ADAMA Reports First Quarter 2022 Results
Strong performance in Q1, with continued price increases while maintaining volume
growth, significant increase in net profit
First Quarter 2022 Highlights:
Sales up 28% to an all-time quarterly record-high of $1,420 million (RMB: +25%), driven by 18%
higher prices and 14% volume growth
Improvement of Opex/Sales ratio of 19.8% vs. 20.1% in Q1 2021
Adjusted EBITDA up 28% to $201 million (RMB: +25%)
Adjusted net income up 44% to $75 million; Reported net income nearly tripled to $67 million
(RMB: +187%)
BEIJING, CHINA and TEL AVIV, ISRAEL, April 27, 2022 – ADAMA Ltd. (the “Company”) (SZSE
000553), today reported its financial results for the first quarter ended March 31, 2022.
Ignacio Dominguez, President and CEO of ADAMA, said, "The first quarter has seen us deliver
an extremely strong start to the year, with a combination of higher prices and continued volume
growth. Indeed, over the past two years, we have seen robust demand for crop protection products
as a result of high agricultural commodity prices and strong farmer profitability. Now in the first
quarter, we are reminded once again that crop protection is a vital component in ensuring global
food security. Uncertainties in the supply from Ukraine and Russia of agricultural inputs, such as
fertilizers, as well as agricultural produce like wheat, barley and sunflowers, have increased
concerns regarding food security. This encourages agricultural production in other geographies and
exacerbates an already tight global supply of all agricultural inputs. We hope that the terrible
situation in Eastern Europe reaches a peaceful resolution as fast as possible, and ADAMA is
committed to play its role in ensuring food security, in this region and globally, while continuing to
provide support to our people and our customers as they navigate through this very difficult time."
Table 1. Financial Performance Summary
As Reported Adjustments Adjusted
USD (m) Q1 Q1 Q1 Q1 Q1 Q1
% Change % Change
2022 2021 2022 2021 2022 2021
Revenues 1,420 1,109 +28% - - 1,420 1,109 +28%
Gross profit 360 305 +18% 54 17 414 322 +29%
% of sales 25.4% 27.5% 29.2% 29.0%
Operating income (EBIT) 124 65 +90% 9 33 133 98 +35%
% of sales 8.8% 5.9% 9.4% 8.9%
Income before taxes 71 29 +148% 9 33 80 62 +30%
% of sales 5.0% 2.6% 5.7% 5.6%
Net income 67 23 +193% 8 29 75 52 +44%
% of sales 4.7% 2.1% 5.3% 4.7%
EPS
- USD 0.0289 0.0099 0.0322 0.0223
- RMB 0.1836 0.0639 0.2045 0.1447
EBITDA 203 138 +48% (2) 19 201 157 +28%
% of sales 14.3% 12.4% 14.2% 14.2%
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Notes:
“As Reported” denotes the Company’s financial statements according to the Accounting Standards for Business Enterprises and the
implementation guidance, interpretations and other relevant provisions issued or revised subsequently by the Chinese Ministry of Finance
(the “MoF) (collectively referred to as “ASBE”). Note that in the reported financial statements, as a result of recent changes in the ASBE
guidelines [IAS 37], certain items as of Q4 2021 (specifically certain transportation costs and certain idleness charges) have been
reclassified from Operating Expenses to COGS. Please see the appendix to this release for further information.
Relevant income statement items contained in this release are also presented on an “Adjusted” basis, which exclude items that are of a
transitory or non-cash/non-operational nature that do not impact the ongoing performance of the business, and reflect the way the
Company’s management and the Board of Directors view the performance of the Company internally. The Company believes that
excluding the effects of these items from its operating results allows management and investors to effectively compare the true underlying
financial performance of its business from period to period and against its global peers. A detailed summary of these adjustments appears
in the appendix below.
The number of shares used to calculate both basic and diluted earnings per share in Q1 of both 2021 and 2022 is 2,329.8 million shares.
The general crop protection market environment
Crop prices increased sharply during Q1 2022 as a result of concerns regarding supply, due mainly
to the Russia-Ukraine conflict, and also due to persistent dryness in parts of South America. Prices
are generally expected to remain high throughout 2022, incentivizing another year of increases in
global planted areas. As a result, crop protection demand remains strong globally as farmers strive
to maximize yields in this high crop price environment. Farmers continue to face elevated production
costs, mainly from higher fertilizer prices resulting from disruption to supply and tight availability
caused by the Russia-Ukraine conflict, yet their farming activities are nevertheless still very
profitable in most regions.
The challenging cost environment of 2021 has extended into 2022. Global energy prices further
increased during the quarter, impacted by Russia's strong share of global gas exports. In addition,
global freight and logistics costs have recently increased again due to oil prices going up, while the
availability of shipping resources continues to be limited. Despite some easing in procurement prices
for raw materials, intermediates and active ingredients in China during the quarter, prices are
expected to remain generally elevated and could increase further due to production disruptions and
tight supply in China as COVID-19 impacts the country. Strong global crop protection demand, as
well as the high energy prices, may exert additional upward pressure on such procurement prices.
Additionally, the availability of certain intermediates, such as co-formulants, has become uncertain
as higher energy prices have decreased the economic viability of their production, causing a spike in
their prices.
Portfolio Development Update
In line with ADAMA's efforts to differentiate its product portfolio through unique formulations, during
the first quarter of 2022, ADAMA registered and launched multiple new products in markets across
the globe. Among these were:
Launch in Canada of SORADUO, a broad-spectrum, long-lasting fungicide against
Fusarium in wheat and barley that includes ADAMA's unique formulation of Prothioconazole
and Tebuconazole. ADAMA is one of the first companies to produce in-house the recently
off-patent Prothioconazole;
Continued rollout in Europe of TIMELINE FX, a three-way herbicide mixture in an advanced
formulation for a wide range of weeds in cereals;
Launch in Canada of ZIVATA, a broad-spectrum insecticide with an advanced, renewably
sourced formulation using sustainable plant-based materials;
Registration in the USA of CORMORAN, a broad range, dual mode, long-lasting insecticide
for use in tree nuts;
Registration in Australia of FIGHTBACK, a dual mode herbicide for use in fallow land,
pastures and others;
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Registration in Mexico, Peru, Ecuador and other countries in Central America of MATTOK a
dual mode systematic broad-spectrum, long-lasting fungicide with unique anti-stress
technology formulation for rice and corn.
Financial Highlights
Revenues in the first quarter grew by 28% (+25% in RMB terms) to $1,420 million, driven by a
significant 18% increase in prices, a trend which started in the third quarter of 2021. The markedly
higher prices were complemented by continued strong volume growth (+14%), including the
contribution of newly acquired companies, achieved despite supply challenges in the market, which
were only slightly moderated by the adverse impact of exchange rate movements.
Table 2. Regional Sales Performance
Q1 2022 Q1 2021 Change Change
$m $m USD CER
Europe 357 344 +3.6% +5.7%
North America 284 189 +50.4% +49.9%
Latin America 234 177 +32.5% +31.5%
Asia Pacific 388 241 +60.8% +62.8%
Of which China 237 124 +90.6% +87.7%
India, Middle East & Africa 157 158 -0.5% +15.8%
Total 1,420 1,109 +28.0% +31.2%
CER: Constant Exchange Rates
Europe: A strong performance in France, Romania and Poland, bolstered by good demand and
high prices, more than offset a decline in sales in Ukraine, drought conditions in parts of southern
Europe, and the adverse impact of exchange rates. The Company benefited from the sales in
various countries of recently launched products POLEPOSITION and TIMELINE FX.
North America: The remarkably strong growth in sales in the first quarter was driven by the
Consumer & Professional business, which experienced robust demand, allowing for price increases
in light of concerns regarding potential shortages. This was further complemented by continued
growth in US crop protection, driven both by higher volumes as well as higher prices, reflecting
generally strong demand, especially in corn, soybeans, cereals and rice.
Latin America: Strong growth was achieved in Brazil due to early demand from farmers and higher
prices, supported by good soybean and corn planting seasons, and despite drought conditions in the
south of the country. This was complemented by demand for the Company's differentiated products,
including the fungicides ARMERO, ACROSS and the herbicide ARADDO, which are part of
ADAMA's leading soybean protection offering.
Sales also grew in most of the countries of the wider region, driven by price increases, as the
Company continues to strengthen its positioning throughout the region.
Asia-Pacific: The Company's rapid growth in Asia Pacific during the first quarter was led by the
particularly strong increase in sales in China. The growth in China was led firstly by the sales of raw
materials and intermediates, which continued to benefit from strong demand and high prices in light
of ongoing tight supply following shutdowns in competing facilities due to environmental inspections
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and COVID-19, which has also disrupted and slowed down transportation. In addition, sales of
ADAMA's branded, formulated portfolio in China also grew significantly, and were supported by a
pleasing performance from the commercial activities and portfolio acquired from Huifeng at the end
of 2020.
In the wider APAC region, strong sales were delivered in the Pacific region and in certain countries
in the Far East, benefiting from favorable seasonal conditions, and despite the impact of the
weakening of the Australian dollar.
India, Middle East & Africa: Sales in the region grew in constant exchange rate terms, mainly led
by India, and despite the cold and rainy season in the Middle East and Africa which brought low
insect and disease pressure. This growth is particularly noteworthy in light of a very strong first
quarter in 2021 and was offset by the adverse impact of the depreciation of the Turkish Lira on the
USD denominated sales.
Gross Profit reported in the first quarter was up 18% to $360 million (gross margin of 25.4%)
compared to $305 million (gross margin of 27.5%) in the same quarter last year.
Adjustments to reported results: The adjusted gross profit includes all idleness costs and
excludes transportation costs to third parties and its marketing subsidiaries (classified
under operating expenses).
In the reported results, as of Q4 2021, following recent changes in the guidelines in
China, the aforementioned transportations costs and opex idleness have been
reclassified from operating expenses to costs of goods (not impacting the operating
results), while these expenses were not recorded in the cost of goods in Q1 2021, but
rather in the operating expenses.
Additionally, certain extraordinary charges related largely to a temporary disruption of the
production of certain products, were adjusted in Q1 2021. These charges have
significantly declined in Q1 2022, as the relocation and upgrade of the manufacturing
Jingzhou site in China has been completed and is now almost fully operational.
Excluding the impact of the abovementioned extraordinary items, adjusted gross profit in the first
quarter was up 29% to $414 million (gross margin of 29.2%) compared to $322 million (gross margin
of 29.0%) in the same quarter last year.
In the quarter, the significantly higher gross profit and improvement in the adjusted gross margin
were mainly driven by the markedly higher prices, complemented by continued volume growth, all of
which more than offset higher logistics, procurement and production costs as well as the negative
FX impact.
Operating expenses reported in the first quarter were $236 million (16.6% of sales) compared to
$239 million (21.6% of sales) in the same quarter last year.
Adjustments to reported results: please refer to the explanation regarding adjustments to
the gross profit in respect to certain transportation costs and idleness.
Additionally, the Company recorded certain non-operational, mostly non-cash, charges
within its reported operating expenses amounting to $5.7 million in Q1 2022 in
comparison to $16.0 million in Q1 2021. These charges include mainly (i) non-cash
amortization charges in respect of Transfer assets received from Syngenta related to the
2017 ChemChina-Syngenta acquisition, (ii) charges related mainly to the non-cash
amortization of intangible assets created as part of the Purchase Price Allocation (PPA)
on acquisitions, with no impact on the ongoing performance of the companies acquired,
as well as other M&A-related costs and (iii) non-cash, share-based compensation
(incentive plans). For further details on these non-operational charges, please see the
appendix to this release.
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Excluding the impact of the abovementioned non-operational charges, adjusted operating
expenses in the quarter were $281 million (19.8% of sales), compared to $223 million (20.1% of
sales) in the corresponding period last year.
The higher operating expenses in the quarter primarily reflect a doubtful debt provision for trade
receivables in Ukraine, higher transportation and logistics costs driven by both volumes being
transported and an increase in freight costs, as well as the inclusion of recent acquisitions.
Operating income reported in the first quarter was up 90% to $124 million (8.8% of sales)
compared to $65 million (5.9% of sales) in the same quarter last year.
Excluding the impact of the abovementioned non-operational, mostly non-cash items, adjusted
operating income in the first quarter was up 35% to $133 million (9.4% of sales) compared to $98
million (8.9% of sales) in the same quarter last year.
EBITDA reported in the first quarter was up 48% to $203 million (14.3% of sales) compared to $138
million (12.4% of sales) in the same quarter last year.
Excluding the impact of the abovementioned non-operational, mostly non-cash items, adjusted
EBITDA in the first quarter was up 28% to $201 million (14.2% of sales) compared to $157 million
(14.2% of sales) in the same quarter last year.
Financial expenses and investment income were $53 million in the first quarter, compared to $36
million in the corresponding period last year. The higher financial expenses in the quarter were
mainly driven by the net effect of the increase in the Israeli CPI on the ILS-denominated, CPI-linked
bonds, and higher non-cash charges related to put options in respect of minority interests on recent
acquisitions.
Taxes on income in the first quarter were $5 million, compared to $9 million in the corresponding
period last year. The first quarter is generally characterized by a low effective tax rate compared to
the effective tax rate of the Company over the full year. This is mainly due to the generation of
profits by subsidiary companies within ADAMA whose tax rates are lower relative to the Company’s
aggregate effective tax rate, as well as to the method of calculation of tax assets related to
unrealized profits. In the first quarter of 2022, the low effective tax rate also reflects the tax income
due to non-cash impact on the value of non-monetary tax assets of the significant strengthening of
the BRL, while in the first quarter of 2021, the Company recorded tax expenses due to the impact of
the weakening of the BRL.
Net income attributable to the shareholders of the Company reported in the first quarter was
$67 million (4.7% of sales), up 193% compared to $23 million (2.1% of sales) in the corresponding
period last year.
Excluding the impact of the abovementioned extraordinary and non-operational charges, adjusted
net income in the first quarter was $75 million (5.3% of sales), up 44% compared to $52 million (4.7%
of sales) in the corresponding period last year.
Trade working capital at March 31, 2022 was $2,695 million compared to $2,604 million at the
same point last year. The slight increase in working capital was due to an increase in trade
receivables, driven largely by its strong sales growth as well as the inclusion of a recently acquired
company. The Company is holding higher inventory levels due mainly to the expectation of further
volume growth in coming quarters as well as anticipated supply shortages and inventory costs
increases. This increase in inventory levels was offset by higher trade payables. The trade
capital/last twelve months sales ratio of 53% at March 31, 2022 in comparison to 61%, at March 31,
2021 demonstrates the improved efficiency in the Company's management of its working capital.
Cash Flow: Operating cash flow of $286 million was consumed in the quarter, compared to $129
million consumed in the corresponding period last year. The negative operating cash flow, which is
5
seasonally typical for ADAMA in the first quarter, also reflects the higher build-up of working capital
in the first quarter compared to the parallel quarter last year for supporting the growth of the
business.
Net cash used in investing activities was $90 million in the quarter, compared to $109 million in the
corresponding period last year. The cash used in investing activities in the first quarter of 2022 is
largely related to investments in our differentiated portfolio (Core Leap) in Israel and Brazil as well as
in China relocations. In the first quarter of 2021, the Company also recorded such investments in
addition to the completion of the payment related to the acquisition of Jiangsu Huifeng’s domestic
commercial crop protection business.
Free cash flow of $386 million was consumed in the first quarter compared to $248 million
consumed in the corresponding period last year, reflecting the aforementioned operating and
investing cash flow dynamics.
Table 3. Revenues by operating segment
First quarter sales by segment
Q1 2022 Q1 2021
% %
USD (m) USD (m)
Crop Protection 1,271 89.5% 1,007 90.8%
Intermediates and Ingredients 149 10.5% 102 9.2%
Total 1,420 100% 1,109 100.0%
First quarter sales by product category
Q1 2022 Q1 2021
% %
USD (m) USD (m)
Herbicides 659 46.4% 477 43.0%
Insecticides 351 24.7% 314 28.3%
Fungicides 261 18.4% 216 19.5%
Intermediates and Ingredients 149 10.5% 102 9.2%
Total 1,420 100% 1,109 100.0%
Note: the sales split by product category is provided for convenience purposes only and is not representative of the way the Company is
managed or in which it makes its operational decisions.
Further Information
All filings of the Company, together with a presentation of the key financial highlights of the period,
can be accessed through the Company website at www.adama.com.
About ADAMA
ADAMA Ltd. is a global leader in crop protection, providing solutions to farmers across the world to
combat weeds, insects and disease. ADAMA has one of the widest and most diverse portfolios of
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active ingredients in the world, state-of-the art R&D, manufacturing and formulation facilities,
together with a culture that empowers our people in markets around the world to listen to farmers
and ideate from the field. This uniquely positions ADAMA to offer a vast array of distinctive
mixtures, formulations and high-quality differentiated products, delivering solutions that meet local
farmer and customer needs in over 100 countries globally. For more information, visit us at
www.ADAMA.com and follow us on Twitter at @ADAMAAgri.
Contact
Rivka Neufeld Zhujun Wang
Global Investor Relations China Investor Relations
Email: ir@adama.com Email: irchina@adama.com
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Abridged Adjusted Consolidated Financial Statements
The following abridged consolidated financial statements and notes have been prepared as described in Note 1 in this
appendix. While prepared based on the principles of Chinese Accounting Standards (ASBE), they do not contain all of the
information which either ASBE or IFRS would require for a complete set of financial statements, and should be read in
conjunction with the consolidated financial statements of both ADAMA Ltd. and Adama Agricultural Solutions Ltd. as filed
with the Shenzhen and Tel Aviv Stock Exchanges, respectively.
Relevant income statement items contained in this release are also presented on an “Adjusted” basis, which exclude items
that are of a one-time or non-cash/non-operational nature that do not impact the ongoing performance of the business, and
reflect the way the Company’s management and the Board of Directors view the performance of the Company internally.
The Company believes that excluding the effects of these items from its operating results allows management and
investors to effectively compare the true underlying financial performance of its business from period to period and against
its global peers.
Abridged Consolidated Income Statement for the First Quarter
Q1 2022 Q12021 Q1 2022 Q1 2021
Adjusted1
USD (m) USD (m) RMB (m) RMB (m)
Revenues 1,420 1,109 9,016 7,187
Cost of Sales 989 782 6,282 5,069
Other costs 16 5 105 34
Gross profit 414 322 2,630 2,085
% of revenue 29.2% 29.0% 29.2% 29.0%
Selling & Distribution expenses 199 178 1,263 1,156
General & Administrative expenses 47 32 296 208
Research & Development expenses 21 17 130 110
Other operating expenses 15 -4 95 -26
Total operating expenses 281 223 1,785 1,448
% of revenue 19.8% 20.1% 19.8% 20.1%
Operating income (EBIT) 133 98 844 637
% of revenue 9.4% 8.9% 9.4% 8.9%
Financial expenses and investment income 53 36 335 236
Income before taxes 80 62 509 401
Taxes on Income 5 9 33 58
Net Income 75 53 477 342
Attributable to:
Non-controlling interest 0 1 0 5
Shareholders of the Company 75 52 477 337
% of revenue 5.3% 4.7% 5.3% 4.7%
Adjustments 8 29 49 188
Reported Net income attributable to the
67 23 428 149
shareholders of the Company
% of revenue 4.7% 2.1% 4.7% 2.1%
Adjusted EBITDA 201 157 1,277 1,018
% of revenue 14.2% 14.2% 14.2% 14.2%
2
Adjusted EPS – Basic 0.0322 0.0223 0.2045 0.1447
– Diluted 0.0322 0.0223 0.2045 0.1447
2
Reported EPS – Basic 0.0289 0.0099 0.1836 0.0639
– Diluted 0.0289 0.0099 0.1836 0.0639
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”.
2
The number of shares used to calculate both basic and diluted earnings per share in in Q1 of both 2021 and 2022 is 2,329.8 million
shares.
8
Abridged Consolidated Balance Sheet
March 31 March 31 March 31 March 31
2022 2021 2022 2021
USD (m) USD (m) RMB (m) RMB (m)
Assets
Current assets:
Cash at bank and on hand 598 596 3,796 3,915
Bills and accounts receivable 1,857 1,707 11,789 11,220
Inventories 2,151 1,663 13,657 10,931
Other current assets, receivables and
333 383 2,117 2,516
prepaid expenses
Total current assets 4,940 4,349 31,359 28,582
Non-current assets:
Fixed assets, net 1,651 1,235 10,480 8,115
Rights of use assets 74 80 467 528
Intangible assets, net 1,506 1,490 9,560 9,790
Deferred tax assets 157 133 994 874
Other non-current assets 114 83 725 542
Total non-current assets 3,501 3,021 22,227 19,849
Total assets 8,441 7,370 53,587 48,431
Liabilities
Current liabilities:
Loans and credit from banks and other
438 618 2,781 4,063
lenders
Bills and accounts payable 1,324 781 8,404 5,131
Other current liabilities 905 760 5,745 4,995
Total current liabilities 2,667 2,159 16,931 14,190
Long-term liabilities:
Loans and credit from banks and other
655 368 4,156 2,416
lenders
Debentures 1,211 1,195 7,690 7,851
Deferred tax liabilities 52 59 330 387
Employee benefits 121 100 770 657
Other long-term liabilities 371 170 2,357 1,120
Total long-term liabilities 2,411 1,892 15,303 12,431
Total liabilities 5,078 4,051 32,234 26,620
Equity
Total equity 3,364 3,319 21,352 21,811
Total liabilities and equity 8,441 7,370 53,587 48,431
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Abridged Consolidated Cash Flow Statement for the First Quarter
Q1 2022 Q1 2021 Q1 2022 Q1 2021
USD (m) USD (m) RMB (m) RMB (m)
Cash flow from operating activities:
Cash flow from operating activities -286 -129 -1,814 -838
Cash flow from operating activities -286 -129 -1,814 -838
Investing activities:
Acquisitions of fixed and intangible assets -92 -91 -584 -588
Proceeds from disposal of fixed and intangible assets 1 1 3 9
Acquisition of subsidiaries 0 -8 - -55
Other investing activities 1 -11 7 -71
Cash flow used for investing activities -90 -109 -574 -704
Financing activities:
Receipt of loans from banks and other lenders
153 287 969 1,862
Repayment of loans from banks and other lenders -27 -38 -172 -244
Interest payment and other -10 -10 -61 -63
Dividends to shareholders -
- - -
Other financing activities -65 5 -410 26
Cash flow from (used for) financing activities 51 244 327 1,581
Effects of exchange rate movement on cash and cash
0 -2 -24 18
equivalents
Net change in cash and cash equivalents -325 4 -2,085 57
Cash and cash equivalents at the beginning of the period 903 588 5,759 3,835
Cash and cash equivalents at the end of the period 579 592 3,674 3,892
Free Cash Flow -386 -248 -2,448 -1,605
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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 ended March 31, 2022 and 2021 incorporate the financial statements of ADAMA Ltd. and of all of its
subsidiaries (the “Company”), including Adama Agricultural Solutions Ltd. (“Solutions”) and its subsidiaries.
The Company has adopted the Accounting Standards for Business Enterprises (ASBE) 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 “ASBE”). Note that in the reported financial
statements, as a result of recent changes in the ASBE guidelines (IAS 37), certain items as of Q4 2021
(specifically certain transportation costs and certain idleness charges) have been reclassified from Operating
Expenses to COGS. See the notes to the financial statements for more details in this regard.
The abridged consolidated financial statements contained in this release are presented in both Chinese
Renminbi (RMB), as the 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 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:
“Gross profit” in this release is revenue less costs of goods sold, taxes and surcharges, inventory
impairment and other idleness charges (in addition to those already included in costs of goods sold);
part of the idleness charges is removed in the Adjusted financial statements
“Other operating expenses” includes impairment losses (not including inventory impairment); gain
(loss) from disposal of assets and non-operating income and expenses
“Operating expenses” in this release differ from those in the formally reported financial statements in
that in the reported financial statements, as a result of recent changes in the ASBE guidelines (IAS 37),
certain items as of Q4 2021 (specifically certain transportation costs and certain idleness charges)
have been reclassified from Operating Expenses to COGS.
“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 held for trading;
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 other equity investments; 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
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Income Statement Adjustments
Q1 2022 Q1 2021 Q1 2022 Q1 2021
USD (m) USD (m) RMB (m) RMB (m)
Net Income (Reported) 67.3 23.3 427.7 150.8
Adjustments to COGS & Operating Expenses:
1. Amortization of Legacy PPA of 2011 acquisition of Solutions (non-cash) 0.3 0.3 1.6 1.6
2. Amortization of Transfer assets received and written-up due to 2017 ChemChina-
Syngenta transaction (non-cash) 5.6 7.8 35.6 50.8
3. Upgrade & Relocation related costs 1.9 15.4 12.0 99.8
4. Incentive plans (non-cash) (4.1) 4.1 (26.2) 26.8
5. Amortization of acquisition-related PPA (non-cash), other acquisition-related costs 5.1 3.7 32.4 24.3
6. Transportation classification COGS impact 50.9 - 323.2 -
7. Transportation classification OPEX impact (50.9) - (323.2) -
8. Provisions in respect of prior years’ legal- and tax-related costs - 1.6 - 10.3
Total Adjustments to Operating Income (EBIT) 8.7 33.0 55.5 213.6
Total Adjustments to EBITDA (2.4) 19.4 (15.3) 125.6
Adjustments to Taxes
1. Tax shield on Legacy PPA of 2011 acquisition of Solutions 0.0 0.0 0.3 0.3
3. Taxes related to Upgrade & Relocation related costs 0.1 2.4 0.4 15.6
5. Deferred tax on amortization of acquisition-related PPA, other acquisition-related costs 0.9 0.6 5.9 3.9
8. Provisions in tax expenses in respect of prior years’ legal- and tax-related costs - 0.4 - 2.5
Total adjustments to Net Income 7.7 29.5 48.9 191.5
Net Income (Adjusted) 75.0 52.8 476.5 342.3
Total adjustments to Net Income attributable to the shareholders of the Company 7.7 29.1 48.9 188.4
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Notes:
1. Amortization of Legacy PPA of 2011 acquisition of Solutions (non-cash): Under ASBE, since the first combined reporting for Q3 2017, the
Company has inherited the historical “legacy” amortization charge that ChemChina previously was incurring in respect of its acquisition of
Solutions in 2011. This amortization is done in a linear manner on a quarterly basis, most of which will have been completed by the end of 2020.
2. Amortization of Transfer assets received and written-up due to 2017 ChemChina-Syngenta transaction (non-cash): The proceeds from
the Divestment of crop protection products in connection with the approval by the EU Commission of the acquisition of Syngenta by
ChemChina, net of taxes and transaction expenses, were paid to Syngenta in return for the transfer of a portfolio of products in Europe of
similar nature and economic value. Since the products acquired from Syngenta are of the same nature and with the same net economic value
as those divested, and since in 2018 the Company adjusted for the one-time gain that it made on the divested products, the additional
amortization charge incurred due to the written-up value of the acquired assets is also adjusted to present a consistent view of Divestment and
Transfer transactions, which had no net impact on the underlying economic performance of the Company. These additional amortization
charges will continue until 2032 but at a reducing rate, yet will still be at a meaningful level until 2028.
3. Upgrade & Relocation-related costs: These charges all relate to the multi-year Upgrade & Relocation program in China. As part of this
program, production assets located in the old production sites in Jingzhou and Huai’An are being relocated to the new sites, both in 2020 and
in the coming years. Since some of the older production assets may not be able to be relocated, some of these assets which are no longer
operational are being written off (or impaired), while for others, their economic life has been shortened and therefore will be depreciated over a
shorter period. Since these are older assets that were built many years ago and will be replaced by newer production facilities at the new sites,
and since the ongoing operations of the business will not be impacted thereby, the Company adjusts for the impact of all charges related to the
China Upgrade & Relocated program, which include mainly: (i) excess procurement costs incurred as the Company continued to fulfill demand
for its products, in order to protect its market position, through replacement sourcing at significantly higher costs from third-party suppliers (ii)
elevated idleness charges largely related to suspensions at the facilities being relocated as well as to the temporary suspensions of the
Jingzhou site in Q1 2020 (at the outbreak of COVID-19 in Hubei Province).
4. Incentive plans (non-cash): The Company granted its employees, who are mainly non-Chinese residents, a long-term incentive (LTI) in the
form of 'phantom' options, due to the complexity of granting Chinese-listed, equity-settled options to non-Chinese employees. As such, the
Company records an expense, or recognizes income, depending on the fluctuation in the Company’s share price, even though the Company
will not incur any cash impact prior to exercise of the phantom options. To neutralize the impact of such share price movements on the
measurement of the Company’s performance and expected employee compensation and to reflect the existing phantom options, in the
Company’s adjusted financial performance, the LTI is presented on an equity-settled basis in accordance with the value of the existing plan at
the grant date.
5. Amortization of acquisition-related PPA (non-cash) and other acquisition-related costs: Related mainly to the non-cash amortization of
intangible assets created as part of the Purchase Price Allocation (PPA) on acquisitions, with no impact on the ongoing performance of the
companies acquired, as well as other M&A-related costs.
6. Transportation classification COGS impact – as a result of recent changes in the ASBE guidelines [IAS 37], certain items as of Q4 2021
(specifically certain transportation costs and certain idleness charges) have been reclassified from Operating Expenses to COGS.
7. Transportation classification OPEX impact – as a result of recent changes in the ASBE guidelines [IAS 37], certain items as of Q42021
(specifically certain transportation costs and certain idleness charges) have been reclassified from Operating Expenses to COGS.
8. Provisions in tax expenses related to prior years’ activities: Provisions in respect of tax expenses related to activities of prior years.
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Exchange Rate Data for the Company's Principal Functional Currencies
March 31 Q1 Average
2022 2021 Change 2022 2021 Change
EUR/USD 1.109 1.174 (5.5%) 1.122 1.206 (7.0%)
USD/BRL 4.738 5.697 16.8% 5.233 5.473 4.4%
USD/PLN 4.180 3.968 (5.4%) 4.180 3.772 (10.8%)
USD/ZAR 14.51 14.93 2.8% 15.249 14.970 (1.9%)
AUD/USD 0.749 0.761 (1.7%) 0.724 0.773 (6.4%)
GBP/USD 1.312 1.376 (4.6%) 1.342 1.380 (2.7%)
USD/ILS 3.176 3.334 4.7% 3.198 3.270 2.2%
USD LIBOR 3M 0.96% 0.20% 380.5% 0.53% 0.20% 164.4%
March 31 Q1 Average
2022 2021 Change 2022 2021 Change
USD/RMB 6.348 6.571 (3.4%) 6.351 6.481 (2.0%)
EUR/RMB 7.043 7.712 (8.7%) 7.126 6.481 10.0%
RMB/BRL 0.746 0.867 13.9% 0.824 0.844 2.4%
RMB/PLN 0.658 0.604 (9.1%) 0.649 0.604 (7.5%)
RMB/ZAR 2.286 2.271 (0.7%) 2.401 2.271 (5.7%)
AUD/RMB 4.752 5.003 (5.0%) 4.595 5.012 (8.3%)
GBP/RMB 8.332 9.041 (7.8%) 8.520 9.041 (5.8%)
RMB/ILS 0.500 0.507 1.4% 0.504 0.507 0.7%
RMB LIBOR 3M 2.37% 2.64% (9.9%) 2.42% 2.71% (10.8%)
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