Makhteshim Agan sales up 8% in Q1 2011

Date:05-16-2011

The Makhteshim Agan Group, the world leader in branded off-patent crop protection solutions, today reported financial results for the 2011 first quarter, ended March 31, 2011.

EBITDA during 1Q 2011 was $143.2 million equal to 18.3% of sales compared to $132.8 million EBITDA for the same period in the prior year, representing an 8.0% growth rate.
 
Gross profit for 1Q 2011 totaled $255.5 million, compared to $232.9 million in the same period of 2010, an increase of 9.7%. Gross margin for the quarter was 32.7%, compared with 32.2% for the same period in 2010.

The growth both in gross profit and in gross margin during the first quarter of 2011 was due to an increase in sales volume coupled with the positive effect of the Company’s implementation of its organizational change plan initiated in 2010.  Also contributing to the positive results were an improved product mix, as well as the sale of lower cost inventory compared to inventory costs in the first quarter of 2010. This was partially offset by the decline in average sales price.
 
Operating profit for the first quarter of 2011 was $112.1 million (14.4% of sales) compared with a profit of $106.5 million (approximately 14.7% of sales) in the same quarter of last year.
 
Operating expenses for the quarter totaled $143.3 million (18.4% of sales), compared with $12631 million (17.5% of sales) during 1Q 2010.
 
Net income for the first three months of 2011 was $91.7 million, this compares with $70.9 million for the first quarter of 2010.

Below are key financial metrics for 1Q 11:

In millions of US$	1Q 2011	1Q 2010	Change
Sales	780.5	723.1	8.0%
EBITDA	143.2	132.8	8.0%
Gross profit	255.5	232.9	9.7%
Gross margin	32.7%	32.2%
Operating profit	112.1	106.5	5.3%
Net income	91.7	70.9	29.4%

Regional sales

First quarter 2011 sales were $780.5 million, compared with $723.1 million in the corresponding period of 2010, an increase of 8.0%. The main contributor to sales growth was an increase in volumes sold as well as the consolidation of new activities in Korea and Mexico. This increase was partially offset by exchange rates.
 
Below are sales for the 1Q 11 by geographic region:

Millions of US$	1Q 2011	1Q 2010	% change
Europe	388.9	372.5	4.4%
Latin America	113.5	116.6	(2.6%)
North America	126.9	119.6	6.1%
Asia Pacific & Africa	126.7	93.8	35.1%
Israel	24.5	20.6	19.1%

On a geographic basis, the strongest sales growth was in the Company’s Asia Pacific & Africa region, which contributed $126.7 million in the first quarter year of 2011, a 35.1% increase from $93.8 million in first quarter of 2010. This improvement was due to an increase in sales volume, particularly in India and Australia and an appreciation of the Australian currency.
 
Sales in Latin America for first quarter of 2011 amounted to $113.5 million, compared with $116.6 million for the same quarter last year, a 2.6% reduction.  Increased sales volume in Latin America excluding Brazil were offset by continued implementation of Brazil restructuring, which led to more selective sales. 
 
North American sales for 1Q 2011 amounted to $126.9 million, compared with $119.6 million in the same period of the previous year, an increase of 6.1%. Increased volumes were slightly offset by competitive pricing pressures in some products.
 
European sales for the first quarter of 2011 were $388.9 million, compared with $372.5 million in the corresponding period of the previous year, an increase of 4.4%. The growth stemmed mainly from increased sales of crop protection products in the region resulting from favorable weather conditions.

Mr. Ami Erel, Makhteshim Agan’s Chairman of the Board, commented, “Fundamentals in our industry are recovering. Our growth and business performance in the quarter were aided by stable weather in the Northern Hemisphere and focused execution discipline across all regions. We are pleased to see the significant progress made in our operational change plan and that we were able to benefit from it already this quarter. On the ChemChina business combination, ChemChina, Koor and we have made meaningful progress towards closing the transaction in-line with the agreement and its expected timeline.”
 
Mr. Erez Vigodman, President and CEO of Makhteshim Agan, added "Our financial results for the quarter are the outcome of significant actions which we have taken over the last nine months, coupled with positive market trends, as we currently see them.

Our operations benefited from the combination of a number of important measures including: reconfiguring our organizational structure, changing our global manufacturing and supply-chain operations and a major restructuring of our Brazilian operation. At the same time, we strengthened our business in the U.S. and established a platform for further growth in APAC& ME. We remained focused on expanding our global network and product portfolio via add-on acquisitions completing transactions in Mexico and Korea together with the acquisition of an important product from DuPont which we completed this quarter.

The completion of the ChemChina business combination, which also kept us busy during 2010, is progressing according to the agreements’ timeline." Mr. Vigodman concluded.