ADAMA Reports First Quarter 2023 Results
Sales & Profit impacted by channel inventory
First Quarter 2023 Highlights:
Sales down 11% to $1,259 million (-4% in RMB terms; -7% in CER1 terms), 1% higher prices and
8% decrease in volume
Adjusted EBITDA amounted to $165 million vs. $201 million in Q1 2022
Adjusted net income of $22 million; Reported net income of $12 million
BEIJING, CHINA and TEL AVIV, ISRAEL, April 24, 2023 – ADAMA Ltd. (the “Company”) (SZSE
000553), today reported its financial results for the first quarter ended March 31, 2023.
Ignacio Dominguez, President and CEO of ADAMA, said, "In 2022, supply challenges and rising
crop protection prices led to inventory buildup throughout the supply chain. While market demand is
being supplied by the stockpiles of product in the channel, the high inventory levels and declining raw
material pricing are also supporting a "wait and see" approach. We believe that as the year progresses
and the agricultural season in Latin America and India begins, this inventory will begin to deplete and
the demand ADAMA sees for its products will be invigorated.
"On a personal note, as recently announced, I requested to retire from ADAMA after 22 years with the
Company. Steve Hawkins, who currently serves as Senior Vice President of the Americas, will be
replacing me as President & CEO. I would like to assure all that I will remain at the disposal of the
Company in order to ensure a seamless transition and I am confident that under Steve's leadership
ADAMA will reach new heights."
Table 1. Financial Performance Summary
As Reported Adjustments Adjusted
USD (m) Q1 Q1 Q1 Q1 Q1 Q1
% Change % Change
2023 2022 2023 2022 2023 2022
Revenues 1,259 1,420 (11%) - - 1,259 1,420 (11%)
Gross profit 310 368 (16%) 30 46 340 414 (18%)
% of sales 24.6% 25.9% 27.0% 29.2%
Operating income (EBIT) 92 124 (26%) 10 9 102 133 (24%)
% of sales 7.3% 8.8% 8.1% 9.4%
Income before taxes 10 71 (85%) 10 9 20 80 (74%)
% of sales 0.8% 5.0% 1.6% 5.7%
Net income 12 67 (82%) 9 8 22 75 (71%)
% of sales 1.0% 4.7% 1.7% 5.3%
EPS
- USD 0.0052 0.0289 0.0093 0.0322
- RMB 0.0357 0.1836 0.0633 0.2045
EBITDA 166 203 (18%) (1) (2) 165 201 (18%)
% of sales 13.2% 14.3% 13.1% 14.2%
1 CER – Constant Exchange Rates
1
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, according to the ASBE guidelines
[IAS 37], certain items (specifically certain transportation costs and certain idleness charges) are classified under 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 both Q1 2023 and 2022 is 2,329.8 million shares.
In this table and all tables in this release numbers may not sum due to rounding.
The general crop protection market environment2
In Q1 2023 commodity crop prices continued to decline as the result of a slowing global economy and
better than expected production in some regions. However, crop prices remain elevated above the
10-yr average as crop inventories remain low, supporting positive grower margins.
While Q1 2022 was characterized by early purchases as a result of concerns about product availability
and supply shortages, in Q1 2023 the channel and farmers were much more cautious regarding input
purchases. An improved supply and logistics situation, relatively high channel inventories as well as
the deflationary environment of AI prices in China have led customers to adopt a “wait-and-see”3
approach regarding some crop protection purchases.
Portfolio Development Update
Formulation Mastery Update:
In Q1 2023, the Company continued with the roll out of its formulation mastery products with
16 registrations, including of Prothioconazole mixtures based on ADAMA's Asorbital
formulation mastery technology platform, for optimized penetration and enhanced long-lasting
protection.
Patent granted in Europe for a formulation mastery technology used to stabilize AI's that
otherwise cannot be formulated together. Expected to be included in ADAMA products in the
coming years.
Patent granted in additional geographies during the first quarter for Sesgama a proprietary
formulation technology platform for high-load and other challenging formulations, enabling less
use of co-formulants, transport and packaging materials per acre treated with a resulting
improved product sustainability profile. First products expected to be launched in the coming
year.
Product Launches & Registrations:
During the first quarter of 2023 ADAMA continued to register and launch multiple new products in
markets across the globe, adding on to its differentiated product portfolio. Differentiated products may
also be based on recently off-patented active ingredients (AI's) that have been classified as high
commercial potential - "Core Leap" AI's and include a variety of product characteristics such as (i)
2Sources: Rabobank, Agri Commodity Markets Research, March 2023; AgbioInvestor-Quarterly-Briefing-Service-PLUS_Q1-2023;
JPM: Agricultural Markets Weekly, March 2023
3 "wait & see" refers to customers delaying purchases, while waiting to see if the market price declines further.
2
unique proprietary formulations, (ii) products with more than one mode of action, and (iii) biologicals.
Among these were:
Launch of differentiated products during the first quarter of 2023 in select countries including:
Launch in India of two insecticides Cosayr and Lapidos, based on "Core Leap" AI,
Chlorantraniliprole (CTPR), focusing on rice and sugar cane targeting stem borer and grubs.
Executing on its "Core Leap" strategy, these products are based on backward integration (in-
house) production of ADAMA.
Registration of differentiated products during first quarter of 2023 in select countries including:
Registration in Australia for "Core Leap" herbicide AI, Saflufenacil.
Registration in Australia for Sierra, targeting arable land, pulses, orchards and non-crop uses,
based on "Core Leap" herbicide AI Saflufenacil and ADAMA's formulation mastery technology
for improved consumer traits including ease of use and a better efficacy on certain weed
species. The registration of Sierra in Australia is the first global approval of an ADAMA
Saflufenacil based solution.
Financial Highlights
Revenues in the first quarter declined by approximately 11% (-4% in RMB terms; -7% in CER terms)
to $1,259 million, reflecting an increase of 1% in prices and a decrease of 8% in volumes mainly due
to high channel inventory in the market and declining raw material prices supporting a "wait and see"
approach across the board that impacted volumes and prices in the first quarter in 2023.
Table 2. Regional Sales Performance
Q1 2023 Q1 2022 Change Change
$m $m USD CER
Europe, Africa & Middle East (EAME)* 430 429 +0% +9%
North America 211 284 (26%) (25%)
Latin America 233 234 (1%) (3%)
Asia Pacific* 384 472 (19%) (12%)
Of which China 182 237 (23%) (16%)
Total 1,259 1,420 (11%) (7%)
CER: Constant Exchange Rates
* 2022 denote proforma sales. As of 2023, the India, Middle East & Africa (IMA) region has been reorganized such that the countries formerly
included in this region are now included in the Europe region (renamed EAME) or in the Asia Pacific region.
Europe, Africa & Middle East (EAME): The sales in EAME increased in the first quarter in constant
exchange rates, most notably in UK and Germany, despite delayed rainfall, high channel inventories
and continued drought in Southern Europe.
North America: The Consumer & Professional Solutions sales decreased in the first quarter,
impacted by weather conditions as well inflationary pressure on consumer demand and a slowdown in
the professional market mostly due high levels of inventory in the channel and expectation for price
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decreases.
Sales in the US Ag market decreased in the first quarter as the market is in a state of "wait and see"
due to high channel inventory and in anticipation of the spring season.
Sales in Canada increased in the first quarter as the Company expanded its product portfolio during
2022 and while the Company's products' pricing held. This was achieved despite cold weather delaying
spring product movement, creating a backing up of inventory in the channel.
Latin America: Sales in Brazil increased slightly in the first quarter, reflecting a "wait and see"
approach in the market in light of declining selling prices and competition to sell the high, expensive
inventory accumulated throughout the channel.
In other LATAM countries slightly lower sales were achieved due to the negative impact of the weather
in Argentina and Ecuador as well as lower sales in Peru.
Asia-Pacific (APAC): During the first quarter the Company's sales decreased in the Asia Pacific region
following a decline in the Company's sales in China of raw material, intermediates and fine chemicals
due to softening of demand, strong competition and an overall decline in market prices.
The Company's sales of its branded portfolio in China increased in local currency following strong sales
of differentiated products and despite the decrease in market selling prices and high channel inventory.
Sales in Pacific region in the first quarter were negatively impacted as the positive La Nia effect
begins to pass, while declining prices of AI from China and India encourage a "wait and see" approach.
In India, the sales were impacted by exchange rates and by reduced market demand following high Q4
2022 market sales. In the rest of Asia, Thailand and South Korea presented strong performance in the
first quarter.
Gross Profit reported in the first quarter reached $310 million (gross margin of 24.6%) compared to
$368 million (gross margin of 25.9%) in the same quarter last year.
Adjustments to reported results: The adjusted gross profit includes reclassification of all
inventory impairment, taxes and surcharge and excludes certain transportation costs
(classified under operating expenses).
Excluding the impact of the abovementioned extraordinary items, adjusted gross profit in the first
quarter reached $340 million (gross margin of 27.0%) compared to $414 million (gross margin of
29.2%) in the same quarter last year.
The decline in gross profit in the first quarter was due to the decline in sales, as described above,
exchange rates and high-cost inventory. These impacts were slightly moderated by the improvement
in the Company's sales mix of higher margin products.
Operating expenses reported in the first quarter were $218 million (17.3% of sales) compared to
$243 million (17.1% of sales) in the corresponding period last year.
Adjustments to reported results: please refer to the explanation regarding adjustments to the gross
profit in respect to certain transportation costs, taxes and surcharges and inventory impairment.
Additionally, the Company recorded certain non-operational charges within its reported
operating expenses amounting to $10 million in Q1 2023 in comparison to $6 million in Q1
2022. 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 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, and (iii) incentive plans - share-based
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compensation. For further details on these non-operational charges, please see the
appendix to this release.
Excluding the impact of the abovementioned non-operational charges, adjusted operating expenses
in the first quarter of 2023 were $238 million (18.9% of sales), compared to $281 million (19.8% of
sales) in the corresponding period last year.
The operating expenses were lower in the first quarter of 2023 mainly due to the Company recording
a doubtful debt provision for trade receivables in Ukraine in the first quarter of 2022. Additionally, in
the first quarter of 2023 these expenses decreased, among others, due to lower transportation and
logistics costs and the positive impact of exchange rates.
Operating income reported in the first quarter amounted to $92 million (7.3% of sales) compared to
$124 million (8.8% of sales) in the same quarter last year.
Excluding the impact of the abovementioned non-operational items, adjusted operating income in
the first quarter amounted to $102 million (8.1% of sales) compared to $133 million (9.4% of sales) in
the same quarter last year.
EBITDA reported in the first quarter amounted to $166 million (13.2% of sales) compared to $203
million (14.3% of sales) in the same quarter last year.
Excluding the impact of the abovementioned non-operational items, adjusted EBITDA in the first
quarter amounted to $165 million (13.1% of sales) compared to $201 million (14.2% of sales) in the
same quarter last year.
Adjusted Financial expenses amounted to $81 million in the first quarter, compared to $53 million
in the corresponding period last year. The higher financial expenses were mainly driven by (i) higher
bank interest expenses due an increase in short-term loans as well as the sharp increase in interest
rates, (ii) higher hedging costs on exchange rates mainly due to volatility in the ILS/Dollar exchange
rate and (iii) the net effect of the high Israeli CPI on the ILS-denominated, CPI-linked bonds.
Adjusted taxes on income in the first quarter amounted to an income of $1 million, compared to tax
expenses of $5 million in the corresponding period last year. The tax income in the first quarter of
2023 was mainly due to the non-cash impact of the stronger BRL on the value of non-monetary tax
assets, the method of calculation of tax assets related to unrealized profits and low profit before tax.
The low effective tax rate in first quarter of 2022 was mainly due to the generation of profits by
subsidiaries 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 and a tax income from the
strengthening of the BRL.
Net income attributable to the shareholders of the Company in the first quarter reached $12
million (1.0% of the sales), compared to $67 million (4.7% 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 $22 million (1.7% of the sales), compared to $75 million (5.3% of
sales) in the corresponding period last year.
Trade working capital as of March 31, 2023, was $3,148 million compared to $2,695 million at the
same point last year. The increase in working capital was due to an increase in the value and levels
of inventory procured to support the sales in light of supply shortages, logistic challenges and inventory
costs increases seen in 2022. In the first quarter the procurement of inventory continued to decline in
comparison to the fourth quarter of 2022, also resulting in lower trade payables. Trade receivables
decreased reflecting good collections across the board.
Cash Flow: Operating cash flow of $423 million was consumed in the first quarter, compared to $286
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 reflected higher payments to suppliers to support
the procurement of inventory in 2022.
Net cash used in investing activities was $95 million in the first quarter, compared to $90 million in the
corresponding period last year. The cash used in investing activities in the first quarter of 2023
included the acquisition of AgriNova New Zealand, investments in new production facilities in ADAMA
Anpon, investments in manufacturing capabilities in Israel and investments in intangible assets
relating to ADAMA's global registrations.
Free cash flow of $542 million was consumed in the first quarter compared to $386 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 2023 Q1 2022
% %
USD (m) USD (m)
Crop Protection 1,146 91.1% 1,271 89.5%
Intermediates and Ingredients 112 8.9% 149 10.5%
Total 1,259 100% 1,420 100%
First quarter sales by product category
Q1 2023 Q1 2022
% %
USD (m) USD (m)
Herbicides 575 45.7% 659 46.4%
Insecticides 334 26.5% 351 24.7%
Fungicides 237 18.9% 261 18.4%
Intermediates and Ingredients 112 8.9% 149 10.5%
Total 1,259 100% 1,420 100%
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. Numbers may not sum due to rounding.
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.
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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
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 2023 Q1 2022 Q1 2023 Q1 2022
Adjusted4
USD (m) USD (m) RMB (m) RMB (m)
Revenues 1,259 1,420 8,611 9,016
Cost of Sales 898 989 6,147 6,282
Other costs 20 16 138 105
Gross profit 340 414 2,325 2,630
% of revenue 27.0% 29.2% 27.0% 29.2%
Selling & Distribution expenses 186 199 1,270 1,263
General & Administrative expenses 39 47 267 296
Research & Development expenses 20 21 135 130
Other operating expenses (6) 15 (43) 95
Total operating expenses 238 281 1,630 1,785
% of revenue 18.9% 19.8% 18.9% 19.8%
Operating income (EBIT) 102 133 696 844
% of revenue 8.1% 9.4% 8.1% 9.4%
Financial expenses 81 53 555 335
Income before taxes 20 80 140 509
Taxes on Income (1) 5 (7) 33
Net Income 22 75 148 477
Attributable to:
Non-controlling interest 0 0 0 0
Shareholders of the Company 22 75 148 477
% of revenue 1.7% 5.3% 1.7% 5.3%
Adjustments 9 8 64 49
Reported Net income attributable to the
12 67 83 428
shareholders of the Company
% of revenue 1.0% 4.7% 1.0% 4.7%
Adjusted EBITDA 165 201 1,131 1,277
% of revenue 13.1% 14.2% 13.1% 14.2%
Adjusted EPS5 – Basic 0.0093 0.0322 0.0633 0.2045
– Diluted 0.0093 0.0322 0.0633 0.2045
Reported EPS2 – Basic 0.0052 0.0289 0.0357 0.1836
– Diluted 0.0052 0.0289 0.0357 0.1836
4
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”.
5
The number of shares used to calculate both basic and diluted earnings per share in both Q1 2023 and 2022 is 2,329.8 million shares.
8
Abridged Consolidated Balance Sheet
March 31 March 31 March 31 March 31
2023 2022 2023 2022
USD (m) USD (m) RMB (m) RMB (m)
Assets
Current assets:
Cash at bank and on hand 514 598 3,529 3,796
Bills and accounts receivable 1,637 1,857 11,246 11,789
Inventories 2,512 2,151 17,265 13,657
Other current assets, receivables and
285 333 1,961 2,117
prepaid expenses
Total current assets 4,948 4,940 34,001 31,359
Non-current assets:
Fixed assets, net 1,749 1,651 12,022 10,480
Rights of use assets 80 74 547 467
Intangible assets, net 1,479 1,506 10,163 9,560
Deferred tax assets 217 157 1,490 994
Other non-current assets 115 114 788 725
Total non-current assets 3,640 3,501 25,010 22,227
Total assets 8,588 8,441 59,011 53,587
Liabilities
Current liabilities:
Loans and credit from banks and other
1,319 438 9,067 2,781
lenders
Bills and accounts payable 1,009 1,324 6,934 8,404
Other current liabilities 905 905 6,220 5,745
Total current liabilities 3,234 2,667 22,221 16,931
Long-term liabilities:
Loans and credit from banks and other
512 655 3,521 4,156
lenders
Debentures 1,039 1,211 7,142 7,690
Deferred tax liabilities 45 52 311 330
Employee benefits 116 121 799 770
Other long-term liabilities 302 371 2,074 2,357
Total long-term liabilities 2,015 2,411 13,847 15,303
Total liabilities 5,249 5,078 36,068 32,234
Equity
Total equity 3,339 3,364 22,943 21,352
Total liabilities and equity 8,588 8,441 59,011 53,587
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Abridged Consolidated Cash Flow Statement for the First Quarter
Q1 2023 Q1 2022 Q1 2023 Q1 2022
USD (m) USD (m) RMB (m) RMB (m)
Cash flow from operating activities:
Cash flow used for operating activities (425) (286) (2,905) (1,814)
Cash flow used for operating activities (425) (286) (2,905) (1,814)
Investing activities:
Acquisitions of fixed and intangible assets (85) (92) (580) (584)
Proceeds from disposal of fixed and intangible assets 4 1 26 3
Acquisition of subsidiary (22) 0 (148) 0
Other investing activities 9 1 63 7
Cash flow used for investing activities (93) (90) (639) (574)
Financing activities:
Receipt of loans from banks and other lenders 525 153 3,595 969
Repayment of loans from banks and other lenders (29) (27) (200) (172)
Interest payment and other (26) (10) (179) (61)
Other financing activities (53) (65) (365) (410)
Cash flow from financing activities 417 51 2,851 327
Effects of exchange rate movement on cash and cash
1 0 (53) (24)
equivalents
Net change in cash and cash equivalents (100) (325) (747) (2,085)
Cash and cash equivalents at the beginning of the period 607 903 4,225 5,759
Cash and cash equivalents at the end of the period 506 579 3,479 3,674
Free Cash Flow (542) (386) (3,710) (2,448)
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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, 2023 and 2022 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”).
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 certain transportation costs have been reclassified from COGS to Operating Expenses.
“Financial expenses” includes net financing expenses and gains/losses from changes in fair value.
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 2023 Q1 2022 Q1 2023 Q1 2022
USD (m) USD (m) RMB (m) RMB (m)
Net Income (Reported) 12.2 67.3 83.3 427.7
Adjustments to COGS & Operating Expenses:
1. Amortization of acquisition-related PPA and other acquisition related costs 4.2 5.4 28.7 34.0
2. Amortization of Transfer assets received and written-up due to 2017 ChemChina-
6.1 5.6 41.5 35.6
Syngenta transaction (non-cash)
3. Upgrade & Relocation related costs 0.7 1.9 4.6 12.0
4. Incentive plans (0.8) (4.1) (5.7) (26.2)
5. ASBEs classifications COGS impact (29.7) (43.4) (203.4) (275.4)
6. ASBEs classifications OPEX impact 29.7 43.4 203.4 275.4
Total Adjustments to Operating Income (EBIT) 10.1 8.7 69.2 55.5
Total Adjustments to EBITDA (0.5) (2.4) (3.6) (15.3)
Adjustments to Taxes
1. Taxes impact 0.7 1.0 4.9 6.6
Total adjustments to Net Income 9.4 7.7 64.3 48.9
Net Income (Adjusted) 21.6 75.0 147.6 476.5
Total adjustments to Net Income attributable to the shareholders of the Company 9.4 7.7 64.3 48.9
Notes:
1. Amortization of acquisition-related PPA and other acquisition related costs:
a. 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.
b. 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.
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 & manufacturing facilities 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 were relocated to new sites in 2020,
2021 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 These charges have significantly declined since the
first quarter of 2022, as the relocation and upgrade of the manufacturing Jingzhou site in China has been completed and is now at a high level
of operation.
4. Incentive plans: ADAMA granted certain of its employees, a long-term incentive (LTI) in the form of 'phantom' awards linked to the Company’s
share price. As such, the Company records an expense, or recognizes income, depending on the fluctuation in the Company’s share price,
regardless of award exercises. 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 awards, 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. ASBEs classifications COGS impact – according to the ASBE guidelines [IAS 37], certain items (specifically certain transportation costs) are
classified under COGS.
6. ASBEs classifications OPEX impact – according to the ASBE guidelines [IAS 37], certain items (specifically certain transportation costs) are
classified under COGS.
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Exchange Rate Data for the Company's Principal Functional Currencies
March 31 Q1 Average
2023 2022 Change 2023 2022 Change
EUR/USD 1.088 1.109 (2.0%) 1.073 1.122 (4.4%)
USD/BRL 5.080 4.738 (7.2%) 5.195 5.233 0.7%
USD/PLN 4.293 4.180 (2.7%) 4.392 4.180 (5.1%)
USD/ZAR 17.83 14.51 (22.8%) 17.735 15.249 (16.3%)
AUD/USD 0.668 0.749 (10.7%) 0.684 0.724 (5.5%)
GBP/USD 1.236 1.312 (5.8%) 1.214 1.342 (9.5%)
USD/ILS 3.615 3.176 (13.8%) 3.538 3.198 (10.6%)
USD LIBOR 3M 5.19% 0.96% 423bp 4.92% 0.53% 439bp
March 31 Q1 Average
2023 2022 Change 2023 2022 Change
USD/RMB 6.872 6.348 8.2% 6.842 6.351 7.7%
EUR/RMB 7.474 7.043 6.1% 7.338 7.126 3.0%
RMB/BRL 0.739 0.746 0.9% 0.759 0.824 7.9%
RMB/PLN 0.625 0.658 5.1% 0.642 0.649 1.1%
RMB/ZAR 2.594 2.286 (13.5%) 2.592 2.401 (8.0%)
AUD/RMB 4.573 4.752 (3.8%) 4.679 4.595 1.8%
GBP/RMB 8.491 8.332 1.9% 8.307 8.520 (2.5%)
RMB/ILS 0.526 0.500 (5.2%) 0.517 0.504 (2.7%)
RMB SHIBOR 3M 2.48% 2.37% 11 bp 2.41% 2.42% (1) bp
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