Stock Code: 000553 (200553) Stock abbreviation: ADAMA A (B) Announcement No. 2020-37
ADAMA Ltd.
H1 2020 Performance Estimation
The Company and all the directors confirm that the information disclosed herein is true,
accurate, complete and contains no false recording, misleading statement or material
omission.
I. Performance Estimation
1. Estimation period: January 1, 2020 – June 30, 2020
2. Estimated performance: lower compared with the corresponding period last year
Item Current reporting period Same period last year
January to June 2020 January to June 2019
Net income attributable to the 164 – 214
shareholders of the listed
589
company
(RMB in millions) Percentage decrease YoY
63.7% – 72.2%
Basic earnings per share
0.0669 – 0.0873 0.2406
(RMB)
II. Pre-audit of the estimated performance
The estimated results of this period are the preliminary estimation of the Company and have not
been audited nor reviewed by certified accountants.
III. Explanations for Performance Variation
The Company is expecting to deliver record second quarter sales, in both RMB and USD terms,
driven by strong business growth, enabling first half sales to finish in line with those of the same
period last year, crossing the RMB 14 billion mark for the first time and the $2 billion mark for the
third consecutive year.
The solid sales performance in the quarter was achieved in the midst of the ongoing COVID-19
pandemic, which continues to disrupt the global crop protection market, amongst many others.
The pandemic has contributed to the significant weakening of many global currencies against the
US dollar in recent months, most notably the Brazilian Real, Indian Rupee and Turkish Lira, as
well as increased volatility in the Euro and Australian dollar. These currency movements have
negatively impacted the Company’s performance in the first half of the year, as reflected in a
lower sales growth in both USD and RMB terms when compared to the growth in constant
exchange rate (CER) terms, as well as reduced profitability.
Sales
Sales in the second quarter are expected to increase by more than 12% in CER terms, driven by
a strong, double-digit increase in volumes alongside higher prices. In RMB terms, sales are
expected to grow by around 7%, and by a more moderate 3% in USD terms, reflecting the
significant impact of the weaker currencies.
Growth in the second quarter was led by a strong performance in Latin America, driven by Brazil
and Argentina, overcoming the material depreciation of regional currencies as well as robust
growth in the India, Middle East & Africa region, which benefited from favorable weather.
ADAMA continues to grow strongly in China, driven by sales of the Company’s branded,
formulated products, and supporting an almost complete recovery from the first quarter
COVID-19 impact. ADAMA is expecting to deliver robust second-quarter growth also in
Asia-Pacific, led by a strong performance in Australia, benefiting from favorable rainfall in the
country.
Sales in Europe in the second quarter are expected to be in line with those of last year, with
growth in North Europe being offset by a challenging season in South Europe, where a severe
drought over much of the quarter caused a reduction in planted areas in some key crops. Sales
in North America in the second quarter are expected to be lower than those in the same quarter
last year, with challenging weather reducing purchasing from customers in key crops.
Over the first half of 2020, ADAMA generated sales growth of almost 7% in CER terms and is
expecting to report growth of 4% in RMB terms, improving on the sales of the first quarter that
were in line with those of the same period last year, to now exceed RMB 14 billion in sales for
the half year period. This was achieved despite the various impacts of COVID-19, which
continues to pose both numerous challenges to the way the Company is able to do its business,
as well as materially impacting global currencies. In the half year, growth was led by Latin
America, mainly driven by Argentina alongside a pleasing contribution from Peru following an
acquisition there in 2019. The Company grew strongly over the half year also in the India, Africa
and Middle East region, driven by continued robust growth in India and a return to supportive
weather conditions in South Africa, and also saw significant growth in Australia, benefiting from
favorable weather conditions.
Gross Profit
In the second quarter, the Company is expecting to report somewhat lower gross profit
compared to the same period last year, with the material depreciation of global currencies
against the US dollar more than offsetting the strong business growth and moderate price
increases. Similarly, over the half year period, the significant currency weakness against the US
dollar in recent months is expected to outweigh the Company’s resilient business growth,
resulting in reduced gross profit compared to the same period last year.
Operating Profit and EBITDA
In the second quarter, the Company is expecting to report a relatively moderate decline in
Operating Profit and EBITDA, driven by the lower gross profit. The Company continues to
exercise tight control of its operating expenses, which also benefited to some extent from the
weaker currencies. Similarly, in the first half of the year, the lower gross profit is expected to be
only partially offset by a reduction in operating expenses, reflecting the impact of COVID-19
constraints as well as the related weakening of currencies, resulting in lower Operating Profit
and EBITDA than those reported in the same period last year.
Net Income
Net income in the second quarter is expected to be somewhat below that reported in the same
quarter last year, driven by the lower operating income, partially offset by reduced financial
expenses.
Similarly, over the first half of the year, Net Income is expected to be below that reported in the
same period last year, again driven by the reduced operating income. While the Company is
expecting to record lower financial expenses in the first half, this is expected to be outweighed
by markedly higher tax expenses, largely due to the first-quarter impact of the weakening of the
Brazilian Real against the US dollar, which resulted in non-cash tax expenses due to differences
between the functional (US dollar) and tax (local) currencies regarding the value of
non-monetary assets.
The Company’s reported net income in the second quarter and first half will reflect around RMB
109 million and RMB 313 million, respectively, of net expenses in respect of certain one-time,
mostly non-cash items, including mainly:
i. Approximately RMB 67 million in the quarter, and RMB 133 million in the first half, in
non-cash legacy amortization charges in respect of the 2011 PPA for the acquisition of
Adama Agricultural Solutions Ltd. by ChemChina, which charges will conclude by the
end of 2020;
ii. Approximately RMB 53 million in the quarter and RMB 107 million in the first half in
non-cash amortization charges in respect of Transfer assets received from Syngenta
related to the 2017 ChemChina-Syngenta acquisition, which charges in 2020 are
expected to be approximately RMB 215 million (down from RMB 242 million in 2019),
while in the year 2021 they are expected to further reduce to RMB 164 million;
iii. Approximately RMB 66 million in the first half in respect of a one-time provision, mostly
made in the first quarter, for early retirement of certain employees at the Company’s
manufacturing facilities in Israel.
Excluding the impact of the abovementioned one-time, mostly non-cash items, results in the
following:
Adjusted net income in the first half is expected to be between RMB 477 – 527 million,
compared to RMB 887 million in the same period last year;
Adjusted basic earnings per share in the first half is expected to be between RMB 0.1950
– 0.2153, compared to RMB 0.3626 in the same period last year.
IV. Other Remarks
The estimated results above are only preliminary calculations performed by the finance team of
the Company based on initial financial data available to the Company, and have not been audited
or reviewed by the Company's independent auditors. These estimations may change, inter alia,
as a result of the further processing and analysis of the financial data that the Company will
perform for the preparation of its H1 2020 financial statements. Please refer to the H1 2020
Report to be duly disclosed by the Company on August 21, 2020 for specific and accurate
financial information.
The ongoing spread of the COVID-19 pandemic is expected to continue to negatively impact the
performance of the Company in the third quarter, and potentially beyond. The Company
continues to actively manage its response to the outbreak in order to ensure the safety of its
employees and limit the impact on the Company’s performance. 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.
The assessment regarding the second half of the year, and the assessment regarding the 2021
non-cash amortization charges in respect of Transfer assets received from Syngenta related to
the 2017 ChemChina-Syngenta acquisition, both described above, are forward-looking
statements that may not be realized, or may be realized in a different manner than the Company
estimates, inter alia, due to factors that are not in the Company's control, amongst which are
developments in the crop protection market, changes in demand for the Company's products, in
currencies and other macroeconomic trends as well as decisions of regulatory authorities.
The forward-looking assessment does not constitute in any manner whatsoever a substantial
commitment of the Company to investors. Investors are reminded to exercise caution when
making investment decisions.
Media for Information Disclosure of the Company: China Securities Journal, Securities Times, Ta
Kung Pao, and Cninfo (www.cninfo.com.cn).
By order of the Board
ADAMA Ltd.
July 15th, 2020
