ADAMA Agricultural Solutions delivers 8.6% decrease to $ 696.1million in the third quarter of 2015 ended Sept 30th. For the first nine-month, the sales declined 5.2% to $ 2,414.0 million, mainly due to the impact of the significant weakening of currencies across the globe.
In constant currency terms, Adama delivered strong growth in both the third quarter and in the year-to-date, with estimated 9.5% and 6.0% growth in the respective periods. This growth was driven largely by an increase in volumes of 6.0% and 4.8% in the third quarter and the year-to-date, respectively, achieved while increasing prices by 3.9% and 1.2% in the respective periods, notwithstanding the extremely challenging global market conditions.
Commenting on the results, Yang Xingqiang, Chairman of Adama’s Board of Directors, said, "Our ability to grow our business, in both volume and constant currency terms, despite the difficult market conditions, demonstrates the resilience of our global and diversified business model and the determination of our people to continually deliver a strong performance despite the challenging times. The Company continues to invest in the future growth of the business, and remains well positioned to accelerate its growth trajectory once the market recovers."
Europe: Strong volume growth in Europe over the entire 2015 season has led to an increase in revenues in the region of 2.3% in constant currency terms in the year-to-date. In the third quarter, sales in Europe were impacted by a decrease in oilseed rape and sugar beet planting as a result of widespread drought in Central Europe, which was partially offset by an increase in cereals. US Dollar revenues in the third quarter and year-to-date were further impacted by the significant decline of the Euro by 16% which occurred over the last year.
North America: Revenues in North America grew strongly in the third quarter, with sales up by 13.2% in constant currency terms and by 12.9% in USD terms, compared to the corresponding quarter last year, driven by robust volume growth. The North American business is making significant progress in the evolution of its product portfolio, with a focus on more differentiated, higher-margin products. NIMITZ® is performing beyond expectations at field level, and benefiting from expanded labels. In the year-to-date, revenues in North America increased by 4.9% in constant currency terms and by 3.8% in USD terms, despite the impact of severe drought in Western Canada.
Latin America: The third quarter of the year is traditionally heavily weighted towards Brazil. However, notwithstanding the worsening macroeconomic situation in the country and the substantial depreciation of the Real by 56% against the US Dollar over the last year, revenues in the region grew strongly in constant currency terms, with sales up by an estimated 17.6% in the third quarter and by 14.9% in the year-to-date, compared to the corresponding periods last year.
India, Middle East & Africa: Revenues in the region continued their strong growth trajectory, with sales in constant currency terms up by 18.3% in the third quarter and by 7.4% in the year-to-date, compared to the corresponding periods last year. This performance has been driven by increased volumes in India, notwithstanding the late start to the rainy season in the country.
Reported revenues in the third quarter and year-to-date were negatively impacted by the depreciation of local currencies, resulting in sales in USD terms up by 8.1% in the third quarter and down by 1.0% in the year-to-date, compared to the corresponding periods last year.
Asia Pacific: Revenues in Asia Pacific in constant currency terms increased by 8.3% in the third quarter and by 1.8% in the year-to-date, compared to the corresponding periods last year, reflecting strong volume growth. A strong performance in Australia saw Adama increase its market share in the country, with a good result also in New Zealand, notwithstanding poor seasonal weather conditions. Adama launched three new products in its Advanced product range in Thailand during the quarter, further enhancing the differentiation of its offering in the country.
Brazil Macroeconomic Environment
The Company's performance in the third quarter was particularly impacted by the difficult macroeconomic environment in Brazil, which was reflected in the sharp depreciation of the Brazilian real during the quarter (56% YoY, of which 27% during the third quarter), as well as in the recent downgrades of the country's credit rating. These factors have led Adama to take proactive steps to reduce the negative effects of the environment in Brazil on the Company, including a decision not to fulfil certain outstanding orders and thereby partially limit sales in the country, in so doing reducing its exposure to currency and credit risks.
This comes amid overall challenging conditions in the agricultural markets in 2015, reflected by the significant depreciation of all currencies against the US Dollar, as well as low soft commodities prices. In addition, several markets have experienced exceptional weather conditions in the third quarter, such as drought in Europe, Canada and South Africa and a late start of the rain season in India, which impacted demand in those regions.
General Business Update
Adama continues to make major strides in the differentiation of its portfolio. The Company's innovative nematicide, NIMITZ®, which first launched in the US in the beginning of the year, is continuing to be rolled-out across Adama's global commercial platform, with further launches this quarter in Australia, Israel and Mexico.
Adama continues to execute on its promise to "Bring Simplicity to Agriculture". During the quarter, the Company launched its new global packaging family, with an emphasis on convenience and simplicity for farmers.
The Company has been progressing in its efforts to achieve its commercial and operational objectives in China. Adama is now well-advanced in establishing its own sales force on the ground in China, with direct sales expected to commence in the 2016 season. Construction of the new state-of-the-art formulation and packaging plant in the city of Huai'an is proceeding and the facility is expected to come on stream next year.
Adama is continuing to work with its shareholders to progress the contemplated reverse merger of the Company with Sanonda, which was announced during the third quarter.
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