ADAMA Ltd. Annual Report 2020
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ADAMA LTD.ANNUAL REPORT 2020
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 differentiated products,delivering solutions that meet local farmer and customer needs in over 100 countries globally.For further important additional information and details, please refer to the Annex.
March 2021
ADAMA Ltd. Annual Report 2020
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 difference betweenplans, forecasts and commitments.
? The Company has described its future development strategies, work plan for 2021 and possible risks in “IX.
Outlook of future development of the Company” in Section IV. The major risks of the Company include, amongothers, exchange rate fluctuations; exposure to interest rate, Israel CPI and NIS exchange rate fluctuations;fluctuations in raw material inputs and prices, and in sales. Investors and other relevant people are cautioned tobe sufficiently mindful of investment risks. For the complete “Risk factors and countermeasures” of the Company,please see the relevant section below.
? The pre-plan of the dividend distribution approved by the meeting of the Board of Directors on March 29, 2021
refers to the total outstanding 2,329,811,766 shares of the Company which are entitled to the dividends as of therecord day when the profit distribution proposal is implemented as the basis for the distribution as cash dividendof RMB 0.16 (before tax) per 10 shares, to all the shareholders of the Company. No shares will be distributed asshare 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 discrepanciesbetween the two versions, the Chinese version shall prevail.
ADAMA Ltd. Annual Report 2020
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 ...... 16
Section V - Significant Events ...... 58
Section VI. - Change in Shares & Shareholders ............................................................ 92
Section VII. - Preferred stock ........................................................................................ 105
Section VIII. - Convertible Bonds.................................................................................. 106
Section IX. - Directors, Members of the Supervisory Board, ..................................... 107
Section X. - Corporate Governance.............................................................................. 118
Section XI - Corporate Bonds ...... 125
Section XII - Financial Report ...... 126
Section XIII - Documents Available for Reference ...... 254
ADAMA Ltd. Annual Report 2020
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., 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. |
| CSRC | China Securities Regulatory Commission |
| SZSE | Shenzhen Stock Exchange |
| SASAC | State Assets Supervision and Administration Commission of China |
| Syngenta Group | Syngenta Group Co., Ltd., the controlling shareholder of the Company as of June 15, 2020, a wholly-owned subsidiary of CNAC |
| Report | This 2020 Annual Report |
| Financial Report | The Financial Reports for the year 2020, as contained in this Report |
| Reporting Period, this Period, Current Year | Year 2020 |
| 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 2020
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 | |||
| 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 |
| Board Secretary | Securities Affairs Representative | Investor Relations Manager | |
| Name | Guo Zhi | Wang Zhujun | 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 2020
IV. Company registration and alteration
| 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) | During the Reporting Period, the controlling shareholder of the Company changed from CNAC to Syngenta Group, a wholly-owned subsidiary of CNAC. For additional information, please refer to the Announcement on the Completion of the Registration of the Transfer of State-owned Shares held by the Controlling Shareholder (Announcement No. 2020-33) disclosed by the Company on June 17, 2020. |
| 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 | Mou Zhengfei and Ma Renjie |
ADAMA Ltd. Annual Report 2020
VI. Main accounting and financial resultsWhether the Company performed any retroactive adjustments to or restatement of its accounting data
□ Yes √ No
| 2020 | 2019 | +/- (%) | 2018 | |
| Operating revenue (RMB’000) | 28,444,833 | 27,563,239 | 3.20% | 26,867,308 |
| Net profit attributable to the shareholders (RMB’000) | 352,753 | 277,041 | 27.33% | 2,447,876 |
| Net profit attributable to the shareholders, excluding non-recurring profit and loss (RMB’000) | 287,724 | 610,059 | -52.84% | 859,448 |
| Net cash flows from operating activities (RMB’000) | 2,023,015 | 843,487 | 139.84% | 2,299,153 |
| Basic EPS (RMB/share) | 0.1505 | 0.1132 | 32.89% | 1.0005 |
| Diluted EPS (RMB/share) | N/A | N/A | N/A | N/A |
| Weighted average return on equity | 1.61% | 1.23% | 0.38% | 11.66% |
| 31.12.2020 | 31.12.2019 | +/- (%) | 31.12.2018 | |
| Total assets (RMB’000) | 46,801,034 | 45,288,940 | 3.34% | 44,135,063 |
| Net assets attributable to the shareholders (RMB’000) | 21,353,752 | 22,371,665 | -4.55% | 22,744,862 |
ADAMA Ltd. Annual Report 2020
3. Explanation on the differences in accounting data
□ Applicable √ Not applicable
VIII. Main Financial results by quarter
Unit: RMB’000
| Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | |
| Operating revenue | 6,782,243 | 7,338,797 | 6,768,583 | 7,555,210 |
| Net profit attributable to the shareholders | (16,707) | 221,356 | 20,409 | 127,695 |
| Net profit attributable to the shareholders excluding non-recurring profit and loss | 16,813 | 202,960 | 9,876 | 58,075 |
| Net cash flows from operating activities | (384,708) | 1,619,239 | 157,469 | 631,015 |
| Item | 2020 | 2019 | 2018 | Note |
| Gains/losses on the disposal of non-current assets (including the offset part of asset impairment provisions) | 69,710 | 127,073 | 1,959,005 | 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) | 41,871 | 27,410 | 21,089 | |
| Profit or loss of subsidiaries generated before combination date of a business combination involving enterprises under common control | - | 38,027 | 45,414 | |
| Profit or loss arising from contingencies other than those related to normal operating business | - | (45,989) | - | |
| Recovery or reversal of provision for bad debts which is assessed individually during the years | 26,102 | 25,821 | 17,303 | |
| Other non-operating income and expenses other than the above | 19,989 | (40,992) | (11,719) | |
| Other profit or loss that meets the definition of non-recurring profit or loss | (62,855) | (574,500) | - | Mainly provision for early retirement plan of employees at the Company’s Israeli manufacturing facilities. |
| Less: Income tax effects | 29,788 | (110,132) | 442,664 | |
| NCI (after tax) | - | - | ||
| Total | 65,029 | (333,018) | 1,588,428 |
ADAMA Ltd. Annual Report 2020
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 the Public-Non-Recurring Profit and Loss, and reclassified any non-recurring profit/loss item given as an example in the said explanatoryannouncement to recurrent profit/loss
□ Applicable √ Not applicable
No such cases during the Reporting Period.
ADAMA Ltd. Annual Report 2020
Section III - Business Profile
I. Main business of the Company during the Reporting Period
The Company is a corporation incorporated in the People's Republic of China.The Group is a global leader in crop protection, engaging in the development, manufacturing and commercialization of awide range of crop protection products, that are largely off-patent. The Group provides solutions to farmers to combatweeds, insects and disease, and sells its products in approximately 100 countries, through approximately 60 subsidiariesworldwide.The Group's business model integrates end-customer access, regulatory expertise, state-of-the art global R&D, productionand formulation facilities, thereby providing the Group a significant competitive edge and allowing it to launch new anddifferentiated products that meet local farmers and customer 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.The Group also utilizes its expertise to adapt such products also for the development, manufacturing and commercializationof similar products for non-agricultural purposes (Consumer and Professional 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 as Inter-mediates 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.Distinctive member of the Syngenta GroupIn June 2020, ADAMA Group became a distinctive member of the newly established Syngenta Group, a world leader inagricultural inputs, spanning crop protection, seeds, fertilizers, additional agricultural and digital technologies, as well as anadvanced distribution network in China.ADAMA joined this newly-formed ag-industry leader through the contribution of most of the stake that ChemChina indirectlyowned in the Company into Syngenta Group. The Syngenta Group is owned by ChemChina, and as such, ChemChinaremains the Company’s ultimate controlling shareholder.ADAMA continues to be headquartered in Israel and remains traded on the Shenzhen Stock Exchange, while maintainingits unique brand and positioning.Performance in the context of general crop protection market environmentIn 2020, the global agrochemical market saw resilient growth, with robust demand for crop protection products despite theongoing COVID-19 pandemic, demonstrating the industry’s importance in the global food production chain.Crop prices mostly declined in the first half of the year as the demand for some agricultural crops, especially corn, cotton,sugar and some fresh fruits and vegetables, softened in the first half of the year as a result of widespread pandemic-relatedshutdowns. Crop prices improved significantly in the second half of the year as crop demand recovered, fueled bypandemic-related food security concerns, the recovery of oil prices (benefiting corn and sugar prices) and the recovery intextile demand (benefiting cotton prices). The spike in agricultural import demand is led by China, the world’s largestagricultural importer, which is rebuilding its crop reserves. Dryness in Latin America due to the La Ni?a weather event also
ADAMA Ltd. Annual Report 2020
pushed crop prices higher in the latter part of 2020.Overall, worldwide crop protection volumes were strong in 2020, driven by increased global planted acreages, higher pestpressure and improved weather conditions in key growing regions. Growth was also bolstered by demand for cropprotection products in developing markets such as India, where pandemic-induced labor shortages encouraged higher useof herbicides.The non-crop industry, especially the consumer segment, saw strong demand as COVID-19 lockdowns drove investmentsin the Home & Garden segments.During most of 2020, prices of active ingredients in China declined as the cost of oil and related basic chemicals decreasedsharply at the initial onset of the pandemic. However, towards the end of the year, prices began to increase due to therecovery of oil prices alongside higher raw material costs. This, combined with stronger demand for crop protection productsand a strengthening of the RMB when compared to the US dollar, has contributed to a recent increase in the procurementcosts of raw materials, intermediates and active ingredients, a trend which is continuing into 2021. This increase inprocurement costs, if sustained for an extended period, may challenge the Company’s gross margin over the comingquarters. The Company actively manages its procurement and supply chain activities in order to mitigate these higherprocurement costs, and adjusts its pricing wherever possible to compensate. However, intense competitive dynamics inmarkets worldwide may constrain the Company's ability to fully and timely pass on these increases in procurement costs.2020 saw significant volatility in global currency markets, with the rapid depreciation of many currencies against the USdollar in the first half of the year, most notably the Brazilian Real, Australian dollar, Turkish Lira and Indian Rupee, as wellas volatility in the Euro. These trends, although stabilizing to some extent in the second half of the year, impacted thefinancial performance of multi-national companies throughout the world, including the Company. It should be noted thatdeveloped market currencies have strengthened more than those in developing markets where the Company isexperiencing its strongest growth, another trend which is continuing into 2021. Furthermore, the relatively strong currenciesof the Company’s two main production hubs, Israel and China, have brought, and are expected to continue to bring, upwardpressure on manufacturing costs in USD terms.Crop Protection ProductsThe 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.Herbicides - During cultivation, crops are exposed to various weeds that grow in their environment and compete for water,light and nutrients. Herbicides are designed to prevent or stunt the development of such weeds to allow the cultivated cropto develop optimally throughout the different stages of its growth, and therefore to reach optimum yield. The herbicides soldby the Company are both selective (do not affect or harm the crop itself) and non-selective. The best-selling herbicides arethose designed to protect soy, corn, cereals, rice and cotton.Insecticides - Insecticides are designed to control various types of insects and pests in a selective manner (without harmingthe crop itself). The best-selling insecticides are designed to protect fruits and vegetables, corn, cotton and soy.Fungicides - Fungicides are designed to combat various diseases and parasitical fungi. In general, when weather conditionsin the agricultural season are dry, the prevalence of crop diseases is much smaller, reducing demand for such products.Crops in which fungicides are used most frequently are cereals, fruit, vegetables, soy, grapevines and rice.
ADAMA Ltd. Annual Report 2020
Main production processes, and upstream and downstream elementsProduction - The Group's manufacturing sites house two types of facilities: (1) dedicated facilities designed to produce asingle product or product family; and (2) multi-purpose facilities - comprising the majority of the Group's facilities whereseveral kinds of products may be manufactured. The latter provide the Group with manufacturing flexibility and enable it toprepare for the manufacturing of new products, subject to maintaining and ensuring quality standards.Value chain - Generally, the value chain between the Group and the end customer who ultimately purchases its productsaround the world may be characterized as follows: Importer / Formulator -> Distributor -> Retailer -> Farmer. Due to theexpansion of the Company's activities and the acquisition and establishment of subsidiary companies in different regionsof the world in recent years, in most cases companies owned by the Group carry out the role of the formulator and/or theimporter, and occasionally also the role of the distributor and sometimes the retailer. In the past, farmers stored the inventoryin their own warehouses, but this trend has changed and today most of inventories are stored either in the importers' or thedistributors’ warehouses.Raw materials and suppliers - The Group procures and manufactures a large variety of raw materials, which may not beuniformly characterized, together with complementary raw materials or intermediates required to produce the finishedproducts and/or their formulations. The most significant element of the Group's cost of sales is the cost of raw materialsused in its production processes, which is primarily influenced by global changes in the supply of raw materials, and, to acertain extent, extreme fluctuations in international oil prices. Similarly, the cost of purchasing finished products for sale tothird parties is also significant. The Group purchases its raw materials from various suppliers, primarily in China, Europe,the U.S.A., and South America. The Group's supplier network has not changed significantly over the past few years, whilesuppliers from China are still a main source for raw material, due to the wide range of products and competitive pricesoffered by them, together with the improved quality of the products that are examined by the Group through product qualitytesting.Customers - The Company’s customers are numerous and are distributed across many countries throughout the world,although in some countries, sales are made to a relatively small number of customers. Generally, the Group's products areprimarily sold to regional and local distributors in the different countries, who in turn market them to end customers in thatcountry, some of whom are large cooperatives. The Group also sells, inter alia, to multinational companies and to otherproducers that manufacture end-use products based on active ingredients sourced from the Group's. The vast majority ofsales are made to returning customers, typically without long-term supply contracts, as is customary in the industry. In mostcountries, purchases are made without long-term advance orders, while in some areas they are made based on (non-binding) rolling sales forecasts and actual orders. The Group's actual production is based on these forecasts.Distribution and marketing - The Group's marketing operations are global and designed to consistently increase profits andmarket share. The Group markets its products directly through local representation in all of the largest agricultural marketsworldwide by means of local salespeople and commercial activities directed at the distributors, agricultural consultants andfarmers.General environment and the effect of external factors on the Company’s operationsMajor trends, events and key developments in the Group's macro-economic environment may materially impact the Group’sbusiness results and development. The impact of these factors may differ by geographic region and the different productsof the Group. Since the Group offers one of the a widest and most diverse product portfolios of crop protection productsand since it operates in many geographic regions, the aggregate effect of these factors in any given year, and during thecourse thereof, is not uniform and may sometimes be mitigated by offsetting effects. The activities and results of the Groupare further subject to, and affected by, certain global, localized and other factors, such as: demographic changes; economicgrowth and rising standards of living; agricultural commodity prices; significant fluctuations in raw material costs and global
ADAMA Ltd. Annual Report 2020
energy prices; development of new crop protection technologies; patent expiries and growth in volumes of off-patentproducts; the global agricultural markets and volatile weather conditions; regulatory changes; government policies; worldports, international monetary policies and the financial markets.For further important additional information and details, please refer to the Annex.II. Significant changes to main assets
1. Significant changes to main assets
| Main Assets | Significant Change |
| Stock rights/Equity assets | Decrease due to the acquisition of Alfa, a previous joint venture of the Company, after which it became a subsidiary of the Company. |
| Fixed assets | No significant change |
| Intangible assets | No significant change |
| Construction in progress | Investments in relocation projects |
| 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 | 18,577,615 | Israel and globally | Corporate Governance | Corporate Governance | 201,814 | 87% | No |
| Other explanations | ||||||||
ADAMA Ltd. Annual Report 2020
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 and formulations. In parallel, the Group’s global scale, registration expertise andmanufacturing 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 with
extensive market presence. The Group enjoys broad geographic diversification by selling in over 100 countrieswith a balanced regional split, as evidenced by its 2020 revenue breakdown of approximately 25% in Europe,26% in Latin America, 19% in North America, 16% in Asia Pacific, and 14% in India, the Middle East and Africa.This regional 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 2020 sales.? Unique Positioning and Access to China. The Group believes that the foundation provided by the integrationof Adama Solutions with the operational and commercial infrastructure of the Company in China, together with itsunique relationship with its ultimate controlling shareholder, ChemChina, provides it with a clear advantage inpenetrating the Chinese market, one of the largest and fastest growing agricultural markets in the world. TheGroup is one of the only global crop protection providers with a significant integrated commercial and operationalinfrastructure within China. The Group intends to leverage this infrastructure to pursue a leading position in theChinese crop protection market and capitalize on the growing importance of high-quality global brands in China.With its activities in China also forming part of Syngenta Group China, the Group believes it is uniquely positionedto capitalize on the trend toward consolidation within the high-growth, highly fragmented Chinese crop protectionmarket. In addition to helping it become a leader in the Chinese crop protection market, the integration of theCompany’s China-based manufacturing facilities into the Group’s global manufacturing operations provides it withthe ability to more effectively develop and commercialize advanced, differentiated products, as well as benefitfrom improved cost positions in key molecules, enhance the optimization of its global supply chain over time, drivegreater efficiency throughout the organization, and secure both revenue growth as well 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 initiatives for the sale and distribution of finished products, raw materials supply andprocurement, logistics and supply chain, as well as in the R&D and products’ registration fields.? Vertically Integrated Business with Global Scale. The Group is one of the few off-patent crop protection
providers that is active across virtually the entire value chain, from worldwide marketing, sales and distribution, toregistration, 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 85% 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 protection solutions.In the last five years, the Group’s registration network of highly-skilled professionals has obtained approximately1,000 new product registrations. These capabilities are increasingly important as regulatory requirementscontinue to increase globally. The Group’s sales and marketing infrastructure is characterized by its local sales
ADAMA Ltd. Annual Report 2020
forces in each of its strategic markets, who build strong relationships with local distributors and with the end users,the farmers, to better understand their needs. This drives demand at the wholesale, retail and farmer level andprovides 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 2020
Section IV - Performance Discussion and Analysis
I. Overview
For general crop protection market environment, please refer to I. Main business of the Company during the ReportingPeriod of Section III above.
| Item | Reporting Period (000’RMB) | Same period of last year as previously reported (000’RMB) | +/-% |
| Revenues | 28,444,833 | 27,563,239 | 3.20% |
| Pre-Tax Profits | 575,212 | 451,572 | 27.38% |
| Pre-tax profit margin | 2.0% | 1.6% | - |
| Net income | 352,753 | 277,041 | 27.33% |
| Net income margin | 1.2% | 1.0% | - |
| EBITDA | 4,088,571 | 4,195,328 | -2.54% |
| EBITDA margin | 14.4% | 15.2% | - |
| Item | Reporting Period (000’USD) | Same period of last year as previously reported (000’USD) | +/-% |
| Revenues | 4,127,751 | 3,996,773 | 3.28% |
| Pre-Tax Profits | 82,620 | 68,337 | 20.90% |
| Pre-tax profit margin | 2.0% | 1.6% | - |
| Net income | 51,068 | 42,790 | 19.35% |
| Net income margin | 1.2% | 1.0% | - |
| EBITDA | 592,480 | 610,440 | -2.94% |
| EBITDA margin | 14.4% | 15.2% | - |
| Main raw materials | Procurement model | Proportion out of total purchase amount | Significant change in the settlement method | Average price in H1 (RMB/Kg)* | Average price in H2 (RMB/Kg)* |
| AI Tech | Purchase through multiple channels | 41.9% | No | 58.3 | 61.6 |
| Raw Materials | 27.2% | No | 15.8 | 21.3 | |
| Co-Formulants | 5.4% | No | 10.8 | 12.3 | |
| Packaging | 5.3% | No | 1.3 | 1.4 | |
| Other | 20.3% | No | 4.0 | 2.1 |
ADAMA Ltd. Annual Report 2020
Whether the Company spends more than 30% of its total production cost on energy supply
□ Applicable √ Not applicable
Reasons that there is material change to the main energy types during the reporting period
□ Applicable √ Not applicable
Production technologies of main products
| Main Products | Stage of Production Technologies of Main Products | Key Technical Experts | Patents | R&D advantages |
| Herbicides | Industrialized production | Employed by the Group | Some are patent protected | Off-patent AIs developed into differentiated mixtures and formulations, in combination with new formulation and delivery technologies that provide more efficient ways to deliver the products into the plants |
| Fungicides | Industrialized production | Employed by the Group | Some are patent protected | Off-patent AIs developed into differentiated mixtures and formulations, in combination with new formulation and delivery technologies that provide more efficient ways to deliver the products into the plants |
| Insecticides | Industrialized production | Employed by the Group | Some are patent protected | Off-patent AIs developed into differentiated mixtures and formulations, in combination with new formulation and delivery technologies that provide more efficient ways to deliver the products into the plants |
ADAMA Ltd. Annual Report 2020
Capacity of main products
| Main Products | Normal Capacity (tons/year) | Capacity Utilization (%) | Capacity Under Construction (tons/year) | construction Investment in the production of Main Products |
| Herbicides | 53,545 | 95 | 13,000 | Ongoing |
| Fungicides | 54,802 | 84 | 1,500 | Ongoing |
| Insecticides | 39,874 | 79 | 20,400 | Ongoing |
| Major Chemical Industry Parks | Products |
| Neot Hovav, Israel | Plant for production of insecticides and fungicides active ingredients as well as formulations, R&D center and Non-Agro activity |
| Ashdod, Israel | Manufacturing of the herbicides’ active ingredients, formulations and Non-Agro activity as well |
| Anpon, China | Plant for the manufacturing of insecticides and herbicides active ingredients, formulations, Flame Retardants and Non-Agro activity |
| Sanonda, China | Plant for the manufacturing of insecticides active ingredients as well as number of formulations and Non-Agro activity |
| Taquari, Brazil | Plant for the manufacturing of active ingredients as well as number of formulations used for the manufacturing of insecticides, fungicides and herbicides |
ADAMA Ltd. Annual Report 2020
Relevant approvals, permits and qualifications
√ Applicable □ Not applicable
| Entity in China | Name of the Certificate | Number | Expiration |
| ADAMA Ltd. | Pesticide Production Permit | Pesticide Production Permit (E) 0010 | March 15th, 2023 |
| Safety Production Permit | （E）WH [2020] extended No. 0011 | March 1st, 2023 | |
| Special Permit for the Manufacturing of Monitored Chemicals | HW-D42I0001 | April 3rd, 2024 | |
| Special Permit for the Manufacturing of Monitored Chemicals | HW-C0110173 | January 12th, 2022 | |
| National Industrial Production Permit | XK13-008-00019 of Hubei | November 13th, 2023 | |
| Veterinary Drug Production License | （2016）No.17027 for Veterinary Drug Production | December 26th, 2021 | |
| Veterinary Drug GMP Certificate | （2016）No. 17012 for Veterinary Drug GMP | December 26th, 2021 | |
| Business License for Hazardous Chemicals | No. [2019]000348 of Safety Operation of Hubei D | July 5th, 2021 | |
| Port Operation Permit | No.（0045）for Port Operation of Jingzhou of Hubei | January 16th, 2022 | |
| Port Shoreline Use Permit | No. 5, 2015 for Use of Port Shoreline | August 7th, 2061 | |
| Water Extraction Permit | No. 3, 2020 for Water Extraction of Jingzhou of Hubei | August 13th, 2025 | |
| Registration Certificate of Hazardous Chemicals | 421012001 | December 9th, 2021 | |
| Pollutant Emission Permit | 91420000706962287Q001P | December 25th, 2025 | |
| ADAMA Anpon (Jiangsu) Ltd. | Safety Production Permit | WH No. [H00029] for Safety Production of Jiangsu | January 17th, 2021 |
| Business License for Hazardous Chemicals | No. 00394 for Business of Hazardous Chemicals of Huai’an of Jiangsu | November 1st, 2021 | |
| Pesticide Business License | No. 32080020034 for Pesticide Business of Jiangsu | December 26th, 2024 | |
| Pesticide Production Permit | No. 0014 for Pesticide Production of Jiangsu | December 6th, 2022 | |
| Pollutant Emission Permit | 91320800139433337K001P | May 31th,2025 | |
| National Industrial Production Permit | XK13-010-00189 of Jiangsu | January 12th, 2024 | |
| National Industrial Production Permit | XK13-008-00007 of Jiangsu | September 23rd, 2023 | |
| National Industrial Production Permit | XK13-014-00235 of Jiangsu | July 11th, 2024 | |
| Mining License | C3200002009096120039192 | September 30th, 2025 | |
| Safety Production Permit | FM No. [2020]0801 of Jiangsu | November 25th, 2021 | |
| Maidao, | Business License for | No. 00641 for Business of | December 30th, 2022 |
ADAMA Ltd. Annual Report 2020
| Entity in China | Name of the Certificate | Number | Expiration |
| Branch of ADAMA Anpon (Jiangsu) Ltd. | Hazardous Chemicals | Hazardous Chemicals of Jiangsu | |
| Safety Production Permit | WH No. [H00015] for Safety Production of Jiangsu | July 22nd, 2021 | |
| Pollutant Emission Permit | 91320800MA1NX3QW56001P | November 26th, 2025 | |
| Hubei Sanonda Trading Co., Ltd. | Pesticide Business License | No. 42000010083 for Pesticide Business of Hubei | September 3rd, 2023 |
| ADAMA (Beijing) Agricultural Technology Company Limited | Pesticide Business License | No. 11000010005 for Pesticide Business of Beijing | April 11th, 2023 |
| Shanghai Dibai Plant Protection Co., Ltd. | Pesticide Business License | No. 31011420006 for Pesticide Business of Shanghai | September 3rd, 2023 |
ADAMA Ltd. Annual Report 2020
Company focused on chemical fiber industry
□Applicable √Not applicable
Company focused on plastic and rubber making
□Applicable √Not applicable
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
RevenuesRevenues grew by 17% in the fourth quarter and by 11% in the full-year period, in constant exchange rates (CER) terms,compared to the corresponding periods last year, driven by a 16% increase in volumes in the quarter and a 10% increaseover the full year.In the fourth quarter, the Company delivered strong, double-digit growth in all key regions in constant currency terms. Aparticularly strong performance in the quarter in North America saw the region almost fully recover from the severe weatherand other challenges seen mainly in the US earlier in the year. Similarly strong growth was achieved in Europe in thequarter, bolstered by good consumption by farmers and the Company’s acquisition in Greece in mid-year, bringing theregion into positive growth territory for the full year. Favorable weather conditions in the quarter in Asia-Pacific supportedgrowth across the region, with noteworthy performances seen in Australia, Japan and across south-east Asia. The India,Middle East & Africa region delivered continued growth, with noteworthy performances seen in India and South Africa,which also enjoyed supportive seasonal conditions. The Company continues to grow its market share in Latin America, ledby strong business growth in Brazil, despite challenging weather in some parts which delayed the soybean planting season,as well as solid performances in Chile, Peru, Colombia and Mexico.The robust growth in the fourth quarter drove ADAMA to achieve record-high sales in 2020. The Company saw its strongestgrowth over the year in the emerging markets of Latin America and the India, Middle East and Africa region, as well as inAPAC. Its performance was further bolstered by various acquisitions completed in 2020, including in Greece and Paraguay .In US dollar terms, sales in the fourth quarter grew by 10% and by 3% in the full-year period, compared to the correspondingperiods last year, reflecting the impact of the generally weaker currencies, especially in the emerging market regions wherethe Company is growing the fastest. The currency weakness constrained sales in US dollar terms by an estimated $71million in the fourth quarter and by an estimated $293 million over the full year.
ADAMA Ltd. Annual Report 2020
(1) Operating revenues
Unit: RMB’000
| 2020 | 2019 | YoY +/-% | |||
| Amount | Ratio of the operating revenue | Amount | Ratio of the operating revenue | ||
| Total operating revenue | 28,444,833 | 100% | 27,563,239 | 100% | 3.20% |
| Classified by industries | |||||
| Manufacture of chemical raw materials and chemical products | 28,444,833 | 100% | 27,563,239 | 100% | 3.20% |
| Classified by products | |||||
| Herbicides | 11,763,783 | 41.4% | 11,848,417 | 42.99% | -0.7% |
| Fungicides | 5,898,321 | 20.7% | 5,189,971 | 18.83% | 13.6% |
| Insecticides | 8,095,679 | 28.5% | 7,867,286 | 28.54% | 2.9% |
| Ingredients and Intermediates (Formerly referred to as Non-Agro) | 2,687,050 | 9.4% | 2,657,565 | 9.64% | 1.1% |
| Classified by regions | |||||
| Europe | 7,155,152 | 25.2% | 7,078,409 | 25.68% | 1.1% |
| North America | 5,333,514 | 18.8% | 5,418,509 | 6619.% | -1.6% |
| Latin America | 7,460,282 | 26.2% | 7,085,817 | 25.71% | 5.3% |
| Asia-Pacific | 4,533,778 | 15.9% | 4,351,929 | 15.79% | 4.2% |
| India, Middle East and Africa | 3,962,107 | 13.9% | 3,628,575 | 13.16% | 9.2% |
| 2020 | 2019 | YoY +/-% | |||
| Amount | Ratio of the operating revenue | Amount | Ratio of the operating revenue | ||
| Total operating revenue | 4,127,751 | 100% | 3,996,773 | 100% | 3.3% |
| Classified by industries | |||||
| Manufacture of chemical raw materials and chemical products | 4,127,751 | 100% | 3,996,773 | 100% | 3.3% |
| Classified by products | |||||
| Herbicides | 1,707,193 | 41.4% | 1,719,666 | 43.03% | -0.7% |
| Fungicides | 856,648 | 20.8% | 751,752 | 18.81% | 14.0% |
| Insecticides | 1,174,463 | 28.4% | 1,139,961 | 28.52% | 3.0% |
| Ingredients and Intermediates (Non-Agro) | 389,447 | 9.4% | 385,394 | 9.64% | 1.1% |
| Classified by regions | |||||
| Europe | 1,035,865 | 25.1% | 1,030,551 | 25.78% | 0.5% |
| North America | 775,744 | 18.8% | 785,519 | 19.65% | -1.2% |
| Latin America | 1,087,796 | 26.4% | 1,021,819 | 25.57% | 6.5% |
| Asia-Pacific | 656,276 | 15.9% | 632,542 | 15.83% | 3.8% |
| India, Middle East and Africa | 572,070 | 13.8% | 526,342 | 13.17% | 8.7% |
ADAMA Ltd. Annual Report 2020
continued to deliver a pleasing performance in Greece, following its recent acquisition in the country.The robust performance in the quarter saw the Company deliver positive growth in the region over the full year period,driven by moderate volume growth which was partially offset by a somewhat softer pricing environment. The Companycontinues to gain market share in key countries in the region, with strong performances over the full year in Germany,Poland and Ukraine, as well as in Italy and France, despite an overall contraction of the market in the country.During the quarter, the Company obtained multiple new registrations, including the Company’s self-produced prothiocon-azole-based solution in the UK, a further milestone in the journey of this molecule that is expected to be a key contributorto the Company’s future growth. the Company achieved the registration of TIMELINE FX
?
, a cross-spectrum herbicide forspring cereal, in Lithuania, penetrating an important segment in the region.In US dollar terms, sales grew by 14.7% in the quarter and by 0.5% in the full-year period, compared to the correspondingperiods last year, reflecting the net impact of the relative strengthening of European currencies against the US dollar in thequarter, contrasted with their relatively weaker levels over much of the full-year period.North America: Sales grew by 14.7% in the fourth quarter but were lower by 0.9% in the full-year period, in CER terms,compared with the corresponding periods last year. The robust business growth in the quarter saw the Company almostfully overcome the severe weather-related challenges and COVID-19 impact seen earlier in the year. Sales of crop protec-tion products in the US and Canada in the quarter benefited from strong demand, especially for fall burndown herbicides,which more than offset a challenging season for cotton growers. The quarter also saw good momentum being generatedby the Company’s portfolio of recently launched products targeting the Spring 2021 season, among them the FullPage
TM
rice cropping system, which enjoyed early demand from growers following the considerable increases in rice yields seenin the 2020 season.Continued growth of the Company’s Consumer and Professional Solutions business in the quarter brought a resilient finishand a pleasing performance in what was a challenging year.In US dollar terms, sales grew by 14.4% in the quarter but were lower by 1.2% in the full-year period, compared to thecorresponding periods last year, reflecting the moderate weakening of the Canadian Dollar seen in the first half of the year.Latin America: grew by a robust 24.9% in the fourth quarter and by 29.9% in the full-year period, in CER terms, comparedto the corresponding periods last year, driven by significant volume growth in key countries and continued price increasesto partially compensate for the material weakening of the currencies in the region.In Brazil, a strong performance in the quarter resulted in continued market share gain, despite experiencing unstableweather which delayed soybean planting and reduced cotton acreage, as well as continued COVID-19-related challenges.The Company also recorded strong growth in the quarter in Colombia and Chile, as well as in Peru and Paraguay, bolsteredby its recent acquisitions in those countries, and offsetting the impact of severe drought conditions in several countries inthe region, including Argentina. Over the full-year period, the Company delivered strong business growth in the region inCER terms, driven by significant volume growth, most notably in Brazil as well as Mexico, Chile and Argentina, alongsidelocal currency price increases, mainly in Brazil.During the quarter, the Company obtained more than a dozen new product registrations in the region, including ACROSS
?broad spectrum fungicide, ARREMATE
? triple mode herbicide, both in Brazil, as well as MATTOK
?
a differentiated
combi-nation fungicide and bio-stimulant, in Colombia and Honduras, and PLETHORA
?a unique and highly efficient combinationinsecticide for key crops in Colombia.In US dollar terms, sales in the region grew by 2.5% in the quarter and 6.5% in the full-year period, compared to thecorresponding periods last year, as the robust business growth was heavily impacted by weaker currencies in the region,in particular the significant decline in the Brazilian Real against the US dollar.
ADAMA Ltd. Annual Report 2020
Asia-Pacific: Sales grew by 12.9% in the quarter and by 5.4% in the full-year period, in CER terms, compared to thecorresponding periods last year.In Asia-Pacific (outside of China), the Company delivered strong business growth across the region in the quarter, withnoteworthy performances seen in Australia and across South East Asia and Japan, benefiting from favorable weatherconditions. The strong growth in the quarter capped a pleasing performance over the full year period in this part of theregion, despite COVID-related challenges seen throughout the year. During the quarter, the Company launched a newproduct in New Zealand, GOLTIX GOLD
?, featuring a unique formulation with reduced hazard profile and improved efficacyfor controlling weeds in beet crops.In China, the Company recorded double-digit volume growth in the quarter, with strong sales of raw materials and inter-mediates, albeit at lower prices due to increased supply generally from Chinese producers. In the full-year period, theCompany continued to deliver solid growth of its branded, formulated portfolio. The Company significantly enhanced itscommercial reach in China, by acquiring a majority stake in Dibai, Jiangsu Huifeng’s domestic commercial crop protectionbusiness. This transaction is a significant milestone in the Company’s continuous commercial expansion in China, and willsignificantly bolster the Company’s commercial activities, positioning and offering in this key strategic market. In addition,the Company continues to work towards the Closing of the second phase of the transaction with Huifeng (the acquisitionof a majority stake in most of Huifeng’s manufacturing operations), which is currently expected to close during the secondquarter of 2021.In US dollar terms, sales in the region grew by 16.8% in the fourth quarter by 3.8% in the full-year period, compared to thecorresponding periods last year, reflecting mainly the strengthening of the Chinese Renminbi and the Australian dollaragainst the US dollar in the quarter, contrasted with the generally weaker currencies over the full-year period.India, Middle East & Africa: Sales grew by 12.8% in the quarter and by 13.9% in the full-year period, in CER terms,compared to the corresponding periods last year, driven by strong volume growth.The growth in the region over the quarter was driven by strong performances in all key countries, notwithstanding theongoing COVID-19 restrictions, with noteworthy performances seen in India and South Africa, which benefited from favor-able weather and cropping conditions. Turkey continued to grow in the quarter, despite experiencing a major earthquakewhich temporarily suspended commerce in the country, and following challenges seen earlier in the year due to lowerdemand for cotton as a result of the pandemic. The strong performance over the full year saw the Company take advantageof the good monsoon season in India as well as positive seasonal conditions in South Africa, to drive significant volume-led business growth across the region.During the quarter, the Company launched multiple new products in India, including ZAMIR
?, a systemic and long-actingfungicide in wheat, as well as FLAMBERGE
?
, a bio-stimulant, strengthening its portfolio in this key segment.In US dollar terms, sales in the region grew by 10.5% in the quarter and by 8.7% in the full-year period, compared to thecorresponding periods last year, reflecting the impact of softer currencies, most notably the Turkish Lira, the Indian Rupeeand the South African Rand.
ADAMA Ltd. Annual Report 2020
(2) List of the industries, products or regions exceed 10% of the operating revenues or operatingprofits of the Company
√ Applicable □ Not applicable
| Region | sales in volume (ton) | Revenue (RMB’000) | Average Selling Price for H1 (RMB/ton) | Average Selling Price for H2 (RMB/ton) | YoY sales Change | Reason of the Change (regions sales YOY) |
| Europe | 256,994 | 7,155,152 | 81.8 | 69.2 | -15.4% | Different product mix in H2 with lower selling price |
| North America | 526,552 | 5,333,514 | 34.2 | 34.7 | 1.4% | |
| Latin America | 146,319 | 7,460,282 | 50.9 | 51.4 | 0.8% | |
| Asia-Pacific | 1,279,504 | 4,533,778 | 8.5 | 5.0 | -41.3% | Non Agro segment proportion in H2 much bigger, Average selling price of this segment is lower |
| India, Middle East and Africa | 319,974 | 3,962,107 | 48.5 | 48.5 | -0.1% | |
| Total | 2,529,343 | 28,444,833 | 28.3 | 22.4 | -21.0% |
| Overseas Business | How it operates in foreign markets | Whether the tax policy influences the business overseas | measures it takes during the reporting period |
| Adama Solutions | The Group develops, purchases, manufactures and markets its products through many companies worldwide. As such, the Group operates through approximately 60 subsidiaries, with each of the Group companies being independent and fulfilling a different role and making a different contribution to the Group's operations, and | No material influence exists. | The Group’s services or products are priced based on transfer pricing studies conducted to reflect the market price that would have been determined for these services or products were they to be provided to non-group members. Such transfer prices are reviewed on a quarterly basis. |
ADAMA Ltd. Annual Report 2020
| Overseas Business | How it operates in foreign markets | Whether the tax policy influences the business overseas | measures it takes during the reporting period |
| being assessed according to the tax laws in their specific localities. |
| Industries | Items | Units | 2020 | 2019 | YoY +/-% |
| Crop Protection | Sales volume | Ton | 768,688 | 662,752 | 16.0% |
| Production | Ton | 491,925 | 405,518 | 21.3% | |
| Inventory | Ton | 223,176 | 213,387 | 4.6% |
| Industries | Items | 2020 | 2019 | 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) | 16,740,996 | 83.4% | 15,463,150 | 84.3% | 8.3% |
| Industry of manufacturing chemical raw materials and chemical products | Labor cost | 1,153,968 | 5.7% | 1,105,014 | 5.9% | 4.4% |
| Industry of manufacturing chemical raw materials and chemical products | Depreciation expense | 669,414 | 3.3% | 660,812 | 3.5% | 1.3% |
ADAMA Ltd. Annual Report 2020
Jingzhou (Hubei Province) and Huai’An (Jiangsu Province) sites. Despite the temporary suspension of the Jingzhou siteat the outbreak of the COVID-19 pandemic in Q1 2020, and some delays due to severe flooding in the area a few monthslater, the Company is expecting to start production at the new site in Jingzhou within the next few months. The first phaseof the Huai’An relocation is expected to be completed by the end of 2022.In addition to the significant capital sums being invested in the Relocation & Upgrade program, the Company recordedlargely relocation-related costs within its Cost of Goods Sold of approximately RMB 174 million (USD 26 million) in the full-year period compared with RMB 70 million (USD 10 million) in 2019. These charges include mainly (i) higher procurementcosts incurred as the Company continued to fulfill demand for its products, in order to protect its market position, throughreplacement sourcing at significantly higher costs from third-party suppliers, and (ii) non-cash accelerated depreciationcharges related to terminated facilities at the old sites.Excluding the impact of the abovementioned, largely non-recurring and relocation-related costs, over the full-year period,the significant currency weakness constrained gross profit by an estimated USD 247 million, outweighing the Company’srobust business growth and lower procurement costs, resulting in lower gross profit when compared to the same periodlast year.
(6) Has the consolidated scope changed during the Reporting Period
√ Yes □ No
During the reporting period, the Group executed a number of acquisitions:
1. Alfa Agricultural Supplies Commercial and Industrial S.A. - acquired the remaining 51% holdings
2. FNV S.A - acquired 51% of outstanding share
3. Shanghai Dibai Plant Protection Co., Ltd. - acquired 51% of outstanding shares
(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) | 1,705,367 |
| Ratio of total sales to top 5 customers to annual total sales | 6.00% |
| Ratio of total sales to related parties (within top 5 customers) to annual total sales | 2.49% |
| Customers | Sales Amount (RMB’000) | Ratio of the sales to this customer to the annual total sales | |
| 1 | A | 670,231 | 2.36% |
| 2 | B | 281,034 | 0.99% |
| 3 | C | 280,336 | 0.99% |
| 4 | D | 240,558 | 0.85% |
| 5 | E | 233,208 | 0.82% |
| Aggregated | 1,705,367 | 6.00% |
ADAMA Ltd. Annual Report 2020
Notes of other situation of the major customers
□ Applicable √ Not applicable
List of the major suppliers of the Company
| Total purchase to top 5 suppliers (RMB’000) | 2,900,911 |
| Ratio of total purchase to top 5 suppliers to annual total purchase | 17.7% |
| Ratio of total purchase from related parties (within top 5 suppliers) to annual total purchase | 6.55% |
| Suppliers | Purchase Amount (RMB’000) | Ratio of the purchases to this supplier to the annual total sales | |
| 1 | A | 1,075,518 | 6.55% |
| 2 | B | 921,307 | 5.61% |
| 3 | C | 357,237 | 2.17% |
| 4 | D | 303,871 | 1.85% |
| 5 | E | 242,978 | 1.48% |
| Aggregated | 2,900,911 | 17.66% |
| In RMB ’000 | In USD ’000 | |||||
| 2020 | 2019 | YoY +/-% | 2020 | 2019 | YoY +/-% | |
| Sales and Marketing expenses | 4,945,345 | 4,873,256 | 1.48% | 717,453 | 707,156 | 1.46% |
| General and Administrative expenses | 1,043,708 | 1,562,317 | -33.19% | 151,517 | 225,707 | -32.87% |
| R&D expenses | 478,778 | 436,325 | 9.73% | 70,058 | 63,230 | 10.80% |
| Financial (income) / expenses | 1,847,189 | 1,665,885 | 10.88% | 269,341 | 242,331 | 11.15% |
| Tax expenses | 222,459 | 174,531 | 27.46% | 31,552 | 25,547 | 23.50% |
ADAMA Ltd. Annual Report 2020
charge that ChemChina was previously incurring in respect of its acquisition of Solutions in 2011. This amortizationis done in a linear manner on a quarterly basis, most of which have been completed by the end of 2020. Its reportedfinancial impact in the full year of 2020 is RMB 255 million (USD 37 million), net of tax.? Amortization of Transfer assets received and written-up due to 2017 ChemChina-Syngenta transaction(non-cash): The proceeds from the Divestment of crop protection products in connection with the approval by theEU Commission of the acquisition of Syngenta by ChemChina, net of taxes and transaction expenses, were paidto Syngenta in return for the transfer of a portfolio of products in Europe of similar nature and economic value. Sincethe products acquired from Syngenta were of the same nature and with the same net economic value as thosedivested, the Divestment and Transfer transactions had no net impact on the underlying economic performance ofthe Company. These additional amortization charges will continue until 2032 but at a reducing rate, yet will still beat a meaningful level until 2028. Its reported financial impact in the full year of 2020 is RMB 211 million (USD 31million), while in 2021 it is expected to be further reduced to approximately RMB 151 million (USD 23 million)? Amortization of acquisition-related PPA (non-cash) and other acquisition-related costs: Mainly the non-cash
amortization of intangible assets created in the course of acquisitions as well as other M&A-related costs, and hasno impact on the ongoing performance of the companies acquired. Its reported financial impact in the full year of2020 is RMB 64 million (USD 9 million), net of tax.The Company continues to maintain strong operating cost discipline while accommodating significantly higher sales andthe inclusion of acquisitions. Sales and marketing expenses in the 2020 periods benefited from the global currency weak-ness against the US dollar when compared to prior periods, and were further aided by the impact of COVID-19 restrictionsthat caused savings on certain expenses.
(2) General and Administrative expenses
The Company is in the process of its multi-year Upgrade & Relocation program in China, where its production assetslocated in the old production sites in Jingzhou and Huai’An are being relocated to the new sites, both in 2020 and in thecoming years. Related to that, the Company recorded in the general and administrative expenses and idleness cost ofRMB 134 million (USD 19 million) mainly in Jingzhou site for its temporary suspensions mostly during Q1 2020 at theoutbreak of COVID-19 in Hubei Province compared with RMB 342 million (USD 50 million) in 2019 due to environmentalinspections carried out at that time). As part of the relocation process, Jingzhou and Huai’An sites began to execute areduction plan to reduce the number of employees related to which. The fourth quarter of 2019 included one-timeseverance expenses of RMB 243 (USD 35 million).This largely explained for the big changes of the general and administrative expenses between 2020 and 2019.In addition, the Company recorded a provision for an early retirement plan of employees at the Company’s Israelimanufacturing facilities. Its financial impact in the FY is RMB 73 million (USD 11 million), most of which was incurred duringQ1 2020.Despite the above, the Company continues to maintain strong operating cost discipline. General and administrativeexpenses in the 2020 periods benefited from the global currency weakness against the US dollar when compared to priorperiods, and were further aided by the impact of COVID-19 restrictions that caused savings on certain expenses.
(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 1,847 million (USD 269 million) for the full yearof 2020 compared with RMB 1,666 million (USD 242 million) for 2019.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. Net
ADAMA Ltd. Annual Report 2020
gains/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 the hedging transactions onGains/Losses from Changes in Fair Value and Investment Income, excluding capital gain/loss from realization of com-panies, is a net gain of RMB 681 million (USD 100 million) in the full year of 2020 compared with RMB 574 million(USD 84 million) for 2019.The aggregate of Financial Expenses, Gains/Losses from Changes in Fair Value and Investment Income, which morecomprehensively reflects the financial expenses of the Company in supporting its main business and protecting itsmonetary assets/liabilities, amounts to RMB 1,166 million (USD 169 million) in the full year of 2020, compared withRMB 1,092 million (USD 158 million) for 2019. The higher financial expenses in the full year period were largely dueto the effect on balance sheet positions of the strengthening of the RMB when compared to 2019, alongside higherfinancing costs on the NIS-denominated, CPI-linked bonds publicly traded at Tel Aviv Stock Exchange due to theexpansion of the series in mid-2020, which were partially offset by a lower CPI in Israel over the year.In addition, Investment Income also mainly includes an amount of RMB 16 million (USD 2 million) in respect of equityaccounted investees in the full year of 2020 compared with RMB 20 million (USD 3 million) in the corresponding periodin 2019 and RMB 59 million (USD 9 million) recognized as capital gain due to gaining control over an equity investee,bringing the total Gains/Losses from Changes in Fair Value and Investment Income to RMB 747 million (USD 110million) in the full year of 2020 compared with expense of RMB 594 million (USD 87 million) for 2019.
(4) Tax Expenses
The Company reported net tax expenses of RMB 222 million (USD 32 million) for the full year of 2020 compared toRMB 175 million (USD 26 million) in 2019. It’s largely due to the impact of the significant weakening of the BrazilianReal against the US dollar, which resulted in an increase in non-cash tax expenses.
4. R&D Investment
√ Applicable □ Not applicable
In order to capitalize on future opportunities in the agrochemical market, the Group has intensified its efforts in recent yearsto develop a leading pipeline of crop protection products aimed at providing value-added solutions to farmers around theworld and build significant positions in a number of strategic market segments, based on dozens of AIs that are expectedto come off-patent in the coming years, under a strategic plan named “Core Leap” adopted by the Company. These newlyoff-patent AIs will be developed into new differentiated mixtures and formulations, in combination with new formulation anddelivery technologies that provide more efficient ways to deliver the products into the plants, thereby creating truly uniqueand differentiated, value-added solutions to farmers. Since the strategy was launched, the Company has already addedmore than 100 product concepts to its pipeline, some of which have already been launched and are driving growth in keymarkets. In this way, the Group strives to achieve a double competitive advantage - to be the first to market launching newproducts after 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 2020
List of the R&D investment of the Group
| 2020 | 2019 | Change (%) | |
| R&D headcount personnel (person) | 259 | 269 | -3.72% |
| R&D headcount as % of total headcount | 3.34% | 3.47% | -0.13% |
| R&D Investment (RMB’000) | 478,778 | 437,802 | 9.36% |
| Ratio of R&D investment to operating income | 1.68% | 1.59% | 0.09% |
| Amount of capitalized R&D investment (RMB’000) | - | - | - |
| Ratio of capitalized R&D investment to total R&D investment | - | - | - |
| Item | 2020 | 2019 | YoY +/-% |
| Subtotal of cash inflows from operating activities | 27,729,885 | 25,613,708 | 8.26% |
| Subtotal of cash outflows from operating activities | 25,706,870 | 24,770,221 | 3.78% |
| Net cash flows from operating activities | 2,023,015 | 843,487 | 139.84% |
| Subtotal of cash inflows from investing activities | 110,787 | 263,924 | -58.02% |
| Subtotal of cash outflows from investing activities | 2,442,755 | 2,942,447 | -16.98% |
| Net cash flows from investing activities | -2,331,968 | -2,678,523 | -12.94% |
| Subtotal of cash inflows from financing activities | 4,685,824 | 3,212,045 | 45.88% |
| Subtotal of cash outflows from financing activities | 4,542,773 | 3,424,071 | 32.67% |
| Net cash flows from financing activities | 143,051 | -212,026 | -167.47% |
| Net increase in cash and cash equivalents | -484,836 | -2,026,289 | -76.07% |
ADAMA Ltd. Annual Report 2020
of 2020 of the Company during the Reporting Period
√ 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 | Recurrence | |
| Investment income | 206,502 | 35.90% | Mainly from realization of hedging derivatives (Refer to explanation to Financial expenses above) as well as 59 million as a result of change in consolidation scope of an equity investee as the group gained control. | No |
| Gain/loss from change of FV | 540,698 | 94.00% | Mainly foreign currency effect on financial assets and liabilities (refer to explanation to Financial expenses above). | No |
| Impairment of asset | -164,154 | -28.54% | No | |
| Gain from disposal of assets | 10,750 | 1.87% | No | |
| Non-operating income | 77,025 | 13.39% | No | |
| Non-operating loss | 39,847 | 6.93% | No |
| Item | As at 31 Dec. 2020 | As at 31 Dec. 2019 | % change | Explanation for any major change | ||
| Amount | % of total assets | Amount | % of total assets | |||
| Cash at bank and on hand | 3,863,886 | 8.26% | 4,348,588 | 9.60% | -1.34% | |
| Accounts receivable | 8,766,869 | 18.73% | 8,004,157 | 17.67% | 1.06% | |
| Inventories | 10,338,273 | 22.09% | 9,932,654 | 21.93% | 0.16% | |
| Investment property | 4,364 | 0.01% | 3,771 | 0.01% | 0% | |
| Long term equity investments | 14,081 | 0.03% | 133,098 | 0.29% | -0.26% | |
| Fixed assets | 6,576,116 | 14.05% | 6,939,610 | 15.32% | -1.27% | |
| Construction in progress | 1,405,328 | 3.00% | 788,386 | 1.74% | 1.26% | |
| Short-term loans | 1,205,498 | 2.58% | 2,009,882 | 4.44% | -1.86% | |
| Long-term loans | 2,387,628 | 5.10% | 927,159 | 2.05% | 3.05% | |
ADAMA Ltd. Annual Report 2020
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) | 29,510 | - | - | - | - | (28,257) | 1,253 |
| 2. Derivative financial assets | 508,705 | 1,439,034 | (201,874) | - | 337,400 | (522,484) | 1,560,781 |
| 3. Other equity investments | 155,062 | - | (2,862) | - | - | - | 152,200 |
| Total financial assets | 693,277 | 1,439,034 | (204,736) | - | 337,400 | (550,741) | 1,714,234 |
| Others | 126,812 | 16,889 | - | - | 30,535 | - | 174,236 |
| Total of above | 820,089 | 1,455,923 | (204,736) | - | 367,935 | (550,741) | 1,888,470 |
| Financial liabilities | 717,057 | 746,555 | - | - | - | - | 1,463,612 |
| Investment during the Reporting Period (RMB'000) | Investment during the Same Period Last Year (RMB'000) | +/-% YoY |
| 52,081,331 | 36,425,306 | 43% |
ADAMA Ltd. Annual Report 2020
(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 | 2,078,908 | 04/07/2020 | 14/12/2020 | 2,078,908 | 4,937,231 | -5,021,901 | No | 1,994,238 | 9.08% | 207,744 |
| Banks | No | No | Forward | 19,122,640 | 22/04/2020 | 19/01/2021 | 19,122,640 | 47,144,100 | -45,469,816 | No | 20,796,924 | 94.69% | 484,735 |
| Total | 21,201,548 | -- | -- | 21,201,548 | 52,081,331 | -50,491,717 | No | 22,791,162 | 103.77% | 692,479 | |||
| 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 2020
| 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 XII 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 2020
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 | 27,600 | 99,337 | 89,373(Note) | 129,381 | 83% | 62,062 | Acquisition of 51% Dibai and 51% Kelinong (Note) | 62,062 |
| Total | -- | 155,999.99 | 27,600 | 99,337 | 89,373(Note) | 129,381 | 83% | 62,062 | -- | 62,062 |
| 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, April 28, 2020 and March 31 2021; 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, August 22, 2019 and August 21, 2020. | ||||||||||
| Note: On May 20, 2020, the Annual Shareholders Meeting approved a Proposal on the Termination of the Use of Raised Funds for Certain Designated Projects included in the Project of Share Issuance for Assets Purchase and Supporting Finance. The Company will no longer use of the raised funds for the following previously designated projects: Projects of product development and registration, and fixed-asset Investment of ADAMA Agricultural Solutions Ltd. (the “Solutions”). On October 28, 2020, the 27th meeting of the 8th session of the Board of Directors and the 14th meeting of the 8th session of the Board of Supervisors approved a Proposal on the Use of the Raised Funds for the Acquisition of the 51% Equity Stake in Jiangsu Kelinong Agrochemical Co., Ltd. as well as that in Shanghai Dibai Plant Protection Co., Ltd.. In order to efficiently use the raised funds, the Company plans to use the balance of the raised funds, in the amount of approximately RMB 893,731,302.67 (balance as at 30 September 2020, including interest income and the actual amount is subject to the bank settlement balance on the date of transfer ), and which are no longer designated for previously approved projects according to the resolutions of the Company’s Board and Shareholders meeting held on April 27, 2020 and May 20, 2020 respectively, for the payment for the acquisitions of a 51% equity stake in Shanghai Dibai Plant Protection Co., LTD. (“Dibai”) and a 51% equity stake in Jiangsu Kelinong Agrochemical Co., Ltd. (“Kelinong”) from Jiangsu Huifeng | ||||||||||
ADAMA Ltd. Annual Report 2020
Agrochemical Co., Ltd. (“Huifeng”). This proposal had been approved by the 4th Interim Shareholders Meeting on 16 November, 2020..
(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 | ||||||||||
| Acquisition of Anpon | No | - | 40,008 | 0 | 40,008 | 100% | 2019 | Not applicable | Not applicable | No |
| Acquisition of 51% Dibai and 51% Kelinong | No | - | 89,373 | 27,600 | 27,600 | 31% | Not applicable | Not applicable | Not applicable | No |
| Huai’an Pesticide Formulation Center | Yes | 24,980 | - | 0 | 0 | 0.00% | Not applicable | Not applicable | Not applicable | Yes |
| Project development and registration | Yes | 93,507 | 13,103 | 0 | 13,103 | 100% | Terminated | Not applicable | Not applicable | Yes |
| Fixed-asset Investment of ADAMA | Yes | 66,204 | 5,913 | 0 | 5,913 | 100% | Terminated | Not applicable | Not applicable | Yes |
| Fees for the intermediary agencies and transaction taxes | No | 13,600 | 12,713 | 0 | 12,713 | 100% | Not applicable | Not applicable | Not applicable | |
| Sub-total of Designated Projects | -- | 198,291 (Note 1) | 161,110 | 27,600 | 99,337 | -- | -- | -- | -- | |
| Investment of Extra Funds Raised | ||||||||||
| Not Applicable | ||||||||||
| How and why the planned progress or expected income is not met (per project) | 1 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 | |||||||||
ADAMA Ltd. Annual Report 2020
| 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 | ||||||||||
| and exist, is complicated. In order to avoid delays of the project, the Company invested its own capital on the project. Following approval of the 2018 Annual Shareholders Meeting, this project had been replaced by the Anpon acquisition. 2. Development and Registration Since ADAMA Makhteshim Ltd., ADAMA Agan Ltd., and ADAMA Brazil S/A, the subsidiaries of Solutions, are the entities to implement the projects of products development and registration, this project also involves approval procedures for cross boarder investments. In order to avoid delays of this project, the Company invested its own capital in 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 has been completed and delivered for use in May 2020. (3) Investment of the Equipment of Liquid Product Packaging | ||||||||||
ADAMA Ltd. Annual Report 2020
| 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 | ||||||||||
| 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 postponed the investment progress of the project and terminated the use of raised funds on this project. (4) Investment for the Relocation of Be’er Sheva Plant and Its Integration with Neot-Hovav 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 terminated the use of raised funds on this project. The proposal on terminating the above projects has been approved by the shareholders of the Company, on May 20, 2020. The Company will no longer use the raised funds for the following previously designated projects: Projects of product development and registration and fixed-asset Investment of Solutions. On October 28, 2020, the 27th meeting of the 8th session of the Board of Directors and the 14th meeting of the 8th session of the Board of Supervisors approved a Proposal on the Use of the Raised Funds for the Acquisition of the 51% Equity Stake in Jiangsu Kelinong Agrochemical Co., Ltd. as well as that in Shanghai Dibai Plant Protection Co., Ltd.. In order to efficiently use the raised funds, the Company plans to use the balance of the raised funds, in the amount of approximately RMB 893,731,302.67 (balance as at 30 September 2020, including interest income and the actual amount is subject to the bank settlement balance on the date of transfer), and which are no longer designated for previously approved projects according to the resolutions of the Company’s Board and Shareholders meeting held on April 27, 2020 and May 20, 2020 respectively, for the payment for the acquisitions of a 51% equity stake in Dibai and a 51% equity stake in Kelinong from Huifeng. This proposal had been approved by the 4th Interim Shareholders Meeting on November 16, 2020. As of December 31, 2020, the Company has paid RMB 276 Million and already obtained 51% equity interests in Dibai and has completed corresponding procedures with competent administration for market regulation on the 51% Dibai Transaction.. | ||||||||||
ADAMA Ltd. Annual Report 2020
| 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 | ||||||||||
| 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 | |||||||||
| 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 remaining unused raised funds and interest will continue to be deposited in the corresponding raised funds account. The Company will continue to invest in the acquisition of 51% of Dibai and 51% of Kelinong. | |||||||||
| Problems or other issues in the use raised funds and disclosure | Not applicable | |||||||||
ADAMA Ltd. Annual Report 2020
Note 1: The Company intends to raise funds of no more than 198,291 RMB’0000 in the supporting finance program, while the actual funds raised was 155,999.99 RMB’0000 onDecember 27, 2017.
(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 |
| Acquisition of Anpon | Huai’an pesticide formulation center project | 40,008 | 0 | 40,008 | 100% | 2019 | N/A | N/A | No |
| ADAMA fixed asset investment project | |||||||||
| Acquisition of 51% Dibai and 51% Kelinong | Product development and registration project | 89,373 | 27,600 | 27,600 | 31% | N/A | N/A | N/A | N/A |
| Total | - | 129,381 | 27,600 | 67,608 | - | - | - | - | - |
| 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 cross-border investment, 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. | ||||||||
ADAMA Ltd. Annual Report 2020
| 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 |
| 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 Acquisition of 51% Dibai and 51% Kelinong On May 20, 2020, the Company's Annual Shareholding Meeting 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. The Company plans to stop using the raised funds on the projects of products development and registration, and fixed-asset Investment of ADAMA. After the termination of the use of the raised funds for the certain designated projects, the remaining unused raised funds (including the resulting interest) will continue to be deposited in the corresponding raised funds account. The Company will actively deliberate on new investment projects which the remaining raised funds can be used for. 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. Decision-making procedure: On October 28, 2020, the 27th meeting of the 8th session of the Board of Directors and the 14th meeting of the 8th session of the Board of Supervisors approved a Proposal on the Use of the Raised Funds for the Acquisition of the 51% Equity Stake in Jiangsu Kelinong Agrochemical Co., Ltd. as well as that in Shanghai Dibai Plant Protection Co., Ltd.. In order to efficiently use the raised funds, the Company plans to use the balance of the raised funds, in the amount of approximately RMB 893,731,302.67 (balance as at 30 September 2020, including interest income and the actual amount is subject to the bank settlement balance on the date of transfer ), and which are no longer designated for previously approved projects according to the resolutions of the Company’s Shareholders meeting held on May 20, 2020, for the payment for the acquisitions of a 51% equity stake in Dibai and a 51% equity stake in Kelinong from Huifeng. This proposal had been approved by the 4th Interim Shareholders Meeting on November 16, 2020. | |||||||||
ADAMA Ltd. Annual Report 2020
| 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 |
| Information disclosure of the Company: The detailed information please refer to Announcement on the Use of the Raised Funds for the Acquisition of the 51% Equity Stake in Jiangsu Kelinong Agrochemical Co., Ltd. as well as that in Shanghai Dibai Plant Protection Co., Ltd., published on the Cninfo (http://www.cninfo.com.cn), 29, October, 2020. | |||||||||
| Situations failing to meet the planned schedule or achieve expected benefits and the reasons | N/A | ||||||||
| Explanation of the new committed project whose feasibility changed significantly | N/A | ||||||||
ADAMA Ltd. Annual Report 2020
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 | 38,930,013 | 15,961,884 | 26,679,696 | 676,644 | 453,237 |
| Company Name | Way of Acquirement or Disposal | Impact on the Business Operation and Performance of the Company |
| FNV S.A. | Purchase of 51% Share Equity | No significant impact |
| Alfa Agricultural Supplies Commercial and Industrial S.A. | Purchase of the remainder (51%) Share Equity | No significant impact |
| Shanghai Dibai Plant Protection Co., Ltd. | Purchase 51% of Share Equity | Dibai’s commercial presence, numerous differentiated, patented products and wide portfolio of product registrations are highly complementary to the Company’s. This strategic acquisition is a significant milestone in the Company’s ongoing, rapid expansion in China, and will significantly bolster the Company’s commercial activities, positioning and offering in this key crop protection market. |
ADAMA Ltd. Annual Report 2020
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 industry
The global crop protection market is dominated by seven multinational companies, including the Group, five of whichare originator companies. In recent years, a number of mergers and acquisitions were completed among the largest playersin the crop protection industry - the merger between Dow and DuPont to create Corteva; the acquisition of Monsanto byBayer; the acquisition of a large part of DuPont’s crop protection portfolio, including products under development and R&Dinfrastructure, by FMC; the acquisition of Arysta by UPL, and the acquisition of Syngenta by ChemChina, resulting in theformation of Syngenta Group. Nonetheless, the crop protection industry as a whole is relatively decentralized, with anumber of local manufacturers competing in each country against the global multinational companies. The Group believesthat entry barriers for the crop protection market are relatively high, although they vary from region to region.
ADAMA is a leading company (in sales terms) among the crop-protection companies that focus on off-patent cropprotection solutions. The Group’s global crop protection market share was approximately 6.1% in 2020, based on AgBioInvestor’s preliminary estimation of the global agrochemical industry in 2020.
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 30% - 70%within a number of years following the expiry of the relevant patent, leaving the remaining market share open to competitionamong off-patent crop protection companies, in addition to their competition with the Originator Company (which continuesmanufacturing 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-patent cropprotection companies that do not have international marketing and distribution networks compete with the Group locally inthose 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 understands 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 companies acrossthe world, including the Group and its competitors. The growth in production capacity, on one hand, and the price levelsand competitiveness of the products produced in China on the other, affect the structure of competition in the entire industry.However, price levels of the products manufactured in China have risen in recent years, mainly stemming from the increaseof costs relating to environment protection and regulation in China, including by way of limited granting of productionpermits, shutting down of plants, fines, etc. Active Ingredient prices in China declined through 2020 as the cost of oil andrelated basic chemicals decreased sharply. However, towards the end of 2020 prices begun to increase again due to therecovery of oil price together with reduced capacities of chemical manufactures caused by higher raw material costs. Thistogether with stronger demand due to crop commodities price increase and a strong RMB has led to the recent increase
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in the price of Active Ingredients. The Company estimates that prices will continue to increase for some Active Ingredientsat least during the first half of 2021.
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 patented originalproducts, primarily due to the fact that the rate of patent expiry exceeds that of the launching of new patent-protectedproducts; (2) a trend of some off-patent companies expanding and becoming stronger (inter alia, as a result of corporatemergers and acquisitions as well as product acquisitions), which may lead to them competing with the Group in geographicmarkets in which they have not operated up to now; (3) smaller companies have begun operating, in limited scale, in certainmarkets with relatively low entry barriers; (4) improvement of the agrochemicals industry in China inter alia, increasingmarket entry barriers; (5) price competition in certain markets by multinational Originator Companies and/or increasing thecredit days to its customers; and (6) large 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 andin profitability. In this respect, and in order to capitalize on future opportunities in the agrochemical market, the Grouphas intensified its efforts to develop a leading pipeline of crop protection products aimed at providing value-addedsolutions to farmers around the world, based on AIs that are expected to come off-patent in the coming years. Thesenewly off-patent AIs will be developed into new mixtures and formulations, in combination with new formulation anddelivery technologies that provide more efficient ways to deliver the products into the plants, thereby creating truly uniqueand differentiated, value-added solutions to farmers. In this way, the Group strives to achieve a double competitive
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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 to introducecost-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 Eastern Europe,with around half of its global sales achieved in these emerging markets. Over the last several years, in order to establishdirect market access and distribution capabilities in these markets, the Group has successfully integrated acquisitions inColombia, Chile, Poland, Serbia, Romania, the Czech Republic, Slovakia, and South Korea. Similarly, the Group hasimplemented a direct go-to-market strategy in many high-growth markets including India, Turkey, Indonesia, Vietnamand South Africa, leveraging a direct sales force and driving demand at the retail and farmer level. The Group intends tocontinue to invest in its growth in the key emerging markets with high growth potential. The Group’s strong global platformand leading commercial infrastructure in such markets will allow it to capitalize on worldwide growth opportunities, andcontinue to drive its profitable growth.
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? Grow Revenues and Increase Profitability. The Group believes that it has the capacity and operational leverage to
increase 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 brand
was 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, known as “Listen, Learn, Deliver”,focuses on a process of listening to customer needs, bringing insights from the field and combining them with theextensive know-how and experience in the Company; and delivering solutions that meet local farmer and customer painpoints. The Core Leap strategy discussed above provides the platform needed to create distinct mixtures andformulations based on farmer needs. With this new brand positioning the Company is investing in platforms to ensureongoing and intimate farmer and customer interactions which will provide the source for future product and solutionideation.? 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. The Groupintends to continue to pursue acquisitions, in-licensing agreements and joint ventures that offer attractive opportunitiesto enhance its market access and position, as well as strengthen and further differentiate its product portfolio. The Groupplans to focus these efforts largely in high-growth geographies, particularly in emerging markets where it aims to gainmarket share, as well as access to selected sources of innovation. The Group continues with its track record of makingand integrating selective.(III) 2021 Business plan
In 2021, the Company is expecting moderate growth, supported by higher crop commodity prices, which in recentmonths have bolstered farmer profitability levels. Overall, the Group is expecting to see revenue growth driven by volumegrowth and the continued launch of new products. The overall pricing environment is expected to be moderate, asrelatively higher crop prices, alongside higher input costs are counterbalanced by intensive competitive dynamics in mostkey markets across the globe.
Raw material and Active Ingredient (AI) procurement costs are expected to remain relatively high resulting fromcontinued tight supply conditions that have driven recent increases in the costs of 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.
In 2021, the Group will continue to pursue its comprehensive portfolio development strategy, driven by further
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momentum 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 innovative deliverytechnologies, as well as differentiated mixtures, alongside further investments in chemical R&D.During 2021, 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 both Jingzhou and Huai’An, as well as the continued build-up of its commercial and operational presence inChina, 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 ofits ERP 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 creditThe 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 countermeasuresThe 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. The strengtheningof the US dollar against other currencies in which the Company operates reduces the dollar value of such sales and viceversa.On an annual perspective, approximately 25% 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 against currencyexposure, 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 balance sheetexposure and only against part of its economic exposure, exchange rate volatility might impact the Group’s results andprofitability. As of the date of approval of the financial statements, the Group has hedged most of its balance sheet exposurefor 2020 as it is on the date of publication of this report.
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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. In the southernhemisphere, the seasons are opposite and most of the local sales are carried out during the second half of the year. Duringthese months, most of the Company's exposure pertains to the Brazilian Real. The Company has more sales in marketsin the northern hemisphere and therefore, the Company's sales volume during the first half of the year is higher than thesales 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 part of theglobal reform in interest rate benchmarks, the phasing out of LIBOR (the so-called LIBOR fallback) is scheduled for theend of 2021. Three global interest rate benchmarks are expected to transition to alternative risk-free rates and to replacethe existing benchmark London Interbank Offered Rates (LIBOR): SOFR (USD), ESTR (EUR) and SONIA (GBP). As ofthe date of approval of the financial statements, the Group has not carried out hedging for such exposure, since US dollarinterest rates 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 revisions ofeconomic legislation; relatively high inflation and interest rates; terrorism or war; restrictions on import and trade; differingbusiness cultures; uncertainty as to the ability to enforce contractual and intellectual property rights; foreign currencycontrols; governmental price controls; restrictions on the withdrawal of money from the country; barter deals and potentialentry 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 of thesemarkets 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 its dependencyon particular economies. In addition, changes in registration requirements or customers' preferences in developed westerncountries, which may limit the use of raw materials purchased from emerging economies, may require redeployment of theGroup'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, seven multinational companies, including theCompany, lead the global industry. Five of these, Bayer, Syngenta, Corteva, BASF and FMC, are Originator Companies,which develop, manufacture and market both patent-protected as well as off-patent products. The Group competes with
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the original products with the aim of maintaining and increasing its market share.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 segment of the market, against other off-patentcompanies and smaller-scale Originator Companies, which have significantly grown in number in recent years and arematerially changing the face of the crop protection industry, the majority of whom have not yet deployed global distributionnetworks, and are only active locally. These companies often price their products aggressively and at times have lowerprofit margins than the Group, which may adversely impact 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 timing 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, affect its global position and lead to priceerosion.Decline in scope of agricultural activities; exceptional changes in weather conditionsThe scope of general agricultural activities worldwide may be negatively affected by many exogenous factors, such asextreme weather conditions, natural disasters, a decrease in agricultural commodity prices, government policies and theeconomic condition of farmers. A material decline in the scope of agricultural activities would by necessary implicationcause a decline in the demand for the Group’s products, erosion of its prices and collection difficulties, which may have asignificant adverse effect on the Group's results. Extreme weather conditions as well as other damages caused by naturemay have an impact on the demand for the Group's products. The Group believes, that should a number of such badseasons 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, and particularlyin relation to the storage, treatment, manufacturing, transport, usage and disposal of its products, their ingredients andbyproducts, some of which are considered hazardous. The Group's activities involve hazardous materials. Defectivestorage or handling of hazardous materials may cause harm to human life or to the environment in which the Groupoperates. The regulatory requirements regarding the environment, health and safety could, inter alia, include soil andgroundwater clean-up requirements; as well as restrictions on the volume and type of emissions the Group is permitted torelease 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 increasing 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 these legislative and regulatory requirements and protection against such legal actions requires the Groupto commit considerable human and financial resources (both in terms of substantial ongoing costs and in terms of materialone-time investments) to meet mandatory environmental standards. In some instances, this may result in delaying theintroduction of products into new markets or in adverse effects on the Group’s profitability. In addition, the toughening,
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material alteration or revocation of environmental licenses or permits, or their stipulations, or the inability to obtain suchlicenses and permits, may significantly affect the Group's ability to operate its production facilities, which in turn may havea material adverse effect on the financial and business results of the Group. The Group may be required to bear significantcivil liabilities (including due to class actions) or criminal liabilities (including high penalties and/or high compensationpayments and/or costs of environmental monitoring and rehabilitation), resulting from violation of environmental, healthand safety regulations, while some of the existing legislation may impose obligations 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 current or future requirements, should these be significantly increased or changed.In addition, the Group is unable to predict with any certainty the extent of future costs and investments it may incur in orderto meet 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 duration, the extent of the measures required to betaken by the Group in handling them, the division of responsibility among other parties and the amounts recoverable fromthird parties.Furthermore, the Group may be the target of bodily injury claims and property damage claims caused by exposure tohazardous materials, which are largely 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 regulatory 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 Group’s expenses, cost structure and profit margins, as well as penetration of its products in the relevant market,and may even lead to suspension of sales of the relevant product, and recall of those products already sold, or to legalaction. Moreover, to the extent new regulatory requirements are imposed on existing registered products (requiringadditional investment or leading to the existing registration's revocation) and/or the Group is required to compensateanother company for its use of the latter's product registration data, these might amount to significant sums, considerablyincreasing the Group's costs and adversely affecting its results and reputation. In recent years the industry has beensuffering from revocation of registration for many products around the world. This trend is particularly evident in Europeancountries as well as in many other countries worldwide.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 may makefurther penetration of the Group's products into that market more difficult.Product liabilityProduct and producer liability are a risk for the Group. Regardless of their prospects or actual results, product liabilitylawsuits might involve considerable costs as well as tarnish the Group's reputation, thus potentially impacting its profits.The Group has a third-party and defective product liability insurance cover. However, there is no certainty that the scopeof insurance 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 the Group has not currently 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 defective productson terms acceptable to the Group.
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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. As such, the Group's revenues and profit margins from a certain new off-patentproduct could be materially affected by its ability to launch such product ahead of the launch of a comparable product byits 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 relevant market in the futuremay be affected, since entry into the market prior to other competitors is important for successful market penetration.Furthermore, successful market penetration involves, inter alia, product diversification in order to suit each market'schanging needs. Therefore, if the Group fails to adapt its product mix by developing new products and obtaining therequired regulatory approvals, its future ability to penetrate that market and to maintain its existing market share could beaffected. Failure to introduce new products to given markets and meet Group objectives (given the considerable time andresources invested in their development and registration) might affect the sales of the product in question in the relevantmarket, 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 or patentapplication of Originator Companies or other third parties, or to develop products that do not otherwise infringe intellectualproperty rights in a manner that may involve significant legal and other costs. Originator Companies tend to vigorouslydefend their products and may attempt to delay the launch of competing off-patent products by registering patents onslightly different versions of products for which the original patent protection is about to expire or has expired, with the aimof competing against the off-patent versions of the original product. The Originator Companies may also change thebranding and marketing of their products. Such actions may increase the Group's costs and the risk it entails, and harm oreven prevent its ability 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. Such lawsuits that were concluded involved non-material amounts.Furthermore, although the Group protects its brands and trade secrets with patents, trademarks and other methods ofintellectual property protection, these protective means may not be sufficient for fully safeguarding its intellectual property.Any unlawful 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 actions involving financial costs andresources to safeguard its intellectual property rights.Fluctuations in raw material inputs and prices, and in sales costsSignificant percentage of the Groups’ cost of sales derives from raw material costs. Hence, significant increases ordecreases in raw material costs affect the cost of goods sold, and are, due to the length of the Company’s inventory cycle,generally reflected in the Company’s financials. Most of the Group's raw materials are distant derivatives of oil prices andtherefore, extreme changes or decrease in oil prices may affect the costs of raw materials, although 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, wherever possible,to reflect the 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 against
ADAMA Ltd. Annual Report 2020
increases in oil and other raw material costs.Exposure due to recent developments in the genetically modified seeds marketAny significant development in the market of genetically modified seeds for agricultural crops, including as a result ofregulatory changes in certain countries currently prohibiting the use of genetically modified seeds, and/or any significantincrease in the sales of genetically modified seeds and/or to the extent new crop protection products are developed forfurther crops that would be widely used (substituting traditional products), will affect demand for crop protection products,requiring the Group to respond by adapting its product portfolio to the new demand structure. Consequently, to the extentthat the Group fails to adapt its product mix accordingly, this may reduce demand for its products, erode their sales priceand by implication affect the Group’s results and market share.Nevertheless, the fact that the Group itself markets some of the products for which herbicide tolerance traits have beendeveloped, acts to mitigate this exposure (albeit only in terms of marketing 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 relatively limited, and they are commercializedin a relatively 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 from malfunctions and attack. Any unexpected failureof these systems, as well as the integration of new systems, could involve substantial costs and adversely affect theGroup's operations until completion of the repair or integration. The potential occurrence of a substantial failure that cannotbe repaired within a reasonable time frame may also affect the Group's operations and its results. Currently, the Grouphas a property and loss-of-profit insurance policy.Data protection and cyber securityDuring its activity, the Group may be exposed to risks and threats, related to the stability of its information technologiessystems, data protection and cyber security, 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 expenses andeven partial suspension and disruption of their proper functioning. In order to minimize the abovementioned risks, the groupinvests resources in its technological resilience and in proper protection of its systems.Raw material supply and/or shipping and port service disruptionsLack of raw materials or other inputs utilized in the manufacture of the Group’s products may prevent the Group fromsupplying its products or significantly increase production costs. Moreover, the Group imports raw materials to itsproduction facilities worldwide, from where it then exports the technical or formulated products to its subsidiaries aroundthe world for formulation and/or commercialization purposes. Disruptions in the supply of raw materials from regularsuppliers may adversely affect operations until an alternative supplier is engaged. If any of the Group's suppliers are unableto supply raw materials for a prolonged period, including due to ongoing disruptions and/or prolonged strikes and/orinfrastructure defects in the operating of a relevant port, and if the Group is unable to engage with an alternative supplierat similar terms and in accordance with the relevant product registration requirements, this may adversely affect the Group'sresults, significantly affect its ability to obtain raw materials in general, or obtain them at reasonable prices, as well as limitits ability to supply products and/or meet customer supply deadlines. These might negatively affect the Group, its financesand operating results. In order to reduce this risk, it is the Group's practice to occasionally adjust the volume of its productinventories and at times utilize air freight.Failed mergers and acquisitions; difficulties in integrating acquired operationsThe Group's strategy includes growth through mergers, acquisitions, investments and collaborations designed to expand
ADAMA Ltd. Annual Report 2020
its product portfolio and deepen its presence in certain geographical markets.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 relevant forecasts may result in not achieving theincremental value forecasted, loss of 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 relatively small number of locations. Naturaldisasters, hostilities, labor disputes, substantial operational malfunction or any other material damage might significantlyaffect Group operations, as a result of the difficulty, the time and investment required for relocating the production operationor any 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 arising from the proportional value of thecomponents of each of the companies in the Group in the various countries, as is recognized in each tax jurisdiction;changes in the characteristics (including regarding the location of control and management) of these companies; changesin the breakdown 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 financialposition, 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 (primarily tradeddebentures 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's abilityto finance its operations and service its debt.In addition, the Group's Finance Documents, as contained in the bank credit agreements, require meeting certain FinancialCovenants. Failure to meet these covenants due to an exogenous event or non-materialization of Group forecasts, andinsofar as the financing parties refuse to extend or update these Financial Covenants as per the Group’s capabilities, maylead the financing parties to demand the immediate payment of these liabilities (or part thereof).Exposure to customer credit risksThe Group’s sales to customers worldwide usually involve customer credit as is customary in each market. A portion ofthese credit lines is insured, while the remainder are exposed to risk, particularly during economic slowdowns in therelevant markets. The Group’s aggregate credit, however, is diversified among many customers in dozens of countries,mitigating this risk. In addition, in certain regions, particularly in South America, credit days are particularly long (comparedto those extended to customers in regions such as Europe), and on occasion, inter alia, owing to agricultural seasons oreconomic downturns in those countries, the Group may encounter difficulty in timely collection of customer debts, with thecollection period being extended over several years.
ADAMA Ltd. Annual Report 2020
Generally, such issues arise more often in developing countries where the Group may be less familiar with its customers,the collaterals 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 its workingcapital. While currently the Group is in compliance with all its financial covenants, significant deterioration of its operatingresults may in the future lead the Group to fail to comply with its financial covenants and fail to meet its financial needs. Asa result, the Group's ability to meet its goals and growth plans, as well as its ability to meet its financial obligations, maybe harmed.Contagious disease outbreakOutbreak of a contagious disease and pandemics, or other adverse public health developments, in territories wheresignificant production activity is taking place or from which raw materials are supplied to a significant extent, may have amaterial adverse effect on the Company’s activity, such that the Company may encounter difficulties with procurement ofraw materials and intermediates, experience a certain decrease of activity within its production facilities due togovernmental instructions, and be constrained with respect to its logistics and supply lines. In addition, the Company salescould be potentially impacted by a temporary decrease in demand for its products, as well as by temporary disruption ofthe Company’s ability to sell and distribute products as mentioned above.
X. Information regarding communication with investors
1. Information regarding communication with investors
√ Applicable □ Not applicable
| Date | Place | Reception mode | Type of visitor | Name of the visitor | About | Index |
| April 27, 2020 | Not appli-cable | Phone call | Institutional investors | Everbright Securities, CITIC Securities, CICC, Industrial Se-curities, TF Securities, Shen-wan Hongyuan Securities, North East Securities, Haitong Securities, Dongxing Securi-ties, CMS, Zhongtai Securities | Introduction on the Q1 performance. Corresponding slides was pub-lished on the web-site of the Com-pany. | Record of the Com-munications be-tween the Company and the Investors (record number-2020-1) published by the Company on April 29, 2020. |
| August 20, 2020 | Not appli-cable | Phone call | Institutional investors | Everbright Securities, CICC, Industrial Securities, TF Secu-rities, Haitong Securities, Dongxing Securities, CMS, Zhongtai Securities, BOC In-ternational, Nanjing Securities, HSBC Qianhai Securities, Banc of America Securities | Introduction on the Q2 performance. Corresponding slides was pub-lished on the web-site of the Com-pany. | Record of the Com-munications be-tween the Company and the Investors (record number-2020-2) published by the Company on August 23, 2020. |
ADAMA Ltd. Annual Report 2020
| Date | Place | Reception mode | Type of visitor | Name of the visitor | About | Index | |
| August 21, 2020 | Not appli-cable | Webcast-ing | Institutional and individ-ual inves-tors | Not applicable | Introduction on the H1 and Q2 perfor-mance. Corre-sponding slides was published on the website of the Company. | Record of the Com-munications be-tween the Company and the Investors (record number-2020-3) published by the Company on August 25, 2020. | |
| October 29, 2020 | Not appli-cable | Phone call | Institutional investors | Everbright Securities, CICC, Industrial Securities, TF Secu-rities, Haitong Securities, Dongxing Securities, CMS, Zhongtai Securities, BOC In-ternational, Nanjing Securities, HSBC Qianhai Securities, Guolian Securities, SWHY Se-curities | Introduction on the Q3 and 9M perfor-mance. Corre-sponding slides was published on the website of the Company. | Record of the Com-munications be-tween the Company and the Investors (record number-2020-4) published by the Company on November 2, 2020. | |
| October 30, 2020 | Not appli-cable | Webcast-ing | Institutional and individ-ual inves-tors | Not applicable | Introduction on the Q3 and 9M perfor-mance. Corre-sponding slides was published on the website of the Company. | Record of the Com-munications be-tween the Company and the Investors (record number-2020-5) published by the Company on November 3, 2020. | |
| Times of reception | 5 | ||||||
| The number of agencies in reception | 5 | ||||||
| The number of individuals in reception | 2 | ||||||
| The number of other objects in reception | 0 | ||||||
| Whether undisclosed significant information is disclosed, revealed or divulged? | No | ||||||
ADAMA Ltd Annual Report 2020
Section V - Significant Events
I. Dividend distribution of Company’s securities and turning capital reserve into sharecapital 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 2019 Annual General Meetingwhich was held on May 20, 2020 approved the dividend distribution plan for the year 2019. The Company accordinglypublished an Announcement of Dividend Distribution for the Year 2019 on June 20, 2020 (announcement No.2020-34).
| 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 2020
Compensation Agreement and completed the cancellation procedures for those shares on July 13, 2020. The Company’stotal share capital reduced from 2,446,553,582 shares to 2,344,121,302 shares. Up to now, the total share capital of theCompany is 2,344,121,302 shares.
(2) During the reporting period, the Company implemented the B-Shares Repurchase Plan. As of the date of the expirationof the repurchase period (December 6, 2020), the Company has repurchased 14,309,536 shares of B-Shares by meansof a centralized price bidding transaction through a special securities repurchase account for B-Shares. According to theImplementation Rules of the Shenzhen Stock Exchange on Share Repurchases of Listed Companies, the Company’sshares deposited in the special securities repurchase account shall be deprived of the right of profit distribution.According to the Repurchase Plan for Part of the Company’s Domestically Listed Foreign Shares (B Share), after thecompletion of the repurchase of shares, the Board of Directors shall propose to shareholders to approve the cancellationof the repurchased shares, the decrease of the Company’s registered capital and the corresponding amendments to theArticles of Association of the Company. The above matters have been reviewed and approved by the 31
stmeeting of the
thBoard of Directors of the Company and have yet to be reviewed and approved by the shareholders. It is estimated thatwhen the profit distribution proposal is implemented, the Company will have completed the relevant cancellationprocedures, and the total share capital of the Company will have been reduced to 2,329,811,766 at that time.In view of the above reasons, the Company intends to declare a cash dividend of RMB 0.16 (before tax) for every 10shares to the all shareholders on the basis of 2,329,811,766 shares entitled to dividend distribution on the record day whenthe profit distribution plan is implemented (excluding the repurchased shares held by the Company which are not entitledto dividend and which, subject to the approval of the Company’s Board of Directors and shareholders, shall be cancelled),resulting in a total cash dividend of RMB 37,276,988.26 (before tax).. No share will be distributed as share dividend, aswell as no reserve will be transferred to equity capital.
(3) According to the Implementation Rules of the Shenzhen Stock Exchange on Share Repurchases of Listed Companies,where a listed company, with cash as the consideration, conducts a share repurchase by means of centralized bidding,the amount already paid for buying back shares in the current year shall be deemed as cash dividends and incorporatedinto the calculation thereof in a certain proportion for the year.As of the date of the expiration of the repurchase period (December 6, 2020), the Company has repurchased 14,309,536shares of B-Shares by means of a centralized price bidding transaction through a special securities repurchase accountfor B-Shares. The total payment amount for the repurchase is HKD 69,747,209 (including transaction fees, equivalent toRMB 60,399,296，which shall be included in the cash dividend in 2020.Cash dividend distribution of the common shares of the Company in the last 3 years (including the Reporting Period):
ADAMA Ltd Annual Report 2020
Unit: RMB
| Dividend year | Amount of cash dividend (before 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 |
| 2020 | 37,276,988.26 | 352,753,000 | 10.57% | 60,399,296 | 17.12% | 97,676,284.26 | 27.69% |
| 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% |
| Bonus shares for every 10-share (Share) | Not Applicable. |
| Dividends for every 10-share (RMB) (Tax included) | 0.16 |
| Every 10-share increased the shares’ number | 0 |
| Equity base of distribution plan (Share) | On the basis of 2,329,811,766 shares entitled to dividend distribution on the record day when the profit distribution plan is implemented |
| Cash dividend (RMB) (Tax included) | 37,276,988.26 |
| Amount of the cash dividend by other methods (e.g. share buyback) | 60,399,296 |
| Total cash dividend (RMB) (Tax included) | 97,676,284.26 |
| Distributable profits (RMB) | 352,753,000 |
| Ratio of the Cash dividend (including the amount to be distributed in other ways) accounting in the total amount of the distributed dividend | 100% |
ADAMA Ltd Annual Report 2020
| Cash dividends of This Time | |
| 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 352,753,000. 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 2020 is RMB 352,753,000. The current total share capital of the Company is 2,344,121,302 shares, of which 2,329,811,766 are entitled to dividend distribution and 14,309,536, repurchased by the Company during 2020 and yet to be canceled, are not entitled to dividend distribution. It is estimated that when the profit distribution proposal is implemented, the Company will have completed the relevant cancellation procedures, and the total share capital of the Company will have been reduced to 2,329,811,766 shares at that time. The proposal for profit distribution for the year 2020 is a distribution of 10% of the total profit available for distribution, calculated as follows with no transfer of reserves into equity: On the basis of 2,329,811,766 shares entitled to dividend distribution on the record day when the profit distribution plan is implemented (excluding the repurchased shares held by the Company which are not entitled to dividend and which, subject to the approval of the Company’s Board of Directors and shareholders, shall be cancelled), the Company plans to declare a cash dividend of RMB 0.16 (before tax) for every 10 shares to the all shareholders, resulting in a total cash dividend of RMB 37,276,988.26 (before tax). No share will be distributed as share dividend, and no reserve shall be transferred to equity capital. | |
ADAMA Ltd Annual Report 2020
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 ChemChina’s subsidiaries - Jiangsu Anpon Electrochemical Co., Ltd., Anhui Petroleum Chemical Group Co., Ltd., Shangdong Dacheng Agrochemical Co., Ltd., Jiamusi Heilong Agrochemicals Co., Ltd., and Hunan Haohua Chemical Co., Ltd. and its subsidiary are the same or similar business as the main business of ADAMA. As for horizontal domestic 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 | 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 | On-going. The committed party complies 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, such that. Jiangmusi Heilong is no longer a subsidiary of ChemChina; (3) Shangdong Dacheng is not a subsidiary of CNAC and doesn’t carry out agrochemical |
ADAMA Ltd Annual Report 2020
| Commitment | Commitment maker | Commitment type | Contents | Time of making commitment | Period of commitment | Fulfillment |
| competition between ChemChina’s controlled subsidiaries and ADAMA. 2. Other than the existing and potential horizontal competition stated in the acquisition report, ChemChina will take effective measures to avoid engagements by itself and its controlled subsidiaries in new business that is in the same or similar business to ADAMA, within the territory in future. 3. If ChemChina or its controlled subsidiaries domestically conduct related business which form horizontal competition with ADAMA, in the future, ChemChina will actively take steps, to gradually eliminate the competition, the concrete measures including but not limited to internal assets reorganization, (including putting the business into ADAMA or operated through ADAMA) to adjust the industrial plan and business structure, to modify technology and to upgrade products, to segment the market so as to distinguish each corporation in terms of products and its end users, thus to avoid and eliminate domestic horizontal competition between ChemChina’s controlled subsidiaries and ADAMA. | Electrochemical 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. | business; (4) ChemChina is not the actual controller of Haohua. | ||||
| ChemChina | Commitments on the independence of ADAMA and related- party transactions | 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, and enter into agreement(s) legally and | September 7, 2013 and January 7, 2020 | Long term | On-going. The committed party complies with the commitments. |
ADAMA Ltd Annual Report 2020
| Commitment | Commitment maker | Commitment type | Contents | Time of making commitment | Period of commitment | Fulfillment |
| go through lawful procedures. ChemChina will honor its disclosure obligations and apply for relevant approvals according to the AoA of ADAMA, rules regarding related-party transactions and relevant regulations, not impairing the lawful rights and interest of ADAMA and its shareholders by related-party transactions. After completion of the acquisition 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 action that may impair the operating independence of ADAMA. | ||||||
| ChemChina | Commitments on 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 party complies 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 2020
| 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 horizontal 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 will be 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 party complies with the commitments. | |||
| Once Sinofert and Sinochem Agriculture are the subsidiaries of ChemChina, ChemChina will analyze if there are same or similar businesses among the three subsidiaries. If the result will be 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 horizontal competition. | January 7, 2020 | Long term | On-going. The committed party complies with the commitments. |
ADAMA Ltd Annual Report 2020
| Commitment | Commitment maker | Commitment type | Contents | Time of making commitment | Period of commitment | Fulfillment |
| Other than the foregoing, none of the main business of ChemChina and other controlled subsidiaries is the same or similar to that of ADAMA. | January 7, 2020 | Long term | On-going. The committed party complies 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 horizontal competition against the domestic business of ADAMA in the future, it 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 horizontal competition with ADAMA. | January 7, 2020 | Long term | On-going. The committed party complies with the commitments. | |||
| From the effective date of the Commitment 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 party complies with the commitments. | |||
| Commitments | ChemChina | Commitments | The subsidiaries controlled by ChemChina, | October 12, | January 4, | On-going. |
ADAMA Ltd Annual Report 2020
| Commitment | Commitment maker | Commitment type | Contents | Time of making commitment | Period of commitment | Fulfillment |
| made at the time of assets reorganization | on the horizontal competition | 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 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 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. | 2016 | 2022 | The committed party complies 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 merged with Maidao and ChemChina’s 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 | ChemChina will take effective actions to avoid that | October 12, | Long term | On-going. |
ADAMA Ltd Annual Report 2020
| Commitment | Commitment maker | Commitment type | Contents | Time of making commitment | Period of commitment | Fulfillment |
| on Potential Horizontal Competition | it or its controlled subsidiaries will add new business in China same or similar to ADAMA. If ChemChina or its controlled subsidiaries will in the future be engaged in business in China that constitutes horizontal competition with 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. | 2016 | The committed party complies with the commitments. | |||
| ChemChina | Commitment to reduce and standardize related-party transactions | ChemChina will, as required by law, regulation and other specifications, avoid and reduce related party transactions with ADAMA; however, for the 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 related party transaction will be done to impair lawful rights and interest of ADAMA and its shareholders. | August 4, 2016 | Long term | On-going. The committed party complies with the commitments. | |
| ChemChina | Commitment to maintain independence of | After completion of the acquisition transaction, ADAMA will continue to keep complete procurement, production and sales systems and to | August 4, 2016 | Long term | On-going. The committed party complies with the |
ADAMA Ltd Annual Report 2020
| Commitment | Commitment maker | Commitment type | Contents | Time of making commitment | Period of commitment | Fulfillment |
| the ADAMA | possess independent intellectual properties, and ChemChina its affiliated parties 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. | commitments. | ||||
| CNAC /Syngenta Group | Commitment on share lock-up | All new shares purchased and held through the 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 ADAMA 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 case the transferee must keep such shares obtained locked up until the lock-up period expires. According to 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 | October 12, 2016 and January 7, 2020 | August 2, 2020 | Completed. The restricted shares were released on August 3, 2020. |
ADAMA Ltd Annual Report 2020
| Commitment | Commitment maker | Commitment type | Contents | Time of making commitment | Period of commitment | Fulfillment |
| 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 the Performance Compensation Agreement signed with ADAMA 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 compensation period, then CNAC/Syngenta Group shall compensate ADAMA. The aggregated adjusted actual net profit of the target company for the 2017-2019 period was USD 512.6756 million, implying a | September 13, 2016 and January 7, 2020 | December 31, 2019 | Completed. Please refer to Announcement on the Completion of Buyback and Cancellation of the Compensation Shares(Announcement No.36) for details. |
ADAMA Ltd Annual Report 2020
| Commitment | Commitment maker | Commitment type | Contents | Time of making commitment | Period of commitment | Fulfillment |
| shortfall of USD 30.7381 million, a 94.34% completion rate of the committed performance. According to the Performance Compensation Agreement and the supplementary agreements, the number of shares to be returned to the Company as compensation is 102,432,280. The cumulative cash dividend distributed during the profit compensation period generated from the compensation shares shall be returned to the Company. |
ADAMA Ltd Annual Report 2020
2. Assets or projects with profit forecast, still relevant for forecast period
□ Applicable √ Not applicable
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 accounting methodscompared to last financial report
√ Applicable □ Not applicable
"Accounting Standards for Business Enterprises Interpretation No. 13"Interpretation No. 13 revised the three elements that constitute a business and elaborated the criteria for a business. "Theconcentration test" is introduced as an option, for the acquirer in business combinations involving enterprises not undercommon control, when determining whether the acquired operation or set of assets constitute a business. At the sametime, Interpretation No. 13 further clarifies the definition of related parties.In addition, Interpretation No. 13 further clarifies that related parties of an enterprise also include joint ventures orassociates of other members (including parent company and subsidiaries) of the group to which the enterprise belongs,and other joint ventures and associates of investors who exercise joint control over the enterprise etc.Interpretation No. 13 was effective from January 1, 2020. Adoption of the interpretation has no significant impact on theCompany’s financial statements."Regulations on Accounting Treatment of Rent Concessions Related to the New Coronary Pneumonia Epidemic"(Caikuai [2020] No. 10)In June 2020, the Ministry of Finance issued the "Notice on Issuing the "Regulations on Accounting Treatment of RentalConcessions Related to the New COVID-19 Epidemic" (Financial Accounting Policy [2020] No. 10), which can be used inaccordance with the accounting treatment regulations for rental concessions related to the COVID-19 in order to apply asimplified approach. The notice did not have a significant impact on the Company’s financial statements.
VII. Financial re-statement during the Reporting Period
□ Applicable √ Not applicable
ADAMA Ltd Annual Report 2020
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 Alfa Agricultural Supplies, S.A., FNV S.A., and Shanghai Dibai PlantProtection Co., Ltd. through business combination not under common control.IX. Engagement of Company’s AuditorAuditor 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) | 276 |
| Consecutive years of the audit services provided by domestic Auditor | 4 |
| Name of domestic accountants | Mou Zhengfei, and Ma Renjie |
| Consecutive years of the audit services provided by the domestic accountants | 3 |
| 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 2020
XI. Bankruptcy and reorganization
□ Applicable √ Not applicable
No such cases in the Reporting Period.
XII. Material Legal Claims/proceedings
□ Applicable √ Not applicable
No such cases in the Reporting Period.
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 Anpon | ADAMA Anpon | On August 26, 2020, the law enforcement officers of Huai’an Ecological Environment Bureau conducted an inspection and commission test. The air pollutants discharge from Anpon’s buprofezi workshop exceeded the emission standard of Jiangsu Province. | Punished by the environmental protection authority. | On November 11, 2020, Huai’an Ecological Environment Bureau made an decision on administrative penalty for Anpon’s air pollutants discharge that exceeded the emission limit, and imposed a fine of RMB 100,000 on Anpon. | / | Considering the violation is not serious and the amount of the fine is small, it shall not be deemed as an administrative penalty that shall be disclosed in the ad hoc announcement according to the Listing Rules of SZSE. |
ADAMA Ltd Annual Report 2020
□ Applicable √ Not applicable
XIV. Credibility of the Company, its controlling shareholders and actual controller
□ Applicable √ Not applicable
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 currently has several long-term incentive plans according to which it has granted long-termcash rewards to executive officers and employees. These long-term incentive plans are based either on the performanceof the Company's shares (phantom cash incentives) and/or the Company's performance.. Adama Solutions has furtheradopted an 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 2020 in the ordinary course ofbusiness.
(2) Item XI 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
There were no related-party transactions arising from asset acquisition or sale in the Reporting Period.
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.
5. Other material related-party transactions
ADAMA Ltd Annual Report 2020
√ Applicable □ Not applicable
(1) The 2019 Annual General Meeting approved the expected related-party transactions in the ordinary business
course of the Company in 2020. Please refer to Item X of Section XII “Financial Report” for details of the related-party transactions in the ordinary business course.
(2) The 3
rd
Interim Shareholders Meeting in 2020 approved the proposal on the renewal of the Financial ServiceAgreement with ChemChina Finance 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 |
| Amended Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2020 (Announcement No.2020-30) | May 12, 2020 | Juchao website www.cninfo.com.cn |
| Announcement on the Intended Renewal of the Financial Service Agreement with ChemChina Finance Co., Ltd. constituting a related-party transaction (Announcement No.2020-42) | August 21, 2020 | Juchao website www.cninfo.com.cn |
ADAMA Ltd Annual Report 2020
2. Significant guarantees
√ Applicable □ Not applicable
(1) Guarantees
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 | |||
| -- | -- | -- | -- | -- | -- | -- | -- | -- | |||
| Total guarantee line approved in favor of third parties (excluding subsidiaries) during the reporting period (A1) | -- | Total amount of the occurred guarantee in favor of third parties (excluding subsidiaries) during the reporting period (A2) | -- | ||||||||
| 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) | -- | ||||||||
| 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 | Yes | No | |||
ADAMA Ltd Annual Report 2020
| ADAMA Anpon (Jiangsu) Ltd. | August 22, 2019 | 63,000 | October 10,2019 | 4,000 | joint and several liability | Two years after the loan matures | Yes | No |
| November 19, 2019 | 5,000 | joint and several liability | Three years after the loan matures | Yes | No | |||
| December 10, 2019 | 5,000 | joint and several liability | Three years after the loan matures | Yes | No | |||
| December 26, 2019 | 5,000 | joint and several liability | Three years after the loan matures | Yes | No | |||
| December 26, 2019 | 2,000 | Joint liability and several liability | Two years after the loan matures | Yes | No | |||
| ADAMA Anpon (Jiangsu) Ltd. | February 27,2020 | 130,900 | February 27,2020 | 2,000 | Joint liability and several liability | Two years after the loan matures | Yes | No |
| February 26,2020 | 6,400 | Joint liability and several liability | Two years after the loan matures | Yes | No | |||
| April 2, 2020 | 5,000 | Joint liability and several liability | Three years after the loan matures | Yes | No | |||
| May 19, 2020 | 3,000 | Joint liability and several liability | Three years after the loan matures | No | No | |||
| May 27, 2020 | 5,000 | Joint liability and several liability | Three years after the loan matures | Yes | No | |||
| June 16, 2020 | 2,000 | Joint liability and several liability | Two years after the loan matures | Yes | No | |||
| June 29, 2020 | 5,000 | Joint liability and several liability | Three years after the loan matures | No | No | |||
| September 1, 2020 | 3,000 | Joint liability and several liability | Two years after the loan matures | No | No | |||
| July 20, 2020 | 5,000 | Joint liability | Three years | No | No |
ADAMA Ltd Annual Report 2020
| and several liability | after the loan matures | ||||||||
| December 14, 2020 | 5,000 | Joint liability and several liability | Three years after the loan matures | No | No | ||||
| December 16, 2020 | 5,000 | Joint liability and several liability | Three years after the loan matures | No | No | ||||
| December 22, 2020 | 2,000 | Joint liability and several liability | Two years after the loan matures | No | No | ||||
| July 21, 2020 | 3,000 | Joint liability and several liability | Two years after the loan matures | No | No | ||||
| August 19, 2020 | 1,800 | Joint liability and several liability | Two years after the loan matures | No | No | ||||
| Hubei Sanonda Foreign Trade Co., Ltd. | August 21, 2020 | 20,000 | October 28, 2020 | 3,444 | 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) | 150,900 | Total amount of the occurred guarantee in favor of the subsidiaries during the reporting period (B2) | 56,644 | ||||||
| Aggregated guarantee line that has been approved in favor of the subsidiaries by the end of the reporting period (B3) | 293,900 | Total guarantee balance in favor of the subsidiaries by the end of the reporting period (B4) | 82,644 | ||||||
| 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 | |
| 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 | No | No | |
ADAMA Ltd Annual Report 2020
| limitations pe-riod (gener-ally 7 years). | ||||||||
| ADAMA Brazil | Not applicable | 27399.55 | The guarantee existed before the company was consolidated into the financial statements of the Company. | 7,227.29 | 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. | 4,858.05 | 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 154,354.9k (approximately USD 2,184.38) | 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 statements of the Company. | 13,471.48 | joint and several liability | Valid until cancelled | No | No |
| Adama Agan | Not applicable | unlimited | The guarantee existed before the company was | 14,176.48 | joint and several liability | Valid until cancelled | No | No |
ADAMA Ltd Annual Report 2020
| consolidated into the financial statements of the Company. | |||||||||
| 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. | 3,053.68 | 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. | 1,336.89 | 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 51,608.25 (approximately RMB 336,738.67) | ||||||
| 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 361,703.85 | Total guarantee balance in favor of the subsidiaries by the end of the reporting period (C4) | USD 51,608.25 (approximately RMB 336,738.67 | ||||||
| Total guarantee amount provided by the Company (total of the above-mentioned three kinds of guarantees) | |||||||||
| Total guarantee line approved during the reporting period (A1+B1+C1) | 150,900 | Total actual occurred amount of guarantee during the reporting period (A2+B2+C2) | 393,382.67 | ||||||
| Total guarantee line that has been approved at the end of the reporting period (A3+B3+C3) | 660,603.85 | Total actual guarantee balance at the end of the reporting period (A4+B4+C4) | 419,382.67 | ||||||
| Proportion of total guarantee amount (A4+B4+C4) to the net | 19.64% | ||||||||
ADAMA Ltd Annual Report 2020
| assets of the Company | |
| 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) | 56,288.52 |
| The amount of the guarantee that exceeds 50% of the net assets | 0 |
| Total amount of the above three guarantees (D+E+F) | 56,288.52 |
| 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 2020
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 gas treatment,enhances the safety of production devices, carries forward lean production, reduces the consumption of energy andmaterials and carries forward energy conservation and emission reduction. For output value per ten thousand RMB, theoverall energy consumption and water consumption decrease year by year. The Company will invest more in environmentalprotection, carry forward comprehensive treatment on environment and persistently improve the performance ofenvironmental 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.
(1) Establishment of Safety Production Management System
The Company held series of activities at both Jingzhou and Huai’an Sites in 2020 to enhance HSE awareness and improveHSE performance. Those activities include drafting, revising and issuing policies, procedures, performance indicators andmid-and long-term improvement plans. The HSE systems that have been materialized at the two production sites are HSEprocedures, management regulations, dual prevention mechanism, management of personal protective equipment (PPE),regulations for hot work, environmental management and various rules related to process safety.
(2) Setup and Operation of the Supervisory System
The Company has a well-established supervision system for safety production which has been operating effectively. TheHSE committee and the safety director system are set up while the main responsible persons and employeerepresentatives of various functional departments and plants are actively engaged in the safety committee.The committee promotes the implementation of HSE laws and regulations, communication of HSE performance and therectification to remove HSE risks. It makes work plans while continuously raising the bar for better HSE performance. Adedicated HSE department has been established for safety production management in accordance with relevantregulations. The department is strongly committed to its duties and cooperates with the main responsible persons toformulate the three-year work plan.
(3) Ongoing Performance of Safety Standardization
The plant has passed the second grade of certification for safety production standardization (for hazardous chemicalmanufacturers).Safety standardization and the HSE system support and supplement each other in efficient operation. The Company runsa self-assessment over the ongoing performance of safety production standardization and promptly rectify issues foundaccordingly.
ADAMA Ltd Annual Report 2020
(4) Investment in Safety Production
The Company invests the full required amount of expense for safety production in strict accordance with the " ManagementMeasures for Allocation and Use of Expense for Safety Production in Enterprises" and the "HSE Expenses AllocationManagement Regulations" of its own.
(5) Education and Training for Safety Production
The Company has formulated a relatively comprehensive work plan for safety training. Through the combined internal andexternal training programs, the safety awareness and operation skills of workers engaged in production of hazardouschemicals have been improved.The Company has ensured that relevant personnel for safety management and special operations should all holdcertificates before being assigned with any work. It also employs a group of registered safety engineers to participate in itssafety production management.
(6) Accepting Safety Inspection of the Competent Authorities
In 2020, the Company accepted safety inspections for more than 100 times by SASAC as well as local authorities at alllevels. Primarily, there was no major safety hazards found in those inspections and the production sites also rectified thedetected problems as required.
(7) Safety Production Accidents
No major safety accidents occurred during the reporting period. The Company adopts the universally applied Injury &Illness rate, IIR, to evaluate its safety performance. The rolling recordable rate of injuries and occupational disease hascontinued to decline for 12 consecutive months and since August 2020, it has further reduced to below 0.2, which is theglobal excellence level of industries.
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
During the reporting period, the Company actively response the call of Labors Union of Hubei province and Jingzhou city,and purchased RMB 229,950 goods produced by Xuanen County, a designated poverty alleviation county.
(3) Results of Targeted Poverty Alleviation
| Indicator | Unit | Quantity/ Progress |
| I. Overview | 10,000RMB | 22.995 |
| Of which, 1. funds | 10,000RMB | —— |
| 2. goods | 10,000RMB | 22.995 |
| II. Input Breakdown | —— | —— |
| 1. Sector development | —— | —— |
| 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 |
ADAMA Ltd Annual Report 2020
| Indicator | Unit | Quantity/ Progress |
| 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 | 22.995 |
| 10,000RMB | —— | |
| 10,000RMB | 22.995 | |
| 9. Others | —— | —— |
| III. Awards | —— | —— |
ADAMA Ltd Annual Report 2020
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 | 158.82 | 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; | 5.01 | 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 | No |
ADAMA Ltd Annual Report 2020
| 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 | NOx | Continuous | 1 | Power plant | Within limit | Standard on Air Pollution of Power Plant（GB13223-2011）NOx <200mg/m | 24.598 | 212.22 | No |
| ADAMA | SO2 | Continuous | 1 | Power plant | Within limit | Standard on Air Pollution of Power Plant（GB13223-2011）SO2<200mg/m3 | 2.467 | 126.09 | No |
| ADAMA | Fume and dust | Continuous | 1 | Power plant | Within limit | Standard on Air Pollution of Power Plant（GB13223-2011） | 0.457 | 47.28 | No |
| Anpon | COD | Continuous | 3 | Centralized Discharge Point | Within Limit | Comprehensive Standard on Discharge of Waste Water (GB8978-2002)，COD<100mg/L | 278.716 | 292.88 | None |
| Anpon | Ammonia Nitrogen | Continuous | 3 | Centralized Discharge Point | Within Limit | Water Quality Standard for Sewage Discharged into Urban Sewerage（GBT 31962-2015）, Ammonia Nitrogen <45mg/L | 2.75 | 30.11 | None |
| 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 | 8.9429 | 447.366 | None |
ADAMA Ltd Annual Report 2020
| 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 |
| Anpon | SO2 | Continuous | 1 | Power Plant | Within Limit | Standard on Air Pollution of Power Plant（GB13223-2011）SO2<50mg/m3 | 0.9774 | 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 | 1.689 | 67.105 | None |
ADAMA Ltd Annual Report 2020
(1) Development and Operation of Environmental Facilities
1. Development and Operation of Waste Water Facilities
The Company has a 20,000 tons/ D wastewater treatment station.The wastewater treatment facilities are running normally.After treatment, the COD, ammonia nitrogen and total phosphorus in the discharged wastewater are within the limit.Anpon, the subsidiary of the Company, has a 11,000 tons/ D wastewater treatment station. As all its facilities are operatingwell, COD, ammonia nitrogen, and total phosphorous discharged after the treatment are within the limit.
2. Development and Operation of Waste Gas Facilities
The company's coal-fired thermal power plant has carried out ultra-low emission transformation. After the transformation,the environmental protection facilities of the power plant operate normally. Sulfur dioxide, nitrogen oxides and dust in fluegas all meet the ultra-low emission standards.The exhaust treatment facilities in the coal-based power plants of Anpon are running well. SO2, Nitrogen oxide and fumeand dust discharged after the treatment are within the limit. Anpon adopted the pipe network power distribution in thesecond half of 2020 and shut down its own coal-fired power plants. In addition, the chemical plant had been upgraded toVOC treatment facilities and is now in trial operation.
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 permitsDuring the reporting period, the Company obtained the approvals on ultra-low emission reconstruction project and pesticiderelocation and upgrading project from the local environmental protection authority. The company has also obtained theextension approval on the pollutant discharge permit, which will last until December 25, 2025.Anbang’s "relocation and upgrading project with an annual output of 13,000 tons of ethephon (100%) was approved by theenvironmental protection department.
(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 strict accordancewith the requirements.
The major monitored indicators and frequency of the Company and Anpon are as the following:
1. Monitored Indicators
ADAMA Ltd Annual Report 2020
Waste water: COD, NH3-N, PH, SS, Petroleum, TP.Air Pollutant: SO2, Nitrogen oxide, Fume and Dust, Non Methane HydrocarbonNoise: 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 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 February13, 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 upgraded biological-decomposition systems are being acclimated to the improved wastewater quality. As this progresses, the Company isexperiencing constrained supply in key products manufactured at the site, especially impacting North America, Latin-America, Asia-Pacific, China, India, Middle-East and Africa, and recorded approximately RMB 276 million in relatedidleness 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.
ADAMA Ltd Annual Report 2020
XIX. Other significant events
□ Applicable √ Not applicable
There were no other significant events during the Reporting Period.
XX. Significant events of subsidiaries
□ Applicable √ Not applicable
ADAMA Ltd Annual Report 2020
Section VI. - Change in Shares & ShareholdersI. 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 | 1,810,887,539 | 74.02% | -- | -- | -- | -1,810,883,039 | -1,810,883,039 | 4,500 | 0.0002% |
| a. State-owned legal person’s shares | 1,810,883,039 | 74.02% | -- | -- | -- | -1,810,883,039 | -1,810,883,039 | 0 | 0.0000% |
| b. Shares held by domestic investors | 4,500 | 0.00% | -- | -- | -- | -- | -- | 4,500 | 0.0002% |
| i. Shares held by domestic legal person | 0 | 0.00% | -- | -- | -- | -- | -- | 0 | 0.0000% |
| ii. Shares held by domestic natural person | 4,500 | 0.00% | -- | -- | -- | -- | -- | 4,500 | 0.0002% |
| II. Shares not subject to trading moratorium | 635,666,043 | 25.98% | -- | -- | -- | 1,708,450,759 | 1,708,450,759 | 2,344,116,802 | 99.9998% |
| a. RMB ordinary shares | 468,616,702 | 19.15% | -- | -- | -- | 1,708,450,759 | 1,708,450,759 | 2,177,067,461 | 92.8735% |
| b. Domestically listed foreign shares | 167,049,341 | 6.83% | -- | -- | 167,049,341 | 7.1263% | |||
| III. Total shares | 2,446,553,582 | 100.00% | -- | -- | -- | -102,432,280 | -102,432,280 | 2,344,121,302 | 100.0000% |
ADAMA Ltd Annual Report 2020
with a trading moratorium period of 36 months. Within the context of the above-mentioned major assets restructuring, the Company entered into a Performance CompensationAgreement and two supplementary agreements with CNAC. CNAC made a commitment that Solutions' adjusted aggregated net profit for the 2017-2019 period attributed to theCompany shall not be lower than USD 543.4137 million. Under the obligation of performance compensation, shares of ADAMA were to be primarily used for the fulfillment of thecommitment while cash were to be paid if there was any insufficiency of the amount.On June 15, 2020, CNAC transferred its 1,810,883,039 shares of the Company to Syngenta Group for free (hereinafter referred to as the “Free Transfer of Shares”). Therefore,Syngenta Group carried on CNAC’s commitment for the lock up of these shares within the remaining lock-up period, and undertook to fulfill CNAC’s relevant compensationobligations under the Performance Compensation Agreement.As the aggregated adjusted actual net profit of ADAMA Solutions for the 2017-2019 period was USD 512.6756 million, implying a shortfall of USD 30.7381 million, a 94.34%completion rate of the committed performance, and to fulfill performance compensation obligations, the Company repurchased the 102,432,280 shares from Syngenta Groupand completed the cancellation procedures for those shares on July 13, 2020. After the completion of the repurchase and cancellation, the number of the Company’s shares heldby Syngenta Group changed to 1,708,450,759, which have been released since August 3, 2020.Approval of the change in shares
√ Applicable □ Not applicable
1. Regarding the Free Transfer of Shares, the CSRC issued Approval on a Waiver of a Mandatory Tender Offer Obligation Relating to the Share Transfer Implemented by theSyngenta Group Co., Ltd. (CSRC License [2020] No.351), and exempted Syngenta Group from a tender offer obligation regarding the share transfer, thus Syngenta Group willhold 1,810,883,039 shares of the Company due to the Free Transfer of Shares.
2. Regarding the repurchase and cancellation of compensation shares, the 25
th Meeting of the 8
thSession of the Board of Directors and the 2019 Annual General Meeting haveapproved the Proposal on the Overall Achievement of the Committed Performance included in the Major Assets Restructuring Project and the Planned Compensation to theCompany by the Obligors and the Proposal on the Share Buyback and Cancellation and the Decrease of the Registered Capital of the Company.
ADAMA Ltd Annual Report 2020
The registered status for the change in shares
√ Applicable □ Not applicable
1. Regarding the Free Transfer of Shares, On June 16, 2020, Syngenta Group forwarded to the Company the SharesRegistration Confirmation Letter issued by China Securities Depository and Clearing Corporation Limited, approving thatthe registration procedures for the Free Transfer of Shares have been completed, please refer to the Announcement onthe Completion of the Registration of the Transfer of State-owned Shares held by the Controlling Shareholder (Announce-ment No. 2020-33) for details.
2. Regarding the repurchase and cancellation of compensation shares, the number of shares returned to the Company ascompensation was 102,432,280. The Company has completed the cancellation procedures at the China SecuritiesDepository and Clearing Corporation Limited Shenzhen Branch on July 13, 2020. Please refer to Announcement on theCompletion of Buyback and Cancellation of the Compensation Shares (Announcement No. 2020-36) for details.
Status of share buyback
√ Applicable □ Not applicable
The Company held the 26th Meeting of the 8th Session of the Board of Directors on August 19, 2020 and the 3rd InterimShareholders Meeting on September 7, 2020, approving the Repurchase Plan for Part of the Company’s DomesticallyListed Foreign Shares (B Share), and subsequently disclosed the repurchase report and a series of repurchase progressannouncements according to relevant regulations.As of December 6, 2020, the repurchase period has expired. From September 16, 2020 (the first actual occurrence dateof the share repurchase) to December 6, 2020, the Company repurchased 14,309,536 shares of B-Shares by means of acentralized price bidding transaction through a special securities repurchase account for B-Shares, which accounts for
0.61% of the Company’s total share capital. The highest transaction price is 5.22 HKD/share, the lowest transaction priceis 4.27 HKD/share, and the total payment amount is HKD 69,747,209 (including transaction fees). Please refer to theAnnouncement on the Expiry of the Repurchase Period and the Results of the B-Shares Repurchase (AnnouncementNo.2020-71) for details.According to the Repurchase Plan, after the completion of the repurchase of shares, the Board of Directors shall proposeto shareholders to approve the cancellation of the repurchased shares, the decrease of the Company’s registered capitaland the corresponding amendments to the Articles of Association of the Company. The above matters have been reviewedand approved by the 31
st
Meeting of the 8
thSession of the Board of Directors of the Company, and have yet to be reviewedand approved by the shareholders. After the shareholders’ meeting will have reviewed and approved the share cancellation,the reduction of the registered capital and the corresponding amendments to the Company’s Articles of Association, theCompany will submit applications for the cancellation of the repurchased shares and the reduction of the registered capitalto the Shenzhen Stock Exchange and China Registration and Clearing Corporation (Shenzhen Branch), respectively. Afterthe share cancellation will be completed, the Company will make corresponding amendments to the relevant provisions inthe Articles of Association of the Company, and file the industrial and commercial registration.
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
ADAMA Ltd Annual Report 2020
The 25
th
Meeting of the 8
th
Session of the Board of Directors and the 2019 Annual General Meeting have approved theProposal on the Overall Achievement of the Committed Performance included in the Major Assets Restructuring Projectand the Planned Compensation to the Company by the Obligors and the Proposal on the Share Buyback and Cancellationand the Decrease of the Registered Capital of the Company. Subsequently, the Company’s total share capital reducedfrom 2,446,553,582 shares to 2,344,121,302 shares. As this is a small reduction l, it has no significant impact on the basicEPS, diluted EPS, net assets per share attributable to common shareholders of the Company and other financial indexesin 2019 and 2020.Other contents that the Company considered necessary or were required by the securities regulatory authorities todisclose
□ Applicable √ Not applicable
ADAMA Ltd Annual Report 2020
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 |
| Syngenta Group Co., Ltd. | 1,810,883,039 | 1,708,450,759 | 0 | 0 | Committed not to trade | August 3, 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 | 1,810,887,539 | 1,708,450,759 | 0 | 4,500 | -- | -- |
ADAMA Ltd Annual Report 2020
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 of assetsand liabilities
√ Applicable □ Not applicable
The 25
th Meeting of the 8
th
Session of the Board of Directors held on April 27, 2020 and the 2019 Annual GeneralMeeting held on May 20, 2020 have approved the Proposal on the Overall Achievement of the Committed Performanceincluded in the Major Assets Restructuring Project and the Planned Compensation to the Company by the Obligors andthe Proposal on the Share Buyback and Cancellation and the Decrease of the Registered Capital of the Company. TheCompany repurchased the 102,432,280 compensation shares from the obligor in consideration of 1 RMB, and completedthe cancellation procedures at the China Securities Depository and Clearing Corporation Limited Shenzhen Branch onJuly 13, 2020. The Company’s total share capital reduced from 2,446,553,582 shares to 2,344,121,302 shares, and theresisted capital reduced from RMB 2,446,553,582 to RMB 2,344,121,302. The Company will complete the industrial andcommercial registration procedures for the above capital reduction.
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 2020
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 | 48,018 (the number of ordinary A share shareholders is 33,680; the number of B share shareholders is 14,338) | Total number of shareholders on the 30th trading day before the disclosure date of the annual report | 46,509 | 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 | |||||||||||||
| Syngenta Group Co., Ltd. | State-owned legal person | 72.88% | 1,708,450,759 | -102,432,280 | -- | 1,708,450,759 | -- | -- | ||||||
| Jingzhou Sanonda Holding Co., Ltd. | State-owned legal person | 5.11% | 119,687,202 | -- | -- | 119,687,202 | -- | -- | ||||||
| China Cinda Asset Management Co., Ltd. | State-owned legal person | 1.33% | 31,115,916 | -2,441,130 | -- | 31,115,916 | -- | -- | ||||||
| China Structural Reform Fund Co., Ltd. | State-owned legal person | 1.27% | 29,828,446 | -3,728,600 | -- | 29,828,446 | -- | -- | ||||||
| Portfolio No.503 of National Social Security Fund | Others | 0.98% | 23,000,052 | 1,499,955 | -- | 23,000,052 | -- | -- | ||||||
| Huarong Ruitong Equity Investment Management Co., Ltd. | State-owned legal person | 0.55% | 12,885,906 | 12,885,906 | -- | 12,885,906 | -- | -- | ||||||
| Hong Kong Securities | Overseas | 0.25% | 5,948,320 | 2,143,274 | -- | 5,948,320 | -- | -- | ||||||
ADAMA Ltd Annual Report 2020
| Clearing Company Ltd. (HKSCC) | legal person | ||||||||||
| Qichun County State-owned Assets Administration | State-owned legal person | 0.18% | 4,169,266 | -- | -- | 4,169,266 | -- | -- | |||
| GUOTAI JUNAN SECURITIES(HONGKONG) LIMITED | Overseas legal person | 0.17% | 4,040,329 | -359,243 | -- | 4,040,329 | -- | -- | |||
| Zhu Shenglan | Domestic Individual | 0.17% | 3,920,000 | -4,607,200 | -- | 3,920,000 | -- | -- | |||
| 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 Syngenta Group are related parties, and are acting-in-concert parties as prescribed in the Administrative Methods for Acquisition of Listed Companies. Both Jingzhou Sanonda Holdings Co., Ltd. and Syngenta Group are controlled by ChemChina. 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 | ||||||||||
| Syngenta Group Co., Ltd. | 1,708,450,759 | RMB ordinary share | 1,708,450,759 | ||||||||
| Jingzhou Sanonda Holding Co., Ltd. | 119,687,202 | RMB ordinary share | 119,687,202 | ||||||||
| China Cinda Asset Management Co., Ltd. | 31,115,916 | RMB ordinary share | 31,115,916 | ||||||||
| China Structural Reform Fund Co., Ltd. | 29,828,446 | RMB ordinary share | 29,828,446 | ||||||||
| National Social Security Fund Portfolio 503 | 23,000,052 | RMB ordinary share | 23,000,052 | ||||||||
| Huarong Ruitong Equity Investment Management Co., Ltd. | 12,885,906 | RMB ordinary share | 12,885,906 | ||||||||
| Hong Kong Securities Clearing Company Ltd. (HKSCC) | 5,948,320 | RMB ordinary share | 5,948,320 | ||||||||
| Qichun County State-owned Assets Administration | 4,169,266 | RMB ordinary share | 4,169,266 | ||||||||
| GUOTAI JUNAN SECURITIES(HONGKONG) LIMITED | 4,040,329 | Domestically listed foreign share | 4,040,329 | ||||||||
| Zhu Shenglan | 3,920,000 | RMB ordinary share | 3,920,000 | ||||||||
| 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 3,920,000 shares of the Company through a credit collateral securities trading account. | ||||||||||
ADAMA Ltd Annual Report 2020
Did any top 10 common shareholders or the top 10 common shareholders not subject to trading moratorium of the Company carry out an agreed buy-back in the ReportingPeriod?
□ Yes √ No
The top 10 common shareholders or the top 10 common shareholders of the Company were not subject to trading moratorium of the Company carry out an agreed buy-back inthe reporting period
ADAMA Ltd Annual Report 2020
2. Particulars about the controlling shareholder
Nature of controlling shareholder: The central state-ownedType of controlling shareholder: legal personBy 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 |
| Syngenta Group Co., Ltd. | Ning Gaoning | June 27, 2019 | 91310000MA1FL6MN13 | Engaged in technology development, transfer, consultation and services in the fields of agricultural science and technology, biotechnology and information technology, production and management of crop seeds, genetically modified crop seed production, chemical raw materials and products (except dangerous chemicals, monitoring chemicals, civil use of explosives and precursor chemicals) R&D and sales, chemical fertilizer management, warehousing (except dangerous goods), import and export of goods and technology, and economic information consultation. Projects subject to approval according to law, can be carried out after approval by relevant departments |
| 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, Syngenta Group directly holds 52.65% equity of SinoFert Holdings Limited, and indirectly holds 14.42% equity of Jiangsu Yangnong Chemical Co., Ltd. through Jiangsu Yangnong Chemical Group Co., Ltd.; 21.5% equity of Win-All High-tech Seed Co., Ltd. through Sinochem Modern Agriculture Co., Ltd. | |||
| Name of controlling shareholder | Syngenta Group Co., Ltd. |
| Change date | June 15, 2020 |
| Index to the disclosed | Announcement on the Completion of the Registration of the Transfer of State-owned Shares held by the Controlling Shareholder (Announcement NO.：2020-33). Disclosed at the website CNINFO www.cninfo.com.cn |
ADAMA Ltd Annual Report 2020
| Disclosure date | June 17, 2020 |
ADAMA Ltd Annual Report 2020
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 | |||
ADAMA Ltd Annual Report 2020
□ Applicable √ Not applicable
5. Particulars regarding restriction of reducing holding-shares of controlling shareholders, actualcontroller, restructuring parties and other commitment entities
□ Applicable √ Not applicable
ADAMA Ltd Annual Report 2020
Section VII. - Preferred stock
□ Applicable √ Not applicable
There was no preferred stock during Reporting Period.
ADAMA Ltd Annual Report 2020
Section VIII. - Convertible Bonds
□ Applicable √ Not applicable
There were no convertible bonds during Reporting Period.
ADAMA Ltd Annual Report 2020
Section IX. - 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 | 62 | April 9, 2020 | 0 | 0 | 0 | 0 | 0 | |
| Chen Lichtenstein | Director | In Office | Male | 53 | Sep 29, 2017 | 0 | 0 | 0 | 0 | 0 | |
| An Liru | Director | In Office | Male | 51 | Apr 29, 2015 | 0 | 0 | 0 | 0 | 0 | |
| Xi Zhen | Independent Director | In Office | Male | 57 | Dec 25, 2017 | 0 | 0 | 0 | 0 | 0 | |
| Ge Ming | Independent Director | In Office | Male | 69 | Nov 16, 2020 | 0 | 0 | 0 | 0 | 0 | |
| Ignacio Dominguez | President & CEO | In Office | Male | 61 | March 1, 2020 | 0 | 0 | 0 | 0 | 0 | |
| Aviram Lahav | Chief Financial Officer & Deputy CEO | In Office | Male | 61 | Sep 29, 2017 (Deputy | 0 | 0 | 0 | 0 | 0 |
ADAMA Ltd Annual Report 2020
| 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 | 62 | Sep 29, 2017 | 0 | 0 | 0 | 0 | 0 | |
| Jiang Chenggang | Chairman of the Supervisory Board | In Office | Male | 46 | Jan 6, 2013 | 6,000 | 0 | 0 | 0 | 6,000 | |
| Li Dejun | Member of the Supervisory Board | In Office | Male | 62 | March 19, 2018 | 0 | 0 | 0 | 0 | 0 | |
| Clement Tung | Member of the Supervisory Board | In Office | Male | 53 | Nov 16, 2020 | 0 | 0 | 0 | 0 | 0 | |
| Guo Zhi | Secretary of the BOD | In Office | Male | 43 | Nov 27, 2020 | 0 | 0 | 0 | 0 | 0 | |
| Yang Xingqiang | Chairman of the BOD | Demission | Male | 53 | Sep 29, 2017 | April 9, 2020 | 0 | 0 | 0 | 0 | 0 |
| Tang Yunwei | Independent Director | Demission | Male | 76 | Dec 25, 2017 | Nov 16, 2020 | 0 | 0 | 0 | 0 | 0 |
| Guo Zhi | Member of the Supervisory Board | Demission | Male | 43 | March 19, 2018 | Nov 16, 2020 | 0 | 0 | 0 | 0 | 0 |
| Li Zhongxi | Secretary of the BOD | Demission | Male | 50 | Feb 9, 2000 | Nov 25, 2020 | 0 | 0 | 0 | 0 | 0 |
| Total | -- | -- | -- | -- | -- | 6,000 | 0 | 0 | 0 | 6,000 |
ADAMA Ltd Annual Report 2020
II. Particulars regarding changes of Directors, Supervisors and Senior Executives
√ Applicable □ Not applicable
| 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. |
| Tang Yunwei | Independent Director | Left the position | Nov 16, 2020 | Personal reason |
| Guo Zhi | Member of the Supervisory Board | Left the position | Nov 16, 2020 | Work arrangement |
| Li Zhongxi | Secretary of the BOD | Left the position | Nov 25, 2020 | Work arrangement |
| Ge Ming | Independent Director | Take up the position | Nov 16, 2020 | Elected by the shareholders |
| Clement Tung | Member of the Supervisory Board | Take up the position | Nov 16, 2020 | Elected by the shareholders |
| Guo Zhi | Secretary of the BOD | Take up the position | Nov 27, 2020 | Appointed by the board of directors |
ADAMA Ltd Annual Report 2020
activities) and serving as the President & CEO of China National Agrochemical Corporation (CNAC).
Mr. An Liru, serves as a Director of the Company. He holds a master degree of chemical engineering and MBA, seniorengineering, senior economist. He used to be the Assistant of General Manager, Vice General Manager, General Manager,Deputy Party Secretary of Jiangsu Anpon Electrochemical Co., Ltd., Chairman of Directors, Party Secretary of JiangsuHuaihe Chemicals Co., Ltd., Executive Director and CEO of Jiangsu Maidao Agrochemical Co., Ltd., the Chairman of theBoard of Directors of the Company, Executive Director of Jiangsu Anpon Electrochemical Co., Ltd., Chairman of Directorsand Party Secretary of China National Agrochemical Co., Ltd. Currently, he serves also as a Director and the Senior VicePresident of Solutions, Director and General Manager of Adama (China) Investment Co., Ltd., Chairman of Directors ofAdama (Beijing) Agricultural Technology Co., Ltd., Chairman of Directors of Adama Agrochemical (Jiangsu) Co., Ltd.Mr. Ge Ming, serves as an independent director of the Company. He holds a master’s degree in western accounting, andhe is a senior accountant, a certified Chinese public accountant as well as an Australian certified public accountant. Hepreviously served as the chairman and chief accountant of Ernst & Young Hua Ming Certified Public Accountants Firm, andas the managing partner, chief accountant and senior advisor of Ernst & Young Hua Ming Certified Public Accountants(special general partnership). Mr. Ge currently serves as an independent director on the boards of China Pingan Group,Focus Media and AsiaInfo. He currently also serves on the supervisory boards of the Bank of Shanghai, Bank of Suzhou,Tencent Foundation, and serves as the executive director and general manager of Beijing Huaming Fulong AccountingConsulting 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 a ResearchAssociate in Department of Biological Chemistry and Molecular Pharmacology of Harvard Medical School from 1997 to2001. Mr. Xi is currently Cheung Kong Scholar of Pesticide Science of the Ministry of Education of the PRC, Chairman ofDepartment of Chemical Biology, Professor of Chemistry and Chemical Biology, Fellow of the University Committee ofNankai University in China, and Director of National Pesticide Engineering Research Center (Tianjin). Mr. Xi is also aCommittee Member of Chinese Chemical Society and Deputy Director of its Division of Chemical Biology, Deputy Directorof the Pesticide Science Division of Chinese Chemical Industry and Engineering Society. In addition, he is a director ofSuzhou 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 various managementpositions in companies such as Syngenta and American Cyanamid, boasting more than 20 years of experience in theagrochemical 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).In 2000, he was awarded the title of “Israel’s CFO of the Year”.
ADAMA Ltd Annual Report 2020
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. Arlosoroffserved 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.
Mr. Jiang Chenggang, serves as the Chairman of the Supervisory Board of the Company. He served as a Deputy Directorof the Office and Deputy Secretaries of the Discipline Inspection Commission of the Company.; acted as the Chairman ofthe Labor Union, Supervisor, Deputy Director of the Office and Deputy Secretaries of the Discipline Inspection Commissionof the Company from Jun. 2012 to Dec. 2012; has been acting as the Deputy Party Committee Secretary of JingzhouSanonda Holdings Co., Ltd. and Secretary of the Discipline Inspection Commission of the Company since January 2017;and he has been the Chairman of the Labor Union, Supervisor and Secretaries of the Discipline Inspection Commission ofthe Company since Jan. 2013.
Mr. Li Dejun, serves as a member of the Supervisory Board of the Company. Mr. Li holds a Doctor degree. He successivelyacted as Chief Officer, Deputy Chief, Chief of CCNU and Research Institute of Wuhan Province Commission forRestructuring Economic System and Editor in Chief of Overview of Private Economy, Chief of Hubei Regional EconomicDevelopment Research Center, Secretary General of Research Institute of Hubei Province Commission for RestructuringEconomic System and Hubei Province Culture and Economy Research Society as well as Independent Director of J.S.Machine, Angel Yeast. From Jul. 2010 to December 2017, he was an independent director of the Company.
Mr. Clement Tung, with Hong Kong and Australian citizenship, serves as a member of the Supervisory Board of theCompany. He holds a bachelor degree in accountancy and a master degree in business administration. He owns HongKong CPA, Australian CPA & ACCA (UK) qualifications. He currently serves as the CFO of ADAMA China. He previouslyserved as the audit supervisor of KPMG, as the finance director of AB Mauri, and as the financial controller of ASSA ABLOYGreater China.
Mr. Guo Zhi, serves as the secretary of the Board of Directors and the legal head of ADAMA China. Mr. Guo got his Masterof Laws severally from Peking University and Melbourne University. From 2004 to 2017, he practiced law in Commerce &Finance Law Offices (“C&F”) and had been a partner of C&F for eight years. His practicing area covers IPO, M&A, andForeign Investment. From March 19, 2018 to November 16, 2020, he was a member of the Supervisory Board of theCompany.
ADAMA Ltd Annual Report 2020
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 | |
| Jiang Chenggang | Jingzhou Sanonda Holdings Co., Ltd. | Deputy Party Secretary, Secretary of the Discipline Inspection Commission | January 2017 | -- | No |
| 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 | Adama (China) Investment Co., Ltd. | Director and General Manager | November 2018 | - | No |
ADAMA Ltd Annual Report 2020
| 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? |
| 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 | November 2020 | No |
| Aviram Lahav | Solutions | CEO & CFO | October 2017 | - | Yes |
| Michal Arlosoroff | Solutions | SVP, General Counsel, Company Secretary & CSR Officer | October 2017 | - | Yes |
| Ge Ming | China Pingan Group | Independent Director | June 2015 | -- | Yes |
| Ge Ming | Focus Media | Independent Director | January 2016 | -- | Yes |
| Ge Ming | AsiaInfo | Independent Director | December 2018 | -- | Yes |
| Ge Ming | Bank of Shanghai | Supervisor | June 2017 | -- | Yes |
| Ge Ming | Bank of Suzhou | Supervisor | July 2017 | -- | Yes |
| Ge Ming | Tencent Foundation | Supervisor | Jan 2019 | -- | No |
| Ge Ming | Beijing Huaming Fulong Accounting Consulting Co., Ltd. | Executive Director and General Manager | December 2001 | -- | No |
| 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 |
| 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 | J.S. Machine | Independent Director | October 2016 | - | Yes |
ADAMA Ltd Annual Report 2020
IV. Remuneration of directors, supervisors and senior management
Decision-making procedures, basis for determination and actual payment of the remuneration to directors,supervisors and senior executivesRemuneration of office holders is decided by the authorized organs of the Company according to the Remuneration Policy.In addition, global professional benchmarks, implementations of performance at the Company level, and the actualperformance of the respective person are also taken into account in the resolutions regarding remuneration.Independent directors are entitled to receive annual allowance and would not receive salary by the Company. TheCompany also adopted a remuneration plan of the non-independent directors. A non-independent director who holds amanagement position in the Company and/or any of its subsidiaries, shall receive the remuneration set for such positionand will not be entitled to any additional remuneration for serving as a director; A non-independent director who doesn’thold a management position in the Company or any of its subsidiaries, may receive a monthly remuneration. For details,please see the Announcement of the Resolutions of 25
th
meeting of the 7
thSession of the Board of Directors(Announcement no. 2018-5) and the Announcement of the Resolutions of 21
st
meeting of the 8
thSession of the Board ofDirectors (Announcement no. 2020-7).Internal supervisors, who are full-time employees of the Company (or any of its subsidiaries), will be entitled to receive aremuneration set for their posts and will not be entitled to any additional remuneration for serving as supervisors.External supervisors, who are not employees of the Company (or any of its subsidiaries), will be entitled to receive annualallowance and would not receive salary by the Company.For details, please see the Announcement of the Resolutions of 4
th meeting of the 8
thSession of the Board of Supervisors(Announcement no. 2018-25).Total remuneration of the directors, supervisors and senior management of the Company during the Reporting Period isas follow:
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 |
| Erik Fyrwald | Chairman of the BOD | Male | 62 | Current | Yes | |
| Chen Lichtenstein | Director (former President & CEO) | Male | 53 | Current | Yes | |
| An Liru | Director | Male | 51 | Current | No |
| Ge Ming | Independent Director | Male | 69 | Current | No | |
| Xi Zhen | Independent Director | Male | 57 | Current | No | |
| Ignacio Dominguez | President & CEO | Male | 61 | Current | No | |
| Aviram Lahav | Chief Financial Officer and Deputy CEO | Male | 61 | Current | No | |
| Michal Arlosoroff | General Legal Counsel | Female | 62 | Current | No | |
| Jiang Chenggang | Chairman of the Supervisory Board | Male | 46 | Current | No | |
| Li Dejun | Member of the | Male | 63 | Current | No |
ADAMA Ltd Annual Report 2020
| Name | Position | Gender | Age | Current/Former | Total before-tax remuneration gained from the Company | Whether gained remuneration from the related parties of the Company |
| Supervisory Board | ||||||
| Clement Tung | Member of the Supervisory Board | Male | 52 | Current | No | |
| Guo Zhi | Secretary of the BOD (former Member of the Supervisory Board) | Male | 43 | Current | No | |
| Yang Xingqiang | Chairman of the BOD | Male | 53 | Former | Yes | |
| Tang Yunwei | Independent Director | Male | 76 | Former | No | |
| Li Zhongxi | Secretary of the BOD | Male | 50 | Former | No | |
| Total | 6,121 |
ADAMA Ltd Annual Report 2020
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) | 969 |
| The number of on-duty employees in main subsidiary companies (person) | 6,799 |
| The total number of on-duty employees of the Group (person) | 7,768 |
| The total number of employees of the Group who received salaries in the period (person) | 7,768 |
| The number of retired employees for whom ADAMA Ltd. and main subsidiary companies need to pay retirement expense. | 3,267 |
| Specialty classification | |
| Specialty category | Number |
| Production personnel | 2,718 |
| Sales personnel | 2,149 |
| Technicians | 1,920 |
| Financial personnel | 466 |
| Administrative personnel | 515 |
| Total | 7,768 |
| Education classification | |
| Education category | Number |
| Doctor | 10 |
| Master | 144 |
| Bachelor | 578 |
| College | 702 |
| Others | 881 |
| Total* | 7,768 |
ADAMA Ltd Annual Report 2020
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 and are assessed at the end of the year. At the end of the year, a totalof 295 middle and senior managers and backbones in Jingzhou Site entered SF system for online assessment in 2020.Employees who do not participate in online assessment will conduct offline performance 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) | 1,435,704 | |
| Total remuneration paid for service outsourcing (RMB) | 23,719,831.92 |
ADAMA Ltd Annual Report 2020
Section X. - 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, promotedinternal control activities, and constantly improve the Company's management levels stringently according to requirements ofrelevant laws and regulations like the Company Law, Securities Law, and Corporate Governance Principle 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, aretreated equal and able to fully exercise their rights. It held one annual general meeting of shareholders and four interimshareholders' meetings, during which 23 proposals in total were reviewed and approved. Lawyers were invited to attend all themeetings mentioned above for testimony and issuing legal opinions. Online voting has been applied during all above-mentionedmeetings to ensure that all shareholders, especially small and medium shareholders, enjoy equal status and fully exercise theirrights. Notices of shareholders' meeting, meeting proposals, discussion procedures, voting on proposals and informationdisclosure all meet the requirements. Every major decision of the Company has been decided by the shareholders' meetingaccording to laws and regulations with lawyers as the witness to ensure that the right to know, to participate and vote on majorissues of all shareholders, especially the small and medium shareholders are properly 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 with thelaws and regulations as well as the Articles of Association of the Company. All board members are diligent and responsible forattending the board and shareholders’ meetings in accordance with the relevant provisions of the Company Law and the Articlesof Association. During the Reporting Period, the Company held 10 board meetings during which 52 proposals were reviewed.The organizing, convening and formation of resolutions were carried out in accordance with relevant provisions of the Articles ofAssociation and the Rules of Procedure for the Board of Directors. The Company has established an independent director systemin accordance with relevant regulations. Each of the independent directors have expressed independent opinions on importantbusiness of the Company during the Reporting Period. The Company's board of directors consists of one strategy committee,one nomination committee, one audit committee and one remuneration and assessment committee, all of which are functioningwith respective implementation rules 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 an external one.The number, composition and qualifications of the Board of Supervisors were in compliance with laws and regulations as well asthe Articles of Association of the Company. During the Reporting Period, four meetings were held and 16 proposals were reviewed.All meetings were organized and convened in accordance with the procedures of the Articles of Association and the Rules ofProcedure for the Board of Supervisors. All supervisors have earnestly performed their duties by reviewing the company's periodicreports and other matters and issuing verification opinions with a strong sense of responsibilities to the shareholders. All of themhave effectively fulfilled their duties and safeguarded the legitimate rights and interests of the Company and its shareholders
4. About Investors’ Relations
The Company communicates with investors through public announcements, consultations by telephone, interactive platforms, e-mails and other multiple media to enhance opinion exchange. It has been making various efforts on deepening the understandingof investors about the Company's operation and development outlook and also maintaining good relations with them. Meanwhile,it has been serious to receive investors' opinions and suggestions and encouraged the interaction between investors and itself.During the Reporting Period, the Company has been patient to respond investors by answering calls and questions through allinteractive platforms, which has guaranteed a sound and fair access for investors to obtain information.Whether there is any difference between the actual corporate governance situation of the Company and the provisions of therelevant rules of CSRC or not?
□ Yes √ No
There is no difference between the actual corporate governance situation of the Company and the provisions of the relevant rulesof CSRC.
II. Particulars about the Company’s separation from the controlling shareholder in respectof business, personnel, assets, organization and financial affairs
1. In respect of business: the Company had a complete business system and independent operation, and conducts itsindependent and complete business with self-management ability.
2. In the respect of personnel: The Company and controlling shareholder are mutually independent in the labor, personnel andsalary management, the Company CEO and other senior management personnel get the salary in the Company, and not performadministrative work in the controlling shareholder unit.
3. In respect of assets: The assets relationship between the Company and the controlling shareholder is clear. The company hascomplete control over all its assets. There is no such thing as a free possession or usage by the controlling shareholder.
4. In respect of financing, the Company owned independent financial department, established independent accounting systemand 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 controlling shareholdercompletely, the Board of Directors, the Supervisory Committee and internal organization could operate independently.
ADAMA Ltd Annual Report 2020
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. |
| Session | Type | Proportion of investors' participation | Convening date | Disclosure date | Index to the disclosed |
| 1st Interim Shareholders Meeting in 2020 | Interim Shareholders Meeting | 75.55% | March 30, 2020 | March 31, 2020 | Announcement of the Resolutions of the 1st Interim Shareholders Meeting in 2020 (Announcement Number: 2020-17). Disclosed at the website CNINFO www.cninfo.com.cn |
| 2nd Interim Shareholders Meeting in 2020 | Interim Shareholders Meeting | 78.46% | April 9, 2020 | April 10, 2020 | Announcement of the Resolutions of the 2nd Interim Shareholders Meeting in 2020 (Announcement Number: 2020-20). Disclosed at the website CNINFO www.cninfo.com.cn |
| 2019 Annual Shareholders Meeting | Annual Shareholders Meeting | 76.22% | May 20, 2020 | May 21, 2020 | Announcement on the Resolutions of 2019 Annual General Meeting (Announcement Number: 2020-31). Disclosed at the website CNINFO www.cninfo.com.cn |
| 3rd Interim Shareholders Meeting in 2020 | Interim Shareholders Meeting | 74.66% | September 7, 2020 | September 8, 2020 | Announcement on the Resolutions of the 3rd Interim Shareholders Meeting in 2020 (Announcement Number: 2020-50). Disclosed at the website CNINFO www.cninfo.com.cn |
| 4th Interim Shareholders Meeting in 2020 | Interim Shareholders Meeting | 2.16% | November 16, 2020 | November 17, 2020 | Announcement on the Resolutions of the 4th Interim Shareholders Meeting in 2020 (Announcement Number: 2020-67). Disclosed at the website CNINFO |
ADAMA Ltd Annual Report 2020
| Session | Type | Proportion of investors' participation | Convening date | Disclosure date | Index to the disclosed |
| www.cninfo.com.cn |
| 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 | 8 | -- | 8 | -- | -- | No | 5 |
| Xi Zhen | 10 | -- | 10 | -- | -- | No | 5 |
| Ge Ming | 2 | -- | 2 | -- | -- | No | -- |
ADAMA Ltd Annual Report 2020
Has 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 ManagementThe performance evaluation and incentives of the senior executives of the Company are based on the Remuneration Policy forSenior 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 contingent upon targets; (iii) long termincentives - Share-based cash reward and/or other long-term incentive in the form of cash. The Remuneration Policy establishesa fair and reasonable performance evaluation and incentives system, which helps giving full play to the ‘talents’ of the seniorexecutives and promote the long-term and healthy development of the Company. For details, please refer to the RemunerationPolicy of Senior Executives published by the Company on February 22, 2019 on the website www.cninfo.com.cn .
ADAMA Ltd Annual Report 2020
IX. Internal Control
1. Particulars regarding material deficiencies found in the internal control during the Reporting Period
□ Yes √ No
2. Self-assessment report on internal control
| Date of disclosure of self-assessment report on internal control | March 31, 2021 | ||
| 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 | 68.73% | ||
| Rate of total Operating Income of Units within the Assessment Scope Compared to Total Operating Income in the Consolidated Statements of the Company | 66.99% | ||
| 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 | |
ADAMA Ltd Annual Report 2020
| 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: Net income related: The corresponding misstatement relates to an amount that is greater than or equal to RMB 80 million. Balance sheet related: The corresponding misstatement relates to an amount that is greater than or equal to RMB 500 million. Significant Deficiency: Net income related: The corresponding misstatement relates to an amount that is greater than or equal to RMB 50 million, but less than RMB 80 million. Balance sheet related: The corresponding misstatement relates to an amount that is greater than or equal to RMB 250 million, but less than RMB 500 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 deficiencies in internal control over financial reporting | 0 | |
| Number of material deficiencies in | 0 | |
ADAMA Ltd Annual Report 2020
| internal control not related to financial reporting | |
| 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 | March 31, 2021 |
| 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. |
ADAMA Ltd Annual Report 2020
Section XI - Corporate Bonds
Are there any corporate bonds publicly offered and listed on the stock exchange, which were undue before the approval date ofthis Report or were due but could not be redeemed in full?
□ Applicable √ Not applicable
ADAMA Ltd Annual Report 2020
Section XII - Financial Report
| Type of auditor’s opinion | Standard Unqualified Opinion |
| Audit opinion signoff date | March 29, 2021 |
| Name of the auditor | Deloitte Touche Tohmatsu CPA LLP |
| Reference number of the audit report | De Shi Bao (Shen) Zi (21) No P01902 |
| Name of CPA | Mou Zhengfei, Ma Renjie |
AUDITOR'S REPORT
De Shi Bao (Shen) Zi (21) No. P01902
(Page 1 of 7)
To the shareholders of ADAMA Ltd.:
I. Opinion
We have audited the financial statements of ADAMA Ltd. (hereinafter referred to as the "Company"),which comprise the consolidated and the Company's balance sheets as at 31 December 2020, and theconsolidated and the Company's income statements, the consolidated and the Company's statements ofchanges in shareholders' equity and the consolidated and the Company's statements of cash flows forthe year then ended, and notes to the financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects, the con-solidated and the Company's financial position as of 31 December 2020, 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 underthose standards are further described in the Auditor's Responsibilities for the Audit of the FinancialStatements section of our report. We are independent of the Company in accordance with the Code ofEthics for Chinese Certified Public Accountants (the "Code"), and we have fulfilled our other ethicalresponsibilities in accordance with the Code. We believe that the audit evidence we have obtained issufficient and appropriate to provide 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 ouraudit of the financial statements for the current year. These matters were addressed in the context ofour audit of the financial statements as a whole, and in forming our opinion thereon, and we do notprovide a separate opinion on these matters. The followings are key audit matters that we have deter-mined to communicate in the auditor's report.
AUDITOR'S REPORT - continued
De Shi Bao (Shen) Zi (21) No. P01902
(Page 2 of 7)
III. Key Audit Matters - continued
(I) Cut-off of revenue recognition
Description
ADAMA's sale revenue is mainly contributed by the sales of goods in about 100 countries all over theworld. As stated in Note (V), 42 operating income, ADAMA's consolidated principal activities revenuefor 2020 was RMB 28,385,744,000, which was significant to the financial statements. As stated in Note(III), 24, ADAMA recognizes revenue when the customer obtains control over relevant commodities,and the Company has a risk of overstating the revenue by late cutoffs. Therefore, we considered theappropriateness of cutoffs and correctness of accounting periods for principal activities revenue recog-nition as a key audit matter.
Audit response
Our procedures in relation to this matter mainly include:
1、 Testing and assessing the design, implementation and operating effectiveness of internal con-trols relating to the cut-off of principal activities revenue recognition;
2、 Reviewing the contracts with key customers for the terms and conditions relating to the transfer
of controls of goods and services, and assessing whether the timing of principal activities revenuerecognition complies with the Accounting Standards for Business Enterprises;
3、 Performing cut-off test by selecting samples from sales of goods recorded in the current year,
checking the supporting documents such as sales invoices and inventory transfer documents, andchecking whether the income is recorded in the correct accounting period;
4、 Performing analytic procedures and comparing whether there is abnormal fluctuation in the salesof the major sales regions in the current period and the previous period, and analyzing whether thereis any abnormality in the sales return of the products.
AUDITOR'S REPORT - continued
De Shi Bao (Shen) Zi (21) No. P01902
(Page 3 of 7)
III. Key Audit Matters - continued
(II) Provision for decline in value of inventories
Description
As stated in Note (V), 9, the carrying amount of ADAMA's inventories net of provisions for decline invalue was RMB10,338,273,000 as of 31 December 2020, which was significant to the consolidatedfinancial statements. As disclosed in Note (III), 12.3 and 30.2, ADAMA measures inventories at thelower of cost and net realizable value. Provisions for decline in value of inventories are made when thenet realizable values are lower than the carrying amounts. The determination of the net realizable valueof inventories requires the application of significant accounting estimates, including estimated sellingprice of inventories, estimated costs of completion, the estimated costs necessary to make the sale andrelevant taxes etc. and the effect is significant. Therefore, we considered the provision for decline invalue of inventories as a key audit matter.
Audit response
Our procedures in relation to this matter mainly include:
1、 Testing and assessing the design, implementation and operating effectiveness of internal controlsrelating to the provision for decline in value of inventories;
2、 Reviewing and assessing the reasonableness and consistency of the methodology used by the man-agement to make provision for decline in value of inventories;
3、 Reviewing the inventory age and turnover conditions, and checking the management's identi-fication of the damaged and slow moving inventories with the inventory monitoring procedures;
4、 Assessing the reasonableness of key assumptions involved in management's determination of thenet realizable value of inventories, including? sampling check whether the estimated selling price of inventories upon the management's deter-
mining the net realizable value of inventories significantly deviated from the actual selling priceof inventories subsequent to balance sheet date.? for work in progress, sampling to assess the reasonableness of estimated cost of completion on
the basis of stage of completion of the work in progress and actual cost of the finished goods;? assessing the reasonableness of the estimated costs necessary to make the sale and the related
taxes used in the calculation of net realizable value on the basis of historical data.
5、 Testing the accuracy of the calculation of provisions for decline in value of inventories.
AUDITOR'S REPORT - continued
De Shi Bao (Shen) Zi (21) No. P01902
(Page 4 of 7)
III. Key Audit Matters - continued
(III) Provision for Impairment of Goodwill on Crop Protection Units
Description
As stated in Note (V), 18, the carrying amount of goodwill was RMB4,584,226,000 as of 31 December2020, which was mainly allocated to Crop Protection unit. As disclosed in Note III, 19 and 20,ADAMA’s goodwill arising from business combination is measured at the cost less the accumulatedimpairment loss after initial recognition, and should be entitled to impairment test at least at the end ofeach year. When performing impairment test of Crop Protection unit with goodwill allocated, the man-agement determined the recoverable amount of relevant assets group of units based on the model ofpresent value determined on future cash flows, which depend on the judgement of the management, itrequires the management to estimate the cash flows from relevant assets group of units and select anappropriate discount rate that reflects the time value of money in the current market and the specificrisk of the assets. As significant accounting estimates and judgments are involved and the goodwillallocated to Crop Protection unit is significant in amount, we considered the provision for impairmentof goodwill on Crop Protection unit as a key audit matter.
Audit response
Our procedures in relation to this matter mainly include:
1. Testing and assessing the design, implementation and operating effectiveness of internal controlsrelating to the provision for impairment of goodwill on Crop Protection unit;
2. Checking the basis on which the management allocated goodwill to Crop Protection unit and as-
sessing the reasonableness;
3. Reviewing and assessing the reasonableness of the management's adoption of discount cash flowmodel for the Crop Protection unit containing goodwill.
4. Analyzing and reviewing the significant accounting estimates and judgements used in estimation of
future cash flows, including the key parameters such as discount rate and growth rate, etc. We willalso involve internal valuation specialist for assistance;
5. Checking the expected future cash flows to historical data and other supporting evidence, and assessthe reasonableness;
6. Performing sensitivity analysis on possible changes in relevant key assumptions in impairment test
models.
AUDITOR'S REPORT - continued
De Shi Bao (Shen) Zi (21) No. P01902
(Page 5 of 7)
IV. Other Information
Management of the Company is responsible for the other information. The other information comprisesthe information included in the 2020 annual report, but does not include the financial statements andour auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we do not express anyform of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other infor-mation and, in doing so, consider whether the other information is materially inconsistent with thefinancial statements or our knowledge obtained in the audit or otherwise appears to be materially mis-stated.
If, based on the work we have performed, we conclude that there is a material misstatement of thisother information; 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 State-ments
The management of the Company is responsible for the preparation and fair presentation of the financialstatements in accordance with Accounting Standards for Business Enterprises, and designing, imple-menting and maintaining internal control that is necessary to enable the financial statements that arefree from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company's abilityto continue as a going concern, disclosing, as applicable, matters related to going concern and using thegoing concern basis of accounting unless management either intends to liquidate the Company or toceases operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting pro-cess.
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 arefree from material misstatement, whether due to fraud or error, and to issue an auditor's report thatincludes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that anaudit conducted in accordance with China Standards on Auditing will always detect a material mis-statement 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 decisionsof users taken on the basis of these financial statements.
AUDITOR'S REPORT - continued
De Shi Bao (Shen) Zi (21) No. P01902
(Page 6 of 7)
VI. Auditor's Responsibilities for the Audit of the Financial Statements - continued
As part of an audit in accordance with China Standards on Auditing, we exercise professional judgmentand maintain professional skepticism throughout the audit. We also:
(1) Identify and assess the risks of material misstatement of the financial statements, whether due tofraud or error, design and perform audit procedures responsive to those risks, and obtain audit evi-dence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detectinga material misstatement resulting from fraud is higher than for one resulting from error, as fraudmay involve collusion, forgery, intentional omissions, misrepresentations, or the override of internalcontrol;
(2) Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances;
(3) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting es-timates and related disclosures made by the management;
(4) Conclude on the appropriateness of the management' use of the going concern basis of accountingand, based on the audit evidence obtained, whether a material uncertainty exists related to eventsor conditions that may cast significant doubt on the Company's ability to continue as a going con-cern. If we conclude that a material uncertainty exists, we are required to draw attention in ourauditor's report to the related disclosures in the financial statements or, if such disclosures are inad-equate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor's report. However, future events or conditions may cause the Company to ceaseto continue as a going concern;
(5) Evaluate the overall presentation (including the disclosures), structure and content of the financialstatements, and whether the financial statements represent the underlying transactions and eventsin a manner that achieves fair presentation;
(6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Company to express an opinion on the financial statements. We areresponsible for the direction, supervision and performance of the group audit. We remain solelyresponsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the plannedscope and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.
AUDITOR'S REPORT - continued
De Shi Bao (Shen) Zi (21) No. P01902
(Page 7 of 7)
VI. Auditor's Responsibilities for the Audit of the Financial Statements - continued
We also provide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence, and to communicate with them all relationships and othermatters that may reasonably be thought to bear on our independence, and where applicable, relatedsafeguards.
From the matters communicated with those charged with governance, we determine those matters thatwere of most significance in the audit of the financial statements of the current year and are thereforethe key audit matters. We describe these matters in our auditor's report unless law or regulation pre-cludes public disclosure about the matter or when, in extremely rare circumstances, we determine thata matter should not be communicated in our report because the adverse consequences of doing so wouldreasonably be expected to outweigh the public interest benefits of such communication.
Deloitte Touche Tohmatsu CPA LLP Chinese Certified Public Accountant
Shanghai China Mou Zhengfei(Engagement Partner)
Chinese Certified Public AccountantMa Renjie
29 March 2021
This independent auditor's report of the financial statements and the accompanying financial statements areEnglish translations of the independent auditor's report and the financial statements prepared under accountingprinciples and practices generally accepted in the People's Republic of China. These financial statements arenot intended to present the balance sheet and results of operations and cash flows in accordance with accountingprinciples and practices generally accepted in other countries and jurisdictions. In case the English version doesnot conform to the Chinese version, the Chinese version prevails.
ADAMA Ltd Annual Report 2020
(Expressed in RMB '000)Consolidated Balance Sheet
| December 31 | December 31 | ||
| Notes | 2020 | 2019 | |
| Current assets | |||
| Cash at bank and on hand | V.1 | 3,863,886 | 4,348,588 |
| Financial assets held for trading | V.2 | 1,253 | 29,510 |
| Derivative financial assets | V.3 | 1,560,788 | 490,113 |
| Bills receivable | V.4 | 102,082 | 26,000 |
| Accounts receivable | V.5 | 8,766,869 | 8,004,157 |
| Receivables financing | V.6 | 109,483 | 78,948 |
| Prepayments | V.7 | 406,008 | 377,808 |
| Other receivables | V.8 | 1,310,029 | 1,195,253 |
| Inventories | V.9 | 10,338,273 | 9,932,654 |
| Other current assets | V.10 | 769,641 | 659,195 |
| Total current assets | 27,228,312 | 25,142,226 | |
| Non-current assets | |||
| Long-term receivables | V.11 | 95,329 | 170,896 |
| Long-term equity investments | V.12 | 14,081 | 133,098 |
| Other equity investments | V.13 | 152,200 | 155,062 |
| Investment properties | 4,364 | 3,771 | |
| Fixed assets | V.14 | 6,576,116 | 6,939,610 |
| Construction in progress | V.15 | 1,405,328 | 788,386 |
| Right-of-use assets | V.16 | 483,618 | 536,034 |
| Intangible assets | V.17 | 5,226,455 | 5,835,785 |
| Goodwill | V.18 | 4,584,226 | 4,511,193 |
| Deferred tax assets | V.19 | 773,673 | 826,696 |
| Other non-current assets | V.20 | 257,332 | 246,183 |
| Total non-current assets | 19,572,722 | 20,146,714 | |
| Total assets | 46,801,034 | 45,288,940 | |
ADAMA Ltd Annual Report 2020
(Expressed in RMB '000)Consolidated Balance Sheet (continued)
| December 31 | December 31 | ||
| Notes | 2020 | 2019 | |
| Current liabilities | |||
| Short-term loans | V.21 | 1,205,498 | 2,009,882 |
| Derivative financial liabilities | V.22 | 1,463,614 | 691,475 |
| Bills payable | V.23 | 369,791 | 321,674 |
| Accounts payable | V.24 | 4,557,006 | 4,205,901 |
| Contract liabilities | V.25 | 1,092,253 | 664,228 |
| Employee benefits payable | V.26 | 1,208,834 | 1,211,713 |
| Taxes payable | V.27 | 358,988 | 369,038 |
| Other payables | V.28 | 1,075,721 | 1,049,594 |
| Non-current liabilities due within one year | V.29 | 1,272,581 | 1,066,243 |
| Other current liabilities | V.30 | 315,597 | 355,243 |
| Total current liabilities | 12,919,883 | 11,944,991 | |
| Non-current liabilities | |||
| Long-term loans | V.31 | 2,387,628 | 927,159 |
| Debentures payable | V.32 | 8,078,113 | 7,965,942 |
| Lease liabilities | V.33 | 379,190 | 406,358 |
| Long-term payables | 27,327 | 29,021 | |
| Long-term employee benefits payable | V.34 | 645,755 | 738,854 |
| Provisions | V.35 | 163,251 | 176,822 |
| Deferred tax liabilities | V.19 | 331,942 | 323,304 |
| Other non-current liabilities | V.36 | 434,030 | 404,824 |
| Total non-current liabilities | 12,447,236 | 10,972,284 | |
| Total liabilities | 25,367,119 | 22,917,275 | |
| Shareholders' equity | |||
| Share capital | V.37 | 2,344,121 | 2,446,554 |
| Capital reserve | V.38 | 13,023,219 | 12,903,168 |
| Less: Treasury shares | 60,357 | - | |
| Other comprehensive income | V.39 | (72,055) | 1,192,681 |
| Special reserves | 15,960 | 14,927 | |
| Surplus reserve | V.40 | 240,162 | 240,162 |
| Retained earnings | V.41 | 5,862,702 | 5,574,173 |
| Total equity attributed to the shareholders of the company | 21,353,752 | 22,371,665 | |
| Non-controlling interests | 80,163 | - | |
| Total Equity | 21,433,915 | 22,371,665 | |
| Total liabilities and equity | 46,801,034 | 45,288,940 | |
| Ignacio Dominguez Legal representative | Aviram Lahav Chief of accounting work & Chief of accounting organ |
ADAMA Ltd Annual Report 2020
(Expressed in RMB '000)Balance Sheet
| December 31 | December 31 | ||
| Notes | 2020 | 2019 | |
| Current assets | |||
| Cash at bank and on hand | XV.1 | 1,034,812 | 1,423,051 |
| Accounts receivable | XV.2 | 387,117 | 349,109 |
| Receivables financing | XV.3 | 25,060 | 11,722 |
| Prepayments | 5,973 | 6,055 | |
| Other receivables | XV.4 | 27,138 | 14,051 |
| Inventories | 141,235 | 97,861 | |
| Other current assets | 42,243 | 19,117 | |
| Total current assets | 1,663,578 | 1,920,966 | |
| Non-current assets | |||
| Long-term equity investments | XV.5 | 16,663,212 | 16,371,411 |
| Other equity investments | 85,495 | 85,495 | |
| Investment properties | 4,364 | 3,771 | |
| Fixed assets | 784,218 | 777,476 | |
| Construction in progress | 992,863 | 504,936 | |
| Right-of-use assets | 37 | 486 | |
| Intangible assets | 220,963 | 170,053 | |
| Deferred tax assets | 66,036 | 84,950 | |
| Other non-current assets | 238,750 | 73,668 | |
| Total non-current assets | 19,055,938 | 18,072,246 | |
| Total assets | 20,719,516 | 19,993,212 | |
| Current liabilities | |||
| Short-term loans | 100,000 | 150,000 | |
| Bills payables | 19,600 | 90,190 | |
| Accounts payables | 324,047 | 124,228 | |
| Contract liabilities | 17,480 | 6,748 | |
| Employee benefits payable | 99,808 | 204,238 | |
| Taxes payable | 3,143 | 3,614 | |
| Other payables | 240,939 | 237,266 | |
| Non-current liabilities due within one year | 39,302 | 454 | |
| Total current liabilities | 844,319 | 816,738 | |
| Non-current liabilities | |||
| Long-term loans | 941,430 | 141,960 | |
| Lease Liabilities | - | 21 | |
| Long-term employee benefits payable | 89,658 | 96,826 | |
| Provisions | 44,743 | 43,238 | |
| Other non-current liabilities | 143,770 | 171,770 | |
| Total non-current liabilities | 1,219,601 | 453,815 | |
| Total liabilities | 2,063,920 | 1,270,553 | |
| Shareholders’ equity | |||
| Share capital | V.37 | 2,344,121 | 2,446,554 |
| Capital reserve | 15,569,929 | 15,449,878 | |
| Less: Treasury shares | 60,357 | - | |
| Other comprehensive income | 47,390 | 41,308 | |
| Special reserves | 16,651 | 12,973 | |
| Surplus reserve | 240,162 | 240,162 | |
| Retained earnings | V.41 | 497,700 | 531,784 |
| Total shareholders’ equity | 18,655,596 | 18,722,659 | |
| Total liabilities and shareholders’ equity | 20,719,516 | 19,993,212 |
ADAMA Ltd. Annual Report 2020
(Expressed in RMB '000)
Consolidated Income Statement
| Year ended December 31 | |||
| Notes | 2020 | 2019 | |
| I. Operating income | V.42 | 28,444,833 | 27,563,239 |
| Less: Cost of sales | V.42 | 20,071,035 | 18,679,512 |
| Taxes and surcharges | V.43 | 88,591 | 84,403 |
| Selling and Distribution expenses | V.44 | 4,945,345 | 4,873,256 |
| General and administrative expenses | V.45 | 1,043,708 | 1,562,317 |
| Research and Development expenses | V.46 | 478,778 | 436,325 |
| Financial expenses | V.47 | 1,847,189 | 1,665,885 |
| Including: Interest expense | 679,225 | 694,350 | |
| Interest income | 64,022 | 81,190 | |
| Add: Investment income (loss), net | V.48 | 206,502 | (231,205) |
| Including: Income from investment in associates and joint ventures | 15,584 | 19,861 | |
| Gain (loss) from changes in fair value | V.49 | 540,698 | 825,512 |
| Credit impairment reversal (losses) | V.50 | (25,949) | (39,405) |
| Asset impairment reversal (losses) | V.51 | (164,154) | (413,816) |
| Gain from disposal of assets | V.52 | 10,750 | 127,073 |
| II. Operating profit | 538,034 | 529,700 | |
| Add: Non-operating income | 77,025 | 25,726 | |
| Less: Non-operating expenses | 39,847 | 103,854 | |
| III. Total profit | 575,212 | 451,572 | |
| Less: Income tax expenses | V.53 | 222,459 | 174,531 |
| IV. Net profit | 352,753 | 277,041 | |
| (1). Classified by nature of operations | |||
| (1.1). Continuing operations | 352,753 | 277,041 | |
| (2). Classified by ownership | |||
| (2.1). Shareholders of the Company | 352,753 | 277,041 | |
| V. Other comprehensive income, net of tax | V. 39 | (1,264,736) | 106,365 |
| Other comprehensive income (net of tax) attributable to shareholders of the Company | (1,264,736) | 106,365 | |
| (1) Items that will not be reclassified to profit or loss: | 36,109 | (48,181) | |
| (1.1) Re-measurement of defined benefit plan liability | 29,618 | (50,771) | |
| (1.2) Fair Value changes in other equity investment | 6,491 | 2,590 | |
| (2) Items that were or will be reclassified to profit or loss | (1,300,845) | 154,546 | |
| (2.1) Effective portion of gains or loss of cash flow hedge | (175,187) | (138,917) | |
| (2.2) Translation differences of foreign financial statements | (1,125,658) | 293,463 | |
| VI. Total comprehensive income for the period attributable to Shareholders of the Company | (911,983) | 383,406 | |
| VII. Earnings per share | XIV.2 | ||
| (1) Basic earnings per share (Yuan/share) | 0.15 | 0.11 | |
| (2) Diluted earnings per share (Yuan/share) | N/A | N/A | |
ADAMA Ltd. Annual Report 2020
(Expressed in RMB '000)
Income Statement
| Year ended December 31 | |||
| Notes | 2020 | 2019 | |
| I. Operating income | XV.6 | 1,516,459 | 1,405,709 |
| Less: Operating costs | XV.6 | 1,177,550 | 1,024,665 |
| Taxes and surcharges | 6,033 | 11,992 | |
| Selling and Distribution expenses | 46,036 | 58,172 | |
| General and administrative expenses | 179,481 | 632,515 | |
| Research and Development expenses | 49,219 | 53,447 | |
| Financial expenses (income) | 23,671 | (13,211) | |
| Including: Interest expense | 9,757 | 3,941 | |
| Interest income | 18,382 | 26,114 | |
| Add: Investment income (loss), net | (16,173) | 2,583 | |
| Credit impairment reversal (losses) | 4,071 | (2,018) | |
| Asset Impairment reversal (losses) | (17,655) | (147,421) | |
| Gain from disposal of assets | 4,174 | - | |
| II. Operating Profit | 8,886 | (508,727) | |
| Add: Non-operating income | 13,730 | 6,726 | |
| Less: Non-operating expenses | 1,934 | 28,739 | |
| III. Total profit | 20,682 | (530,740) | |
| Less: Income tax expense (income) | 25,407 | (42,767) | |
| IV. Loss (Continuing operations) | (4,725) | (487,973) | |
| V. Other comprehensive income, net of tax | 6,082 | (1,859) |
| (1) Items that will not be reclassified to profit or loss | 6,082 | (1,859) |
| (1.1) Re-measurement of defined benefit plan liability | (411) | 62 |
| (1.2) FV changes in other equity investment | 6,493 | (1,921) |
| VI. Total comprehensive income (loss) for the period | 1,357 | (489,832) |
ADAMA Ltd. Annual Report 2020
(Expressed in RMB '000)Consolidated Cash Flow Statement
| Year ended December 31 | |||
| Notes | 2020 | 2019 | |
| I. Cash flows from operating activities: | |||
| Cash received from sale of goods and rendering of services | 26,822,969 | 24,860,829 | |
| Refund of taxes and surcharges | 213,704 | 88,042 | |
| Cash received relating to other operating activities | V.55(1) | 693,212 | 664,837 |
| Sub-total of cash inflows from operating activities | 27,729,885 | 25,613,708 | |
| Cash paid for goods and services | 18,671,558 | 17,877,786 | |
| Cash paid to and on behalf of employees | 3,605,027 | 3,408,818 | |
| Payments of taxes and surcharges | 385,056 | 683,477 | |
| Cash paid relating to other operating activities | V.55(2) | 3,045,229 | 2,800,140 |
| Sub-total of cash outflows from operating activities | 25,706,870 | 24,770,221 | |
| Net cash flows from (used in) operating activities | V.56(1)a | 2,023,015 | 843,487 |
| II. Cash flows from investing activities: | |||
| Cash received from disposal of investments | 29,808 | 63,685 | |
| Cash received from returns of investments | 55,078 | 8,424 | |
| Net cash received from disposal of fixed assets, intangible assets and other long-term assets | 22,678 | 186,607 | |
| Cash received relating to other investing activities | V.55(3) | 3,223 | 5,208 |
| Sub-total of cash inflows from investing activities | 110,787 | 263,924 | |
| Cash paid to acquire fixed assets, intangible assets and other long-term assets | 1,969,793 | 1,760,000 | |
| Cash paid for acquisition of investments | 53,422 | 60,500 | |
| Net cash paid to acquire subsidiaries or other business units | 371,192 | 1,121,947 | |
| Cash paid relating to other investing activities | V.55(4) | 48,348 | - |
| Sub-total of cash outflows from investing activities | 2,442,755 | 2,942,447 | |
| Net cash flows used in investing activities | (2,331,968) | (2,678,523) | |
| III. Cash flows from financing activities: | |||
| Cash received from borrowings | 3,772,193 | 3,032,134 | |
| Cash received from issuance of debentures | 692,893 | - | |
| Cash received from other financing activities | V.55(5) | 220,738 | 179,911 |
| Sub-total of cash inflows from financing activities | 4,685,824 | 3,212,045 | |
| Cash repayments of borrowings | 3,405,046 | 1,486,586 | |
| Cash payment for dividends, profit distributions and interest | 728,369 | 1,000,773 | |
| Including: Dividends paid to non-controlling interest | 34,865 | 43,043 | |
| Cash paid relating to other financing activities | V.55(6) | 409,358 | 936,712 |
| Sub-total of cash outflows from financing activities | 4,542,773 | 3,424,071 | |
| Net cash from financing activities | 143,051 | (212,026) | |
| IV. Effects of foreign exchange rate changes on cash and cash equiva-lents | (318,934) | 20,773 | |
| V. Net decrease in cash and cash equivalents | V.56(1)b | (484,836) | (2,026,289) |
| Add: Cash and cash equivalents at the beginning of the year | 4,319,907 | 6,346,196 | |
| I. VI. Cash and cash equivalents at the end of the period | V.56(2) | 3,835,071 | 4,319,907 |
ADAMA Ltd. Annual Report 2020
(Expressed in RMB '000)Cash Flow Statement
| Year ended December 31 | |||
| Notes | 2020 | 2019 | |
| I. Cash flows from operating activities: | |||
| Cash received from sale of goods and rendering of services | 1,275,007 | 1,634,256 | |
| Refund of taxes and surcharges | 91,565 | 54,483 | |
| Cash received relating to other operating activities | XV.7(1) | 31,031 | 33,582 |
| Sub-total of cash inflows from operating activities | 1,397,603 | 1,722,321 | |
| Cash paid for goods and services | 1,032,657 | 1,043,318 | |
| Cash paid to and on behalf of employees | 208,933 | 213,846 | |
| Payments of taxes and surcharges | 9,234 | 78,567 | |
| Cash paid relating to other operating activities | XV.7(2) | 242,563 | 164,778 |
| Sub-total of cash outflows from operating activities | 1,493,387 | 1,500,509 | |
| Net cash flows from (used in) operating activities | XV.8 | (95,784) | 221,812 |
| II. Cash flows from investing activities: | |||
| Cash received from returns of investments | 2,583 | 4,391 | |
| Net cash received from disposal of fixed assets, intangible assets and other long-term assets | 4,357 | - | |
| Sub-total of cash inflows from investing activities | 6,940 | 4,391 | |
| Cash paid to acquire fixed assets, intangible assets and other long-term assets | 519,363 | 400,366 | |
| Cash paid for acquisition of investments | 276,000 | 415,000 | |
| Cash paid for other investing activities | XV.7.(3) | 150,000 | - |
| Sub-total of cash outflows from investing activities | 945,363 | 815,366 | |
| Net cash flows used in investing activities | (938,423) | (810,975) | |
| III. Cash flows from financing activities: | |||
| Cash received from borrowings | 1,094,232 | 292,000 | |
| Cash received relating to other financing activities | XV.7.(4) | 21,177 | 39,886 |
| Sub-total of cash inflows from financing activities | 1,115,409 | 331,886 | |
| Cash repayments of borrowings | 333,500 | 92,000 | |
| Cash payment for dividends, profit distributions or interest | 34,407 | 243,733 | |
| Cash paid relating to other financing activities | XV.7.(5) | 66,971 | 14,469 |
| Sub-total of cash outflows from financing activities | 434,878 | 350,202 | |
| Net cash flow provided by (used in) financing activities | 680,531 | (18,316) | |
| IV. Effects of foreign exchange rate changes on cash and cash equivalents | (19,560) | (1,840) | |
| V. Net decrease in cash and cash equivalents | (373,236) | (609,319) | |
| Add: Cash and cash equivalents at the beginning of the year | XV.8(2) | 1,395,994 | 2,005,313 |
| VI. Cash and cash equivalents at the end of the period | XV.8(2) | 1,022,758 | 1,395,994 |
ADAMA Ltd. Annual Report 2020
(Expressed in RMB '000)Consolidated Statement of Changes in Shareholders’ Equity
For the year ended December 31, 2020
| Attributable to shareholders of the Company | ||||||||||
| Share capi-tal * | Capital re-serve * | Less: Treasury shares * | Other compre-hensive in-come | Special reserves | Surplus re-serve | Retained earn-ings | Total | Non-controlling interests | Total equity | |
| I. Balance at December 31, 2019 | 2,446,554 | 12,903,168 | - | 1,192,681 | 14,927 | 240,162 | 5,574,173 | 22,371,665 | - | 22,371,665 |
| II. Changes in equity for the period | (102,433) | 120,051 | 60,357 | (1,264,736) | 1,033 | - | 288,529 | (1,017,913) | 80,163 | (937,750) |
| 1. Total comprehensive income | - | - | - | (1,264,736) | - | - | 352,753 | (911,983) | - | (911,983) |
| 2. Owner’s contributions and reduction | (102,433) | 120,051 | 60,357 | - | - | - | - | (42,739) | 80,163 | 37,424 |
| 2.1 Repurchase of shares | (102,433) | 102,433 | 60,357 | - | - | - | - | (60,357) | - | (60,357) |
| 2.2 Non-controlling interests in respect of business combination | - | - | - | - | - | - | - | - | 80,163 | 80,163 |
| 2.3 Other | - | 17,618 | - | - | - | - | - | 17,618 | - | 17,618 |
| 3. Appropriation of profits | - | - | - | - | - | - | (64,224) | (64,224) | - | (64,224) |
| 3.1 Distribution to owners | - | - | - | - | - | - | (29,359) | (29,359) | - | (29,359) |
| 3.2 Distribution to non-controlling interest | - | - | - | - | - | - | (34,865) | (34,865) | - | (34,865) |
| 4. Special reserve | - | - | - | - | 1,033 | - | - | 1,033 | - | 1,033 |
| 4.1 Transfer to special reserve | - | - | - | - | 7,511 | - | - | 7,511 | - | 7,511 |
| 4.2 Amount utilized | - | - | - | - | (6,478) | - | - | (6,478) | - | (6,478) |
| III. Balance at December 31, 2020 | 2,344,121 | 13,023,219 | 60,357 | (72,055) | 15,960 | 240,162 | 5,862,702 | 21,353,752 | 80,163 | 21,433,915 |
ADAMA Ltd. Annual Report 2020
(Expressed in RMB '000)
Statement of Changes in Shareholders’ Equity
For the year ended December 31, 2019
| Attributable to shareholders of the Company | |||||||
| Share capital | Capital re-serve | Other com-prehen-sive in-come | Special re-serves | Surplus re-serve | 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) | - | - | (18,824) |
| 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. Annual Report 2020
(Expressed in RMB '000)Statement of Changes in Shareholders’ Equity
For the year ended December 31, 2020
| Attributable to shareholders of the Company | |||||||||||||||||||||||
| Share capital | Capital re-serve | Less: treasury share | Other compre-hensive income | Special reserves | Surplus reserve | Retained earnings | Total | ||||||||||||||||
| I. Balance at December 31, 2019 | 2,446,554 | 15,449,878 | - | 41,308 | 12,973 | 240,162 | 531,784 | 18,722,659 | |||||||||||||||
| II. Changes in equity for the period | (102,433) | 120,051 | 60,357 | 6,082 | 3,678 | - | (34,084) | (67,063) | |||||||||||||||
| 1. Total comprehensive income | - | - | - | 6,082 | - | - | (4,725) | 1,357 | |||||||||||||||
| 2. Owner’s contributions and reduction | (102,433) | 120,051 | 60,357 | (42,739) | |||||||||||||||||||
| 2.1 Repurchase of shares | (102,433) | 102,433 | 60,357 | - | - | - | - | (60,357) | |||||||||||||||
| 2.2 Other | - | 17,618 | - | - | - | - | - | 17,618 | |||||||||||||||
| 3. Appropriation of profits | - | - | - | - | - | - | (29,359) | (29,359) | |||||||||||||||
| 3.1 Transfer to Distribution to shareholders | - | - | - | - | - | - | (29,359) | (29,359) | |||||||||||||||
| 4. Special reserve | - | - | - | - | 3,678 | - | - | 3,678 | |||||||||||||||
| 4.1 Transfer to special reserve | - | - | - | - | 7,511 | - | - | 7,511 | |||||||||||||||
| 4.2 Amount utilized | - | - | - | - | (3,833) | - | - | (3,833) | |||||||||||||||
| Ⅲ. Balance at December 31, 2020 | 2,344,121 | 15,569,929 | 60,357 | 47,390 | 16,651 | 240,162 | 497,700 | 18,655,596 | |||||||||||||||
| For the year ended December 31, 2019 | |||||||||||||||||||||||
| Attributable to shareholders of the Company | |||||||||||||||||||||||
| Share capital | Capital re-serve | Other compre-hensive 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 | ||||||||||||||||
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
I BASIC CORPORATE INFORMATION
ADAMA Ltd. (hereinafter the “Company” or the “Group”) is a company limited by shares established inChina with its head office located in Hubei Jingzhou.
In June 2020, the controlling shareholder of the Company changed from China National Agrochemical Co,.Ltd. (hereinafter – “CNAC") to Syngenta Group Co., Ltd. (hereinafter “Syngenta Group”). The ultimatecontrolling shareholder remains China National Chemical Corporation (hereinafter - “ChemChina”).
The principal activities of the Company and its subsidiaries (together referred to as the “Group”) are engagedin development, manufacturing and marketing of agrochemicals, intermediate materials for other industries,food additives and synthetic aromatic products, mainly for export. For information about the largest subsid-iaries of the Company, refer to Note VII.
The Company’s consolidated financial statements had been approved by the Board of Directors of the Com-pany on March 29, 2021.
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 Finance(the "MoF"). In addition, the Group has disclosed relevant financial information in these financial statementsin accordance with Information Disclosure and Presentation Rules for Companies Offering Securities to thePublic No. 15－General Provisions on Financial Reporting (revised by China Securities Regulatory Com-mission (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 historical costas the principle of measurement in the financial statements. Where assets are impaired, provisions for assetimpairment are made in accordance with relevant requirements.
In the historical cost measurement, assets obtained shall be measured at the amount of cash or cash equiva-lents 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 or cashequivalents paid to discharge the liabilities.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable,willing market participants in an arm’s length transaction at the measurement date. Fair value measured anddisclosed in the financial statements are determined on this basis whether it is observable or estimated byvaluation 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 going concern assessment for the following 12 months from December 31, 2020and have not identified any significant doubtful matter or event on the going concern, as such the financialstatement 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 to trulyand completely reflect the Company's consolidated financial position as at December 31, 2020 and the Com-pany's consolidated operating results, changes in shareholders' equity and cash flows for the twelve monthsthen ended.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
2. Accounting period
The Group has adopted the calendar year as its accounting year, i.e. from 1 January to 31 December.
3. Business cycle
The company takes the period from the acquisition of assets for processing to their realisation in cash or cashequivalents 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 subsidiariesis mainly the United States Dollar (hereinafter "USD"). The presentation currency of these financial state-ments 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 which allof the combining enterprises are ultimately controlled by the same party or parties both before and after thecombination, 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 considerationpaid for the combination is adjusted to the share premium in capital reserve. If the share premium is notsufficient 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 incurred.
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 in whichall of the combining enterprises are not ultimately controlled by the same party or parties before and afterthe 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 related man-agement costs that are directly attributable to the combination by the acquirer are charged to profit or loss inthe period in which they are incurred. Direct capital issuance costs incurred in respect of equity instrumentsor liabilities issued pursuant to the business combination should be charged to the respect equity instrumentsor 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. Wherethe cost of combination exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable netassets, the difference is treated as an asset and recognized as goodwill, which is measured at cost on initialrecognition. Where the cost of combination is less than the acquirer’s interest in the fair value of the ac-quiree’s identifiable net assets, the remaining difference is recognized immediately in profit or loss for thecurrent year.
The goodwill raised because of the business combination should be separately disclosed in the consolidatedfinancial statement and measured by the initial amount less any accumulative impairment provision.
In a business combination achieved in stages, the Group remeasure its previously held equity interest in theacquiree at its acquisition-date fair value and recognise the resulting gain or loss, if any, in profit or loss.
6. Basis for preparation of consolidated financial statements
The scope of consolidation in consolidated financial statements is determined on the basis of control. Controlis achieved when the Company has power over the investee; is exposed, or has rights, to variable returnsfrom 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 includedin 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 inter-ests and presented as "non-controlling interests" in the shareholders’ equity in consolidated balance sheet.The portion of net profits or losses of subsidiaries for the period attributable to non-controlling interests ispresented as "non-controlling interests" in consolidated income statement below the "net profit" line item.Total comprehensive income attributable to non-controlling shareholders is presented separately in the con-solidated 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 interestsin the subsidiary. The difference between the amount by which the non-controlling interests are adjusted andthe fair value of the consideration paid or received is adjusted to capital reserve under owners' equity. If thecapital reserve is not sufficient to absorb the difference, the excess is adjusted against retained earnings.Other comprehensive income attributed to the non-controlling interest is reattributed to the shareholders ofthe company.
A put option issued by the Group to holders of non-controlling interests that is settled in cash or other finan-cial instrument is recognized as a liability at the present value of the exercise price. The Group’s share of asubsidiary’s profits includes the share of the holders of the non-controlling interests to which the Groupissued 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 according tothe 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 invest-ment 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 operatingdecisions 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 cash andwhich are subject to an insignificant risk of changes in value.
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 between thespot exchange rates prevailing at the balance sheet date and those on initial recognition or at the previousbalance sheet date are recognized in profit or loss for the period, except that (i) exchange differences relatedto a specific-purpose borrowing denominated in foreign currency that qualify for capitalization are capital-ized as part of the cost of the qualifying asset during the capitalization period. (ii) exchange differencesrelated to hedging instruments for the purpose of hedging against foreign currency risks are accounted forusing hedge accounting.
When preparing financial statements involving foreign operations, if there is any foreign currency monetaryitems, which in substance forms part of the net investment in the foreign operations, exchange differencesarising from the changes of foreign currency are recorded as other comprehensive income, and will be re-classified 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 functionalcurrency at the spot exchange rates on the dates of the transactions and the amounts in functional currencyremain 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 spot exchange rate prevailing at the balance sheet date; shareholders' equityitems, except for retained earnings, are translated at the spot exchange rates at the dates on which such itemsarose; all items in the income statement as well as items reflecting the distribution of profits are translated ataverage rate or at spot exchange rates on the dates of the transactions; the retained earnings opening balanceis previous year's translated retained earnings closing balance; the closing balance of retained earnings iscalculated and presented on the basis of each translated income statement and profit distribution item. Thedifference between the translated assets and the aggregate of liabilities and shareholders' equity items isrecorded as other comprehensive income. Cash Flows arising from transaction in foreign currency and thecash flows of a foreign subsidiary are translated at the spot exchange rate on the date of the cash flow, theeffect of exchange rate changes on the cash and cash equivalents is regarded as a reconciling item and presentseparately in the statement “effect of foreign exchange rate changes on the 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 aforeign operation due to disposal of certain equity interest in it or other reasons, the Group transfers theaccumulated 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 operation,the proportionate share of accumulated translation differences are re-attributed to non-controlling interestsand are not recognized in profit and loss. For partial disposals of equity interest in foreign operations, whichare associates or joint ventures, the proportionate share of the accumulated translation differences are reclas-sified 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 liabilityat its fair value plus or minus, in the case of a financial asset or financial liability not at fair value throughprofit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial assetor financial liability. Initial recognition in trade receivables which do not contain a significant financingcomponent, shall be made according to their transaction price.
10.1 Classification and measurement of financial assets
After initial recognition, an entity shall measure a financial asset at: (a) amortised cost; (b) fair value throughother 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 financialasset is held within a business model whose objective is to hold financial assets in order to collect contractualcash flows; and (b) the contractual terms of the financial asset give rise on specified dates to cash flows thatare solely payments of principal and interest on the principal amount outstanding.
Such financial assets are subsequently measured at amortised cost, using effective interest method. Gains orlosses 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 liabilities(inclusive of a set of financial assets or financial liabilities). Effective interest rate represents the rate thatdiscounts the future cash flow over the expected subsisting period or shorter period, if appropriate, of thefinancial asset or financial liability to the current carrying value of such financial asset or financial liability.
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 liabilities,as well as consider all kinds of charges which are an integral part of the effective interest rate, includingtransaction fees and discount or premium paid or received between both parties of financial asset or financialliability 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 finan-cial asset give rise on specified dates to cash flows that are solely payments of principal and interest on theprincipal amount outstanding.
A gain or loss on a financial asset measured at fair value through other comprehensive income is recognizedin other comprehensive income, except for impairment gains or losses, foreign exchange gains and lossesand interest calculated using the effective interest method, until the financial asset is derecognized or reclas-sified. When the financial asset is derecognized the cumulative gain or loss previously recognized in othercomprehensive 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 doingso eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to asan ‘accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recognizing thegains 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 recognisedin other comprehensive income. Upon realization the accumulated gains or losses from other comprehensiveincome are transferred from other comprehensive income and included in retained earnings. During the pe-riod in which the Group holds these non-trading investment instruments, the right to receive dividends in theGroup has been established, and the economic benefits related to dividends are likely to flow into the Group,and when the amount of dividends can be reliably measured, the dividend income is recognized in the currentprofit 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 thatfinancial instrument at an amount equal to 12-month expected credit losses. At each balance sheet date, ifthe credit 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 recognized.
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 instrumentor similar 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 envi-ronment of the debtor.(g) significant changes in the value of the collateral supporting the obligation or in the quality of third-
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 makescheduled 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 estimatedfuture cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impairedinclude 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 finan-cial difficulty, 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 possibleoutcomes;(b) the time value of money; and(c) reasonable and supportable information that is available without undue cost or effort at the reporting
date about past events, current conditions and forecasts of future economic conditions.
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)
10.2 Impairment of financial assets - (cont’d)
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 aderecognition event.
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 substantially allthe risks and rewards of ownership of the financial asset but has not retained control of the financial asset.
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 in thevalue 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) the sumof 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 instrument.
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 in profitor loss unless the derivative is designated and highly effective as a hedging instrument, in which case thetiming 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 receivables 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 inter-alia aging analysis, historical loss experiences adjusted by the observable factors reflecting current and ex-pected future economic conditions. The ratio of the collective provision for non-overdue account receivablesis between 0%-1.7%.
When credit risk on a receivable has increased significantly since initial recognition, the group records spe-cific provision or collective provision, which is determined for groups of similar assets in countries in whichthere 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 adefault occurring on the receivable at the date of initial recognition and considers both quantitative andqualitative information that is reasonable and supportable, including observable data that comes to the atten-tion of the Group about loss events such as a significant decline in the solvency of an individual debtor orthe portfolio 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, finished goodsand reusable materials. Reusable materials include low-value consumables, packaging materials and othermaterials, 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 of con-version and other expenditures incurred in bringing the inventories to their present location and conditionincluding 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. Netrealizable value is the estimated selling price in the ordinary course of business less the estimated costs ofcompletion, the estimated costs necessary to make the sale and relevant taxes.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
12. Inventories - (cont’d)
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.
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 over whichthe Group has significant influence. Joint ventures are joint arrangements over which the Group has jointcontrol 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 financial state-ments. 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 carrying amountof the shareholders' equity of the acquiree attributable to the ultimate controlling party at the date of combi-nation. The difference between initial investment cost and cash paid, non-cash assets transferred and bookvalue of liabilities assumed, is adjusted in capital reserve. If the balance of capital reserve is not sufficient toabsorb the difference, any excess is adjusted to retained earnings.
For a long-term equity investment acquired through business combination not involving enterprises undercommon control, the investment cost of the long-term equity investment is the cost of acquisition. For abusiness combination not involving enterprises under common control achieved in stages that involves mul-tiple exchange transactions, the initial investment cost is carried at the aggregate of the carrying amount ofthe acquirer’s previously held equity interest in the acquiree and the new investment cost incurred on theacquisition 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 instru-ments, 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 lessaccumulated impairment losses. Dividend declared by the investee should be accounted for as investmentincome.
Under the equity method, where the long-term equity investment initial investment cost exceeds the Group’sshare of the fair value of the investee’s identifiable net assets at the time of acquisition, no adjustment ismade to the initial investment cost. Where the initial investment cost is less than the Group’s share of thefair value of the investee’s identifiable net assets at the time of acquisition, the difference is recognized inprofit or loss for the period, and the cost of the long-term equity investment is adjusted accordingly.
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 theinvestee’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 theinvestee 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 period.
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 investeebut 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 convertible debts)held by the investing enterprises or other parties that are currently exercisable or convertible shall be con-sidered.
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 than theircarrying amounts, an impairment loss should be recognized to reduce the carrying amounts to the recoverableamounts (Note III 20).
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
13. Long-term equity investments - (cont’d)
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.
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 propertyshall be included in cost of investment property only when the economic benefits associated with the assetwill likely flow to the Group and its cost can be measured reliably. All other subsequent expenditures oninvestment 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 depreciated oramortized 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 disposal ofthe property net of the carrying amount and related taxes and surcharges is recognized in profit or loss forthe 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 administrativepurposes, and have useful lives of more than one accounting year. A fixed asset is recognized only when itis probable that economic benefits associated with the asset will flow to the Group and the cost of the assetcan be reliably measured. Purchased or constructed fixed assets are initially measured at cost when 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 expend-itures can be measured reliably. Other subsequent expenditures are recognized in profit or loss in the periodin 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 of fixedassets 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 intended useor sale have commenced. Capitalization of borrowing costs ceases when the qualifying asset being acquired,constructed or produced becomes ready for its intended use or sale. Borrowing costs incurred subsequentlyshould be charged to profit or loss. Capitalization of borrowing costs is suspended during periods in whichthe acquisition, construction or production of a qualifying asset is suspended abnormally and when the sus-pension is for a continuous period of more than 3 months. Capitalization is suspended until the 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 capitalizationrate 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, charged toprofit 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 products,marketing rights and rights to use tradenames and trademarks, land use rights, software and customer rela-tions. Intangible assets are stated at cost less accumulated amortization and impairment 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 method atthe 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 expend-itures capitalized during the development stage are recognized as development costs incurred and will betransferred 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 the fairvalue of the identifiable net assets of the acquiree under a business combination not involving enterprisesunder common control.
Goodwill is not amortized and is stated in the balance sheet at cost less accumulated impairment losses (seeNote III 20 – Impairment of long-term assets). On disposal of an asset group
or a set of asset groups, anyattributable 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, the Groupdetermines the recoverable amount of the asset group to which the asset belongs. Identification of an assetgroup is based on whether major cash inflows generated by the asset group are largely independent of thecash 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, irrespectiveof whether there is any indication that the asset may be impaired. For the purpose of impairment testing, thecarrying amount of goodwill acquired in a business combination is allocated from the acquisition date on areasonable basis to each of the related asset groups; if it is impossible to allocate to the related asset groups,it is allocated to each of the related set of asset groups. Each of the related asset groups or set of asset groupsis an asset group or set of asset group that is able to benefit from the synergies of the business combinationand shall not be larger than a reportable segment determined by the Group. If the carrying amount of theasset group or set of asset groups is higher than its recoverable amount, the amount of the impairment lossfirst reduced by the carrying amount of the goodwill allocated to the asset group or set of asset groups, andthen the carrying amount of other assets (other than the goodwill) within the asset group 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, andthe expense is recorded when the related service is provided. A provision for short-term employee benefitsin respect of cash bonuses is recognized in the amount expected to be paid where the Group has a currentlegal or constructive obligation to pay the said amount for services provided by the employee in the past andthe 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 contributions toa separate entity and has no legal or constructive obligation to pay further amounts. Obligations for contri-butions 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 contribution plans.In accordance with the projected unit credit method, the Group measures the obligations under defined ben-efit plans using unbiased and mutually compatible actuarial assumptions to estimate related demographicvariables and financial variables, and discount obligations under the defined benefit plans to determine thepresent value of the defined benefit liability. The discount rate used is the yield on the reporting date onhighly-rated corporate debentures denominated in the same currency, that have maturity dates approximatingthe 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 profit orloss 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 benefitsand has raised a valid expectation in those affected that it will carry out the restructuring by starting toimplement 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 the Group’sobligation.
21.4 Other long-term employee benefits
The Group’s net obligation for long-term employee benefits, which are not attributable to post-employmentbenefit plans, is for the amount of the future benefit to which employees are entitled for services that wereprovided 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 to theseobligations is deducted therefrom. The discount rate used is the yield on the reporting date on highly-ratedcorporate debentures denominated in the same currency, that have maturity dates approximating the termsof 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-settled share-based payment made in return for the rendering of employee services that cannot be exercised until theservices are fully provided during the vesting period or specified performance targets are met, on each bal-ance sheet date within the vesting period, the services acquired in the current period shall, based on the bestestimate of the number of exercisable instruments, be recognized in relevant expenses and the correspondingliabilities 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, the Com-pany should re-measure the fair value of the liabilities and the changes should be included in the currentperiod profit and loss.
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 obligationcan 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 provisiondue 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 transaction price.Goods are considered transferred when the customer obtains control of the goods. Transaction price is theamount of consideration to which an entity expects to be entitled in exchange for transferring goods to acustomer, 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 reflectsthe price that a customer would have paid for the goods if the customer had paid cash for those goods atreceipt. The difference between the amount of consideration and the cash selling price of the goods, is amor-tized in the contract period using effective interest rate. The Group does not adjust the amount of consider-ation for the effects of a significant financing component if the Group expects, at contract inception, that theperiod between when the entity transfers a good to a customer and when the customer pays for that goodwill 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 revenue whenit transfers products to customers but shall recognize those amounts received (or receivable) as a refundliability. An asset recognized for the Group’s right to recover products from a customer on settling a refundliability shall initially be measured by reference to the former carrying amount of the product less any ex-pected 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 receivethe 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 to beincurred in subsequent periods, the grant is recognized as deferred income, and recognized in profit or lossover the periods in which the related costs are recognized. If the grant is a compensation for related expensesor 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 are meas-ured 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 and theirtax 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 businesscombination) that affects neither the accounting profit nor taxable profits (or deductible losses) at the timeof 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 in sub-sidiaries and associates, and interests in joint ventures, except where the Group is able to control the timingof the reversal of the temporary difference and it is probable that the temporary difference will not reversein the foreseeable future.
The Group may be required to pay additional tax in case of distribution of dividends by the Group companies.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 no longerprobable that sufficient taxable profits will be available in the future to allow the benefit of deferred taxassets to be utilized. Such reduction is reversed when it becomes probable that sufficient taxable profits willbe 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 assetsand 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 assets andliabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabil-ities are expected to be reversed, deferred tax assets and deferred tax liabilities are offset and presented on anet 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 the useof an identified asset, the Group assesses whether it has the following two rights throughout the lease term:
(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 before,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 of thelessee 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 terminationoption, 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 rate andadjust 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 correspondence changein 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 interestmethod.
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 relation-ship;? the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the
hedged item that the entity actually hedges and the quantity of the hedging instrument that the entityactually uses 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 inexecuting the hedge transaction, together with the methods that will be used by the Group to assess theeffectiveness 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.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
28. Other significant accounting policies and accounting estimates - (cont’d)
28.1 Hedging (cont’d)
Measurement of derivative financial instruments
Derivative financial instruments are recognized initially at fair value; attributable transaction costs are rec-ognized in profit or loss as incurred.
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 of thehedge that is effective. Regarding the portion of the hedge that is not effective, the changes in fair value arerecognized in profit and loss. The amount accumulated in the hedging reserve is reclassified to profit andloss in the period in which the hedged cash flows impact profit or loss and is presented in the same line itemin the statement of income as the hedged item.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated orexercised, 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 transactionoccurs or is no longer expected to occur. If the forecasted transaction is no longer expected to occur, thecumulative gain or loss in respect of the hedging instrument in the hedging reserve is reclassified to profitor loss.
Economic hedge
Hedge accounting is not applied with respect to derivative instruments used to economically hedge financialassets and liabilities denominated in foreign currency or CPI linked. Changes in the fair value of such deriv-atives 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 structureof the Group’s internal organization, management requirements and internal reporting system.
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 methodsused 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
"Accounting Standards for Business Enterprises Interpretation No. 13"
Interpretation No. 13 revised the three elements that constitute a business and elaborated the criteria for abusiness. "The concentration test" is introduced as an option, for the acquirer in business combinations in-volving enterprises not under common control, when determining whether the acquired operation or set ofassets constitute a business. At the same time, Interpretation No. 13 further clarifies the definition of relatedparties.
In addition, Interpretation No. 13 further clarifies that related parties of an enterprise also include joint ven-tures or associates of other members (including parent company and subsidiaries) of the group to which theenterprise belongs, and other joint ventures and associates of investors who exercise joint control over theenterprise etc.
Interpretation No. 13 was effective from January 1, 2020. Adoption of the interpretation has no significantimpact on the Company’s financial statements.
"Regulations on Accounting Treatment of Rent Concessions Related to the New Coronary PneumoniaEpidemic" (Caikuai [2020] No. 10)
In June 2020, the Ministry of Finance issued the "Notice on Issuing the "Regulations on Accounting Treat-ment of Rental Concessions Related to the New COVID-19 Epidemic" (Financial Accounting Policy [2020]No. 10), which can be used in accordance with the accounting treatment regulations for rental concessionsrelated to the COVID-19 in order to apply a simplified approach. The notice did not have a significant impacton the Company’s financial statements.
29. Changes in significant accounting policies and accounting estimates – (cont’d)
29.1 Changes in significant accounting estimates
There are no significant changes in accounting estimates in the reporting period.
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 atten-tion of the Group about loss events such as a significant decline in the solvency of an individual debtor orthe portfolio of debtors, and significant changes in the financial condition that have an adverse effect on thedebtor. If there is objective evidence of a recovery in the value of receivables which can be related objectivelyto an event occurring after the impairment was recognized, the previously recognized impairment loss isreversed .
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 intoconsideration 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 assetsare assessed at balance sheet date to determine whether the carrying amount exceeds the recoverable amountof 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 and itspresent value of expected future cash flows. Since a market price of the asset (or the asset group) cannot beobtained reliably, the fair value of the asset cannot be estimated reliably, the recoverable amount is calculatedbased on the present value of estimated future cash flows. In assessing the present value of estimated futurecash flows, significant judgements are exercised over the asset’s production, selling price, related operatingexpenses and discount rate to calculate the present value. All relevant materials which can be obtained areused for estimation of the recoverable amount, including the estimation of the production, selling price andrelated 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 jurisdictionsand, therefore, Company management is required to use considerable judgment in determining the total pro-vision for taxes and attribution of income.
When assessing whether there will be sufficient future taxable profits available against which the deductibletemporary differences can be utilised, the Group recognizes deferred tax assets to the extent that it is probablethat future taxable profits will be available against which the deductible temporary differences can be utilised,using tax rates that would apply in the period when the asset would be utilised. In determining the amountof deferred tax assets, the Group makes reasonable judgements and estimates about the timing and amountof taxable profits to be utilised in the following periods, and of the tax rates applicable in the future accordingto the existing tax policies and other relevant regulations. If the actual timing and amount of future taxableprofits or the actual applicable tax rates differ from the estimates made by management, the differences affectthe amount of tax expenses.
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 companies,the company positions are based on the opinions of their legal advisors. These assessments by the legaladvisors are based on their professional judgment, considering the stage of the proceedings and the legalexperience accumulated regarding the various matters. Since the results of the claims will be determined bythe 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 servicesduring the current period and prior periods. The benefit is stated at present value net of the fair value of theplan’s assets, based on actuarial assumptions. Changes in the actuarial assumptions could lead to materialchanges 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 relatedto foreign currency and inflationary risks. The derivatives are recorded at their fair value. The fair value ofderivative financial instruments is based on quotes from financial institutions. The reasonableness of thequotes is examined by discounting the future cash flows, based on the terms and length of the period tomaturity 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.
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
IV. Taxation
1. Main types of taxes and corresponding tax rates
The income tax rate in China is 25% (2019: 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 third party:
| Name of subsidiary | Location | 2020 | ||
| 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 | 28.0% | ||
| ADAMA Northern Europe B.V. | Nether-lands | 25.0% | ||
| ADAMA Italia S.R.L. | Italy | 27.9% | ||
| Alligare Inc. | U.S. | 27.5% |
IV. Taxation - (cont’d)
1. Main types of taxes and corresponding tax rates - (cont’d)
(1) Benefits from High-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 the StateAdministration of Taxation and Hubei Local Taxation Bureau. The applicable income tax rate from 2020 to2022 is 15%.
Adama Anpon (Jiangsu) Ltd. (Formally know as Jiangsu Anpon Electrochemical Co. Ltd), a subsidiary ofthe Company, was jointly approved as new and high-tech enterprise, by the Jiangsu Provincial Departmentof Science and Technology, Department of Finance of Jiangsu Province, Jiangsu Provincial Office of theState Administration of Taxation. The applicable 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 Enterprise”status under the Israeli Law for the Encouragement of Capital Investments, 1959. Should a dividend bedistributed from the retained earning produced in which the company was considered as an “Approved En-terprise” 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.
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 the sametime. The tax benefit tracks under the law constitute a preferred enterprise and a special preferred enterprise,which mainly provide a uniform and reduced tax rate for all the company’s income entitled to benefits. Taxrates on preferred income as from 2017 tax year are as follows: 7.5% for Development Area A and 6% forthe rest of the country.
The amendment further determined that no tax shall apply to dividend distributed out of preferred income toIsrael resident company shareholder.
As of the date of the report, all subsidiaries in Israel adopted the amendment and the deferred taxes werecalculated accordingly.
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
IV. Taxation - (cont’d)
1. Main types of taxes and corresponding tax rates - (cont’d)
(2) Benefits under the Law for the Encouragement of Capital Investments - (cont’d)
On December 21, 2016 the Knesset plenum passed the second and third reading of the Economic EfficiencyLaw (Legislative Amendments for Achieving Budget Objectives in the Years 2017 and 2018) – 2016 inwhich the Encouragement Law was also amended (hereinafter: “the Amendment”). The Amendment is ef-fective as from January 1, 2017 and added new tax benefit tracks for a “preferred technological enterprise”and a “special preferred technological enterprise” which award reduced tax rates to a technological industrialenterprise for the purpose of 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” per itsdefinition in the Encouragement Law.
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 A toa tax rate of 7.5%. Special preferred technological enterprise will be subject to a reduced corporate tax rateof 6% regardless of the development area in which the enterprise is located.
In addition, as part of the amendment, a temporary provision was enacted, valid until June 30, 2021, whichsettles tax benefits continuation on income that is eligible to the Preferred Enterprise tax benefits as at June30, 2016. ADAMA Agricultural Solutions Ltd. (hereinafter: “Solutions”) implement and act in accordancewith the temporary provision.
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 mecha-nism for allocating the technological income eligible for the benefits.
Solutions, through a subsidiary, filed an application to the Israeli Tax Authority for settling its eligibility tothe tax benefits in accordance with the amendment to the Encouragement 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 this lawis the filing of consolidated income tax returns (Solutions files a consolidated income tax return with AdamaMakhteshim and submission of a consolidated report together with Adama Agan as of 2017) and amortiza-tion of know-how over 8 years, higher rates of depreciation.
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
V. Notes to the consolidated financial statements
1. Cash at Bank and On Hand
| December 31 | December 31 | ||
| 2020 | 2019 | ||
| Cash on hand | 4,590 | 6,265 | |
| Deposits in banks | 3,830,481 | 4,313,642 | |
| Other cash and bank | 28,815 | 28,681 | |
| 3,863,886 | 4,348,588 | ||
| Including cash and bank placed outside China | 2,064,876 | 2,443,065 | |
| December 31 | December 31 | ||
| 2020 | 2019 | ||
| Debt instruments | - | 15,788 | |
| Other | 1,253 | 13,722 | |
| 1,253 | 29,510 |
| December 31 | December 31 | ||
| 2020 | 2019 | ||
| Economic hedge | 1,545,481 | 436,201 | |
| Accounting hedge derivatives | 15,307 | 53,912 | |
| 1,560,788 | 490,113 |
| December 31 | December 31 | ||
| 2020 | 2019 | ||
| Post-dated checks receivable | 91,975 | 13,757 | |
| Bank acceptance draft | 10,107 | 12,243 | |
| 102,082 | 26,000 |
V. Notes to the consolidated financial statements – (cont'd)
5. Accounts Receivable
a. By category
| December 31, 2020 | |||||
| Book value | Provision for expected credit losses | ||||
| Amount | Percentage (%) | Amount | Percentage (%) | Carrying amount | |
| Account receivables assessed individually for impairment | 467,325 | 5 | 262,933 | 56 | 204,392 |
| Account receivables assessed collectively for impairment | 8,661,818 | 95 | 99,341 | 1 | 8,562,477 |
| 9,129,143 | 100 | 362,274 | 4 | 8,766,869 | |
| 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, 2020 | |
| Within 1 year (inclusive) | 8,610,726 |
| Over 1 year but within 2 years | 226,709 |
| Over 2 years but within 3 years | 66,495 |
| Over 3 years but within 4 years | 58,907 |
| Over 4 years but within 5 years | 27,887 |
| Over 5 years | 138,419 |
| 9,129,143 |
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, 2020 | |||
| Book value | Provision for expected credit loss | Percentage (%) | |
| Credit group A | 1,740,928 | 8,109 | 0.03-0.75 |
| Credit group B | 981,811 | 12,069 | 1.23 |
| Credit group C | 325,064 | 17,078 | 5.25 |
| Credit group D | 36,933 | 1,151 | 3.12 |
| 3,084,736 | 38,407 | 1.25 | |
| December 31, 2020 | |||
| Book value | Provision for expected credit loss | Percentage (%) | |
| Accounts receivable that are not overdue | 257,117 | 2,284 | 0.9 |
| Debts overdue less than 60 days | 124,725 | 3,742 | 3.0 |
| Debts overdue less than 180 days but more than 60 days | 31,502 | 3,150 | 10.0 |
| Debts overdue above 180 days | 17,759 | 7,104 | 40.0 |
| Legal Debtors | 33,450 | 33,450 | 100.0 |
| 464,553 | 49,730 | 10.7 | |
| December 31, 2020 | |||
| Book value | Provision for expected credit loss | Percentage (%) | |
| Other account receivables assessed collectively for impairment | 5,112,529 | 11,204 | 0.0-4.26 |
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, 2020 | 47,908 | 350,544 | 398,452 |
| Addition during the period, net | 11,910 | 38,627 | 50,537 |
| Write back during the period | - | (26,102) | (26,102) |
| Write-off during the period | - | (5,703) | (5,703) |
| First time consolidation | - | 13,468 | 13,468 |
| Exchange rate effect | (7,923) | (60,455) | (68,378) |
| Balance as of December 31, 2020 | 51,895 | 310,379 | 362,274 |
| Name | Closing balance | Proportion of Accounts receivable (%) | Allowance of expected credit losses (credit losses has occurred) |
| Customer 1 | 155,050 | 2 | - |
| Customer 2 | 108,933 | 1 | - |
| Customer 3 | 97,462 | 1 | 5,416 |
| Customer 4 | 95,290 | 1 | - |
| Customer 5 | 72,563 | 1 | - |
| Total | 529,298 | 6 | 5,416 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
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 Company’sactivities, as follows: during the months March through June the maximum scope of the securitization is$350 million (as of December 31, 2020 - 2,284 million RMB), during the months July through Septemberthe maximum scope of the securitization is $300 million (as of December 31, 2020 – 1,957 million RMB)and during the months October through February the maximum scope of the securitization is $250 million(as of December 31, 2020 - 1,631 million RMB). In addition the company has uncommitted facility of $50million (as of December 31, 2020 - 326 million RMB) which will be applicable each period. The proceedsreceived from those customers whose 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 calculatedbased on, among other things, the expected length of the period between the date of sale of the trade receiv-able and its anticipated repayment date. In the month following acquisition of the debt, the Acquiring Com-pany pays in cash most of the debt while the remainder is recorded as a subordinated note and as continuinginvolvement that is paid after collection of the debt sold. If the customer does not pay its debt on the antici-pated repayment date, the Company bears interest up to the earlier of the date on which the debt is actuallyrepaid or the date on which debt collection is transferred to the insurance company (the actual costs are notsignificant and are not expected to be significant).
The Acquiring Company bears 95% of the credit risk in respect of the customers whose debts were sold andwill not have a right of recourse to the Company in respect of the amounts paid in cash, except regardingdebts 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 supply agree-ment covering the product, such as: a failure to supply the correct product, a defect in the product, delin-quency 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 the ratioof the liabilities to equity and profit ratios. As of December 31, 2020, Solutions was in compliance with thefinancial 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 receiv-ables” 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”.
The Company’s subsidiary in Brazil (hereinafter - “the subsidiary”) entered into a securitization agreementwith Rabobank Brazil for sale of trade receivables. Under the agreement, the subsidiary will sell its tradereceivables to a securitization structure (hereinafter - “the entity”) that was formed for this purpose wherethe subsidiary has subordinate rights of 5% of the entity's capital.
As at the report date, the subsidiary agreement was approved up to September 1, 2022. The maximum secu-ritization scope as of December 31, 2020 is BRL 364 million (457 million RMB).
On the date of the sale of the trade receivables, the entity pays the full amount which is the debt amount soldnet of discount calculated, among others, over the expected length of the period between the date of sale ofthe 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 entityhas the right of recourse of 5% of the unpaid amount. The subsidiary should make a pledged deposit equalto 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 financialstatements.
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 to profit and loss under financingexpenses.
| December 31 | December 31 | |
| 2020 | 2019 | |
| Accounts receivables derecognized | 2,850,745 | 2,994,917 |
| Continuing involvement | 125,578 | 134,243 |
| Subordinated note in respect of trade receivables | 762,598 | 808,807 |
| Liability in respect of trade receivables | 22,002 | 26,370 |
| Year ended December 31 | ||
| 2020 | 2019 | |
| Loss in respect of sale of trade receivables | 73,673 | 91,006 |
V. Notes to the consolidated financial statements – (cont'd)
6. Receivables financing
| December 31 | December 31 | ||
| 2020 | 2019 | ||
| Bank acceptance draft | 109,483 | 78,948 | |
| 109,483 | 78,948 |
| December 31 | December 31 | |||
| 2020 | 2019 | |||
| Amount | Percentage (%) | Amount | Percentage (%) | |
| Within 1 year (inclusive) | 400,549 | 99 | 370,607 | 98 |
| Over 1 year but within 2 years (inclusive) | 3,037 | 1 | 3,691 | 1 |
| Over 2 years but within 3 years (inclusive) | 640 | - | 621 | - |
| Over 3 years | 1,782 | - | 2,889 | 1 |
| 406,008 | 100 | 377,808 | 100 | |
| Amount | Percentage of prepayments (%) | |
| December 31, 2020 | 175,395 | 43 |
V. Notes to the consolidated financial statements – (cont'd)
8. Other Receivables
(1) Other receivables by nature
| December 31 | December 31 | |
| 2020 | 2019 | |
| Dividends receivable | - | - |
| Others | 1,310,029 | 1,195,253 |
| 1,310,029 | 1,195,253 |
| December 31 | December 31 | |
| 2020 | 2019 | |
| Trade receivables as part of securitization transactions not yet eliminated | 125,578 | 134,243 |
| Subordinated note in respect of trade receivables | 762,598 | 808,807 |
| Financial institutions | 231,183 | 5,107 |
| Receivables in respect of disposal of fixed assets | 23,949 | 28,762 |
| Other | 182,867 | 233,238 |
| Sub total | 1,326,175 | 1,210,157 |
| Provision for expected credit losses - other receivables | (16,146) | (14,904) |
| 1,310,029 | 1,195,253 |
| December 31 | |
| 2020 | |
| Within 1 year (inclusive) | 1,272,058 |
| Over 1 year but within 2 years | 10,020 |
| Over 2 years but within 3 years | 16,286 |
| Over 3 years but within 4 years | 674 |
| Over 4 years but within 5 years | 2,826 |
| Over 5 years | 24,311 |
| 1,326,175 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
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 the
period:
| Year ended | ||
| December 31, 2020 | ||
| Balance as of January 1 2020, | 14,904 | |
| Addition during the period | 1,514 | |
| Written back during the period | - | |
| Write-off during the period | - | |
| Exchange rate effect | (272) | |
| Balance as of December 31, 2020 | 16,146 |
| Name | Closing balance | Proportion of other re-ceivables (%) | Allowance of ex-pected credit losses |
| Party 1 | 762,598 | 58 | - |
| Party 2 | 231,184 | 18 | - |
| Party 3 | 13,324 | 1 | - |
| Party 4 | 10,627 | 1 | - |
| Party 5 | 7,921 | 1 | - |
| Total | 1,025,654 | 79 | - |
| December 31, 2020 | |||
| Book value | Provision for impair-ment | Carrying amount | |
| Raw materials | 3,060,965 | 42,945 | 3,018,020 |
| Work in progress | 704,391 | - | 704,391 |
| Finished goods | 6,488,658 | 153,577 | 6,335,081 |
| Others | 288,218 | 7,437 | 280,781 |
| 10,542,232 | 203,959 | 10,338,273 | |
| 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 | |
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, 2020
| January 1, 2020 | Provision | Reversal or write-off | Other | December 31, 2020 | |
| Raw material | 22,344 | 33,540 | (10,436 ) | (2,503 ) | 42,945 |
| Work in progress | 5,351 | - | (5,339 ) | (12 ) | - |
| Finished goods | 184,900 | 85,296 | (105,951 ) | (10,668 ) | 153,577 |
| Others | 8,689 | 2,195 | (2,898 ) | (549 ) | 7,437 |
| 221,284 | 121,031 | (124,624 ) | (13,732 ) | 203,959 |
| December 31 | December 31 | |
| 2020 | 2019 | |
| Deductible VAT | 499,136 | 459,209 |
| Current tax assets | 232,051 | 170,505 |
| Others | 38,454 | 29,481 |
| 769,641 | 659,195 |
| December 31 | December 31 | |
| 2020 | 2019 | |
| Long term account receivables from sale of goods | 95,329 | 170,896 |
| 95,329 | 170,896 |
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 | |
| 2020 | 2019 | |
| Investments in joint ventures | 14,081 | 92,695 |
| Investments in associates | - | 40,403 |
| 14,081 | 133,098 |
| December 31 | December 31 | Dividend received during December 31, 2020 | |
| 2020 | 2019 | ||
| Investment A | 85,495 | 85,495 | 2,583 |
| Investment B | 65,034 | 67,781 | 4,040 |
| Investment C | 1,671 | 1,786 | - |
| 152,200 | 155,062 | 6,623 |
| January 1, 2020 | Investment income | Other Compre-hensive income | Declared dis-tribution of cash dividend | Capital investment | Change in consolidation scope | Impairment | December 31, 2020 | |
| Joint ven-tures | ||||||||
| Investee A | 75,924 | 10,841 | 2,485 | (62,600) | 51,435 | (78,085) | - | - |
| Investee B | 5,441 | 91 | (168) | (2,480) | - | - | - | 2,884 |
| Investee C | 1,046 | - | (113) | - | - | - | - | 933 |
| Investee D | 10,284 | 4,652 | (3,862) | (810) | - | - | - | 10,264 |
| Sub-total | 92,695 | 15,584 | (1,658) | (65,890) | 51,435 | (78,085) | - | 14,081 |
| Associates | ||||||||
| Investee E | 40,403 | - | (326) | - | - | - | (40,077) | - |
| Sub-total | 40,403 | - | (326) | - | - | - | (40,077) | - |
| 133,098 | 15,584 | (1,984) | (65,890) | 51,435 | (78,085) | (40,077) | 14,081 |
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, 2020 | 3,377,533 | 14,383,742 | 119,900 | 365,798 | 18,246,973 |
| First time consolidation | 1,777 | - | 7,701 | 3,477 | 12,955 |
| Purchases | 62,847 | 250,808 | 23,408 | 29,896 | 366,959 |
| Transfer from construction in progress | 71,804 | 367,046 | 1,539 | 1,387 | 441,776 |
| Disposals | (78,095) | (315,504) | (22,475) | (5,899) | (421,973) |
| Currency translation adjustment | (136,297) | (703,716) | (7,858) | (23,086) | (870,957) |
| Balance as at December 31, 2020 | 3,299,569 | 13,982,376 | 122,215 | 371,573 | 17,775,733 |
| Accumulated depreciation | |||||
| Balance as at January 1, 2020 | (1,667,208) | (8,690,076) | (60,679) | (276,110) | (10,694,073) |
| First time consolidation | (1,005) | - | (6,594) | (2,848) | (10,447) |
| Charge for the period | (105,642) | (605,857) | (17,388) | (38,839) | (767,726) |
| Disposals | 34,336 | 227,207 | 18,867 | 5,727 | 286,137 |
| Currency translation adjustment | 66,475 | 421,485 | 3,570 | 18,547 | 510,077 |
| Balance as at December 31, 2020 | (1,673,044) | (8,647,241) | (62,224) | (293,523) | (10,676,032) |
| Provision for impairment | |||||
| Balance as at January 1, 2020 | (196,295) | (416,011) | (733) | (251) | (613,290) |
| Charge for the period | (5,392) | (34,202) | - | - | (39,594) |
| Transfer from construction in progress | - | (3,512) | - | - | (3,512) |
| Disposals | 41,397 | 86,216 | 82 | - | 127,695 |
| Currency translation adjustment | 599 | 4,501 | - | 16 | 5,116 |
| Balance as at December 31, 2020 | (159,691) | (363,008) | (651) | (235) | (523,585) |
| Carrying amounts | |||||
| As at December 31, 2020 | 1,466,834 | 4,972,127 | 59,340 | 77,815 | 6,576,116 |
| As at January 1, 2020 | 1,514,030 | 5,277,655 | 58,488 | 89,437 | 6,939,610 |
V. Notes to the consolidated financial statements - (cont'd)
15. Construction in Progress
(1) Construction in progress
| December 31 | December 31 | ||||
| 2020 | 2019 | ||||
| Book value | Provision for im-pairment | Carrying amount | Book value | Provision for im-pairment | Carrying amount |
| 1,431,068 | (25,740) | 1,405,328 | 814,126 | (25,740) | 788,386 |
| Budget | January 1, 2020 | Additions | Currency translation differences | Transfer to fixed assets | December 31, 2020 | Actual cost to budget (%) | Project progress (%) | Source of funds | |
| Project A | 1,509,420 | 358,952 | 364,469 | - | (90,765) | 632,656 | 49% | 49% | Bank loan |
| Project B * | 722,302 | 13,064 | 12,377 | - | - | 25,441 | 5% | 5% | Bank loan |
| Project C | 226,740 | 5,246 | 54,514 | (3,300) | - | 56,460 | 25% | 25% | Internal finance |
| Project D | 172,055 | 18,434 | 42,815 | - | (9,847) | 51,402 | 53% | 53% | Internal finance |
| Project E | 138,000 | 8,256 | 31,530 | - | - | 39,786 | 29% | 29% | Internal finance |
| Project F | 113,481 | - | 57,019 | (3,097) | - | 53,922 | 48% | 48% | Internal finance |
| Project G | 75,689 | 45,073 | 18,549 | (3,923) | - | 59,699 | 79% | 79% | Internal finance |
V. Notes to the consolidated financial statements - (cont'd)
16. Right-of-use assets
| Land & Build-ings | Machinery & equipment | Motor vehicles | Office & other equipment | Total | |
| Cost | |||||
| Balance as at January 1, 2020 | 456,983 | 46,714 | 178,402 | 3,187 | 685,286 |
| First time consolidation | 4,368 | 29 | 3,122 | - | 7,519 |
| Additions | 43,413 | 2,884 | 96,051 | 931 | 143,279 |
| Disposals | (9,747) | (1,470) | (39,331) | (600) | (51,148) |
| Currency translation adjustment | (26,496) | (2,828) | (14,330) | (73) | (43,727) |
| Balance as at December 31, 2020 | 468,521 | 45,329 | 223,914 | 3,445 | 741,209 |
| Accumulated depreciation | |||||
| Balance as at January 1, 2020 | (77,196) | (7,820) | (63,238) | (998) | (149,252) |
| Charge for the period | (81,554) | (6,934) | (74,393) | (906) | (163,787) |
| Disposals | 7,142 | 1,456 | 34,008 | 283 | 42,889 |
| Currency translation adjustment | 6,382 | 745 | 5,390 | 42 | 12,559 |
| Balance as at December 31, 2020 | (145,226) | (12,553) | (98,233) | (1,579) | (257,591) |
| Provision for impairment | |||||
| Balance as at January 1, 2020 | - | - | - | - | - |
| Balance as at December 31, 2020 | - | - | - | - | - |
| Carrying amounts | |||||
| As at December 31, 2020 | 323,295 | 32,776 | 125,681 | 1,866 | 483,618 |
| As at January 1, 2020 | 379,787 | 38,894 | 115,164 | 2,189 | 536,034 |
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.
(3) First time consolidation includes conclusion of purchase price allocation related to 2019 acquisitions and a provisional purchase price allocation for 2020 Dibai acquisition.
| Product registra-tion | Intangible assets on Purchase of Products | Software | Marketing rights, trade-name and trade-marks | Customers rela-tions | Land use rights (1) | Others(2) | Total | |
| Costs | ||||||||
| Balance as at January 1, 2020 | 10,769,146 | 4,189,417 | 761,236 | 743,734 | 399,193 | 344,917 | 326,115 | 17,533,758 |
| First time consolidation (3) | 88114,9 | - | - | 51,034 | 82,222 | - | 11,668 | 912259, |
| Purchases | 571,077 | - | 153,125 | 290 | - | 53,868 | 13,330 | 791,690 |
| Currency translation adjustment | (343711, ) | (271,010 ) | (56,447 ) | (50,832 ) | (30,407 ) | 28 | (21,327 ) | (141,3381, ) |
| Disposal | (50,837 ) | - | (1,173 ) | (166 ) | - | (5,937 ) | (399,0 ) | (152,76 ) |
| Balance as at December 31, 2020 | 10,693,031 | 4073,918, | 856,741 | 744,060 | 451,008 | 392,876 | 320,747 | 376,87017, |
| Accumulated amortization | ||||||||
| Balance as at January 1, 2020 | )7,873,186 ( | )2,278,371 ( | )513,028( | )441,587 ( | )196,458 ( | (65,271 ) | )164,844 ( | )11,532,745( |
| Charge for the period | (806,855 ) | (344,334 ) | (62,058 ) | (32,108 ) | (37,964 ) | (7,524 ) | (34,552 ) | (1,325,395 ) |
| Currency translation adjustment | 544,555 | 166,093 | 35,658 | 30,070 | 14,120 | (3) | 11,843 | 802,336 |
| Disposal | 29,303 | - | 1,173 | - | - | 1,330 | 4,318 | 36,124 |
| Balance as at December 31, 2020 | (8,106,183 ) | (2,456,612 ) | (538,255 ) | (443,625 ) | (220,302 ) | (71,468 ) | (183,235 ) | (12,019,680 ) |
| Provision for impairment | ||||||||
| Balance as at January 1, 2020 | )108,075( | )52,182 ( | - | - | - | - | )4,971 ( | )165,228( |
| Charge for the period | (173 ) | - | - | - | - | - | - | (173 ) |
| Disposal | 21,088 | - | - | - | - | - | 4,721 | 25,809 |
| Currency translation adjustment | 5,481 | 3,376 | - | - | - | - | - | 8,857 |
| Balance as at December 31, 2020 | (81,679 ) | (48,806 ) | - | - | - | - | (250 ) | (130,735 ) |
| Carrying amount | ||||||||
| As at December 31, 2020 | 2,505,169 | 1,412,989 | 318,486 | 300,435 | 230,706 | 321,408 | 137,262 | 5,226,455 |
| As at January 1, 2020 | 2,787,885 | 1,858,864 | 248,208 | 302,147 | 202,735 | 279,646 | 156,300 | 5,835,785 |
V. Notes to the consolidated financial statements - (cont'd)
18. Goodwill
Changes in goodwill
The Group allocates goodwill to two cash generating units ("CGU "), Crop Protection (Agro) and a non-core ac-tivity included in the Intermediates and ingredients segment. At the end of the year, or more frequently whetherindicators for impairment exists, the Group estimates the recoverable amount of each CGU for which goodwillhas been allocated to using th DCF model.
The carrying amount of goodwill is mainly allocated to Agro units, which includes RMB 227 million from theacquisition of Shanghai Dibai Plant Protection Co., Ltd. The goodwill allocated to non-core CGU is not signif-icant.
As of December 31, 2020 the fair value of the cash generating units to which goodwill has been allocated toexceeds its carrying amount.
| January 1, 2020 | Additions | Currency translation adjustment | Balance at De-cember 31, 2020 | |
| Book value | 4,511,193 | 376,006 | (302,973) | 4,584,226 |
| Impairment provision | - | - | - | - |
| Carrying amount | 4,511,193 | 376,006 | (302,973) | 4,584,226 |
| December 31 | December 31 | |||
| 2020 | 2019 | |||
| Deductible temporary differences | Deferred tax assets | Deductible temporary differences | Deferred tax assets | |
| Deferred tax assets | ||||
| Deferred tax assets in respect of carry forward losses | 785,259 | 142,312 | 611,496 | 136,594 |
| Deferred tax assets in respect of inven-tories | 1,555,528 | 422,995 | 1,552,766 | 413,713 |
| Deferred tax assets in respect of em-ployee benefits | 910,081 | 128,676 | 973,434 | 135,422 |
| Other deferred tax asset | 1,569,188 | 366,652 | 1,606,933 | 387,109 |
| 4,820,056 | 1,060,635 | 4,744,629 | 1,072,838 | |
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 | |||
| 2020 | 2019 | |||
| Taxable temporary differences | Deferred tax liabilities | Taxable temporary differences | Deferred tax liabilities | |
| Deferred tax liabilities | ||||
| Deferred tax liabilities in respect of fixed assets and intangible assets | 3,512,629 | 618,904 | 3,551,402 | 569,446 |
| 3,512,629 | 618,904 | 3,551,402 | 569,446 | |
| December 31 | December 31 | |||
| 2020 | 2019 | |||
| The offset amount of deferred tax assets and li-abilities | Deferred tax assets or lia-bilities after offset | The offset amount of de-ferred tax as-sets and liabili-ties | Deferred tax assets or liabili-ties after offset | |
| Presented as: | ||||
| Deferred tax assets | 286,962 | 773,673 | 246,142 | 826,696 |
| Deferred tax liabilities | 286,962 | 331,942 | 246,142 | 323,304 |
| December 31 | December 31 | |||
| 2020 | 2019 | |||
| Deductible temporary differences | 523,951 | 515,589 | ||
| Deductible losses carry forward | 103,402 | 142,042 | ||
| 627,353 | 657,631 |
| December 31 | December 31 | |||
| 2020 | 2019 | |||
| 2020 | - | 16,171 | ||
| 2021 | 2,388 | 13,031 | ||
| 2022 | 1,626 | 1,402 | ||
| 2023 | 2,105 | 27,767 | ||
| 2024 | 1,785 | 7,599 | ||
| After 2024 | 95,498 | 76,072 | ||
| 103,402 | 142,042 |
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 | ||
| 2020 | 2019 | ||
| Judicial deposits | 93,182 | 56,347 | |
| Assets related to securitization | 31,979 | 38,648 | |
| Advances in respect of non-current assets | 40,857 | 58,689 | |
| Call option in respect of business combination | 18,733 | 9,216 | |
| Others | 72,581 | 83,283 | |
| 257,332 | 246,183 |
| December 31 | December 31 | |
| 2020 | 2019 | |
| Guaranteed loans | - | 414,000 |
| Unsecured loans | 1,205,498 | 1,595,882 |
| 1,205,498 | 2,009,882 |
| December 31 | December 31 | |
| 2020 | 2019 | |
| Economic hedge | 1,197,274 | 603,009 |
| Accounting hedge derivatives | 266,340 | 88,466 |
| 1,463,614 | 691,475 |
V. Notes to the consolidated financial statements - (cont'd)
23. Bills Payables
| December 31 | December 31 | |
| 2020 | 2019 | |
| Post-dated checks payables | 264,402 | 224,878 |
| Note payables draft | 105,389 | 96,796 |
| 369,791 | 321,674 |
| December 31 | December 31 | |
| 2020 | 2019 | |
| Within 1 year (including 1 year) | 4,523,845 | 4,172,996 |
| 1-2 years (including 2 years) | 7,454 | 10,458 |
| 2-3 years (including 3 years) | 4,349 | 2,881 |
| Over 3 years | 21,358 | 19,566 |
| 4,557,006 | 4,205,901 |
| December 31 | December 31 | |
| 2020 | 2019 | |
| Discount for customers | 633,882 | 522,614 |
| Advances from customers | 458,371 | 141,614 |
| 1,092,253 | 664,228 |
| December 31 | December 31 | |
| 2020 | 2019 | |
| Short-term employee benefits | 660,144 | 656,272 |
| Post-employment benefits* | 122,216 | 224,035 |
| Share based payment (See note XIII) | 85,900 | - |
| Other benefits within one year | 306,506 | 304,366 |
| 1,174,766 | 1,184,673 | |
| Current maturities | 34,068 | 27,040 |
| 1,208,834 | 1,211,713 |
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 | |
| 2020 | 2019 | |
| Corporate income tax | 168,033 | 157,548 |
| VAT | 166,073 | 180,818 |
| Others | 24,882 | 30,672 |
| 358,988 | 369,038 |
| December 31 | December 31 | |
| 2020 | 2019 | |
| Dividends payables | 3,780 | 750 |
| Other payables | 1,071,941 | 1,048,844 |
| 1,075,721 | 1,049,594 |
| December 31 | December 31 | |
| 2020 | 2019 | |
| Accrued expenses | 541,250 | 613,183 |
| Payables in respect of intangible assets | 135,176 | 130,329 |
| Financial institutions | 111,863 | 1,137 |
| Liability in respect of securitization transactions | 22,002 | 26,370 |
| Other payables | 261,650 | 277,825 |
| 1,071,941 | 1,048,844 |
| December 31 | December 31 | |
| 2020 | 2019 | |
| Long-term loans due within one year | 587,864 | 420,086 |
| Lease liabilities due within one year | 146,178 | 148,287 |
| Debentures payable due within one year | 538,539 | 497,870 |
| 1,272,581 | 1,066,243 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
30. Other Current Liabilities
| December 31 | December 31 | |
| 2020 | 2019 | |
| Put options to holders of non-controlling interests | 87,388 | 148,886 |
| Provision in respect of returns | 194,775 | 191,065 |
| Provision in respect of claims | 33,036 | 14,901 |
| Others | 398 | 391 |
| 315,597 | 355,243 |
| December 31 | December 31 | |||
| 2020 | Interest range | 2019 | Interest range | |
| Long term loans | ||||
| Loan secured by tangible assets other than monetary assets | - | - | 2,860 | 2.4%-2.7% |
| Unsecured loans | 2,947,492 | 1.4%-4.7% | 1,344,385 | 1.5%-6.2% |
| Total Long term loans | 2,947,492 | 1,347,245 | ||
| Less: Long term loans from banks due within 1 year | (559,864) | (420,086) | ||
| Long term loans, net | 2,387,628 | 927,159 | ||
| December 31 | December 31 | |
| 2020 | 2019 | |
| Debentures Series B | 8,616,652 | 8,463,812 |
| Current maturities | (538,539) | (497,870) |
| 8,078,113 | 7,965,942 |
| December 31 | |
| 2020 | |
| First year (current maturities) | 538,539 |
| Second year | 538,539 |
| Third year | 538,539 |
| Fourth year | 538,539 |
| Fifth year and thereafter | 6,462,496 |
| 8,616,652 |
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, 2020
| Maturity period | Face value in RMB | Face value NIS | Issuance date | Maturity period | Issuance amount | Balance at January 1, 2020 | Issuance during the pe-riod | Amortization of discounts or premium | CPI and exchange rate effect | Repayment during the period | Currency translation adjustment | Balance at December 31, 2020 |
| Debentures Series B | 2,673,640 | 1,650,000 | 4.12.2006 | November 2020-2036 | 3,043,742 | 3,839,289 | - | 220 | 244,212 | (221,067 ) | (251,265 ) | 3,611,389 |
| Debentures Series B | 843,846 | 513,527 | 16.1.2012 | November 2020-2036 | 842,579 | 1,137,246 | - | 11,424 | 72,624 | (72,334 ) | (74,622 ) | 1,074,338 |
| Debentures Series B | 995,516 | 600,000 | 7.1.2013 | November 2020-2036 | 1,120,339 | 1,417,383 | - | 5,005 | 90,284 | (84,517 ) | (92,828 ) | 1,335,327 |
| Debentures Series B | 832,778 | 533,330 | 1.2.2015 | November 2020-2036 | 1,047,439 | 1,335,461 | - | (3,150 ) | 85,215 | (75,123 ) | (87,339 ) | 1,255,064 |
| Debentures Series B | 418,172 | 266,665 | 1-6.2015 | November 2020-2036 | 556,941 | 734,433 | - | (8,608 ) | 46,955 | (37,562 ) | (47,911 ) | 687,307 |
| Debentures Series B | 497,989 | 246,499 | 5.5.2020 | November 2020-2036 | 692,896 | - | 692,896 | (6,606 ) | 55,628 | (34,720 ) | (53,971 ) | 653,227 |
| 8,463,812 | 692,896 | (1,715 ) | 594,918 | (525,323 ) | (607,936 ) | 8,616,652 | ||||||
V. Notes to the consolidated financial statements - (cont'd)
33. Lease liabilities
| December 31 | December 31 | |||
| 2020 | Interest range | 2019 | Interest range | |
| Lease liabilities | 525,368 | 1.3%-6.1% | 554,645 | 1.9% - 6.1% |
| Less: Lease liabilities due within one year | (146,178) | (148,287) | ||
| Long term lease liabilities, net | 379,190 | 406,358 | ||
| December 31 | December 31 | |
| 2020 | 2019 | |
| Total present value of obligation | 594,165 | 651,803 |
| Less: fair value of plan's assets | (92,634 ) | (104,448) |
| Net liability related to Post-employment benefits | 501,531 | 547,355 |
| Termination benefits | 99,466 | 70,128 |
| Total recognized liability for defined benefit plan, net (1) | 600,997 | 617,483 |
| Share based payment (See note XIII) | 21,088 | 94,104 |
| Other long-term employee benefits | 57,738 | 54,307 |
| Total long-term employee benefits, net | 679,823 | 765,894 |
| Including: Long-term employee benefits payable due within one year | 34,068 | 27,040 |
| 645,755 | 738,854 |
| Defined benefit obli-gation and early re-tirement | Fair value of plan's assets | Total | ||||
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |
| Balance as at January 1, 2020 | 721,931 | 638,355 | 104,448 | 87,492 | 617,483 | 550,863 |
| Expense/income recognized | ||||||
| in profit and loss: | ||||||
| Current service cost | 34,181 | 24,910 | - | - | 34,181 | 24,910 |
| Interest costs | 22,932 | 22,608 | 3,270 | 3,614 | 19,662 | 18,994 |
| Losses (gains) on curtailments and settlements | 54,959 | - | - | - | 54,959 | - |
| Changes in exchange rates | 41,922 | 38,499 | 7,409 | 7,110 | 34,513 | 31,389 |
| Actuarial gain (losses) due to early retirement | (4,670 ) | (4,125) | - | - | (4,670) | (4,125) |
| Included in other comprehensive income: | ||||||
| Actuarial gain (losses) as a result of changes in actu-arial assumptions | (443,60 ) | 65,239 | (7,941) | 7,945 | (35,663) | 57,294 |
| Foreign currency translation differences in respect of foreign operations | (642,27 ) | 9,348 | (6,584) | 1,493 | (35,692) | 7,855 |
| Additional movements: | ||||||
| Benefits paid | (95,546) | (72,903) | (13,212) | (9,372) | (82,334) | (63,531) |
| Contributions paid by the Group | - | - | 5,244 | 6,166 | (5,244) | (6,166) |
| New consolidation | 3,802 | - | - | - | 3,802 | - |
| Balance as at December 31, 2020 | 693,631 | 721,931 | 92,634 | 104,448 | 600,997 | 617,483 |
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 | |
| 2020 | 2019 | |
| Discount rate (%)* | 0.6%-3.3% | 0.4%-3.3% |
| As of December 31, 2020 | ||
| Increase of 1% | Decrease of 1% | |
| Change in defined benefit obligation | (48,969 ) | 61,084 |
| December 31 | December 31 | |
| 2020 | 2019 | |
| Liabilities in respect of contingencies* | 77,138 | 90,051 |
| Provision in respect of site restoration | 79,706 | 84,211 |
| Long-term liability in respect of business combinations | 3,954 | - |
| Other | 2,453 | 2,560 |
| 163,251 | 176,822 |
V. Notes to the consolidated financial statements - (cont'd)
36. Other Non-Current Liabilities
| December 31 | December 31 | |
| 2020 | 2019 | |
| Put options to holders of non- controlling interests | 290,260 | 207,472 |
| Long term transactions in derivatives | - | 25,582 |
| Long term loans - others | 171,770 | 171,770 |
| 462,030 | 404,824 | |
| Current maturities | (28,000) | - |
| 434,030 | 404,824 |
| Balance at Janu-ary 1, 2020 | Issuance of new shares | Buyback of shares | Balance at December 31, 2020 | |
| Share capital | 2,446,554 | - | (102,433) | 2,344,121 |
| Balance at Janu-ary 1, 2020 | Additions during the period | Reductions during the period | Balance at December 31, 2020 | |
| Share premiums | 12,550,177 | 102,433 | - | 12,652,610 |
| Other capital reserve | 352,991 | 17,618 | - | 370,609 |
| 12,903,168 | 120,051 | - | 13,023,219 |
| Attributable to shareholders of the company | |||||||
| Balance at January 1, 2020 | Before tax amount | Less: transfer to profit or loss | Less: In-come tax expenses | Net-of-tax amount | Less: trans-fer to re-tained earnings | Balance at December 31, 2020 | |
| Items that will not be re-classified to profit or loss | 13,824 | 35,663 | - | (446) | 36,109 | - | 49,933 |
| Re-measurement of changes in liabilities under defined benefit plans | (34,876) | 35,663 | 6,045 | 29,618 | - | (5,258) | |
| Changes in fair value of other equity investment | 48,700 | - | - | (6,491) | 6,491 | - | 55,191 |
| Items that may be reclassi-fied to profit or loss | 1,178,857 | (1,319,595) | 7,937 | (26,687) | (1,300,845) | - | (121,988) |
| Effective portion of gain or loss of cash flow hedge | (45,532) | (189,918) | 11,956 | (26,687) | (175,187) | - | (220,719) |
| Translation difference of for-eign financial statements | 1,224,389 | (1,129,677) | (4,019) | - | (1,125,658) | - | 98,731 |
| 1,192,681 | (1,283,932) | 7,937 | (27,133) | (1,264,736) | - | (72,055) | |
V. Notes to the consolidated financial statements - (cont'd)
40. Surplus reserve
| Balance at January 1, 2020 | Additions during the period | Reductions during the period | Balance at December 31, 2020 | |
| Statutory surplus reserve | 236,348 | - | - | 236,348 |
| Discretional surplus reserve | 3,814 | - | - | 3,814 |
| 240,162 | - | - | 240,162 |
| 2020 | 2019 | |
| Retained earnings as at December 31 of preceding year | 5,574,173 | 5,513,466 |
| Adjustment for business combination under common control (Note 1) | - | 115,826 |
| Retained earnings as at January 1 | 5,574,173 | 5,629,292 |
| Net profits for the period attributable to shareholders of the Company | 352,753 | 277,041 |
| Dividends to non-controlling Interest | (34,865) | (43,043) |
| Dividend to the shareholders of the company (Note 2) | (29,359) | (293,628) |
| Transfer from other comprehensive income | - | 4,511 |
| Retained earnings as at December 31 | 5,862,702 | 5,574,173 |
V. Notes to the consolidated financial statements - (cont'd)
42. Operating Income and Cost of Sales
| Year ended December 31 | Year ended December 31 | |||
| 2020 | 2019 | |||
| Income | Cost of sales | Income | Cost of sales | |
| Principal activities | 28,385,744 | 20,033,482 | 27,486,019 | 18,609,841 |
| Other businesses | 59,089 | 37,553 | 77,220 | 69,671 |
| 28,444,833 | 20,071,035 | 27,563,239 | 18,679,512 | |
| Year ended December 31 | |||
| 2020 | 2019 | ||
| Tax on turnover | 24,690 | 21,166 | |
| Others | 63,901 | 63,237 | |
| 88,591 | 84,403 | ||
| Year ended December 31 | |||
| 2020 | 2019 | ||
| Salaries and related expense | 1,638,087 | 1,557,483 | |
| Depreciation and amortization | 1,404,220 | 1,405,411 | |
| Transportation and Commissions | 771,765 | 708,217 | |
| Advertising and sales promotion | 302,921 | 331,763 | |
| Travel expenses | 70,999 | 153,501 | |
| Warehouse expenses | 154,425 | 147,524 | |
| Registration | 150,921 | 121,406 | |
| Professional services | 88,307 | 87,048 | |
| Insurance | 83,293 | 83,307 | |
| Others | 280,407 | 277,596 | |
| 4,945,345 | 4,873,256 | ||
V. Notes to the consolidated financial statements - (cont'd)
45. General and Administrative Expenses
| Year ended December 31 | |||
| 2020 | 2019 | ||
| Salaries and related expenses | 518,889 | 752,816 | |
| Idleness expenses | 134,164 | 342,044 | |
| Professional services | 105,270 | 131,593 | |
| Depreciation and amortization | 86,730 | 96,137 | |
| IT systems | 95,734 | 87,635 | |
| Office rent, maintenance and expenses | 37,522 | 54,903 | |
| Other | 65,399 | 97,189 | |
| 1,043,708 | 1,562,317 | ||
| Year ended December 31 | |||
| 2020 | 2019 | ||
| Salaries and related expenses | 218,596 | 185,356 | |
| Field trial | 45,828 | 60,787 | |
| Professional services | 61,927 | 67,779 | |
| Depreciation and amortization | 44,112 | 37,727 | |
| Materials | 53,596 | 27,244 | |
| Office rent, maintenance and expenses | 7,833 | 8,108 | |
| Other | 46,886 | 49,324 | |
| 478,778 | 436,325 | ||
| Year ended December 31 | |||
| 2020 | 2019 | ||
| Interest expenses on debentures and loans | 700,658 | 707,098 | |
| CPI expense (income) in respect of debentures | (57,101) | 23,418 | |
| Loss in respect of sale of trade receivables | 73,673 | 91,006 | |
| Interest expense in respect of post-employment benefits and early retire-ment, net | 19,473 | 38,681 | |
| Revaluation of put option, net | 10,525 | (7,605) | |
| Interest income from customers, banks and others | (64,022) | (81,190) | |
| Exchange rate differences, net | 1,111,631 | 859,403 | |
| Interest expense on lease liabilities | 24,251 | 25,904 | |
| Other expenses | 28,101 | 9,170 | |
| 1,847,189 | 1,665,885 | ||
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
48. Investment income, net
| Year ended December 31 | |||
| 2020 | 2019 | ||
| Investment income (expenses) from disposal of derivatives | 125,300 | (253,799) | |
| Income from long-term equity investments accounted for using the equity method | 15,584 | 19,861 | |
| Gain from change in consolidation scope | 58,995 | - | |
| Other | 6,623 | 2,733 | |
| 206,502 | (231,205) | ||
| Year ended December 31 | |||
| 2020 | 2019 | ||
| Gain from changes in fair value of derivative financial instruments | 555,223 | 828,527 | |
| Others | (14,525) | (3,015) | |
| 540,698 | 825,512 | ||
| Year ended December 31 | |||
| 2020 | 2019 | ||
| Bills receivable and accounts receivable | (24,435) | (39,323) | |
| Other receivables | (1,514) | (82) | |
| (25,949) | (39,405) | ||
| Year ended December 31 | |||
| 2020 | 2019 | ||
| Inventories | (66,351) | (76,375) | |
| Fixed assets | (39,594) | (285,695) | |
| Construction in progress | (17,265) | (19,763) | |
| Intangible asset | (173) | (22,852) | |
| Long-term equity investment | (40,077) | - | |
| Other | (694) | (9,131) | |
| (164,154) | (413,816) | ||
| Year ended December 31 | Included in non-recurring items | |||
| 2020 | 2019 | |||
| Gain from disposal of fixed assets | 4,134 | 127,443 | 4,134 | |
| Gain (loss) from disposal of intangible assets | 6,616 | (370) | 6,616 | |
| 10,750 | 127,073 | 10,750 | ||
53. Income Tax Expenses
| Year ended December 31 | |||
| 2020 | 2019 | ||
| Current year | 327,341 | 363,279 | |
| Deferred tax expenses (income) | (39,919) | (138,294) | |
| Adjustments for previous years, net | (64,963) | (50,454) | |
| 222,459 | 174,531 | ||
| Year ended December 31 | |||
| 2020 | 2019 | ||
| Profit before taxes | 575,212 | 451,572 | |
| Statutory tax in china | 25% | 25% | |
| Tax calculated according to statutory tax in china | 143,803 | 112,893 | |
| Tax benefits from Approved Enterprises | (26,140) | (6,928 ) | |
| Difference between measurement basis of income for financial statement and for tax purposes | 104,890 | 37,323 | |
| Taxable income and temporary differences at other tax rate | (20,873) | 16,820 | |
| Taxes in respect of prior years | (64,963) | (50,454) | |
| Utilization of tax losses prior years for which deferred taxes were not created | (2,968) | (6,720) | |
| Temporary differences and losses in the report year for which de-ferred taxes were not created | 23,293 | 116,370 | |
| Non-deductible expenses and other differences | 34,704 | (6,795) | |
| Neutralization of tax calculated in respect of the Company’s share in results of equity accounted investees | (5,246) | (6,023) | |
| Effect of change in tax rate in respect of deferred taxes | 38,775 | (33,631) | |
| Creation and reversal of deferred taxes for tax losses and temporary differences from previous years | (2,816) | 1,676 | |
| Income tax expenses | 222,459 | 174,531 | |
V. Notes to the consolidated financial statements - (cont'd)
55. Notes to items in the cash flow statements
(1) Cash received relating to other operating activities
| Year ended December 31 | |||
| 2020 | 2019 | ||
| Derivatives transactions | 404,824 | 260,557 | |
| Financial institutions | 126,770 | 74,615 | |
| Interest income | 53,895 | 61,207 | |
| Government subsidies | 12,759 | 5,899 | |
| Others | 94,964 | 262,559 | |
| 693,212 | 664,837 | ||
| Year ended December 31 | |||
| 2020 | 2019 | ||
| Transportation, Commissions and Warehouse | 847,272 | 753,643 | |
| Advertising and sales promotion | 297,623 | 295,944 | |
| Professional services | 246,200 | 264,241 | |
| Financial institutions | 369,655 | 118,269 | |
| IT and Communication | 184,149 | 179,730 | |
| Registration and Field trials | 166,551 | 186,694 | |
| Derivatives transactions | 183,065 | 54,030 | |
| Travel | 93,357 | 180,303 | |
| Insurance | 103,038 | 99,543 | |
| Others | 554,319 | 667,743 | |
| Net cash flow from operating activities | 3,045,229 | 2,800,140 | |
| Year ended December 31 | |||
| 2020 | 2019 | ||
| Investment grant | 3,223 | 5,208 | |
| 3,223 | 5,208 | ||
| Year ended December 31 | |||
| 2020 | 2019 | ||
| Increase in securitization facility | 31,483 | - | |
| Other | 16,865 | - | |
| 48,348 | - | ||
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
55. Notes to items in the cash flow statements - (cont'd)
(5) Cash received from other financing activities
| Year ended December 31 | |||
| 2020 | 2019 | ||
| Cash received in respect of hedging transactions on debentures | 186,727 | 140,025 | |
| Deposit for issuing bills payables | 34,011 | 39,886 | |
| 220,738 | 179,911 | ||
| Year ended December 31 | |||
| 2020 | 2019 | ||
| Repayment of lease liability | 160,522 | 146,610 | |
| Payment in respect of hedging transactions on debentures | 154,335 | 325,474 | |
| Deposit for issuing bills payable | 34,144 | 14,003 | |
| Payment for business combinations under common control | - | 415,000 | |
| Repurchase of treasury shares | 60,357 | - | |
| Realization of call option | - | 35,625 | |
| 409,358 | 936,712 | ||
| Year ended December 31 | |||
| 2020 | 2019 | ||
| Net profit | 352,753 | 277,041 | |
| Add: Impairment provisions for assets | 164,154 | 413,816 | |
| Credit impairment loss | 25,949 | 39,405 | |
| Depreciation of fixed assets and investment property | 768,076 | 841,041 | |
| Depreciation of right-of-use asset | 163,787 | 160,389 | |
| Amortization of intangible asset | 1,325,395 | 1,334,711 | |
| Gains on disposal of fixed assets, intangible assets, and other long-term assets, net | (10,750) | (127,073) | |
| Gains from changes in fair value | (540,698) | (825,512) | |
| Financial expenses | 1,398,807 | 1,325,875 | |
| Investment loss (income), net | (286,930) | (51,370) | |
| Decrease (increase) in deferred tax assets | (38,515) | (130,959) | |
| Increase (decrease) in deferred tax liabilities | (1,404) | (7,335) | |
| Decrease (increase) in inventories, net | (939,779) | (236,687) | |
| (Increase) in operating receivables | (1,173,437) | (1,080,276) | |
| Increase (decrease) in operating payables | 796,618 | (1,119,479) | |
| Others | 18,989 | 29,900 | |
| Net cash flow from operating activities | 2,023,015 | 843,487 | |
56. Supplementary Information on Cash Flow Statement - (cont'd)
b. Net increase (decrease) in cash and cash equivalents
| Year ended December 31 | |||
| 2020 | 2019 | ||
| Closing balance of cash | 3,835,071 | 4,319,907 | |
| Less: Opening balance of cash | 4,319,907 | 6,346,196 | |
| Decrease in cash and cash equivalents | (484,836) | (2,026,289) | |
| Year ended December 31 | |||
| 2020 | 2019 | ||
| Cash paid for business combination not under common control | 440,495 | 1,126,557 | |
| Less: cash and cash equivalents of the acquirees at the date of acqui-sition | 69,303 | 4,610 | |
| Net cash paid to acquire subsidiaries | 371,192 | 1,121,947 | |
| Year ended December 31 | |||
| 2020 | 2019 | ||
| Cash on hand | 4,590 | 6,265 | |
| Bank deposits available on demand without restrictions | 3,830,481 | 4,313,642 | |
| 3,835,071 | 4,319,907 | ||
| December 31 | ||
| 2020 | Reason | |
| Cash | 28,815 | Pledged |
| Other non-current assets | 101,619 | Guarantees |
| 130,434 |
V. Notes to the consolidated financial statements - (cont'd)
58. Foreign currencies denominated items
(1) Foreign currencies denominated items
| As at December 31, 2020 | |||
| Foreign currency at the end of the pe-riod | Exchange rate | RMB at the end of the period | |
| Cash and bank balances | |||
| USD | 114,714 | 6.5249 | 748,499 |
| EUR | 31,654 | 8.0046 | 253,375 |
| ARS | 1,143,009 | 0.0775 | 88,628 |
| PLN | 44,240 | 1.7361 | 76,805 |
| ILS | 31,600 | 2.0295 | 64,133 |
| CAD | 11,959 | 5.1178 | 61,204 |
| ZAR | 99,708 | 0.4463 | 44,500 |
| GBP | 4,033 | 8.9134 | 35,952 |
| BRL | 26,384 | 1.2556 | 33,127 |
| Other | 277,641 | ||
| Total | 1,683,864 | ||
| Bills and Accounts receivable | |||
| BRL | 1,880,787 | 1.2556 | 2,361,489 |
| EUR | 84,774 | 8.0046 | 678,580 |
| USD | 37,506 | 6.5249 | 244,723 |
| TRY | 208,940 | 0.8889 | 185,725 |
| RON | 111,417 | 1.6452 | 183,304 |
| ZAR | 400,804 | 0.4463 | 178,880 |
| RUB | 1,600,369 | 0.0883 | 141,349 |
| CAD | 17,396 | 5.1178 | 89,032 |
| AUD | 14,187 | 5.0401 | 71,506 |
| GBP | 4,995 | 8.9134 | 44,520 |
| HUF | 1,378,561 | 0.0219 | 30,249 |
| ILS | 2,328 | 2.0295 | 4,725 |
| Other | 379,970 | ||
| Total | 4,594,052 | ||
| Other receivables | |||
| EUR | 77,517 | 8.0046 | 620,491 |
| ILS | 47,070 | 2.0295 | 95,530 |
| BRL | 20,558 | 1.2556 | 25,812 |
| Other | 33,688 | ||
| Total | 775,521 | ||
| Other current assets | |||
| ILS | 67,833 | 2.0295 | 137,668 |
| BRL | 71,948 | 1.2556 | 90,337 |
| EUR | 5,221 | 8.0046 | 41,792 |
| USD | 2,727 | 6.5249 | 17,793 |
| UAH | 64,155 | 0.2308 | 14,805 |
| ARS | 131,106 | 0.0775 | 10,166 |
| Other | 62,470 | ||
| Total | 375,031 | ||
V. Notes to the consolidated financial statements - (cont'd)
58. Foreign currencies denominated items - (cont'd)
(1) Foreign currencies denominated items - (cont'd)
| As at December 31, 2020 | |||
| Foreign currency at the end of the pe-riod | Exchange rate | RMB at the end of the period | |
| Long-term receivables | |||
| BRL | 75,924 | 1.2556 | 95,329 |
| Total | 95,329 | ||
| Other non-current assets | |||
| BRL | 63,628 | 1.2556 | 79,891 |
| Other | 3,523 | ||
| Total | 83,414 | ||
| Short-term loans | |||
| TRY | 205,431 | 0.8889 | 182,606 |
| UAH | 378,003 | 0.2308 | 87,231 |
| EUR | 8,206 | 8.0046 | 65,686 |
| Other | 23,392 | ||
| Total | 358,915 | ||
| Bills and Accounts payable | |||
| ILS | 424,631 | 2.0295 | 861,796 |
| EUR | 58,488 | 8.0046 | 468,175 |
| BRL | 123,432 | 1.2556 | 154,979 |
| USD | 9,242 | 6.5249 | 60,303 |
| RON | 6,798 | 1.6452 | 11,184 |
| Other | 87,172 | ||
| Total | 1,643,609 | ||
| Other payables | |||
| ILS | 60,307 | 2.0295 | 122,394 |
| EUR | 10,061 | 8.0046 | 80,536 |
| BRL | 64,117 | 1.2556 | 80,504 |
| ILS CPI | 18,497 | 2.0295 | 37,540 |
| OTHER | 97,529 | ||
| TOTAL | 418,503 | ||
| Contract liabilities | |||
| EUR | 25,441 | 8.0046 | 203,642 |
| BRL | 59,996 | 1.2556 | 75,330 |
| CAD | 5,677 | 5.1178 | 29,055 |
| TRY | 31,116 | 0.8889 | 27,659 |
| USD | 471 | 6.5249 | 3,073 |
| Other | 30,367 | ||
| Total | 369,126 | ||
V. Notes to the consolidated financial statements - (cont'd)
58. Foreign currencies denominated items - (cont'd)
(1) Foreign currencies denominated items - (cont'd)
| As at December 31, 2020 | |||
| Foreign currency at the end of the period | Exchange rate | RMB at the end of the period | |
| Non-current liabilities due within one year | |||
| ILS CPI | 285,550 | 2.0295 | 579,529 |
| EUR | 24,592 | 8.0046 | 196,850 |
| USD | 1,249 | 6.5249 | 8,150 |
| Other | 30,504 | ||
| Total | 815,033 | ||
| Other current liabilities | |||
| EUR | 3,204 | 8.0046 | 25,649 |
| UAH | 102,863 | 0.2308 | 23,738 |
| Other | 5,559 | ||
| Total | 54,946 | ||
| Long-term loan | |||
| EUR | 44,542 | 8.0046 | 356,540 |
| Total | 356,540 | ||
| Debentures payable | |||
| ILS CPI | 3,980,311 | 2.0295 | 8,078,113 |
| Total | 8,078,113 | ||
| Provision and Long-term payables | |||
| BRL | 45,087 | 1.2556 | 56,610 |
| EUR | 377 | 8.0046 | 3,015 |
| Total | 59,625 | ||
| Other non-current liabilities | |||
| EUR | 8,729 | 8.0046 | 69,876 |
| ILS CPI | 20,444 | 2.0295 | 41,492 |
| USD | 3,566 | 6.5249 | 23,268 |
| GBP | 1,111 | 8.9134 | 9,905 |
| Other | 25,766 | ||
| Total | 170,307 | ||
V. Notes to the consolidated financial statements - (cont'd)
58. 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; Regis-tration | 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; Regis-tration | USD |
| Control Solutions Inc. | United States | Manufacturing; Distribution; Regis-tration | USD |
| ADAMA Agan Ltd. | Israel | Manufacturing; Distribution; Regis-tration | USD |
| ADAMA Makhteshim Ltd. | Israel | Manufacturing; Distribution; Regis-tration | 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 |
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 investment | Acquisition method | Basis of acqui-sition date de-termination | From acquisition date till pe-riod end | |
| Revenue | Net profit | ||||||
| Alfa Agri-cultural Supplies, S.A. | 01.07.2020 | 298,783 | 100% | Stock pur-chase | Obtained con-trol | 129,563 | (89) |
| FNV S.A. | 01.10.2020 | 29,286 | 51% | Stock pur-chase | Obtained con-trol | 39,354 | 993 |
| Shanghai Dibai Plant Protection Co., Ltd. | 31.12.2020 | 310,557 | 51% | Stock pur-chase | Obtained con-trol | - | - |
| Acquisition costs | Alfa Agricultural Supplies, S.A. | FNV S.A. | Shanghai Dibai Plant Protection Co., Ltd. |
| Total acquisition cost in cash | 152,407 | 12,088 | 276,000 |
| Contingent consideration | - | 3,011 | - |
| Other | - | 14,187 | 34,557 |
| Equity investments held before acquisition date | 146,376 | - | - |
| Less: share of the fair value of the identifiable net assets acquired | 213,369 | 15,155 | 83,435 |
| Goodwill | 85,414 | 14,131 | 227,122 |
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
| Alfa Agricultural Supplies, S.A. | |||
| Fair value at acquisition date | Book value at acquisition date | ||
| Assets: | |||
| Cash and bank balances | 53,974 | 53,974 | |
| Bills and Accounts receivable | 192,378 | 192,378 | |
| Prepayments | 177 | 177 | |
| Other receivables | 5,954 | 5,954 | |
| Inventories | 97,732 | 97,732 | |
| Fixed assets | 906 | 906 | |
| Right-of-use assets | 7,519 | 7,519 | |
| Intangible assets | 54,236 | 28 | |
| Deferred tax assets | 2,280 | 2,280 | |
| Other non-current assets | 538 | 538 | |
| Liabilities: | |||
| Short-term loans | 46,073 | 46,073 | |
| Bills and Accounts payable | 86,228 | 86,228 | |
| Employee benefits payable | 2,754 | 2,754 | |
| Taxes payable | 11,901 | 11,901 | |
| Other payables | 30,477 | 30,477 | |
| Lease liabilities | 7,519 | 7,518 | |
| Long-term employee benefits payable | 3,802 | 3,802 | |
| Deferred tax liabilities | 13,571 | 559 | |
| Net assets | 213,369 | 172,174 | |
| Less: Non-controlling interests | - | - | |
| Net assets acquired | 213,369 | 172,174 | |
| FNV S.A. | |||
| Fair value at acquisition date | Book value at acquisition date | ||
| Assets: | |||
| Cash and bank balances | 3,364 | 3,364 | |
| Bills and Accounts receivable | 43,455 | 43,455 | |
| Prepayments | 54 | 54 | |
| Inventories | 48,570 | 48,570 | |
| Fixed assets | 797 | 797 | |
| Intangible assets | 10,597 | - | |
| Other assets | 8,138 | 8,138 | |
| Liabilities: | |||
| Bills and Accounts payable | 78,452 | 78,452 | |
| Other payables | 3,759 | 3,759 | |
| Deferred tax liabilities | 1,060 | - | |
| Other liabilities | 16,549 | 16,549 | |
| Net assets | 15,155 | 5,618 | |
| Less: Non-controlling interests | - | - | |
| Net assets acquired | 15,155 | 5,618 | |
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)
| Shanghai Dibai Plant Protection Co., Ltd. | |||
| Fair value at acquisition date | Book value at acquisition date | ||
| Assets: | |||
| Cash and bank balances | 11,965 | 11,965 | |
| Bills and Accounts receivable | 6,256 | 6,256 | |
| Prepayments | 78,857 | 78,857 | |
| Inventories | 235 | 235 | |
| Fixed assets | 805 | 805 | |
| Intangible assets | 200,000 | - | |
| Other assets | 191 | 191 | |
| Liabilities: | |||
| Bills and Accounts payable | - | - | |
| Other payables | 17,953 | 17,953 | |
| Deferred tax liabilities | 50,557 | 557 | |
| Advances from customers | 66,201 | 66,201 | |
| Net assets | 163,598 | 13,598 | |
| Less: Non-controlling interests | 80,163 | 6,663 | |
| Net assets acquired | 83,435 | 6,935 | |
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 | |
| Adama Anpon (Jiangsu) Ltd. | CHINA | Manufacturing; Distribution | 100% | Purchased |
| December 31 | ||
| 2020 | 2019 | |
| Joint ventures | 14,081 | 92,695 |
| Associates | - | 40,403 |
| 14,081 | 133,098 | |
| December 31, 2020 and twelve months then ended | December 31, 2019 and twelve months then ended | |
| Joint ventures: | ||
| Total carrying amount | 14,081 | 92,695 |
| The Group's share of the following items: | ||
| Net profit | 15,584 | 19,877 |
| Other comprehensive income | 1,658 | (697) |
| Total comprehensive income | 17,242 | 19,180 |
| Associates: | ||
| Total carrying amount | - | 40,403 |
| The Group's share of the following items: | ||
| Net profit | - | (16) |
| Other comprehensive income | (326) | 653 |
| Total comprehensive income | (326) | 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 exposure tothese risks, the Group uses financial derivatives instruments, including forward transactions and options (here-inafter - “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 the Group'srisk management policy. The Finance Committee is responsible for establishing and monitoring the Group'sactual risk management policy. The Chief Financial Officer reports to the Finance Committee on a regularbasis 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 obligations.
B. Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument failsto meet its contractual obligations, and derives mainly from trade receivables and other receivables as well asfrom 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 to about90% 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 indus-try and geographic region in which the customer operates. No single customer accounted for greater than 5%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 exami-nation made by the Group includes an outside credit rating, if any, and in many cases, receipt of documentsfrom an insurance company. A credit limit is prescribed for each customer, outstanding amount of the accountsreceivable balance. These limits are examined annually. Customers that do not meet the Group’s criteria forcredit quality may do business with the Group on the basis of a prepayment or against furnishing of appropriatecollateral.
Most of the Group’s customers have been doing business with it for many years. In monitoring customer creditrisk, the customers were grouped according to a characterization of their credit, based on geographical location,industry, aging of receivables, maturity, and existence of past financial difficulties. Customers defined as “highrisk” are classified to the restricted customer list and are supervised by management. In certain countries,mainly, Brazil, customers are required to provide property collaterals (such as agricultural lands and equip-ment) against execution of the sales, the value of which is examined on a current ongoing basis by the Com-pany. In these countries, in a case of expected credit risk, the Company records a provision for the amount ofthe 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 on an ongoing basis.As a result of the Covid-19 pandemic, the Group also closely monitors the economic situation worldwide.Where necessary, the Group operates to limit its exposure to customers.
The Group recognizes an impairment provision, which reflects its assessment regarding the credit risk of ac-count receivables, Other receivables and investments on a lifetime expected credit loss basis. See also notesⅢ.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, 2020 | |
| Past due by less than 90 days | 538,084 |
| Past due by more than 90 days | 530,116 |
| 1,068,200 |
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 lossesis performed using model including aging analysis and historical loss experiences, and adjusted by the observ-able factors reflecting current and expected future economic conditions.When credit risk on a receivable has increased significantly since initial recognition, the group records specificprovision or general provision which is determined for groups of similar assets in countries in which there arelarge number of customers with immaterial balances.The Group has credit risk exposures for accounts receivables amounted to RMB 8,454,382 thousand relate tocategory of "Lifetime expected credit losses (credit losses has not occurred)" and amounted to RMB 674,761thousand related to category of "Lifetime expected credit losses (credit losses occurred)". The Group has creditrisk exposures for other receivables amounted to RMB 16,146 thousand related to category of "Lifetime ex-pected credit losses (credit losses occurred)". The credit risk exposures for all remaining balance of financialassets at amortised cost and financial assets at FVTOCI are related to "12-month expected credit losses".
C. Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial obligation when theycome due. The Group's approach to managing its liquidity risk is to assure, to the extent possible, an adequatedegree of liquidity for meeting its obligations timely, under ordinary conditions and under pressure conditions,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 that thereis sufficient cash for the operating needs, including the amounts required in order to comply with the financialliabilities, while taking strict care that at all times there will be unused credit frameworks so that the Companywill not exceed the credit frameworks granted to it and the financial covenants with which it is required tocomply with. These forecasts take into consideration matters such as the Company’s plans to use debt forfinancing its activities, compliance with required financial covenants, compliance with certain liquidity ratiosand 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, 2020 | ||||||
| Third- | Fifth year | Contractual | Carrying | |||
| First year | Second year | Fourth year | and above | Cash flow | amount | |
| Non-derivative financial lia-bilities | ||||||
| Short-term loans | 1,224,376 | - | - | - | 1,224,376 | 1,205,498 |
| Bills payables | 369,791 | - | - | - | 369,791 | 369,791 |
| Accounts payables | 4,557,006 | - | - | - | 4,557,006 | 4,557,006 |
| Other payables | 1,075,721 | - | - | - | 1,075,721 | 1,075,721 |
| Other current liabilities | 87,388 | - | - | - | 87,388 | 87,388 |
| Debentures payable | 941,705 | 951,594 | 1,820,243 | 8,598,976 | 12,312,518 | 8,616,652 |
| Long-term loans | 634,180 | 1,209,917 | 1,139,132 | 182,263 | 3,165,492 | 2,947,492 |
| Long-term payables | 1,965 | 2,063 | 4,062 | 29,064 | 37,154 | 27,327 |
| Lease Liabilities | 167,586 | 124,045 | 134,615 | 212,111 | 638,357 | 525,368 |
| Other non-current liabilities | 30,061 | 72,155 | 273,854 | 93,280 | 469,350 | 462,030 |
| Derivative financial liabilities | ||||||
| Foreign currency derivatives | 1,460,228 | - | - | - | 1,460,228 | 1,460,228 |
| CPI/shekel forward transactions | 3,386 | - | - | - | 3,386 | 3,386 |
| 10,553,393 | 2,359,774 | 3,371,906 | 9,115,694 | 25,400,767 | 21,337,887 | |
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 changesin the NIS exchange rate, could cause significant exposure with respect to the subsidiary functional currency– the U.S. dollar. As of the approval date of the financial statements, the subsidiary had hedged most of itsexposure 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, 2020 | ||
| Total assets | Total liabilities | |
| In US Dollar | 1,613,916 | 874,986 |
| In Euro | 1,670,266 | 1,510,756 |
| In Brazilian real | 2,684,354 | 311,701 |
| CPI-linked NIS | 14,635 | 8,725,602 |
| In New Israeli Shekel | 302,056 | 1,007,144 |
| Denominated in or linked to other foreign currency | 3,321,777 | 777,569 |
| 9,607,004 | 13,207,758 | |
| December 31, 2020 | ||||||
| Cur-rency/linkage receiv-able | Cur-rency/linkage paya-ble | Average expiration date | USD thou-sands Par value | RMB thousands Par value | Fair value | |
| Forward foreign currency | USD | EUR | 21/04/2021 | 397,183 | 2,591,580 | (400,155) |
| Contracts and call options | USD | PLN | 13/04/2021 | 26,474 | 172,741 | (14,744) |
| USD | BRL | 28/04/2021 | 364,202 | 2,376,382 | (103,266) | |
| USD | GBP | 18/03/2021 | 26,081 | 170,179 | (9,911) | |
| USD | ZAR | 09/02/2021 | 32,518 | 212,179 | (17,480) | |
| ILS | USD | 20/03/2021 | 1,461,320 | 9,534,964 | 722,001 | |
| USD | OTHER | 485,329 | 3,166,722 | (105,249) | ||
| CPI forward contracts | CPI | ILS | 27/05/2021 | 699,844 | 4,566,415 | 25,973 |
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, 2020and the increase or decrease in the CPI would increase (decrease) the equity and profit or loss by theamounts presented below. This analysis assumes that all the remaining variables, among others interestrates, remains constant.
| December 31, 2020 | ||||
| Decrease of 5% | Increase of 5% | |||
| Equity | Profit (loss) | Equity | Profit (loss) | |
| New Israeli shekel | 52,295 | 41,167 | (2,410) | 7,657 |
| British pound | (2,397) | 1,012 | 2,397 | (1,012) |
| Euro | (141,835) | (2,898) | 133,160 | 4,090 |
| Brazilian real | (7,570) | 897 | (3,723) | (10,893) |
| Polish zloty | (5,651) | (2,434) | 5,052 | 2,141 |
| South African Rand | (1,862) | 2,958 | 723 | (3,641) |
| Chinese Yuan Renminbi | (39,531) | (39,531) | 39,531 | 39,531 |
| CPI-linked NIS | 406,466 | 406,466 | (406,466) | (406,466) |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
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, 2020 | |
| Fixed-rate instruments – unlinked to the CPI | |
| Financial assets | |
| Cash at banks | 620,625 |
| Other non-current assets | 46,849 |
| Financial liabilities | |
| Long-term loans | 1,366,883 |
| Long-term payables | 21,839 |
| Other non-current liabilities (1) | 171,770 |
| (893,018) | |
| Fixed-rate instruments – linked to the CPI | |
| Financial liabilities | |
| Debentures payable (1) | 8,616,652 |
| Variable-rate instruments | |
| Financial assets | |
| Cash at banks | 123,901 |
| Financial assets at fair value through profit or loss | 1,253 |
| Other non-current assets | 24,162 |
| Financial liabilities | |
| Short-term loans and credit from banks | 1,205,498 |
| Long-term loans (1) | 1,580,609 |
| (2,636,791) |
| Profit or loss | Equity | |||
| Increase in interest | Decrease in interest | Increase in interest | Decrease in interest | |
| As at December 31, 2020 | 1,879 | (1,887) | 1,879 | (1,887) |
IX. Fair Value
The fair value of forward contracts on foreign currency is based on their listed market price, if available. In theabsence 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 evaluatedthrough discounting future cash flow estimates, based on the conditions and duration to maturity of each contract,using the market interest rates of a similar instrument at the measurement date and in accordance with 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, billsand 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 financialinstruments presented in the financial statements not in accordance with their fair values:
| December 31, 2020 | ||
| Carrying amount | Fair value | |
| Financial assets | ||
| Other non-current assets (a – Level 2) | 65,797 | 64,094 |
| Financial liabilities | ||
| Long-term loans and others (b – Level 2) | 3,677,384 | 3,792,500 |
| Debentures (c – Level 1) | 8,616,652 | 11,488,256 |
| December 31, 2020 | |
| % | |
| U.S. dollar interest | (0.43) – 1.55 |
| Euro | (0.06) – 0.62 |
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 transactionbetween market participants at the measurement date. The table below presents an analysis of financial instru-ments 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 | |
| 2020 | |
| Forward contracts and options used for hedging the cash flow (Level 2) | (251,039) |
| Forward contracts and options used for economic hedging (Level 2) | 348,208 |
| Other equity investment (Level 2) | 152,200 |
| Other non-current assets (Level 2) | 39,038 |
| Receivables financing (Level 2) | 109,483 |
| Call option in respect of business combination (Level 2) | 25,715 |
| Other (Level 2) | 1,253 |
| 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 |
| Syngenta Group | Shanghai, China | Production and sales of agrochemicals, fertilizers and GM seeds | 11,144,545 | 72.88% | 72.88% |
| Name of entity | Relationship with the Company |
| Innovaroma SA | 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 |
| Bluestar (Beijing) Chemical Machinery Co.,Ltd | Common control |
| Bluestar Engineering Co.,Ltd. | Common control |
| Chem China Information Center Co., Ltd. | Common control |
| ChemChina Asset Management co.,Ltd. | Common control |
| ChemChina Finance Corporation | Common control |
| China Bluestar Chengrand Research Institute co.,Ltd | Common control |
| Elkem Silicones Brasil LtdA | Common control |
| Hangzhou (Torch)Xidoumen Membrane Industry co.,Ltd | Common control |
| Jiangsu Huaihe Chemical co.,Ltd. | Common control |
| Jingzhou Sanonda Holdings Co.,Ltd. | Common control |
| Nidera Seeds ArgentinaSAU | Common control |
| PT Syngenta Indonesia | Common control |
| Shandong Dacheng BIO-CHEM | Common control |
| Shandong Huaxing Petrochemical Group co.,Ltd. | Common control |
| Sinochem (Hainan) Crop Technology Co. Ltd | Common control |
| Sinochem Agricultural Ecological Technology (Hubei) Co. Ltd | Common control |
| Sinochem Agriculture (Xinjiang) Biotechnology Co. Ltd | Common control |
| Sinochem Agro CO.Ltd | Common control |
| Sinochem Chongqing Fuling Chemical Co. Ltd | Common control |
| Sinochem Fertilizer Co., Ltd | Common control |
| Sinochem Fertilizer Co., Ltd Fujian Branch | Common control |
| Sinochem Fertilizer Co., Ltd Guangxi Branch | Common control |
| Sinochem Fertilizer Co., Ltd Hebei Branch | Common control |
| Sinochem Fertilizer Co., Ltd Jiangsu Branch | Common control |
| Sinochem Fertilizer Co., Ltd Jiangxi Branch | Common control |
| Sinochem Fertilizer Co., Ltd Jilin Branch | Common control |
| Sinochem Fertilizer Co., Ltd Nothwest Branch | Common control |
| Sinochem Fertilizer Co., Ltd Shandong Branch | Common control |
| Sinochem Fertilizer Co., Ltd Southwest Branch | Common control |
| Sinochem Modern Agriculture Co. Ltd. Anhui Branch | Common control |
| Sinochem Modern Agriculture Co. Ltd. Guangdong Branch | Common control |
| Sinochem Modern Agriculture Co. Ltd. Jiangxi Branch | Common control |
| Sinochem Modern Agriculture Sichuan Co. Ltd | Common control |
| Sinochem Modern Agriculture Xinjiang Co. Ltd | Common control |
| Sinochem Modern Agriculture (Jiangsu) Co.Ltd | Common control |
| Sinochem Modern Agriculture (Shandong) Co.Ltd | Common control |
| Sinochem ModernAgriculture co.Ltd | Common control |
| Sinochem (Hainan) CropTechnologyCo.,Ltd | Common control |
| Southwest Researche & Design Institute of Chemical Industry | Common control |
| Syngenta Agro,S.A.de C.V. | Common control |
X. Related parties and related party transactions - (cont’d)
4. Information on other related parties - (cont’d)
| Name of other related parties | Related party relationship |
| Syngenta Agro AG | Common control |
| Syngenta Australia Pty Limited | Common control |
| Syngenta Canada Inc. | Common control |
| Syngents Coml Agr LtdA | Common control |
| Syngenta Crop Protection ,LLC | Common control |
| Syngenta Crop Protection Limited | Common control |
| Syngenta Crop Protection AG | Common control |
| Syngenta Crop Protection B.V. | Common control |
| Syngenta Crop Protection N.V. | Common control |
| Syngenta Crop Protection S.A. | Common control |
| Syngenta Espana S.A | Common control |
| Syngenta France S.A.S. | Common control |
| Syngenta Hellas AEBE | Common control |
| Syngenta India Limited | Common control |
| Syngenta Korea Ltd . | Common control |
| Syngenta Nordics A/S | Common control |
| Syngenta Polska Sp .z.o.o. | Common control |
| Syngenta Protecao Cultivos LtdA | Common control |
| Syngenta S.A (Chile) | Common control |
| Syngenta Slovakia s.r.o | Common control |
| Syngenta South Africa (Pty) Ltd . | Common control |
| Syngenta(China) Investment Co.Ltd | Common control |
| Syngenta Agro GmbH | Common control |
| Syngenta Agro S.A. | Common control |
| Syngenta Crop Protection, LLC | Common control |
| Syngenta Czech s.r.o. | Common control |
| Syngenta Hungary Kft. | Common control |
| Syngenta Italia S.p.A | Common control |
| Syngenta S.A. (Colombia) | Common control |
| Syngenta Tarim Sanayive Ticaret A.S. | Common control |
| Syngenta Vietnam Ltd. | Common control |
| Zhonglan International Chemical co.,Ltd | Common control |
| Zhonglan Lianhai (Shanghai) Chemical Engineering Technology Co.,Ltd. | Common control |
| Zhonglan Lianhai Design Institute Co.,Ltd. | Common control |
| Jiangsu Ruixiang Chemical co., Ltd . | Associate of the Group |
| Jiangsu Yangnong Chemical Group co., Ltd . | Associate of the Group |
| Jiangsu Youjia Plant Protection co., Ltd. | Associate of the Group |
| Jiangsu Youshi Chemical co., Ltd . | Associate of the Group |
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 | |||
| Type of purchase | Related Party Relationship | 2020 | 2019 |
| Summary of purchase of goods/services: | |||
| Purchase of goods/services received | Common control under ChemChina | 1,273,820 | 1,449,486 |
| Joint venture | 1,661 | 3,938 | |
| Associates | 260,570 | - | |
| Purchase of fixed assets and other assets | Common control under ChemChina | 325,700 | 201,462 |
| Summary of Sales of goods: | |||
| Sale of goods/ Service rendered | Common control under ChemChina | 953,257 | 752,984 |
| Joint venture | 133,356 | 153,310 | |
| Associates | 43,317 | - | |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
X. Related parties and related party transactions - (cont’d)
5. Transactions and balances with related parties
(2) 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) |
| Common control under ChemChina | 300,000 | 20/11/2017 | 20/11/2022 | Y |
| 30,000 | 01/08/2019 | 30/07/2020 | Y | |
| 2,000 | 11/02/2020 | 11/08/2020 | Y | |
| 20,000 | 28/06/2019 | 18/06/2020 | Y | |
| 20,000 | 01/03/2019 | 20/02/2020 | Y | |
| 50,000 | 01/06/2019 | 29/05/2020 | Y | |
| 50,000 | 28/06/2019 | 27/06/2020 | Y | |
| 64,000 | 19/02/2019 | 18/02/2020 | Y | |
| 80,000 | 02/02/2019 | 30/01/2020 | Y | |
| Periods ended December 31 | ||
| 2020 | 2019 | |
| Remuneration of key management personnel and directors | 56,833 | 48,952 |
| December 31 | December 31 | ||||
| 2020 | 2019 | ||||
| Items | Related Party Relationship | Book Balance | Expected credit losses | Book Balance | Expected credit losses |
| Trade receivables | Common control under Chem-China | 155,050 | - | 153,197 | - |
| Joint venture | 21,630 | - | 24,026 | - | |
| Associates | 327 | - | - | - | |
| Other receivables | Common control under Chem-China | 681 | - | 25,346 | - |
| Prepayments | Common control under Chem-China | 17,065 | - | 69,610 | - |
| Associates | 350 | - | - | - | |
| Other assets | Joint venture | - | - | 314 | - |
X. Related parties and related party transactions - (cont’d)
5. Transactions and balances with related parties - (cont'd)
(4) Receivables from and payables to related parties (including loans) - (cont'd)
Payable Items
| December 31 | December 31 | ||
| Items | Related Party Relationship | 2020 | 2019 |
| Trade payables | Common control under Chem-China | 357,148 | 239,360 |
| Joint venture | - | 258 | |
| Associates | 15,907 | - | |
| Other payables | Common control under Chem-China | 19,354 | 23,195 |
| Contract liability | Common control under Chem-China | 2,355 | - |
| Associates | 340 | - | |
| Other non-current li-abilities due within one year | Common control under Chem-China | 28,000 | - |
| Other non-current li-abilities* | Common control under Chem-China | 143,770 | 171,770 |
| December 31 | December 31 | ||
| Related Party | Related Party Relationship | 2020 | 2019 |
| Parent | Acquisition of a subsidiary | - | 415,000 |
XI. Commitments and contingencies
1. Significant commitments
| December 31 | December 31 | |
| 2020 | 2019 | |
| Investment in Fixed assets | 571,367 | 588,243 |
XI. Commitments and contingencies - (cont’d)
2. Commitments and Contingent Liabilities - (cont’d)
Claims against subsidiaries (cont’d)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, forwhich the Company did not record a provision in the financial statements. Furthermore, claims were filed againstthe Company for product liability damages, for which the Company has adequate insurance coverage, such thatthe Company’s exposure in respect thereof is limited to the deductible amount or the amount thereof does notexceed the deductible amount.Performance Compensation AgreementWithin the context of the 2017 combination between the Company and Solutions, the Company entered into aPerformance Compensation Agreement with CNAC, then the 100% owner of Solutions and the controllingshareholder of the Company, according to which, CNAC made a commitment regarding Solutions’ aggregatenet profit in the years 2017-2019 (the “Compensation Period”). In case of failure to meet such commitment,CNAC committed to compensate the Company either through shares or cash according to a predetermined for-mula.The calculated net profit of Solutions for the Compensation Period was lower than committed. As a result,Syngenta Group (the current direct shareholder of the Company since June 15, 2020), executed such compen-sation commitment, which consists of two parts: (1) the buyback and cancellation of 102,432,280 A shares fora consideration of RMB 1, executed on July 13, 2020, and (2) the return of the cumulative dividend declaredduring the Compensation Period from the Compensation Shares amounting to RMB 17.6 million free of charge,executed on July 14, 2020.As a result, the Company's total share and registered capital was reduced from 2,446,553,582 to 2,344,121,302,and CNAC’s effective ownership in the Company was reduced from 78.9% to 78.0%.
Repurchase of the Company’s B-sharesThe 3
rd
Interim Shareholders Meeting held on September 7, 2020 approved a repurchase plan for part of theCompany’s domestically listed foreign shares (B share) (the “Repurchase Plan”).According to the Repurchase Plan, during the period beginning at September 16, 2020 (the date on which theCompany commenced repurchasing of the B-shares) and ending on December 6, 2020 (the end date of theRepurchase Plan), the Company repurchased 14,309,536 B-Shares, which account for 0.61% of the Company’stotal share capital. The amount paid for the repurchased shares amounted to RMB 60,399,296 (HKD69,747,209), including transaction fees.Within three years following the disclosure of the announcement on the results of the B-shares repurchase, theB-Shares that have been repurchased will be cancelled and the registered capital will be reduced accordinglyfollowing approval of the shareholders.
XI. Commitments and contingencies - (cont’d)
COVID-19 pandemic
In 2020, the global agrochemical market saw resilient growth, with robust demand for crop protection productsdespite the ongoing COVID-19 pandemic, demonstrating the industry’s importance in the global food produc-tion chain.During the first half of 2020, the global agrochemical market, amongst many others, was impacted by the un-precedented COVID-19 pandemic, and as a result thereof, farmers’ incomes have been negatively impacted inmost regions by lower crop prices, reduced demand due to the relative shutdown of the food sector, and laborshortages owing to mobility restrictions, all leading to increased costs for farmers. However, crop prices im-proved significantly in the second half of the year as crop demand recovered, fueled by pandemic-related foodsecurity concerns, the recovery of oil prices (benefiting corn and sugar prices) and the recovery in textile demand(benefiting cotton prices).One of the most widespread economic consequences of the pandemic is the significant volatility in global cur-rency markets, with the rapid depreciation of many currencies against the US dollar in the first half of the year,most notably the Brazilian Real, Australian dollar, Turkish Lira and Indian Rupee, as well as volatility in theEuro. These trends, although stabilizing to some extent in the second half of the year, impacted the financialperformance of the Company. It should be noted that developed market currencies have strengthened more thanthose in developing markets where the Company is experiencing its strongest growth. Furthermore, the rela-tively strong currencies of the Company’s main production hubs in Israel have brought, and are expected tocontinue to bring, upward pressure on manufacturing costs in USD terms.
XIII. Share-based Payments
1. In February 2019, the remuneration committee and Solutions Board of Directors (as well as the General Meet-
ing with respect to theformer CEO and Vice President who also serves as a director) approved the allocationof 77,864,910 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 at thegrant date of February 21, 2019. During 2019, 1,206,081 additional Phantom warrants were 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 subject toachieving financial targets as determined in the plan. The warrants will be exercisable until the end of 2025.
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 Companyon the Shenzhen Stock Exchange, as it will be on the exercise date up, to the ceiling that was determined underthe 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 at thegrant date, amounted to a total of approximately 186 million RMB. The liability at the end of the reportingperiod was recorded according to the vesting period as determined in the plan, taking into account the extentof the service that the employees provided until that date and the Company’s share price at the end of thereporting period.
| Statement of share based payments in the period | Phantom warrants |
| Total number of Phantom warrants at the beginning of the period | 67,226,416 |
| Total number of Phantom warrants granted in current period | 1,613,348 |
| Total number of Phantom warrants exercised in current period | - |
| Total number of Phantom warrants forfeited in current period | (8,792,697) |
| Total number of Phantom warrants at the end of the period | 60,047,067 |
| The exercise prices and the remainder of the contractual period for Phantom warrants outstanding at the end of period | RMB 9.92 – 10.85 5 years |
| The parameters used in implementing the model at the grant date 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 pay-ments (in thousands RMB) | 79,862 |
| Expenses arising from cash-settled share-based payments in current period (in thousands RMB) | 19,431 |
XIII. Share-based Payments - (cont’d)
2. In September 2019, the remuneration committee and Solutions Board of Directors (and the General Meeting
with respect to the CEO and Vice President who also serves as a director) approved the cancellation of 2017Plan against the allocation of 28,258,248 warrants in accordance with the long-term phantom compensationplan (hereinafter - "The Alternative Warrants" and "The Alternative Plan"). The cancellation and allocationdate is September 26, 2019. During 2019, an additional 90,130 Alternative 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 will beexercisable 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 deter-mined 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 at thecancellation and allocation date, amounted to a total of approximately 69 million RMB. The liability in thefinancial statements at the end of the reporting period was recorded at the fair value estimated using the bino-mial option pricing model and by the vesting period from the original grant date of the 2017 plan to the endof the service period determined by the alternative plan, taking into account the extent of the service that theemployees 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: | |
| Total number of Phantom warrants at the beginning of the period | 24,266,876 |
| Total number of Phantom warrants granted in current period | - |
| Total number of Phantom warrants exercised in current period | - |
| Total number of Phantom warrants forfeited in current period | (3,527,734) |
| Total number of Phantom warrants at the end of the period | 20,739,142 |
| The range of the exercise prices and the remainder of the contractual period for Phantom warrants outstanding at the end of period | RMB 9.42 5.75 years |
XIII. Share-based Payments - (cont’d)
| The parameters used in implementing the model at the grant date 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 the alternative plan | The binomial pricing model |
| Accumulated amount of liabilities arising from cash-settled share-based pay-ments related to the alternative plan (in thousands RMB) | 27,126 |
| Expenses (income) arising from cash-settled share-based payments in cur-rent period related to the alternative plan (in thousands RMB) | (443) |
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 | |||||
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |
| Operating income from external customers | 25,757,783 | 24,905,674 | 2,687,050 | 2,657,565 | - | - | 28,444,833 | 27,563,239 |
| Inter-segment operating income | - | - | 1,519 | 1,428 | (1,519) | (1,428) | - | - |
| Interest in the profit or loss of associates and joint ventures | 10,841 | 8,423 | 4,743 | 11,438 | - | - | 15,584 | 19,861 |
| Segment's results | 1,599,829 | 1,670,516 | 149,950 | (127,505) | - | - | 1,749,779 | 1,543,011 |
| Financial expenses, net | (1,847,189) | (1,665,885) | ||||||
| Gain (loss) from changes in fair value | 540,698 | 825,512 | ||||||
| Investment income | 131,924 | (251,066) | ||||||
| Profit before tax | 575,212 | 451,572 | ||||||
| Income tax expense | 222,459 | 174,531 | ||||||
| Net profit | 352,753 | 277,041 | ||||||
| Crop Protection | Intermediates and ingredients | Unallocated assets and liabilities | Total | |||||
| December 31 | December 31 | December 31 | December 31 | |||||
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |
| Total assets | 36,454,726 | 35,506,894 | 2,135,310 | 2,392,909 | 8,210,998 | 7,389,137 | 46,801,034 | 45,288,940 |
| Total liabilities | 5,037,016 | 4,682,416 | 268,972 | 286,109 | 20,061,131 | 17,948,750 | 25,367,119 | 22,917,275 |
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 the caseof investment property, fixed assets, right of used assets and construction in progress, the geographical locationof the assets is based on its physical location. In case of intangible assets and goodwill, the geographicallocation of the company which owns the assets.
| Operating income from external custom-ers | ||
| Year ended December 31 | ||
| 2020 | 2019 | |
| Europe | 7,155,152 | 7,078,409 |
| North America | 5,333,514 | 5,418,509 |
| Latin America | 7,460,282 | 7,085,817 |
| Asia Pacific | 4,533,778 | 4,351,929 |
| Africa, Middle East and India | 3,962,107 | 3,628,575 |
| 28,444,833 | 27,563,239 | |
| Specified non-current assets | ||
| December 31 | December 31 | |
| 2020 | 2019 | |
| Europe | 1,039,248 | 1,047,505 |
| Latin America | 2,122,291 | 2,298,654 |
| North America | 1,169,812 | 1,282,267 |
| Asia Pacific | 3,550,785 | 2,709,786 |
| Africa, Middle East and India | 10,489,849 | 11,512,105 |
| 18,371,985 | 18,850,317 | |
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 period | |
| Net profit from continuing operations attributable to ordinary shareholders | 352,753 | 277,041 |
| Shares | Amount for the current period | Amount for the prior period |
| Number of ordinary shares outstanding at the beginning of the year | 2,446,553,582 | 2,446,553,582 |
| Add: weighted average number of ordinary shares issued during the year | - | - |
| Less: weighted average number of ordinary shares repurchased during the year (1) | (45,076,938) | - |
| Weighted average number of ordinary shares outstanding at the end of the year | 2,401,476,644 | 2,446,553,582 |
| Amount for the current period | Amount for the prior pe-riod | |
| Calculated based on net profit attributable to ordinary shareholders | ||
| Basic earnings per share | 0.15 | 0.11 |
| 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 | 0.15 | 0.11 |
| Diluted earnings per share | N/A | N/A |
| Calculated based on net profit from discontinued operations attribut-able to ordinary shareholders: | ||
| Basic earnings per share | N/A | N/A |
| Diluted earnings per share | N/A | N/A |
XV. Notes to major items in the Company's financial statements
1. Cash at bank and on hand
| December 31 | December 31 | |
| 2020 | 2019 | |
| Deposits in banks | 1,022,758 | 1,395,994 |
| Other cash and bank | 12,054 | 27,057 |
| 1,034,812 | 1,423,051 |
| December 31, 2020 | |||||
| Book value | Provision for expected credit losses | ||||
| Amount | Percentage (%) | Amount | Percentage (%) | Carrying amount | |
| Account receivables assessed individually for impairment | 13,879 | 3 | 13,879 | 100 | - |
| Account receivables assessed collectively for impairment | 387,132 | 97 | 15 | - | 387,117 |
| 401,011 | 100 | 13,894 | 3 | 387,117 | |
| 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, 2020 | |
| Within 1 year (inclusive) | 387,133 |
| Over 1 year but within 2 years | 1 |
| Over 2 years but within 3 years | 1 |
| Over 3 years but within 4 years | 1,699 |
| Over 4 years but within 5 years | 2,634 |
| Over 5 years | 9,543 |
| 401,011 |
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, 2020 | |
| Balance as of January 1 | 131,423 |
| Addition during the year, net | 10 |
| Write back during the year | (4,094) |
| Write-off during the year | (113,445) |
| Exchange rate effect | - |
| Balance as of December 31 | 13,894 |
| Name | Closing balance | Proportion of Accounts re-ceivable (%) | Allowance of expected credit losses |
| Party 1 (1) | 331,931 | 83 | - |
| Party 2 | 24,891 | 6 | 7 |
| Party 3 | 12,505 | 3 | - |
| Party 4 | 6,705 | 2 | 2 |
| Party 5 | 3,140 | 1 | 1 |
| 379,172 | 95 | 10 |
| December 31 | December 31 | ||
| 2020 | 2019 | ||
| Bank acceptance draft | 25,060 | 11,722 | |
| 25,060 | 11,722 |
XV. Notes to major items in the Company's financial statements - (cont'd)
4. Other Receivables
| December 31 | December 31 | |
| 2020 | 2019 | |
| Interest receivable | - | 64 |
| Other receivables | 27,138 | 13,987 |
| 27,138 | 14,051 |
| December 31 | December 31 | |
| 2020 | 2019 | |
| Other | 32,819 | 19,655 |
| Provision for expected credit losses | (5,681) | (5,668) |
| 27,138 | 13,987 |
| December 31, 2020 | |
| Within 1 year (inclusive) | 14,176 |
| Over 1 year but within 2 years | - |
| Over 2 years but within 3 years | 13,679 |
| Over 3 years but within 4 years | - |
| Over 4 years but within 5 years | 10 |
| Over 5 years | 4,954 |
| 32,819 |
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 theperiod:
| Year ended December 31, 2020 | ||
| Balance as of January 1, 2020 | 5,668 | |
| Addition during the period | 333 | |
| Written back during the period | (320) | |
| Write-off during the period | - | |
| Balance as of December 31, 2020 | 5,681 |
| Name | Closing balance | Proportion of other re-ceivables (%) | Credit loss provision |
| Party 1 | 13,322 | 41 | - |
| Party 2 | 11,744 | 36 | - |
| Party 3 | 3,125 | 9 | 3,125 |
| Party 4 | 1,753 | 5 | - |
| Party 5 | 548 | 2 | 548 |
| 30,492 | 93 | 3,673 |
XV. Notes to major items in the Company's financial statements - (cont'd)
5. Long-term equity investments
| December 31, 2020 | December 31, 2019 | |||||
| Amount balance | Impairment loss | Book value | Amount balance | Impairment loss | Book value | |
| Invest in sub-sidiaries. | 16,663,212 | - | 16,663,212 | 16,390,275 | 18,864 | 16,371,411 |
| 16,663,212 | - | 16,663,212 | 16,390,275 | 18,864 | 16,371,411 | |
| Invested unit | Opening balance | Increase | Decrease | Closing bal-ance | Current pro-vision Im-pairment loss | Balance pro-vision Im-pairment loss |
| ADAMA Agricultural Solutions Ltd. | 15,890,213 | - | - | 15,890,213 | - | - |
| Adama Anpon (Jiangsu) Ltd. | 450,449 | - | - | 450,449 | - | - |
| Jingzhou Hongxiang Chemical Co. Ltd. | 18,756 | - | 18,756 | - | - | - |
| Hubei Sanonda Foreign Trade Co. Ltd. | 11,993 | - | - | 11,993 | - | - |
| Shanghai Dibai Plant Protection Co., Ltd | - | 310,557 | - | 310,557 | - | - |
| 16,371,411 | 310,557 | 18,756 | 16,663,212 | - | - |
| Year ended December 31, 2020 | Year ended December 31, 2019 | |||
| Revenue | Operating costs | Revenue | Operating costs | |
| Main operations | 1,463,475 | 1,149,768 | 1,338,579 | 969,902 |
| Other operations | 52,984 | 27,782 | 67,130 | 54,763 |
| 1,516,459 | 1,177,550 | 1,405,709 | 1,024,665 | |
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, 2020 | Year ended Decem-ber 31, 2019 | |
| Interest income | 18,382 | 26,114 |
| Government subsidies | 5,923 | 4,414 |
| Other | 6,726 | 3,054 |
| 31,031 | 33,582 |
| Year ended Decem-ber 31, 2020 | Year ended Decem-ber 31, 2019 | |
| Professional services | 114,444 | 86,915 |
| Transportation and Commissions | 46,601 | 51,660 |
| Other | 81,518 | 26,203 |
| 242,563 | 164,778 |
| Year ended December 31, 2020 | Year ended Decem-ber 31, 2019 | |
| Special borrowing | 150,000 | - |
| Year ended Decem-ber 31, 2020 | Year ended Decem-ber 31, 2019 | |
| Deposit for issuing bills payables | 21,177 | 39,886 |
| Year ended Decem-ber 31, 2020 | Year ended Decem-ber 31, 2019 | |
| Repurchase of treasury shares | 60,357 | - |
| Deposit for issuing bills payables | 6,174 | 14,003 |
| Other | 440 | 466 |
| 66,971 | 14,469 |
XV. Notes to major items in the Company's financial statements - (cont'd)
8. Supplementary information to cash flow statement
(1) Reconciliation of net profit to net cash flows generated from operating activities:
| Year ended December 31 | ||
| 2020 | 2019 | |
| Net profit | (4,725) | (487,973) |
| Add: Assets impairment loss | 17,655 | 147,421 |
| Credit impairment loss | (4,071) | 2,018 |
| Depreciation of fixed assets | 144,061 | 198,193 |
| Depreciation of-right-of use assets | 449 | 430 |
| Amortization of intangible assets | 5,018 | 4,694 |
| Loss (gain) on disposal of fixed assets, intangible assets and other long-term assets | (3,644) | 572 |
| Financial expenses | 41,827 | 12,113 |
| Investment loss (income) | 16,173 | (2,583) |
| Decrease (increase) in deferred income tax assets | 25,407 | (44,146) |
| Decrease (increase) in inventory | (49,395) | 43,479 |
| Increase in accounts receivable from operating activities | (146,241) | 336,662 |
| Increase in payables from operating activities | (138,298) | 10,932 |
| Net cash flows generated from operating activities | (95,784) | 221,812 |
| Closing balance of cash | 1,022,758 | 1,395,994 |
| Less: Opening balance of cash | 1,395,994 | 2,005,313 |
| Net increase in cash and cash equivalents | (373,236 ) | (609,319) |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
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 capital (Thou-sand RMB) | Shareholding percentage | Percentage of voting rights |
| Syngenta Group | Shanghai, China | Production and sales of agrochemicals, fer-tilizers and GM seeds | 11,144,545 | 72.88% | 72.88% |
| Year ended December 31 | |||
| 2020 | 2019 | ||
| Summary of Purchase of goods/services received: | Related Party Relationship | ||
| Purchase of goods/services received | Common control un-der ChemChina | 8,536 | 12,210 |
| Subsidiary | 92,475 | 125,800 | |
| Purchase of fixed assets and other assets | Common control un-der ChemChina | 310,976 | 192,489 |
| Subsidiary | 4,752 | - | |
| Summary of Sales of goods: | |||
| Sale of goods | Associated enterprises under ChemChina | 32,809 | - |
| Subsidiary | 923,077 | 514,469 | |
| Sale of raw materials | Subsidiary | 8,791 | 2,633 |
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. Guarantees
The Company as the guarantor
| 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 | Y | |||
| 40,000 | 10/10/2019 | 09/10/2020 | Y | ||||
| 50,000 | 30/12/2019 | 25/12/2020 | Y | ||||
| 50,000 | 12/12/2019 | 09/12/2020 | Y | ||||
| 50,000 | 21/11/2019 | 18/11/2020 | Y | ||||
| 50,000 | 19/11/2019 | 18/11/2020 | Y | ||||
| 30,000 | 21/07/2020 | 21/01/2021 | N | ||||
| 18,000 | 19/08/2020 | 19/02/2021 | N | ||||
| 30,000 | 01/09/2020 | 17/08/2021 | N | ||||
| 50,000 | 20/07/2020 | 14/07/2021 | N | ||||
| 30,000 | 19/05/2020 | 18/05/2021 | N | ||||
| 20,000 | 22/12/2020 | 16/12/2021 | N | ||||
| 50,000 | 16/12/2020 | 15/12/2021 | N | ||||
| 50,000 | 14/12/2020 | 13/12/2021 | N | ||||
| 50,000 | 29/06/2020 | 27/06/2021 | N | ||||
| 20,438 | 30/10/2020 | 30/04/2021 | N | ||||
| 14,004 | 17/12/2020 | 17/06/2021 | N |
| Guarantee provider | Amount of guaranteed loan | Inception date of guaranty | Maturity date of guaranty | Guaranty completed (Y/ N) | |||
| Common control under ChemChina | 300,000 | 20/11/2017 | 20/11/2022 | 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)
c. Receivables from and payables to related parties (including loans)
Receivable Items
| December 31 | December 31 | ||||
| 2020 | 2019 | ||||
| Items | Related Party Rela-tionship | Book Balance | Expected credit losses | Book Balance | Expected credit losses |
| Trade receivables | Subsidiary | 344,436 | - | 424,182 | 117,491 |
| Other non-current assets | Subsidiary | 212,771 | - | - | - |
| Other receivables | Subsidiary | 11,744 | - | - | - |
| December 31 | December 31 | ||
| Items | Related Party Relationship | 2020 | 2019 |
| Trade payables | Common control under ChemChina | 127,082 | 9,195 |
| Other payables | Subsidiary | 143,840 | 163,877 |
| Common control under ChemChina | 108 | 97 | |
| Contract liability | Associated enterprises under ChemChina | 340 | - |
| Other non-current liabilities due within one year * | Common control under ChemChina | 28,000 | - |
| Other non-current liabili-ties* | Common control under ChemChina | 143,770 | 171,770 |
| Year ended December 31 | |||
| Related Party | Related Party Relationship | 2020 | 2019 |
| Parent | Acquisition of a subsidiary | - | 415,000 |
ADAMA Ltd Annual Report 2020
Supplementary information(Expressed in RMB '000)
1. Extraordinary Gain and Loss
| Year ended | |
| December 31, 2020 | |
| Disposal of non-current assets | 69,710 |
| Government grants recognized through profit or loss | 41,871 |
| Recovery or reversal of expected credit losses which is assessed individually during the years | 26,102 |
| Other non-operating income or expenses other than the above | 19,989 |
| Other profit or loss that meets the definition of non-recurring profit or loss | (62,855) |
| Tax effect | (29,788) |
| 65,029 |
| 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 | 1.61 | 0.15 | N/A | ||
| Net profit after deduction of extraordinary gains/losses attributable to ordinary shareholders of the Company | 1.32 | 0.12 | N/A | ||
ADAMA Ltd Annual Report 2020
Section XIII - 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 by ChinaSecurities Regulatory Commission as well as the originals of all the public notices were deposited in the office of theCompany.
| ADAMA Ltd. Legal Representative：Ignacio Dominguez March 29, 2021 |