Lower Crop Prices, Currency Effects Hit Adama Results
18 May 2015 Adama reported lower earnings and sales in the first quarter, hurt by falling crop prices and the impact of currency exchange rates.
The Tel Aviv, Israel-based company said its net profit was $94.4 million, compared with $98.7 million a year ago. Revenue fell 4.7% to $866.7 million, from $909.7 million a year earlier. Revenue dropped most sharply in Asia Pacific at 17.3% and was flat in North America.
Commenting on the results, Yang Xingqiang, chairman, said, “In this challenging time for the agricultural industry, we have seen both lower crop prices placing pressure on growers to reduce their spending, as well as the impact of significant currency headwinds in all markets. However, the strong joint effort by our entire team across the globe ensured that we were able to adjust to these adverse market conditions, allowing the company to deliver excellent financial results. We remain well positioned to capitalize on our unique business to drive further growth going forward.”
Chen Lichtenstein, president and CEO of Adama, commented, “Our resilient performance this quarter, which compares favorably to our sector, demonstrates the robustness of our diversified business and wide product offering focused on addressing farmers’ needs across the globe. We generated an overall increase in volumes of over 2% during the first quarter, despite the difficult market conditions. We have also shown that, even in less than optimal times, our focus on thoughtful management of our business with an emphasis on profitability allowed the company to maintain and even improve its adjusted net income, operating profit and EBITDA margins, as well as improve significantly its cash flow. We continue to invest in our integrated platform and further enhance our portfolio of solutions we deliver to farmers worldwide.”
China Business Update
In line with its long-term strategy, Adama is taking measures to position it as a leading global company in the crop protection industry, with a significant presence in China. The company is working intensively to realize the potential inherent in the 2011 merger with CNAC, the agrochemical arm of ChemChina. In executing this strategy, in October 2014, the Company signed a definitive agreement to acquire control of four Chinese companies belonging to the ChemChina group (the China Business).
In the latter half of 2014, Adama prepared to execute an initial public offering of its shares on the New York Stock Exchange, with the intention to raise the funds necessary to finance the acquisition of the China Business. However, due to adverse equity market conditions, the company decided to postpone the public offering.
Given the postponement of the offering, the company and its shareholders are examining various possibilities regarding the execution of the business combination between the company and the China Business, whether by consummating the acquisition as originally agreed, or in a different manner.The company is also currently considering its options regarding a future flotation, including both the listing venue and its timing, all in accordance with the advantages of the different markets and the developments in market conditions.
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