MAI reports record sales in fourth quarter

Agrochemicals company Makhteshim-Agan Industries yesterday reported record revenues for the fourth quarter of 2008, belying apprehension in market circles about sales of crop-protection chemicals after the sharp fall in commodity prices.

Companies in the sector had presented a mixed performance for the fourth quarter: While Syngenta reported a 16% increase in revenues from plant-protection chemicals against the parallel quarter, Du Pont admitted that its sales had shrunk. But taken as a whole, excluding Makhteshim-Agan, the agrochemical sectors fourth-quarter sales increased 6.6% year over year.

The fourth quarter is typically a weak one for agrochemicals - its winter, when less crops are grown. Also, this years winter was made much harder by the economic crisis.

Yet Makhteshim-Agan, which is controlled by Nochi Dankners IDB group, posted a 4% year over year increase in revenues to $491 million, a record for the fourth quarter. The companys net profit more than doubled, rising by 141% to $8.7 million. Moreover, chairman Avraham Bigger yesterday reassured jittery investors that the first quarter of 2009 is looking "just fine."

"In Europe, the general picture is good, and its compensating for other places such as South America," he said.

That said, Bigger admitted that growth will be slower than in the last couple of years.
Makhteshim-Agans revenue growth in the preceding three quarters had been faster, the company said. While demand slowed in the fourth quarter, exchange rates were also unfavorable - the U.S. dollar appreciated against the other currencies in which the company operates, reducing its revenues in dollar terms.

Currency fluctuations and dropping prices of certain products were two of the reasons gross profit contracted by 6% year over year to $138.4 million. Earlier in the year prices had been trending upwards, but not in the fourth quarter. Makhteshim-Agans gross margin fell to 28.2% of revenue, compared with 30.9% in the parallel quarter.

But Makhteshim-Agan spent the past two years scaling down its operating costs, while its outlay on interest also dropped thanks to hedging.

While Makhteshim-Agans inventory crept up during the fourth quarter of 2008, the company will be reducing inventory in the first and second quarters of 2009, said Bigger. New inventory the company buys can be expected to be worth less in terms of market prices, because of the retreat in raw material costs (which are based on oil).

For the sake of caution, Makhteshim-Agan has scaled back its sales to drought-stricken Brazil, Bigger said. (That said, last month rains came back, easing the situation - but crop cultivation has suffered and trees have been dying from the unfamiliar aridity in the Amazon rain forest.)

For the year 2008, Makhteshim-Agan reported netting $219 million on revenues of $2.53 billion, compared with netting $156 million on revenues of $2.06 million in 2007.
Israeli companies divulge the wage costs of their top five executives.

The wage cost of Bigger came to NIS 14 million in 2008, including NIS 9 million for stock options and NIS 5 million on waves. Biggers options are outside the money - their exercise price is NIS 21, while Makhteshim-Agans share price closed trading yesterday with a 2.2% gain to NIS 13.30 per share.