ADAMA Ltd.
H1 2019 Performance Estimation
I. Performance Estimation
1. Estimation period: January 1, 2019 – June 30, 2019
2. Estimated performance: lower compared with the corresponding period last year
The Company and all the directors confirm that the information disclosed is true, accurate,complete and with no false recording, misleading statement or material omission.
Item
| Item | Current reporting period January to June 2019 | Same period last year January to June 2018 as previously reported |
| Net income attributable to the shareholders of the listed company (RMB in millions) | 542 – 610 | 2,363 |
| Percentage decrease YoY 74.2% – 77.1% |
| Basic earnings per share (RMB) | 0.2215 – 0.2494 | 0.9658 |
II. Pre-audit of the estimated performance
The estimated results of this period are the preliminary estimation of the Company and have notbeen audited nor reviewed by certified accountants.
III. Explanations for Performance Variation
(1) The Company is expecting to deliver more than $2 billion in sales in the first half of 2019,
in line with last year in constant currency terms, and somewhat below last year in USdollar terms. Significant snow, followed by unprecedented floodings in North America,alongside extreme dry weather in Europe and Asia-Pacific delayed and reducedapplication of crop protection products, while continued tight supply conditions preventedthe Company from fulfilling strong demand for certain key products.
Continued strong contribution from Latin America, India and Middle East, as well as newjoiners Bonide and Anpon, together with further significant price increases across allregions, partially offset these weather- and supply-related delays and allowed theCompany to maintain a stable gross margin. In China, ADAMA continues to see strongdemand for its differentiated, formulated and branded products, as it continues to prioritizethese sales through its own channels by shifting away from sales of unformulated,technical active ingredients to intermediaries.
Following resumption of operations at the Jingzhou old site in late March, the Company isadvancing the gradual ramp-up of production. The new state-of-the-art wastewatertreatment facility is operational, and the upgraded biological-decomposition systems arebeing acclimated to the improved wastewater quality. As this progressed, the Companywas nevertheless still impacted by constrained supply in certain key productsmanufactured at the site and recorded approximately RMB 140 million of related idlenesscost during the half-year.
Looking toward the second half of the year, the Company expects its performance tostrengthen as the southern hemisphere regions, which are performing strongly, move intotheir peak season, and output increases from the Jingzhou old site.
(2) The significantly higher reported net income in the first half of 2018 is due to the
divestiture of several products in Europe in connection with the approval by the EUCommission of the acquisition of Syngenta by ChemChina last year, and other relatedimpacts, which in H1 2018 resulted in the recognition of an approximately RMB 1,573million one-time net income. The proceeds of this divestiture, net of taxes and transactionexpenses, were paid to Syngenta in return for the transfer of a portfolio of products inEurope of similar nature and economic value, which in turn, resulted in the recording inthe reported financials of each quarter of non-cash amortization expenses, with noeconomic impact, in respect of these written-up assets of approximately RMB 65 millionstarting Q2 2018.
(3) Excluding the impact of the products’ divestiture and transfer, net income in H1 2018would have been lower by RMB 1,508 million, while in H1 2019 net income would havebeen higher by RMB 134 million.
(4) Excluding also the impact of certain one-time/non-cash items, including mainly the legacy
amortization of the 2011 PPA for the acquisition of Adama Agricultural Solutions Ltd. byChemChina, and reflecting the long-term incentive plan on an equity-settled basis, resultsin the following:
? Adjusted net income is expected to be between RMB 835 – 903 million, compared tolast year’s adjusted net income of RMB 1,000 million, a decrease of only 9.7% - 16.5%YoY.
? Adjusted basic earnings per share is expected to be between RMB 0.3412 – 0.3690compared to last year's adjusted basic earnings per share of RMB 0.4086.
? Adjusted EBITDA in the half year is expected to be RMB 21 – 89 million above theRMB 2,412 million recorded in the same period last year.
IV. Other Remarks
The estimated results above are only preliminary calculations performed by the finance team ofthe Company based on preliminary financial data available to the Company and have not beenaudited or reviewed by the Company's independent auditors. These estimations may change,inter alia, as a result of the processing and analysis of the financial data that the Company willperform for the preparation of its H1 2019 financial statements. Please refer to the H1 2019
Report to be duly disclosed by the Company on August 22, 2019 for specific and accuratefinancial information.
The assessment regarding the second half of the year described above is a forward-lookingstatement that may not be realized or be realized in a different manner than the Companyestimates, inter alia, due to factors that are not in the Company's control, amongst which aredevelopments in the crop protection market, changes in demands for the Company's products, incurrencies and other macroeconomic trends as well as decisions of regulatory authorities.The forward-looking assessment does not constitute in any manner whatsoever a substantialcommitment of the Company to investors. Investors are reminded to exercise caution whenmaking investment decisions.
Media for Information Disclosure of the Company: China Securities Journal, Securities Times, TaKung Pao, and Cninfo (www.cninfo.com.cn). Investors are reminded to exercise caution whenmaking investment decisions.
By order of the BoardADAMA Ltd.July 15th, 2019