May. 31, 2017
In US dollar terms, the net impact of the weakening of the Euro and the strengthening of the Brazilian Real compared to the corresponding quarter last year, as well as the lower contribution of currency hedging, saw revenues end lower by 1.2%.
Gross profit increased by a marked 5.2% to $311 million, with gross margin up by 2.2 percentage points to 36.9%, compared to the corresponding quarter last year. This significant increase resulted from a combination of the strong improvement in portfolio mix towards a differentiated offering and notable cost reduction. These factors were partially offset by the passing on to customers of a portion of these reduced product costs, as well as by the lower contribution of currency hedging.
EBITDA increased by 4.5% to reach an all-time record high of $180 million, with an increase of 1.1 percentage points in EBITDA margin to 21.3%.
Net income increased by 13.3% to an all-time record high of $114 million, with an increase of 1.8 percentage points in net income margin to 13.6%.
Commenting on the results, Yang Xingqiang, Chairman of Adama’s Board of Directors, said, "This is a strong first quarter for Adama, commencing another year of consecutive progress, with solid execution of our strategy yielding tangible results. We continue to significantly enhance our commercial and product development platforms globally, while our build up and integration in China are in full swing. We are looking forward to reaching a key milestone with the completion of Adama's combination with Sanonda."
Chen Lichtenstein, President and CEO of Adama, added, “This quarter saw us achieving record profits, driven by the enhancement of our portfolio while reducing costs and maintaining working capital discipline. We capitalize on launches of differentiated products as a powerful growth engine, driving our continued market growth across all key agricultural markets, and positioning us well going forward."
Sales by regions
Europe: Sales were lower by 2.3% in constant currency terms, compared with the corresponding quarter last year. This is primarily due to soft demand as a result of weaker yields in 2016 and a delayed start to the agricultural season in western Europe, as well as high inventory levels in the distribution channels in a number of countries, and the passing on to customers of some of the benefit of the products’ significantly reduced cost.
Adama saw a strong performance from its broad sugar beet portfolio in all major markets in the region, capitalizing on an increase in planted areas.
In Ukraine, Adama continues to launch new products and expand its commercial reach throughout the country, while benefiting from the improvement in economic conditions.
In the UK, the Company is seeing significantly increased engagement, also through its digital platforms, including its WaterAware™ app which provides farmers with insights on safe use of crop protection around fresh water sources.
Despite a challenging economic environment, Adama grew well in Greece and further expanded its comprehensive portfolio with products like COTTONEX®, a differentiated pre-emergence herbicide.
In France a number of products, including LEGACY® DUO and PROTUGAN®, lost their registration ahead of the launch of alternative products, which resulted in lower sales.
In US dollar terms, sales in Europe were lower by 6.4% in the quarter, reflecting the weaker exchange rates and the lower contribution of currency hedging.
North America: Sales increased by 10.1% in constant currency terms, compared with the corresponding quarter last year, driven by a significant 15.6% increase in volumes of higher margin products, which was partially offset by the passing on to customers of a portion of the significant reduction in cost of sales.
The US crop protection business continued its strong momentum, building on an improved portfolio mix. Sales of Adama's cotton portfolio increased, benefiting from growth in the cotton market with products such as COTORAN® and DIREX®, herbicides for broadleaf weeds, and DIAMOND®, a differentiated insect growth regulator. CORMORAN™, a distinctive mixture insecticide for apples and pears, was launched in the quarter, and has had an encouraging start in advance of the upcoming season. Adama is deepening its relationship with customers across the channel, through such programs as the NIMITZ University campaign in which field specialists work together with farmers to understand their nematode-related problems, finding ways to maximize their benefit from the flagship NIMITZ® product.
In addition, the Consumer and Professional Solutions business continued to grow markedly.
In US dollar terms, sales increased by 10.0% compared with the corresponding quarter last year.
Latin America: Sales were lower by 9.3% in constant currency terms, compared with the corresponding quarter last year, despite an increase in volumes, primarily in Brazil, which was offset by lower volumes in Argentina and by the passing on to customers of a portion of the significant reduction in cost of sales.
The Company saw robust sales growth in Brazil, with significant volume growth of an improved portfolio. This strong performance is particularly noteworthy when considered against the sluggish Brazilian agrochemical market. Adama saw strong sales of its comprehensive insecticide portfolio for corn, with products such as VORAZ®, a novel formulation for caterpillar control, which offers a solution in the face of increasing resistance in Bt corn. The sugarcane and pasture portfolio also performed well in Brazil, in particular ARREIO®, a new advanced selective herbicide for the control of a variety of weeds in pastures, and PREMERLIN®, a distinctive pre-emergence herbicide for sugar cane.
High levels of inventory in the distribution channels, alongside low insect and disease pressure, impacted sales and pricing in Argentina.
Adama grew and improved its business in Colombia, Ecuador, and Mexico, where its efforts to enhance its portfolio are bearing fruit. The growth in these countries was also supported by positive weather conditions.
In US dollar terms, sales increased by 1.1% compared with the corresponding quarter last year, reflecting the impact of the appreciation of the local currencies, primarily the Brazilian Real, against the US dollar.
India, Middle East & Africa: Sales were lower by 2.7% in constant currency terms, compared with the corresponding quarter last year, with a moderate increase in prices being offset by lower sales volumes, reflecting the negative impact of the weather in a number of countries.
In India, farmers were faced with unfavorable weather conditions as well as disruption to their cash availability, putting pressure on sales in this market.
Adama achieved a robust performance in South Africa, benefiting also from positive currency movements and favorable weather.
In Turkey, the Company continues to expand its commercial platform through a widening network of distributors, and also launched the ADAMA ARTI™ app for smart farm management.
In US dollar terms, sales were lower by 4.2% compared to the corresponding quarter last year.
Asia-Pacific: Sales increased by 2.5% in constant currency terms, compared with the corresponding quarter last year. This increase was driven by significant volume growth, primarily in Australia and parts of south-east Asia which started recovering from El-Niño. This volume growth was partially offset by the passing on to the customers of a portion of the significant reduction in cost of sales.
Adama obtained several new product registrations in the region, among them COUNTDOWN™, a differentiated cereal herbicide for resistance management in Australia, NARKIS®, a unique rice herbicide in the Philippines, and ALMAGOR®, a distinctive rice fungicide in Vietnam.
In China, Adama continued the expansion of its commercial reach to four additional provinces, bringing to growers its advanced product portfolio alongside additional products from the CNAC entities.
In US dollar terms, sales increased by 4.5% compared to the corresponding quarter last year.