ADAMA sales down 2% in Q1 2019
Apr. 30, 2019
This resilient performance was achieved despite the severe winter in North America and continued supply constraints globally. ADAMA delivered strong growth in Latin America and Brazil, in India, Middle East and Africa, as well as high double-digit growth in China excluding products of the Jingzhou old site.
Strong demand for ADAMA’s differentiated product portfolio facilitated price increases across all regions, which more than offset the impact of softer currencies.
This overall robust momentum together with joiners Bonide and Anpon, enabled the Company to overcome the lack of product to fulfill demand due to several weeks of production disruption at the Jingzhou old site, as well as the harsh winter in North America and continued supply constraints.
Chen Lichtenstein, President and CEO of ADAMA, added, “Our resilient performance this quarter saw us overcome challenges that the industry is facing, including difficult weather in North America and Australia and tight supply conditions. Action of our China and global teams ensured that we were able to quickly resume operations at the old site in Jingzhou, mitigating the impact on supply going forward."
Performance in Context of Market Environment
Crop prices remain soft, with continued uncertainty surrounding the US-China trade tensions. These relatively low commodity prices remain challenging for farmer incomes in most regions, resulting in continued subdued demand for crop protection products.
Severe winter conditions in North America have caused a significant delay in planting, impacting crop protection application throughout the region. The season is now commencing, and the pace of temperature rise in the coming weeks will determine how much of the delay can still be captured.
The Company continues to exercise restraint of its manufacturing and other operating costs to mitigate the impact of continued shortages in certain raw materials and intermediates. The supply constrained environment, mostly owing to increased environmental focus in China, has seen procurement costs remain elevated compared to the first quarter of last year, while also contributing to overall stronger pricing of the Company’s products in its end-markets.
Europe: Sales in Europe were lower by 11.1% in the quarter in constant currency terms, compared to the first quarter last year. This is primarily due to tight supply conditions, especially in intermediates procured from China, which constrained sales in key countries across the region. The reduced sales were partially offset by price increases.
In Northern Europe, sales were also impacted by challenging credit conditions in Ukraine, with the Company proactively restricting sales to those customers with a proven ability to pay. In Southern Europe, sales were impacted by a reduction in herbicides due to lower oilseed rape planted areas.
In the quarter, ADAMA launched GIGANT® in Germany and PRIZM® in the UK, a distinctive fungicide mixture delivering long-lasting, broad-spectrum protection in wheat and barley. The Company obtained several new product registrations in the quarter, including MAVRIK JET®, an effective, fast-acting contact insecticide for the control of aphids in oilseed rape in France, as well as EMBRELIA®, a combination fungicide with dual mechanism of action for fruit in Portugal.
In US dollar terms, sales in Europe were lower by 8.3% in the quarter compared with the first quarter last year, with the Company successfully hedging its exposure to the European currencies which softened over the period.
North America: Sales in North America were lower by 6.8% in the quarter in constant currency terms, compared with the first quarter last year, with the impact of the severe winter being partially offset by increased prices.
The extremely cold and wet conditions have delayed the planting season and disrupted transportation lines, impacting sales in both crop and non-crop markets and slowing movement through distribution channels.
In the Consumer and Professional Solutions space, Bonide performed well in its first quarter since acquisition.
ADAMA launched BRAZEN®, a selective herbicide for grass control in spring wheat and barley in Canada.
In US dollar terms, sales in North America were lower by 7.1% in the quarter compared to the first quarter last year.
Latin America: Sales in Latin America grew by a significant 25.9% in the quarter in constant currency terms, compared with the first quarter last year, with robust business growth across the region, alongside higher prices in the face of continued constrained supply.
ADAMA saw noteworthy performances in Brazil, Argentina and Mexico. In Brazil, the strong growth was led by continued strong demand for the Company’s differentiated portfolio including CRONNOS®, as well as for NIMITZ® and ExpertGrow®, despite drought conditions in key regions. The Company also saw a strong performance of its cotton portfolio, benefiting from an increase in planted areas.
The Company continues to develop its differentiated portfolio in the region. In Brazil, ADAMA launched TRIVOR®, a differentiated insecticide combination providing rapid and extended control of white flies in several crops, and obtained registration for COMISSARIO®, an insecticide for controlling sucking pests in cotton. The Company also launched CRONNOS® in Bolivia and obtained registrations for the NIMITZ® suite of products in Peru.
In US dollar terms, sales in Latin America increased by 14.6% in the quarter compared with the first quarter last year, reflecting the softening of local currencies.
Asia-Pacific: Sales in the region grew by 2.9% in the quarter in constant currency terms, compared with the first quarter last year.
In China, ADAMA grew in the quarter by 14.3%, and continues to see strong demand for its differentiated, formulated and branded products, and prioritizes the sale of these products through its own channels by rapidly shifting away from selling unformulated, technical product to intermediaries, and in so doing benefiting from the full product positioning as well as end-to-end margin. Sales of these formulated, branded products grew strongly in the quarter by high double-digit percent excluding those of the suspended Jingzhou old site.
ADAMA continues to make significant portfolio advances in China, including bringing flagship ADAMA global brands to the country. The first quarter saw the launch of AGIL®, a systemic herbicide for selective weed control of a wide range of grasses in many broadleaf crops as well as GALIL®, a differentiated insecticide mixture for rice.
Anpon performed well in its first quarter since acquisition.
While the Company saw a strong performance in Thailand, the continued severe drought in Australia reduced summer crop production in the country by an estimated 30%, impacting sales in the quarter.
During the quarter, the Company obtained a number of new registrations for differentiated products, including AGROSY®, a herbicide for ryegrass and seed clover and APHIDEX®, an insecticide for aphid control in fruit, cereal and vegetable, both in New Zealand, as well as MANDATE XTRA®, a selective grass herbicide for cereals, and QUADRANT®, a four-way combination herbicide for broadleaf weeds in winter cereals, both in Australia.
In US dollar terms, sales were lower by 1.4% in the quarter compared to the first quarter last year, reflecting the impact of softer currencies in the region.
India, Middle East & Africa: Sales grew by a significant 23.9% in the quarter in constant currency terms, compared with the first quarter last year. This strong performance resulted from a combination of strong, double-digit business growth, alongside higher prices.
ADAMA delivered high growth in Turkey, where its business continues to gain significant market share. The Company continues to grow strongly in India, despite the lingering impact of the late 2018 drought conditions, while dry conditions in South Africa impacted sales in the country.
In US dollar terms, sales were higher by 11.8% in the quarter compared to the first quarter last year, reflecting the impact of softer currencies over the period.
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