | 13,537 | ||
| 2022 | 1,402 | 1,380 | ||
| 2023 | 27,767 | 27,739 | ||
| After 2023 | 83,671 | 103,621 | ||
| 142,042 | 162,186 |
V. Notes to the consolidated financial statements - (cont'd)
19. Deferred Tax Assets and Deferred Tax Liabilities - (cont'd)
(6) Unrecognized deferred tax liabilities
When calculating the deferred taxes, taxes that would have applied in the event of realizing investmentsin subsidiaries were not taken into account since it is the Company’s intention to hold these investmentsand not realize them.
20. Other Non-Current Assets
| December 31 | December 31 | ||
| 2019 | 2018 (Restated) | ||
| Asset related to securitization deposit | 38,648 | 62,395 | |
| Advances in respect of non-current assets | 58,689 | 55,282 | |
| Judicial deposits | 56,347 | 51,906 | |
| Call option in respect of business combination | 9,216 | 11,880 | |
| Long term loan | - | 48 | |
| Others | 83,283 | 35,819 | |
| Sub total | 246,183 | 217,330 | |
| Due within one year | - | (48) | |
| 246,183 | 217,282 |
| December 31 | December 31 | |
| 2019 | 2018 (Restated) | |
| Guaranteed loans | 414,000 | 570,000 |
| Unsecured loans | 1,595,882 | 552,774 |
| 2,009,882 | 1,122,774 |
| December 31 | December 31 | |
| 2019 | 2018 (Restated) | |
| Economic hedge | 603,009 | 1,430,497 |
| Accounting hedge derivatives | 88,466 | 21,173 |
| 691,475 | 1,451,670 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
23. Bills Payables
| December 31 | December 31 | |
| 2019 | 2018 (Restated) | |
| Post-dated checks payables | 224,878 | 235,833 |
| Note payables draft | 96,796 | 209,700 |
| 321,674 | 445,533 |
| December 31 | December 31 | |
| 2019 | 2018 (Restated) | |
| Within 1 year (including 1 year) | 4,172,996 | 4,587,719 |
| 1-2 years (including 2 years) | 10,458 | 12,545 |
| 2-3 years (including 3 years) | 2,881 | 16,749 |
| Over 3 years | 19,566 | 10,923 |
| 4,205,901 | 4,627,936 |
| December 31 | December 31 | |
| 2019 | 2018 (Restated) | |
| Discount for customers | 522,614 | 525,982 |
| Advances from customers | 141,614 | 322,420 |
| 664,228 | 848,402 |
| December 31 | December 31 | |
| 2019 | 2018 (Restated) | |
| Short-term employee benefits | 656,272 | 608,839 |
| Post-employment benefits* | 224,035 | 18,050 |
| Other benefits within one year | 304,366 | 277,191 |
| 1,184,673 | 904,080 | |
| Current maturities | 27,040 | 40,095 |
| 1,211,713 | 944,175 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
27. Taxes Payable
| December 31 | December 31 | |
| 2019 | 2018 (Restated) | |
| Corporate income tax | 157,548 | 407,457 |
| VAT | 180,818 | 186,939 |
| Others | 30,672 | 22,384 |
| 369,038 | 616,780 |
| December 31 | December 31 | |
| 2019 | 2018 (Restated) | |
| Dividends payables | 750 | 750 |
| Other payables | 1,048,844 | 1,196,829 |
| 1,049,594 | 1,197,579 |
| December 31 | December 31 | |
| 2019 | 2018 (Restated) | |
| Accrued expenses | 613,183 | 640,507 |
| Liability in respect of securitization transactions | 26,370 | 35,572 |
| Payables in respect of intangible assets | 130,329 | 131,396 |
| Financial institutions | 1,137 | 44,336 |
| Other payables | 277,825 | 345,018 |
| 1,048,844 | 1,196,829 |
V. Notes to the consolidated financial statements - (cont'd)
29. Non-Current Liabilities Due Within One Year
Non-current liabilities due within one year by category are as follows:
| December 31 | December 31 | |
| 2019 | 2018 (Restated) | |
| Long-term loans due within one year | 420,086 | 301,629 |
| Lease liabilities due within one year | 148,287 | N/A |
| Debentures payable due within one year | 497,870 | - |
| Long-term payables due within one year | - | 185 |
| 1,066,243 | 301,814 |
| December 31 | December 31 | |
| 2019 | 2018 (Restated) | |
| Put options to holders of non-controlling interests | 148,886 | 404,463 |
| Provision in respect of returns | 191,065 | 149,686 |
| Provision in respect of claims | 14,901 | 23,644 |
| Others | 391 | 391 |
| 355,243 | 578,184 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
31. Long-Term Loans
Long-term loans by category
| December 31 | December 31 2018 (Restated) | |||
| 2019 | Interest range | 2018 | Interest range | |
| Long term loans | ||||
| Loan secured by tangible assets other than monetary assets | 2,860 | 2.4%-2.7% | 741 | 5.5% |
| Guaranteed loans | - | - | 72,000 | 4.5% |
| Unsecured loans | 1,344,385 | 1.5%-6.2% | 464,707 | 5.1%-6.1% |
| Total Long term loans | 1,347,245 | 537,448 | ||
| Less: Long term loans due within 1 year | (420,086) | (301,629) | ||
| Long term loans, net | 927,159 | 235,819 | ||
| December 31 | December 31 | |
| 2019 | 2018 (Restated) | |
| Debentures Series B | 8,463,812 | 7,649,098 |
| Current maturities | (497,870) | - |
| 7,965,942 | 7,649,098 |
| December 31 | ||
| 2019 | ||
| First year (current maturities) | 497,870 | |
| Second year | 497,870 | |
| Third year | 497,870 | |
| Fourth year | 497,870 | |
| Fifth year and thereafter | 6,472,332 | |
| 8,463,812 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
32. Debentures Payable - (cont'd)
Movements of debentures payable:
For the year ended December 31, 2019
| Face value in RMB | Face value NIS | Issuance date | Maturity period | Issuance amount | Balance at January 1, 2019 | Issuance dur-ing the period | Amortization of discounts or premium | CPI and ex-change rate effect | Repayment during the period | Currency translation adjustment | Balance at December 31, 2019 | |
| Debentures Series B | 2,673,640 | 1,650,000 | 4.12.2006 | November 2020-2036 | 3,043,742 | 3,471,674 | - | 242 | 304,289 | - | 63,084 | 3,839,289 |
| Debentures Series B | 843,846 | 513,527 | 16.1.2012 | November 2020-2036 | 842,579 | 1,018,314 | - | 10,491 | 89,825 | - | 18,616 | 1,137,246 |
| Debentures Series B | 995,516 | 600,000 | 7.1.2013 | November 2020-2036 | 1,120,339 | 1,277,399 | - | 4,638 | 112,108 | - | 23,238 | 1,417,383 |
| Debentures Series B | 832,778 | 533,330 | 1.2.2015 | November 2020-2036 | 1,047,439 | 1,210,195 | - | (2,913) | 106,229 | - | 21,950 | 1,335,461 |
| Debentures Series B | 418,172 | 266,665 | 1-6.2015 | November 2020-2036 | 556,941 | 671,516 | - | (8,103) | 58,911 | - | 12,109 | 734,433 |
| 7,649,098 | - | 4,355 | 671,362 | - | 138,997 | 8,463,812 |
V. Notes to the consolidated financial statements - (cont'd)
33. Lease liabilities
| December 31 | ||
| 2019 | Interest range | |
| Lease liabilities | 554,645 | 1.9% - 6.1% |
| Less: Lease liabilities due within one year | (148,287) | |
| Long term lease liabilities, net | 406,358 | |
| December 31 | December 31 | |
| 2019 | 2018 (Restated) | |
| Total present value of obligation | 651,803 | 533,574 |
| Less: fair value of plan's assets | (104,448) | (87,492) |
| Net liability related to Post-employment benefits | 547,355 | 446,082 |
| Termination benefits | 70,128 | 104,781 |
| Total recognized liability for defined benefit plan, net (1) | 617,483 | 550,863 |
| Share based payment (See note XIII) | 94,104 | 61,961 |
| Other long-term employee benefits | 54,307 | 47,917 |
| Total long-term employee benefits, net | 765,894 | 660,741 |
| Including: Long-term employee benefits payable due within one year | 27,040 | 40,095 |
| 738,854 | 620,646 |
| Defined benefit obligation and early retirement | Fair value of plan's assets | Total | ||||
| 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |
| Balance as at January 1, 2019 | 638,355 | 703,679 | 87,492 | 97,614 | 550,863 | 606,065 |
| Expense/income recognized | ||||||
| in profit and loss: | ||||||
| Current service cost | 24,910 | 30,808 | - | 46 | 24,910 | 30,762 |
| Past service cost | - | 4,840 | - | - | - | 4,840 |
| Interest costs | 22,608 | 20,770 | 3,614 | 3,286 | 18,994 | 17,484 |
| Changes in exchange rates | 38,499 | (39,965) | 7,110 | (7,161) | 31,389 | (32,804) |
| Actuarial gain (losses) due to early retirement | (4,125) | (3,490) | - | - | (4,125) | (3,490) |
| Included in other comprehensive income: | ||||||
| Actuarial gain (losses) as a result of changes in actuar-ial assumptions | 65,239 | (34,820) | 7,945 | (4,827) | 57,294 | (29,993) |
| Foreign currency translation differences in respect of foreign operations | 9,348 | 27,767 | 1,493 | 4,068 | 7,855 | 23,699 |
| Additional movements: | ||||||
| Benefits paid | (72,903) | (71,234) | (9,372) | (11,307) | (63,531) | (59,927) |
| Contributions paid by the Group | - | - | 6,166 | 5,773 | (6,166) | (5,773) |
| Balance as at December 31, 2019 | 721,931 | 638,355 | 104,448 | 87,492 | 617,483 | 550,863 |
V. Notes to the consolidated financial statements - (cont'd)
34. Long-Term Employee Benefits Payable - (cont'd)
Post-employment benefit plans – defined benefit plan and early retirement - (cont'd)
(2) Actuarial assumptions and sensitivity analysis
The principal actuarial assumptions at the reporting date for defined benefit plan
| December 31 | December 31 | ||
| 2019 | 2018 (Restated) | ||
| Discount rate (%)* | 0.4%-3.3% | 1.4%-3.5% |
| As of December 31, 2019 | ||
| Increase of 1% | Decrease of 1% | |
| Discount rate | (54,016) | 66,696 |
| December 31 | December 31 | |
| 2019 | 2018 (Restated) | |
| Liabilities in respect of contingencies* | 90,051 | 92,542 |
| Provision in respect of site restoration | 84,211 | 36,515 |
| Other | 2,560 | 3,294 |
| 176,822 | 132,351 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
36. Other Non-Current Liabilities
| December 31 | December 31 | ||
| 2019 | 2018 (Restated) | ||
| Put options to holders of non- controlling interests | 207,472 | - | |
| Long term transactions in derivatives | 25,582 | 14 | |
| Deferred income | - | 28,146 | |
| Long term loans - others | 171,770 | 171,770 | |
| 404,824 | 199,930 |
| Balance at Jan-uary 1, 2019 | Issuance of new shares | Cancellations of shares | Balance at December 31, 2019 | |
| Share capital | 2,446,554 | - | - | 2,446,554 |
| Balance at Jan-uary 1, 2019 | Additions during the period | Reductions during the period* | Balance at December 31, 2019 | |
| Share premiums | 12,965,177 | - | (415,000) | 12,550,177 |
| Other capital reserve | 359,314 | - | (6,323) | 352,991 |
| 13,324,491 | - | (421,323) | 12,903,168 |
V. Notes to the consolidated financial statements - (cont'd)
39. Other Comprehensive Income, net of tax
| Attributable to shareholders of the company | |||||||
| Balance at January 1, 2019 | Before tax amount | Less: transfer to profit or loss | Less: Income tax expenses | Net –of-tax amount | Less: transfer to retained earnings | Balance at December 31, 2019 | |
| Items that will not be reclassified to profit or loss | 66,516 | (47,264) | - | 917 | (48,181) | 4,511 | 13,824 |
| Re-measurement of changes in liabilities under defined benefit plans | 15,895 | (57,294) | - | (6,523) | (50,771) | - | (34,876) |
| Changes in fair value of other equity investment | 50,621 | 10,030 | - | 7,440 | 2,590 | 4,511 | 48,700 |
| Items that may be reclassified to profit or loss | 1,024,311 | 313,639 | 177,752 | (18,659) | 154,546 | - | 1,178,857 |
| Effective portion of gain or loss of cash flow hedge | 93,385 | 20,176 | 177,752 | (18,659) | (138,917) | - | (45,532) |
| Translation difference of foreign financial statements | 930,926 | 293,463 | - | - | 293,463 | - | 1,224,389 |
| 1,090,827 | 266,375 | 177,752 | (17,742) | 106,365 | 4,511 | 1,192,681 | |
V. Notes to the consolidated financial statements - (cont'd)
40. Surplus reserve
| Balance at January 1, 2019 | Additions during the period | Reductions during the period | Balance at December 31, 2019 | |
| Statutory surplus reserve | 236,348 | - | - | 236,348 |
| Discretional surplus reserve | 3,814 | - | - | 3,814 |
| 240,162 | - | - | 240,162 |
| 2019 | 2018 | |
| Retained earnings as at December 31 of preceding year | 5,513,466 | 3,286,711 |
| Changes in accounting policy | - | 39,481 |
| Adjustment for business combination under common control (Note 1) | 115,826 | 55,045 |
| Retained earnings as at January 1 | 5,629,292 | 3,381,237 |
| Net profits for the period attributable to shareholders of the Company | 277,041 | 2,447,876 |
| Appropriation to statutory surplus reserve | - | (32,339) |
| Dividends to non-controlling Interest | (43,043) | (28,715) |
| Dividend to the shareholders of the company (Note 2) | (293,628) | (154,133) |
| Transfer from other comprehensive income | 4,511 | - |
| Other | - | 15,366 |
| Retained earnings as at December 31 | 5,574,173 | 5,629,292 |
V. Notes to the consolidated financial statements - (cont'd)
42. Operating Income and Cost of Sales
| Year ended December 31 | Year ended December 31 | |||
| 2019 | 2018 (Restated) | |||
| Income | Cost of sales | Income | Cost of sales | |
| Principal activities | 27,486,019 | 18,609,841 | 26,792,123 | 18,005,437 |
| Other businesses | 77,220 | 69,671 | 75,185 | 37,674 |
| 27,563,239 | 18,679,512 | 26,867,308 | 18,043,111 | |
| Year ended December 31 | |||
| 2019 | 2018 (Restated) | ||
| Tax on turnover | 21,166 | 49,101 | |
| Others | 63,237 | 61,411 | |
| 84,403 | 110,512 | ||
| Year ended December 31 | |||
| 2019 | 2018 (Restated) | ||
| Salaries and related expense | 1,557,483 | 1,480,430 | |
| Depreciation and amortization | 1,405,411 | 1,200,375 | |
| Transportation and Commissions | 708,217 | 767,571 | |
| Advertising and sales promotion | 331,763 | 326,707 | |
| Travel expenses | 153,501 | 144,154 | |
| Warehouse expenses | 147,524 | 132,629 | |
| Registration | 121,406 | 108,600 | |
| Professional services | 87,048 | 76,084 | |
| Insurance | 83,307 | 75,095 | |
| Others | 277,596 | 390,291 | |
| 4,873,256 | 4,701,936 | ||
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
45. General and Administrative Expenses
| Year ended December 31 | |||||
| 2019 | 2018 (Restated) | ||||
| Salaries and related expenses | 752,816 | 467,864 | |||
| Idleness expenses* | 342,044 | 74,141 | |||
| Professional services | 131,593 | 137,532 | |||
| Depreciation and amortization | 96,137 | 68,452 | |||
| IT systems | 87,635 | 69,632 | |||
| Office rent, maintenance and expenses | 54,903 | 76,526 | |||
| Other | 97,189 | 103,986 | |||
| 1,562,317 | 998,133 | ||||
| Year ended December 31 | |||||
| 2019 | 2018 (Restated) | ||||
| Salaries and related expenses | 185,356 | 168,405 | |||
| Field trial | 60,787 | 53,663 | |||
| Professional services | 67,779 | 54,435 | |||
| Depreciation and amortization | 37,727 | 28,953 | |||
| Materials | 27,244 | 77,755 | |||
| Office rent, maintenance and expenses | 8,108 | 7,708 | |||
| Other | 49,324 | 51,334 | |||
| 436,325 | 442,253 | ||||
| Year ended December 31 | |||
| 2019 | 2018 (Restated) | ||
| Interest expenses on debentures and loans | 707,098 | 619,134 | |
| CPI expense in respect of debentures | 23,418 | 85,533 | |
| Loss in respect of sale of trade receivables | 91,006 | 79,060 | |
| Interest expense in respect of post-employment benefits and early re-tirement, net | 38,681 | 17,484 | |
| Revaluation of put option, net | (7,605) | 49,654 | |
| Interest income from customers, banks and others | (81,190) | (81,580) | |
| Exchange rate differences, net | 859,403 | (203,422) | |
| Other expenses | 35,074 | 4,529 | |
| 1,665,885 | 570,392 | ||
V. Notes to the consolidated financial statements - (cont'd)
48. Investment income, net
| Year ended December 31 | |||
| 2019 | 2018 (Restated) | ||
| Investment income (expenses) from disposal of derivatives | (253,799) | 619,447 | |
| Income from long-term equity investments accounted for using the equity method | 19,861 | 7,001 | |
| Other | 2,733 | 1,809 | |
| (231,205) | 628,257 | ||
| Year ended December 31 | |||
| 2019 | 2018 (Restated) | ||
| Gain (loss) from changes in fair value of derivative financial instru-ments | 828,527 | (974,413) | |
| Others | (3,015) | (4,921) | |
| 825,512 | (979,334) | ||
| Year ended December 31 | |||
| 2019 | 2018 (Restated) | ||
| Bills receivable and accounts receivable | (39,323) | (51,154) | |
| Other receivables | (82) | (8,255) | |
| (39,405) | (59,409) | ||
| Year ended December 31 | |||
| 2019 | 2018 (Restated) | ||
| Inventories | (76,375) | (80,698) | |
| Fixed assets | (285,695) | (134,091) | |
| Constructions in progress | (19,763) | - | |
| Intangible asset | (22,852) | (17,777) | |
| Other | (9,131) | (4,718) | |
| (413,816) | (237,284) | ||
| Year ended December 31 | Included in non-recurring items | |||
| 2019 | 2018 (Restated) | |||
| Gain (loss) from disposal of fixed assets | 127,443 | (67,059) | 127,443 | |
| Gain (loss) from disposal of intangible assets | (370) | 2,033,214 | (370) | |
| 127,073 | 1,966,155 | 127,073 | ||
V. Notes to the consolidated financial statements - (cont'd)
53. Non-Operating Expenses
| Year ended December 31 | Included in non-recurring items | |||
| 2019 | 2018 (Restated) | |||
| Donation expenses | 13,364 | 12,474 | 13,364 | |
| Other | 90,490 | 24,486 | 79,093 | |
| 103,854 | 36,960 | 92,457 | ||
| Year ended December 31 | |||
| 2019 | 2018 (Restated) | ||
| Current year | 363,279 | 530,037 | |
| Deferred tax expenses (income) | (138,294) | 235,645 | |
| Adjustments for previous years, net | (50,454) | 85,579 | |
| 174,531 | 851,261 | ||
| Year ended December 31 | |||
| 2019 | 2018 (Restated) | ||
| Profit before taxes | 451,572 | 3,299,137 | |
| Statutory tax in china | 25% | 25% | |
| Tax calculated according to statutory tax in china | 112,893 | 824,784 | |
| Tax benefits from Approved Enterprises | (6,928 ) | (83,538) | |
| Difference between measurement basis of income for financial statement and for tax purposes | 37,323 | 107,435 | |
| Taxable income and temporary differences at other tax rate | 16,820 | (72,198) | |
| Taxes in respect of prior years | (50,454) | 85,579 | |
| Utilization of tax losses prior years for which deferred taxes were not created | (6,720) | (58,723) | |
| Temporary differences and losses in the report year for which deferred taxes were not created | 116,370 | 31,034 | |
| Non-deductible expenses and other differences | (6,795) | 10,747 | |
| Neutralization of tax calculated in respect of the Company’s share in results of equity accounted investees | (6,023) | (2,911) | |
| Effect of change in tax rate in respect of deferred taxes | (33,631) | (5,662) | |
| Creation and reversal of deferred taxes for tax losses and tem-porary differences from previous years | 1,676 | 14,714 | |
| Income tax expenses | 174,531 | 851,261 | |
V. Notes to the consolidated financial statements - (cont'd)
56. Notes to items in the cash flow statements
(1) Cash received relating to other operating activities
| Year ended December 31 | |||
| 2019 | 2018 (Restated) | ||
| Derivatives transactions | 260,557 | 471,597 | |
| Financial institutions | 74,615 | 140,559 | |
| Interest income | 61,207 | 62,632 | |
| Government subsidies | 5,899 | 3,665 | |
| Others | 262,559 | 58,381 | |
| 664,837 | 736,834 | ||
| Year ended December 31 | |||
| 2019 | 2018 (Restated) | ||
| Transportation, Commissions and Warehouse | 753,643 | 759,084 | |
| Advertising and sales promotion | 295,944 | 300,452 | |
| Professional services | 264,241 | 267,799 | |
| Registration and Fiels trial | 186,694 | 144,840 | |
| Travel | 180,303 | 157,704 | |
| IT and Communication | 179,730 | 163,834 | |
| Financial institutions | 118,269 | 162,681 | |
| Insurance | 99,543 | 78,846 | |
| Derivatives transactions | 54,030 | 128,503 | |
| Others | 667,743 | 657,943 | |
| Net cash flow from operating activities | 2,800,140 | 2,821,686 | |
| Year ended December 31 | |||
| 2019 | 2018 (Restated) | ||
| Investment grant | 5,208 | - | |
| Other | - | 410 | |
| 5,208 | 410 | ||
| Year ended December 31 | |||
| 2019 | 2018 (Restated) | ||
| Cash received in respect of hedging transactions on debentures | 140,025 | - | |
| Deposit for issuing bills payables | 39,886 | - | |
| 179,911 | - | ||
V. Notes to the consolidated financial statements - (cont'd)
56. Notes to items in the cash flow statements - (cont'd)
(5) Cash paid relating to other financing activities
| Year ended December 31 | |||
| 2019 | 2018 (Restated) | ||
| Payment for business combinations under common control | 415,000 | - | |
| Payment in respect of hedging transactions on debentures | 325,474 | - | |
| Repayment of lease liability | 146,610 | - | |
| Realization of call option | 35,625 | - | |
| Deposit for issuing bills payable | 14,003 | 48,340 | |
| Other | - | 9,663 | |
| 936,712 | 58,003 | ||
| Year ended December 31 | ||||
| 2019 | 2018 (Restated) | |||
| Net profit | 277,041 | 2,447,876 | ||
| Add: Impairment provisions for assets | 413,816 | 237,284 | ||
| Credit impairment loss | 39,405 | 59,409 | ||
| Depreciation of fixed assets and investment property | 841,041 | 816,364 | ||
| Amortization of right-of-use asset | 160,389 | - | ||
| Amortization of intangible asset | 1,334,711 | 1,235,178 | ||
| Gains on disposal of fixed assets, intangible assets, and other long-term assets, net | (127,073) | (1,966,155) | ||
| Loss (gain) from changes in fair value | (825,512) | 979,334 | ||
| Financial expenses | 1,325,875 | 47,879 | ||
| Investment loss (income), net | (51,370) | (628,257) | ||
| Decrease (increase) in deferred tax assets | (130,959) | 109,945 | ||
| Increase (decrease) in deferred tax liabilities | (7,335) | 125,700 | ||
| Decrease (increase) in inventories, net | (236,687) | (1,579,698) | ||
| Increase in operating receivables | (1,080,276) | (557,665) | ||
| Increase in operating payables | (1,119,479) | 971,494 | ||
| Others | 29,900 | 465 | ||
| Net cash flow from operating activities | 843,487 | 2,299,153 | ||
V. Notes to the consolidated financial statements - (cont'd)
57. Supplementary Information on Cash Flow Statement - (cont'd)
b. Net increase (decrease) in cash and cash equivalents
| Year ended December 31 | |||
| 2019 | 2018 (Restated) | ||
| Closing balance of cash | 4,319,907 | 6,346,196 | |
| Less: Opening balance of cash | 6,346,196 | 7,979,502 | |
| Net decrease in cash and cash equivalents | (2,026,289) | (1,633,306) | |
| Year ended December 31 | ||
| 2019 | ||
| Cash paid for business combination | 1,126,557 | |
| Less: Cash and cash equivalents of the acquiree at the date of acquisition | 4,610 | |
| Net cash paid to acquire a subsidiary | 1,121,947 |
| December 31 | January 1 | ||
| 2019 | 2019 | ||
| Cash on hand | 6,265 | 1,380 | |
| Bank deposits available on demand without restrictions | 4,313,642 | 6,344,816 | |
| 4,319,907 | 6,346,196 |
| December 31 | ||
| 2019 | Reason | |
| Cash | 28,681 | Pledged |
| Fixed assets | 900 | Mortgage |
| Other non-current assets | 107,613 | Guarantees |
| 137,194 |
V. Notes to the consolidated financial statements - (cont'd)
59. Foreign currencies denominated items
(1) Foreign currencies denominated items
| As at December 31, 2019 | |||
| Foreign currency at the end of the peri-od | Exchange rate | RMB at the end of the period | |
| Cash and bank balances | |||
| USD | 55,223 | 6.9762 | 385,246 |
| EUR | 29,929 | 7.8288 | 234,310 |
| ILS | 96,267 | 2.0186 | 194,322 |
| PLN | 55,458 | 1.8370 | 101,873 |
| CAD | 10,897 | 5.3564 | 58,370 |
| BRL | 35,454 | 1.7308 | 61,363 |
| ZAR | 59,508 | 0.4960 | 29,516 |
| Other | 228,415 | ||
| Total | 1,293,415 | ||
| Bills and Accounts receivable | |||
| BRL | 698,855 | 1.7308 | 1,209,554 |
| EUR | 77,196 | 7.8288 | 604,348 |
| USD | 44,169 | 6.9762 | 308,132 |
| RON | 129,196 | 1.6373 | 211,532 |
| RUB | 1,453,298 | 0.1127 | 163,773 |
| CAD | 25,846 | 5.3564 | 138,443 |
| TRY | 130,061 | 1.1744 | 152,744 |
| ZAR | 269,016 | 0.4960 | 133,434 |
| Other | 355,117 | ||
| Total | 3,277,077 | ||
| Other receivables | |||
| EUR | 68,331 | 7.8288 | 534,949 |
| GBP | 9,111 | 9.2046 | 83,861 |
| ILS | 39,844 | 2.0186 | 80,429 |
| BRL | 19,682 | 1.7308 | 34,065 |
| Other | 110,231 | ||
| Total | 843,535 | ||
| Other current assets | |||
| ILS | 66,034 | 2.0186 | 133,294 |
| BRL | 59,247 | 1.7308 | 102,543 |
| EUR | 9,123 | 7.8288 | 71,422 |
| UAH | 118,242 | 0.2945 | 34,825 |
| Other | 39,715 | ||
| Total | 381,799 | ||
| Long-term receivables | |||
| BRL | 98,740 | 1.7308 | 170,896 |
| Total | 170,896 | ||
V. Notes to the consolidated financial statements - (cont'd)
59. Foreign currencies denominated items - (cont'd)
(1) Foreign currencies denominated items - (cont'd)
| As at December 31, 2019 | |||
| Foreign currency at the end of the peri-od | Exchange rate | RMB at the end of the period | |
| Other non-current assets | |||
| BRL | 56,216 | 1.7308 | 97,297 |
| Other | 4,089 | ||
| Total | 101,386 | ||
| Short-term loans | |||
| UAH | 256,000 | 0.2945 | 75,399 |
| TRY | 52,220 | 1.1744 | 61,328 |
| EUR | 3,386 | 7.8288 | 26,510 |
| Other | 17,252 | ||
| Total | 180,489 | ||
| Bills and Accounts payable | |||
| ILS | 387,124 | 2.0186 | 781,439 |
| EUR | 61,947 | 7.8288 | 484,964 |
| BRL | 126,350 | 1.7308 | 218,683 |
| COP | 33,508,757 | 0.0021 | 71,332 |
| Other | 148,961 | ||
| Total | 1,705,379 | ||
| Other payables | |||
| ILS | 68,201 | 2.0186 | 137,669 |
| EUR | 12,654 | 7.8288 | 99,062 |
| BRL | 48,542 | 1.7308 | 84,014 |
| UAH | 198,325 | 0.2945 | 58,412 |
| ILS CPI | 18,462 | 2.0186 | 37,267 |
| Other | 59,979 | ||
| Total | 476,403 | ||
| Contract liabilities | |||
| EUR | 19,512 | 7.8288 | 152,758 |
| BRL | 60,742 | 1.7308 | 105,131 |
| TRY | 18,771 | 1.1744 | 22,045 |
| GBP | 1,849 | 9.2046 | 17,015 |
| Other | 28,155 | ||
| Total | 325,104 | ||
V. Notes to the consolidated financial statements - (cont'd)
59. Foreign currencies denominated items - (cont'd)
(1) Foreign currencies denominated items - (cont'd)
| As at December 31, 2019 | |||
| Foreign currency at the end of the period | Exchange rate | RMB at the end of the period | |
| Non-current liabilities due within one year | |||
| EUR | 25,444 | 7.8288 | 199,198 |
| ILS CPI | 264,225 | 2.0186 | 533,358 |
| USD | 525 | 6.9762 | 3,663 |
| BRL | 822 | 1.7308 | 1,423 |
| Other | 30,982 | ||
| Total | 768,624 | ||
| Other current liabilities | |||
| EUR | 3,901 | 7.8288 | 30,542 |
| UAH | 76,199 | 0.2945 | 22,442 |
| Other | 5,840 | ||
| Total | 58,824 | ||
| Long-term loan | |||
| EUR | 66,151 | 7.8288 | 517,878 |
| Total | 517,878 | ||
| Debentures payable | |||
| ILS CPI | 3,946,316 | 2.0186 | 7,965,941 |
| 7,965,941 | |||
| Provision and Long-term payables | |||
| BRL | 40,674 | 1.7308 | 70,397 |
| Other | 2,972 | ||
| Total | 73,369 | ||
| Other non-current liabilities | |||
| EUR | 8,138 | 7.8288 | 63,714 |
| ILS CPI | 23,860 | 2.0186 | 48,164 |
| USD | 5,105 | 6.9762 | 35,614 |
| GBP | 1,150 | 9.2046 | 10,590 |
| ZAR | 16,837 | 0.4960 | 8,351 |
| Other | 39,157 | ||
| Total | 205,590 | ||
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
59. Foreign currencies denominated items - (cont'd)
(2) Major foreign operations
| Name of the Subsidiary | Registration & Principal place of business | Business nature | Functional currency |
| ADAMA France S.A.S | France | Distribution | USD |
| ADAMA Brasil S/A | Brazil | Manufacturing; Distribution; Reg-istration | USD |
| ADAMA Deutschland GmbH | Germany | Distribution; Registration | USD |
| ADAMA India Private Ltd. | India | Manufacturing Distribution; Registration | INR |
| Makhteshim Agan of North America Inc. | United States | Manufacturing; Distribution; Reg-istration | USD |
| Control Solutions Inc. | United States | Manufacturing; Distribution; Reg-istration | USD |
| ADAMA Agan Ltd. | Israel | Manufacturing; Distribution; Reg-istration | USD |
| ADAMA Makhteshim Ltd. | Israel | Manufacturing; Distribution; Reg-istration | USD |
| ADAMA Australia Pty Limited | Australia | Distribution | AUD |
| ADAMA Italia SRL | Italy | Distribution | USD |
| ADAMA Northern Europe B.V. | Netherlands | Distribution | USD |
| Alligare LLC | United States | Manufacturing; Distribution; Registration | USD |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
VI. Change in consolidation Scope
1. Business combinations involving enterprises not under common control
(1) Business combinations involving enterprises not under common control during current period
| Name of the Com-pany | Acquisition date | Cost of equity investment | Proportion of equity in-vestment | Acquisition method | Basis of acquisition date deter-mination | From acquisition date till period end | |
| Revenue | Net profit | ||||||
| Bonide Products INC. | 07.01.2019 | 833,383 | 100% | Stock purchase | Obtained control | 455,477 | 27,369 |
| Agro Klinge S.A. | 29.10.2019 | 174,911 | 100% | Stock purchase | Obtained control | 38,368 | 3,777 |
| Financiere de Pontar-lier S.A. (SFP) | 19.11.2019 | 118,263 | 100% | Stock purchase | Obtained control | - | - |
| Acquisition costs | Agro Klinge S.A. | Financiere de Pontar-lier S.A. (SFP) | Bonide Prod-ucts INC. |
| Total acquisition cost in cash | 174,911 | 118,263 | 833,383 |
| Less: share of the fair value of the identi-fiable net assets acquired | 89,428 | 56,772 | 638,786 |
| Currency translation differences | (806) | 1,112 | (14,449) |
| Goodwill | 86,289 | 60,379 | 209,046 |
VI. Change in consolidation Scope - (cont'd)
1. Business combinations involving enterprises not under common control - (cont'd)
(3) Identifiable assets and liabilities of the acquiree, at acquisition date
| Bonide | |||
| Fair value at acquisition date | Book value at acquisition date | ||
| Assets: | |||
| Cash and bank balances | 3,061 | 3,061 | |
| Bills and Accounts receivable | 104,362 | 104,362 | |
| Prepayments | 11,750 | 11,750 | |
| Inventories | 111,959 | 109,777 | |
| Fixed assets | 56,690 | 56,690 | |
| Intangible assets | 468,839 | 1,510 | |
| Liabilities: | |||
| Bills and Accounts payable | 24,062 | 24,062 | |
| Other payables | 82,434 | 82,434 | |
| Deferred tax liabilities | 11,379 | - | |
| Net assets | 638,786 | 180,654 | |
| Less: Non-controlling interests | - | - | |
| Net assets acquired | 638,786 | 180,654 | |
| Agro Klinge S.A. | |||
| Fair value at acquisition date | Book value at acquisition date | ||
| Assets: | |||
| Cash and bank balances | 1,549 | 1,549 | |
| Bills and Accounts receivable | 59,738 | 59,738 | |
| Inventories | 37,769 | 37,769 | |
| Intangible assets | 95,837 | 9,555 | |
| Other assets | 12,192 | 12,192 | |
| Liabilities: | |||
| Short term loans | 17,944 | 17,944 | |
| Bills and Accounts payable | 89,833 | 89,833 | |
| Other Liabilities | 9,880 | 9,880 | |
| Net assets | 89,428 | 3,146 | |
| Less: Non-controlling interests | - | - | |
| Net assets acquired | 89,428 | 3,146 | |
VI. Change in consolidation Scope - (cont'd)
1. Business combinations involving enterprises not under common control - (cont'd)
(3) Identifiable assets and liabilities of the acquiree, at acquisition date - (cont'd)
| Financiere de Pontarlier S.A. (SFP) | |||
| Fair value at acquisition date | Book value at acquisition date | ||
| Assets: | |||
| Bills and Accounts receivable | 29,021 | 29,021 | |
| Inventories | 21,494 | 21,494 | |
| Intangible assets | 96,313 | 35,934 | |
| Other assets | 7,297 | 7,297 | |
| Liabilities: | |||
| Short term and long term loans | 27,214 | 27,214 | |
| Bills and Accounts payable | 59,137 | 59,137 | |
| Other non-current liabilities | 11,002 | 11,002 | |
| Net assets | 56,772 | (3,607) | |
| Less: Non-controlling interests | - | - | |
| Net assets acquired | 56,772 | (3,607) | |
| Name of the Company | Equity Proportion obtained from combina-tion | Basis of judgement as business combination in-volving enterprises under common control | Acquisition date | Basis of determining acquisition date | Beginning of the Year till acquisition date set out as follows | For the twelve month period ended on December 31, 2018 | ||
| Revenue | Net income | Revenue | Net income | |||||
| Jiangsu Anpon Electrochemical co. LTD. | 100% | Both of the combining enterprises are ultimately controlled by China Nation-al Agrochemical Corpora-tion, and the control is not transitory. | March 29th, 2019 | Obtained control | 393,990 | 38,027 | 1,507,474 | 46,811 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
VI. Change in consolidation Scope (cont'd)
2. Business combinations under common control (cont'd)
(2) Acquisition cost
| Acquisition costs | Jiangsu Anpon Electrochemical co. LTD. |
| Cash | 415,000 |
| Jiangsu Anpon Electrochemical co. LTD. | ||
| Acquisition date | Prior year end | |
| Assets: | ||
| Cash and bank balances | 131,663 | 167,101 |
| Bills receivable | 42,437 | 53,299 |
| Accounts receivable | 146,770 | 101,522 |
| Prepayments | 45,596 | 55,218 |
| Other receivables | 15,660 | 27,606 |
| Inventories | 193,483 | 191,811 |
| Other current assets | - | 31 |
| Fixed assets | 603,205 | 628,268 |
| Construction in progress | 61,693 | 59,397 |
| Intangible assets | 64,115 | 64,574 |
| Deferred tax assets | 8,556 | 8,040 |
| Other non-current assets | 20,315 | 15,219 |
| Liabilities: | ||
| Short-term borrowings | 500,000 | 550,000 |
| Accounts payable | 102,429 | 99,487 |
| Employee benefits payable | 12,855 | 18,829 |
| Taxes payable | 12,997 | 14,150 |
| Other payables | 171,318 | 131,818 |
| Contractual liability | 21,321 | 26,730 |
| Long-term employee benefits payable | 40,266 | 40,284 |
| Provision | 21,858 | 21,858 |
| Net assets | 450,449 | 468,930 |
| Less: Non-controlling interests | - | - |
| Net assets acquired | 450,449 | 468,930 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
VII. Interest in Other Entities
1. Interests in subsidiaries
Composition of the largest subsidiaries of the Group in respect of assets and operating income
| Name of the Subsidiary | Registration & Principal place of business | Business nature | Direct | Indirect | Method of ob-taining the sub-sidiary |
| ADAMA France S.A.S | FRANCE | Distribution | 100% | Established | |
| ADAMA Brasil S/A | BRAZIL | Manufacturing; Distribution; Registration | 100% | Purchased | |
| ADAMA Deutschland GmbH | GERMANY | Distribution; Registration; | 100% | Established | |
| ADAMA India Private Ltd. | INDIA | Manufacturing; Distribution; Registration | 100% | Established | |
| Makhteshim Agan of North America Inc. | UNITED STATES | Manufacturing; Distribution; Registration | 100% | Established | |
| Control Solutions Inc. | UNITED STATES | Manufacturing; Distribution; Registration | 67% | Purchased | |
| ADAMA Agan Ltd. | ISRAEL | Manufacturing; Distribution; Registration | 100% | Restructure | |
| ADAMA Makhteshim Ltd. | ISRAEL | Manufacturing; Distribution; Registration | 100% | Restructure | |
| ADAMA Australia Pty Limited | AUSTRALIA | Distribution | 100% | Purchased | |
| ADAM Italia SRL | ITALY | Distribution | 100% | Established | |
| ADAMA Northern Europe B.V. | NETHERLANDS | Distribution | 55% | Purchased | |
| Alligare LLC | UNITED STATES | Manufacturing; Distribution; Registration | 100% | Purchased | |
| Jiangsu Anpon Electrochemical co. Ltd.. | CHINA | Manufacturing; Distribution | 100% | Purchased |
| December 31 | December 31 | |
| 2019 | 2018 | |
| Joint ventures | 92,695 | 68,584 |
| Associates | 40,403 | 39,766 |
| 133,098 | 108,350 |
| December 31, 2019 and twelve months then ended | December 31, 2018 and twelve months then ended | |
| Joint ventures: | ||
| Total carrying amount | 92,695 | 68,584 |
| The Group's share of the following items: | ||
| Net profit | 19,877 | 7,001 |
| Other comprehensive income | (697) | - |
| Total comprehensive income | 19,180 | 7,001 |
| Associates: | ||
| Total carrying amount | 40,403 | 39,766 |
| The Group's share of the following items: | ||
| Net profit | (16) | - |
| Other comprehensive income | 653 | - |
| Total comprehensive income | 637 | - |
VIII. Risk Related to Financial Instruments
A. General
The Group has extensive international operations, and, therefore, it is exposed to credit risks, liquidity risksand market risks (including currency risk, interest risk and other price risk). In order to reduce the expo-sure to these risks, the Group uses financial derivatives instruments, including forward transactions and op-tions (hereinafter - “derivatives”).
Transactions in derivatives are undertaken with major financial institutions, and therefore, in the opinion ofGroup Management the credit risk in respect thereof is low.
This note provides information on the Group’s exposure to each of the above risks, the Group’s objectives,policies and processes regarding the measurement and management of the risk. Additional quantitative dis-closure is included throughout the consolidated financial statements.
The Board of Directors has overall responsibility for establishing and monitoring the framework of theGroup's risk management policy. The Finance Committee is responsible for establishing and monitoring theGroup's actual risk management policy. The Chief Financial Officer reports to the Finance Committee on aregular basis regarding these risks.
The Group’s risk management policy, established to identify and analyze the risks facing the Group, to setappropriate risk limits and controls, and to monitor risks and adherence to limits. The policy and methods formanaging the risks are reviewed regularly, in order to reflect changes in market conditions and the Group'sactivities. The Group, through training, and management standards and procedures, aims to develop a disci-plined and constructive control environment in which all the employees understand their roles and obliga-tions.
B. Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrumentfails to meet its contractual obligations, and derives mainly from trade receivables and other receivables aswell as from cash and deposits in financial institutions.
Accounts and other receivables
The Group’s revenues are derived from a large number of widely dispersed customers in many countries.Customers include multi-national companies and manufacturing companies, as well as distributors, agricul-turists, agents and agrochemical manufacturers who purchase the products either as finished goods or as in-termediate products for their own requirements.
The Company entered into an agreement for the sale of trade receivables in a securitization transaction, fordetails see note V.5.e.
In April 2019, a two-years agreement with an international insurance company was renewed. The amount ofthe insurance coverage was fixed at $150 million cumulative per year. The indemnification is limited toabout 90% of the debt.
The Group’s exposure to credit risk is influenced mainly by the personal characterization of each customer,and by the demographic characterization of the customer’s base, including the risk of insolvency of the in-dustry and geographic region in which the customer operates. No single customer accounted for greater than5% of total accounts receivable.
VIII. Risk Related to Financial Instruments - (cont’d)
B. Credit risk - (cont’d)
The Company management has prescribed a credit policy, whereby the Company performs current ongoingcredit evaluations of existing and new customers, and every new customer is examined thoroughly regardingthe quality of his credit, before offering him the Group’s customary shipping and payment terms. The ex-amination made by the Group includes an outside credit rating, if any, and in many cases, receipt of docu-ments from an insurance company. A credit limit is prescribed for each customer, outstanding amount of theaccounts receivable balance. These limits are examined annually. Customers that do not meet the Group’scriteria for credit quality may do business with the Group on the basis of a prepayment or against furnishingof appropriate collateral.
Most of the Group’s customers have been doing business with it for many years. In monitoring customercredit risk, the customers were grouped according to a characterization of their credit, based on geographicallocation, industry, aging of receivables, maturity, and existence of past financial difficulties. Customers de-fined as “high risk” are classified to the restricted customer list and are supervised by management. In cer-tain countries, mainly, Brazil, customers are required to provide property collaterals (such as agriculturallands and equipment) against execution of the sales, the value of which is examined on a current ongoingbasis by the Company. In these countries, in a case of expected credit risk, the Company records a provisionfor the amount of the debt less the value of the collaterals provided and acts to realize the collaterals.
The Group closely monitors the economic situation in Eastern Europe and South America where necessary itoperates to limit its exposure to customers in countries having significantly unstable economies.
The Group recognizes an impairment provision, which reflects its assessment regarding the credit risk ofaccount receivables, Other receivables and investments on a lifetime expected credit loss basis. See alsonotes Ⅲ.10 – Financial instruments and Ⅲ.11 – Receivables.
Cash and deposits in banks
The Company holds cash and deposits in banks with a high credit rating. These banks are also required tocomply with capital adequacy or maintain a level of security based on different situations.
Guarantees
The Company’s policy is to provide financial guarantees only to investee companies.
Aging of receivables and expected credit risk
Presented below is the aging of the past due trade receivables:
| December 31, 2019 | |
| Past due by less than 90 days | 506,284 |
| Past due by more than 90 days | 605,941 |
| 1,112,225 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
VIII. Risk Related to Financial Instruments - (cont’d)
B. Credit risk - (cont’d)
The company measure the provision for credit losses on a collective group basis, where receivables sharesimilar credit risk characteristics based on geographical locations. The examination for expected credit loss-es is performed using model including aging analysis and historical loss experiences, and adjusted by theobservable factors reflecting current and expected future economic conditions.When credit risk on a receivable has increased significantly since initial recognition, the group records spe-cific provision or general provision which is determined for groups of similar assets in countries in whichthere are large number of customers with immaterial balances.The Group has credit risk exposures for accounts receivables amounted to RMB 7,686,751 thousand relate tocategory of "Lifetime expected credit losses (credit losses has not occurred)" and amounted to RMB 715,856thousand related to category of "Lifetime expected credit losses (credit losses occurred)". The Group hascredit risk exposures for other receivables amounted to RMB 14,832 thousand related to category of "Life-time expected credit losses (credit losses occurred)". The credit risk exposures for all remaining balance offinancial assets at amortised cost and financial assets at FVTOCI are related to "12-month expected creditlosses".
C. Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial obligation whenthey come due. The Group's approach to managing its liquidity risk is to assure, to the extent possible, anadequate degree of liquidity for meeting its obligations timely, under ordinary conditions and under pressureconditions, without sustaining unwanted losses or hurting its reputation.
The cash-flow forecast is determined both at the level of the various entities as well as of the consolidatedlevel. The Company examines the current forecasts of its liquidity requirements in order to ascertain thatthere is sufficient cash for the operating needs, including the amounts required in order to comply with thefinancial liabilities, while taking strict care that at all times there will be unused credit frameworks so thatthe Company will not exceed the credit frameworks granted to it and the financial covenants with which it isrequired to comply with. These forecasts take into consideration matters such as the Company’s plans to usedebt for financing its activities, compliance with required financial covenants, compliance with certain li-quidity ratios and compliance with external requirements such as laws or regulation.
The surplus cash held by the Group subsidiaries, which is not required for financing the current ongoing op-erations, is invested in short-term interest-bearing investment channels.
VIII. Risk Related to Financial Instruments - (cont’d)C. Liquidity risk - (cont’d)
(1) Presented below are the contractual maturities of the financial liabilities at undiscounted amounts,including estimated interest payments:
| As at December 31, 2019 | ||||||
| Third- | Fifth year | Contractual | Carrying | |||
| First year | Second year | Fourth year | and above | Cash flow | amount | |
| Non-derivative financial lia-bilities | ||||||
| Short-term loans | 2,036,745 | - | - | - | 2,036,745 | 2,009,882 |
| Bills payables | 321,674 | - | - | - | 321,674 | 321,674 |
| Accounts payables | 4,205,901 | - | - | - | 4,205,901 | 4,205,901 |
| Other payables | 1,049,594 | - | - | - | 1,049,594 | 1,049,594 |
| Other current liabilities | 148,886 | - | - | - | 148,886 | 148,886 |
| Debentures payable | 866,339 | 915,040 | 1,752,568 | 8,872,715 | 12,406,662 | 8,463,812 |
| Long-term loans | 448,887 | 327,926 | 574,925 | 77,204 | 1,428,942 | 1,347,245 |
| Long-term payables | 2,025 | 3,979 | 4,050 | 28,605 | 38,659 | 29,021 |
| Lease Liabilities | 166,478 | 130,109 | 149,022 | 243,621 | 689,230 | 554,645 |
| Other non-current liabilities | 2,061 | 30,690 | 267,821 | 87,946 | 388,518 | 379,242 |
| Derivative financial liabilities | ||||||
| Foreign currency derivatives | 667,491 | 25,582 | - | - | 693,073 | 693,073 |
| CPI/shekel forward transactions | 23,984 | - | - | - | 23,984 | 23,984 |
| 9,940,065 | 1,433,326 | 2,748,386 | 9,310,091 | 23,431,868 | 19,226,959 | |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
VIII. Risk Related to Financial Instruments - (cont’d)
D. Market risks - (cont’d)
(1) CPI and foreign currency risks - (cont’d)
The Group hedged a part of the estimated currency exposure to anticipate sales and purchases for the subse-quent year. Likewise, the Group hedges most of its monetary assets and liabilities denominated in a non- U.S.dollar currency. The Group uses foreign currency derivatives to hedge its currency risk, mostly with maturitydates of less than one year from the reporting date.
Solutions debentures are linked to the NIS-CPI and, therefore, an increase in the NIS-CPI, as well as chang-es in the NIS exchange rate, could cause significant exposure with respect to the subsidiary functional cur-rency – the U.S. dollar. As of the approval date of the financial statements, the subsidiary had hedged mostof its exposure deriving from issuance of the debentures, in options and forward contracts.
(A) The Group’s exposure to NIS-CPI and foreign currency risk, except in respect of derivative financialinstruments is as follows:
| December 31, 2019 | ||
| Total assets | Total liabilities | |
| In US Dollar | 1,244,617 | 716,185 |
| In Euro | 1,498,223 | 1,590,204 |
| In Brazilian real | 1,687,912 | 410,758 |
| CPI-linked NIS | - | 8,584,738 |
| In New Israeli Shekel | 418,628 | 921,089 |
| Denominated in or linked to other foreign currency | 3,082,603 | 737,736 |
| 7,931,983 | 12,960,710 | |
| December 31, 2019 | ||||||
| Curren-cy/linkage receivable | Curren-cy/linkage payable | Average expiration date | USD thousands Par value | RMB thousands Par value | Fair value | |
| Forward foreign currency | USD | EUR | 2020/06/08 | 336,670 | 2,348,675 | (236,437) |
| Contracts and call options | USD | PLN | 2020/04/25 | 23,960 | 167,147 | (516 ) |
| USD | BRL | 2020/03/25 | 200,564 | 1,399,172 | (21,836 ) | |
| USD | GBP | 2020/06/12 | 35,530 | 247,864 | (9,941 ) | |
| USD | ZAR | 2020/01/30 | 22,385 | 156,161 | (9,990 ) | |
| ILS | USD | 2020/02/06 | 1,367,668 | 9,541,128 | 138,240 | |
| USD | OTHER | 372,373 | 2,597,746 | (33,862 ) | ||
| CPI forward contracts | CPI | ILS | 2020/04/02 | 679,977 | 4,743,655 | (34,009 ) |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
VIII. Risk Related to Financial Instruments - (cont’d)
D. Market risks - (cont’d)
(1) CPI and foreign currency risks - (cont’d)
(C) Sensitivity analysis
The appreciation or depreciation of the Dollar against the following currencies as of December 31,2019 and the increase or decrease in the CPI would increase (decrease) the equity and profit or loss bythe amounts presented below. This analysis assumes that all the remaining variables, among others in-terest rates, remains constant.
| December 31, 2019 | ||||
| Decrease of 5% | Increase of 5% | |||
| Equity | Profit (loss) | Equity | Profit (loss) | |
| New Israeli shekel | 51,930 | 33,358 | (7,239) | 11,333 |
| British pound | (7,672) | 2,522 | 7,672 | (2,522) |
| Euro | (138,949) | (6,908) | 142,929 | 10,888 |
| Brazilian real | 5,262 | 22,230 | (5,262) | (22,230) |
| Polish zloty | (9,949) | (2,494) | 9,949 | 2,494 |
| South African Rand | (387) | 647 | 387 | (647) |
| Chinese Yuan Renminbi | (21,880) | (21,880) | 21,880 | 21,880 |
| CPI-linked NIS | 271,296 | 271,296 | (271,296) | (271,296) |
VIII. Risk Related to Financial Instruments - (cont’d)
D. Market risks - (cont’d)
(2) Interest rate risks - (cont’d)
(A) Type of interest
The interest rate profile of the Group’s interest-bearing financial instruments was as follows:
| December 31, 2019 | |
| Fixed-rate instruments – unlinked to the CPI | |
| Financial assets | |
| Cash at banks | 883,607 |
| Other non-current assets | 1,151 |
| Financial liabilities | |
| Long-term loans | 149,313 |
| Long-term payables | 21,417 |
| Other non-current liabilities | 171,770 |
| 542,258 | |
| Fixed-rate instruments – linked to the CPI | |
| Financial liabilities | |
| Debentures payable | 8,463,812 |
| Variable-rate instruments | |
| Financial assets | |
| Cash at banks | 508,224 |
| Financial assets at fair value through profit or loss | 29,510 |
| Other non-current assets | 11,350 |
| Financial liabilities | |
| Short-term loans and credit from banks | 2,009,882 |
| Long-term loans(1) | 1,197,932 |
| (2,658,730) |
| Profit or loss | Equity | |||
| Increase in interest | Decrease in interest | Increase in interest | Decrease in interest | |
| As at December 31, 2019 | 1,401 | (1,409) | 1,401 | (1,409) |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
IX. Fair Value
The fair value of forward contracts on foreign currency is based on their listed market price, if available. Inthe absence of market prices, the fair value is estimated based on the discounted difference between the statedforward price in the contract and the current forward price for the residual period until redemption, using anappropriate interest rate.
The fair value of foreign currency options is based on bank quotes. The reasonableness of the quotes is evalu-ated through discounting future cash flow estimates, based on the conditions and duration to maturity of eachcontract, using the market interest rates of a similar instrument at the measurement date and in accordancewith the Black & Scholes model.
1. Financial instruments measured at fair value for disclosure purposes only
The carrying amount of certain financial assets and liabilities, including cash at bank and on hand, bills andaccounts receivable, receivables financing, other receivables, derivatives financial assets, short-term loans,bills and accounts payable and other payable, are the same or proximate to their fair value.
The following table details the carrying amount in the books and the fair value of groups of non-current finan-cial instruments presented in the financial statements not in accordance with their fair values:
| December 31, 2019 | ||
| Carrying amount | Fair value | |
| Financial assets | ||
| Other non-current assets (a – Level 2) | 21,522 | 20,877 |
| Financial liabilities | ||
| Long-term loans and others (b – Level 2) | 2,103,986 | 2,129,912 |
| Debentures (c – Level 1) | 8,463,812 | 11,393,618 |
| December 31, 2019 | |
| % | |
| Brazilian real interest | 4.30 – 5.26 |
| U.S. dollar interest | 1.97 – 2.05 |
| Euro | (0.38) – 0.38 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
IX. Fair Value - (cont’d)
3. Fair value hierarchy of financial instruments measured at fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly trans-action between market participants at the measurement date. The table below presents an analysis of financialinstruments measured at fair value. The various levels have been defined as follows:
? Level 1: quoted prices (unadjusted) in active market for identical instrument.? Level 2: inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly.? Level 3: inputs that are not based on observable market data (unobservable inputs).
The Company’s forward contracts and options are carried at fair value and are evaluated by observable inputsand therefore are concurrent with the definition of level 2.
| December 31 | |
| 2019 | |
| Forward contracts and options used for hedging the cash flow (Level 2) | (50,333) |
| Forward contracts and options used for economic hedging (Level 2) | (158,018) |
| Debt instruments (Level 1) | 15,788 |
| Other equity investment (Level 2) | 155,062 |
| Other non-current asset (Level 2) | 38,648 |
| Receivables financing (Level 2) | 78,948 |
| Call option in respect of business combination (Level 2) | 9,216 |
| Other (Level 2) | 13,722 |
| Financial Instrument | Fair value |
| Forward contracts | Fair value measured on the basis of discounting the difference between the stated forward price in the contract and the current forward price for the residual period until redemption using an appropriate interest rates. |
| Foreign currency options | The fair value is measured based on the Black&Scholes model. |
X. Related parties and related party transactions
1. Information on parent Company
| Company name | Registered place | Business nature | Registered capital (Thousand RMB) | Shareholding percentage | Percentage of voting rights |
| CNAC | Beijing, China | Production and sales of agrochemicals | 3,338,220 | 78.91% | 78.91% |
| Name of entity | Relationship with the Company |
| Alfa Agricultural Supplies S. | Joint venture of the Group |
| Innovaroma SA | Joint venture of the Group |
| Agribul Ltd. | Joint venture of the Group |
X. Related parties and related party transactions - (cont’d)
4. Information on other related parties
| Name of other related parties | Related party relationship |
| Jingzhou Sanonda holdings co. LTD | Common control |
| CNAC International Co., Ltd. (SPV Company) (Headquarter) | Common control |
| ChemChina Asset Management Co., Ltd. | Common control |
| ChemChina Information Center Co., Ltd. | Common control |
| Syngenta Crop Protection AG | Common control |
| Syngenta Supply AG | Common control |
| Syngenta Crop Protection LLC. | Common control |
| Syngenta Romania SRL | Common control |
| Syngenta France SAS | Common control |
| Syngenta Australia Pty Ltd | Common control |
| Syngenta Agro Sociedad Anonima | Common control |
| Syngenta Protecao De Cultivos LTDA | Common control |
| Syngenta Czech s.r.o. | Common control |
| Syngenta Espana S.A. | Common control |
| Syngenta India Limited | Common control |
| Syngenta Agro AG | Common control |
| Syngenta Polska Sp. z o.o. | Common control |
| Syngenta Agro, S.A. DE C.V. | Common control |
| Syngenta Italia S.p.A. | Common control |
| Syngenta Crop Protection Lda. | Common control |
| Syngenta Crop Protection NV | Common control |
| Syngenta Nordics A.S. | Common control |
| Syngenta Tarim Sanayi ve Ticaret A.S. | Common control |
| Syngenta Agro GmbH | Common control |
| Syngenta Kazakhstan Limited Liability Partnership | Common control |
| Syngenta Slovakia S.R.O. | Common control |
| Syngenta Hungary Kft. | Common control |
| Syngenta UK Ltd | Common control |
| Syngenta Ireland Ltd | Common control |
| China Bluestar Lehigh Engineering Corp. | Common control |
| China National Bluestar Co., Ltd. | Common control |
| China Bluestar Chengrand | Common control |
| Bluestar (Beijing) Chemical Machinery Co., Ltd. | Common control |
| Hangzhou (Torch) Xidoumen Membrane Industry Co., Ltd | Common control |
| Shandong Dacheng International Trading | Common control |
| Shandong Dacheng agricultural chemical co. LTD. | Common control |
| Southwest Chemical Research and Design Institute Co., Ltd. | Common control |
| Jiangsu Lianhai Testing Co., Ltd. | Common control |
| Beijing Guangyuan Yinong Chemical Co., Ltd. | Common control |
| Anhui Research Institute of Chemical Industry | Common control |
| Haohua engineering co. LTD. | Common control |
| Shanghai branch of China blue lianhai design and research institute. | Common control |
| Jiangsu Huaihe Chemical Co.,Ltd. | Common control |
| Zhonglan International Chemical Co., Ltd | Common control |
X. Related parties and related party transactions - (cont’d)
5. Transactions and balances with related parties
(1) Transactions with related parties
| Year ended December 31 | |||
| 2019 | 2018 (Restated) | ||
| Type of purchase | Related Party Relation-ship | ||
| Summary of purchase of goods/services: | |||
| Purchase of goods/services received | Common control under ChemChina | 1,449,486 | 1,570,819 |
| Purchase of fixed assets and other assets | Common control under ChemChina | 201,462 | 2,189,652 |
| Purchase of goods/services received | Joint venture | 3,938 | 7,950 |
| Summary of Sales of goods: | |||
| Sale of goods/ Service rendered | Common control under ChemChina | 752,984 | 572,242 |
| Sale of goods/ Service rendered | Joint venture | 153,310 | 157,803 |
| December 31 | December 31 | ||
| Type of leased assets | Lessee | 2019 | 2018 (Restated) |
| Building and Structures | Common control under ChemChina | - | 19 |
X. Related parties and related party transactions - (cont’d)
5. Transactions and balances with related parties - (cont'd)
(3) Guarantee
The Group as the guarantee receiver
| Guarantee provider | Amount of guaranteed loan | Inception date of guaranty | Maturity date of guaranty | Guaranty com-pleted (Y / N) |
| Parent company | 50,000 | 18/10/2017 | 18/10/2021 | Y |
| 300,000 | 20/11/2017 | 20/11/2022 | N | |
| 100,000 | 13/06/2018 | 12/06/2022 | Y | |
| 20,000 | 28/06/2019 | 18/06/2020 | N | |
| 20,000 | 01/03/2019 | 20/02/2020 | N | |
| 30,000 | 01/08/2019 | 30/07/2020 | N | |
| 50,000 | 01/06/2019 | 29/05/2020 | N | |
| 50,000 | 26/06/2019 | 27/06/2020 | N | |
| 64,000 | 19/02/2019 | 18/02/2020 | N | |
| 80,000 | 02/02/2019 | 30/01/2020 | N | |
| Ultimate controller of the Group | 160,000 | 27/05/2014 | 09/06/2021 | Y |
| Year ended December 31 | ||
| 2019 | 2018 (Restated) | |
| Remuneration of key management personnel | 48,952 | 46,734 |
| Directors Fee | 600 | 600 |
X. Related parties and related party transactions - (cont’d)
5. Transactions and balances with related parties - (cont'd)
(5) Receivables from and payables to related parties (including loans)
Receivable Items
| December 31 | December 31 | ||||
| 2019 | 2018 (Restated) | ||||
| Items | Related Party Relationship | Expected credit losses | Expected credit losses | ||
| Trade receivables | Common control under ChemChina | 153,197 | - | 39,420 | - |
| Trade receivables | Joint venture | 24,026 | - | 30,562 | - |
| Other receivables | Common control under ChemChina | 25,346 | - | 42,969 | - |
| Prepayments | Common control under ChemChina | 69,610 | - | 37,945 | - |
| Other assets | Joint venture | 314 | - | 7,543 | - |
| December 31 | December 31 | ||
| Items | Related Party Relationship | 2019 | 2018 (Restated) |
| Trade payables | Common control under ChemChina | 239,360 | 352,492 |
| Trade payables | Joint venture | 258 | 397 |
| Other payables | Common control under ChemChina | 23,195 | 21,636 |
| Other non-current liabilities * | Common control under ChemChina | 171,770 | 171,770 |
| December 31 | December 31 | ||
| Related Party | Related Party Relationship | 2019 | 2018 (Restated) |
| Parent | Acquisition of a subsidiary | 415,000 | - |
XI. Commitments and contingencies
1. Significant commitments
| December 31 | December 31 | |
| 2019 | 2018 (Restated) | |
| Investment in Fixed assets | 588,243 | 667,785 |
XI. Commitments and contingencies - (cont’d)
2. Commitments and Contingent Liabilities - (cont’d)
Claims against subsidiaries
In the ordinary course of business, legal claims are filed against subsidiaries, including lawsuits, regardingclaims for patent infringement. Inter alia, from time to time, the Company, similar to other companies operat-ing in the plant protection industry, is exposed to class actions for large amounts, which it must defend againstwhile incurring considerable costs, even if these claims, from the start, have no basis. In the estimation of theCompany’s management, based, inter alia, on opinions of its legal counsel regarding the prospects of the pro-ceedings, the financial statements include appropriate provisions where necessary to cover the exposure re-sulting from the claims.
Various immaterial claims have been filed against Group companies in courts throughout the world, in imma-terial amounts, for causes of action involving mainly employee-employer relations and various civil claims,for which the Company did not record a provision in the financial statements. Furthermore, claims were filedfor product liability damages, for which the Company has appropriate insurance coverage, such that the Com-pany’s exposure in respect thereof is limited to the amount its deductible requirement or the amount thereofdoes not exceed the deductible amount.
XII. Events subsequent to the balance sheet date
As part of the 2017 combination between the Company, CNAC and Solutions, whereas the Company issuedand transferred to CNAC 1,810,883,039 new share in exchange for the transfer of the entire share capital ofSolutions, the Company entered into a Performance Compensation Agreement with CNAC regarding Solu-tions’ aggregate net profit, after deducting non-recurring profit or loss, for the years 2017-2019 (hereinafter“Compensation period”).
In case Solutions’ fails to meet the aggregate net profit of the Compensation Period, CNAC will be required tocompensate the Company either through shares or cash according to a predetermined formula.
As of December 31, 2019, Solutions’ actual accumulative net profit for 2017-2019 was lower than the com-mitted.
As a result, CNAC will be required to return to the Company 102,432,280 shares out of the 1,810,883,039shares it received in exchange for 1 RMB, and transfer to the Company any dividends received in respect ofsuch shares during the Compensation Period free of charge. Following their receipt, these shares will be can-celed by the Company.
As a result, the total number of shares in issue will be reduced from 2,446,553,582 to 2,344,121,302, andCNAC’s effective ownership in the Company will go from 78.9% to 78.0%.
In addition to the profit commitment, and as required by the relevant regulations, a valuation of Solutions’ hasbeen performed in order to assess any potential requirement for asset impairment in respect of the value ofSolutions. Following the performance of such a valuation, it has been determined that no such impairment isrequired.
XII. Events subsequent to the balance sheet date (cont’d)
COVID-19 pandemic
During the first quarter of 2020, the global agrochemical market, amongst many others, was materially im-pacted by the unprecedented coronavirus pandemic, COVID-19. The pandemic, which started early in thequarter and now continues to rage throughout the rest of the world, has had a number of adverse effects onADAMA’s performance in the first quarter, the most significant of which were:
- In China, while operations at the Company’s Huai’An, Jiangsu site have continued without material in-terruption, operations at the Jingzhou site in Hubei province were temporarily suspended from late Januaryuntil the end of February due to the coronavirus outbreak in the province. Although operations at the site re-commenced at the beginning of March, restrictions on logistics remained, impacting the free transport ofgoods to and from the sites and to the ports;
- Renewed tightening of supply of raw materials and intermediates sourced from third parties in China andaround the world, as well as restrictions on global trading and sales through the Company’s global channels,as well as increased costs of global logistics;
- Lower demand in the Company’s US Consumer & Professional (non-crop) businesses, as retailers slowtheir restocking of products due to the coronavirus outbreak;
- Significant impacts on global currency markets, which have seen the rapid depreciation of many curren-cies against the US dollar, most notably the Brazilian Real, Australian dollar, Turkish Lira and Indian Rupee,as well as increased volatility in the Euro. These movements have negatively impacted the Company’s per-formance in the first quarter compared to the corresponding period last year.
The ongoing spread of the pandemic is expected to continue to negatively impact the performance of theCompany in the second quarter, and potentially beyond. The Company is actively managing its response to theoutbreak in order to ensure the safety of its employees and limit the impact on the Company’s performance.Actions being taken include extending and strengthening distribution channels, use of expedited transport op-tions where possible, working collaboratively with supply chain partners, and raising prices wherever possibleto accommodate the increased logistics costs.
XIII. Share-based Payments
1. In February 2019, the remuneration committee and the Company's Board of Directors (and the General
Meeting with respect to the CEO and Vice President who also serves as a director) approved the allocation of77,864,910 phantom warrants to officers and employees in accordance with the long-term phantom com-pensation plan (hereinafter - "the 2019 Plan"), out of which 75,814,897 phantom warrants were granted atgrant date. The allocation date is February 21, 2019. During the year, additional 1,206,081 phantom warrantswere granted.
The warrants will vest in four equal portions, where the first and second quarters are exercisable after twoyears, the third quarter after three years and the fourth quarter after four years from January 1, 2019. Thewarrants will be exercisable, in whole or in part, in accordance with the terms of the 2019 plan, and subjectto achieving financial targets as determined in the plan. The warrants will be exercisable until the end of2025.
Upon exercise of each warrant, the offeree will be entitled to receive cash payment equal to the differencebetween the base price as determined at the time of the grant and the closing price of one share the companyon the Shenzhen Stock Exchange, as it will be on the exercise date up to the ceiling that was determined un-der the plan.
The fair value of the granted warrants as aforesaid was estimated using the binomial pricing model.
The cost of the benefit embodied in the warrants that were allocated as aforesaid, based on the fair value atthe grant date, amounted to a total of approximately 186 million RMB. The liability at the end of the re-porting period was recorded according to the vesting period as determined in the plan, taking into accountthe extent of the service that the employees provided until that date.
| Statement of share based payments in the period | Phantom warrants |
| Total number of Phantom warrants at the beginning of the period | - |
| Total number of Phantom warrants granted in current period | 77,020,978 |
| Total number of Phantom warrants exercised in current period | - |
| Total number of Phantom warrants forfeited in current period | (9,794,562) |
| Total number of Phantom warrants at the end of the period | 67,226,416 |
| The exercise prices and the remainder of the contractual period for Phantom warrants outstanding at the end of period | RMB 9.93 – 10.85 6 years |
| The parameters used in implementing the model are as follows: | |
| Stock price (RMB) | 10.85 |
| Exercise increment (RMB) | 10.03/10.85 |
| Expected volatility | 43.97% |
| Risk-free interest rate | 3.06 % |
| Economic value as of February 21, 2019 (in thousands RMB) | 186,206 |
| The methods for the determination of the fair value of liabilities arising from cash-settled share-based payments | The binomial pricing model |
| Accumulated amount of liabilities arising from cash-settled share-based payments (in thousands RMB) | 65,937 |
| Expenses arising from cash-settled share-based payments in current period (in thousands RMB) | 65,023 |
XIII. Share-based Payments - (cont’d)
2. In September 2019, the remuneration committee and the Company's Board of Directors (and the General
Meeting with respect to the CEO and Vice President who also serves as a director) approved the cancellationof 45,503,271 warrants allocated under the 2017 Plan against the allocation of 28,258,248 warrants in ac-cordance with the long-term phantom compensation plan (hereinafter - "The Alternative Warrants" and "TheAlternative Plan"), The cancellation and allocation date is September 26, 2019. During the year, additional90,130 phantom warrants were granted.
The alternative warrants will vest in four equal portions, where the first quarter is exercisable after one year,the second quarter after two years, the third quarter after three years and the fourth quarter after four yearsfrom October 1, 2019. The warrants will be exercisable, in whole or in part, in accordance with the terms ofthe Alternative Plan, and subject to achieving financial targets as determined in the plan. The warrants willbe exercisable until October 1, 2026.
Upon exercise of each warrant, the offeree will be entitled to receive cash payment equal to the differencebetween the base price as determined at the time of the grant and the closing price of one share of the parentcompany on the Shenzhen Stock Exchange, as it will be on the exercise date up to the ceiling that was de-termined under the plan.
The fair value of the total granted alternative Warrants at the allocated date is equal to the fair value of thetotal warrants canceled from the 2017 plan.
The cost of the benefit embodied in the warrants that were allocated as aforesaid, based on the fair value atthe cancellation and allocation date, amounted to a total of approximately 69 million RMB. The liability inthe financial statements at the end of the reporting period was recorded at the fair value estimated using thebinomial option pricing model and by the vesting period from the original grant date of the 2017 plan to theend of the service period determined by the alternative plan, taking into account the extent of the service thatthe employees provided until that date and the stock price at the reporting date.
Statement of share based payments in the period
| Phantom warrants | |
| Changes in the number of 2017 Plan: | |
| Balance as of January 1st, 2019 | 48,101,391 |
| Granted in current period | - |
| Forfeited in current period | (2,598,120) |
| Canceled in current period | (45,503,271) |
| Total number of Phantom warrants at the end of the period | - |
| Changes in the number of The Alternative Plan: | |
| Balance as of January 1st, 2019 | - |
| Granted in current period | 28,348,378 |
| Forfeited in current period | (4,081,502) |
| Total number of Phantom warrants at the end of the period | 24,266,876 |
| The range of the exercise prices and the remainder of the contractual period for Phantom warrants outstanding at the end of period | RMB 9.43 6.75 years |
XIII. Share-based Payments - (cont’d)
| The parameters used in implementing the model are as follows: | |
| Stock price (RMB) | 9.23 |
| Exercise increment (RMB) | 9.43 |
| Expected volatility | 40.29% |
| Risk-free interest rate | 3.14 % |
| Economic value as of September 26, 2019 (in thousands RMB) | 68,836 |
| The methods for the determination of the fair value of liabilities arising from cash-settled share-based payments related to 2017 Plan | The binomial pricing model |
| Accumulated amount of liabilities arising from cash-settled share-based payments related to 2017 Plan (in thousands RMB) | - |
| Income arising from cancellation of cash-settled share-based payments related to 2017 plan in current period (in thousands RMB) | (64,356) |
| The methods for the determination of the fair value of liabilities arising from cash-settled share-based payments related to the alternative plan | The binomial pricing model |
| Accumulated amount of liabilities arising from cash-settled share-based payments related to the alternative plan (in thousands RMB) | 28,167 |
| Expenses arising from cash-settled share-based payments in current period related to the alternative plan (in thousands RMB) | 28,251 |
XIV. Other significant items - (cont'd)
1. Segment reporting - (cont’d)
Information regarding the results and assets and liabilities of each reportable segment is included below:
| Crop Protection | Intermediates and ingredients | Elimination among segments | Total | |||||
| Year ended December 31 | Year ended December 31 | Year ended December 31 | Year ended December 31 | |||||
| 2019 | 2018 (Restated) | 2019 | 2018 (Restated) | 2019 | 2018 (Restated) | 2019 | 2018 (Restated) | |
| Operating income from external cus-tomers | 24,905,674 | 24,134,355 | 2,657,565 | 2,732,953 | - | - | 27,563,239 | 26,867,308 |
| Inter-segment operating income | - | - | 1,428 | 719 | (1,428) | (719) | - | - |
| Interest in the profit or loss of as-sociates and joint ventures | 8,423 | 6,207 | 11,438 | 794 | - | - | 19,861 | 7,001 |
| Segment's results | 1,670,516 | 4,050,508 | (127,505) | 177,100 | - | - | 1,543,011 | 4,227,608 |
| Financial expenses, net | (1,665,885) | (570,392) | ||||||
| Gain (loss) from changes in fair value | 825,512 | (979,334) | ||||||
| Investment income | (251,066) | 621,255 | ||||||
| Profit before tax | 451,572 | 3,299,137 | ||||||
| Income tax expense | 174,531 | 851,261 | ||||||
| Net profit | 277,041 | 2,447,876 | ||||||
| Crop Protection | Intermediates and ingredients | Unallocated assets and liabilities | Total | |||||
| December 31 | December 31 | December 31 | December 31 | December 31 | December 31 | December 31 | December 31 | |
| 2019 | 2018 (Restated) | 2019 | 2018 (Restated) | 2019 | 2018 (Restated) | 2019 | 2018 (Restated) | |
| Total assets | 35,506,894 | 32,310,319 | 2,392,909 | 2,404,190 | 7,389,137 | 9,420,554 | 45,288,940 | 44,135,063 |
| Total liabilities | 4,682,416 | 4,800,772 | 286,109 | 300,843 | 17,948,750 | 16,288,586 | 22,917,275 | 21,390,201 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
XIV. Other significant items - (cont'd)
1. Segment reporting - (cont’d)
Geographic information
The following tables sets out information about the geographical segments of the Group’s operating incomebased on the location of customers (sales target) and the Group's non-current assets (including fixed assets,right-of-use assets, construction in progress, investment properties intangible assets and goodwill). In thecase of investment property, fixed assets and construction in progress, the geographical location of the assetsis based on its physical location. In case of intangible assets and goodwill, the geographical location of thecompany which owns the assets.
| Operating income from external cus-tomers | ||
| Year ended December 31 | ||
| 2019 | 2018 (Restated) | |
| Europe | 7,078,409 | 6,983,002 |
| North America | 5,418,509 | 5,038,834 |
| Latin America | 7,085,817 | 6,172,800 |
| Asia Pacific | 4,351,929 | 5,057,860 |
| Africa, Middle East (including Israel) and India | 3,628,575 | 3,614,812 |
| 27,563,239 | 26,867,308 | |
| Specified non-current assets | ||
| December 31 | December 31 | |
| 2019 | 2018 (Restated) | |
| Europe | 1,047,505 | 733,855 |
| Latin America | 2,298,654 | 2,065,089 |
| North America | 1,282,267 | 503,093 |
| Asia Pacific | 2,709,786 | 2,815,195 |
| Africa, Middle East (including Israel) and India | 11,512,105 | 11,659,701 |
| 18,850,317 | 17,776,933 | |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
XIV. Other significant items - (cont'd)
2. Calculation of Earnings per share and Diluted earnings per share
| Amount for the current period | Amount for the prior pe-riod | |
| Net profit from continuing operations attributable to ordinary shareholders | 277,041 | 2,447,876 |
| Thousands shares | Amount for the current period | Amount for the prior pe-riod |
| Number of ordinary shares outstanding at the beginning of the year | 2,446,554 | 2,341,856 |
| Add: weighted average number of ordinary shares issued during the year | - | 104,698 |
| Less: weighted average number of ordinary shares repurchased during the year | - | - |
| Weighted average number of ordinary shares outstanding at the end of the year | 2,446,554 | 2,446,554 |
| Amount for the current period | Amount for the prior pe-riod | |
| Calculated based on net profit attributable to ordinary shareholders | ||
| Basic earnings per share | 0.11 | 1.00 |
| Diluted earnings per share | N/A | N/A |
| Calculated based on net profit from continuing operations attributa-ble to ordinary shareholders: | ||
| Basic earnings per share | 0.11 | 1.00 |
| Diluted earnings per share | N/A | N/A |
| Calculated based on net profit from discontinued operations at-tributable to ordinary shareholders: | ||
| Basic earnings per share | N/A | N/A |
| Diluted earnings per share | N/A | N/A |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
XV. Notes to major items in the Company's financial statements
1. Cash at bank and on hand
| December 31 | December 31 | |
| 2019 | 2018 | |
| Deposits in banks | 1,395,994 | 2,005,313 |
| Other cash and bank | 27,057 | 52,940 |
| 1,423,051 | 2,058,253 |
| December 31, 2019 | |||||
| Book value | Provision for expected credit losses | ||||
| Amount | Percentage (%) | Amount | Percentage (%) | Carrying amount | |
| Account receivables assessed individually for impairment | 131,375 | 27 | 131,375 | 100 | - |
| Account receivables assessed collectively for impairment | 349,157 | 73 | 48 | - | 349,109 |
| 480,532 | 100 | 131,423 | 27 | 349,109 | |
| December 31, 2018 | |||||
| Book value | Provision for expected credit losses | ||||
| Amount | Percentage (%) | Amount | Percentage (%) | Carrying amount | |
| Account receivables assessed individually for impairment | 190,376 | 23 | 127,406 | 67 | 62,970 |
| Account receivables assessed collectively for impairment | 631,764 | 77 | 2,535 | - | 629,229 |
| 822,140 | 100 | 129,941 | 16 | 692,199 | |
| December 31, 2019 | |
| Within 1 year (inclusive) | 350,756 |
| Over 1 year but within 2 years | 74,635 |
| Over 2 years but within 3 years | 42,964 |
| Over 3 years but within 4 years | 2,634 |
| Over 4 years but within 5 years | 1,235 |
| Over 5 years | 8,308 |
| 480,532 |
XV. Notes to major items in the Company's financial statements - (cont'd)
2. Accounts receivable - (cont'd)
c. Addition, written-back and written-off of provision for expected credit losses during the period
| Year ended December 31, 2019 | |
| Balance as of January 1, | 129,941 |
| Addition during the year, net | 3,480 |
| Write back during the year | (1,998) |
| Write-off during the year | - |
| Exchange rate effect | - |
| Balance as of December 31 | 131,423 |
| Name | Closing balance | Proportion of Accounts re-ceivable (%) | Allowance of expected credit losses |
| Party 1 | 284,525 | 59 | - |
| Party 2 | 117,491 | 25 | 117,491 |
| Party 3 | 20,385 | 4 | 11 |
| Party 4 | 11,166 | 2 | - |
| Party 5 | 10,999 | 2 | - |
| 444,566 | 92 | 117,502 |
| December 31 | December 31 | ||
| 2019 | 2018 | ||
| Bank acceptance draft | 11,722 | 19,917 | |
| 11,722 | 19,917 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
XV. Notes to major items in the Company's financial statements - (cont'd)
4. Other Receivables
| December 31 | December 31 | |
| 2019 | 2018 | |
| Interest receivable | 64 | - |
| Dividends receivable | - | 1,808 |
| Other receivables | 13,987 | 29,940 |
| 14,051 | 31,748 |
| December 31 | December 31 | |
| Items/Invested companies | 2019 | 2018 |
| Hubei Bank | - | 1,808 |
| December 31 | December 31 | |
| 2019 | 2018 | |
| Other | 19,655 | 35,072 |
| Provision for expected credit losses | (5,668) | (5,132) |
| 13,987 | 29,940 |
| December 31, 2019 | |
| Within 1 year (inclusive) | 839 |
| Over 1 year but within 2 years | 13,679 |
| Over 2 years but within 3 years | 72 |
| Over 3 years but within 4 years | 10 |
| Over 4 years but within 5 years | - |
| Over 5 years | 5,055 |
| 19,655 |
XV. Notes to major items in the Company's financial statements - (cont'd)
4. Other Receivables - (cont'd)
(2) Other receivables - (cont'd)
c. Additions, recovery or reversal and written-off of provision for expected credit losses during the
period:
| Year ended De-cember 31, 2019 | ||
| Balance as of January 1, 2019 | 5,132 | |
| Addition during the period | 536 | |
| Written back during the period | - | |
| Write-off during the period | - | |
| Balance as of December 31, 2019 | 5,668 |
| Name | Closing balance | Proportion of other receivables (%) | Credit loss provision |
| Party 1 | 13,322 | 68 | - |
| Party 2 | 3,125 | 16 | 3,125 |
| Party 3 | 548 | 3 | 548 |
| Party 4 | 510 | 3 | - |
| Party 5 | 350 | 1 | 349 |
| 17,855 | 91 | 4,022 |
XV. Notes to major items in the Company's financial statements - (cont'd)
5. Long-term equity investments
| December 31, 2019 | December 31, 2018 | |||||
| Amount bal-ance | Impairment loss | Book value | Amount bal-ance | Impairment loss | Book value | |
| Invest in sub-sidiaries. | 16,390,275 | 18,864 | 16,371,411 | 15,939,826 | - | 15,939,826 |
| 16,390,275 | 18,864 | 16,371,411 | 15,939,826 | - | 15,939,826 | |
| Invested unit | Opening balance | Increase | Decrease | Closing bal-ance | Current provision Impairment loss | Balance pro-vision Im-pairment loss |
| Jingzhou Hongxiang chemical co. LTD. | 37,620 | - | 18,864 | 18,756 | 18,864 | 18,864 |
| Hubei Sanonda foreign trade co. LTD. | 11,993 | - | - | 11,993 | - | - |
| Jiangsu Anpon Electro-chemical co. LTD. | - | 450,449 | - | 450,449 | - | - |
| ADAMA Agricultural Solutions Ltd | 15,890,213 | - | - | 15,890,213 | - | - |
| 15,939,826 | 450,449 | 18,864 | 16,371,411 | 18,864 | 18,864 |
| Year ended December 31, 2019 | Year ended December 31, 2018 | |||
| Revenue | Operating costs | Revenue | Operating costs | |
| Main operations | 1,338,579 | 969,902 | 3,008,298 | 1,959,089 |
| Other operations | 67,130 | 54,763 | 103,855 | 88,984 |
| 1,405,709 | 1,024,665 | 3,112,153 | 2,048,073 | |
XV. Notes to major items in the Company's financial statements - (cont'd)
7. Notes to items in the cash flow statements
(1) Other cash received relevant to operating activities
| Year ended December 31, 2019 | Year ended De-cember 31, 2018 | |
| Interest income | 26,114 | 25,827 |
| Government subsidies | 4,414 | 2,628 |
| Other | 3,054 | 3,220 |
| 33,582 | 31,675 |
| Year ended Decem-ber 31, 2019 | Year ended Decem-ber 31, 2018 | |
| Professional services | 86,915 | 71,188 |
| Transportation and Commissions | 51,660 | 77,477 |
| Other | 26,203 | 24,220 |
| 164,778 | 172,885 |
| Year ended Decem-ber 31, 2019 | Year ended Decem-ber 31, 2018 | |
| Deposit for issuing bills payables | 39,886 | - |
| Year ended De-cember 31, 2019 | Year ended Decem-ber 31, 2018 | |
| Repurchase of B shares | - | 393,025 |
| Deposit for issuing bills payables | 14,003 | 48,340 |
| Other | 466 | 8,610 |
| 14,469 | 449,975 |
XV. Notes to major items in the Company's financial statements - (cont'd)
8. Supplementary information to cash flow statement
| Year ended December 31 | ||
| 2019 | 2018 | |
| a. Reconciliation of net profit to net cash flows generated from operating activities: | ||
| Net profit | (487,973) | 323,396 |
| Add: Assets impairment loss | 147,421 | 75,080 |
| Credit impairment loss | 2,018 | 116,171 |
| Depreciation of fixed assets | 198,193 | 218,783 |
| Amortization of intangible assets | 4,694 | 5,516 |
| Amortization of-right-of use assets | 430 | N/A |
| Loss on disposal of fixed assets, intangible assets and other long-term assets | 572 | 1,457 |
| Financial expenses | 12,113 | (21,476) |
| Investment gains | (2,583) | (1,808) |
| Decrease (increase) in deferred income tax assets | (44,146) | (21,533) |
| Decrease (increase) in inventory | 43,479 | 25,153 |
| Increase in accounts receivable from operating activities | 336,662 | 153,415 |
| Increase in payables from operating activities | 10,932 | 199,429 |
| Net cash flows generated from operating activities | 221,812 | 1,073,583 |
| b. Net increase in cash and cash equivalents | ||
| Closing balance of cash | 1,395,994 | 2,005,313 |
| Less: Opening balance of cash | 2,005,313 | 1,864,003 |
| Net increase in cash and cash equivalents | (609,319) | 141,310 |
XV. Notes to major items in the Company's financial statements - (cont'd)
9. Related parties and related parties transactions
(1) Information on parent Company
| Company name | Registered place | Business nature | Registered cap-ital (Thousand) | Shareholding percentage (%) | Percentage of voting rights (%) |
| CNAC | Beijing, China | Production and sales of agrochemicals | 3,338,220 | 78.91 | 78.91 |
| Year ended December 31 | |||
| 2019 | 2018 | ||
| Summary of Purchase of goods/services received: | Related Party Relationship | ||
| Purchase of goods/services received | Common control under ChemChina | 12,210 | 15,733 |
| Purchase of fixed assets and other assets | Common control under ChemChina | 192,489 | 74,308 |
| Purchase of goods/services received | Subsidiary | 125,800 | 220,671 |
| Summary of Sales of goods: | |||
| Sale of goods | Subsidiary | 514,469 | 864,946 |
| Sale of raw materials | Subsidiary | 2,633 | 54,999 |
| Sale of fixed assets | Subsidiary | - | 1,528 |
XV. Notes to major items in the Company's financial statements - (cont'd)
9. Transactions and balances with related parties - (cont'd)
(3) Transactions with related parties - (cont'd)
b. Leases
The Company as lessor
| December 31 | December 31 | |||
| Type of leased assets | Lessee | 2019 | 2018 | |
| Building and Structures | Common control under ChemChina | - | 19 |
| Amount of guaranteed loan | Inception date of guaranty | Maturity date of guaranty | Guaranty completed (Y/ N) | ||||
| Subsidiary | 20,000 | 26/12/2019 | 25/12/2020 | N | |||
| 40,000 | 10/10/2019 | 09/10/2020 | N | ||||
| 50,000 | 30/12/2019 | 25/12/2020 | N | ||||
| 50,000 | 12/12/2019 | 09/12/2020 | N | ||||
| 50,000 | 21/11/2019 | 18/11/2020 | N | ||||
| 50,000 | 19/11/2019 | 18/11/2020 | N |
| Guarantee provider | Amount of guaranteed loan | Inception date of guaranty | Maturity date of guaranty | Guaranty completed (Y/ N) | |||
| Parent | 300,000 | 20/11/2017 | 20/11/2022 | N | |||
| 50,000 | 18/10/2017 | 18/10/2021 | Y | ||||
| 100,000 | 13/06/2018 | 12/06/2022 | Y | ||||
| Ultimate controller | 160,000 | 27/05/2014 | 09/06/2021 | Y |
XV. Notes to major items in the Company's financial statements - (cont'd)
9. Transactions and balances with related parties - (cont'd)
(3) Transactions with related parties - (cont'd)
d. Receivables from and payables to related parties (including loans)
Receivable Items
| December 31 | December 31 | ||||
| 2019 | 2018 | ||||
| Items | Related Party Rela-tionship | Book Balance | Expected credit losses | Book Balance | Expected credit losses |
| Trade receivables | Subsidiary | 424,182 | 117,491 | 753,369 | 113,245 |
| Prepayments | Common control under ChemChina | - | - | 298 | - |
| December 31 | December 31 | ||
| Items | Related Party Relationship | 2019 | 2018 |
| Trade payables | Common control under ChemChina | 9,195 | 184 |
| Other payables | Subsidiary | 163,877 | 105,164 |
| Other payables | Common control under ChemChina | 97 | 240 |
| Other non-current liabili-ties* | Common control under ChemChina | 171,770 | 171,770 |
| Year ended December 31 | |||
| Related Party | Related Party Relationship | 2019 | 2018 |
| Parent | Acquisition of a subsidiary | 415,000 | - |
ADAMA Ltd. Semi-Annual Report 2019
Supplementary information(Expressed in RMB '000)
1. Extraordinary Gain and Loss
| Year ended | |
| December 31, 2019 | |
| Disposal of non-current assets | 127,073 |
| Government grants recognized through profit or loss | 27,410 |
| Profit of subsidiaries generated before combination date of a business combination involving enterprises under common control | 38,027 |
| Recovery or reversal of expected credit losses which is assessed individually during the years | 25,821 |
| Profit or loss arising from contingencies other than those related to normal operating business | (45,989) |
| Other non-operating income or expenses other than the above | (40,992) |
| Other profit or loss that meets the definition of non-recurring profit or loss | (574,500) |
| Tax effect | 110,132 |
| (333,018) |
| Profit during the reporting period | Weighted average rate of return on net assets (%) | ||||
| Basic EPS (RMB/share) | Diluted EPS (RMB/share) | ||||
| Net profit attributable to ordinary shareholders of the Company | 1.23% | 0.11 | N/A | ||
| Net profit after deduction of extraordinary gains/losses attributable to ordinary shareholders of the Company | 2.72% | 0.25 | N/A | ||
ADAMA Ltd. Semi-Annual Report 2019
Supplementary information - (cont'd)
(Expressed in RMB '000)
3. Supplementary information for retrospective restatement
During March 2019, the acquisition of Anpon, a wholly-owned subsidiary of CNAC, was successfullycompleted. On March 29, 2019, the entire share capital of Anpon was transferred from CNAC to theCompany, in return for cash installments of 415 million RMB. The transaction was considered as abusiness combination under common control.
The restated consolidated balance sheets as at January 1, 2018 and December 31, 2018 are as follows:
| January 1, | December 31 | December 31 | |
| 2018 | 2018 | 2019 | |
| (Restated) | (Restated) | ||
| Current assets | |||
| Cash at bank and on hand | 7,984,102 | 6,400,190 | 4,348,588 |
| Financial assets at fair value through profit or loss | 23,000 | 46,095 | 29,510 |
| Derivative financial assets | 455,153 | 517,726 | 490,113 |
| Bills receivables | 29,927 | 40,569 | 26,000 |
| Accounts receivable | 5,229,446 | 6,573,100 | 8,004,157 |
| Receivables financing | 282,645 | 73,216 | 78,948 |
| Prepayments | 298,036 | 410,506 | 377,808 |
| Other receivables | 1,083,330 | 1,079,332 | 1,195,253 |
| Inventories | 7,669,358 | 9,433,876 | 9,932,654 |
| Assets held for sale | 403,297 | - | - |
| Non-current assets due within one year | 46 | 48 | - |
| Other current assets | 614,957 | 660,806 | 659,195 |
| Total current assets | 24,073,297 | 25,235,464 | 25,142,226 |
| Non-current assets | |||
| Long-term receivables | 192,968 | 157,600 | 170,896 |
| Long-term equity investments | 102,384 | 108,350 | 133,098 |
| Other equity investments | 91,090 | 91,559 | 155,062 |
| Investment properties | 4,408 | 4,094 | 3,771 |
| Fixed assets | 6,872,164 | 7,263,866 | 6,939,610 |
| Construction in progress | 841,100 | 487,204 | 788,386 |
| Right-of-use assets | N/A | N/A | 536,034 |
| Intangible assets | 4,102,983 | 5,741,962 | 5,835,785 |
| Goodwill | 3,890,097 | 4,085,945 | 4,511,193 |
| Deferred tax assets | 870,030 | 741,737 | 826,696 |
| Other non-current assets | 209,815 | 217,282 | 246,183 |
| Total non-current assets | 17,177,039 | 18,899,599 | 20,146,714 |
| Total assets | 41,250,336 | 44,135,063 | 45,288,940 |
ADAMA Ltd. Semi-Annual Report 2019
Supplementary information - (cont'd)(Expressed in RMB '000)
3. Supplementary information for retrospective restatement - (cont'd)
| January 1, | December 31 | December 31 | |
| 2018 | 2018 | 2019 | |
| (Restated) | (Restated) | ||
| Current liabilities | |||
| Short-term loans | 3,080,912 | 1,122,774 | 2,009,882 |
| Derivative financial liabilities | 789,050 | 1,451,670 | 691,475 |
| Bills payable | 311,557 | 445,533 | 321,674 |
| Accounts payable | 3,983,018 | 4,627,936 | 4,205,901 |
| Contract liabilities | 781,374 | 848,402 | 664,228 |
| Employee benefits payable | 1,013,830 | 944,175 | 1,211,713 |
| Taxes payable | 437,457 | 616,780 | 369,038 |
| Other payables | 1,062,400 | 1,197,579 | 1,049,594 |
| Non-current liabilities due within one year | 448,504 | 301,814 | 1,066,243 |
| Other current liabilities | 466,078 | 578,184 | 355,243 |
| Total current liabilities | 12,374,180 | 12,134,847 | 11,944,991 |
| Non-current liabilities | |||
| Long-term loans | 514,320 | 235,819 | 927,159 |
| Debentures payable | 7,777,410 | 7,649,098 | 7,965,942 |
| Lease liabilities | N/A | N/A | 406,358 |
| Long-term payables | 23,909 | 25,106 | 29,021 |
| Long-term employee benefits payable | 652,071 | 620,646 | 738,854 |
| Provisions | 186,020 | 132,351 | 176,822 |
| Deferred tax liabilities | 224,613 | 392,404 | 323,304 |
| Other non-current liabilities | 225,586 | 199,930 | 404,824 |
| Total non-current liabilities | 9,603,929 | 9,255,354 | 10,972,284 |
| Total liabilities | 21,978,109 | 21,390,201 | 22,917,275 |
| Shareholders' capital | |||
| Share capital | 2,446,554 | 2,446,554 | 2,446,554 |
| Capital reserve | 13,331,312 | 13,324,491 | 12,903,168 |
| Other comprehensive income | (104,048) | 1,090,827 | 1,192,681 |
| Special reserves | 9,349 | 13,536 | 14,927 |
| Surplus reserve | 207,823 | 240,162 | 240,162 |
| Retained earnings | 3,381,237 | 5,629,292 | 5,574,173 |
| Total shareholders’ equity | 19,272,227 | 22,744,862 | 22,371,665 |
| Total liabilities and shareholders’ equity | 41,250,336 | 44,135,063 | 45,288,940 |
ADAMA Ltd. Semi-Annual Report 2019
Section XII - Documents Available for Reference(I) Financial Statements carried with signatures and seals of Legal Representative and Accounting Principal, as well asHead of the Accounting Organ;(II) Original of the Auditor’s Report with the seals of accounting firm and the signatures and seals of certified publicaccountants;(III) In the reporting period, originals of all documents of the Company ever disclosed publicly in media designated byChina Securities Regulatory Commission as well as the originals of all the public notices were deposited in the office ofthe Company.
ADAMA Ltd.Legal Representative：Ignacio DominguezApril 27, 2020