ADAMA DELIVERS ANOTHER QUARTER OF RECORD SALES
EXCEEDING $1 BILLION
Q2 Sales grew 9.2% to a record $1,023 million, exceeding $1 billion mark for second
consecutive quarter
Excluding the negative impact of hedge positions on European currencies created in
2017, Q2 sales grew 10.6% to $1,036 million
Robust 6.2% volume growth driven by continued demand for differentiated products and
market share gains in all key regions
Solid demand conditions facilitate continued price increases, partially offsetting higher
procurement costs
Half-year sales grew 10.0% to a record $2,045 million, driven by 6.6% growth in volumes and
stronger pricing environment
Excluding the 2017 European hedge impact, H1 sales grew 12.1% to $2,084 million
Q2 Gross profit up to a record $342 million
Gross margin of 33.4% vs 35.6% in Q2 last year
Excluding the 2017 European hedge impact, Q2 gross profit was $354 million and
gross margin 34.2%
Continued improvement in portfolio mix from new and differentiated products alongside price
increases offset by higher procurement costs
Half-year gross profit up 4.6% to a record $694 million, with gross margin of 33.9% vs. 35.7%
in H1 last year
Excluding the 2017 European hedge impact, H1 gross profit was $732 million and
gross margin 35.1%
Q2 EBITDA of $188 million, in line with last year’s record second quarter
EBITDA margin of 18.4% vs 20.2% in Q2 last year
Excluding the 2017 European hedge impact, Q2 EBITDA was $201 million and EBITDA
margin 19.4%
Half-year EBITDA lower by 2.1% to $379 million, with EBITDA margin of 18.5% vs. 20.8% in
H1 last year
Excluding the 2017 European hedge impact, H1 EBITDA was $417 million and EBITDA
margin 20.0%
Q2 Net income of $72 million compared to last year’s second quarter record of $81 million
Net income margin of 7.1% vs 8.7% in Q2 last year
Excluding the 2017 European hedge impact, Q2 net income was $85 million and net
income margin 8.2%
Half-year net income of $157 million (margin of 7.7%) compared to $200 million (margin of
10.7%) in H1 last year
Excluding the 2017 European hedge impact, H1 net income was $195 million and net
income margin 9.4%
Continued strong cash flow generation
Strong Operating Cash Flow of $156 million in Q2, while accommodating higher working
capital to support the significant business growth
Q2 Free Cash Flow generation of $72 million
1
Significant $283 million reduction in balance sheet net debt over the last 12 months to
$447 million
Net debt / EBITDA ratio of 0.7x vs. 1.2x in Q2 last year
TEL AVIV, ISRAEL, August 27, 2018 – Adama Agricultural Solutions Ltd. (“Solutions”), together
with Hubei Sanonda Co., Ltd. (the “Listed Entity”), to be named ADAMA (together, “ADAMA” or “the
Combined Company”), today reported their combined consolidated financial results for the second
quarter and six month period ended June 30, 2018.
Q2 2018 H1 2018
% %
Adjusted, US$m Q2 2018 Q2 2017 (ex. ‘17 EU H1 2018 H1 2017 (ex. ‘17 EU
Change Change
hedge) hedge)
Revenues 1,023 937 9.2% 1,036 2,045 1,859 10.0% 2,084
Gross profit 342 333 2.4% 354 694 663 4.6% 732
Gross margin 33.4% 35.6% 34.2% 33.9% 35.7% 35.1%
Operating income (EBIT) 136 139 -2.2% 149 273 283 -3.5% 311
EBIT margin 13.3% 14.8% 14.4% 13.3% 15.2% 14.9%
Net income 72 81 -11.2% 85 157 200 -21.3% 195
Net income margin 7.1% 8.7% 8.2% 7.7% 10.7% 9.4%
EBITDA 188 190 -0.8% 201 379 387 -2.1% 417
EBITDA margin 18.4% 20.2% 19.4% 18.5% 20.8% 20.0%
Earnings per share – USD 0.0592 0.0384 0.0645 0.0855
– RMB 0.1888 0.2388 0.4048 0.5824
The results of the Combined Company are presented after restatement of prior periods to include the financial position,
results of operations and cash flow of Solutions. All income statement items contained in this release are presented on a
combined, adjusted basis, reflecting the performance of the Combined Company. For a detailed description and analysis
of the differences between the adjusted income statement items and the items as reported in the financial statements, see
“Analysis of Gaps between Adjusted Income Statement and Income Statement in Financial Statements” in the appendix to
this release.
Revenue growth in constant currencies in the second quarter was 9.4%, and 8.6% in the half-year.
Earnings per share are the same for basic and diluted. The number of shares used to calculate earnings per share in Q2
2017 is 2,341.9 million shares, reflecting the issuance of shares as part of the combination transaction in 2017. The
number of shares used to calculate earnings per share in Q2 2018 is 2,446.6 million shares, including also the issuance of
shares in the subsequent private placement equity offering.
Commenting on the results, Yang Xingqiang, Chairman of Adama’s Board of Directors, said,
“Even in a period when the industry is showing signs of recovery, ADAMA continues to outperform
and deliver strong, double-digit growth, reaching record sales and expanding in all key markets.
Supporting this growth, we are pleased with the commercial and operational benefits of our unique
China-Global infrastructure.”
Chen Lichtenstein, President and CEO of Adama, added, “ADAMA continues to launch new
high-value added products, most notably CRONNOS and NIMITZ in Brazil this year. This,
combined with strong, differentiated growth worldwide and price increases, is driving our sales to
record levels, and as the impact of the 2017 European hedges subside, also allows us to
progressively approach last year’s record profit levels.”
2
Performance in Context of Market Environment
The past two quarters have seen the beginnings of a recovery in demand for crop protection
products in many markets, despite ongoing low soft commodity prices and farmer income.
While most agricultural commodities' prices remain subdued, in most regions inventory levels in the
crop protection distribution channels are now lower in comparison to a year ago, allowing customary
market activity levels to resume.
The second quarter saw a partial recovery in the European crop protection sector following a slow
start to the season in the first quarter after an extended winter. ADAMA’s strong performance in the
region in the second quarter nevertheless allowed it to deliver half-year results in Europe in line with
last year.
As previously communicated, the negative impact of 2017 European hedge positions seen in the
first quarter continued to a lesser extent into the second quarter, and is not expected to continue to
impact results going forward.
ADAMA continues to deliver robust volume growth, driven by the introduction of new and
differentiated products, and increased penetration in markets across the globe.
The launch of ADAMA’s innovative, triple mode-of-action soybean fungicide CRONNOS in Brazil
has started well, and is expected to make a meaningful contribution to growth starting in the second
half of the year.
The Combined Company continues to maintain manufacturing cost discipline. However, higher
procurement costs due to shortages in certain raw materials and intermediates, mostly owing to
increased environmental focus in China, have raised product costs compared to last year. Robust
demand conditions facilitate increased prices of approximately 3% across the portfolio to partially
offset the higher procurement costs.
Financial Highlights
Revenues grew by 9.2% in the quarter and by 10.0% in the half-year period compared to the
corresponding periods last year. Excluding the 2017 European hedge impact, revenues increased
by 10.6% to $1,036 million in the quarter and by 12.1% to $2,084 million in the half-year, compared
to the corresponding periods last year.
This increase was driven by volume growth of 6.2% in the quarter and 6.6% in the half-year.
Especially strong performance was recorded in the Americas, China and the India, Middle East and
Africa region, alongside a recovery in Europe after a delayed start to the season in the first quarter.
In addition to the volume growth, improved demand conditions facilitated a stronger pricing
environment, allowing the passing on of some of the impact of the constrained supply and higher
procurement costs.
Gross profit in the quarter increased by 2.4% to $342 million (gross margin of 33.4%), while gross
profit in the half-year increased by 4.6% to $694 million (gross margin of 33.9%), compared to the
corresponding periods last year. Excluding the 2017 European hedge impact, gross profit increased
by 6.3% to $354 million (gross margin of 34.2%) in the quarter and by 10.4% to $732 million (gross
margin of 35.1%) in the half-year, compared to the corresponding periods last year.
The increases in gross profit in both the quarter and the half-year reflect the strong volume growth of
a better product mix, as well as higher prices, which were partially offset by the increased
procurement costs of raw materials and intermediates.
Operating expenses. Total operating expenses were $205 million (20.1% of sales; 19.8% excluding
the 2017 European hedge impact) in the quarter and $421 million (20.6% of sales; 20.2% excluding
the 2017 European hedge impact) in the half-year, compared to $194 million (20.7% of sales) and
$381 million (20.5% of sales) in the corresponding periods last year, respectively.
3
Within operating expenses, Sales and Marketing expenses in the quarter were $158 million (15.4%
of sales; 15.2% excluding the 2017 European hedge impact), compared to $149 million (15.9% of
sales) in the corresponding period last year. Sales and Marketing expenses in the half-year were
$319 million (15.6% of sales; 15.3% excluding the 2017 European hedge impact), compared to $289
million (15.5% of sales) in the corresponding period last year. The increase in this component
resulted primarily from an increase in sales, marketing and product development teams in growing
geographies and an increase in other variable expenses as a result of the increase in sales volumes.
Within operating expenses, R&D, General and Administrative expenses in the quarter were $49
million (4.8% of sales; 4.7% excluding the 2017 European hedge impact) compared to $43 million
(4.6% of sales) in the corresponding period last year. R&D, General and Administrative expenses in
the half-year were $101 million (4.9% of sales; 4.8% excluding the 2017 European hedge impact)
compared to $85 million (4.6% of sales) in the corresponding period last year. The increase in this
component resulted primarily from increased spend on strategic research and development projects.
In addition to these factors, part of the increase in total operating expenses stemmed from the
impact of the strengthening of most currencies against the US dollar, mainly in the first quarter.
Operating income in the quarter was $136 million and $273 million in the half-year, lower by 2.2%
and 3.5% compared to the corresponding periods last year, respectively. Excluding the 2017
European hedge impact, operating income increased by 7.0% to $149 million in the quarter and by
10.1% to $311 million in the half-year, compared to the corresponding periods last year.
EBITDA in the quarter was $188 million and $379 million in the half-year, lower by 0.8% and 2.1%
compared to the corresponding periods last year, respectively. Excluding the 2017 European hedge
impact, EBITDA would have increased by 5.9% to $201 million in the quarter and by 7.9% to $417
million in the half-year, compared to the corresponding periods last year.
Financial expenses and investment income. Total net financial expenses and investment income
in the quarter were $33 million compared to $41 million in the corresponding period last year. This
decrease was primarily due to foreign exchange income related to balance sheet positions, partially
offset by the adoption of a new accounting standard which classifies part of interest income on sales
as revenue. Total net financial expenses and investment income in the half-year were $67 million
compared to $61 million in the corresponding period last year, reflecting the adoption of the new
accounting standard.
Tax expenses. Net tax expenses were $31 million in the quarter, compared to $17 million in the
corresponding period last year. The higher expenses stem from increased profits accrued at the
Combined Company’s selling entities worldwide, as well as the $11m non-cash impact of the
devaluation of the Brazilian Real during the quarter, which resulted in a lower value of local
currency-denominated tax assets. For the same reasons, total net tax expenses in the half-year
were $49 million compared to $22 million in the corresponding period last year. Notably, the
comparatively low tax expenses recorded in the first half of last year reflected a benefit from the
utilization of tax loss carryforwards in the first quarter of 2017.
Net income in the quarter was $72 million and $157 million in the half-year, compared to $81 million
and $200 million in the corresponding periods last year, respectively. Excluding the 2017 European
hedge impact, net income increased by 4.5% to $85 million in the quarter and was lower by 2.1% to
$195 million in the half-year, compared to the corresponding periods last year.
Working capital was higher by $123 million compared to the corresponding point last year,
accommodating the higher sales growth momentum. Inventories were higher due to significant
product preparation in advance of the season in the southern hemisphere, as well as the higher
4
procurement costs. Receivables were higher due to the strong sales growth, partially offset by an
increase in payables.
Cash Flow. Operating cash flow of $156 million was generated in the quarter and $122 million in the
half-year, compared to $323 million and $328 million generated in the corresponding periods last
year, respectively, mainly reflecting the build-up of working capital. Notwithstanding the stronger
growth momentum requiring increased inventories in advance of the season, due to the continued
implementation of advanced supply chain alignment, the Combined Company maintains its inventory
days at their historically low levels. Additionally, continued tight control of credit allowed the
receivable days of the Combined Company to be at record best mid-year levels. This working capital
discipline facilitated the generation of strong operating cash flow, while accommodating the
significant sales growth.
Net cash used in investing activities amounted to $49 million in the quarter and $41 million in the
half-year, compared to $29 million and $70 million invested in the corresponding periods last year,
respectively. Additions to assets includes investments in product registrations and other intangible
and fixed assets, including the transfer of products in Europe from Syngenta in the first quarter of
2018. Proceeds from disposal of assets includes the divestment of certain products in Europe in the
first quarter of 2018 in connection with the approval of the European Commission for ChemChina’s
acquisition of Syngenta, while in 2017 similarly includes one-time proceeds resulting from the sale of
non-core assets. Investments in fixed assets, net of investment grants, amounted to $29 million in
the quarter, and $56 million in the half-year, compared to $26 million and $45 million invested in the
corresponding periods last year, respectively.
Free cash flow of $72 million was generated in the quarter and $42 million in the half-year,
compared to $257 million and $213 million generated in the corresponding periods last year,
respectively.
Leverage: Balance sheet net debt at the end of the quarter was $447 million, down by $283 million
compared to the $730 million in net debt as of June 30, 2017. This puts the Combined Company’s
net debt/EBITDA ratio at 0.7x, compared to 1.2x at the same time last year.
Regional Sales Performance
Q2 2018 Q2 2017 Change Change H1 2018 H1 2017 Change Change
$m $m USD CER $m $m USD CER
Europe 309 287 +7.5% +5.4% 702 686 +2.3% -0.7%
North America 213 192 +11.1% +10.4% 407 361 +12.5% +11.8%
Latin America 172 150 +14.7% +22.5% 311 266 +16.8% +21.8%
Asia Pacific 168 171 -1.8% -5.7% 356 319 +11.6% +6.2%
Of which China 88 74 +19.6% +12.0% 173 127 +36.6% +27.4%
India, Middle East & Africa 162 138 +17.7% +20.8% 270 226 +19.4% +19.4%
Total 1,023 937 +9.2% +9.4% 2,045 1,859 +10.0% +8.6%
CER: Constant Exchange Rates
Europe: Sales increased by 5.4% in the quarter and were lower by 0.7% in the half-year period in
constant currency terms, compared with the corresponding periods last year. Excluding the 2017
5
European hedge impact, sales in the region increased by 9.8% to $316 million in the quarter and
by 4.9% to $720 million in the half-year.
The increase in the quarter was driven by solid volume growth, somewhat offset by softer pricing in
local currencies. The recovery in the second quarter almost completely made up for the late start to
the season as a result of the extended winter in the first quarter, bringing revenues in the half year
in line with last year.
Northern Europe saw a fast development of the season in the beginning of the second quarter,
followed by severe drought in the entire north-east region towards the end of the quarter, reducing
consumption of fungicides and insecticides. In Southern Europe, warm and wet weather in the
south-west caused an increase in insect and disease pressure, driving up consumption and
reducing channel inventories.
A number of new products were registered in the quarter, including CAMARO, a dual-action
cereal herbicide in Russia, SEGURIS ERA, an innovative combination fungicide for cereals in
Germany, COMPLETTO, a plant growth regulator for winter cereals in the UK, TAVAS, a potato
herbicide in the Czech Republic and Portugal, and ARKTIS, a cereal herbicide in France.
In US dollar terms, sales in Europe increased by 7.5% in the quarter and by 2.3% in the half-year
period compared with the corresponding periods last year, reflecting the appreciation of European
currencies against the US dollar. Excluding the 2017 European hedge impact, sales in the region
increased by 12.0% to $322 million in the quarter and by 7.9% to $740 million in the half-year.
North America: Sales increased by 10.4% in the quarter, and by 11.8% in the half-year period in
constant currency terms, compared with the corresponding periods last year, driven by strong
demand supporting volume growth of an improving portfolio mix, as well as higher selling prices.
In the US, strong demand for ADAMA’s differentiated products drove volume growth and supported
a generally stronger pricing environment, exacerbated by industry-wide supply shortages,
compensating for the higher procurement costs. The Combined Company continues to benefit from
key backward-integrated products which serve to entrench strong market positioning and facilitate
market share gains.
Canada delivered a strong performance, with growth across the portfolio despite high channel
inventories and dry weather conditions, which impacted sales of fungicides.
In US dollar terms, sales in North America increased by 11.1% in the quarter and 12.5% in the
half-year period, compared to the corresponding periods last year.
Latin America: Sales increased by 22.5% in the quarter and by 21.8% in the half-year period in
constant currency terms, compared with the corresponding periods last year. This strong
performance was driven by significant volume growth and new product launches, alongside
stronger pricing across most countries in the region.
The second quarter saw significant growth in Brazil, led by a robust increase in volumes and higher
prices.
In one of the most important product launches to-date, ADAMA launched CRONNOS TOV in
Brazil in the second quarter. This unique three-way mixture fungicide provides growers with a
highly effective and simple-to-use solution for Asian soybean rust, which is showing increasing
resistance to currently available treatments. The product is expected to make a meaningful
contribution to growth starting in the second half of the year.
Adama registered and launched a number of new products across the region including GALIL,
CORMORAN and ALBATROSS, new insecticides launched in Mexico, growth regulator
TRITON and vegetables insecticide KADABRA launched in Colombia, Peru and Ecuador, and
the innovative nematicide NIMITZ, launched in Chile, Central America and the Caribbean.
In US dollar terms, sales in Latin America increased by 14.7% in the quarter and by 16.8% in the
half-year period compared with the corresponding periods last year, with the depreciation of local
6
currencies against the US dollar somewhat moderating the strong growth in constant currency
terms.
Asia-Pacific: Sales were lower by 5.7% in the quarter yet grew by 6.2% in the half-year period in
constant currency terms, compared with the corresponding periods last year. The decline in the
quarter was primarily due to the severe drought conditions in Australia and Indonesia, which was
partially offset by the strong growth in China and other countries, as well as price increases across
the region.
In China, sales of branded and formulated products are growing strongly, as ADAMA continues to
expand its product portfolio and geographic reach, with launches of new products including
LIANGKUAI, a fungicide for fruit and vegetables, rice fungicide NONGFUAN, rice herbicides
LIFAN and DINGXING, and citrus insecticides FEISAIDI and HONGJING.
Thailand, Vietnam, Korea, and the Philippines delivered strong sales growth, supported by
favorable weather conditions. In spite of the drought in Australia, the Combined Company
succeeded in growing its share in the country.
ADAMA registered a number of new and differentiated products, including SORCERER, an
insecticide for fruit and vegetables, ALPHASCUD, an insecticide in field crops, pastures and fruit
and vegetables, BOBCAT i-MAXX, a herbicide for a wide range of grasses and broadleaf weeds
in sugarcane, all in Australia, as well as SEBI-O, a fungicide for fruit and vegetables in Thailand,
and BELVEDERE FORTE a herbicide for fodder beet in New Zealand.
In US dollar terms, sales were lower by 1.8% in the quarter yet increased by 11.6% in the half-year
compared to the corresponding periods last year, reflecting the positive impact of the appreciation
of local currencies, primarily the Australian Dollar in the half-year, against the US dollar.
India, Middle East & Africa: Sales grew by 20.8% in the quarter and by 19.4% in the half-year
period in constant currency terms, compared with the corresponding periods last year, driven by
significant volume growth as well as substantial price increases, as a result of strong demand for
the Combined Company’s portfolio and generally favorable weather conditions.
An outstanding performance in India was driven by significant growth of a differentiated portfolio,
while benefiting from a good monsoon season. ADAMA has established leading positions in key
backward-integrated products such as ACEMAIN, as well as TAPUZ, a new mixture for insect
control benefiting from end-to-end process integration on both its constituent active ingredients.
BARAZIDE, a tailor-made mixture insecticide developed specifically for the Indian market, was
registered and is being launched.
ADAMA continues to grow strongly in Turkey, supported by increased brand awareness and strong
positioning of its sugar beet portfolio. Strong portfolio demand facilitated higher prices,
compensating for the depreciation of the local currency over the period.
Sales in Israel increased driven in part by the strong performance of the recently launched
innovative nematicide NIMITZ.
In US dollar terms, sales increased by 17.7% in the quarter and 19.4% in the half-year period,
compared to the corresponding periods last year, with the depreciation of local currencies, most
notably the Indian Rupee and Turkish Lira, against the US dollar somewhat moderating the strong
growth in constant currency terms.
Further Information
All filings of the Combined Company, together with a presentation of the key financial highlights of
the period, can be accessed through the websites of the Combined Company at www.adama.com
and www.sanonda.cn.
7
##
About the Combined Company
The Combined Company, which will be named ADAMA subject to required approvals, is comprised
of Adama Agricultural Solutions Ltd. and Hubei Sanonda Ltd., and is one of the world's leading
crop protection companies. We strive to Create Simplicity in Agriculture – offering farmers effective
products and services that simplify their lives and help them grow. With one of the most
comprehensive and diversified portfolios of differentiated, quality products, our 6,600 strong team
reaches farmers in over 100 countries, providing them with solutions to control weeds, insects and
disease, and improve their yields. For more information, visit us at www.adama.com and follow us
on Twitter at @AdamaAgri.
Contact
Wayne Rudolph Yanlai Xu
Head of Investor Relations China Investor Relations
Email: ir@adama.com Email: irchina@adama.com
8
Abridged Consolidated Financial Statements
The following abridged consolidated financial statements and notes have been prepared as
described in Note 1. While prepared based on the principles of PRC GAAP, they do not contain all
of the information which either PRC GAAP or IFRS would require for a complete set of financial
statements and should be read in conjunction with the consolidated financial statements of both
Hubei Sanonda Co., Ltd and Adama Agricultural Solutions Ltd. as filed with the Shenzhen and Tel
Aviv Stock Exchanges, respectively.
Abridged Consolidated Income Statement for the Second Quarter
Q2 2018 Q2 2018
1 Q2 2018 Q2 2017 ex. EU Q2 2018 Q2 2017 ex. EU
Adjusted
USD(m) USD(m) hedge RMB(m) RMB(m) hedge
USD(m) RMB(m)
Revenues 1,023 937 1,036 6,527 6,426 6,608
Cost of Sales 679 601 679 4,330 4,124 4,330
Business taxes and surcharges 3 2 3 18 16 18
Gross profit 342 333 354 2,179 2,286 2,260
% of revenue 33.4% 35.6% 34.2% 33.4% 35.6% 34.2%
Operating expenses 205 194 205 1,310 1,332 1,310
Operating income (EBIT) 136 139 149 868 954 950
% of revenue 13.3% 14.8% 14.4% 13.3% 14.8% 14.4%
Financial expenses and investment income 33 41 33 210 279 210
Income before taxes 103 98 116 658 675 740
Taxes on Income 31 17 31 197 117 197
Net income 72 81 85 461 558 543
% of revenue 7.1% 8.7% 8.2% 7.1% 8.7% 8.2%
Attributable to:
Owners of the Company 72 81 461 558
Non-controlling Interests - - - -
EBITDA 188 190 201 1,200 1,301 1,281
% of revenue 18.4% 20.2% 19.4% 18.4% 20.2% 19.4%
Earnings per Share – Basic 0.0295 0.0348 0.1884 0.2384
– Diluted 0.0295 0.0348 0.1884 0.2384
The number of shares used to calculate earnings per share in Q2 2017 is 2,341.9 million shares, reflecting the issuance of shares as
part of the combination transaction in 2017. The number of shares used to calculate earnings per share in Q2 2018 is 2,446.6 million
shares, including also the issuance of shares in the subsequent private placement equity offering.
1
For an analysis of the differences between the adjusted income statement items and the income statement items as reported in the
financial statements, see below “Analysis of Gaps between Adjusted Income Statement and Income Statement in Financial Statements”.
9
Abridged Consolidated Income Statement for the Half-Year
H1 2018 H1 2018
2 H1 2018 H1 2017 ex. EU H1 2018 H1 2017 ex. EU
Adjusted
USD(m) USD(m) hedge RMB(m) RMB(m) hedge
USD(m) RMB(m)
Revenues 2,045 1,859 2,084 13,026 12,770 13,271
Cost of Sales 1,346 1,191 1,346 8,571 8,181 8,571
Business taxes and surcharges 6 5 6 37 33 37
Gross profit 694 663 732 4,418 4,557 4,662
% of revenue 33.9% 35.7% 35.1% 33.9% 35.7% 35.1%
Operating expenses 421 381 421 2,681 2,615 2,681
Operating income (EBIT) 273 283 311 1,736 1,942 1,981
% of revenue 13.3% 15.2% 14.9% 13.3% 15.2% 14.9%
Financial expenses and investment income 67 61 67 426 420 426
Income before taxes 206 221 244 1,310 1,521 1,554
Taxes on Income 49 22 49 310 149 310
Net income 157 200 195 1,000 1,372 1,244
% of revenue 7.7% 10.7% 9.4% 7.7% 10.7% 9.4%
Attributable to:
Owners of the Company 157 200 1,000 1,372
Non-controlling Interests - - - -
EBITDA 379 387 417 2,412 2,645 2,656
% of revenue 18.5% 20.8% 20.0% 18.5% 20.8% 20.0%
Earnings per Share – Basic 0.0642 0.0852 0.4086 0.5858
– Diluted 0.0642 0.0852 0.4086 0.5858
2
For an analysis of the differences between the adjusted income statement items and the income statement items as reported in the
financial statements, see below “Analysis of Gaps between Adjusted Income Statement and Income Statement in Financial Statements”.
10
Abridged Consolidated Balance Sheet
June 30 June 30 June 30 June 30
2018 2017 2018 2017
USD (m) USD (m) RMB (m) RMB (m)
Assets
Current assets:
Cash at bank and on hand 914 671 6,050 4,544
Bills and accounts receivable 1,013 966 6,703 6,546
Inventories 1,251 1,084 8,275 7,345
Assets held for sale - 55 - 376
Other current assets, receivables and 380 322 2,517 2,182
prepaid expenses
Total current assets 3,558 3,099 23,544 20,993
Non-current assets:
Fixed assets, net 1,061 1,043 7,021 7,068
Intangible assets, net 1,486 1,231 9,835 8,336
Deferred tax assets 94 105 624 708
Other non-current assets 84 73 554 492
Total non-current assets 2,726 2,451 18,034 16,605
Total assets 6,284 5,550 41,578 37,597
Liabilities
Current liabilities:
Loans and credit from banks and other 125 196 825 1,330
lenders
Bills and accounts payable 660 570 4,366 3,859
Other current liabilities 832 759 5,507 5,140
Total current liabilities 1,617 1,525 10,699 10,329
Long-term liabilities:
Long-term loans from banks and other 48 73 320 493
lenders
Debentures 1,141 1,185 7,549 8,027
Deferred tax liabilities 71 36 472 242
Employee benefits 95 69 631 470
Other long-term liabilities 55 62 363 420
Total long-term liabilities 1,411 1,425 9,336 9,651
Total liabilities 3,028 2,950 20,034 19,980
Equity
Total equity 3,256 2,601 21,543 17,617
Total equity 3,256 2,601 21,543 17,617
Total liabilities and equity 6,284 5,550 41,578 37,597
11
Abridged Consolidated Cash Flow Statement for the Second Quarter
Q2 2018 Q2 2017 Q2 2018 Q2 2017
USD (m) USD (m) RMB (m) RMB (m)
Cash flow from operating activities:
Cash flow from operating activities 156 323 995 2,212
Cash flow from operating activities 156 323 995 2,212
Investing activities:
Additions to fixed and intangible assets -48 -58 -304 -399
Proceeds from disposal of fixed and intangible assets - 13 1 91
Other investing activities -1 16 -7 109
Cash flow used for investing activities -49 -29 -310 -199
Financing activities:
Receipt of loans from banks and other lenders - 1 - 5
Repayment of loans from banks and other lenders -33 -44 -212 -300
Other financing activities -40 -39 -258 -269
Cash flow from (used for) financing activities -74 -82 -470 -563
Effects of exchange rate movement on cash and cash -14 0 209 -75
equivalents
Net change in cash and cash equivalents 20 211 424 1,375
Cash and cash equivalents at the beginning of the period 890 458 5,597 3,163
Cash and cash equivalents at the end of the period 910 670 6,021 4,538
Free Cash Flow 72 257 453 1,759
12
Abridged Consolidated Cash Flow Statement for the Half-Year
H1 2018 H1 2017 H1 2018 H1 2017
USD (m) USD (m) RMB (m) RMB (m)
Cash flow from operating activities:
Cash flow from operating activities 122 328 780 2,249
Cash flow from operating activities 122 328 780 2,249
Investing activities:
Additions to fixed and intangible assets -421 -105 -2,678 -723
Proceeds from disposal of fixed and intangible assets 380 14 2,413 94
Other investing activities 0 21 1 145
Cash flow used for investing activities -41 -70 -265 -484
Financing activities:
Receipt of loans from banks and other lenders - 15 - 105
Repayment of loans from banks and other lenders -322 -91 -2,048 -625
Other financing activities -48 -65 -308 -446
Cash flow from (used for) financing activities -370 -141 -2,356 -966
Effects of exchange rate movement on cash and cash -4 0 -2 -95
equivalents
Net change in cash and cash equivalents -294 117 -1,843 704
Cash and cash equivalents at the beginning of the period 1,204 553 7,864 3,834
Cash and cash equivalents at the end of the period 910 670 6,021 4,538
Free Cash Flow 42 213 254 1,452
13
Notes to Abridged Consolidated Financial Statements
Note 1: Basis of preparation
Basis of presentation and accounting policies: The abridged consolidated financial statements for the
quarters and half-years ended June 30, 2018 and 2017 incorporate the financial statements of Hubei Sanonda
Ltd. (so called prior to its expected name change) and of all of its subsidiaries (“The Combined Company”),
including Adama Agricultural Solutions Ltd. (“Solutions”) and its subsidiaries.
The Combined Company has adopted the Accounting Standards for Business Enterprises issued by the
Ministry of Finance (the "MoF") and the implementation guidance, interpretations and other relevant provisions
issued or revised subsequently by the MoF (collectively referred to as "CASBE").
Solutions’ consolidated financial statements are prepared in accordance with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
The abridged consolidated financial statements contained in this release are presented in both Chinese
Renminbi (RMB) as the Combined Company’s shares are traded on the Shenzhen Stock Exchange as well as
in United States dollars ($) as this is the major currency in which the Combined Company’s business is
conducted. For the purposes of this release, a customary convenience translation has been used for the
translation from RMB to US dollars, with Income Statement and Cash Flow items being translated using the
quarterly average exchange rate, and Balance Sheet items being translated using the exchange rate at the
end of the period.
The preparation of financial statements requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimated.
Note 2: Abridged Financial Statements
For ease of use, the Financial Statements shown in this release have been abridged as follows:
Abridged Consolidated Income Statement:
“Operating expenses” includes selling and distribution expenses; general and administrative (including
research and development); impairment losses; gain (loss) from disposal of assets and non-operating
income and expenses
“Financial expenses and investment income” includes net financing expenses; gains from changes in
fair value; and investment income (including share of income of equity accounted investees)
Abridged Consolidated Balance Sheet:
“Other current assets, receivables and prepaid expenses” includes financial assets at fair value
through profit or loss; financial assets in respect of derivatives; prepayments; other receivables; and
other current assets
“Fixed assets, net” includes fixed assets and construction in progress
“Intangible assets, net” includes intangible assets and goodwill
“Other non-current assets” includes assets available for sale; long-term equity investments; long-term
receivables; investment property; and other non-current assets
“Loans and credit from banks and other lenders” includes short-term loans and non-current liabilities
due within one year
“Other current liabilities” includes financial liabilities in respect of derivatives; payables for employee
benefits, taxes, interest, dividends and others; advances from customers and other current liabilities
“Other long-term liabilities” includes long-term payables, provisions, deferred income and other non-
current liabilities
14
Analysis of Gaps between Adjusted Income Statement and Reported
Income Statement in Financial Statements
Q2 Adjusted Adjustments Reported
USD(m) Q2 2018 Q2 2017 Q2 2018 Q2 2017 Q2 2018 Q2 2017
Revenues 1,023 937 - - 1,023 937
Gross profit 342 333 - - 342 333
Operating expenses 205 194 -22 - 228 194
Operating income (EBIT) 136 139 22 - 114 139
Income before taxes 103 98 22 - 81 99
Net income 72 81 20 1 52 81
EBITDA 188 190 1 -10 187 200
Earnings per share 0.0295 0.0348 0.0083 0.0002 0.0212 0.0345
Q2 Adjusted Adjustments Reported
RMB(m) Q2 2018 Q2 2017 Q2 2018 Q2 2017 Q2 2018 Q2 2017
Revenues 6,527 6,426 - - 6,527 6,426
Gross profit 2,179 2,286 - -1 2,179 2,287
Operating expenses 1,310 1,332 -143 2 1,453 1,331
Operating income (EBIT) 868 954 143 -2 726 956
Income before taxes 658 675 143 -2 515 677
Net income 461 558 130 4 331 554
EBITDA 1,200 1,301 6 -71 1,194 1,372
Earnings per share 0.1884 0.2384 0.0532 0.0017 0.1352 0.2367
H1 Adjusted Adjustments Reported
USD(m) H1 2018 H1 2017 H1 2018 H1 2017 H1 2018 H1 2017
Revenues 2,045 1,859 - - 2,045 1,859
Gross profit 694 663 1 - 692 663
Operating expenses 421 381 282 -9 140 390
Operating income (EBIT) 273 283 -280 9 553 274
Income before taxes 206 221 -280 9 486 212
Net income 157 200 -214 8 372 192
EBITDA 379 387 -311 -12 689 399
Earnings per share 0.0642 0.0852 -0.0877 0.0034 0.1518 0.0818
H1 Adjusted Adjustments Reported
RMB(m) H1 2018 H1 2017 H1 2018 H1 2017 H1 2018 H1 2017
Revenues 13,026 12,770 - - 13,026 12,770
Gross profit 4,418 4,557 9 -1 4,408 4,558
Operating expenses 2,681 2,615 1,790 -63 892 2,678
Operating income (EBIT) 1,736 1,942 -1,780 62 3,516 1,879
Income before taxes 1,310 1,521 -1,780 62 3,090 1,459
Net income 1,000 1,372 -1,363 55 2,363 1,317
EBITDA 2,412 2,645 -1,976 -86 4,387 2,731
Earnings per share 0.4086 0.5858 -0.5571 0.0235 0.9658 0.5624
15
Income Statement Adjustments
Q2 2018 Q2 2017 Q2 2018 Q2 2017
USD (m) USD (m) RMB (m) RMB (m)
Net Income (as Reported) 51.9 80.8 330.8 554.3
Non-cash legacy amortization of 2011 PPA for acquisition of Solutions, net of tax 9.5 9.5 60.6 65.2
Non-cash Amortization of Transfer assets from Syngenta related to 2017 ChemChina 10.2 - 64.8 -
acquisition of Syngenta
One-time capital gain from sale of EU and US registrations, related to 2017 ChemChina - -8.6 - -59.0
acquisition of Syngenta, net of taxes
Reinstatement of depreciation expenses due to classification of to-be-divested - -1.4 - -9.6
European registrations as “Held-for-Sale”, related to 2017 ChemChina acquisition of
Syngenta
Adjustment of 2017 LTI provision made in Q4 to accrual over the full year - -1.8 - -12.2
Non-core asset disposal 0.8 - 4.9 -
Net expense related to conclusion of 1985 tax claim in Brazil - 2.9 - 19.6
Total adjustments 20.4 0.6 130.3 3.9
Net Income (as Adjusted) 72.3 81.4 461.0 558.2
H1 2018 H1 2017 H1 2018 H1 2017
USD (m) USD (m) RMB (m) RMB (m)
Net Income (as Reported) 371.5 191.6 2,362.8 1,317.0
Non-cash legacy amortization of 2011 PPA for acquisition of Solutions, net of tax 19.0 19.0 121.1 130.6
Non-cash Amortization of Transfer assets from Syngenta related to 2017 ChemChina 10.2 - 64.8 -
acquisition of Syngenta
One-time capital gain from sale of EU and US registrations, related to 2017 ChemChina -244.8 -8.6 -1,556.6 -59.0
acquisition of Syngenta, net of taxes
Reinstatement of depreciation expenses due to classification of to-be-divested -2.6 -1.4 -16.5 -9.6
European registrations as “Held-for-Sale”, related to 2017 ChemChina acquisition of
Syngenta
Adjustment of 2017 LTI provision made in Q4 to accrual over the full year - -3.9 - -26.6
Non-core asset disposal 2.3 - 14.8 -
Combination Transaction – one time taxes 1.5 - 9.4 -
Net expense related to conclusion of 1985 tax claim in Brazil - 2.9 - 19.6
Total adjustments -214.5 8.0 -1,363.1 54.9
Net Income (as Adjusted) 157.0 199.6 999.7 1,371.9
16
Exchange Rate Data for the Combined Company's Principal
Functional Currencies
June 30 Q2 Average H1 Average
2018 2017 Change 2018 2017 Change 2018 2017 Change
EUR/USD 1.166 1.140 2.2% 1.193 1.099 8.6% 1.211 1.082 11.9%
USD/BRL 3.856 3.308 (16.6%) 3.606 3.214 (12.2%) 3.425 3.178 (7.8%)
USD/PLN 3.744 3.706 (1.0%) 3.575 3.838 6.9% 3.487 3.949 11.7%
USD/ZAR 13.701 13.033 (5.1%) 12.623 13.033 3.1% 12.284 13.214 7.0%
AUD/USD 0.739 0.768 (3.7%) 0.757 0.751 0.8% 0.771 0.754 2.3%
GBP/USD 1.317 1.299 1.4% 1.361 1.278 6.5% 1.376 1.258 9.4%
USD/ILS 3.650 3.496 (4.4%) 3.570 3.589 0.5% 3.514 3.661 4.0%
USD LIBOR 3M 2.34% 1.29% 80.9% 5..2% 1.20% 95.2% 5.22% 1.13% 48.8%
June 30 Q2 Average H1 Average
2018 2017 Change 2018 2017 Change 2018 2017 Change
USD/RMB 6.617 6.774 (2.3%) 6.376 6.857 (7.0%) 6.367 6.870 (7.3%)
EUR/RMB 7.714 7.724 (0.1%) 7.605 7.533 1.0% 7.708 7.432 3.7%
RMB/BRL 0.583 0.488 (19.3%) 0.565 0.469 (20.7%) 0.538 0.575 6.4%
RMB/PLN 0.566 0.547 (3.4%) 0.561 0.560 (0.2%) 0.548 0.575 4.7%
RMB/ZAR 0.483 0.520 7.1% 0.505 0.520 2.9% 0.518 0.520 0.3%
AUD/RMB 4.892 5.199 (5.9%) 4.828 5.149 (6.2%) 4.912 5.181 (5.2%)
GBP/RMB 8.715 8.801 (1.0%) 8.679 8.764 (1.0%) 8.761 8.642 1.4%
RMB/ILS 0.552 0.516 (6.9%) 0.560 0.523 (7.0%) 0.552 0.533 (3.6%)
RMB SHIBOR 3M 4.155% 4.50% (7.7%) 4.190% 4.474% (6.3%) 4.441% 4.277% 3.8%
17
