ADAMA Reports Third Quarter and First Nine Months 2022 ResultsQ3 and 9M sales growth driven by continued price increases and volume
growth led by Brazil
Third Quarter 2022 Highlights:
? Sales up 18% to $1,359 million (+25% in RMB terms; +24% in CER
terms), driven by 18% higherprices and 6% volume growth? Improvement of Opex/Sales ratio of 20.1% vs. 22.2% in Q3 2021? Adjusted operating income up 70% to $100 million (RMB: +79%), representing an improvementof operating income margin from 5.1% in Q3 2021 to 7.4% in Q3 2022? Adjusted EBITDA up 40% to $171 million (RMB: +48%) vs. Q3 2021, representing an improvement
of EBITDA margin from 10.6% in Q3 2021 to 12.5% in Q3 2022? Adjusted net income of $8 million; Reported net income of $5 million
First Nine Months 2022 Highlights? Sales up 22% to a nine-month record-high of $4,258 million (+25% in RMB terms; +26% in CER
terms), driven by 19% higher prices and 7% volume growth? Improvement of Opex/Sales ratio of 19.3% vs. 20.6% in the first nine months of 2021? Adjusted operating income up 43% to $403 million (RMB: +45%), representing an improvement
of operating income margin from 8.1% in first nine months of 2021 to 9.5% in the first nine months
of 2022? Adjusted EBITDA up 32% to $611 million (RMB: +34%), vs. the first nine months of 2021
representing an improvement of EBITDA margin from 13.4% in first nine months 2021 to 14.4%
in the first nine months of 2022? Adjusted net income up to $159 million; Reported net income up to $119 million
BEIJING, CHINA and TEL AVIV, ISRAEL, October 26, 2022 – ADAMA Ltd. (the “Company”) (SZSE000553), today reported its financial results for the third quarter and nine-month period endedSeptember 30, 2022.Ignacio Dominguez, President and CEO of ADAMA, said, "ADAMA presents another quarter ofstrong sales, led by our business in Brazil, reflecting solid demand for crop protection products andpositive farmer profitability. Crop commodity prices are expected to maintain historically elevatedlevels supported by underlying economic fundamentals, continuing to drive the demand for cropprotection products."We are committed to serving farmers, wherever they may be, despite the many challenges we seein the market today. Food security is increasingly under pressure with extreme weather conditions anddisruptions in the global trade of crop commodities. Especially in such times of uncertainty, cropprotection remains an invaluable tool for farmers to maximize yields and ADAMA is consistently thereto support farmers in feeding the world."
CER: Constant Exchange Rates
Table 1. Financial Performance Summary
| USD (m) | As Reported | Adjustments | Adjusted | ||||||||
| Q3 2022 | Q3 2021 | % Change | Q3 2022 | Q3 2021 | Q3 2022 | Q3 2021 | % Change | ||||
Revenues
| Revenues | 1,359 | 1,147 | +18% | - | - | 1,359 | 1,147 | +18% | |||
| Gross profit | 322 | 287 | +12% | 50 | 27 | 373 | 313 | +19% | |||
| % of sales | 23.7% | 25.0% | 27.4% | 27.3% | |||||||
| Operating income (EBIT) | 96 | 26 | +269% | 4 | 33 | 100 | 59 | +70% | |||
| % of sales | 7.1% | 2.3% | 7.4% | 5.1% | |||||||
| Income before taxes | 10 | (27) | 4 | 33 | 14 | 6 | +142% | ||||
| % of sales | 0.7% | (2.4%) | 1.0% | 0.5% | |||||||
| Net income | 5 | (57) | 3 | 27 | 8 | (30) | |||||
| % of sales | 0.4% | (5.0%) | 0.6% | (2.6%) | |||||||
| EPS | |||||||||||
| - USD | 0.0023 | (0.0246) | 0.0036 | (0.0130) | |||||||
| - RMB | 0.0155 | (0.1592) | 0.0245 | (0.0839) | |||||||
| EBITDA | 177 | 103 | +72% | (7) | 19 | 171 | 122 | +40% | |||
| % of sales | 13.0% | 9.0% | 12.5% | 10.6% |
| USD (m) | As Reported | Adjustments | Adjusted | ||||||||
| 9M 2022 | 9M 2021 | % Change | 9M 2022 | 9M 2021 | 9M 2022 | 9M 2021 | % Change | ||||
Revenues
| Revenues | 4,258 | 3,476 | +22% | - | - | 4,258 | 3,476 | +22% | |||
| Gross profit | 1,068 | 932 | +15% | 156 | 68 | 1,224 | 1,000 | +22% | |||
| % of sales | 25.1% | 26.8% | 28.7% | 28.8% | |||||||
| Operating income (EBIT) | 363 | 182 | +100% | 40 | 101 | 403 | 282 | +43% | |||
| % of sales | 8.5% | 5.2% | 9.5% | 8.1% | |||||||
| Income before taxes | 139 | 38 | +267% | 44 | 101 | 182 | 139 | +32% | |||
| % of sales | 3.3% | 1.1% | 4.3% | 4.0% | |||||||
| Net income | 119 | (1) | 41 | 86 | 159 | 85 | +87% | ||||
| % of sales | 2.8% | 0.0% | 3.7% | 2.5% | |||||||
| EPS | |||||||||||
| - USD | 0.0510 | (0.0003) | 0.0684 | 0.0366 | |||||||
| - RMB | 0.3297 | (0.0017) | 0.4442 | 0.2367 | |||||||
| EBITDA | 605 | 405 | +49% | 7 | 59 | 611 | 464 | +32% | |||
| % of sales | 14.2% | 11.6% | 14.4% | 13.4% |
Notes:
“As Reported” denotes the Company’s financial statements according to the Accounting Standards for Business Enterprises and theimplementation 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 ASBEguidelines [IAS 37], certain items as of Q4 2021 (specifically certain transportation costs and certain idleness charges) have been reclassifiedfrom 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 atransitory or non-cash/non-operational nature that do not impact the ongoing performance of the business, and reflect the way theCompany’s management and the Board of Directors view the performance of the Company internally. The Company believes that excludingthe effects of these items from its operating results allows management and investors to effectively compare the true underlying financialperformance of its business from period to period and against its global peers. A detailed summary of these adjustments appears in theappendix below.The number of shares used to calculate both basic and diluted earnings per share in both Q3 and 9M 2021 and 2022 is 2,329.8 millionshares.In this table and all tables in this release numbers may not sum due to rounding.
The general crop protection market environment
Preliminary projections estimate the global crop protection industry to increase by 14.5% in 2022
.High crop prices incentivized another year of increases in global planted areas, which drove highercrop protection volumes as well as by higher pricing.Crop prices remain elevated above historic averages despite decreasing somewhat in the last twoquarters, after reaching historically high levels in Q1 2022. Prices are expected to remain elevatedinto 2023, supported by key fundamentals including very low stocks, unfavorable weather conditionsin the Americas and parts of Europe and continued supply disruptions exacerbated by the conflict inUkraine as well as the energy crisis in Europe. However, weaker economic conditions and broad-based monetary tightening could weigh on consumer demand, softening prices further.Farmer profitability continues to face pressures from high production costs, mainly from high fertilizerprices, driven by a surge in energy costs and the application of international economic sanctions toRussia and Belarus (both large fertilizer exporters), as well as supply disruption and tight availabilitycaused by the conflict in Ukraine. Despite this, farming activities are nevertheless still very profitablein most regions.Crude oil prices continued to decline in the third quarter of 2022 from the peak levels reached in thefirst quarter of 2022, mainly due to concerns regarding the global economic outlook. Prices are,however, expected to remain elevated into the fourth quarter of 2022 and beyond, due to low globalinventory levels, uncertainty of Russia’s oil exports as well as the OPEC+ decision to further limit oilproduction.European gas prices and indirectly Asian spot LNG prices reached record highs in the third quarterof 2022 following the sharp decline in Russian gas flows to Europe and a tight energy market.Meanwhile, prices in the United States reached their highest summer levels since 2008.Global container freight rates have dropped significantly in the third quarter of 2022, driven by afurther weakening in demand in the light of high inflation and slower-than-expected economic growth,easing port congestion. A large amount of scheduled new deliveries of container vessel capacity,starting from the end of 2022, is expected to further soften port congestion and put container shippingrates under pressure.Prices for raw materials, intermediates and active ingredients reached peak levels towards theend of 2021; however, since then there has been a general softening of prices in China and anincrease in prices of such products in other geographies. With strong global crop protection demand,and supply shortages driven by the energy crisis in Europe and the ongoing conflict in Ukraine, aswell as the ongoing "Zero COVID" policy in China, overall prices are expected to remain above levelsin recent years. In China, an increase in production capacity and an ease in logistic disruptions led tosoftening of prices of many key raw materials, intermediates and active ingredients from China. Inother geographies cost inflation, energy prices, supply shortages and logistic challenges are drivingprocurement prices upward and impacting availability of raw materials and intermediates.Portfolio Development UpdateDuring the third quarter of 2022 ADAMA continued to register and launch multiple new products inmarkets across the globe, adding on to its differentiated product portfolio. Differentiated productsinclude a variety of product characteristics and may include products with (i) unique proprietaryformulations, (ii) products with more than one mode of action, (iii) recently off-patented active
Sources: Rabobank, Agri Commodity Markets Research, Sep 2022; AgbioInvestor-Quarterly-Briefing-Service-PLUS_Q3-2022;
JPM: Global Economic Research, Global Data Watch, September 2022; JPM: Agricultural Markets Weekly, Sep 2022
Source: AgbioInvestor-Quarterly-Briefing-Service-PLUS_Q3-2022
ingredients (AI's) that have been classified as high commercial potential - "Core Leap" AI's and (iv)biologicals. Among these were:
? Launch in Brazil of APRESA
?
, pre-emergent dual mode herbicide, powered by ADAMA’sproprietary T.O.V. Formulation Technology, for use in a variety of crops.? Launch of Nimitz
?
in South Africa, an innovative nematicide for potatoes containing proprietaryAI Fluensulfone.
Financial HighlightsRevenues in the third quarter grew by 18% (+25% in RMB terms; +24% in CER terms) to $1,359million, 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 volume growth (+6%), and achieveddespite supply challenges in certain markets, and the adverse impact of exchange rate movements inmany regions. The Company achieved growth in sales in constant exchange rates across mostregions.The accelerated growth in the quarter brought the first nine months sales to a record-high of $4,258million, an increase of 22% (+25% in RMB terms; +26% in CER terms) driven by a 19% increase inprices and an 7% growth in volume.
Table 2. Regional Sales Performance
Europe: Increase in sales in the third quarter in constant exchange rate terms attributed mainlyto distributors securing inventory for the autumn season in the UK, Czech Republic, France,Romania, Benelux and Baltics. This growth in constant exchange rate terms was achieved despitedrought conditions across European countries such as Spain, France, Italy and Germanyimpacting demand, as well as supply issues, high channel inventories in some countries and aloss of sales due to the Ukraine-Russia conflict.North America: In the US Ag market, sales decreased in the third quarter as the Company wasnegatively impacted by the record low harvest of cotton as farmers abandoned non-irrigated fieldsdue to extreme drought conditions across Texas and other southwest regions. Drought inCalifornia continued to impact demand. With the North American market in the midst of harvestseason, renewed demand for crop protection is expected in anticipation of the upcoming Q1 2023planting season.Very strong growth in sales in Canada enabled by the in-house production of cereal herbicidewhich supported the cereal season before harvest.The Consumer & Professional business presented slower sales in the quarter. On the
| Q3 2022 $m | Q3 2021 $m | Change USD | Change CER | 9M 2022 $m | 9M 2021 $m | Change USD | Change CER |
Europe
| Europe | 211 | 220 | (4.0%) | 8.2% | 861 | 825 | 4.3% | 11.2% |
North America
| North America | 174 | 183 | (4.7%) | (4.2%) | 736 | 628 | 17.2% | 17.2% |
Latin America
| Latin America | 548 | 372 | 47.3% | 47.1% | 1,161 | 820 | 41.7% | 39.7% |
Asia Pacific
| Asia Pacific | 238 | 194 | 22.4% | 27.9% | 958 | 677 | 41.4% | 45.5% |
Of which China
| Of which China | 156 | 121 | 28.9% | 34.4% | 605 | 380 | 59.1% | 61.0% |
India, Middle East & Africa
| India, Middle East & Africa | 187 | 178 | 5.3% | 18.1% | 542 | 525 | 3.1% | 16.4% |
Total
| Total | 1,359 | 1,147 | 18.4% | 23.7% | 4,258 | 3,476 | 22.5% | 26.5% |
professional side, initial market price reductions, high levels of inventory in the channel andanticipation of decreases in costs of goods led to a slowdown in the market. On the consumerside, inflationary pressures are softening overall market demand.Latin America: Strong growth in sales in Brazil, driven by prices and volume supporting theanticipated soybean, corn, sugarcane and cotton fourth quarter crop seasons; sales which in 2021were also included in the fourth quarter.In other LATAM countries the higher sales reflect the strong demand across the region and wereachieved despite some adverse weather conditions and inventory in the channel.Asia-Pacific: The Company's strong growth in Asia Pacific was led by the sales of raw material,intermediates and fine chemicals in China, driven by continued strong demand, in light of thestrong global demand for crop protection and achieved despite an ease in fine chemical prices.The sales in China of ADAMA's branded portfolio also continued to grow nicely, despite the strongcompetition in the market.In the wider APAC region, growth in sales in the quarter was also achieved led by strong sales inAsian countries such as Thailand, Korea and Indonesia due to favorable seasonal conditionsand with the return of face-to-face business post-COVID. In the Pacific region fungicide salesgrew nicely following favorable seasonal conditions. This growth was achieved despite highchannel inventories in parts of Asia.India, Middle East & Africa: Sales in the third quarter were led by India and represent the peakseason for sales in this country due to the monsoon season. Despite this, heavy rainfall negativelyimpacted insecticide and fungicide sales in certain crops and overall sales were also impacted bysome supply constraints.Gross Profit reported in the third quarter was up 12% to $322 million (gross margin of 23.7%)compared to $287 million (gross margin of 25.0%) in the same quarter last year and was up 15% to$1,068 million (gross margin of 25.1%) in the first nine month period compared to $932 million (grossmargin of 26.8%) last year
.Adjustments to reported results: The adjusted gross profit includes all idleness costs andexcludes transportation costs to third parties and its marketing subsidiaries (classifiedunder 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 fromoperating expenses to costs of goods (not impacting the operating results), while theseexpenses were not recorded in the cost of goods in the third quarter and first nine monthperiod in 2021, but rather in the operating expenses.Additionally, certain extraordinary charges related largely to a temporary disruption of theproduction of certain products, were adjusted in the third quarter and first nine months in2021. These charges have significantly declined since the first quarter of 2022, as therelocation and upgrade of the manufacturing Jingzhou site in China has been completedand is now at a high level of operation.Excluding the impact of the abovementioned extraordinary items, adjusted gross profit in the thirdquarter was up 19% to $373 million (gross margin of 27.4%) compared to $313 million (gross marginof 27.3%) in the same quarter last year and was up 22% to $1,224 million (gross margin of 28.7%) inthe first nine month period compared to $1,000 million (gross margin of 28.8%) last year.
In the reported results, as of Q4 2021, following recent changes in the guidelines in China, the aforementioned transportations costs andOPEX idleness have been reclassified from operating expenses to costs of goods.
In the quarter and nine month period, the higher gross profit was mainly driven by the markedly higherprices, complemented by continued volume growth, which offset the higher logistic, procurement andproduction costs, as well as the negative impact of exchange rates.Due to seasonality, the Company's third quarter is generally characterized by lower profitability.Operating expenses reported in the third quarter were $226 million (16.7% of sales) and $705 million(16.6% of sales) in the first nine month period, compared to $261 million (22.7% of sales) and$750million (21.6% of sales) in the corresponding periods last year, respectively
.Adjustments to reported results: please refer to the explanation regarding adjustments to the grossprofit in respect to certain transportation costs and idleness.Additionally, the Company recorded certain non-operational charges within its reportedoperating expenses amounting to $3 million in Q3 2022 in comparison to $6 million in Q32021 and $31 million in the first nine months of 2022 in comparison to $32 million in firstnine months of 2021. These charges include mainly (i) non-cash amortization charges inrespect of Transfer assets received from Syngenta related to the 2017 ChemChina-Syngenta acquisition, (ii) charges related to the non-cash amortization of intangible assetscreated as part of the Purchase Price Allocation (PPA) on acquisitions, with no impact onthe ongoing performance of the companies acquired and (iii) incentive plans - share-basedcompensation. For further details on these non-operational charges, please see theappendix to this release.Excluding the impact of the abovementioned non-operational charges, adjusted operating expensesin the quarter and nine month period were $273 million (20.1% of sales) and $821 million (19.3% ofsales), compared to $254 million (22.2% of sales) and $718 million (20.6% of sales) in thecorresponding periods last year, respectively.The higher operating expenses in the quarter and first nine month period reflect the strong growth ofthe business, higher transportation and logistics costs driven by both an increase in freight costs andvolumes transported, an increase in expenses attributed to company success-based employeecompensation, the inclusion of a recent acquisition (in the nine month period) and moderated by thepositive impact of exchange rates.In addition, in the first quarter of 2022 the Company recorded a doubtful debt provision for tradereceivables in Ukraine.Operating income reported in the third quarter was up 269% to $96 million (7.1% of sales) comparedto $26 million (2.3% of sales) in the same quarter last year and was up 100% to $363 million (8.5% ofsales) in the first nine month period compared to $182 million (5.2% of sales) last year.Excluding the impact of the abovementioned non-operational items, adjusted operating income inthe third quarter amounted to $100 million (7.4% of sales) compared to $59 million (5.1% of sales) inthe same quarter last year and was up 43% to $403 million (9.5% of sales) in the first nine monthperiod compared to $282 million (8.1% of sales) in the same period last year.EBITDA reported in the third quarter was up 72% to $177 million (13.0% of sales) compared to $103million (9.0% of sales) in the same quarter last year and was up 49% to $605 million (14.2% of sales)in the first nine month period compared to $405 million (11.6% of sales) last year.Excluding the impact of the abovementioned non-operational items, adjusted EBITDA in the thirdquarter was up 40% to $171 million (12.5% of sales) compared to $122 million (10.6% of sales) in thesame quarter last year and was up 32% to $611 million (14.4% of sales) in the first nine month periodcompared to $464 million (13.4% of sales) last year.
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.
Financial expenses and investment income were $86 million in the third quarter and $220 millionin the first nine month period, compared to $53 million and $144 million in the corresponding periodslast year, respectively. The higher financial expenses were mainly driven by the net effect of the highIsraeli CPI on the ILS-denominated, CPI-linked bonds and higher hedging costs on exchange rates.In the nine month period in 2022, these expenses also included the valuation of put options attributedto minority stakes of a subsidiary fully consolidated from Q3 2021.Taxes on income in the third quarter were $6 million and $23 million in the first nine month period,compared to $36 million and $52 million in the corresponding periods last year, respectively.In 2022, the company recognized a higher deferred tax asset, related to inter-group sales, that led toa decline in the tax on income.The significantly higher tax expenses in the third quarter of 2021 reflected the high growth in end-market sales, which incur higher tax rates, as well as the impact of a significantly weaker BRL on non-monetary tax assets.Net income attributable to the shareholders of the Company reported in the third quarter was $5million (0.4% of sales) and $119 million (2.8% of sales) in the first nine month period, compared to anet loss of $57 million and a loss of $1 million in the corresponding periods last year, respectively.Excluding the impact of the abovementioned extraordinary and non-operational charges, adjustednet income in the third quarter was $8 million (0.6% of sales) and $159 million (3.7% of sales) in thefirst nine month period, compared to a loss of $30 million and an income of $85 million in thecorresponding periods last year, respectively.Trade working capital as of September 30, 2022, was $2,832 million compared to $2,489 million atthe same point last year. The increase in working capital was due to an increase in the value andlevels of inventory held by the Company to support expected future sales, in light of anticipated supplyshortages, logistic challenges and inventory costs increases. This increase in inventory levels wasmoderated by higher trade payables. Trade receivables reflect good collections across the board.The trade capital/last twelve months sales ratio of 51% as of September 30, 2022, in comparison to54%, as of September 30, 2021, demonstrates the improved efficiency in the Company's managementof its working capital.Cash Flow: Operating cash flow of $31 million was consumed in the quarter and $246 millionconsumed in the first nine month period, compared to $107 million and $338 million generated in thecorresponding periods last year, respectively. The cash flow consumed in the quarter and nine monthperiod was primarily due to an increase in payments for goods procured in previous quarterssupporting the increase in inventory levels.Net cash used in investing activities was $102 million in the quarter and $299 million in the first ninemonth period, compared to $96 million and $388 million in the corresponding periods last year,respectively. The cash used in investing activities in the third quarter of 2022 is largely related toinvestments in "Core Leap" manufacturing capabilities in Israel, investments in intangible assetsrelating to ADAMA's global registrations as well as the new production facilities in ADAMA Anpon. Inthe first nine month period in 2022, cash was also used for investing in manufacturing capabilities inBrazil.In the third quarter of 2021, investments were attributed to Israel and China based manufacturing sites.In the nine month period in 2021, cash was also used for the completion of the payment and acquisitionof Huifeng’s domestic commercial crop protection business and manufacturing site, as well as for therelocation and upgrade of the manufacturing Sanonda Jingzhou site, both completed towards the endof the second quarter of 2021.Free cash flow of $154 million was consumed in the third quarter and $623 million consumed in thefirst nine month period compared to $1 million generated and $115 million consumed in the
corresponding periods last year, respectively, reflecting the aforementioned operating and investingcash flow dynamics.
Table 3. Revenues by operating segment
Sales by segment
| Q3 2022 USD (m) | % | Q3 2021 USD (m) | % | 9M 2022 USD (m) | % | 9M 2021 USD (m) | % |
Crop Protection
| Crop Protection | 1,228 | 90.4% | 1,041 | 90.7% | 3,825 | 89.8% | 3,152 | 90.7% |
Intermediates andIngredients
| Intermediates and Ingredients | 131 | 9.6% | 106 | 9.3% | 432 | 10.2% | 324 | 9.3% |
Total
| Total | 1,359 | 100% | 1,147 | 100% | 4,258 | 100% | 3,476 | 100% |
Sales by product category
| Q3 2022 USD (m) | % | Q3 2021 USD (m) | % | 9M 2022 USD (m) | % | 9M 2021 USD (m) | % |
Herbicides
| Herbicides | 571 | 42.0% | 441 | 38.4% | 1,933 | 45.4% | 1,390 | 40.0% |
Insecticides
| Insecticides | 381 | 28.0% | 360 | 31.4% | 1,124 | 26.4% | 1,066 | 30.7% |
Fungicides
| Fungicides | 276 | 20.3% | 241 | 21.0% | 769 | 18.1% | 696 | 20.0% |
Intermediates andIngredients
| Intermediates and Ingredients | 131 | 9.6% | 106 | 9.3% | 432 | 10.2% | 324 | 9.3% |
Total
| Total | 1,359 | 100.0% | 1,147 | 100.0% | 4,258 | 100.0% | 3,476 | 100.0% |
Note: the sales split by product category is provided for convenience purposes only and is not representative of the way the Company ismanaged or in which it makes its operational decisions.
Further InformationAll 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 ADAMAADAMA Ltd. is a global leader in crop protection, providing solutions to farmers across the world tocombat weeds, insects and disease. ADAMA has one of the widest and most diverse portfolios ofactive 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 farmersand 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 andcustomer needs in over 100 countries globally. For more information, visit us at www.ADAMA.comand follow us on Twitter
?
at @ADAMAAgri.
ContactRivka Neufeld Zhujun WangGlobal Investor Relations China Investor RelationsEmail: ir@adama.com Email: irchina@adama.com
Abridged Adjusted Consolidated Financial StatementsThe following abridged consolidated financial statements and notes have been prepared as described in Note 1 in thisappendix. While prepared based on the principles of Chinese Accounting Standards (ASBE), they do not contain all of theinformation which either ASBE or IFRS would require for a complete set of financial statements, and should be read inconjunction with the consolidated financial statements of both ADAMA Ltd. and Adama Agricultural Solutions Ltd. as filedwith 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 itemsthat are of a one-time or non-cash/non-operational nature that do not impact the ongoing performance of the business, andreflect 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 investorsto effectively compare the true underlying financial performance of its business from period to period and against its globalpeers.Abridged Consolidated Income Statement for the Third Quarter
| Adjusted6 | Q3 2022 USD (m) | Q3 2021 USD (m) | Q3 2022 RMB (m) | Q3 2021 RMB (m) |
Revenues
| Revenues | 1,359 | 1,147 | 9,282 | 7,425 |
Cost of Sales
| Cost of Sales | 966 | 829 | 6,594 | 5,366 |
Other costs
| Other costs | 21 | 5 | 143 | 32 |
Gross profit
| Gross profit | 373 | 313 | 2,545 | 2,027 |
% of revenue
| % of revenue | 27.4% | 27.3% | 27.4% | 27.3% |
Selling & Distribution expenses
| Selling & Distribution expenses | 199 | 181 | 1,361 | 1,174 |
General & Administrative expenses
| General & Administrative expenses | 52 | 54 | 356 | 352 |
Research & Development expenses
| Research & Development expenses | 21 | 18 | 142 | 114 |
Other operating expenses
| Other operating expenses | 0 | 1 | 2 | 5 |
Total operating expenses
| Total operating expenses | 273 | 254 | 1,862 | 1,645 |
% of revenue
| % of revenue | 20.1% | 22.2% | 20.1% | 22.2% |
Operating income (EBIT)
| Operating income (EBIT) | 100 | 59 | 683 | 382 |
% of revenue
| % of revenue | 7.4% | 5.1% | 7.4% | 5.1% |
Financial expenses and investment income
| Financial expenses and investment income | 86 | 53 | 587 | 344 |
Income before taxes
| Income before taxes | 14 | 6 | 96 | 38 |
Taxes on Income
| Taxes on Income | 6 | 36 | 38 | 233 |
Net Income
| Net Income | 8 | (30) | 57 | (195) |
Attributable to:
| Attributable to: |
Non-controlling interest
| Non-controlling interest | 0 | - | 0 | 0 |
Shareholders of the Company
| Shareholders of the Company | 8 | (30) | 57 | (195) |
% of revenue
| % of revenue | 0.6% | (2.6%) | 0.6% | (2.6%) |
Adjustments
| Adjustments | 3 | 27 | 21 | 175 |
Reported Net income attributable to theshareholders of the Company
| Reported Net income attributable to the shareholders of the Company | 5 | (57) | 36 | (371) |
% of revenue
| % of revenue | 0.4% | (5.0%) | 0.4% | (5.0%) |
Adjusted EBITDA
| Adjusted EBITDA | 171 | 122 | 1,165 | 788 |
% of revenue
| % of revenue | 12.5% | 10.6% | 12.5% | 10.6% |
Adjusted EPS
– Basic
| Adjusted EPS7 – Basic | 0.0036 | )0.0130) | 0.0245 | (0.0839) |
– Diluted
| – Diluted | 0.0036 | (0.0130) | 0.0245 | (0.0839) |
Reported EPS
– Basic
| Reported EPS2 – Basic | 0.0023 | (0.0246) | 0.0155 | (0.1592) |
– Diluted
| – Diluted | 0.0023 | (0.0246) | 0.0155 | (0.1592) |
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”.
The number of shares used to calculate both basic and diluted earnings per share in both Q3 and 9M 2021 and 2022 is 2,329.8 millionshares.
Abridged Consolidated Income Statement for the First Nine Months
| Adjusted8 | 9M 2022 USD (m) | 9M 2021 USD (m) | 9M 2022 RMB (m) | 9M 2021 RMB (m) |
Revenues
| Revenues | 4,258 | 3,476 | 28,078 | 22,488 |
Cost of Sales
| Cost of Sales | 2,967 | 2,459 | 19,569 | 15,909 |
Other costs
| Other costs | 67 | 17 | 442 | 110 |
Gross profit
| Gross profit | 1,224 | 1,000 | 8,067 | 6,469 |
% of revenue
| % of revenue | 28.7% | 28.8% | 28.7% | 28.8% |
Selling & Distribution expenses
| Selling & Distribution expenses | 607 | 545 | 4,007 | 3,528 |
General & Administrative expenses
| General & Administrative expenses | 146 | 125 | 962 | 811 |
Research & Development expenses
| Research & Development expenses | 63 | 53 | 416 | 341 |
Other operating expenses
| Other operating expenses | 5 | (6) | 32 | (37) |
Total operating expenses
| Total operating expenses | 821 | 718 | 5,417 | 4,643 |
% of revenue
| % of revenue | 19.3% | 20.6% | 19.3% | 20.6% |
Operating income (EBIT)
| Operating income (EBIT) | 403 | 282 | 2,650 | 1,827 |
% of revenue
| % of revenue | 9.5% | 8.1% | 9.4% | 8.1% |
Financial expenses and investment income
| Financial expenses and investment income | 220 | 144 | 1,462 | 930 |
Income before taxes
| Income before taxes | 182 | 139 | 1,188 | 897 |
Taxes on Income
| Taxes on Income | 23 | 52 | 153 | 338 |
Net Income
| Net Income | 159 | 86 | 1,035 | 559 |
Attributable to:
| Attributable to: |
Non-controlling interest
| Non-controlling interest | 0 | 1 | 0 | 7 |
Shareholders of the Company
| Shareholders of the Company | 159 | 85 | 1,035 | 552 |
% of revenue
| % of revenue | 3.7% | 2.5% | 3.7% | 2.5% |
Adjustments
| Adjustments | 41 | 86 | 267 | 555 |
Reported Net income attributable to theshareholders of the Company
| Reported Net income attributable to the shareholders of the Company | 119 | (1) | 768 | (4) |
% of revenue
| % of revenue | 2.8% | 0.0% | 2.7% | 0.0% |
Adjusted EBITDA
| Adjusted EBITDA | 611 | 464 | 4,027 | 3,004 |
% of revenue
| % of revenue | 14.4% | 13.4% | 14.3% | 13.4% |
Adjusted EPS
– Basic
| Adjusted EPS9 – Basic | 0.0684 | 0.0366 | 0.4442 | 0.2367 |
– Diluted
| – Diluted | 0.0684 | 0.0366 | 0.4442 | 0.2367 |
Reported EPS
– Basic
| Reported EPS2 – Basic | 0.0510 | (0.0003) | 0.3297 | (0.0017) |
– Diluted
| – Diluted | 0.0510 | (0.0003) | 0.3297 | (0.0017) |
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”.
The number of shares used to calculate both basic and diluted earnings per share in both Q3 and 9M 2021 and 2022 is 2,329.8 millionshares.
Abridged Consolidated Balance Sheet
| September 30 2022 USD (m) | September 30 2021 USD (m) | September 30 2022 RMB (m) | September 30 2021 RMB (m) |
Assets
| Assets |
Current assets:
| Current assets: |
Cash at bank and on hand
| Cash at bank and on hand | 524 | 764 | 3,720 | 4,956 |
Bills and accounts receivable
| Bills and accounts receivable | 1,547 | 1,553 | 10,985 | 10,071 |
Inventories
| Inventories | 2,448 | 1,749 | 17,381 | 11,345 |
Other current assets, receivables andprepaid expenses
| Other current assets, receivables and prepaid expenses | 318 | 266 | 2,256 | 1,723 |
Total current assets
| Total current assets | 4,836 | 4,332 | 34,343 | 28,095 |
Non-current assets:
| Non-current assets: |
Fixed assets, net
| Fixed assets, net | 1,666 | 1,504 | 11,829 | 9,755 |
Rights of use assets
| Rights of use assets | 82 | 73 | 582 | 472 |
Intangible assets, net
| Intangible assets, net | 1,462 | 1,498 | 10,393 | 9,713 |
Deferred tax assets
| Deferred tax assets | 185 | 129 | 1,314 | 839 |
Other non-current assets
| Other non-current assets | 105 | 99 | 746 | 640 |
Total non-current assets
| Total non-current assets | 3,501 | 3,303 | 24,864 | 21,419 |
Total assets
| Total assets | 8,337 | 7,635 | 59,206 | 49,514 |
Liabilities
| Liabilities |
Current liabilities:
| Current liabilities: |
Loans and credit from banks and otherlenders
| Loans and credit from banks and other lenders | 704 | 446 | 4,997 | 2,893 |
Bills and accounts payable
| Bills and accounts payable | 1,172 | 822 | 8,322 | 5,331 |
Other current liabilities
| Other current liabilities | 892 | 809 | 6,330 | 5,247 |
Total current liabilities
| Total current liabilities | 2,768 | 2,077 | 19,650 | 13,471 |
Long-term liabilities:
| Long-term liabilities: |
Loans and credit from banks and otherlenders
| Loans and credit from banks and other lenders | 591 | 556 | 4,193 | 3,609 |
Debentures
| Debentures | 1,120 | 1,259 | 7,952 | 8,167 |
Deferred tax liabilities
| Deferred tax liabilities | 53 | 52 | 379 | 335 |
Employee benefits
| Employee benefits | 117 | 116 | 827 | 751 |
Other long-term liabilities
| Other long-term liabilities | 371 | 312 | 2,636 | 2,026 |
Total long-term liabilities
| Total long-term liabilities | 2,252 | 2,296 | 15,986 | 14,889 |
Total liabilities
| Total liabilities | 5,019 | 4,373 | 35,636 | 28,359 |
Equity
| Equity |
Total equity
| Total equity | 3,318 | 3,262 | 23,570 | 21,154 |
Total liabilities and equity
| Total liabilities and equity | 8,337 | 7,635 | 59,206 | 49,514 |
Abridged Consolidated Cash Flow Statement for the Third Quarter
| Q3 2022 USD (m) | Q3 2021 USD (m) | Q3 2022 RMB (m) | Q3 2021 RMB (m) | |
| Cash flow from operating activities: | ||||
| Cash flow from operating activities | (31) | 107 | (213) | 691 |
| Cash flow from operating activities | (31) | 107 | (213) | 691 |
| Investing activities: | ||||
| Acquisitions of fixed and intangible assets | (99) | (96) | (677) | (624) |
| Proceeds from disposal of fixed and intangible assets | 0 | 0 | 2 | 0 |
| Acquisition of subsidiaries | 0 | 0 | - | - |
| Other investing activities | (3) | 1 | (22) | 5 |
| Cash flow used for investing activities | (102) | (96) | (697) | (619) |
| Financing activities: | ||||
| Receipt of loans from banks and other lenders | 216 | 92 | 1,474 | 593 |
| Repayment of loans from banks and other lenders | (24) | (50) | (161) | (326) |
| Interest payment and other | (20) | (10) | (140) | (65) |
| Dividends to shareholders | - | (6) | - | (37) |
| Other financing activities | 4 | 11 | 28 | 73 |
| Cash flow from (used for) financing activities | 176 | 37 | 1,201 | 237 |
| Effects of exchange rate movement on cash and cash equivalents | (5) | 0 | 161 | 17 |
| Net change in cash and cash equivalents | 38 | 47 | 452 | 325 |
| Cash and cash equivalents at the beginning of the period | 475 | 714 | 3,191 | 4,615 |
| Cash and cash equivalents at the end of the period | 513 | 762 | 3,643 | 4,940 |
| Free Cash Flow | (154) | 1 | (1,050) | 6 |
Abridged Consolidated Cash Flow Statement for the First Nine Months
| 9M 2022 USD (m) | 9M 2021 USD (m) | 9M 2022 RMB (m) | 9M 2021 RMB (m) | |
| Cash flow from operating activities: | ||||
| Cash flow from operating activities | (246) | 338 | (1,559) | 2,182 |
| Cash flow from operating activities | (246) | 338 | (1,559) | 2,182 |
| Investing activities: | ||||
| Acquisitions of fixed and intangible assets | (298) | (279) | (1,969) | (1,803) |
| Proceeds from disposal of fixed and intangible assets | 11 | 3 | 72 | 20 |
| Acquisition of subsidiaries | 0 | (101) | - | (655) |
| Other investing activities | (12) | (11) | (80) | (73) |
| Cash flow used for investing activities | (299) | (388) | (1,976) | (2,511) |
| Financing activities: | ||||
| Receipt of loans from banks and other lenders | 590 | 675 | 3,909 | 4,370 |
| Repayment of loans from banks and other lenders | (201) | (411) | (1,324) | (2,655) |
| Interest payment and other | (83) | (70) | (553) | (453) |
| Dividends to shareholders | (3) | (6) | (19) | (37) |
| Other financing activities | (140) | 35 | (906) | 222 |
| Cash flow from (used for) financing activities | 164 | 223 | 1,107 | 1,446 |
| Effects of exchange rate movement on cash and cash equivalents | (9) | 1 | 311 | (11) |
| Net change in cash and cash equivalents | (390) | 174 | (2,117) | 1,105 |
| 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 | 513 | 762 | 3,643 | 4,940 |
| Free Cash Flow | (623) | (115) | (4,049) | (745) |
Notes to Abridged Consolidated Financial StatementsNote 1: Basis of preparationBasis of presentation and accounting policies: The abridged consolidated financial statements for thequarters ended September 30, 2022 and 2021 incorporate the financial statements of ADAMA Ltd. and of all ofits 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 Ministryof Finance (the "MoF") and the implementation guidance, interpretations and other relevant provisions issuedor revised subsequently by the MoF (collectively referred to as “ASBE”). Note that in the reported financialstatements, 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 OperatingExpenses 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 ChineseRenminbi (RMB), as the Company’s shares are traded on the Shenzhen Stock Exchange, as well as in UnitedStates dollars ($) as this is the major currency in which the Company’s business is conducted. For the purposesof 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, andBalance 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 affectthe reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of thefinancial statements, and the reported amounts of revenues and expenses during the reporting period. Actualresults could differ from those estimated.Note 2: Abridged Financial StatementsFor 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
Income Statement Adjustments
| Q3 2022 USD (m) | Q3 2021 USD (m) | Q3 2022 RMB (m) | Q3 2021 RMB (m) |
Net Income (Reported)
| Net Income (Reported) | 5.3 | (57.3) | 36.0 | (371.0) |
Adjustments to COGS & Operating Expenses:
| Adjustments to COGS & Operating Expenses: |
1. Amortization of Legacy PPA of 2011 acquisition of Solutions (non-cash)
| 1. Amortization of Legacy PPA of 2011 acquisition of Solutions (non-cash) | 0.3 | 0.3 | 1.7 | 1.6 |
2. Amortization of Transfer assets received and written-up due to 2017 ChemChina-
Syngenta transaction (non-cash)
| 2. Amortization of Transfer assets received and written-up due to 2017 ChemChina-Syngenta transaction (non-cash) | 5.8 | 4.3 | 39.5 | 27.8 |
3. Upgrade & Relocation related costs
| 3. Upgrade & Relocation related costs | 1.6 | 26.7 | 10.7 | 172.5 |
4. Incentive plans
| 4. Incentive plans | (8.4) | (2.0) | (57.7) | (13.1) |
5. Amortization of acquisition-related PPA (non-cash), other acquisition-related costs
| 5. Amortization of acquisition-related PPA (non-cash), other acquisition-related costs | 4.9 | 3.8 | 33.6 | 24.6 |
6. Transportation classification COGS impact
| 6. Transportation classification COGS impact | (49.2) | - | (335.9) | - |
7. Transportation classification OPEX impact
| 7. Transportation classification OPEX impact | 49.2 | - | 335.9 | - |
Total Adjustments to Operating Income (EBIT)
| Total Adjustments to Operating Income (EBIT) | 4.1 | 33.0 | 27.8 | 213.3 |
Total Adjustments to EBITDA
| Total Adjustments to EBITDA | (6.8) | 18.7 | (46.6) | 120.8 |
Adjustments to Financing Expenses
| Adjustments to Financing Expenses |
Revaluation of non-cash adjustment related to non-controlling interest
| Revaluation of non-cash adjustment related to non-controlling interest | - | - | - | - |
Adjustments to Taxes
| Adjustments to Taxes |
1. Tax shield on Legacy PPA of 2011 acquisition of Solutions
| 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
| 3. Taxes related to Upgrade & Relocation related costs | 0.1 | 5.2 | 0.5 | 33.7 |
5. Deferred tax on amortization of acquisition-related PPA, other acquisition-related costs
| 5. Deferred tax on amortization of acquisition-related PPA, other acquisition-related costs | 0.9 | 0.6 | 6.0 | 3.9 |
Total adjustments to Net Income
| Total adjustments to Net Income | 3.1 | 27.1 | 21.1 | 175.5 |
Net Income (Adjusted)
| Net Income (Adjusted) | 8.4 | (30.2) | 57.1 | (195.5) |
Total adjustments to Net Income attributable to the shareholders of the Company
| Total adjustments to Net Income attributable to the shareholders of the Company | 3.1 | 27.1 | 21.1 | 175.5 |
| 9M 2022 USD (m) | 9M 2021 USD (m) | 9M 2022 RMB (m) | 9M 2021 RMB (m) |
Net Income (Reported)
| Net Income (Reported) | 118.7 | (0.3) | 768.1 | -1.7 |
Adjustments to COGS & Operating Expenses:
| Adjustments to COGS & Operating Expenses: |
1. Amortization of Legacy PPA of 2011 acquisition of Solutions (non-cash)
| 1. Amortization of Legacy PPA of 2011 acquisition of Solutions (non-cash) | 0.8 | 0.8 | 4.9 | 4.9 |
2. Amortization of Transfer assets received and written-up due to 2017 ChemChina-
Syngenta transaction (non-cash)
| 2. Amortization of Transfer assets received and written-up due to 2017 ChemChina-Syngenta transaction (non-cash) | 17.1 | 18.8 | 112.6 | 121.7 |
3. Upgrade & Relocation related costs
| 3. Upgrade & Relocation related costs | 5.5 | 66.9 | 35.9 | 432.5 |
4. Incentive plans
| 4. Incentive plans | 1.7 | 1.5 | 10.4 | 9.8 |
5. Amortization of acquisition-related PPA (non-cash), other acquisition-related costs
| 5. Amortization of acquisition-related PPA (non-cash), other acquisition-related costs | 15.0 | 11.3 | 99.2 | 73.3 |
6. Transportation classification COGS impact
| 6. Transportation classification COGS impact | (146.7) | - | 967.3 | - |
7. Transportation classification OPEX impact
| 7. Transportation classification OPEX impact | 146.7 | - | (967.3) | - |
8. Provisions in respect of prior years’ legal- and tax-related costs
| 8. Provisions in respect of prior years’ legal- and tax-related costs | - | 1.6 | - | 10.3 |
Total Adjustments to Operating Income (EBIT)
| Total Adjustments to Operating Income (EBIT) | 40.0 | 100.8 | 263.1 | 652.5 |
Total Adjustments to EBITDA
| Total Adjustments to EBITDA | 6.7 | 59.4 | 43.4 | 384.7 |
Adjustments to Financing Expenses
| Adjustments to Financing Expenses |
Revaluation of non-cash adjustment related to non-controlling interest
| Revaluation of non-cash adjustment related to non-controlling interest | 3.6 | - | 23.8 | - |
Adjustments to Taxes
| Adjustments to Taxes |
1. Tax shield on Legacy PPA of 2011 acquisition of Solutions
| 1. Tax shield on Legacy PPA of 2011 acquisition of Solutions | 0.1 | 0.1 | 0.8 | 0.8 |
3. Taxes related to Upgrade & Relocation related costs
| 3. Taxes related to Upgrade & Relocation related costs | 0.2 | 11.9 | 1.3 | 77.0 |
5. Deferred tax on amortization of acquisition-related PPA, other acquisition-related costs
| 5. Deferred tax on amortization of acquisition-related PPA, other acquisition-related costs | 2. 7 | 1.8 | 17.9 | 11.6 |
8. Provisions in tax expenses in respect of prior years’ legal- and tax-related costs
| 8. Provisions in tax expenses in respect of prior years’ legal- and tax-related costs | - | 0.4 | - | 2.5 |
Total adjustments to Net Income
| Total adjustments to Net Income | 40.6 | 86.6 | 266.8 | 560.6 |
Net Income (Adjusted)
| Net Income (Adjusted) | 159.3 | 86.4 | 1,034.9 | 558.9 |
Total adjustments to Net Income attributable to the shareholders of the Company
| Total adjustments to Net Income attributable to the shareholders of the Company | 40.6 | 85.9 | 266.8 | 555.5 |
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 ofSolutions 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 fromthe 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 andeconomic 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 incurreddue to the written-up value of the acquired assets is also adjusted to present a consistent view of Divestment and Transfer transactions, whichhad no net impact on the underlying economic performance of the Company. These additional amortization charges will continue until 2032 butat 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 inChina. 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 nolonger operational are being written off (or impaired), while for others, their economic life has been shortened and therefore will be depreciatedover a shorter period. Since these are older assets that were built many years ago and will be replaced by newer production facilities at the newsites, and since the ongoing operations of the business will not be impacted thereby, the Company adjusts for the impact of all charges relatedto the China Upgrade & Relocated program, which include mainly: (i) excess procurement costs incurred as the Company continued to fulfilldemand 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 thefirst quarter of 2022, as the relocation and upgrade of the manufacturing Jingzhou site in China has been completed and is now at a high levelof 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 performanceand expected employee compensation and to reflect the existing phantom awards, in the Company’s adjusted financial performance, the LTI ispresented 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 thecompanies 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.
Exchange Rate Data for the Company's Principal Functional Currencies
| September 30 | Q3 Average | 9M Average | |||||||||
| 2022 | 2021 | Change | 2022 | 2021 | Change | 2022 | 2021 | Change | |||
| EUR/USD | 0.984 | 1.157 | (14.97%) | 1.008 | 1.179 | (14.50%) | 1.064 | 1.198 | (11.24%) | ||
| USD/BRL | 5.407 | 5.439 | 0.60% | 5.249 | 5.229 | (0.38%) | 5.134 | 5.323 | 3.54% | ||
| USD/PLN | 4.953 | 3.993 | (24.07%) | 4.706 | 3.873 | (21.53%) | 4.395 | 3.793 | (15.89%) | ||
| USD/ZAR | 17.953 | 15.060 | (19.21%) | 17.030 | 14.63 | (16.42%) | 15.950 | 14.460 | (10.30%) | ||
| USD/AUD | 0.652 | 0.719 | (9.39%) | 0.684 | 0.735 | (6.93%) | 0.707 | 0.761 | (7.09%) | ||
| GBP/USD | 1.118 | 1.344 | (16.79%) | 1.179 | 1.379 | (14.50%) | 1.256 | 1.388 | (9.51%) | ||
| USD/RMB | 7.100 | 6.485 | 9.47% | 6.830 | 6.470 | 5.55% | 6.597 | 6.470 | 1.97% | ||
| USD/ILS | 3.543 | 3.229 | (9.72%) | 3.400 | 3.234 | (5.13%) | 3.313 | 3.259 | (1.67%) | ||
| USD LIBOR 3M | 3.75% | 0.13% | 362 bp | 2.99% | 0.13% | 287 bp | 1.69% | 0.16% | 153 bp | ||
| September 30 | Q3 Average | 9M Average | |||||||||
| 2022 | 2021 | Change | 2022 | 2021 | Change | 2022 | 2021 | Change | |||
| USD/RMB | 7.100 | 6.485 | 9.47% | 6.830 | 6.470 | 5.55% | 6.597 | 6.470 | 1.97% | ||
| EUR/RMB | 6.985 | 7.504 | (6.91%) | 6.886 | 7.630 | (9.75%) | 7.017 | 7.740 | (9.35%) | ||
| RMB/BRL | 0.762 | 0.839 | 9.20% | 0.769 | 0.808 | 4.90% | 0.778 | 0.824 | 5.57% | ||
| RMB/PLN | 0.658 | 0.616 | (6.96%) | 0.649 | 0.599 | (8.39%) | 0.649 | 0.588 | (10.39%) | ||
| RMB/ZAR | 2.529 | 2.322 | (8.89%) | 2.494 | 2.261 | (10.30%) | 2.418 | 2.252 | (7.34%) | ||
| AUD/RMB | 4.627 | 4.664 | (0.81%) | 4.671 | 4.755 | (1.76%) | 4.666 | 4.909 | (4.95%) | ||
| GBP/RMB | 7.939 | 8.716 | (8.91%) | 8.051 | 8.921 | (9.75%) | 8.286 | 8.961 | (7.53%) | ||
| RMB/ILS | 0.499 | 0.498 | (0.23%) | 0.498 | 0.500 | 0.40% | 0.502 | 0.503 | 0.22% | ||
| RMB LIBOR 3M | 1.67% | 2.43% | (76) bp | 1.73% | 2.39% | (65) bp | 2.09% | 2.54% | (45) bp | ||