Hebei Lansheng Biotech Co., Ltd.

ADAMA delivers record fourth quarter with over $1 billion in sales, touching $4 billion sales for the yearqrcode

Mar. 31, 2020

Favorites Print
Mar. 31, 2020
ADAMA Ltd. (the “Company”) (SZSE 000553), reported on Monday its financial results for the fourth quarter and full year period ended December 31, 2019.

Q4 Sales grew 7% to a record-high $1,035 million, up 10% at constant exchange rates 
‒ Strong business growth in nearly all regions, most notably in Europe, Asia-Pacific and North America, bolstered by contribution of joiners 
‒ Q4 sales constrained by more than $40 million due to Jingzhou old site disruption impacting supply of high-demand products
Full year sales up 3% (+5% at constant exchange rates) to a record-high, touching $4 billion mark 
‒ Driven by business growth, led by Latin America and complemented by joiners, alongside robust price increases, resulting in a continued increase of share 
‒ Overcoming significant headwinds seen during the year, including challenging weather conditions in H1, as well as the impact of material supply constraints, in particular more than $200 million in missing sales of Jingzhou old site products 
Q4 Gross Profit of $313 million, in line with last-year’s record-high 
‒ Gross margin of 30.2% (2018: 32.4%)
‒ Business growth, improved portfolio mix and slightly higher prices offset by higher procurement costs and currency headwinds
‒ Jingzhou old site disruption constrained Q4 gross profit by $16 million
Full year Gross Profit of $1,280 million (2018: $1,291 million)
‒ Gross margin of 32.0% (2018: 33.3%)
‒ Markedly higher prices, business growth and improvement in product mix more than offset by higher procurement costs and impact of softer currencies
‒ Jingzhou old site disruption constrained full year gross profit by $80 million
Q4 EBITDA up 16% to an all-time fourth quarter record-high $147 million
‒ EBITDA margin of 14.2%, up 1.0 percentage points over last year, reflecting strong operating cost discipline
‒ Achieved despite Jingzhou old site disruption which constrained Q4 EBITDA by $26 million, including related idleness cost
All-time high Full year EBITDA of $656 million, beating last year’s record 
‒ EBITDA margin of 16.4% (2018: 16.5%), despite significant headwinds throughout the year
‒ Jingzhou old site disruption constrained full year EBITDA by $111 million
Q4 Net Income of $35 million (Q4 2018: $38 million) 
‒ Net income margin of 3.4% (2018: 4.0%), reflecting higher financial and tax expenses
‒ Jingzhou old site disruption constrained Q4 net income by $20 million 
Full year Net Income of $208 million (2018: $236 million)
‒ Net income margin of 5.2% (2018: 6.1%), reflecting higher financial expenses partially offset by lower tax expenses
‒ Jingzhou old site disruption constrained full year net income by $89 million
Commenting on the results, Erik Fyrwald, incoming Chairman of ADAMA’s Board of Directors, said, “ADAMA has delivered record sales, year after year, in the face of some major market challenges. I am very excited to welcome the company to the Syngenta Group, and to take on the role as its Chairman. For years I have admired ADAMA and its impressive history of profitable growth. It is one of the leading off-patent crop protection companies in the world, and it will be a key part of the newly formed Syngenta Group. With ADAMA in the fold, Syngenta is well on its way to becoming the world’s largest agricultural technology and service company, serving farmers across the globe.”
Ignacio Dominguez, President and CEO of ADAMA, added, “Our solid business growth in the fourth quarter enabled us to deliver yet another all-time record high full-year performance in what was a challenging year for the global crop protection market. Under Chen Lichtenstein’s leadership, our agile teams from around the world focused on execution, while being responsive to the tough market conditions, ensuring our ability to continue our growth momentum. I now look forward to building on this foundation and leading the Company in its next growth phase.”
Performance in Context of Market Environment
In 2019, the global crop protection market experienced challenging weather conditions in many regions, most notably flooding in North America and droughts in Southeast Asia and Australia, limiting crop protection application, delaying harvesting and reducing planted areas in key crops. 
In Europe, channel inventories remained elevated, limiting sales into distribution and putting pressure on prices and margins. 
The US-China trade tensions continued to affect global agricultural crop trading patterns, most notably with soybean growers in South America benefiting from a shift of Chinese import demand away from the US.
Despite these challenging market conditions, the Company delivered record sales in the fourth quarter and full year, driven by a combination of solid business growth as well as higher prices and the introduction of new and differentiated products, which have supported penetration and continued share gains in markets across the globe.
The Company continues to maintain cost discipline and raise prices wherever demand allows, mitigating to the extent possible the continued impact of shortages in certain raw materials and intermediates, mostly owing to increased environmental focus in China. While some production capacity returned to the market in the second half of 2019, procurement costs remained generally elevated compared to the prior year.
Going forward, the Company is seeing many challenges, both from the supply and demand side, including effects related to the ongoing COVID-19 pandemic, including the suspension for most of the quarter of the Company’s manufacturing facilities in Jingzhou resulting in significant idleness costs, as well as from the related depreciation of many currencies against the US Dollar, most notably the Brazilian Real. As the outbreak in China appears to be coming under control, production facilities of the Company and the vast majority of its China-based suppliers are now back on line, and logistics and supply lines within the country are opening up. At this point, the Company’s major production facilities globally are continuing to operate, although logistics and supply lines in many places are becoming increasingly restricted due to the pandemic. 
These impacts are expected to have a material negative effect on the performance of the business in Q1 2020, and potentially beyond. With respect to the potential impact on the remainder of the year, as this is a dynamic situation, the Company will continue to actively monitor the situation as it evolves in the coming weeks and months, and will provide a further update in its first quarter report. The Company is actively managing its response to the outbreak in order to ensure the safety of its employees, and making every effort to limit the impact on the performance of the Company.
Business Update
Corporate Development 
During 2019, ADAMA executed a number of acquisitions and investments in support of its growth strategy. In the fourth quarter, the Company acquired two companies: the Peruvian crop protection company AgroKlinge, providing a leading commercial platform countrywide as well as a comprehensive portfolio of solutions for Peruvian farmers; the French-Swiss company SFP, strengthening ADAMA’s PGR (plant growth regulator) and fungicide franchises in Europe. In addition, the Company acquired a minority stake in Agricover SA, one of Romania’s leading distributors of agricultural inputs.
These follow two acquisitions performed by ADAMA earlier in the year: in the first quarter, the Company acquired Bonide Products Inc., a US provider of pest-control solutions for the consumer Home & Garden market, as well as Jiangsu Anpon Electrochemical Co., Ltd., a backward-integrated manufacturer of key active ingredients used in crop protection markets worldwide.
Innovation, Development, Research and Registrations
In 2019, the Company made significant progress in the development of its advanced product portfolio, complementing its existing offering and strengthening its position in global crop protection markets.

Highlights include:
• ARMERO®, a broad-spectrum systemic fungicide containing Prothioconazole and Mancozeb, launched in Paraguay, the first market globally where ADAMA is launching a product containing Prothioconazole;
• BRAZEN®, a herbicide for the protection of spring wheat and barley, launched in Canada as the world’s first alternative Pinoxaden herbicide; Pinoxaden is one of the world’s leading post-emergence grassy weed-herbicides for spring wheat and barley, and prior to its launch by ADAMA had only been available from one source;
• BARAZIDE®, a differentiated combination insecticide for the treatment of lepidoptera in multiple crops, launched in India, and PLEMAX®, a broad-spectrum mixture insecticide launched in Turkey; both products contain ADAMA’s own proprietary active ingredient Novaluron, now in unique combinations with other complementary active ingredients, providing dual modes of action and increased breadth of coverage; 
• COMISSARIO®, a dual mixture insecticide developed for use in cotton plantations, launched in Brazil;
• FOLPAN®, ADAMA’s proprietary fungicide, launched in Germany as a solution for resistant Septoria leaf blotch in wheat;
• MERPLUS®, a differentiated fungicide controlling apple scab in pome fruits, launched in Europe; and
• EXELGROW®, a unique seaweed-based biostimulant promoting plant growth, launched in Europe. 

During the fourth quarter, ADAMA and Tel Aviv University announced the launch of ‘The ADAMA Center for Novel Crop Protection Delivery Systems’, a unique research and teaching center for the development of innovative delivery systems for crop protection products, combining the worlds of industry and academia. This initiative is tied to ADAMA's vision for the next generation of differentiated, advanced formulations and delivery systems.
China Facilities Upgrade and Relocation Update
ADAMA continues to progress the upgrade and relocation of its production and environmental facilities at both its Jingzhou (Hubei Province) and Huai’An (Jiangsu Province) sites. 
The Company expects to realize significant operational efficiencies from upgrading of processes and technology at the sites, including automated control and data systems, machinery and laboratory equipment, as well as the termination of less profitable production lines. As the Company is reaching the final stages of relocation of the old sites, and expecting to commence production of the relocated products at the new Jingzhou site in the second half of 2020, in its fourth quarter 2019 financial reports the Company has recorded a one-time, non-cash asset impairment charge related to terminated facilities at the old sites in both Jingzhou and Huai’An, together with related implementation costs, of approximately $50 million. In addition, the upgraded sites and their level of automation will allow for a more skilled, smaller workforce, a process which is expected to be largely completed by the end of 2020. As such, the Company has recorded a one-time provision for employee severance costs of approximately $35 million in the fourth quarter of 2019.
Going forward, these actions are expected to deliver ongoing annual savings of up to $34-47 million per year, commencing in 2020, including the elimination of most idleness charges, which were approximately $42 million in 2019. 
ADAMA is aiming to complete most of the relocations and be operational with improved cost and efficiency at its new sites at Jingzhou by year-end 2020 and at Huai’An by mid-2021.The transformed new sites are designed to be more profitable than the old ones, and ready to accommodate additional new molecules emerging from the Company’s strong development pipeline. 
Over the longer term, the Company is working towards the commercialization of all its vacated old sites, subject to receipt of the required approvals. As a result, the Company aims to be able to recover the remainder of its upgrade and relocation investments, with the anticipated gains from the realization of this significant value expected to be included in the Company’s reported net income in the coming years. 

COVID-19 Impact

The ramp-up of production at the Jingzhou site was temporarily interrupted from late January to the end of February 2020 due to the COVID-19 novel coronavirus outbreak in Hubei province in the first few months of the year. Although the ramp-up of production at the site has since resumed, the Company will nevertheless see related idleness costs reflecting the temporary interruption. Although logistics in Hubei province are starting to open up, certain restrictions remain, impacting the free transport of goods to the ports.
The Company’s operations at its Huai’An, Jiangsu site have continued without material interruption during 2020. Relevant supply and transport lines are open.
As a result of the COVID-19 outbreak, the Company is again seeing some renewed tightening of supply of raw materials and intermediates sourced from third parties in China and sold through the Company’s global channels.
The Company is actively managing its response to the outbreak in order to ensure the safety of its employees and limit the impact on the performance of the Company. Actions being taken include extending and strengthening distribution channels, use of expedited transport options where possible, working collaboratively with supply chain partners, and raising prices wherever possible to accommodate the increased logistics costs.
ADAMA becoming part of the Syngenta Group
ADAMA announced in January 2020 that it is becoming a distinctive member of the Syngenta Group (“Group”), a newly-formed ag-industry leader being created through the bringing together of the agricultural businesses of ChemChina and Sinochem. The Group, comprising ADAMA, Syngenta and Sinochem’s agriculture-related activities, is expected to become the world’s leading agriculture inputs company, spanning crop protection, seeds, fertilizers, additional agricultural and digital technologies, as well as an advanced distribution network in China, reaching farmers nationwide.
ADAMA is joining this new industry leader through the contribution of the stake that ChemChina currently owns in ADAMA into the Group, which will also be owned by ChemChina. As such, there is no change in the Company’s ultimate controlling shareholder. ADAMA will continue to be headquartered in Israel, and remain traded on the Shenzhen Stock Exchange, as well as maintain its unique brand and positioning.
Chen Lichtenstein, former President and CEO of ADAMA, has taken up the position of CFO of Syngenta Group, with responsibility also for Strategy and Integration. Mr. Lichtenstein will be based in Basel, Switzerland. Frank Ning, Chairman of ChemChina and Sinochem, is the Chairman of the new Group. After the completion of the transfer of ADAMA’s shares into the Group, Chen Lichtenstein remains on ADAMA’s board of directors, and is joined by Erik Fyrwald, CEO of the new Group, who replaces Yang Xingqiang as Chairman of the board.
The various companies within the Syngenta Group have made significant advances in their intra-Group collaboration over the last year, generating meaningful additional revenue through cross-sales and benefiting from procurement and operational savings. The forming of the Group will further bolster the alignment between the companies and capitalize on the value creation and synergy opportunities identified. 
Source: ADAMA

Picture 0/1200

More from AgroNews


2021 Certified Organic Agri-inputs Guide Chinese issue of Annual Review 2020
Annual Review 2020 2020 India Pesticide Suppliers Guide
2020 Market Insight Chinese issue of 2020 Market Insight
I wanna post a press Comment


Subscribe Email: *
Mobile Number:  


Picture 0/1200

Subscribe to daily email alerts of AgroNews.