ADAMA Ltd. Semi-Annual Report 2020
ADAMA LTD.
SEMI-ANNUAL REPORT 2020
ADAMA Ltd. is a global leader in crop protection, providing solutions to farmers across theworld to combat weeds, insects and disease. ADAMA has one of the widest and mostdiverse portfolios of active ingredients in the world, state-of-the art R&D, manufacturing andformulation facilities, together with a culture that empowers our people in markets aroundthe world to listen to farmers and ideate from the field. This uniquely positions ADAMA tooffer 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.Please see important additional information and further details included in the Annex.
August 2020
ADAMA Ltd. Semi-Annual Report 2020
Section I - Important Notice, Table of Contents and Definitions
? The Company’s Board of Directors, Board of Supervisors, directors, supervisors and
senior managers confirm that the content of the Report is true, accurate and completeand contains no false statement, misleading presentations or material omissions, andassume joint and several legal liability arising therefrom.? Ignacio Dominguez, the person in charge of the Company (President and Chief
Executive Officer) as well as its legal representative, and Aviram Lahav, the personleading the accounting function (Chief Financial Officer & Deputy Chief ExecutiveOfficer), hereby assert and confirm the truthfulness, accuracy and completeness of theFinancial Report.? All the Company’s directors attended the board meeting for the review of this Report.? The forward-looking information described in this Report, such as future plans,
development strategy, market trends and their effect etc., does not constitute, in anymanner whatsoever, a substantial commitment of the Company to investors. Investorsand other relevant people are cautioned to be sufficiently mindful of investment risksas well as the difference between plans, forecasts and commitments.? The Company has described its possible risks in “X - Risks Facing the Company and
Countermeasures” under Section IV herein.? For the Reporting Period, the Company does not plan to distribute cash dividends or
bonus shares or convert capital reserve into share capital.? This Report and its Abstract have been prepared in both Chinese and English. Should
there be any discrepancies between the two versions, the Chinese version shall prevail.
ADAMA Ltd. Semi-Annual Report 2020
Table of Contents
Section I - Important Notice, Table of Contents and Definitions ...... 2
Section II - Corporate Profile and Financial Results ...... 5
Section III - Business Profile ...... 8
Section IV - Performance Discussion and Analysis ...... 10
Section V - Significant Events ...... 33
Section VI - Share Changes and Shareholders ...... 50
Section VII - Preferred stock ...... 56
Section VIII - Convertible Bonds ...... 57
Section IX - Directors, Supervisors and Senior Management ...... 58
Section X - Corporate Bonds ...... 59
Section XI - Financial Report ...... 60
Section XII - Documents Available for Reference ...... 176
ADAMA Ltd. Semi-Annual Report 2020
Definitions
| General Terms | Definition |
| Company, the Company | ADAMA Ltd. |
| Adama Solutions | Adama Agricultural Solutions Ltd., a wholly-owned subsidiary of the Company, incorporated in Israel according to its laws |
| Anpon | ADAMA Anpon (Jiangsu) Ltd., a wholly-owned subsidiary of the Company, incorporated in China according to its laws |
| Board of Directors/Board | The Board of Directors of the Company |
| Board of Supervisors | The Board of Supervisors of the Company |
| Group, the Group, ADAMA | The Company, including all its subsidiaries, unless expressly stated otherwise |
| ChemChina | China National Chemical Co., Ltd. |
| ChemChina-Syngenta Transaction | The acquisition of Syngenta AG by ChemChina in 2017 |
| CNAC | China National Agrochemical Co., Ltd., the indirect controlling shareholder of the Company, a wholly-owned subsidiary of ChemChina |
| CSRC | China Securities Regulatory Commission |
| SZSE | Shenzhen Stock Exchange |
| SASAC | State Assets Supervision and Administration Commission of China |
| Syngenta Group | Syngenta Group Co., Ltd, the controlling shareholder of the Company as of June 15, 2020, a wholly-owned subsidiary of CNAC |
| Report | This 2020 Semi-Annual Report |
| Reporting Period, this Period | January 1, 2020 - June 30, 2020 |
| 2019 Annual Report | The Company’s 2019 Annual Report published on April 28, 2020 |
ADAMA Ltd. Semi-Annual Report 2020
Section II - Corporate Profile and Financial Results
I. Corporate Information
| Stock name | ADAMA A, ADAMA B | Stock code | 000553, 200553 |
| Stock exchange | Shenzhen Stock Exchange | ||
| Company name in Chinese | 安道麦股份有限公司 | ||
| Abbr. | 安道麦 | ||
| Company name in English (if any) | ADAMA Ltd. | ||
| Abbr. (if any) | ADAMA | ||
| Legal representative | Ignacio Dominguez | ||
| Board Secretary | Securities Affairs Representative | Investor Relations Manager | |
| Name | Li Zhongxi | Liang Jiqin | Wang Zhujun |
| Address | 6/F, No.7 Office Building, No.10 Courtyard, Chaoyang Park South Road, Chaoyang District, Beijing | ||
| Tel. | 010-56718110 | 010-56718110 | 010-56718110 |
| Fax | 010-59246173 | 010-59246173 | 010-59246173 |
| irchina@adama.com | irchina@adama.com | irchina@adama.com | |
ADAMA Ltd. Semi-Annual Report 2020
3. Other Relevant Documents
Indicate by tick mark whether any changes occurred to the relevant documents during the ReportingPeriod.
□ Applicable √ Not applicable
IV. Main Accounting Data and Financial ResultsIndicate by tick mark whether the Company needs to retroactively adjust or restate any of its accountingdata.
□ Yes √ No
| Reporting Period | Same period of last year | +/- (%) | |
| Operating revenues (RMB’000) | 14,121,040 | 13,616,032 | 3.71% |
| Net profit attributable to shareholders of the Company (RMB’000) | 204,649 | 588,638 | -65.23% |
| Net profit attributable to shareholders of the Company excluding non-recurring profit and loss (RMB’000) | 219,772 | 430,270 | -48.92% |
| Net cash flow from operating activities (RMB’000) | 1,234,531 | (304,950) | -504.83% |
| Basic EPS (RMB/share) | 0.0836 | 0.2406 | -65.25% |
| Diluted EPS (RMB/share) | N/A | N/A | N/A |
| Weighted average return on net assets | 0.91% | 2.59% | -1.68% |
| End of Reporting Period | End of last year | +/- (%) | |
| Total assets (RMB’000) | 49,096,179 | 45,288,940 | 8.41% |
| Net assets attributable to shareholders of the Company (RMB’000) | 22,669,778 | 22,371,665 | 1.33% |
ADAMA Ltd. Semi-Annual Report 2020
2. Differences in Net Profit and Net Assets Disclosed in Financial Reports Prepared under
Chinese and Foreign Accounting Standards
□ Applicable √ Not applicable
None during the Reporting Period.
3. Reason for accounting data differences under Chinese and Foreign Accounting Standards
□ Applicable √ Not applicable
VI. Non-Recurring Profit/Loss
√ Applicable □ Not applicable
Unit: RMB’000
| Item | Reporting Period | Note |
| Gains/losses on the disposal of non-current assets (including the offset part of asset impairment provisions) | 7,694 | - |
| Government grants recognized through profit or loss (excluding government grants closely related to business of the Company and given at a fixed quota or amount in accordance with government’s uniform standards) | 17,834 | - |
| Recovery or reversal of provision for bad debts which is assessed individually during the years | 15,508 | - |
| Other non-operating income and expenses other than the above | 19,274 | - |
| Other profit or loss that meets the definition of non-recurring profit or loss | (66,192) | Employee early retirement plan expenses at the Company’s Israeli manufacturing facilities |
| Less: Income tax effects | 9,241 | |
| NCI (after tax) | - | |
| Total | (15,123) |
ADAMA Ltd. Semi-Annual Report 2020
Section III - Business Profile
I. Main Business of the Company during the Reporting PeriodThe Company is a corporation incorporated in the People's Republic of China.The Group engages in the development, manufacturing and commercialization of crop protectionproducts, that are largely off-patent, and is one of the leading companies in the world in this field. TheGroup provides solutions to farmers in approximately 100 countries, through approximately 60 subsidiarycompanies throughout the world.The Group's business model integrates end-customer access, regulatory expertise, global R&D andproduction capabilities, thereby providing the Group a significant competitive edge and allowing it tolaunch new and differentiated products that address farmers’ needs in key markets.The Group's primary operations are global, spanning activities in Europe, North America, Latin America,Asia-Pacific (including China) and India, the Middle-East and Africa. In aggregate, the Group sells itsproducts in approximately 100 countries across the globe.The Group is focused on the development, manufacturing and commercialization of largely off-patentcrop protection products, which are generally herbicides, insecticides and fungicides, which protectagricultural and other crops against weeds, insects and disease, respectively. The Group also utilizes itsexpertise to adapt such products also for the development, manufacturing and commercialization ofsimilar products for non-agricultural purposes (Consumer and Professional Solutions).In addition, the Group leverages its core capabilities in the agricultural and chemical fields and operatesin several other non-agricultural areas, none of which, individually, is material for the Group. Theseactivities, collectively reported as Intermediates and Ingredients, include primarily, (a) the manufacturingand marketing of dietary supplements, food colors, texture and flavor enhancers, and food fortificationingredients; (b) fragrance products for the perfume, cosmetics, body care and detergents industries; (c)the manufacturing of industrial products and (d) other non-material activities.Trends, events and key developments in the Group's macro-economic environment may have a materialimpact on its business results and development. The influence of these factors may differ depending onthe geographic region and the different products of the Group. Since the Group maintains a wide productportfolio and since it is active in many geographic regions, the aggregate effect of these factors in anygiven year, and during the course thereof, is not uniform and may sometimes be mitigated bycounterbalancing influences. The activities and results of the Group are further subject to, and affectedby, certain global, localized and other factors, such as: demographic changes; economic growth andrising standards of living; agricultural commodity prices; significant fluctuations in raw material costs andglobal energy prices; development of new crop protection technologies; patent expiries and growth involumes of off-patent products; the global agricultural markets and volatile weather conditions; regulatorychanges; government policies; world ports, international monetary policies and the financial markets.Becoming Part of the Syngenta GroupIn June 2020, the Company became a distinctive member of the newly established Syngenta Group. Thenew group is a world leader in agricultural inputs, spanning crop protection, seeds, fertilizers, additionalagricultural and digital technologies, as well as an advanced distribution network in China. The Companyjoined this newly-formed ag-industry leader through the contribution of most of the stake that ChemChinaindirectly owned in the Company into the group. As such, there is no change in the Company’s ultimate
ADAMA Ltd. Semi-Annual Report 2020
controlling shareholder. The Company continues to be headquartered in Israel, remains traded on theShenzhen Stock Exchange, and maintains its unique brand and positioning.Please see important additional information and further details included in the Annex.II. Significant Changes in Main Assets
1. Significant Changes to Main Assets
| Main Assets | Significant Change |
| Stock rights/Equity assets | No significant change |
| Fixed assets | No significant change |
| Intangible assets | No significant change |
| Construction in progress | Changes are mainly due to investments as part of China relocation and CIP transferred to fixed assets |
| Specific contents of the assets | Reason | Scale (Amount) of the assets (RMB’000) | Location | Operation /Management mode | Control measures to guarantee safety of the assets | Net Profit of the assets (RMB’000) | Proportion of overseas assets out of total net assets (%) | Significant impairment risk? |
| Equity investment in Adama Solutions | Acquired through Major Assets Restructuring | 19,875,516 | Israel and globally | Corporate Governance | Corporate Governance | 80,586 | 88% | No |
| Other explanations | ||||||||
ADAMA Ltd. Semi-Annual Report 2020
Section IV - Performance Discussion and Analysis
I. Overview
During the first half of 2020, the global agrochemical market, amongst many others, was impactedby the unprecedented COVID-19 pandemic. As a result, farmers’ incomes have been, and continueto be, negatively impacted in most regions by lower crop prices, reduced demand due to the relativeshutdown of the food sector, and labor shortages owing to mobility restrictions, all leading toincreased costs for farmers. Governments across the world continue to include farmers in extensivesupport programs, partially offsetting lost income due to the pandemic.One of the most widespread economic consequences of the pandemic is the significant weakeningof many global currencies against the US dollar, which started abruptly towards the end of Q1 andcontinued throughout the duration of Q2. This has been seen most notably in the Brazilian Real,Indian Rupee and Turkish Lira, and has contributed to increased volatility in the Euro and Australiandollar.Following tight supply in the first quarter due to COVID-19 disruptions, chemical production in Chinahas largely returned to prior levels and prices of raw materials and intermediates are starting toreflect such increase in supply. The Company expects to benefit from this trend in the upcomingquarters.The ongoing spread of the COVID-19 pandemic is expected to continue to impact the performanceand profitability of the Company in the coming months. The Company continues to actively manageits response to the pandemic in order to ensure the safety of its employees and limit its impact onthe Company’s business and financial performance.Despite these challenging conditions largely owing to COVID-19, the Company delivered a resilientperformance in the second quarter driven by significant volume growth, mainly in emerging markets,supporting continued sales growth over the half-year period in constant exchange terms.
Regarding the explanations on the changes in the financial data, please refer to the following section - “IIAnalysis of Main Business” of this chapter.
ADAMA Ltd. Semi-Annual Report 2020
II. Analysis of Main BusinessSee details on the relevant contents of the aforementioned “I. Overview” of “Performance Discussionand Analysis”.
Year-on-year changes of main financial data:
| 2020 Apr-June (000’RMB) | Same period of last year (000’RMB) | +/-% | 2020 Apr-June (000’USD) | Same period of last year (000’USD) | +/-% | |
| Operating income | 7,338,797 | 6,828,281 | 7.48% | 1,035,873 | 1,001,729 | 3.41% |
| Cost of goods sales | 5,147,057 | 4,574,006 | 12.53% | 726,512 | 671,020 | 8.27% |
| Selling and Distribution expenses | 1,211,697 | 1,230,808 | -1.55% | 171,033 | 180,568 | -5.28% |
| General and administrative expenses | 227,957 | 310,745 | -26.64% | 32,176 | 45,582 | -29.41% |
| R&D expenses | 96,177 | 114,346 | -15.89% | 13,576 | 16,777 | -19.08% |
| Financial Expense | 431,172 | 458,815 | -6.02% | 60,872 | 67,320 | -9.58% |
| Profit before tax | 312,215 | 314,064 | -0.59% | 44,051 | 46,083 | -4.41% |
| Income tax expenses | 90,859 | 92,182 | -1.44% | 12,823 | 13,521 | -5.16% |
| Net income | 221,356 | 221,882 | -0.24% | 31,228 | 32,562 | -4.10% |
| EBITDA | 1,191,383 | 1,228,809 | -3.05% | 168,159 | 180,267 | -6.72% |
| Net cash flows from operating activities | 1,619,239 | 984,534 | 64.47% | 228,566 | 144,436 | 58.25% |
| Net cash flows used in investing activities | (442,286) | (300,265) | 47.30% | (62,439) | (44,079) | 41.65% |
| Net cash flows used in financing activities | 846,222 | (97,912) | -964.27% | 119,445 | (14,435) | -927.47% |
| Net increase in cash and cash equivalents | 2,018,188 | 643,136 | 213.80% | 284,548 | 79,097 | 259.75% |
ADAMA Ltd. Semi-Annual Report 2020
| Reporting Period (000’RMB) | Same period of last year (000’RMB) | +/-% | Reporting Period (000’USD) | Same period of last year (000’USD) | +/-% | |
| Operating income | 14,121,040 | 13,616,032 | 3.71% | 2,008,404 | 2,008,150 | 0.01% |
| Cost of goods sales | 9,904,470 | 9,023,242 | 9.77% | 1,408,693 | 1,330,711 | 5.86% |
| Selling and Distribution expenses | 2,468,568 | 2,499,774 | -1.25% | 351,260 | 368,715 | -4.73% |
| General and administrative expenses | 553,186 | 628,259 | -11.95% | 78,810 | 92,661 | -14.95% |
| R&D expenses | 188,185 | 210,699 | -10.69% | 26,769 | 31,062 | -13.82% |
| Financial Expense | 842,792 | 938,196 | -10.17% | 119,894 | 138,402 | -13.37% |
| Profit before tax | 448,847 | 729,175 | -38.44% | 63,652 | 107,630 | -40.86% |
| Income tax expenses | 244,198 | 140,537 | 73.76% | 34,811 | 20,692 | 68.23% |
| Net income | 204,649 | 588,638 | -65.23% | 28,841 | 86,938 | -66.82% |
| EBITDA | 2,119,271 | 2,460,919 | -13.88% | 301,217 | 362,956 | -17.01% |
| Net cash flows from (used in) operating activities | 1,234,531 | (304,950) | -504.83% | 173,400 | (46,757) | -470.85% |
| Net cash flows used in investing activities | (815,385) | (1,369,994) | -40.48% | (115,939) | (202,688) | -42.80% |
| Net cash flows provided by financing activities | 1,475,449 | 735,633 | 100.57% | 209,672 | 109,154 | 92.09% |
| Net increase (decrease) in cash and cash equivalents | 1,936,200 | (964,376) | -300.77% | 264,458 | (141,826) | -286.47% |
ADAMA Ltd. Semi-Annual Report 2020
Analysis of Financial Highlights
(1) Revenues
Revenues in the second quarter were $1,036 million, up by 12% in CER terms, driven by robust12% volume growth, alongside generally stable prices. This performance was achieved despite thevarious impacts of COVID-19, which continued to pose numerous challenges to the way theCompany conducts its business, as well as materially impacting global currencies. In US dollarterms, sales grew by a more moderate 3% (+8% in RMB terms), reflecting an estimated $85 millionnegative impact from the weaker currencies, and reflecting the Company’s strong growth inemerging markets which were among the most significantly impacted by the global currencyweakness.
Growth in the second quarter was fueled by a strong performance in emerging markets, mostnotably in Latin America, with strong business volume overcoming the material depreciation ofregional currencies, as well as in the India, Middle East & Africa region, which benefited fromfavorable weather. The second quarter also saw a return to growth in China, with a strong recoveryfrom the first quarter’s COVID-19 pandemic-related impact on operations at the Company’sJingzhou site in Hubei province. The Company also delivered solid growth in Asia-Pacific (outsideChina), led by a strong performance in Australia.Sales were lower in both Europe and North America in the second quarter. Steady growth innorthern and western Europe only partially compensated for a challenging season seen in centraland eastern Europe, where volatile weather posed challenges for growers, reducing planting insome crops earlier in the season, and preventing application in the latter part. In North America,challenging weather reduced purchasing from customers in some US crops, while COVID-19related uncertainty impacted demand from distribution channels.The return to growth in the second quarter saw the Company generate sales growth of almost 7%in CER terms over the first half of the year, while in USD terms the Company was able to matchthe first-half record high sales of $2,008 million seen in 2019 (+4% in RMB terms). This reflects theovercoming of an estimated $56 million impact from the COVID-19 pandemic over the first half ofthe year, as well as the material impact of widespread global currency weakness against the USdollar, which constrained sales US dollar terms sales in the period by an estimated $135 million.
ADAMA Ltd. Semi-Annual Report 2020
Operating revenues
Unit: RMB’000
| 2020H1 | 2019H1 | YoY +/-% | |||
| Amount | Ratio of the operating revenue | Amount | Ratio of the operating revenue | ||
| Total operating revenue | 14,121,040 | 100.00% | 13,616,032 | 100.00% | 3.71% |
| Classified by industries | |||||
| Manufacture of chemical raw materials and chemical products | 14,121,040 | 100.00% | 13,616,032 | 100.00% | 3.71% |
| Classified by products | |||||
| Herbicides | 6,230,425 | 44.12% | 6,184,441 | 45.42% | 0.74% |
| Fungicides | 2,879,888 | 20.39% | 2,410,406 | 17.70% | 19.48% |
| Insecticides | 3,724,051 | 26.37% | 3,707,558 | 27.23% | 0.44% |
| Ingredients and Intermediates (Formerly referred to as Non-Agro) | 1,286,676 | 9.11% | 1,313,627 | 9.65% | -2.05% |
| Classified by regions | |||||
| Europe | 4,275,020 | 30.27% | 4,252,479 | 31.23% | 0.53% |
| North America | 2,622,636 | 18.57% | 2,715,528 | 19.94% | -3.42% |
| Latin America | 2,669,490 | 18.90% | 2,411,530 | 17.71% | 10.70% |
| Asia-Pacific | 2,456,818 | 17.40% | 2,426,931 | 17.82% | 1.23% |
| India, Middle East and Africa | 2,097,076 | 14.85% | 1,809,564 | 13.29% | 15.89% |
| Q2 2020 $m | Q2 2019 $m | Change USD | H1 2020 $m | H1 2019 $m | Change USD |
| Europe | 252 | 267 | -5.6% | 609 | 628 | -3.0% |
| North America | 205 | 220 | -7.0% | 373 | 400 | -6.9% |
| Latin America | 220 | 196 | 12.4% | 379 | 355 | 6.7% |
| Asia Pacific | 191 | 173 | 11.0% | 349 | 358 | -2.4% |
| Of which China | 99 | 86 | 15.6% | 168 | 180 | -6.7% |
| India, Middle East & Africa | 167 | 146 | 14.6% | 298 | 267 | 11.7% |
| Total | 1,036 | 1,002 | 3.4% | 2,008 | 2,008 | 0.0% |
ADAMA Ltd. Semi-Annual Report 2020
reducing planting in some crops earlier in the season, while the sudden wet weather which followedhampered application in the latter part.On 1 July, 2020, the Company acquired the remaining 51% stake in Alfa Agricultural Supplies, S.A., aleading Greek provider of crop protection and other agriculture-related inputs. Through this acquisition,the Company will further bolster its position and offering in this relevant market by driving the continueddevelopment of its value-added product portfolio, deepening Alfa’s already strong relationships with localag-input distributors, retailers and farmers, aiming at meeting the growing needs of farmers in Greece.In US dollar terms, sales were lower by 5.6% in the quarter and by 3.0% in the half-year period, comparedto the corresponding periods last year, also reflecting the net impact of weaker currencies, largelyattributed to the COVID-19 outbreak.North America: Sales were lower by 6.5% in the second quarter and by 6.3% in the first half of the year,in CER terms, compared with the corresponding periods last year. This was largely due to challengingweather conditions, primarily in southern US, which delayed planting and reduced cotton acreagealongside a reduction in cotton demand due to lower retail apparel sales as a result of COVID-19. Inaddition, COVID-19 related uncertainty saw distributors reducing inventories, putting pressure on prices.The Company recorded robust growth in Canada, partially offsetting the lower sales in the US, supportedby successful product launches including ORIUS
?
a broad-spectrum herbicide in wheat, barley and oats,PYTHON
TMa broad-spectrum, dual mode of action herbicide in field peas and soybeans, as well asLEOPARD
?
, a fast-acting, selective graminicide for use against grassy weeds in multiple crops.In US dollar terms, sales were lower by 7.0% in the quarter and by 6.9% in the first half, compared to thecorresponding period last year, reflecting the weakening of the Canadian Dollar.Latin America: Sales grew by 39.8% in the second quarter and by 27.6% in the first half of the year, inCER terms, compared to the corresponding periods last year, driven by significant volume growth in keycountries and continued price increases throughout the region.The Company delivered strong growth in Brazil, supported by favorable weather conditions and increasedsoybean and corn acreage. The Company continues to expand its differentiated product offering in thecountry, recently launching PLETHORA
?
, an innovative insecticide mixture with dual mode of action,addressing a broad spectrum of caterpillar and other pests.Noteworthy performances were also recorded with continued market share gains in Argentina, supportedby favorable weather conditions that accelerated the pace of summer crop harvesting and winter grainplanting, Peru where the Company’s activities were bolstered by its Q4 2019 acquisition in the country,as well as a strong performance in Paraguay.In US dollar terms, sales in the region grew by 12.4% in the quarter and 6.7% in the first half of the year,compared to the corresponding periods last year, as the robust business growth was heavily impacted byweaker currencies in the region, in particular the significant decline in the Brazilian Real against the USdollar.Asia-Pacific: Sales grew by 16.1% in the quarter and by 2.7% in the first half of the year in CER terms,compared to the corresponding periods last year, driven by strong volume growth and continued priceincreases, recovering from the first quarter COVID-19 impact.In Asia-Pacific (outside of China), a noteworthy performance was recorded in Australia which has seen astrong season supported by favorable weather. This compensated for challenging seasonal and COVID-
ADAMA Ltd. Semi-Annual Report 2020
19 related conditions in many parts of South East Asia. However, good rice cropping conditions in theregion, drove increased sales of the Company’s leading rice insecticide offering.During the quarter, the Company obtained multiple new product registrations in the region, includingNEGATE
?
, a dual-mode of action herbicide for use in turf in Australia, GOLTIX GOLD
?, a unique herbicideformulation with improved efficacy for controlling weeds in beets in New Zealand, and Banjo Forte
?, afungicide for use in black pepper in Vietnam.In China, the Company saw a strong recovery in business growth in the second quarter, supported bynew product launches including XISHENG LV
?, a protective fungicide for fruits and vegetables, as wellas FEIDIAN #1?, an insecticide for drone application, mainly in rice. This second quarter performancesaw the Company, almost fully overcoming the loss of sales in the first quarter cause largely by theCOVID-19 impact on operations at the Company’s Jingzhou site in Hubei province. The second quartersaw a recovery in sales of raw materials and intermediates, albeit at lower prices due to increased supplygenerally from Chinese producers.In US dollar terms, sales in the region grew by 11.0% in the second quarter but were lower by 2.4% inthe first half of the year, compared to the corresponding periods last year, reflecting the impact of weakercurrencies, most notably the Australian Dollar and Chinese Renminbi.India, Middle East & Africa: Sales grew by 23.2% in the quarter and by 18.3% in the first half of the year,in CER terms, compared to the corresponding periods last year. The Company delivered robust businessgrowth in the region, led by India, alongside continued price increases.In India, the timely arrival of the monsoon and its associated rains facilitated the good sowing of summercrops, encouraging application of crop protection products, following the lifting of the lockdown imposedby the Indian government. Favorable rainfall in South Africa improved cropping conditions, more thanoffsetting a challenging cotton season in Turkey.In US dollar terms, sales in the region grew by 14.6% in the quarter and by 11.7% in the first half of theyear, compared to the corresponding periods last year, reflecting the impact of softer currencies, mostnotably the Turkish Lira, the Indian Rupee and the South African Rand.
(2) Gross Profit:
In the second quarter, the strong volume growth alongside somewhat higher prices and animproved product mix were more than offset by the material depreciation of global currencies andslightly higher manufacturing costs. Similarly, over the half-year period, the significant currencyweakness and somewhat higher manufacturing costs outweighed the Company’s strong volumegrowth.The widespread currency depreciation resulting largely from the COVID-19 outbreak constrainedgross profit by an estimated $70 million in the quarter. The pandemic impacted H1 gross profit byan estimated $16 million, in addition to an estimated $109 million in currency headwinds.
(3) Operating Expenses:
Operating expenses include Sales and Marketing, General and Administration and R&D. Totaloperating expenses in the second quarter were $217 million (20.9% of sales) and $457 million(22.7% of sales) in the half-year, compared to $243 million (24.3% of sales) and $492 million (24.5%of sales) in the corresponding periods last year, respectively.The Company continues to exercise tight control of its operating expenses, which were alsonaturally constrained by the impact of COVID-19, and was able to achieve significant savings in
ADAMA Ltd. Semi-Annual Report 2020
the quarter and first half, despite the inclusion of the companies acquired during 2019. Operatingexpenses in the 2020 periods also benefited from the global currency weakness against the USdollar.In recent years, the Company recorded various one-time or non-cash or non-operational items affectingits reported numbers, including as a result of mergers and acquisitions, which resulted in the inclusionwithin its operating expenses of, mainly, the following items:
? Amortization of legacy Purchase Price Allocation (PPA) of 2011 acquisition of Adama Solutions,a wholly-owned subsidiary of the Company (non-cash): Under PRC GAAP, since the firstcombined reporting in Q3 2017 following the combination, the Company has inherited the historical“legacy” amortization charge that ChemChina previously was incurring in respect of its acquisition ofAdama Solutions in 2011. This amortization is done in a linear manner on a quarterly basis, most ofwhich will be fully amortized by the end of 2020. Its reported financial impact (affecting the Sales &Marketing expenses) in the first half of 2020 is RMB 133 million (USD 19 million), net of tax, comparedwith RMB 129 million (USD 19 million) in the corresponding period in 2019.? Amortization of Transfer assets received and written-up due to 2017 ChemChina-Syngentatransaction (non-cash): The proceeds from the Divestment of crop protection products in connectionwith the approval by the EU Commission of the acquisition of Syngenta by ChemChina, net of taxesand transaction expenses, were paid to Syngenta in return for the transfer of a portfolio of products inEurope of similar nature and economic value. Since the products acquired from Syngenta are of thesame nature, and with the same net economic value as those divested, the Divestment and Transfertransactions had no net impact on the underlying economic performance of the Company. Its reportedfinancial impact (affecting the Sales & Marketing expenses) in the first half of 2020 is RMB 107.4million (USD 15 million), compared with RMB 134 million (USD 20 million) in the corresponding periodin 2019. Such non-cash charges in 2020 are expected to be approximately RMB 215 million (USD31 million) (down from RMB 242 million (USD 35 million) in 2019), while in the full year of 2021
they are expected to further reduce to RMB 164 million (USD 23 million).
? Employee early retirement plan expenses: a one-time provision for the early retirement plan of
employees at the Company’s Israeli manufacturing facilities, made mainly in the first quarter. Itsreported financial impact (affecting the General & Administrative expenses) in the first half of 2020 isRMB 66 million (USD 9 million).
(4) Financial Expenses:
“Financial Expenses” alone mainly reflect interest payments on corporate bonds and bank loansas well as foreign exchange gains/losses on the bonds and other monetary assets and liabilitiesbefore the Company carries out any hedging. The impact of Financial Expenses (before hedging)is RMB 843 million (USD 120 million) for the first half of 2020 compared with RMB 938 million (USD138 million) for the corresponding period in 2019.Given the global nature of its operational activities and the composition of its assets and liabilities,the Company, in the ordinary course of its business, uses foreign currency derivatives (forwardsand options) to hedge the cash flow risks associated with existing monetary assets and liabilitiesthat may be affected by exchange rate fluctuations. Net gains/losses from hedging of thosepositions, are recorded in “Gains/Losses from Changes in Fair Value”, and are then transferredto “Investment Income” upon realization. The combined impact of Gains/Losses from Changes
ADAMA Ltd. Semi-Annual Report 2020
in Fair Value and Investment Income is a net gain of RMB 303 million (USD 43 million) in the firsthalf of 2020 compared with RMB 348 million (USD 51 million) in the corresponding period in 2019.The aggregate of Financial Expenses, Gains/Losses from Changes in Fair Value andInvestment Income (hereinafter as “Total Net Financial Expenses and Investment Income”),which more comprehensively reflects the financial expenses of the Company in supporting its mainbusiness and protecting its monetary assets/liabilities, amounts to RMB 540 million (USD 77 million)in the first half of 2020 compared with RMB 590 million (USD 87 million) in the corresponding periodin 2019.The lower Total Net Financial Expenses and Investment Income in the first half largely reflects areduction in financing costs on the NIS-denominated, CPI-linked bonds due to a lower CPI in Israel.
(5) Income Tax expenses:
The higher tax expenses in the first half are largely due to the first-quarter impact of the weakeningof the Brazilian Real against the US dollar, which resulted in non-cash tax expenses due todifferences between the functional currency (US dollar) and tax currency (BRL) with respect to thevalue of non-monetary assets.
(6) Net income in the second quarter was $31 million (3.0% of sales) and $29 million (1.4% of
sales) in the first half compared to $33 million (3.3% of sales) and $87 million (4.3% of sales)in the corresponding periods last year. The net income of 2019 also benefited from a landexpropriation. The Company estimates the net impact of the global currency headwinds on NetIncome to be $55 million in the second quarter and $117 million in the half year period, inaddition the impact from COVID-19 impact of an estimated $12 million over the half year period.
(7) Cash Flow:
Operating cash flow of $229 million was generated in the quarter and $173 million was generatedin the first half, compared to $144 million generated and $47 million consumed in the correspondingperiods last year, respectively. The improved operating cash flow in both the quarter and first halfmainly reflects the improvement in working capital during the periods compared to the parallelperiods last year.Net cash used in investing activities was $62 million in the second quarter and $116 million in thefirst half, compared to $44 million and $203 million in the corresponding periods last year,respectively. The increase in investments in the second quarter reflect capital investments ininfrastructure, including relocations, as well as portfolio expansion, while the higher spend in the2019 half-year period reflected the acquisition of Bonide in Q1 2019.Free cash flow of $127 million was generated in the second quarter and $12 million in the first halfcompared to $59 million generated and $297 million consumed in the corresponding periods lastyear, respectively, reflecting the improvement in operating cash flow in the second quarter of thisyear, contrasted with the higher investment levels and acquisitions over the half-year period in 2019.
Major changes to the profit structure or sources of the Company in the Reporting Period:
□ Applicable √ Not applicable
None during the Reporting Period.
ADAMA Ltd. Semi-Annual Report 2020
List of the industries, products or regions which exceed 10% of the operating revenues oroperating profits of the Company as at the Reporting Period
Unit: RMB’000
| Operating revenues | Cost of goods sold | Gross Margin (%) | YoY increase/decrease of the operating revenues | YoY increase/decrease of the cost of goods sold | YoY increase/decrease of the gross margin | |
| Classified by industries | ||||||
| Manufacturing chemical raw materials and chemical products | 14,121,040 | 9,904,470 | 29.86% | 3.71% | 9.77% | -8.19% |
| Classified by products | ||||||
| Crop Protection | 12,834,364 | 8,855,628 | 31.00% | 4.32% | 10.52% | -7.26% |
| Ingredients and Intermediates | 1,286,676 | 1,048,842 | 18.48% | -2.04% | 3.76% | -21.41% |
| Classified by regions | ||||||
| -- | -- | -- | -- | -- | -- | |
| Amount | Proportion in total profit | Reasons | Whether sustained | |
| Investment income | 52,129 | 11.61% | Mainly from the realization of derivatives. See explanation of financial expenses. | No |
| Gain/loss from change of Fair Value | 265,510 | 59.15% | Mainly from changes in fair value of derivatives. See explanation of financial expenses. | No |
| Asset impairment reversal (losses) | (25,376) | -5.65% | - | No |
| Gain or loss from disposal of assets | 7,694 | 1.71% | - | No |
| Non-operating income | 39,020 | 8.69% | - | No |
| Non-operating loss | 13,441 | 2.99% | No |
ADAMA Ltd. Semi-Annual Report 2020
IV. Analysis of Assets and Liabilities
1. Significant Changes in Asset Composition
Unit: RMB’000
| End of Reporting Period | End of same period of last year | Change in percentage (%) | Reason for significant change | |||
| Amount | As a percentage of total assets (%) | Amount | As a percentage of total assets (%) | |||
| Cash at bank and on hand | 6,293,175 | 12.82% | 5,425,392 | 11.84% | 0.98% | |
| Accounts receivable | 8,677,392 | 17.67% | 7,674,381 | 16.75% | 0.92% | |
| Inventories | 10,618,794 | 21.63% | 10,337,924 | 22.57% | -0.94% | |
| Investment properties | 3,609 | 0.01% | 3,933 | 0.01% | 0.00% | |
| Long term equity investments | 134,420 | 0.27% | 135,075 | 0.29% | -0.02% | |
| Fixed assets | 6,942,743 | 14.14% | 7,167,032 | 15.65% | -1.51% | |
| Construction in progress | 998,060 | 2.03% | 534,351 | 1.17% | 0.86% | |
| Short-term loans | 1,893,876 | 3.86% | 2,308,286 | 5.04% | -1.18% | |
| Long-term loans | 2,224,678 | 4.53% | 673,796 | 1.47% | 3.06% | |
| Derivative financial assets | 1,017,302 | 2.07% | 416,991 | 0.91% | 1.16% | |
| Intangible assets | 5,543,526 | 11.29% | 5,802,932 | 12.67% | -1.38% | |
| Goodwill | 4,627,331 | 9.43% | 4,298,747 | 9.38% | 0.05% | |
| Deferred tax assets | 857,313 | 1.75% | 767,928 | 1.68% | 0.07% | |
| Accounts payables | 4,773,708 | 9.72% | 4,178,668 | 9.12% | 0.60% | |
| Employee benefits payable | 985,533 | 2.01% | 912,354 | 1.99% | 0.02% | |
| Debentures | 8,663,773 | 17.65% | 8,152,990 | 17.80% | -0.15% | |
| Derivative financial liabilities | 1,065,034 | 2.17% | 688,267 | 1.50% | 0.67% | |
| Other payables | 1,342,465 | 2.73% | 1,970,641 | 4.30% | -1.57% | |
| Item | Opening balance | Profit/loss on fair value changes in the Reporting Period | Cumulative fair value changes charged to equity | Impairment provided in the Reporting Period | Purchased in the Reporting Period | Sold in the Reporting Period | Others | Closing balance |
| Financial assets | ||||||||
| Financial assets held for trading (excluding derivative financial assets) | 29,510 | - | - | - | - | (16,901) | - | 12,609 |
| Derivative financial assets (including long term) | 508,705 | 740,120 | (79,999) | - | 359,509 | (507,366) | - | 1,020,969 |
| Other equity investments | 155,062 | - | 1,030 | - | - | - | 156,092 | |
| Total financial assets | 693,277 | 740,120 | (78,969) | - | 359,509 | (524,267) | - | 1,189,670 |
| Other | 126,812 | (2,152) | - | - | - | (46,809) | 115 | 77,966 |
| Total of above | 820,089 | 737,968 | (78,969) | - | 359,509 | (571,076) | 115 | 1,267,636 |
| Financial liabilities | 717,057 | 350,972 | - | - | - | - | - | 1,068,029 |
ADAMA Ltd. Semi-Annual Report 2020
3. Limitation on Asset Rights as of End of the Reporting PeriodAt the end of this Reporting Period, restricted assets included RMB 37 million - restricted cash, most ofwhich as guarantee for bank acceptance bills; and RMB 109 million - other non-current assets, mainly asguarantee for asset securitization and lawsuits.V. Investments Made
1. Overall Condition of the Total Investments Made
√ Applicable □ Not applicable
| Investment during the Reporting Period (RMB'000) | Investment during the Same Period Last Year (RMB'000) | +/-% YoY |
| 41,529,668 | 25,350,061 | 63.82% |
| Asset category | Initial investment cost | Profit/loss on fair value changes in the Reporting Period | Cumulative fair value changes charged to equity | Purchased in the Reporting Period | Sold in the Reporting Period | Accumulated investment income | Closing balance | Source of funds |
| Financial derivatives* | (208,352) | 389,148 | (79,999) | 359,509 | (507,366) | 37,701 | (47,060) | Internal finance |
| Others | 184,572 | - | 1,030 | - | (16,901) | - | 168,701 | Internal finance |
| Total | (23,780) | 389,148 | (78,969) | 359,509 | (524,267) | 37,701 | 121,641 |
ADAMA Ltd. Semi-Annual Report 2020
(2) Investments in Derivative Financial Instruments
√ Applicable □ Not applicable Unit: RMB’000
| The party that operates the investment | Relation with the Company | Related party transaction or not? | Type | Initial investment amount | Starting date | Expiring date | Investment amount at beginning of the period | Amount purchased during the Reporting Period | Amount sold during the Reporting Period | Impairment accrued (if any) | Investment amount at end of the period | Percentage of investment amount divided by net asset at end of the period | Gain/loss during the Reporting Period |
| Banks | No | No | Option | 2,078,908 | 26/04/2020 | 08/09/2020 | 2,078,908 | 3,703,626 | -5,123,871 | No | 658,663 | 2.91% | 116,744 |
| Banks | No | No | Forward | 19,122,640 | 13/02/2020 | 12/11/2020 | 19,122,640 | 37,826,042 | -34,924,572 | No | 22,024,110 | 97.15% | 272,403 |
| Total | 21,201,548 | -- | -- | 21,201,548 | 41,529,668 | -40,048,443 | 22,682,773 | 100.06% | 389,147 | ||||
| Source of fund for the investment | Internal. | ||||||||||||
| Litigation-related situations (if applicable) | N/A | ||||||||||||
| Date of disclosure of Board approval (if any) | December 30, 2017 | ||||||||||||
| Date of disclosure of Shareholders’ approval (if any) | N/A | ||||||||||||
| Risk and control analysis for the Reporting Period (including but not limited to market risk, liquidity risk, credit risk, operational risk, legal risk, etc.) | The aforesaid refers to short term hedging currency transactions made with banks. The Group’s transactions are not traded in the market. The Transactions are between the applicable company in the Group and the applicable bank until the expiration date of the transaction, therefore no market risk is involved. Regarding credit and liquidity risk, the Group is working with large and substantial banks only and with some of them the Group has ISDA agreements. As to operational risk, the Group is working with relevant software, which is its back office for all transactions. | ||||||||||||
ADAMA Ltd. Semi-Annual Report 2020
| No legal risk is involved. The actions taken in order to further reduce risks are: ? The relevant subsidiaries have specific guidelines, under the Group’s policy, which were approved by the subsidiaries' financial statements committee of the board, which specifies, inter alia, the hedging policy, the persons that have the authorization to deal with hedging, the tools, ranges etc. The only subsidiary that has hedging positions in the Group in the period was Adama Solutions and its subsidiaries. ? The relevant subsidiaries apply management designed procedures and controls, which among other things, monitor the working process and the controls of the hedging transactions and are quarterly reviewed and annually audited. ? The controllers of the relevant subsidiaries are involved in the process and are monitoring the hedging accounting treatment. ? Every 2-3 years the internal audit of the relevant subsidiaries’ department is auditing the entire procedure. | |
| Market price or fair value change of investments during the Reporting Period. Specific methodology and assumptions should be disclosed in the analysis of fair value of the investments | The aforesaid refers to short time hedging currency transactions made by the relevant subsidiary with banks. Segregation of duties as follows: For the fair value evaluation, the relevant subsidiary is usually using external experts. The relevant subsidiary hedges currencies only; the relevant transactions are simple (Options and forwards) for short terms. For fair value methodology see section XI of the Annual Report, note IX. Fair Value. The exchange rates are provided by the accounting department of the relevant subsidiary and all other parameters are provided by the experts. |
| Explanation for any significant changes in accounting policies and principles, compared with last reporting period | N/A |
| Independent Directors’ opinion on the investment in derivative financial instruments and related risk controls | The derivative investments carried by the Company are for hedging and narrowing down the risk of market fluctuations. The investments respond to the Company’s routine business demands and are in accordance with the relevant laws and regulations. Additionally, the Company has adopted Currency Risk Hedging Policy to strengthen the risk management and control which benefit the Company’s ability to protect against market risk. The derivative investments do not harm the interests of the Company and its shareholders. |
ADAMA Ltd. Semi-Annual Report 2020
VI. Sale of Major Assets and Equity Interests
1. Sale of Significant Assets
□ Applicable √ Not applicable
None during the Reporting Period.
2. Sale of Significant Equities
□ Applicable √ Not applicable
VII. Main Controlled and Joint Stock Companies
√ Applicable □ Not applicable
List of the stock-participating companies influencing over 10% of the net profits on the majorsubsidiaries and the Company
Unit: RMB’000
| Name | Type | Main services | Registered capital | Total assets | Net assets | Operating revenues | Operating profit | Net profit |
| Adama Solutions | Subsidiary | Development, manufacturing and marketing of agrochemicals, intermediate materials for other industries, food additives and synthetic aromatic products, mainly for export. | 720,085 | 41,587,425 | 16,910,238 | 13,266,084 | 485,150 | 219,858 |
ADAMA Ltd. Semi-Annual Report 2020
X. Risks Facing the Company and CountermeasuresThe Group believes that it is exposed to several major risk factors, resulting from its economicenvironment, the industry and the Group's unique characteristics, as follows (the order below does notindicate priority):
Exchange rate fluctuationsAlthough the Company reports its consolidated financial statements in RMB, the Company’s materialsubsidiary, Adama Solutions, reports its consolidated financial statements in US dollars, which is itsfunctional currency, while its operations, sales and purchases of raw materials are carried out in variouscurrencies. Therefore, fluctuations in the exchange rate of the selling currency against the purchasingcurrency impact the Company’s results. The Group's most significant exposures are to the Euro, theIsraeli Shekel and the Brazilian Real. The Group has lesser exposures to other currencies. Thestrengthening of the US dollar against other currencies in which the Company operates reduces the dollarvalue of such sales and vice versa.On an annual perspective, approximately 26% of the Group’s sales are to the European market andtherefore the impact of long-term trends on the Euro may affect the Company's results and profitability.Concentration of currency exposure from foreign currency exchange rate fluctuations against assets,including inventory of finished products in countries of sale, liabilities and cash flow denominated inforeign currencies are done constantly. High volatility of the exchange rates of these currencies couldincrease the costs of transactions to hedge against currency exposure, thereby increasing the Company'sfinancing costs.The Group uses commonly accepted financial instruments to hedge most of its substantial net balancesheet exposure to any particular currency. Nonetheless, since as part of these operations the Grouphedges against most of its balance sheet exposure and only against part of its economic exposure,exchange rate volatility might impact the Group’s results and profitability. As of the date of approval ofthe financial statements, the Group has hedged most of its balance sheet exposure for 2020 as it is onthe date of publication of this Report.In addition, as the Company’s product sales depend directly on the cyclical nature of the agriculturalseasons, therefore the Company’s income and its exposure to the various currencies is not evenlydistributed over the year. Countries in the northern hemisphere have similar agricultural seasons andtherefore, in these countries, the highest sales are usually during the first half of the calendar year. In thesouthern hemisphere, the seasons are opposite and most of the local sales are carried out during thesecond half of the year. During these months, most of the Company's exposure pertains to the BrazilianReal. The Company has more sales in markets in the northern hemisphere and therefore, the Company'ssales volume during the first half of the year is higher than the sales volume during the second half of theyear.Exposure to Interest rate, Israel CPI and NIS exchange rate fluctuationsThe debentures issued by Adama Solutions, the material subsidiary of the Company, are Israeli Shekelbased and linked to the Israel Consumer Price Index (CPI) and therefore an increase in the CPI and anappreciation of the shekel rate against the dollar might lead to a significant increase in its financingexpenses. As of the date of approval of the financial statements, Adama Solutions hedged most of itsexposure to these risks on an ongoing basis, through CPI hedging and USD-ILS exchange rate hedgingtransactions.
ADAMA Ltd. Semi-Annual Report 2020
The Group is exposed to changes in the US dollar LIBOR interest rate as the Group has dollardenominated liabilities, which bear variable LIBOR interest. The Group prepares a quarterly summary ofits exposure to changes in the LIBOR interest rate and periodically examines hedging the variable interestrate by converting it to a fixed rate. As of the date of approval of the financial statements, the Group hasnot carried out hedging for such exposure, since US dollar interest rates have been relatively stable.Business operations in emerging marketsThe Group conducts business - mainly product sales and raw material procurement - inter alia, inemerging markets such as Latin America (particularly in Brazil, the largest market, country wise, in whichthe Group operates), Eastern Europe, South East Asia and Africa. The Group's activity in emergingmarkets is exposed to risks typical of those markets, including: political and regulatory instability; volatileexchange rates; economic and fiscal instability and frequent revisions of economic legislation; relativelyhigh inflation and interest rates; terrorism or war; restrictions on import and trade; differing businesscultures; uncertainty as to the ability to enforce contractual and intellectual property rights; foreigncurrency controls; governmental price controls; restrictions on the withdrawal of money from the country;barter deals and potential entry of international competitors and accelerated consolidations by large-scalecompetitors in these markets. Developments in these regions may have a significant effect on the Group'soperations. Distress to the economies of these markets could impair the ability of the Group's customersto purchase its products or the ability to market them at international market prices, as well as harm theGroup's ability to collect customer debts, in a way that could have a significant adverse effect on theGroup's operating results.The Group’s operations in multiple regions allows for the diversification of such risks and for the reductionof its dependency on particular economies. In addition, changes in registration requirements orcustomers' preferences in developed western countries, which may limit the use of raw materialspurchased from emerging economies, may require redeployment of the Group's procurementorganization, which might negatively affect its profitability for a certain period.Operating in a competitive marketThe crop protection products industry is highly competitive. Currently, the industry's global market isshared by seven global companies, five of which are originator companies that continue producing andmarketing their original products after their patent expiry (“Originator Companies”) which control 60%of the global market with annual sales of over USD six billions in the crop protection field (not includingthe seeds activity), these being Corteva, Bayer, BASF Syngenta and FMC, which develop, manufactureand market both patent-protected as well as off-patent products. The Group competes with the originalproducts with the aim of maintaining and increasing its market share.The Originator Companies possess resources enabling them to compete aggressively, in the short-to-medium term, on price and profit margins, so as to protect their market share. Loss of market share orinability to acquire additional market share from the Originator Companies can affect the Group's positionin the market and adversely affect its financial results. For details regarding the Group’s competitiveadvantages see section III - subsection III. Core competitiveness analysis above.Similarly, the Group also competes in the more decentralized off-patent market, with other off-patentcompanies and smaller-scale Originator Companies, which have significantly grown in number in recentyears and are materially changing the face of the crop protection products industry, the majority of whomhave not yet deployed global distribution networks, and are only active locally. These companies pricetheir products aggressively and at times have lower profit margins than the Group, which may harm the
ADAMA Ltd. Semi-Annual Report 2020
volume of the Group's sales and product prices. The Group's ability to maintain its revenues andprofitability from a specific product in the long term is affected by the number of companies producingand selling comparable off-patent products and the time of their entrance to the relevant market.Any delay in developing or obtaining registrations for products and/or delayed penetration into marketsand/or growth of competitors that focus on off-patent active ingredients (whether by the expansion of theirproduct portfolio, granting registrations to other manufacturers (including manufacturers in China andIndia) to operate in additional markets, transforming their distribution network to a global scale orincreasing the competition for distribution access), and/or difficulty in purchasing low cost raw materials,may harm the Group’s sales volumes in this sector, affect its global position and lead to price erosion.Decline in scope of agricultural activities; exceptional changes in weather conditionsThe scope of agricultural activities may be negatively affected by many exogenous factors, such asextreme weather conditions, natural disasters, a significant decrease in agricultural commodity prices,government policies and the economic condition of farmers. A decline in the scope of agricultural activitiesnecessarily would cause a decline in the demand for the Group’s products, erosion of its prices andcollection difficulties, which may have a significant adverse effect on the Group's results. Extreme weatherconditions as well as damages caused by nature have an impact on the demand for the Group's products.The Group believes that, should a number of such bad seasons occur in succession, without favorableseasons in the interim, its results may sustain significant harm.Environmental, health and safety legislation, standards, regulation and exposureMany aspects of the Group's operations are strictly regulated, including in relation to production andtrading, and particularly in relation to the storage, treatment, manufacturing, transport, usage and disposalof its products, their ingredients and byproducts, some of which are considered hazardous. The Group'sactivities involve hazardous materials. Defective storage or handling of hazardous materials may causeharm to human life or to the environment in which the Group operates. The regulatory requirementsregarding the environment, health and safety could, inter alia, include soil and groundwater clean-uprequirements; as well as restrictions on the volume and type of emissions the Group is permitted torelease into the air, water and soil.The regulatory requirements applicable to the Group vary from product to product and from market tomarket, and tend to become stricter with time. In recent years, both government authorities andenvironmental protection organizations have been applying growing pressure, including throughinvestigations and indictments as well as increasingly stricter legislative proposals and class action suitsrelated to companies and products that may potentially pollute the environment. Compliance with theforegoing legislative and regulatory requirements and protection against such legal actions requires theGroup to spend considerable financial resources (both in terms of substantial ongoing costs and in termsof material one-time investments) as well as human resources in order to meet mandatory environmentalstandards. In some instances, this may result in delaying the introduction of products into new marketsor in adverse effects on the Group’s profitability. In addition, the toughening, material alteration orrevocation of environmental licenses or permits, or their stipulations, or the inability to obtain suchlicenses and permits, may significantly affect the Group's ability to operate its production facilities, whichin turn may have a material adverse effect on the financial and business results of the Group. The Groupmay be required to bear significant civil liability (including due to class actions) or criminal liability(including high penalties and/or high compensation payments and/or costs of environmental monitoringand rehabilitation), resulting from violation of environmental, health and safety regulations, while some ofthe existing legislation may impose obligations on the Group for strict liability, regardless of proof of
ADAMA Ltd. Semi-Annual Report 2020
negligence or malice.While the Group invests material sums in adapting its facilities and in constructing special facilities inaccordance with environmental requirements, it is currently unable to assess with any certainty whetherthese investments (current and future) and their outcomes may satisfy or meet future requirements,should these be significantly increased or adjusted. In addition, the Group is unable to predict with anycertainty the extent of future costs and investments it may incur so as to meet the requirements of theenvironmental authorities in the relevant countries in which it operates since, inter alia, the Group isunable to estimate the extent of potential pollutions, their length, the extent of the measures required tobe taken by the Group in handling them, the division of responsibility among other parties and theamounts recoverable from third parties.Furthermore, the Group may be the target of bodily injury claims and property damage claims caused byexposure to hazardous materials, which are predominantly covered under the Group’s insurance policies.Legislative, standard and regulatory changes in product registrationThe majority of the substances and products marketed by the Group require registration at various stagesof their development, production, import, utilization and marketing, and are also subject to strict regulatorysupervision by the regulatory authorities in each country. Compliance with the registration requirementsthat vary from country to country and which are becoming more stringent with time, involves significanttime and costs, and rigorous compliance with individual registration requirements for each product.Noncompliance with these regulatory requirements might materially adversely affect the scope of theGroup’s expenses, cost structure and profit margins, as well as penetration of its products in the relevantmarket, and may even lead to suspension of sales of the relevant product, and recall of those productsalready sold, or to legal action. Moreover, to the extent new regulatory requirements are imposed onexisting registered products (requiring additional investment or leading to the existing registration'srevocation) and/or the Group is required to compensate another company for its use of the latter's productregistration data, these might amount to significant sums, considerably increasing the Group's costs andadversely affecting its results and reputation. In recent years the industry is suffering from revocation ofregistration for many products around the world. This trend is particularly evident in European countriesas well as in other countries, including India.Nevertheless, the Group believes that, in countries where the Group maintains a competitive edge, anytoughening of registration requirements may actually increase this edge, since this will make it difficult forits competitors to penetrate the same market, whereas in countries in which the Group possesses a smallmarket share, if any, such toughening may make further penetration of the Group's products into thatmarket more difficult.Product liabilityProduct and producer liability present a risk factor to the Group. Regardless of their prospects or actualresults, product liability lawsuits might involve considerable costs as well as tarnish the Group's reputation,thus impacting its profits. The Group has a third-party and defective product liability insurance cover.However, there is no certainty that the scope of insurance cover is sufficient. Any future product liabilitylawsuit or series of lawsuits could materially affect the Group’s operations and results, should the Grouplose the lawsuit or should its insurance cover not suffice or apply in a particular instance. In addition,while currently the Group has not encountered any difficulty renewing such insurance policy, it is possiblethat it will encounter future difficulties in renewing an insurance policy for third party liability and defectiveproducts on terms acceptable to the Group.
ADAMA Ltd. Semi-Annual Report 2020
Successful market penetration and product diversificationThe Group’s growth and profit margins are affected, inter alia, by the extent of its success in developingdifferentiated products and obtaining registrations for them, so as to enable it to gain market share at theexpense of its competitors. Usually, being the first to launch a certain off-patent product affords the Groupcontinuing advantage, even after other competitors penetrate the same market. Thus, the Group'srevenues and profit margins from a certain product could be materially affected by its ability to launchsuch product ahead of the launch of a comparable product by its competitors.Should new products fail to meet registration requirements in the different countries or should it take along period of time to obtain such registrations, the Group's ability to successfully introduce a new productto the market in question in the future would be affected, since entry into the market prior to othercompetitors is important for successful market penetration. Furthermore, successful market penetrationinvolves, inter alia, product diversification in order to suit each market's changing needs. Therefore, if theGroup fails to adapt its product mix by developing new products and obtaining the required regulatoryapprovals, its future ability to penetrate that market and to maintain its existing market share could beaffected. Failure to introduce new products to given markets and meet Group objectives (given theconsiderable time and resources invested in their development and registration) might affect the sales ofthe product in question in the relevant market, the Group’s results and margins.Intellectual property rights of the Group and of third partiesThe Group's ability to develop off-patent products is dependent, inter alia, on its ability to oppose patentsof an Originator Company or other third parties, or to develop products that do not otherwise infringeintellectual property rights in a manner that may involve significant legal and other costs. OriginatorCompanies tend to vigorously defend their products and may attempt to delay the launch of competingoff-patent products by registering patents on slightly different versions of products for which the originalpatent protection is about to expire or has expired, with the aim of competing against the off-patentversions of the original product. The Originator Companies may also change the branding and marketingmethod of their products. Such actions may increase the Group's costs and the risk it entails, and harmor even prevent its ability to launch new products.The Group is also exposed to legal claims that its products or production processes infringe on third-partyintellectual property rights. Such claims may involve time, costs, substantial damages and managementresources, impair the value of the Group's brands and its sales and adversely affect its results. To thebest of the Group’s current knowledge, such lawsuits that were concluded involved non-material amounts.Furthermore, the Group protects its brands and trade secrets with patents, trademarks and other methodsof intellectual property protection, however these protective means may not be sufficient for safeguardingits intellectual property. Any unlawful or other unauthorized use of the Group's intellectual property rightscould adversely affect the value of its intellectual property and goodwill. In addition, the Group may berequired to take legal action involving financial costs and resources to safeguard its intellectual propertyrights.Fluctuations in raw material inputs and prices, and in sales costsSignificant percentage of the cost of the Groups’ sales derives from raw material costs. Hence, significantincreases or decreases in raw material cost affect the cost of goods sold, which is generally expressed anumber of months following such cost fluctuation. Most of the Group's raw materials are distantderivatives of oil prices and therefore, extreme increase or decrease in oil prices may affect the costs ofraw materials, yet only partially.
ADAMA Ltd. Semi-Annual Report 2020
To reduce exposure to fluctuations in the prices of raw materials, the Group customarily engages in long-term purchase contracts for key raw materials, wherever possible. Similarly, the Group acts to adjust itssales prices, if possible, to reflect the changes in the costs of raw materials.As of the date of approval of the financial statements, the Group has not engaged in any hedgingtransactions against increases in oil and other raw material costs.Exposure due to recent developments in the genetically modified seeds marketAny further significant development in the market of genetically modified seeds for agricultural crops,including as a result of regulatory changes in certain countries currently prohibiting the use of geneticallymodified seeds, and/or any significant increase in the sales of genetically modified seeds or Glyphosateand/or to the extent new crop protection products are developed for further crops that would be widelyused (substituting traditional products), will affect demand for crop protection products, requiring theGroup to respond by adapting its product portfolio to the new demand structure. Consequently, to theextent that the Group fails to adapt its product mix accordingly, this may reduce demand for its products,erode their sales price and necessarily affect the Group’s results and market share.Nevertheless, the fact that the Group itself markets Glyphosate acts to mitigate this exposure (albeit onlyin terms of marketing margins).In addition, natural and/or biological substances that attack weeds, pests and diseases are potentialalternatives for the Company’s products, though as of the date of the report, their efficiency is limited andthey are commercialized in a relatively small volumes.Operational risksThe Group’s operations, including its manufacturing activities, rely, inter alia, on state-of-the-art computersystems. The Group continually invests in upgrading and protecting these systems. Any unexpectedfailure of these systems, as well as the integration of new systems, could involve substantial costs andadversely affect the Group's operations until completion of the repair or integration. The potentialoccurrence of a substantial failure that cannot be repaired within a reasonable time frame may also affectthe Group's operations and its results. Currently, the Group has a property and loss-of-profit insurancepolicy.Data protection and cyberDuring its activity, the Group may be exposed to risks and threats, related to the stability of its informationtechnologies systems, data protection and cyber, which could appear in many different forms (such asservice denial, misleading employees, malfunction, encryption or data erasing and other cyber-attacksvia E-mail or malicious software). An attack on such computerized systems, mainly network basedsystems may cause the group material damages and expenses and even partial suspension anddisruption of their proper functioning. In order to minimize the abovementioned risks, the group investsresources in its technological strength and in proper protection of its systems.Raw material supply and/or shipping and port services disruptionsLack of raw materials or other inputs utilized in the manufacture of Group products may prevent the Groupfrom supplying its products or significantly increase production costs. Moreover, the Group imports rawmaterials to its production facilities worldwide, from where it exports the products to its subsidiariesaround the world for formulation and/or commercialization purposes. Disruptions in the supply of rawmaterials from regular suppliers may adversely affect operations until an alternative supplier is engaged.If any of the Group's suppliers are unable to supply raw materials for a prolonged period, including dueto ongoing disruptions and/or prolonged strikes and/or infrastructure defects in the operating of a relevant
ADAMA Ltd. Semi-Annual Report 2020
port, and the Group is unable to engage with an alternative supplier at similar terms and in accordancewith product registration requirements, this may adversely affect the Group's results, significantly affectits ability to obtain raw materials in general, or obtain them at reasonable prices, as well as limit its abilityto supply products and/or meet customer supply deadlines. These might negatively affect the Group, itsfinances and operating results. In order to reduce this risk, it is the Group's practice to occasionally adjustthe volume of its product inventories and at times utilize air freight.Failed mergers and acquisitions; difficulties in integrating acquired operationsThe Group's strategy includes growth through mergers, acquisitions, investments and collaborationsdesigned, in a calculated manner, to expand its product portfolio and deepen its presence in certaingeographical markets.Growth through mergers and acquisitions requires assimilation of acquired operations and their effectiveintegration in the Group, including realization of certain forecasts, profitability, market conditions andcompetition.Failure to successfully implement the above and/or non-realization of the said forecasts may result in notachieving the additional value forecasted, losing customers, exposure to unexpected liabilities, reducedvalue of the intangible assets included in the merger or acquisition as well as the loss of professional andskilled human resources.Production concentration in limited plantsA large portion of the Group’s production operations is concentrated in a small number of locations.Natural disasters, hostilities, labor disputes, substantial operational malfunction or any other materialdamage might significantly affect Group operations, as a result of the difficulty, the time and investmentrequired for relocating the production operation or any other activity.International taxationMost of the Group’s sales are global, through its consolidated subsidiaries worldwide. These individualcompanies are assessed in accordance with the tax laws effective in each respective location. TheGroup’s effective tax rate could be significantly affected by different classification or attribution of theprofits arise from the share of value earned of the companies in the Group in the various countries, asshall be recognized in each tax jurisdiction; changes in the characteristics (including regarding thelocation of control and management) of these companies; changes in the breakdown of the Group'sprofits into regions where differing tax rates apply; changes in statutory tax rates and other legislativechanges; changes in assessment of the Group's deferred tax assets or deferred tax liabilities; changesin determining the areas in which the Group is taxed; and potential changes in the Group's organizationalstructure.Changes in tax regulations and the manner of their implementation, including with regard to theimplementation of BEPS, may lead to a substantial increase in the Group's applicable tax rates and havea material adverse effect on its financial state, results and cash flows.The Group’s Financial Statements do not include a material provision for exposure for internationaltaxation, as stated above.Risks arising from the Group’s debtThe Group finances its business operations by means of its own equity and loans from external sources(primarily debentures issued by Adama Solutions and bank credit). The Group's main source for servicingthe debt and its operating expenses is by means of the profits from the Group companies’ operations.Restrictions applying to the Group companies regarding distribution of dividends to the Group, or the tax
ADAMA Ltd. Semi-Annual Report 2020
rate applicable on these dividends, may affect the Group's ability to finance its operations and service itsdebt.In addition, the Group's Finance Documents require it to meet certain Financial Covenants. Failure tomeet these covenants due to an exogenous event or non-materialization of Group forecasts, and insofaras the financing parties refuse to extend or update these Financial Covenants as per the Group’scapabilities, may lead the financing parties to demand the immediate payment of these liabilities (or partthereof).Exposure to customer credit risksThe Group’s sales to customers usually involve customer credit as is customary in each market. A portionof these credit lines are insured, while the remainder are exposed to risk, particularly during economicslowdowns in the relevant markets. The Group’s aggregate credit, however, is diversified among manycustomers in multiple countries, mitigating this risk. In addition, in certain regions, particularly in SouthAmerica, credit days are particularly long (compared to those extended to customers in regions such asEurope), and on occasion, inter alia, owing to agricultural seasons or economic downturns in thosecountries, the Group may encounter difficulty in collection of customer debts, with the collection periodbeing extended over several years.Generally, such issues arise more often in developing countries where the Group is less familiar with itscustomers, the collaterals might be in double until actual repayment and the insurance cover of thesecustomers is likely to be limited. Credit default by any of the customers may negatively impact the Group'scash flow and financial results.The Group’s working capital and cash flow needsSimilar to other companies operating in the crop protection industry, the Group has substantial cash flowand working capital requirements in the ordinary course of operations. In view of the Group's growth andconsidering its primary growth regions, the Group’s broad product portfolio and the Group’s investmentsin manufacturing infrastructures, the Group has significant financing and investment needs. The Groupacts continually to improve the state and management of its working capital. While currently the Group isin compliance with all its financial covenants, significant deterioration of its operating results may in thefuture lead the Group to fail to comply with its financial covenants and fail to meet its financial needs. Asa result, the Group's ability to meet its goals and growth plans, and its ability to meet its financialobligations, may be harmed.Contagious disease outbreakOutbreak of a contagious disease, or other adverse public health developments, in territories wheresignificant production activity is taking place or from which raw materials are supplied to a significantextent, might have a material adverse effect on the Company’s activity, such that the Company mightencounter difficulties with procurement of raw materials and intermediates, experience a certain decreaseof activity within its production facilities due to governmental instructions, and to be constrained withrespect to its logistics and supply lines. In addition, the Company sales could be potentially impacted bytemporary demand’s decrease of its products, as well as by temporary disruption of the Company’s abilityto sell and distribute products as mentioned above.
ADAMA Ltd. Semi-Annual Report 2020
Section V - Significant EventsI. Annual and Special Meetings of Shareholders Convened during the Reporting
Period
1. Meetings of Shareholders Convened during the Reporting Period
| Meeting | Type | Investor participation ratio | Convened date | Disclosure date | Index to disclosed information |
| 1st Interim Shareholders Meeting in 2020 | Interim | 75.55% | March 30, 2020 | March 31, 2020 | Announcement of the Resolutions of the 1st Interim Shareholders Meeting in 2020 (announcement no. 2020-17, www.cninfo.com.cn ) |
| 2nd Interim Shareholders Meeting in 2020 | Interim | 78.46% | April 9, 2020 | April 10, 2020 | Announcement of the Resolutions of the 2nd Interim Shareholders Meeting in 2020 (announcement no. 2020-20, www.cninfo.com.cn ) |
| 2019 Annual General Meeting | Annual | 76.22% | May 20, 2020 | May 21, 2020 | Announcement of the Resolutions of 2019 Annual General Meeting (announcement no. 2020-31, www.cninfo.com.cn ) |
ADAMA Ltd. Semi-Annual Report 2020
Note 1: No commitment that should have been completed during the Reporting Period failed to be timely fulfilled. Fordetails of the on-going commitments, please refer to the 2019 Annual Report published on the website www.cninfo.com.cnon April 28, 2020.Note 2: On May 20, 2020, the 2019 Annual General Meeting reviewed and approved the Proposals relating to theperformance compensation. On July 13, 2020, Syngenta Group timely fulfilled its commitment and completed theperformance compensation. For details, please refer to Announcement on the Completion of Buyback and Cancellation ofthe Compensation Shares (announcement no.2020-36) published on the website www.cninfo.com.cn.Note 3: On August 3, 2020, 1,708,450,759 restricted shares held by Syngenta Group issued as part of the 2017 MajorAssets Restructuring were released for public trading. For details, please refer to Announcement on the Release ofRestricted Shares issued for the Major Assets Restructuring (announcement no.2020-38) published on the websitewww.cninfo.com.cn.
IV. Engagement and Disengagement of CPA FirmHas the semi-annual financial report been audited?
□ Yes √ No
This Semi-Annual Report is unaudited.V. Explanations Given by the Board of Directors and Board of Supervisors
Regarding “Modified Auditor’s Report” Issued by CPA Firm for the ReportingPeriod
□ Applicable √ Not applicable
VI. Explanations Given by Board of Directors Regarding “Modified Auditor’s Report”
Issued for Last Year
□ Applicable √ Not applicable
VII. Bankruptcy and Restructuring
□ Applicable √ Not applicable
None during the Reporting Period.VIII. Litigation and Arbitration Matters
Material litigations or arbitrations:
□ Applicable √ Not applicable
None during the Reporting Period.Other litigations or arbitrations:
□ Applicable √ Not applicable
No significant litigation or arbitrations during the Reporting Period.
ADAMA Ltd. Semi-Annual Report 2020
IX. Enquiry from Media
□ Applicable √ Not applicable
During the Reporting Period, no matter of the Company was widely enquired by the media.X. Punishment and Rectification
□Applicable √Not applicable
Status of Rectification
□ Applicable √ Not applicable
XI. Integrity of the Company, its controlling shareholders and actual controller
□ Applicable √ Not applicable
XII. Stock Incentive Plans, ESOP or Other employee Incentives
□ Applicable √ Not applicable
To the date of the report, the Company does not have stock incentive plans, ESOP or other staff incentives.It shall be noted, that the Company’s subsidiary, Adama Solutions, approved in December 2017 and inFebruary 2019 long-term incentive plans and granted long-term cash rewards to executive officers andemployees, which are based on the performance of the Company's shares (phantom cash incentives). InSeptember 2019, the cash rewards granted according to the 2017 long-term incentive plan were replacedby cash rewards granted according to an approved replacement plan. Adama Solutions has furtheradopted an incentive plan linked to the increase in the Syngenta Group EBITDA.XIII. Material Related-Party Transactions
1. Related-Party Transactions in the ordinary course of business
□Applicable √ Not applicable
(1) The Company was not involved in any material related-party transactions during the Reporting
Period.
(2) Item X of Section XI “Financial Statements” of this Report sets out the related parties and the
related-party transactions of the Company.
2. Related-Party Transactions arising from Asset acquisition or sale
□ Applicable √ Not applicable
The Company was not involved in any related-party transactions arising from asset acquisition or saleduring the Reporting Period.
3. Related-Party Transactions with Joint Investments
□ Applicable √ Not applicable
The Company was not involved in any related-party transaction with joint investments during the
ADAMA Ltd. Semi-Annual Report 2020
Reporting Period.
4. Credits and Liabilities with Related Parties
√ Applicable □ Not applicable
Whether non-operating credits and liabilities with related parties exist or not?
□ Yes √ No
The Company was not involved in any non-operating credit and liability with related parties in theReporting Period.
5. Other material related-party transactions
√Applicable □ Not applicable
The 2019 Annual Shareholders Meeting approved the expected related-party transactions in theordinary business course of the Company in 2020. Please refer to Item X of Section XI “FinancialStatements” of this Report for details of the related-party transactions in the ordinary business course.
The website to disclose the interim announcements on significant related-party transactions:
XIV. Inadequate use of Company’s capital by the controlling shareholder or its
related parties for non-operating purposes
□ Applicable √ Not applicable
No such situation occurred during the Reporting Period.
XV. Particulars regarding material contracts and execution thereof
1. Particulars about trusteeship, Contract and Lease
(1) Trusteeship
□ Applicable √ Not applicable
There was no trusteeship of the Company in the Reporting Period.
(2) Contract operation
□ Applicable √ Not applicable
There was no contract operation of the Company in the Reporting Period.
(3) Lease
□Applicable√ Not applicable
| Name of the interim announcement | Disclosure date of the interim announcement | Website to disclose the interim announcement |
| Amended Announcement on Expected Related-Party Transactions in the Ordinary Course of Business in 2020 (announcement no. 2019-30) | May 12, 2020 | www.cninfo.com.cn |
ADAMA Ltd. Semi-Annual Report 2020
There is no major lease in the Reporting Period.
2. Significant Guarantees
(1) Details of guarantees
√Applicable □ Not applicable
Unless otherwise specified, the unit hereunder is RMB ‘0000
| Guarantees provided by the Company in favor of third parties (excluding subsidiaries) | ||||||||||||
| Guaranteed party | Disclosure date of the announcement | Planned guarantee amount | Actual occurrence date | Actual guarantee amount | Type of guarantee | Period of guarantee | expired or not | Guarantee for a related party or not | ||||
| -- | -- | -- | -- | -- | -- | -- | -- | -- | ||||
| Total guarantee line approved in favor of third parties (excluding subsidiaries) during the reporting period (A1) | 0 | Total amount of the occurred guarantee in favor of third parties (excluding subsidiaries) during the reporting period (A2) | 0 | |||||||||
| Aggregated guarantee line in favor of third parties (excluding subsidiaries) that has been approved by the end of the reporting period (A3) | 5,000 | Total guarantee balance in favor of third parties (excluding subsidiaries) by the end of the reporting period (A4) | 0 | |||||||||
| Guarantees provided by the Company in favor of its subsidiaries | ||||||||||||
| Guaranteed party | Disclosure date of the announcement | Planned guarantee amount | Actual occurrence date | Actual guarantee amount | Type of guarantee | Period of guarantee | expired or not | Guarantee for a related party or not | ||||
| ADAMA Anpon (Jiangsu) Ltd. | May 18, 2019 | 80,000 | November 13, 2019 | 5,000 | joint and several liability | Two years after the loan matures | No | No | ||||
| ADAMA Anpon (Jiangsu) Ltd. | August 22, 2019 | 63,000 | October 10, 2019 | 4,000 | Joint liability and several liability | Two years after the loan matures | No | No | ||||
| November 19, 2019 | 5,000 | joint and several liability | Three years after the loan matures | No | No | |||||||
ADAMA Ltd. Semi-Annual Report 2020
| December 10, 2019 | 5,000 | joint and several liability | Three years after the loan matures | No | No | ||||
| December 26, 2019 | 5,000 | joint and several liability | Three years after the loan matures | No | No | ||||
| December 26, 2019 | 2,000 | Joint liability and several liability | Two years after the loan matures | No | No | ||||
| ADAMA Anpon (Jiangsu) Ltd. | February 27, 2020 | 130,900 | April 1, 2020 | 6,400 | Joint liability and several liability | Two years after the loan matures | No | No | |
| April 1, 2020 | 2,000 | Joint liability and several liability | Two years after the loan matures | No | No | ||||
| April 2, 2020 | 5,000 | Joint liability and several liability | Three years after the loan matures | Yes. The loan had been repaid. | No | ||||
| May 19, 2020 | 3,000 | Joint liability and several liability | Three years after the loan matures | No | No | ||||
| May 27, 2020 | 5,000 | Joint liability and several liability | Three years after the loan matures | No | No | ||||
| June 16, 2020 | 2,000 | Joint liability and several liability | Two years after the loan matures | No | No | ||||
| June 29, 2020 | 5,000 | Joint liability and several liability | Three years after the loan matures | No | No | ||||
| Total guarantee line approved | 130,900 | Total amount of the occurred | 28,400 | ||||||
ADAMA Ltd. Semi-Annual Report 2020
| in favor of the subsidiaries during the reporting period (B1) | guarantee in favor of the subsidiaries during the reporting period (B2) | ||||||||
| Aggregated guarantee line that has been approved in favor of the subsidiaries by the end of the reporting period (B3) | 273,900 | Total guarantee balance in favor of the subsidiaries by the end of the reporting period (B4) | 49,400 | ||||||
| Guarantees provided by subsidiaries in favor of subsidiaries (USD ’0000) | |||||||||
| Guaranteed party | Disclosure date of the announcement | Planned guarantee amount | Actual occurrence date | Actual guarantee amount | Type of guarantee | Period of guarantee | expired or not | Guarantee for a related party or not | |
| Control Solutions, Inc. | October 31, 2018 | 1,300 | October 30, 2018 | 1,300 | joint and several liability | Generally 7 years (subject to the overseas laws) | No | No | |
| Control Solutions, Inc. | January 10, 2019 | 4,000 | January 9, 2019 | 4,000 | joint and several liability | The loan term (5 years) and any applicable statute of limitations period (generally 7 years). | No | No | |
| ADAMA Brazil | Not applicable | 27,399.55 | The guarantee existed before the company was consolidated into the financial statements of the Company. | 5,329.19 | joint and several liability | Valid until cancelled | No | No | |
| Adama India Private Ltd. | Not applicable | 9,019.2 | The guarantee existed before the company was | 1,581 | joint and several liability | Valid until cancelled | No | No | |
ADAMA Ltd. Semi-Annual Report 2020
| consolidated into the financial statements of the Company. | ||||||||
| ADAMA (Beijing) Agricultural Technology Company Limited | Not applicable | 2,500 | The guarantee existed before the company was consolidated into the financial statements of the Company. | 0 | joint and several liability | Valid until cancellation | No | No |
| ADAMA Turkey Tar?m Sanayi ve Ticaret Limited ?irketi | Not applicable | 3,850 | The guarantee existed before the company was consolidated into the financial statements of the Company. | TRY 151,320k (approximately USD 2,200.19) | joint and several liability | Valid until cancelled | No | No |
| Adama Makhteshim | Not applicable | unlimited | The guarantee existed before the company was consolidated into the financial statements of the Company. | 15,146.7 | joint and several liability | Valid until cancelled | No | No |
| Adama Agan | Not applicable | unlimited | The guarantee existed before the company was consolidated into the financial statements of the Company. | 20,077.9 | joint and several liability | Valid until cancelled | No | No |
| ADAMA Agricultural Solutions UK Ltd. | Not applicable | 365.64 | The guarantee existed before the company was consolidated into the financial statements of | 0 | joint and several liability | Valid until cancelled | No | No |
ADAMA Ltd. Semi-Annual Report 2020
| the Company. | |||||||||
| ADAMA CELSIUS BV, Curacao branch, & ADAMA Fahrenheit BV, Curacao Branch | Not applicable | 4,500 | The guarantee existed before the company was consolidated into the financial statements of the Company. | 196.27 | joint and several liability | Valid until cancelled | No | No | |
| ADAMA Ukraine LLC | Not applicable | 2,500 | The guarantee existed before the company was consolidated into the financial statements of the Company. | 1,491 | joint and several liability | Valid until cancelled | No | No | |
| Total guarantee line approved in favor of the subsidiaries during the reporting period (C1) | -- | Total amount of the guarantee in favor of the subsidiaries occurred during the reporting period (C2) | USD 51,322.25 (approximately RMB 363,335.87) | ||||||
| Aggregated guarantee line that has been approved in favor of the subsidiaries by the end of the reporting period (C3) | USD 55,434.39(approximately RMB 386,721.39) | Total guarantee balance in favor of the subsidiaries by the end of the reporting period (C4) | USD 51,322.25 (approximately RMB 363,335.87) | ||||||
| Total guarantee amount provided by the Company (total of the above-mentioned three kinds of guarantees) | |||||||||
| Total guarantee line approved during the reporting period (A1+B1+C1) | 130,900 | Total actual occurred amount of guarantee during the reporting period (A2+B2+C2) | 391,735.87 | ||||||
| Total guarantee line that has been approved at the end of the reporting period (A3+B3+C3) | 665,621.39 | Total actual guarantee balance at the end of the reporting period (A4+B4+C4) | 412,735.87 | ||||||
| Proportion of total guarantee amount (A4+B4+C4) to the net assets of the Company | 18.21% | ||||||||
| Of which: | |||||||||
| The balance of the guarantee provided in favor of the controlling shareholder and related party. | 0 | ||||||||
| Amount of debt guarantee provided for the guaranteed party whose asset-liability ratio is not less than 70% | USD 24,167.08 (approximately RMB 168,589.55) | ||||||||
ADAMA Ltd. Semi-Annual Report 2020
| directly or indirectly (E) | |
| The amount of the guarantee that exceeds 50% of the net assets | 0 |
| Total amount of the above three guarantees (D+E+F) | USD 24,167.08 (approximately RMB 168,589.55) |
| As for undue guarantee, liability to guarantee has happened or joint liquidated liability may be undertaken during this Reporting Period (if existing) | -- |
| Regulated procedures are violated to offer guarantee (if existing) | -- |
ADAMA Ltd. Semi-Annual Report 2020
XVI. Social Responsibilities
1. Environmental Situation
Is the Company listed as a “Key Polluting Entity” by the environmental protection agencies?Yes
| Company name | Main pollutants and special pollutants | Way of emission | Number of emission points | Layout of emission points | Concentration | Pollution standards applied | Total amount emitted/ discharged | Total amount approved | Exceeding limit |
| ADAMA | COD | Continuous | 2 | Centralized discharge point | Within limit | (1) for the old site: Comprehensive Standard on Discharge of Waste Water (GB8978-2002)，COD<100mg/L; (2) for the new site: Discharge Standards for Pollutants from Urban Sewage Treatment Plant (GB 18918 – 2002), COD <50mg/L | 12.868 | 391.3 | No |
| ADAMA | Ammonia nitrogen | Continuous | 2 | Centralized discharge point | Within limit | (1) for the old site: Comprehensive Standard on Discharge of Waste Water (GB8978-2002), ammonia nitrogen<15mg/L; (2) for the new site: Discharge Standards for Pollutants from Urban Sewage Treatment Plant (GB 18918 – 2002), ammonia nitrogen<8mg/L; | 0.619 | 50 | No |
| ADAMA | Total Phosphorous | Continuous | 2 | Centralized Discharge Point | Within Limit | for the old site & new site: Discharge Standards for Pollutants from Urban Sewage Treatment Plant (GB 18918 – 2002), total phosphorous <0.5mg/L | N/A | N/A | No |
ADAMA Ltd. Semi-Annual Report 2020
| Company name | Main pollutants and special pollutants | Way of emission | Number of emission points | Layout of emission points | Concentration | Pollution standards applied | Total amount emitted/ discharged | Total amount approved | Exceeding limit |
| ADAMA | NOx | Continuous | 1 | Power plant | Within limit | Standard on Air Pollution of Power Plant（GB13223-2011）NOx <200mg/m | 7.73 | 564.7 | No |
| ADAMA | SO2 | Continuous | 1 | Power plant | Within limit | Standard on Air Pollution of Power Plant（GB13223-2011）SO2<200mg/m3 | 0.841 | 380 | No |
| ADAMA | Fume and dust | Continuous | 1 | Power plant | Within limit | Standard on Air Pollution of Power Plant（GB13223-2011）Fume and dust <30mg/m3 | 0.192 | 80 | No |
| Anpon | COD | Continuous | 3 | Centralized Discharge Point | Within Limit | Comprehensive Standard on Discharge of Waste Water (GB8978-2002)，COD<500mg/L | 196 | 292.88 | None |
| Anpon | Ammonia Nitrogen | Continuous | 3 | Centralized Discharge Point | Within Limit | Water Quality Standard for Sewage Discharged into Urban Sewerage（GBT 31962-2015）, Ammonia Nitrogen <45mg/L | 2.26 | 30.117 | None |
| Anpon | Total Phosphorous | Continuous | 3 | Centralized Discharge Point | Within Limit | For Anpon: Water Quality Standard for Sewage Discharged into Urban Sewerage （GBT 31962-2015）, total phosphorous <8mg/L; For Anpon’s branch Maidao: Agreement on Waste Water Discharge, total phosphorous <3mg/L; | N/A | N/A | None |
| Anpon | NOx | Continuous | 1 | Power | Within Limit | Standard on Air Pollution of Power Plant | 8.9428 | 447.366 | None |
ADAMA Ltd. Semi-Annual Report 2020
| Company name | Main pollutants and special pollutants | Way of emission | Number of emission points | Layout of emission points | Concentration | Pollution standards applied | Total amount emitted/ discharged | Total amount approved | Exceeding limit |
| Plant | （GB13223-2011）NOx <100mg/m3 | ||||||||
| Anpon | SO2 | Continuous | 1 | Power Plant | Within Limit | Standard on Air Pollution of Power Plant（GB13223-2011）SO2<50mg/m3 | 0.977 | 447.366 | None |
| Anpon | Fume and Dust | Continuous | 1 | Power Plant | Within Limit | Standard on Air Pollution of Power Plant（GB13223-2011）Fume and Dust<20mg/m3 | 1.689 | 67.105 | None |
ADAMA Ltd. Semi-Annual Report 2020
(1) Development and Operation of Environmental Facilities
1. Development and Operation of Waste Water Facilities
There are waste water treatment facilities in both the Company and Anpon with the designedcapacity of 37,400 tons/day and 11,000 tons/day, respectively. As all the facilities areoperating well, COD, ammonia nitrogen, and total phosphorous discharged after thetreatment are within the limit.
2. Development and Operation of Waste Gas Facilities
The exhaust treatment facilities in the coal-based power plants of the Company and Anponare running well. Therefore, SO
, Nitrogen oxide and fume and dust discharged after thetreatment are within the limit.
3. The Company and Anpon disclose production and pollution information according the Interim
Measures on Environmental Information Disclosure and transfers information of main wastewater and air pollutants to the information platform of the local environmental bureau on adaily basis.
(2) EIA of construction projects and other environmental administrative permitsNo.
(3) Contingency plan of environmental accidents
The Company and its relevant subsidiaries have formulated the Contingency Plan for EnvironmentalEmergencies according to their production facilities and industry features, and then submitted filesto the local environmental protection authorities as record.
(4) Environment self-monitoring plan
the Company attributes great importance to protecting the environment, out of a sense ofresponsibility to society and the environment and strives to meet the relevant regulatory requirementsand to even go beyond mere compliance, engaging in constant dialogue with stakeholders, includingthe authorities and the community.In order to improve the environmental management, track the discharge of various pollutants,evaluate the impact on the surrounding environment, strengthen the discharge management ofpollutants in the production process, accept the supervision and inspection of environmentalauthorities and provide reference for pollution prevention and control, the company and its subsidiaryAnpon have formulated a self-monitoring plan, which conducts regular tests in strict accordance withthe requirements.
The major monitored indicators and frequency of the Company and Anpon are as the following:
1. Monitored Indicators
Waste water: COD, NH
-N, PH, SS, Petroleum, TP.Air Pollutant: SO
, Nitrogen oxide, Fume and Dust.Noise: Noise at the Site Border
2. Frequency
Boiler emission and waste water discharged from the centralized point: continuous auto
ADAMA Ltd. Semi-Annual Report 2020
monitoringManual sampling: SS, Petroleum, TP, once a month.Noise: once a quarter.
The Company continually examines the implications of the environmental laws, taking actions to preventor mitigate the environmental risks and to reduce the environmental effects that may result from itsactivities, and invests extensive resources to fulfill those legal provisions that are, and are anticipated to,affect it. The Company’s plants are subject to atmospheric emissions regulations, whether by virtue ofthe stipulations provided in the business licenses or under the applicable law. Hazardous materials arestored and utilized in the Company's plants, together with infrastructures and facilities containing fuelsand hazardous materials. The Company takes actions to prevent soil and water pollution by thesematerials and treats them, if revealed. The Company’s plants conduct various soil surveys, risk surveysand tests with regard to treatment of the soil or ground water at the plants.The Company intends to continue investing in environmental protection, to the extent required andbeyond this, whether on its own volition or in compliance with contractual commitments, regulatory orlegal standards relating to environmental protection, so as to realize its best available policy and complywith any legal requirements.As part of its policy of ecological process improvement, the Company also invests in remediation,changes in production processes, establishment of sewage facilities, as well as in byproduct storage andrecycling.
(5) Other environmental information that should be disclosedNo.
(6) Other related information on environmental protectionNo.
2. Perform the social responsibility of targeted poverty alleviation
(1) Targeted Poverty Alleviation Planning
The Company actively implements targeted poverty alleviation according to relevant instructions fromJingzhou Municipal Leading Group and ChemChina on Poverty Alleviation.
(2) Half-year Overview
During the Reporting Period, the trade union of the Company actively responded to the call of HubeiProvincial Federation of trade unions and Jingzhou Municipal Federation of trade unions, and purchasedRMB 229,950 of poverty relief materials from Xuanen County of Enshi City.
ADAMA Ltd. Semi-Annual Report 2020
(3) Results of Targeted Poverty Alleviation
| Indicator | Measurement unit | Number/Progress |
| I. General condition | RMB'0,000 | 22.995 |
| Of which: 1. Capital | RMB'0,000 | —— |
| 2. Material | RMB'0,000 | 22.995 |
| II. Itemized investment | —— | —— |
| 1. Out of poverty by industrial development | —— | —— |
| Of which: 1.1 type of industrial development out of poverty | —— | |
| 1.2 number of industrial development out of poverty | Unit | |
| 1.3 investment amount of industrial development out of poverty | RMB'0,000 | |
| 1.4 the number of people out of poverty who were helped to establish card for archives | Number | |
| 2. Out of poverty by transferring employment | —— | —— |
| 3. Out of poverty by relocating | —— | —— |
| 4. Out of poverty by education | —— | —— |
| 5. Out of poverty by improving health | —— | —— |
| 6. Out of poverty by protecting ecological environment | —— | —— |
| 7. Subsidy for the poorest | —— | —— |
| 8. Social poverty alleviation | RMB'0,000 | 22.995 |
| 9. Other items | —— | —— |
| III. Received awards (contents and rank) | —— | —— |
ADAMA Ltd. Semi-Annual Report 2020
2019. In case of failure to meet such commitment, CNAC committed to compensate the Company either through sharesor cash according to a predetermined formula. Despite Solutions’ strong performance during the three-year period, due toexogenous reasons, the calculated net profit of Solutions for this period implies a certain shortfall.As a result, Syngenta Group (the current direct shareholder of the Company since June 15, 2020), executed suchcompensation commitment, which consists of two parts: (1) the buyback and cancellation of 102,432,280 A shares(executed on July 13,2020), and (2) the return of distributed dividends RMB 17,618,352 (executed on July 14, 2020).The following are the relevant announcements disclosed on the website www.cninfo.com.cn.
XVIII. Significant Events of Subsidiaries
□ Applicable √ Not applicable
| Announcements | Disclosure date |
| Announcement on the Transfer of State-owned Shares of Controlling Shareholders (announcement no. 2020-1) | January 6, 2020 |
| Announcement-SinoChem Group and ChemChina Planning for Strategic Restructuring (announcement no. 2020-4) | January 23, 2020 |
| Announcement on the Completion of the Registration of the Transfer of State-owned Shares held by the Controlling Shareholder (announcement no. 2020-33) | June 17, 2020 |
| Announcement on the Overall Achievement of the Committed Performance Included in the Major Assets Restructuring and the Planned Compensations to the Company by the Obligors (announcement no. 2020-25) | April 28, 2020 |
| Announcement on the Completion of Shares Buyback and Cancellation of Compensation Shares (announcement no. 2020- 36) | July 15, 2020 |
ADAMA Ltd. Semi-Annual Report 2020
Section VI - Share Changes and ShareholdersI. Changes in shares
1. Changes in shares
Unit: share
| Before the change | Increase/decrease (+/-) | After the change | |||||||
| Amount | Proportion | Newly issue share | Bonus shares | Capitalization of public reserves | Other | Subtotal | Amount | Proportion | |
| I. Restricted shares | 1,810,887,539 | 74.02% | -- | -- | -- | -- | -- | 1,810,887,539 | 74.02% |
| a. State-owned legal person’s shares | 1,810,883,039 | 74.02% | -- | -- | -- | -- | -- | 1,810,883,039 | 74.02% |
| b. Shares held by domestic investors | 4,500 | 0.00% | -- | -- | -- | -- | -- | 4,500 | 0.00% |
| i. Shares held by domestic legal person | 0 | 0.00% | -- | -- | -- | -- | -- | 0 | 0.00% |
| ii. Shares held by domestic natural person | 4,500 | 0.00% | -- | -- | -- | -- | -- | 4,500 | 0.00% |
| II. Shares not subject to trading moratorium | 635,666,043 | 25.98% | -- | -- | -- | -- | -- | 635,666,043 | 25.98% |
| a. RMB ordinary shares | 468,616,702 | 19.15% | -- | -- | -- | -- | -- | 468,616,702 | 19.15% |
| b. Domestically listed foreign shares | 167,049,341 | 6.83% | 167,049,341 | 6.83% | |||||
| III. Total shares | 2,446,553,582 | 100.00% | -- | -- | -- | -- | -- | 2,446,553,582 | 100.00% |
ADAMA Ltd. Semi-Annual Report 2020
Reasons for the change in shares
□ Applicable √ Not applicable
Approval of the change in shares
□ Applicable √ Not applicable
The registered status for the change in shares
□ Applicable √ Not applicable
Status of share buyback
□Applicable √Not applicable
Subsequent to the Reporting Period, on August 19, 2020, the 26
th meeting of the 8
th session of the Board of Directors approved a Repurchase Plan for up to 26 million Domestically Listed Foreign B-shares, constituting up to 15.6% of the Company's B-shares and up to 1.1% of its total shares outstanding, at an expected cost in the range of approximately RMB 66.3 million to RMB 132.6 million,which is subject to the shareholders’ further approval. For details, please refer to the Repurchase Plan for Part of the Company’s Domestically Listed Foreign Shares (B share) published by theCompany on the website www.cninfo.com.cn on August 21, 2020.
Status of share buyback in the way of centralized bidding
□Applicable √Not applicable
Effects of the change in shares on the basic EPS, diluted EPS, net assets per share attributable to common shareholders of the Company and otherfinancial indexes over the last year and last period.
□ Applicable √ Not applicable
Other contents that the Company considered necessary or is required by securities regulatory authorities to disclose
□ Applicable √ Not applicable
ADAMA Ltd. Semi-Annual Report 2020
2. Changes in Restricted Shares
√ Applicable □ Not applicable
| Shareholders | Restricted shares at the opening of the Reporting Period | Shares released in the Reporting Period | Restricted shares increased in the Reporting Period | Restricted shares at the end of the Reporting Period | Restriction reasons | Date of release |
| Syngenta Group Co., Ltd. | 1,810,883,039 | 0 | 0 | 1,810,883,039* | Commitment not to trade | August 3, 2020 |
| Jiang Chenggang | 4,500 | 0 | 0 | 4,500 | Shares held by a supervisor should be locked up. | Six months after the expiration of the term |
| Total | 1,810,887,539 | 0 | 0 | 1,810,887,539 | -- | -- |
ADAMA Ltd. Semi-Annual Report 2020
III. Total Number of Shareholders and Their Shareholdings
Unit: share
| Total number of shareholders as of the end of the Reporting Period | 49,602 (the number of ordinary A share shareholders is 34,498; the number of B share shareholders is 15,104) | Total number of preferred stockholders with vote right restored (if any) as of the end of the Reporting Period | 0 | |||||||
| Shareholding of shareholders holding more than 5% shares | ||||||||||
| Name of shareholder | Nature of shareholder | Holding percentage (%) | Number of shareholding at the end of the Reporting Period | Increase and decrease of shares during Reporting Period | Number of shares held subject to trading moratorium | Number of shares held not subject to trading moratorium | Pledged or frozen shares | |||
| Status of shares | Amount | |||||||||
| Syngenta Group Co., Ltd. | State-owned legal person | 74.02% | 1,810,883,039 | 1,810,883,039 | 1,810,883,039 | -- | -- | -- | ||
| Jingzhou Sanonda Holding Co., Ltd. | State-owned legal person | 4.89% | 119,687,202 | -- | -- | 119,687,202 | -- | -- | ||
| China Cinda Asset Management Co., Ltd. | State-owned legal person | 1.37% | 33,557,046 | -- | -- | 33,557,046 | -- | -- | ||
| China Structural Reform Fund Co., Ltd. | State-owned legal person | 1.37% | 33,557,046 | -- | -- | 33,557,046 | -- | -- | ||
| Portfolio No.503 of National Social Security Fund | Others | 0.94% | 23,000,052 | 1,499,955 | -- | 23,000,052 | -- | -- | ||
| UBS AG | Overseas legal person | 0.68% | 16,634,350 | 16,634,350 | -- | 16,634,350 | -- | -- | ||
| CCB Principal-ICBC-Avic Trust, Trust Plan of Pooled Funds of CCB Principal Private Placement Investment, Tianqi (2016) No. 293 of Avic Trust | Others | 0.53% | 12,885,906 | - | - | 12,885,906 | -- | -- | ||
| Caitong Fund Fuchun Chuangyi Private Placement No.3 Asset Management Plan | Others | 0.19% | 4,697,986 | -- | -- | 4,697,986 | -- | -- | ||
| GUOTAI JUNAN | Overseas | 0.18% | 4,319,872 | -79,700 | -- | 4,319,872 | -- | -- | ||
ADAMA Ltd. Semi-Annual Report 2020
| SECURITIES(HONGKONG) LIMITED | legal person | ||||||||||
| Qichun County State-owned Assets Administration | State-owned | 0.17% | 4,169,266 | -- | -- | 4,169,266 | -- | -- | |||
| Strategic investors or the general legal person due to the placement of new shares become the top 10 shareholders (if any) | Not applicable | ||||||||||
| Explanation on associated relationship or/and persons | Syngenta Group Co., Ltd. and Jingzhou Sanonda Holdings Co., Ltd. are related parties, and are acting-in-concert parties as prescribed in the Administrative Methods for Acquisition of Listed Companies. Both of them are controlled subsidiaries of CNAC. It is unknown whether the other shareholders are related parties or acting-in-concert parties as prescribed in the Administrative Methods for Acquisition of Listed Companies. | ||||||||||
| Details of shares held by top 10 shareholders not subject to trading moratorium | |||||||||||
| Name of shareholder | Number of shares held not subject to trading moratorium at the end of the period | Type of share | |||||||||
| Type of share | Amount | ||||||||||
| Jingzhou Sanonda Holding Co., Ltd. | 119,687,202 | RMB ordinary share | 119,687,202 | ||||||||
| China Cinda Asset Management Co., Ltd. | 33,557,046 | RMB ordinary share | 33,557,046 | ||||||||
| China Structural Reform Fund Co., Ltd. | 33,557,046 | RMB ordinary share | 33,557,046 | ||||||||
| National Social Security Fund Portfolio 503 | 23,000,052 | RMB ordinary share | 23,000,052 | ||||||||
| UBS AG | 16,634,350 | RMB ordinary share | 16,634,350 | ||||||||
| CCB Principal-ICBC-Avic Trust, Trust Plan of Pooled Funds of CCB Principal Private Placement Investment, Tianqi (2016) No. 293 of Avic Trust | 12,885,906 | RMB ordinary share | 12,885,906 | ||||||||
| Caitong Fund Fuchun Chuangyi Private Placement No.3 Asset Management Plan | 4,697,986 | RMB ordinary share | 4,697,986 | ||||||||
| GUOTAI JUNAN SECURITIES(HONGKONG) LIMITED | 4,319,872 | Domestically listed foreign share | 4,319,872 | ||||||||
| Qichun County State-owned Assets Administration | 4,169,266 | RMB ordinary share | 4,169,266 | ||||||||
| Hong Kong Securities Clearing Company Ltd. | 4,007,531 | RMB ordinary share | 4,007,531 | ||||||||
| Explanation on associated relationship among the top ten shareholders of tradable share not subject to trading moratorium, as well as among the top ten shareholders of tradable share not subject to trading moratorium and top ten shareholders, or explanation on acting-in-concert | Qichun County Administration of State-Owned Assets held shares of the Company on behalf of the government. It is unknown whether the other shareholders are related parties or acting-in-concert parties as prescribed in the Administrative Methods for Acquisition of Listed Companies. | ||||||||||
| Particular about shareholder participate in the securities lending and borrowing business (if any) | -- | ||||||||||
ADAMA Ltd. Semi-Annual Report 2020
Did any top 10 common shareholders or the top 10 common shareholders not subject to tradingmoratorium of the Company carry out a promissory buy-back in the Reporting Period?
□ Yes √ No
The top 10 common shareholders or the top 10 common shareholders not subject to tradingmoratorium of the Company had not carried out any agreed buy-back in the Reporting Period.
IV. Change of the Controlling Shareholder or the Actual Controller
Change of the controlling shareholder in the Reporting Period
√ Applicable □ Not applicable
| New Direct Controlling Shareholder | Syngenta Group Co., Ltd. - a wholly owned subsidiary of CNAC, the former direct controlling shareholder of the Company |
| Date of the Change of Controlling Shareholder | June 15, 2020 |
| Disclosure Index | Announcement on the Completion of the Registration of the Transfer of State-owned Shares held by the Controlling Shareholder (No. 2020-33) |
| Disclosure Date | June 17, 2020 |
ADAMA Ltd. Semi-Annual Report 2020
Section VII - Preferred stock
□ Applicable √ Not applicable
There was no preferred stock during Reporting Period.
ADAMA Ltd. Semi-Annual Report 2020
Section VIII - Convertible Bonds
□ Applicable √ Not applicable
No such cases in the Reporting Period.
ADAMA Ltd. Semi-Annual Report 2020
Section IX - Directors, Supervisors and Senior ManagementI. Changes in Shareholdings of Directors, Supervisors and Senior Management
□ Applicable √ Not applicable
No such cases in the Reporting Period that were not described in the Annual Report. For details, seeAnnual Report 2019.
II. Changes in Directors, Supervisors and Senior Management
√Applicable □ Not applicable
As stated in the 2019 Annual Report, changes in directors and senior management during theReporting Period, were as follows:
| Name | Position | Type | Date | Reason |
| Erik Fyrwald | Chairman of the Board | Elected | April 9, 2020 | -- |
| Chen Lichtenstein | Director | Elected | April 9, 2020 | -- |
| Ignacio Dominguez | President & CEO | Appointment | March 1, 2020 | -- |
| Yang Xingqiang | Chairman of the Board | Left the position | April 9, 2020 | Due to work arrangements by ChemChina. |
| Chen Lichtenstein | President & CEO | Left the position | March 1, 2020 | Nomination as the CFO of Syngenta Group responsible also for strategy alignment. |
ADAMA Ltd. Semi-Annual Report 2020
Section X - Corporate Bonds
Are there any corporate bonds publicly offered and listed on the stock exchange, which were undue beforethe approval date of this Report or were due but could not be redeemed in full?
□ Applicable √ Not applicable
ADAMA Ltd. Semi-Annual Report 2020
Section XI - Financial Report
I. Audit report
Was the half-year report audited?
□ Yes √ No
The half-year report was not audited.
II. Financial Statements
Notes to the financial statements are presented in RMB’000.
ADAMA Ltd. Semi-Annual Report 2020
ADAMA Ltd.(Expressed in RMB '000)Consolidated Balance Sheet
| June 30 | December 31 | ||
| Notes | 2020 | 2019 | |
| Current assets | |||
| Cash at bank and on hand | V.1 | 6,293,175 | 4,348,588 |
| Financial assets held for trading | V.2 | 12,609 | 29,510 |
| Derivative financial assets | V.3 | 1,017,302 | 490,113 |
| Bills receivable | V.4 | 47,433 | 26,000 |
| Accounts receivable | V.5 | 8,677,392 | 8,004,157 |
| Receivables financing | V.6 | 35,552 | 78,948 |
| Prepayments | V.7 | 351,997 | 377,808 |
| Other receivables | V.8 | 1,235,318 | 1,195,253 |
| Inventories | V.9 | 10,618,794 | 9,932,654 |
| Other current assets | V.10 | 611,296 | 659,195 |
| Total current assets | 28,900,868 | 25,142,226 | |
| Non-current assets | |||
| Long-term receivables | V.11 | 120,550 | 170,896 |
| Long-term equity investments | V.12 | 134,420 | 133,098 |
| Other equity investments | V.13 | 156,092 | 155,062 |
| Investment properties | 3,609 | 3,771 | |
| Fixed assets | V.14 | 6,942,743 | 6,939,610 |
| Construction in progress | V.15 | 998,060 | 788,386 |
| Right-of-use assets | V.16 | 515,779 | 536,034 |
| Intangible assets | V.17 | 5,543,526 | 5,835,785 |
| Goodwill | V.18 | 4,627,331 | 4,511,193 |
| Deferred tax assets | V.19 | 857,313 | 826,696 |
| Other non-current assets | V.20 | 295,888 | 246,183 |
| Total non-current assets | 20,195,311 | 20,146,714 | |
| Total assets | 49,096,179 | 45,288,940 | |
ADAMA Ltd. Semi-Annual Report 2020
ADAMA Ltd.(Expressed in RMB '000)Consolidated Balance Sheet (continued)
| June 30 | December 31 | ||
| Notes | 2020 | 2019 | |
| Current liabilities | |||
| Short-term loans | V.21 | 1,893,876 | 2,009,882 |
| Derivative financial liabilities | V.22 | 1,065,034 | 691,475 |
| Bills payable | V.23 | 255,417 | 321,674 |
| Accounts payable | V.24 | 4,773,708 | 4,205,901 |
| Contract liabilities | V.25 | 1,052,333 | 664,228 |
| Employee benefits payable | V.26 | 985,533 | 1,211,713 |
| Taxes payable | V.27 | 386,070 | 369,038 |
| Other payables | V.28 | 1,342,465 | 1,049,594 |
| Non-current liabilities due within one year | V.29 | 1,336,375 | 1,066,243 |
| Other current liabilities | V.30 | 381,188 | 355,243 |
| Total current liabilities | 13,471,999 | 11,944,991 | |
| Non-current liabilities | |||
| Long-term loans | V.31 | 2,224,678 | 927,159 |
| Debentures payable | V.32 | 8,663,773 | 7,965,942 |
| Lease Liabilities | V.33 | 387,635 | 406,358 |
| Long-term payables | 26,860 | 29,021 | |
| Long-term employee benefits payable | V.34 | 676,624 | 738,854 |
| Provisions | V.35 | 162,545 | 176,822 |
| Deferred tax liabilities | V.19 | 416,449 | 323,304 |
| Other non-current liabilities | V.36 | 395,838 | 404,824 |
| Total non-current liabilities | 12,954,402 | 10,972,284 | |
| Total liabilities | 26,426,401 | 22,917,275 | |
| Shareholders' equity | |||
| Share capital | V.37 | 2,446,554 | 2,446,554 |
| Capital reserve | V.38 | 12,903,168 | 12,903,168 |
| Other comprehensive income | V.39 | 1,340,054 | 1,192,681 |
| Special reserves | 17,205 | 14,927 | |
| Surplus reserve | V.40 | 240,162 | 240,162 |
| Retained earnings | V.41 | 5,722,635 | 5,574,173 |
| Total shareholders’ equity | 22,669,778 | 22,371,665 | |
| Total liabilities and shareholders’ equity | 49,096,179 | 45,288,940 | |
| Ignacio Dominguez Legal representative | Aviram Lahav Chief of accounting work & Chief of accounting organ |
ADAMA Ltd. Semi-Annual Report 2020
ADAMA Ltd.(Expressed in RMB '000)Balance Sheet
| June 30 | December 31 | ||
| Notes | 2020 | 2019 | |
| Current assets | |||
| Cash at bank and on hand | XV.1 | 1,445,904 | 1,423,051 |
| Accounts receivable | XV.2 | 400,029 | 349,109 |
| Receivables financing | XV.3 | 8,512 | 11,722 |
| Prepayments | 11,641 | 6,055 | |
| Other receivables | XV.4 | 45,492 | 14,051 |
| Inventories | 83,789 | 97,861 | |
| Other current assets | 36,105 | 19,117 | |
| Total current assets | 2,031,472 | 1,920,966 | |
| Non-current assets | |||
| Long-term equity investments | XV.5 | 16,371,411 | 16,371,411 |
| Other equity investments | 85,495 | 85,495 | |
| Investment properties | 3,609 | 3,771 | |
| Fixed assets | 791,306 | 777,476 | |
| Construction in progress | 640,442 | 504,936 | |
| Right-of-use assets | 252 | 486 | |
| Intangible assets | 167,831 | 170,053 | |
| Deferred tax assets | 57,077 | 84,950 | |
| Other non-current assets | 83,998 | 73,668 | |
| Total non-current assets | 18,201,421 | 18,072,246 | |
| Total assets | 20,232,893 | 19,993,212 | |
| Current liabilities | |||
| Short-term loans | 152,000 | 150,000 | |
| Bills payables | 75,360 | 90,190 | |
| Accounts payables | 233,960 | 124,228 | |
| Contract liabilities | 4,007 | 6,748 | |
| Employee benefits payable | 147,645 | 204,238 | |
| Taxes payable | 2,779 | 3,614 | |
| Other payables | 265,035 | 237,266 | |
| Non-current liabilities due within one year | 13,299 | 454 | |
| Total current liabilities | 894,085 | 816,738 | |
| Non-current liabilities | |||
| Long-term loans | 377,750 | 141,960 | |
| Lease Liabilities | - | 21 | |
| Long-term employee benefits payable | 96,608 | 96,826 | |
| Provisions | 43,907 | 43,238 | |
| Other non-current liabilities | 171,770 | 171,770 | |
| Total non-current liabilities | 690,035 | 453,815 | |
| Total liabilities | 1,584,120 | 1,270,553 | |
| Shareholders’ equity | |||
| Share capital | V.37 | 2,446,554 | 2,446,554 |
| Capital reserve | 15,449,878 | 15,449,878 | |
| Other comprehensive income | 37,267 | 41,308 | |
| Special reserves | 15,251 | 12,973 | |
| Surplus reserve | 240,162 | 240,162 | |
| Retained earnings | V.41 | 459,661 | 531,784 |
| Total shareholders’ equity | 18,648,773 | 18,722,659 | |
| Total liabilities and shareholders’ equity | 20,232,893 | 19,993,212 |
ADAMA Ltd. Semi-Annual Report 2020
ADAMA Ltd.(Expressed in RMB '000)Consolidated Income Statement
| Six months ended June 30 | |||
| Notes | 2020 | 2019 | |
| I. Operating income | V.42 | 14,121,040 | 13,616,032 |
| Less: Cost of sales | V.42 | 9,904,470 | 9,023,242 |
| Taxes and surcharges | V.43 | 46,117 | 46,226 |
| Selling and Distribution expenses | V.44 | 2,468,568 | 2,499,774 |
| General and administrative expenses | V.45 | 553,186 | 628,259 |
| Research and Development expenses | V.46 | 188,185 | 210,699 |
| Financial expenses | V.47 | 842,792 | 938,196 |
| Including: Interest expense | 350,041 | 325,138 | |
| Interest income | 29,625 | 41,534 | |
| Add: Investment income, net | V.48 | 52,129 | (514,443) |
| Including: Income from investment in associates and joint ventures | 14,392 | 21,724 | |
| Gain (loss) from changes in fair value | V.49 | 265,510 | 884,135 |
| Credit impairment reversal (losses) | V.50 | 5,589 | 3,347 |
| Asset impairment reversal (losses) | V.51 | (25,376) | (23,809) |
| Gain from disposal of assets | V.52 | 7,694 | 115,514 |
| II. Operating profit | 423,268 | 734,380 | |
| Add: Non-operating income | 39,020 | 10,811 | |
| Less: Non-operating expenses | 13,441 | 16,016 | |
| III. Total profit | 448,847 | 729,175 | |
| Less: Income tax expenses | V.53 | 244,198 | 140,537 |
| IV. Net profit | 204,649 | 588,638 | |
| (1). Classified by nature of operations | |||
| (1.1). Continuing operations | 204,649 | 588,638 | |
| (2). Classified by ownership | |||
| (2.1). Shareholders of the Company | 204,649 | 588,638 | |
| V. Other comprehensive income, net of tax | V. 39 | 147,373 | (113,471) |
| Other comprehensive income (net of tax) attributable to shareholders of the Company | 147,373 | (113,471) | |
| (1) Items that will not be reclassified to profit or loss: | 39,373 | (4,417) | |
| (1.1) Re-measurement of defined benefit plan liability | 39,373 | (13,978) | |
| (1.2) Fair Value changes in other equity investment | - | 9,561 | |
| (2) Items that were or will be reclassified to profit or loss | 108,000 | (109,054) | |
| (2.1) Effective portion of gains or loss of cash flow hedge | (78,285) | (151,993) | |
| (2.2) Translation differences of foreign financial statements | 186,285 | 42,939 | |
| VI. Total comprehensive income for the period attributable to Shareholders of the Company | 352,022 | 475,167 | |
| VII. Earnings per share | XIV.2 | ||
| (1) Basic earnings per share (Yuan/share) | 0.08 | 0.24 | |
| (2) Diluted earnings per share (Yuan/share) | N/A | N/A | |
ADAMA Ltd. Semi-Annual Report 2020
ADAMA Ltd.(Expressed in RMB '000)Income Statement
| Six months ended June 30 | |||
| Notes | 2020 | 2019 | |
| I. Operating income | XV.6 | 673,646 | 735,426 |
| Less: Operating costs | XV.6 | 537,314 | 518,561 |
| Taxes and surcharges | 2,821 | 8,910 | |
| Selling and Distribution expenses | 17,072 | 43,054 | |
| General and administrative expenses | 133,338 | 190,950 | |
| Research and Development expenses | 4,559 | 24,464 | |
| Financial expenses (income) | (4,826) | (1,254) | |
| Including: Interest expense | 3,143 | 2,059 | |
| Interest income | 8,507 | 14,333 | |
| Add: Credit impairment reversal (losses) | (674) | (1,633) | |
| Asset Impairment reversal (losses) | (2,864) | (272) | |
| Gain from disposal of assets | 101 | - | |
| II. Operating Profit | (20,069) | (51,164) | |
| Add: Non-operating income | 5,597 | 4,430 | |
| Less: Non-operating expenses | 420 | 1,896 | |
| III. Total profit | (14,892) | (48,630) | |
| Less: Income tax expense (income) | 27,872 | (10,841) | |
| IV. Loss | (42,764) | (37,789) | |
| Continuing operations | (42,764) | (37,789) | |
| V. Other comprehensive income, net of tax | (4,041) | 5,050 |
| (1) Items that will not be reclassified to profit or loss | (4,041) | 5,050 |
| (1.1) Re-measurement of defined benefit plan liability | (4,041) | - |
| (1.2) FV changes in other equity investment | - | 5,050 |
| VI. Total comprehensive income (loss) for the period | (46,805) | (32,739) |
ADAMA Ltd. Semi-Annual Report 2020
ADAMA Ltd.(Expressed in RMB '000)Consolidated Cash Flow Statement
| Six months ended June 30 | |||
| Notes | 2020 | 2019 | |
| I. Cash flows from operating activities: | |||
| Cash received from sale of goods and rendering of services | 13,378,983 | 12,817,678 | |
| Refund of taxes and surcharges | 67,336 | 39,737 | |
| Cash received relating to other operating activities | V.55(1) | 630,515 | 258,378 |
| Sub-total of cash inflows from operating activities | 14,076,834 | 13,115,793 | |
| Cash paid for goods and services | 9,247,435 | 9,779,321 | |
| Cash paid to and on behalf of employees | 1,967,484 | 1,801,614 | |
| Payments of taxes and surcharges | 168,816 | 465,018 | |
| Cash paid relating to other operating activities | V.55(2) | 1,458,568 | 1,374,790 |
| Sub-total of cash outflows from operating activities | 12,842,303 | 13,420,743 | |
| Net cash flows from (used in) operating activities | V.56(1)a | 1,234,531 | (304,950) |
| II. Cash flows from investing activities: | |||
| Cash received from disposal of investments | 16,224 | 20,173 | |
| Cash received from returns of investments | 54,304 | 3,372 | |
| Net cash received from disposal of fixed assets, intangible assets and other long-term assets | 15,677 | 30,843 | |
| Cash received relating to other investing activities | V.55(3) | - | 9,327 |
| Sub-total of cash inflows from investing activities | 86,205 | 63,715 | |
| Cash paid to acquire fixed assets, intangible assets and other long-term assets | 803,315 | 606,126 | |
| Cash paid for acquisition of investments | 51,435 | - | |
| Net cash paid to acquire subsidiaries or other business units | - | 826,805 | |
| Cash paid relating to other investing activities | V.55(4) | 46,840 | 778 |
| Sub-total of cash outflows from investing activities | 901,590 | 1,433,709 | |
| Net cash flows used in investing activities | (815,385) | (1,369,994) | |
| III. Cash flows from financing activities: | |||
| Cash received from borrowings | 2,822,626 | 1,987,810 | |
| Cash received from other financing activities | V.55(5) | 4,449 | 61,701 |
| Sub-total of cash inflows from financing activities | 2,827,075 | 2,049,511 | |
| Cash repayments of borrowings | 745,547 | 463,876 | |
| Cash payment for dividends, profit distributions and interest | 356,793 | 406,111 | |
| Including: Dividends paid to non-controlling interest | 26,828 | 28,936 | |
| Cash paid relating to other financing activities | V.55(6) | 249,286 | 443,891 |
| Sub-total of cash outflows from financing activities | 1,351,626 | 1,313,878 | |
| Net cash from financing activities | 1,475,449 | 735,633 | |
| IV. Effects of foreign exchange rate changes on cash and cash equivalents | 41,605 | (25,065) | |
| V. Net decrease in cash and cash equivalents | V.56(1)b | 1,936,200 | (964,376) |
| Add: Cash and cash equivalents at the beginning of the year | 4,319,907 | 6,346,196 | |
| I. VI. Cash and cash equivalents at the end of the period | V.56(2) | 6,256,107 | 5,381,820 |
ADAMA Ltd. Semi-Annual Report 2020
ADAMA Ltd.(Expressed in RMB '000)Cash Flow Statement
| Six months ended June 30 | |||
| Notes | 2020 | 2019 | |
| I. Cash flows from operating activities: | |||
| Cash received from sale of goods and rendering of services | 581,672 | 1,034,417 | |
| Refund of taxes and surcharges | 27,022 | 23,042 | |
| Cash received relating to other operating activities | XV.7(1) | 15,063 | 18,958 |
| Sub-total of cash inflows from operating activities | 623,757 | 1,076,417 | |
| Cash paid for goods and services | 467,607 | 535,991 | |
| Cash paid to and on behalf of employees | 122,633 | 94,867 | |
| Payments of taxes and surcharges | 4,959 | 73,468 | |
| Cash paid relating to other operating activities | XV.7(2) | 90,807 | 89,570 |
| Sub-total of cash outflows from operating activities | 686,006 | 793,896 | |
| Net cash flows from (used in) operating activities | XV.8 | (62,249) | 282,521 |
| II. Cash flows from investing activities: | |||
| Net cash received from disposal of fixed assets, intangible assets and other long-term assets | 114 | - | |
| Cash received relating to other investing activities | - | 1,808 | |
| Sub-total of cash inflows from investing activities | 114 | 1,808 | |
| Cash paid to acquire fixed assets, intangible assets and other long-term assets | 154,378 | 92,180 | |
| Sub-total of cash outflows from investing activities | 154,378 | 92,180 | |
| Net cash flows used in investing activities | (154,264) | (90,372) | |
| III.Cash flows from financing activities: | |||
| Cash received from borrowings | 441,500 | - | |
| Cash received relating to other financing activities | XV.7.(3) | 4,449 | 11,947 |
| Sub-total of cash inflows from financing activities | 445,949 | 11,947 | |
| Cash repayments of borrowings | 190,500 | 72,000 | |
| Cash payment for dividends, profit distributions or interest | 14,606 | 2,059 | |
| Cash paid relating to other financing activities | XV.7.(4) | 200 | 200 |
| Sub-total of cash outflows from financing activities | 205,306 | 74,259 | |
| Net cash flow provided by (used in) financing activities | 240,643 | (62,312) | |
| IV. Effects of foreign exchange rate changes on cash and cash equivalents | 3,172 | (2,976) | |
| V. Net increase in cash and cash equivalents | 27,302 | 126,861 | |
| Add: Cash and cash equivalents at the beginning of the year | XV.8(2) | 1,395,994 | 2,005,313 |
| VI. Cash and cash equivalents at the end of the period | XV.8(2) | 1,423,296 | 2,132,174 |
ADAMA Ltd. Semi-Annual Report 2020
ADAMA Ltd.(Expressed in RMB '000)Consolidated Statement of Changes in Shareholders’ Equity
For the six months ended June 30, 2020
| Attributable to shareholders of the Company | |||||||
| Share capital | Capital reserve | Other comprehen-sive income | Special reserves | Surplus reserve | Retained earnings | Total | |
| I. Balance at December 31, 2019 | 2,446,554 | 12,903,168 | 1,192,681 | 14,927 | 240,162 | 5,574,173 | 22,371,665 |
| II. Changes in equity for the period | - | - | 147,373 | 2,278 | - | 148,462 | 298,113 |
| 1. Total comprehensive income | - | - | 147,373 | - | - | 204,649 | 352,022 |
| 2. Owner’s contributions and reduction | - | - | - | - | - | - | - |
| 3. Appropriation of profits | - | - | - | - | - | (56,187) | (56,187) |
| 3.1 Distribution to owners | - | - | - | - | - | (29,359) | (29,359) |
| 3.2 Distribution to non-controlling interest | - | - | - | - | - | (26,828) | (26,828) |
| 4. Transfers within owners’ equity | - | - | - | - | - | - | - |
| 5. Special reserve | - | - | - | 2,278 | - | - | 2,278 |
| 5.1 Transfer to special reserve | - | - | - | 3,756 | - | - | 3,756 |
| 5.2 Amount utilized | - | - | - | (1,478) | - | - | (1,478) |
| III. Balance at June 30, 2020 | 2,446,554 | 12,903,168 | 1,340,054 | 17,205 | 240,162 | 5,722,635 | 22,669,778 |
| For the six months ended June 30, 2019 | |||||||
| Attributable to shareholders of the Company | |||||||
| Share capital | Capital reserve | Other comprehen-sive income | Special reserves | Surplus reserve | Retained earnings | Total | |
| I. Balance at December 31, 2018 | 2,446,554 | 12,975,456 | 1,090,952 | 13,536 | 240,162 | 5,513,466 | 22,280,126 |
| Add: Business combination under common control | - | 349,035 | (125) | - | - | 115,826 | 464,736 |
| II. Balance at January 1, 2019 | 2,446,554 | 13,324,491 | 1,090,827 | 13,536 | 240,162 | 5,629,292 | 22,744,862 |
| III. Changes in equity for the period | - | (421,323) | (117,982) | 3,262 | - | 270,585 | (265,458) |
| 1. Total comprehensive income | - | - | (113,471) | - | - | 588,638 | 475,167 |
| 2. Owner’s contributions and reduction | - | (415,000) | - | - | - | - | (415,000) |
| 2.1 Consideration for Business combination under common control | - | (415,000) | - | - | - | - | (415,000) |
| 3. Appropriation of profits | - | (6,323) | - | - | - | (322,564) | (328,887) |
| 3.1 Distribution to owners | - | - | - | - | - | (293,628) | (293,628) |
| 3.2 Distribution to non-controlling interest | - | - | - | - | - | (28,936) | (28,936) |
| 3.3 Other | - | (6,323) | - | - | - | - | (6,323) |
| 4. Transfers within owners’ equity | - | - | (4,511) | - | - | 4,511 | - |
| 4.1 Others | - | - | (4,511) | - | - | 4,511 | - |
| 5. Special reserve | - | - | - | 3,262 | - | - | 3,262 |
| 5.1 Transfer to special reserve | - | - | - | 10,646 | - | - | 10,646 |
| 5.2 Amount utilized | - | - | - | (7,384) | - | - | (7,384) |
| IV. Balance at June 30, 2019 | 2,446,554 | 12,903,168 | 972,845 | 16,798 | 240,162 | 5,899,877 | 22,479,404 |
ADAMA Ltd. Semi-Annual Report 2020
ADAMA Ltd.(Expressed in RMB '000)Statement of Changes in Shareholders’ Equity
For the six months ended June 30, 2020
| Attributable to shareholders of the Company | |||||||
| Share capital | Capital reserve | Other comprehensive income | Special reserves | Surplus reserve | Retained earnings | Total | |
| I. Balance at December 31, 2019 | 2,446,554 | 15,449,878 | 41,308 | 12,973 | 240,162 | 531,784 | 18,722,659 |
| II. Changes in equity for the period | - | - | (4,041) | 2,278 | - | (72,123) | (73,886) |
| 1. Total comprehensive income | - | - | (4,041) | - | - | (42,764) | (46,805) |
| 2. Owner’s contributions and reduction | - | - | - | - | - | - | - |
| 3. Appropriation of profits | - | - | - | - | - | (29,359) | (29,359) |
| 3.1 Transfer to Distribution to shareholders | - | - | - | - | - | (29,359) | (29,359) |
| 4. Special reserve | - | - | - | 2,278 | - | - | 2,278 |
| 4.1 Transfer to special reserve | - | - | - | 3,756 | - | - | 3,756 |
| 4.2 Amount utilized | - | - | - | (1,478) | - | - | (1,478) |
| Ⅲ. Balance at June 30, 2020 | 2,446,554 | 15,449,878 | 37,267 | 15,251 | 240,162 | 459,661 | 18,648,773 |
| For the six months ended June 30, 2019 | |||||||
| Attributable to shareholders of the Company | |||||||
| Share capital | Capital reserve | Other comprehensive income | Special reserves | Surplus reserve | Retained earnings | Total | |
| I. Balance at December 31, 2018 | 2,446,554 | 15,414,429 | 43,167 | 11,564 | 240,162 | 1,257,073 | 19,412,949 |
| II. Changes in equity for the period | - | 48,816 | 5,050 | 2,482 | - | (275,105) | (218,757) |
| 1. Total comprehensive income | - | - | 5,050 | - | - | (37,789) | (32,739) |
| 2. Owner’s contributions and reduction | - | 48,816 | - | - | - | - | 48,816 |
| 2.1 Other | - | 48,816 | - | - | - | - | 48,816 |
| 3. Appropriation of profits | - | - | - | - | - | (237,316) | (237,316) |
| 3.1 Transfer to Distribution to shareholders | - | - | - | - | - | (237,316) | (237,316) |
| 4. Special reserve | - | - | - | 2,482 | - | - | 2,482 |
| 4.1 Transfer to special reserve | - | - | - | 5,462 | - | - | 5,462 |
| 4.2 Amount utilized | - | - | - | (2,980) | - | - | (2,980) |
| Ⅲ. Balance at June 30, 2019 | 2,446,554 | 15,463,245 | 48,217 | 14,046 | 240,162 | 981,968 | 19,194,192 |
I BASIC CORPORATE INFORMATION
ADAMA Ltd. (hereinafter the “Company” or the “Group”) is a company limited by shares established inChina with its head office located in Hubei Jingzhou.
The Company's parent company is Syngenta Group Co., Ltd. (hereinafter “Syngenta Group”), and theultimate holding company is China National Chemical Corporation (hereinafter - “ChemChina”).
The principal activities of the Company and its subsidiaries (together referred to as the “Group”) are engagedin development, manufacturing and marketing of agrochemicals, intermediate materials for other industries,food additives and synthetic aromatic products, mainly for export. For information about the largestsubsidiaries of the Company, refer to Note VII.
The Company’s consolidated financial statements had been approved by the Board of Directors of theCompany on August 19, 2020.
Details of the scope of consolidated financial statements are set out in Note VII "Interest in other entities",whereas the changes of the scope of consolidation are set out in Note VI "Changes in consolidation scope".
II BASIS OF PREPARATION
1. Basis of preparation
The Group has adopted the Accounting Standards for Business Enterprises issued by the Ministry of Finance(the "MoF"). In addition, the Group has disclosed relevant financial information in these financial statementsin accordance with Information Disclosure and Presentation Rules for Companies Offering Securities to thePublic No. 15－General Provisions on Financial Reporting (revised by China Securities RegulatoryCommission (hereinafter "CSRC”) in 2014).
II BASIS OF PREPARATION - (cont’d)
2. Accrual basis and measurement principle
The Group has adopted the accrual basis of accounting. Except for certain financial instruments which aremeasured at fair value, deferred tax assets and liabilities, assets and liabilities relating to employee benefits,provisions, and investments in associated companies and joint ventures, the Group adopts the historical costas the principle of measurement in the financial statements. Where assets are impaired, provisions for assetimpairment are made in accordance with relevant requirements.
In the historical cost measurement, assets obtained shall be measured at the amount of cash or cashequivalents or fair value of the consideration paid. Liabilities shall be measured at the actual amount of cashor assets received, or the contractual amount in a present obligation, or the prospective amount of cash orcash equivalents paid to discharge the liabilities.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable,willing market participants in an arm’s length transaction at the measurement date. Fair value measured anddisclosed in the financial statements are determined on this basis whether it is observable or estimated byvaluation techniques.
The following table provides an analysis, grouped into Levels 1 to 3 based on the degree to which the fairvalue input is observable and significant to the fair value measurement as a whole:
Level 1 - based on quoted prices (unadjusted) in active markets;
Level 2 - based on valuation techniques for which the lowest level input that is significant to the fair value
measurement is observable (other than quoted prices included within Level 1), either directly orindirectly;
Level 3 - based on valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable.
3. Going concern
The financial statements have been prepared on the going concern basis.
The Group has performed going concern assessment for the following 12 months from June 30, 2020 andhave not identified any significant doubtful matter or event on the going concern, as such the financialstatement have been prepared on the going concern basis.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES
1. Statement of compliance
These financial statements are in compliance with the Accounting Standards for Business Enterprises to trulyand completely reflect the Company's consolidated financial position as at June 30, 2020 and the Company'sconsolidated operating results, changes in shareholders' equity and cash flows for the six months then ended.
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
2. Accounting period
The Group has adopted the calendar year as its accounting year, i.e. from 1 January to 31 December.
3. Business cycle
The company takes the period from the acquisition of assets for processing to their realisation in cash or cashequivalents as a normal operating cycle. The operating cycle for the company is 12 months.
4. Reporting currency
The Company and its domestic subsidiaries choose Renminbi (hereinafter "RMB") as their functionalcurrency. Functional currencies of overseas subsidiaries are determined on the basis of the principaleconomic environment in which the overseas subsidiaries operate. The functional currency of the overseassubsidiaries is mainly the United States Dollar (hereinafter "USD"). The presentation currency of thesefinancial statements is Renminbi.
5. Business combinations
5.1 Business combinations involving enterprises under common control
A business combination involving enterprises under common control is a business combination in which allof the combining enterprises are ultimately controlled by the same party or parties both before and after thecombination, and that control is not transitory. Assets and liabilities obtained shall be measured at theirrespective carrying amounts as recorded by the combining entities at the date of the combination. Thedifference between the carrying amount of the net assets obtained and the carrying amount of theconsideration paid for the combination is adjusted to the share premium in capital reserve. If the sharepremium is not sufficient to absorb the difference, any excess shall be adjusted against retained earnings.Costs that are directly attributable to the combination are charged to profit or loss in the period in which theyare incurred.
5.2 Business combinations not involving enterprises under common control and goodwill.
A business combination not involving enterprises under common control is a business combination in whichall of the combining enterprises are not ultimately controlled by the same party or parties before and afterthe combination.
The costs of business combination are the fair value of the assets paid, liabilities incurred or assumed andequity instruments issued by the acquirer for the purpose of achieving the control rights over the acquiree.
The intermediary costs such as audit, legal services and assessment consulting costs and other relatedmanagement costs that are directly attributable to the combination by the acquirer are charged to profit orloss in the period in which they are incurred. Direct capital issuance costs incurred in respect of equityinstruments or liabilities issued pursuant to the business combination should be charged to the respect equityinstruments or liabilities upon initial recognition of the underlying equity instruments or liabilities.
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
5. Business combinations - (cont’d)
5.2 Business combinations not involving enterprises under common control and goodwill - (cont’d)
The acquiree’s identifiable assets, liabilities and contingent liabilities acquired by the acquirer in a businesscombination, that meet the recognition criteria shall be measured at fair value at the acquisition date. Wherethe cost of combination exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable netassets, the difference is treated as an asset and recognized as goodwill, which is measured at cost on initialrecognition. Where the cost of combination is less than the acquirer’s interest in the fair value of theacquiree’s identifiable net assets, the remaining difference is recognized immediately in profit or loss for thecurrent year.
The goodwill raised because of the business combination should be separately disclosed in the consolidatedfinancial statement and measured by the initial amount less any accumulative impairment provision.
6. Basis for preparation of consolidated financial statements
The scope of consolidation in consolidated financial statements is determined on the basis of control. Controlis achieved when the Company has power over the investee; is exposed, or has rights, to variable returnsfrom its involvement with the investee; and has the ability to use its power to affect its returns.
For a subsidiary disposed of by the Group, the operating results and cash flows before the date of disposal(the date when control is lost) are included in consolidated income statement and consolidated statement ofcash flows.
For a subsidiary acquired through a business combination not involving enterprises under common control,the operating results and cash flows from the acquisition date (the date when control is obtained) are includedin consolidated income statement and consolidated statement of cash flows.
For a subsidiary acquired through a business combination involving enterprises under common control, itwill be fully consolidated into consolidated financial statements from the date on which the subsidiary wasultimately under common control by the same party or parties.
The significant accounting policies and accounting years adopted by the subsidiaries are determined basedon the uniform accounting policies and accounting years set out by the Company.
All significant intra-group balances, transactions and unrealized profits are eliminated on consolidation.
The portion of subsidiaries' equity that is not attributable to the Company is treated as non-controllinginterests and presented as "non-controlling interests" in the shareholders’ equity in consolidated balancesheet. The portion of net profits or losses of subsidiaries for the period attributable to non-controllinginterests is presented as "non-controlling interests" in consolidated income statement below the "net profit"line item. Total comprehensive income attributable to non-controlling shareholders is presented separatelyin the consolidated income statement below the total comprehensive income line item.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
6. Basis for preparation of consolidated financial statements - (cont’d)
When the amount of loss for the period attributable to the non-controlling shareholders of a subsidiaryexceeds the non-controlling shareholders' portion of the opening balance of owners' equity of the subsidiary,the excess amount is still allocated against non-controlling interests.
Acquisition of non-controlling interests or disposal of equity interest in a subsidiary that does not result inthe loss of control over the subsidiary is accounted for as equity transactions. The carrying amounts of theCompany's interests and non-controlling interests are adjusted to reflect the changes in their relative interestsin the subsidiary. The difference between the amount by which the non-controlling interests are adjusted andthe fair value of the consideration paid or received is adjusted to capital reserve under owners' equity. If thecapital reserve is not sufficient to absorb the difference, the excess is adjusted against retained earnings.Other comprehensive income attributed to the non-controlling interest is reattributed to the shareholders ofthe company.
A put option issued by the Group to holders of non-controlling interests that is settled in cash or otherfinancial instrument is recognized as a liability at the present value of the exercise price. The Group’s shareof a subsidiary’s profits includes the share of the holders of the non-controlling interests to which the Groupissued a put option.
When the Group loses control over a subsidiary due to disposal of certain equity interest or other reasons,any retained interest is re-measured at its fair value at the date when control is lost. The difference between(i) the aggregate of the consideration received on disposal and the fair value of any retained interest and (ii)the share of the former subsidiary's net assets cumulatively calculated from the acquisition date according tothe original proportion of ownership interest is recognized as investment income in the period in whichcontrol is lost. Other comprehensive income associated with the disposed subsidiary is reclassified toinvestment income in the period in which control is lost.
7. Classification and accounting methods of joint arrangement
Joint arrangement involves by two or more parties jointly control. Joint control is the contractually agreedsharing of control over an economic activity, and exists only when the strategic financial and operatingdecisions relating to the activity require the unanimous consent of the parties sharing control (the ventures).
The Group makes the classification of the joint arrangements according to the rights and obligations in thejoint arrangements to either joint operations or joint ventures.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement haverights to the net assets of the joint arrangement. Joint ventures are accounted for using the equity method.
8. Cash and cash equivalents
Cash comprises cash on hand and deposits that can be readily withdrawn on demand. Cash equivalents arethe Group's short-term, highly liquid investments that are readily convertible to known amounts of cash andwhich are subject to an insignificant risk of changes in value.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
9. Translation of transactions and financial statements denominated in foreign currencies
9.1 Transactions denominated in foreign currencies
On initial recognition, foreign currency transactions are translated into functional currency using the spotexchange rate prevailing at the date of transaction.
At the balance sheet date, foreign currency monetary items are translated into functional currency using thespot exchange rates at the balance sheet date. Exchange differences arising from the differences between thespot exchange rates prevailing at the balance sheet date and those on initial recognition or at the previousbalance sheet date are recognized in profit or loss for the period, except that (i) exchange differences relatedto a specific-purpose borrowing denominated in foreign currency that qualify for capitalization arecapitalized as part of the cost of the qualifying asset during the capitalization period. (ii) exchange differencesrelated to hedging instruments for the purpose of hedging against foreign currency risks are accounted forusing hedge accounting.
When preparing financial statements involving foreign operations, if there is any foreign currency monetaryitems, which in substance forms part of the net investment in the foreign operations, exchange differencesarising from the changes of foreign currency are recorded as other comprehensive income, and will bereclassified to profit or loss upon disposal of the foreign operations.
Foreign currency non-monetary items measured at historical cost are translated to the amounts in functionalcurrency at the spot exchange rates on the dates of the transactions and the amounts in functional currencyremain unchanged.
9.2 Translation of financial statements denominated in foreign currency
For the purpose of preparing consolidated financial statements, financial statements of a foreign operationare translated from the foreign currency into RMB using the following method: assets and liabilities on thebalance sheet are translated at spot exchange rate prevailing at the balance sheet date; shareholders' equityitems, except for retained earnings, are translated at the spot exchange rates at the dates on which such itemsarose; all items in the income statement as well as items reflecting the distribution of profits are translated ataverage rate or at spot exchange rates on the dates of the transactions; the retained earnings opening balanceis previous year's translated retained earnings closing balance; the closing balance of retained earnings iscalculated and presented on the basis of each translated income statement and profit distribution item. Thedifference between the translated assets and the aggregate of liabilities and shareholders' equity items isrecorded as other comprehensive income. Cash Flows arising from transaction in foreign currency and thecash flows of a foreign subsidiary are translated at the spot exchange rate on the date of the cash flow, theeffect of exchange rate changes on the cash and cash equivalents is regarded as a reconciling item and presentseparately in the statement “effect of foreign exchange rate changes on the cash and cash equivalents".
The opening balances and the comparative figures of prior year are presented at the translated amounts inthe prior year's financial statements.
On disposal of the Group's entire equity interest in a foreign operation, or upon a loss of control over aforeign operation due to disposal of certain equity interest in it or other reasons, the Group transfers theaccumulated translation differences, which are attributable to the owners' equity of the Company andpresented under other comprehensive income to profit or loss in the period in which the disposal occurs.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
9. Translation of transactions and financial statements denominated in foreign currencies - (cont’d)
9.2 Translation of financial statements denominated in foreign currency - (cont’d)
In case of a disposal or other reason that does not result in the Group losing control over a foreign operation,the proportionate share of accumulated translation differences are re-attributed to non-controlling interestsand are not recognized in profit and loss. For partial disposals of equity interest in foreign operations, whichare associates or joint ventures, the proportionate share of the accumulated translation differences arereclassified to profit or loss.
10. Financial instruments
The Group recognizes a financial asset or a financial liability when it becomes a party to the contractualprovisions of the instrument. At initial recognition, the Group measures a financial asset or financial liabilityat its fair value plus or minus, in the case of a financial asset or financial liability not at fair value throughprofit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial assetor financial liability. Initial recognition in trade receivables which do not contain a significant financingcomponent, shall be made according to their transaction price.
10.1 Classification and measurement of financial assets
After initial recognition, an entity shall measure a financial asset at: (a) amortised cost; (b) fair value throughother comprehensive income (“FVTOCI”); or (c) fair value through profit or loss (“FVTPL”).
10.1.1 Financial assets at amortised cost
A financial asset is measured at amortised cost if both of the following conditions are met: (a) the financialasset is held within a business model whose objective is to hold financial assets in order to collect contractualcash flows; and (b) the contractual terms of the financial asset give rise on specified dates to cash flows thatare solely payments of principal and interest on the principal amount outstanding.
Such financial assets are subsequently measured at amortised cost, using effective interest method. Gains orlosses upon impairment and derecognition are recognized in profit or loss.
10.1.1.1 Effective interest method and amortised cost
Effective interest method represents the method for calculating the amortized costs and interest income orexpense of each period in accordance with the effective interest rate of financial assets or financial liabilities(inclusive of a set of financial assets or financial liabilities). Effective interest rate represents the rate thatdiscounts the future cash flow over the expected subsisting period or shorter period, if appropriate, of thefinancial asset or financial liability to the current carrying value of such financial asset or financial liability.
When calculating the effective interest rate, the Group will consider the anticipated future cash flow (notconsidering the future credit loss) on the basis of all contract clauses of financial assets or financial liabilities,as well as consider all kinds of charges which are an integral part of the effective interest rate, includingtransaction fees and discount or premium paid or received between both parties of financial asset or financialliability contract.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
10. Financial instruments - (cont’d)
10.1 Classification and measurement of financial assets - (cont’d)
10.1.2 Financial assets at FVTOCI
A financial asset is measured at fair value through other comprehensive income if both of the followingconditions are met: (a) the financial asset is held within a business model whose objective is achieved byboth collecting contractual cash flows and selling financial assets and (b) the contractual terms of thefinancial asset give rise on specified dates to cash flows that are solely payments of principal and interest onthe principal amount outstanding.
A gain or loss on a financial asset measured at fair value through other comprehensive income is recognizedin other comprehensive income, except for impairment gains or losses, foreign exchange gains and lossesand interest calculated using the effective interest method, until the financial asset is derecognized orreclassified. When the financial asset is derecognized the cumulative gain or loss previously recognized inother comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment.
10.1.3 Financial assets at FVTPL
Financial assets at FVTPL are either those that are classified as financial assets at FVTPL or designated asfinancial assets at FVTPL.
A financial asset is measured at FVTPL unless it is measured at amortised cost or at FVTOCI.
The Group may, at initial recognition, irrevocably designate a financial asset as measured at FVTPL if doingso eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to asan ‘accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recognizing thegains and losses on them on different bases.
A gain or loss on a financial asset that is measured at FVTPL is recognized in profit or loss unless it is partof a hedging relationship. Dividends are recognized in profit or loss.
10.1.4 Designated financial assets at FVTOCI
At initial recognition, the Group makes an irrevocable election to designate to FVTOCI an investment in anequity instrument that is not held for trading.
When a non-trading equity instrument investment is designated as a financial asset that is measured at fairvalue through other comprehensive income, the changes in the fair value of the financial asset are recognisedin other comprehensive income. Upon realization the accumulated gains or losses from other comprehensiveincome are transferred from other comprehensive income and included in retained earnings. During theperiod in which the Group holds these non-trading investment instruments, the right to receive dividends inthe Group has been established, and the economic benefits related to dividends are likely to flow into theGroup, and when the amount of dividends can be reliably measured, the dividend income is recognized inthe current profit and loss.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
10. Financial instruments - (cont’d)
10.2 Impairment of financial assets
The Group recognizes a loss allowance for expected credit losses on financial assets that are classified toamortised cost and FVTOCI.
The Group always measures the loss allowance at an amount equal to lifetime expected credit losses fortrade receivables.
For financial assets other than trade receivables, the Group initially measure the loss allowance for thatfinancial instrument at an amount equal to 12-month expected credit losses. At each balance sheet date, ifthe credit risk on that financial instrument has increased significantly since initial recognition, the Groupmeasures the loss allowance for a financial instrument at an amount equal to the lifetime expected creditlosses. The Group recognizes in profit or loss, as an impairment gain or loss, the amount of expected creditlosses (or reversal) that is required to adjust the loss allowance to the amount that is required to be recognized.
10.2.1 Significant increases in credit risk
At each balance sheet date, the Group assesses whether the credit risk on a financial instrument hasincreased significantly since initial recognition.
The Group mainly considers the following list of information in assessing changes in credit risk:
(a) significant changes in internal price indicators of credit risk as a result of a change in credit risk sinceinception.(b) significant changes in external market indicators of credit risk for a particular financial instrumentor similar financial instruments with the same expected life.(c) a significant change in the debtors’ ability to meet its debt obligations.(d) an actual or expected significant change in the operating results of the debtor.(e) significant increases in credit risk on other financial instruments of the same debtor.(f) an actual or expected significant adverse change in the regulatory, economic, or technological
environment of the debtor.(g) significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements, which are expected to reduce the debtor’s economicincentive to make scheduled contractual payments or to otherwise have an effect on the probabilityof a default occurring.(h) significant changes that are expected to reduce the receivable’s economic incentive to makescheduled contractual payments.(i) significant changes in the expected performance and behaviour of the debtor.(j) past due information.
The Group assumes that the credit risk on a financial instrument has not increased significantly since initialrecognition if the financial instrument is determined to have low credit risk at the reporting date.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
10. Financial instruments - (cont’d)
10.2 Impairment of financial assets - (cont’d)
10.2.2 Credit-impaired financial asset
A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimatedfuture cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impairedinclude observable data about the following events:
(a) significant financial difficulty of the issuer or the receivable;(b) a breach of contract, such as a default or past due event;(c) the lender(s) of the receivable, for economic or contractual reasons relating to the receivable’sfinancial difficulty, having granted to the receivable a concession(s) that the lender(s) would nototherwise consider;(d) it is becoming probable that the receivable will enter bankruptcy or other financial reorganization;
10.2.3 Recognition of expected credit losses
For the purpose of determining significant increases in credit risk and recognizing a loss allowance on acollective basis, financial instruments are grouped on the basis of shared credit risk. Examples of sharedcredit risk characteristics may include, but are not limited to, the:(a) instrument type; (b) credit risk ratings;(c) collateral type; (d) industry; (e) geographical location of the debtor; and (f) the value of collateralrelative to the financial asset if it has an impact on the probability of a default occurring.
Expected credit losses of financial instruments are determined as the present value of the differencebetween: (a) the contractual cash flows that are due to an entity under the contract; and (b) the cash flowsthat the entity expects to receive.
For a financial asset that is credit-impaired at the reporting date, an entity shall measure the expected creditlosses as the difference between the asset’s gross carrying amount and the present value of estimated futurecash flows discounted at the financial asset’s original effective interest rate. Any adjustment is recognizedin profit or loss as an impairment gain or loss.
The Group measures expected credit losses of a financial instrument in a way that reflects:
(a) an unbiased and probability-weighted amount that is determined by evaluating a range of possibleoutcomes;(b) the time value of money; and(c) reasonable and supportable information that is available without undue cost or effort at the reporting
date about past events, current conditions and forecasts of future economic conditions.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
10. Financial instruments - (cont’d)
10.2 Impairment of financial assets - (cont’d)
10.2.4 Written-off of financial assets
The Group directly reduces the gross carrying amount of a financial asset when the entity has no reasonableexpectations of recovering a financial asset in its entirety or a portion thereof. A write-off constitutes aderecognition event.
10.3 Transfer of financial asset
The Group derecognizes a financial asset if one of the following conditions is satisfied: (i) the contractualrights to the cash flows from the financial asset expire; or (ii) the financial asset has been transferred andsubstantially all the risks and rewards of ownership of the financial asset is transferred to the transferee; or(iii) although the financial asset has been transferred, the Group neither transfers nor retains substantially allthe risks and rewards of ownership of the financial asset but has not retained control of the financial asset.
If the Group neither transfers nor retains substantially all the risks and rewards of ownership of a financialasset, and it retains control of the financial asset, it recognizes the financial asset to the extent of its continuinginvolvement in the transferred financial asset and recognizes an associated liability. The extent of theGroup’s continuing involvement in the transferred asset is the extent to which it is exposed to changes in thevalue of the transferred asset.
When the company is derecognizing a financial asset in its entirety, except for equity instrument designatedto FVTOCI, the difference between (i) the carrying amount of the financial asset transferred; and (ii) the sumof the consideration received from the transfer is recognized in profit or loss.
10.4 Classification and measurement of financial liabilities
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with thesubstance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
All financial liabilities are subsequently measured at FVTPL or other financial liabilities.
Financial liabilities are classified as at FVTPL when the financial liability is (i) held for trading or (ii) it isdesignated as at FVTPL. The financial liability other than derivative financial liabilities are stated asliabilities held for trading.
Other financial liabilities are subsequently measured at amortized cost by using effective interest method.Gain or loss arising from derecognition or amortization is recognized in current profit or loss.
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
10. Financial instruments - (cont’d)
10.5 Derecognition of financial liabilities
Financial liabilities are derecognized in full or in part only when the present obligation is discharged in fullor in part. An agreement entered into force between the Group (debtor) and a creditor to replace the originalfinancial liabilities with new financial liabilities with substantially different terms, derecognize the originalfinancial liabilities as well as recognize the new financial liabilities. When financial liabilities isderecognized in full or in part, the difference between the carrying amount of the financial liabilitiesderecognized and the consideration paid (including transferred non-cash assets or new financial liability) isrecognized in profit or loss for the current period.
10.6 Derivatives
Derivative financial instruments include forward exchange contracts, currency swaps and foreign exchangeoptions, etc. Derivatives are initially measured at fair value at the date when the derivative contracts areentered into and are subsequently re-measured at fair value. The resulting gain or loss is recognized in profitor loss unless the derivative is designated and highly effective as a hedging instrument, in which case thetiming of the recognition in profit or loss depends on the nature of the hedge relationship (Note III 28.1).
10.7 Offsetting financial assets and financial liabilities
Financial assets and financial liabilities shall be presented separately in the balance sheet and shall not beoffset, except for circumstances where the Group has a legal right that is currently enforceable to offset therecognized financial assets and financial liabilities, and intends either to settle on a net basis, or to realizethe financial asset and settle the financial liability simultaneously, a financial asset and a financial liabilityshall be offset and the net amount is presented in the balance sheet.
10.8 Equity instruments
The consideration received from the issuance of equity instruments net of transaction costs is recognized inshareholders’ equity. Consideration and transaction costs paid by the Company for repurchasing self-issuedequity instruments are deducted from shareholders’ equity.
When the Company repurchases its own shares, those shares are treated as treasury shares. All expendituresrelating to the repurchase are recorded in the cost of the treasury shares, with the transaction entering intothe share capital. Treasury shares are excluded from profit distributions and are stated as a deduction undershareholders’ equity in the balance sheet.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
11. Receivables
Receivables are assessed for impairment on a collective group and/or on an individual basis as follows:
Expected credit losses in respect of a receivables is measured at an amount equal to lifetime expected creditlosses. The assessment is made collectively for account receivables, where receivables share similar creditrisk characteristics based on geographical location, using the expected credit losses model including inter-alia aging analysis, historical loss experiences adjusted by the observable factors reflecting current andexpected future economic conditions. The ratio of the collective provision for non-overdue accountreceivables is between 0%-1.7%.
When credit risk on a receivable has increased significantly since initial recognition, the group recordsspecific provision or collective provision, which is determined for groups of similar assets in countries inwhich there are large number of customers with immaterial balances.
In assessing whether the credit risk on a receivable has increased significantly since initial recognition, theGroup compares the risk of a default occurring on the receivable at the reporting date with the risk of adefault occurring on the receivable at the date of initial recognition and considers both quantitative andqualitative information that is reasonable and supportable, including observable data that comes to theattention of the Group about loss events such as a significant decline in the solvency of an individual debtoror the portfolio of debtors, and significant changes in the financial condition that have an adverse effect onthe debtor.
12. Inventories
12.1 Categories of inventories and initial measurement
The Group's inventories mainly include raw materials, work in progress, semi-finished goods, finished goodsand reusable materials. Reusable materials include low-value consumables, packaging materials and othermaterials, which can be used repeatedly but do not meet the definition of fixed assets.
Inventories are initially measured at cost. Cost of inventories comprises all costs of purchase, costs ofconversion and other expenditures incurred in bringing the inventories to their present location and conditionincluding direct labor costs and an appropriate allocation of production overheads.
12.2 Valuation method of inventories upon delivery
The actual cost of inventories upon delivery is calculated using the weighted average method.
12.3 Basis for determining net realizable value of inventories and provision methods for decline in value of
inventories
At the balance sheet date, inventories are measured at the lower of cost and net realizable value. If the netrealizable value is below the cost of inventories, a provision for decline in value of inventories is made. Netrealizable value is the estimated selling price in the ordinary course of business less the estimated costs ofcompletion, the estimated costs necessary to make the sale and relevant taxes.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
12. Inventories - (cont’d)
After the provision for decline in value of inventories is made, if the circumstances that previously causedinventories to be written down below cost no longer exist so that the net realizable value of inventories ishigher than their carrying amount, the original provision for decline in value is reversed and the reversal isincluded in profit or loss for the period.
12.4 The perpetual inventory system is maintained for stock system.
13. Long-term equity investments
Long-term equity investments include investments in subsidiaries, joint ventures and associates.
Subsidiaries are the companies that are controlled by the Company. Associates are the companies over whichthe Group has significant influence. Joint ventures are joint arrangements over which the Group has jointcontrol along with other investors and has rights to the net assets of the joint arrangement.
The Company accounts for the investment in subsidiaries at historical cost in the Company's financialstatements. Investments in associates and joint ventures are accounted for under equity method.
13.1 Determination of investment cost
For a long-term equity investment acquired through a business combination involving enterprises undercommon control, the investment cost of the long-term equity investment is the share of the carrying amountof the shareholders' equity of the acquiree attributable to the ultimate controlling party at the date ofcombination. For a long-term equity investment acquired through business combination not involvingenterprises under common control, the investment cost of the long-term equity investment is the cost ofacquisition. For a business combination not involving enterprises under common control achieved in stagesthat involves multiple exchange transactions, the initial investment cost is carried at the aggregate of thecarrying amount of the acquirer’s previously held equity interest in the acquiree and the new investment costincurred on the acquisition date.
Regarding the long-term equity investment acquired otherwise than through a business combination, if thelong-term equity investment is acquired by cash, the historical cost is determined based on the amount ofcash paid and payable; if the long-term equity investment is acquired through the issuance of equityinstruments, the historical cost is determined based on the fair value of the equity instruments issued.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
13. Long-term equity investments - (cont’d)
13.2 Subsequent measurement and recognition of profit or loss
If the long-term equity investment is accounted for at cost, it should be measured at historical cost lessaccumulated impairment losses. Dividend declared by the investee should be accounted for as investmentincome.
Under the equity method, where the long-term equity investment initial investment cost exceeds the Group’sshare of the fair value of the investee’s identifiable net assets at the time of acquisition, no adjustment ismade to the initial investment cost. Where the initial investment cost is less than the Group’s share of thefair value of the investee’s identifiable net assets at the time of acquisition, the difference is recognized inprofit or loss for the period, and the cost of the long-term equity investment is adjusted accordingly.
Under the equity method, the Group recognizes its share of the net profit or loss and other comprehensiveincome of the investee for the period as investment income or loss and other comprehensive income for theperiod. The Group recognizes its share of the investee’s net profit or loss based on the fair value of theinvestee’s individual separately identifiable assets, etc. at the acquisition date after making appropriateadjustments to be confirmed with the Group's accounting policies and accounting period. The Groupdiscontinues recognizing its share of net losses of the investee after the carrying amount of the long-termequity investment together with any long-term interests that in substance form part of its net investment inthe investee is reduced to zero. If the Group has incurred obligations to assume additional losses of theinvestee, a provision is recognized according to the expected obligation, and recorded as investment loss forthe period.
13.3 Basis for determining control, joint control and significant influence over investee
Control is achieved when the Company has power over the investee; is exposed, or has rights, to variablereturns from its involvement with the investee; and has the ability to use its power to affect its returns.
Joint control is the contractually agreed sharing of control over an economic activity, and exists only whenthe strategic financial and operating policy decisions relating to the activity require the unanimous consentof the parties sharing control.
Significant influence is the power to participate in the financial and operating policy decisions of the investeebut is not control or joint control over those policies.
When determining whether an investing enterprise is able to exercise control or significant influence overan investee, the effect of potential voting rights of the investee (for example, warrants and convertible debts)held by the investing enterprises or other parties that are currently exercisable or convertible shall beconsidered.
13.4 Methods of impairment assessment and determining the provision for impairment loss
If the recoverable amounts of the investments to subsidiaries, joint ventures and associates are less than theircarrying amounts, an impairment loss should be recognized to reduce the carrying amounts to the recoverableamounts (Note III 20).
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
13. Long-term equity investments - (cont’d)
13.5 The disposal of long-term equity investment
On disposal of a long term equity investment, the difference between the proceeds actually received andreceivable and the carrying amount is recognized in profit or loss for the period.
14. Investment properties
Investment property refers to real estate held to earn rentals or for capital appreciation, or both, includingleased land use rights, land use rights held and provided for transferring after appreciation and leasedconstructions, etc.
Investment property is initially measured at cost. Subsequent expenditures related to an investment propertyshall be included in cost of investment property only when the economic benefits associated with the assetwill likely flow to the Group and its cost can be measured reliably. All other subsequent expenditures oninvestment property shall be included in profit or loss for the current period when incurred.
The Group adopts cost method for subsequent measurement of investment property, which is depreciated oramortized using the same policy as that for buildings and land use rights.
When an investment property is sold, transferred, retired or damaged, the amount of proceeds on disposal ofthe property net of the carrying amount and related taxes and surcharges is recognized in profit or loss forthe current period.
15. Fixed assets
15.1 Recognition criteria for fixed assets
Fixed assets include land owned by the Group and buildings, machinery and equipment, transportationvehicles, office equipment and others.
Fixed assets are tangible assets that are held for use in the production or supply of goods or for administrativepurposes, and have useful lives of more than one accounting year. A fixed asset is recognized only when itis probable that economic benefits associated with the asset will flow to the Group and the cost of the assetcan be reliably measured. Purchased or constructed fixed assets are initially measured at cost when acquired.
Subsequent expenditures incurred for the fixed asset are included in the cost of the fixed asset and if it isprobable that economic benefits associated with the asset will flow to the Group and the subsequentexpenditures can be measured reliably. Other subsequent expenditures are recognized in profit or loss in theperiod in which they are incurred.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
15. Fixed assets - (cont’d)
15.2 Depreciation of each category of fixed assets
Fixed asset is depreciated based on the cost of fixed asset recognized less expected net residual value overits useful life using the straight-line method since the month subsequent to the one in which it is ready forintended use. Depreciation is calculated based on the carrying amount of the fixed asset after impairmentover the estimated remaining useful life of the asset.
The Group reviews the useful life and estimated net residual value of a fixed asset and the depreciationmethod applied at least once at each financial year-end, and account for any change as a change in anaccounting estimate.
The estimated useful life, estimated net residual value and annual depreciation rate of each category of fixedassets are as follows:
| Category | Depreciation | Useful life (years) | Residual value (%) | Annual depreciation rate (%) |
| Buildings | the straight-line method | 15-50 | 0-4 | 1.9-6.7 |
| Machinery and equipment | the straight-line method | 3-22 | 0-4 | 4.4-33.3 |
| Office and other equipment | the straight-line method | 3-17 | 0-4 | 5.6-33.3 |
| Motor vehicles | the straight-line method | 5-9 | 0-2 | 10.9-20.0 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
17. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying asset arecapitalized when expenditures for such asset and borrowing costs are incurred and activities relating to theacquisition, construction or production of the asset that are necessary to prepare the asset for its intended useor sale have commenced. Capitalization of borrowing costs ceases when the qualifying asset being acquired,constructed or produced becomes ready for its intended use or sale. Borrowing costs incurred subsequentlyshould be charged to profit or loss. Capitalization of borrowing costs is suspended during periods in whichthe acquisition, construction or production of a qualifying asset is suspended abnormally and when thesuspension is for a continuous period of more than 3 months. Capitalization is suspended until the acquisition,construction or production of the asset is resumed.
Where funds are borrowed under a specific-purpose borrowing, the amount of interest to be capitalized isthe actual interest expenses incurred on that borrowing for the period less any bank interest earned fromdepositing the borrowed funds before being used on the asset or any investment income on the temporaryinvestment of those funds.
Where funds are borrowed under general-purpose borrowings, the Group determines the amount of interestto be capitalized on such borrowings by applying a capitalization rate to the weighted average of the excessof cumulative expenditures on the asset over the amounts of specific-purpose borrowings. The capitalizationrate is the weighted average of the interest rates applicable to the general-purpose borrowings.
During the capitalization period, exchange differences on foreign currency specific-purpose borrowing arefully capitalized whereas exchange differences on foreign currency general-purpose borrowing, charged toprofit or loss.
18. Intangible assets
18.1 Valuation methods, useful life, impairment test
The Group’s intangible assets include product registration assets, intangible assets upon purchase of products,marketing rights and rights to use tradenames and trademarks, land use rights, software and customerrelations. Intangible assets are stated at cost less accumulated amortization and impairment losses.
When an intangible asset with a finite useful life is available for use, its original cost less any accumulatedimpairment losses is amortized over its estimated useful life using the straight-line method. An intangibleasset with an indefinite useful life is not amortized.
For an intangible asset with a finite useful life, the Group reviews the useful life and amortization method atthe end of the year, and makes adjustments when necessary.
The respective amortization periods for such intangible assets are as follows:
| Item | Amortization period (years) | |
| Land use rights | 49-50 years | |
| Product registration | 8 years | |
| Intangible assets on purchase of products | 7-11, 20 years | |
| Marketing rights, tradename and trademarks | 4-10, 30 years | |
| Software | 3-5 years | |
| Customer relations | 5-10 years |
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
18. Intangible assets - (cont’d)
18.2 Research and development expenditure
Internal research and development project expenditures were classified into research expenditures anddevelopment expenditures depending on its nature and the greater uncertainty whether the research activitiesbecoming to intangible assets.
Expenditure during the research phase is recognized as an expense in the period in which it is incurred.Expenditure during the development phase that meets all of the following conditions at the same time isrecognized as intangible asset:
- It is technically feasible to complete the intangible asset so that it will be available for use or sale;- The Group has the intention to complete the intangible asset and use or sell it;- The Group can demonstrate the ways in which the intangible asset will generate economic benefits;- The availability of adequate technical, financial and other resources to complete the development and theability to use or sell the intangible asset;- The expenditure attributable to the intangible asset during its development phase can be reliablymeasured.Expenditures that do not meet all of the above conditions at the same time are recognized in profit or losswhen incurred. If the expenditures cannot be distinguished between the research phase and developmentphase, the Group recognizes all of them in profit or loss for the period. Expenditures that have previouslybeen recognized in the profit or loss would not be recognized as an asset in subsequent years. Thoseexpenditures capitalized during the development stage are recognized as development costs incurred andwill be transferred to intangible asset when the underlying project is ready for an intended use.
19. Goodwill
The initial cost of goodwill represents the excess of cost of acquisition over the acquirer’s interest in the fairvalue of the identifiable net assets of the acquiree under a business combination not involving enterprisesunder common control.
Goodwill is not amortized and is stated in the balance sheet at cost less accumulated impairment losses (seeNote III 20 – Impairment of long-term assets). On disposal of an asset group
or a set of asset groups, anyattributable goodwill is written off and included in the calculation of the profit or loss on disposal.
20. Impairment of long-term assets
The Company assesses at each balance sheet date whether there is any indication that the fixed assets,construction in progress, right of use assets, intangible assets with finite useful lives, investment propertiesmeasured at historical cost, investments in subsidiaries, joint ventures and associates may be impaired. Ifthere is any indication that such assets may be impaired, recoverable amounts are estimated for such assets.The recoverable amount of an asset is the higher of its fair value less costs to sell and the present value ofthe future cash flow estimated to be derived from the asset. The Group estimates the recoverable amount onan individual basis. If it is not possible to estimate the recoverable amount of the individual asset, the Groupdetermines the recoverable amount of the asset group to which the asset belongs. Identification of an assetgroup is based on whether major cash inflows generated by the asset group are largely independent of thecash inflows from other assets or asset groups.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
20. Impairment of long-term assets - (cont’d)
Goodwill arising from a business combination is tested for impairment at least at each year end, irrespectiveof whether there is any indication that the asset may be impaired. For the purpose of impairment testing, thecarrying amount of goodwill acquired in a business combination is allocated from the acquisition date on areasonable basis to each of the related asset groups; if it is impossible to allocate to the related asset groups,it is allocated to each of the related set of asset groups. Each of the related asset groups or set of asset groupsis an asset group or set of asset group that is able to benefit from the synergies of the business combinationand shall not be larger than a reportable segment determined by the Group. If the carrying amount of theasset group or set of asset groups is higher than its recoverable amount, the amount of the impairment lossfirst reduced by the carrying amount of the goodwill allocated to the asset group or set of asset groups, andthen the carrying amount of other assets (other than the goodwill) within the asset group or set of asset groups,pro rata based on the carrying amount of each asset.
Once the impairment loss of such assets is recognized, it will not be reversed in any subsequent period.
21. Employee benefits
21.1 Short-term employee benefits
Employee wages or salaries, bonuses, social security contributions, measured on a non-discounted basis, andthe expense is recorded when the related service is provided. A provision for short-term employee benefitsin respect of cash bonuses is recognized in the amount expected to be paid where the Group has a currentlegal or constructive obligation to pay the said amount for services provided by the employee in the past andthe amount can be estimated reliably.
21.2 Post-employment benefits
Post-employment benefits are classified into defined contribution plans and defined benefit plans.
A defined contribution plan is a post-employment benefit plan under which the Group pays contributions toa separate entity and has no legal or constructive obligation to pay further amounts. Obligations forcontributions to defined contribution plans are recognized as an expense in profit or loss in the periods duringwhich related services are rendered by employees.
Defined benefit plans of the Group are post-employment benefit plans other than defined contribution plans.In accordance with the projected unit credit method, the Group measures the obligations under definedbenefit plans using unbiased and mutually compatible actuarial assumptions to estimate related demographicvariables and financial variables, and discount obligations under the defined benefit plans to determine thepresent value of the defined benefit liability. The discount rate used is the yield on the reporting date onhighly-rated corporate debentures denominated in the same currency, that have maturity dates approximatingthe terms of the Group’s obligation.
The Group attributes benefit obligations under a defined benefit plan to periods of service provided byrespective employees. Service cost and interest expense on the defined benefit liability are charged to profitor loss and remeasurements of the defined benefit liability are recognized in other comprehensive income.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
21. Employee benefits - (cont’d)
21.3 Termination benefits
When the Group terminates the employment with employees or provides compensation under an offer toencourage employees to accept voluntary redundancy, a provision is recognized with a correspondingexpense in profit or loss at the earlier of the following dates:
- When the Group cannot unilaterally withdraw the offer of termination benefits because of an employeetermination plan or a curtailment proposal.- When the Group has a formal detailed restructuring plan involving the payment of termination benefits
and has raised a valid expectation in those affected that it will carry out the restructuring by starting toimplement that plan or announcing its main features to those affected by it.If the benefits are payable more than 12 months after the end of the reporting period, they are discounted totheir present value. The discount rate used is the yield on the reporting date on highly-rated corporatedebentures denominated in the same currency, that have maturity dates approximating the terms of theGroup’s obligation.
21.4 Other long-term employee benefits
The Group’s net obligation for long-term employee benefits, which are not attributable to post-employmentbenefit plans, is for the amount of the future benefit to which employees are entitled for services that wereprovided during the current and prior periods.
The amount of these benefits is discounted to its present value and the fair value of the assets related to theseobligations is deducted therefrom. The discount rate used is the yield on the reporting date on highly-ratedcorporate debentures denominated in the same currency, that have maturity dates approximating the termsof the Group’s obligation.
22. Share-based payment
Share-based payment refers to the transaction in order to acquire the service offered by the employees orother parties that grants equity instruments or liabilities on the basis of the equity instruments. Share-basedpayment classified into equity-settled share-based payment and cash-settled share-based payment.
22.1 Cash-settled share-based payment
The cash-settled share-based payment should be measured according to the fair value of the liabilitiesrecognized based on the shares or other equity instrument undertaken by the Company. For cash-settledshare-based payment made in return for the rendering of employee services that cannot be exercised untilthe services are fully provided during the vesting period or specified performance targets are met, on eachbalance sheet date within the vesting period, the services acquired in the current period shall, based on thebest estimate of the number of exercisable instruments, be recognized in relevant expenses and thecorresponding liabilities at the fair value of the liability incurred by the Company.
On each balance sheet date and the settlement date before the settlement of the relevant liabilities, theCompany should re-measure the fair value of the liabilities and the changes should be included in the currentperiod profit and loss.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
23. Provisions
Provisions are recognized when the Group has a present obligation related to a contingency, it is probablethat an outflow of economic benefits will be required to settle the obligation, and the amount of the obligationcan be measured reliably.
The amount recognized as a provision is the best estimate of the consideration required to settle the presentobligation at the settlement date, taking into account factors pertaining to a contingency such as the risks,uncertainties and time value of money. Where the effect of the time value of money is material, the amountof the provision is determined by discounting the related future cash outflows. The increase in the provisiondue to passage of time is recognized as interest expense.
If all or part of the provision settlements is reimbursed by third parties, when the realization of income isvirtually certain, then the related asset should be recognized. However, the amount of related assetrecognized should not be exceeding the respective provision amount.
At the balance sheet date, the amount of provision should be re-assessed to reflect the best estimation then.
24. Revenue
Revenue of the Group is mainly from sale of goods.
The Group recognizes revenue when transferring goods to a customer, at the amount of the transaction price.Goods are considered transferred when the customer obtains control of the goods. Transaction price is theamount of consideration to which an entity expects to be entitled in exchange for transferring goods to acustomer, excluding amounts collected on behalf of third parties.
Significant financing component
For a contract with a significant financing component, the Group recognize revenue at an amount that reflectsthe price that a customer would have paid for the goods if the customer had paid cash for those goods atreceipt. The difference between the amount of consideration and the cash selling price of the goods, isamortized in the contract period using effective interest rate. The Group does not adjust the amount ofconsideration for the effects of a significant financing component if the Group expects, at contract inception,that the period between when the entity transfers a good to a customer and when the customer pays for thatgood will be one year or less.
Sale with a right of return
For sale with a right of return, the Group recognizes revenue at the amount of consideration to which theGroup expects to be entitled (ie excluding the products expected to be returned). For any amounts received(or receivable) for which an entity does not expect to be entitled, the entity shall not recognize revenue whenit transfers products to customers but shall recognize those amounts received (or receivable) as a refundliability. An asset recognized for the Group’s right to recover products from a customer on settling a refundliability shall initially be measured by reference to the former carrying amount of the product less anyexpected costs to recover those products.
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
25. Government grants
Government grants are transfer of monetary assets and non-monetary assets from the government to theGroup at no consideration, including tax returns, financial subsidies and so on. A government grant isrecognized only when the Group can comply with the conditions attached to the grant and the Group willreceive the grant.
If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount receivedor receivable. If a government grant is in the form of a non-monetary asset, it is measured at fair value. Ifthe fair value cannot be reliably determined, it is measured at a nominal amount.
Government grants are either related to assets or income.
(1) The basis of judgment and accounting method of the government grants related to assets
Government grants obtained for acquiring long-term assets are government grants related to assets. Agovernment grant related to an asset is offset with the cost of the relevant asset.
(2) The basis of judgment and accounting method of the government grants related to income
For a government grant related to income, if the grant is a compensation for related expenses or losses to beincurred in subsequent periods, the grant is recognized as deferred income, and recognized in profit or lossover the periods in which the related costs are recognized. If the grant is a compensation for related expensesor losses already incurred, the grant is recognized immediately in profit or loss for the period.
Government grants related to the Group’s normal course of business are offset with related costs andexpenses. Government grants related that are irrelevant with the Groups’s normal course of business areincluded in non-operating gains.
26. Current and deferred tax
The income tax expenses include current income tax and deferred income tax.
26.1 Current income tax
At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods aremeasured at the amount expected to be paid (or recovered) according to the requirements of tax laws.
26.2 Deferred tax assets and deferred tax liabilities
Temporary differences are differences between the carrying amounts of certain assets or liabilities and theirtax base.
All taxable temporary differences are recognized as related deferred tax liabilities. Deferred tax assets arerecognized to the extent that it is probable that future taxable profits will be available against which thedeductible losses and tax credits can be utilized.
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
26. Current and deferred tax - (cont’d)
26.2 Deferred tax assets and deferred tax liabilities - (cont’d)
For deductible losses and tax credits that can be carried forward, deferred tax assets are recognized to theextent that it is probable that future taxable profits will be available against which the deductible losses andtax credits can be utilized. However, for deductible temporary differences associated with the initialrecognition of goodwill and the initial recognition of an asset or liability arising from a transaction (not abusiness combination) that affects neither the accounting profit nor taxable profits (or deductible losses) atthe time of transaction, no deferred tax asset or liability is recognized.
At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates, according to taxlaws, that are expected to apply in the period in which the asset is realized or the liability is settled.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments insubsidiaries and associates, and interests in joint ventures, except where the Group is able to control thetiming of the reversal of the temporary difference and it is probable that the temporary difference will notreverse in the foreseeable future.
The Group may be required to pay additional tax in case of distribution of dividends by the Group companies.This additional tax was not included in the financial statements, since the policy of the Group is not todistribute in the foreseeable future a dividend which creates a significant additional tax liability.
Except for those current income tax and deferred tax charged to comprehensive income or shareholders’equity in respect of transactions or events which have been directly recognized in other comprehensiveincome or shareholders’ equity, and deferred tax recognized on business combinations, all other currentincome tax and deferred tax items are charged to profit or loss in the current period.
At the balance sheet date, the carrying amount of deferred tax assets is reviewed and reduced if it is no longerprobable that sufficient taxable profits will be available in the future to allow the benefit of deferred taxassets to be utilized. Such reduction is reversed when it becomes probable that sufficient taxable profits willbe available.
26.3 Offset of income tax
When the Group has a legal right to settle current tax assets and liabilities on a net basis, and tax assets andtax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entityor different taxable entities which intend to realize the assets and liabilities simultaneously, current tax assetsand liabilities are offset and presented on a net basis.
When the Group has a legal right to settle deferred tax assets and liabilities on a net basis which relates toincome taxes levied by the same taxation authority, on either the same taxable entity or different taxableentities which intend either to settle current tax assets and liabilities on a net basis or to realize the assets andliabilities simultaneously, in each future period in which significant amounts of deferred tax assets orliabilities are expected to be reversed, deferred tax assets and deferred tax liabilities are offset and presentedon a net basis.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
27. Leases
Lease is a contract, that conveys the right to use an asset for a period of time in exchange for consideration.
27.1 Determining whether an arrangement contains a lease
On the inception date of the lease, the Group determines whether the arrangement is a lease or contains alease, while assessing if it conveys the right to control the use of an identified asset for a period of time inexchange for consideration. In its assessment of whether an arrangement conveys the right to control the useof an identified asset, the Group assesses whether it has the following two rights throughout the lease term:
(a) The right to obtain substantially all the economic benefits from use of the identified asset; and(b) The right to direct the identified asset’s use.An arrangement does not contain a lease if an asset is leased for a period of less than 12 months, or to lease ofasset with low economic value.
27.2 Initial recognition of leased assets and lease liabilities
Upon initial recognition, the Group recognizes a liability at the present value of future lease payments(exclude certain variable lease payments, as detailed in note III 27.4), and concurrently the Group recognizesa right-of-use asset at the same amount, adjusted for any prepaid lease payments paid at the lease date orbefore, plus initial direct costs incurred in respect of the lease.
When the interest rate implicit in the lease is not readily determinable, the incremental borrowing rate of thelessee is used.The Group presents right-of-use assets separately from other assets in the balance sheet.
27.3 The lease term
The lease term is the non-cancellable period of the lease plus periods covered by an extension or terminationoption, if it is reasonably certain that the lessee will exercise or not exercise the option, respectively.
If there is a change in the lease term, or in the assessment of an option to purchase the underlying asset, theGroup remeasures the lease liability, on the basis of the revised lease term and the revised discount rate andadjust the right-of-use assets accordingly.
27.4 Variable lease payments
Variable lease payments that depend on an index or a rate, are initially measured using the index or rateexisting at the commencement of the lease. When the cash flows of future lease payments change as theresult of a change in an index or a rate, the balance of the liability is adjusted with a correspondence changein the right-of-use asset.
Other variable lease payments that are not included in the measurement of the lease liability are recognizedin profit or loss in the period in which the condition that triggers payment occurs.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
27. Leases (cont’d)
27.5 Subsequent measurement
After lease commencement, a right-of-use asset is measured on a cost basis less accumulated depreciationand accumulated impairment losses and is adjusted for re-measurements of the lease liability. The asset isdepreciated on a straight-line basis over the useful life or contractual lease period, whichever earlier.
The Group applies ASBE8 Impairment of Assets, to determine whether the right-of-use asset is impairedand to account for any impairment loss identified.
A lease liability is measured after the lease commencement date at amortized cost using the effective interestmethod.
28. Other significant accounting policies and accounting estimates
28.1 Hedging
The Group uses derivative financial instruments to hedge its risks related to foreign currency and inflationrisks and derivatives that are not used for hedging.
Hedge accounting
The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoingbasis, whether the hedge is expected to be effective in offsetting the changes in the fair value of cash flowsthat can be attributed to the hedged risk during the period for which the hedge is designated.
An effective hedge exists when all of the below conditions are met:
? There is an economic relationship between the hedged item and the hedging instrument;? the effect of credit risk does not dominate the value changes that result from that economicrelationship;? the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the
hedged item that the entity actually hedges and the quantity of the hedging instrument that the entityactually uses to hedge that quantity of hedged item.
On the commencement date of the accounting hedge, the Group formally documents the relationship betweenthe hedging instrument and hedged item, including the Group’s risk management objectives and strategy inexecuting the hedge transaction, together with the methods that will be used by the Group to assess theeffectiveness of the hedging relationship.
With respect to a cash-flow hedge, a forecasted transaction that constitutes a hedged item must be highlyprobable and must give rise to exposure to changes in cash flows that could ultimately affect profit or loss.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
28. Other significant accounting policies and accounting estimates - (cont’d)
28.1 Hedging (cont’d)
Measurement of derivative financial instruments
Derivative financial instruments are recognized initially at fair value; attributable transaction costs arerecognized in profit or loss as incurred.
Cash-flow hedges
Subsequent to the initial recognition, changes in the fair value of derivatives used to hedge cash flows arerecognized through other comprehensive income directly in a hedging reserve, with respect to the part of thehedge that is effective. Regarding the portion of the hedge that is not effective, the changes in fair value arerecognized in profit and loss. The amount accumulated in the hedging reserve is reclassified to profit andloss in the period in which the hedged cash flows impact profit or loss and is presented in the same line itemin the statement of income as the hedged item.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated orexercised, the hedge accounting is discontinued. The cumulative gain or loss previously recognized in ahedging reserve through other comprehensive income remains in the reserve until the forecasted transactionoccurs or is no longer expected to occur. If the forecasted transaction is no longer expected to occur, thecumulative gain or loss in respect of the hedging instrument in the hedging reserve is reclassified to profitor loss.
Economic hedge
Hedge accounting is not applied with respect to derivative instruments used to economically hedge financialassets and liabilities denominated in foreign currency or CPI linked. Changes in the fair value of suchderivatives are recognized in profit or loss as gain (loss) from changes in fair value or investment income.
Derivatives that are not used for hedging
Changes in the fair value of derivatives that are not used for hedging are recognized in profit or loss as gain(loss) from changes in fair value or investment income.
28.2 Securitization of assets
Details of the securitization of asset agreements and accounting policy are set out in Note V.5 - Accountreceivables.
28.3 Segment reporting
Reportable segments are identified based on operating segments which are determined based on the structureof the Group’s internal organization, management requirements and internal reporting system.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
28. Other significant accounting policies and accounting estimates - (cont’d)
28.3 Segment reporting - (cont’d)
Two or more operating segments may be aggregated into a single operating segment if the segments havesimilar economic characteristics and are same or similar in respect of the nature of each product and service,the nature of production processes, the type or class of customers for the products and services, the methodsused to distribute the products or provide the services, and the nature of the regulatory environment.
Inter-segment revenues are measured on the basis of actual transaction price for such transactions forsegment reporting. Segment accounting policies are consistent with those for the consolidated financialstatements.
28.4 Profit distributions to shareholders
Dividends which are approved after the balance sheet date are not recognized as a liability at the balancesheet date but are disclosed in the notes separately.
29. Changes in significant accounting policies and accounting estimates
29.1 Changes in significant accounting policies
There are no significant changes in accounting policies in the reporting period.
29.2 Changes in significant accounting estimates
There are no significant changes in accounting estimates in the reporting period.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
30. Significant accounting estimates and judgments
The preparation of the financial statements requires management to make estimates and assumptions thataffect the application of accounting policies and the reported amounts of assets, liabilities, income andexpenses. Actual results may differ from these estimates. Estimates as well as underlying assumptions anduncertainties involved are reviewed on an ongoing basis. Revisions to accounting estimates are recognizedin the period in which the estimate is revised and in any future periods affected.
Notes V.34, Note VIII, Note IX and Note XIII contain information about the assumptions and their riskfactors relating to post-employment benefits – defined benefit plans, fair value of financial instruments andshare-based payments. Other key sources of estimation uncertainty are as follows:
30.1 Expected credit loss of trade receivables
As described in Note III.11, trade receivables are reviewed at each balance sheet date to determine whethercredit risk on a receivable has increased significantly since initial recognition, lifetime expected losses isaccrued for impairment provision. Evidence of impairment includes observable data that comes to theattention of the Group about loss events such as a significant decline in the solvency of an individual debtoror the portfolio of debtors, and significant changes in the financial condition that have an adverse effect onthe debtor. If there is objective evidence of a recovery in the value of receivables which can be relatedobjectively to an event occurring after the impairment was recognized, the previously recognized impairmentloss is reversed .
30.2 Provision for impairment of inventories
As described in Note III.12, the net realisable value of inventories is under management’s regular review,and as a result, provision for impairment of inventories is recognized for the excess of inventories’ carryingamounts over their net realisable value. When making estimates of net realisable value, the Group takes intoconsideration the use of inventories held on hand and other information available to form the underlyingassumptions, including the inventories’ market prices and the Group’s historical operating costs. The actualselling price, the costs of completion and the costs necessary to make the sale and relevant taxes may varybased on the changes in market conditions and product saleability, manufacturing technology and the actualuse of the inventories, resulting in the changes in provision for impairment of inventories. The net profit orloss may then be affected in the period when the impairment of inventories is adjusted.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
30. Significant accounting estimates and judgments - (cont’d)
30.3 Impairment of assets other than inventories and financial assets
As described in Note III.20, if impairment indication exists, assets other than inventories and financial assetsare assessed at balance sheet date to determine whether the carrying amount exceeds the recoverable amountof the assets. If any such case exists, an impairment loss is recognized.
The recoverable amount of an asset (or an asset group) is the greater of its fair value less costs to sell and itspresent value of expected future cash flows. Since a market price of the asset (or the asset group) cannot beobtained reliably, the fair value of the asset cannot be estimated reliably, the recoverable amount is calculatedbased on the present value of estimated future cash flows. In assessing the present value of estimated futurecash flows, significant judgements are exercised over the asset’s production, selling price, related operatingexpenses and discount rate to calculate the present value. All relevant materials which can be obtained areused for estimation of the recoverable amount, including the estimation of the production, selling price andrelated operating expenses based on reasonable and supportable assumptions.
30.4 Depreciation and amortisation of assets such as fixed assets and intangible assets
As described in Note III.15 and III.18, assets such as fixed assets and intangible assets are depreciated andamortised over their useful lives after taking into account residual value. The estimated useful lives of theassets are regularly reviewed to determine the depreciation and amortisation costs charged in each reportingperiod. The useful lives of the assets are determined based on historical experience of similar assets and theestimated technical changes. If there have been significant changes in the factors used to determine thedepreciation or amortisation, the rate of depreciation or amortisation is revised prospectively.
30.5 Income taxes and deferred income tax
The Company and Group companies are assessed for income tax purposes in a large number of jurisdictionsand, therefore, Company management is required to use considerable judgment in determining the totalprovision for taxes and attribution of income.
When assessing whether there will be sufficient future taxable profits available against which the deductibletemporary differences can be utilised, the Group recognizes deferred tax assets to the extent that it is probablethat future taxable profits will be available against which the deductible temporary differences can be utilised,using tax rates that would apply in the period when the asset would be utilised. In determining the amountof deferred tax assets, the Group makes reasonable judgements and estimates about the timing and amountof taxable profits to be utilised in the following periods, and of the tax rates applicable in the future accordingto the existing tax policies and other relevant regulations. If the actual timing and amount of future taxableprofits or the actual applicable tax rates differ from the estimates made by management, the differences affectthe amount of tax expenses.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - (cont’d)
30. Significant accounting estimates and judgments - (cont’d)
30.6 Contingent liabilities
When assessing the possible outcomes of legal claims filed against the Company and its investee companies,the company positions are based on the opinions of their legal advisors. These assessments by the legaladvisors are based on their professional judgment, considering the stage of the proceedings and the legalexperience accumulated regarding the various matters. Since the results of the claims will be determined bythe courts, the outcomes could be different from the assessments.
In addition to the said claims, the Group is exposed to unasserted claims, inter alia, where there is doubt asto interpretation of the agreement and/or legal provision and/or the manner of their implementation. Thisexposure is brought to the Company’s attention in several ways, among others, by means of contacts madeto Company personnel. In assessing the risk deriving from the unasserted claims, the Company relies oninternal assessments by the parties dealing with these matters and by management, who weigh assessmentof the prospects of a claim being filed, and the chances of its success, if filed. The assessment is based onexperience gained with respect to the filing of claims and the analysis of the details of each claim. By theirnature, in view of the preliminary stage of the clarification of the legal claim, the actual outcome could bedifferent from the assessment made before the claim was filed.
30.7 Employee benefits
The Group’s liabilities for long-term post-employment and other benefits are calculated according to theestimated future amount of the benefit to which the employee will be entitled in consideration for his servicesduring the current period and prior periods. The benefit is stated at present value net of the fair value of theplan’s assets, based on actuarial assumptions. Changes in the actuarial assumptions could lead to materialchanges in the book value of the liabilities and in the operating results.
30.8 Derivative financial instruments
The Group enters into transactions in derivative financial instruments for the purpose of hedging risks relatedto foreign currency and inflationary risks. The derivatives are recorded at their fair value. The fair value ofderivative financial instruments is based on quotes from financial institutions. The reasonableness of thequotes is examined by discounting the future cash flows, based on the terms and length of the period tomaturity of each contract, while using market interest rates of a similar instrument as of the measurementdate. Changes in the assumptions and the calculation model could lead to material changes in the fair valueof the assets and liabilities and in the results.
IV. Taxation
1. Main types of taxes and corresponding tax rates
The income tax rate in China is 25% (2019: 25%). The subsidiaries outside of China are assessed based onthe tax laws in the country of their residence.
Set forth below are the tax rates outside China relevant to the subsidiaries with significant sales to third party:
| Name of subsidiary | Location | 2020 | ||
| ADAMA agriculture solutions Ltd. | Israel | 23.0% | ||
| ADAMA Makhteshim Ltd. | Israel | 7.5% | ||
| ADAMA Agan Ltd. | Israel | 16.0% | ||
| ADAMA Brasil S/A | Brazil | 34.0% | ||
| Makhteshim Agan of North America Inc. | U.S. | 24.7% | ||
| ADAMA India Private Ltd | India | 25.2% | ||
| ADAMA Deutschland GmbH | Germany | 32.5% | ||
| Control Solutions Inc. | U.S. | 24.0% | ||
| Adama Australia Pty Ltd | Australia | 30.0% | ||
| ADAMA France S.A.S | France | 28.0% | ||
| ADAMA Northern Europe B.V. | Netherlands | 25.0% | ||
| ADAMA Italia S.R.L. | Italy | 27.9% | ||
| Alligare Inc. | U.S. | 27.5% |
IV. Taxation - (cont’d)
1. Main types of taxes and corresponding tax rates - (cont’d)
(1) Benefits from Hi-Tech Certificate
Adama Anpon (Jiangsu) Ltd. (Formally know as Jiangsu Anpon Electrochemical Co. Ltd), a subsidiary ofthe Company, was jointly approved as new and high-tech enterprise, by the Jiangsu Provincial Departmentof Science and Technology, Department of Finance of Jiangsu Province, Jiangsu Provincial Office of theState Administration of Taxation. The applicable income tax rate from 2018 to 2020 is 15%.
(2) Benefits under the Law for the Encouragement of Capital Investments
Industrial enterprises of subsidiaries in Israel were granted “Approved Enterprise” or “Beneficiary Enterprise”status under the Israeli Law for the Encouragement of Capital Investments, 1959. Should a dividend bedistributed from the retained earning produced in which the company was considered as an “ApprovedEnterprise” or “Beneficiary Enterprise”, the company may be liable for tax at the time of distribution.
On December 29, 2010 the Knesset approved the Economic Policy Law for 2011-2012, which includes anamendment to the Law for the Encouragement of Capital Investments - 1959 (hereinafter - “theAmendment”). The Amendment is effective from January 1, 2011 and its provisions apply to preferredincome derived or accrued in 2011 and thereafter by a preferred company, per the definition of these termsin the Amendment.
As of the date of the report, all subsidiaries in Israel adopted the amendment and the deferred taxes werecalculated accordingly.
The Amendment provides that only companies in Development Area A will be entitled to the grants trackand that they will be entitled to receive benefits under this track and under the tax benefits track at the sametime. The tax benefit tracks under the law are: a preferred enterprise and a special preferred enterprise, whichmainly provide a uniform and reduced tax rate for all the company’s income entitled to benefits. Tax rateson preferred income as from the 2017 tax year as follows: 7.5% for Development Area A and 6% for the restof the country.
The amendment further determined that no tax shall apply to dividend distributed out of preferred income toshareholder who is Israel resident company.
IV. Taxation - (cont’d)
1. Main types of taxes and corresponding tax rates - (cont’d)
(2) Benefits under the Law for the Encouragement of Capital Investments - (cont’d)
On December 21, 2016 the Knesset plenum passed the second and third reading of the Economic EfficiencyLaw (Legislative Amendments for Achieving Budget Objectives in the Years 2017 and 2018) – 2016 inwhich the Encouragement Law was also amended (hereinafter: “the Amendment”). The Amendment addednew tax benefit tracks for a “preferred technological enterprise” and a “special preferred technologicalenterprise” which award reduced tax rates to a technological industrial enterprise for the purpose ofencouraging activity relating to the development of qualifying intangible assets.
The benefits will be awarded to a “preferred company” that has a “preferred technological enterprise” or a“special preferred technological enterprise” with respect to taxable “preferred technological income” per itsdefinition in the Encouragement Law.
Preferred technological income that meets the conditions required in the law, will be subject to a reducedcorporate tax rate of 12%, and if the preferred technological enterprise is located in Development Area A toa tax rate of 7.5%. A company that owns a special preferred technological enterprise will be subject to areduced corporate tax rate of 6% regardless of the development area in which the enterprise is located. TheAmendment is effective as from January 1, 2017.
On May 16, 2017 the Knesset Finance Committee approved Encouragement of Capital InvestmentRegulations (Preferred Technological Income and Capital Gain of Technological Enterprise) – 2017(hereinafter: “the Regulations”), which provides rules for applying the “preferred technological enterprise”and “special preferred technological enterprise” tax benefit tracks including the Nexus formula that providesthe mechanism for allocating the technological income eligible for the benefits.
ADAMA Agan applied to the Tax Authority in order to be included under the applicability of the amendedlaw.
(3) Benefits under the Law for the Encouragement of Industry (Taxes), 1969
Under the Israeli Law for the Encouragement of Industry (Taxes) 1969, ADAMA Agricultural Solutions Ltd.(hereinafter: “Solutions”) is an Industrial Holding Company and some of the subsidiaries in Israel are“Industrial Companies”. The main benefit under this law is the filing of consolidated income tax returns(Solutions files a consolidated income tax return with Adama Makhteshim and submission of a consolidatedreport together with Adama Agan as of 2017) and amortization of know-how over 8 years, higher rates ofdepreciation.
V. Notes to the consolidated financial statements
1. Cash at Bank and On Hand
| June 30 | December 31 | ||
| 2020 | 2019 | ||
| Cash on hand | 3,651 | 6,265 | |
| Deposits in banks | 6,252,456 | 4,313,642 | |
| Other cash and bank | 37,068 | 28,681 | |
| 6,293,175 | 4,348,588 | ||
| Including cash and bank placed outside China | 4,212,790 | 2,443,065 | |
| June 30 | December 31 | ||
| 2020 | 2019 | ||
| Debt instruments | - | 15,788 | |
| Other | 12,609 | 13,722 | |
| 12,609 | 29,510 |
| June 30 | December 31 | ||
| 2020 | 2019 | ||
| Economic hedge | 949,757 | 436,201 | |
| Accounting hedge derivatives | 67,545 | 53,912 | |
| 1,017,302 | 490,113 |
| June 30 | December 31 | ||
| 2020 | 2019 | ||
| Post-dated checks receivable | 14,478 | 13,757 | |
| Bank acceptance draft | 32,955 | 12,243 | |
| 47,433 | 26,000 |
V. Notes to the consolidated financial statements – (cont'd)
5. Accounts Receivable
a. By category
| June 30, 2020 | |||||
| Book value | Provision for expected credit losses | ||||
| Amount | Percentage (%) | Amount | Percentage (%) | Carrying amount | |
| Account receivables assessed individually for impairment | 491,187 | 5 | 252,313 | 51 | 238,874 |
| Account receivables assessed collectively for impairment | 8,523,290 | 95 | 84,772 | 1 | 8,438,518 |
| 9,014,477 | 100 | 337,085 | 4 | 8,677,392 | |
| December 31, 2019 | |||||
| Book value | Provision for expected credit losses | ||||
| Amount | Percentage (%) | Amount | Percentage (%) | Carrying amount | |
| Account receivables assessed individually for impairment | 534,532 | 6 | 299,267 | 56 | 235,265 |
| Account receivables assessed collectively for impairment | 7,868,077 | 94 | 99,185 | 1 | 7,768,892 |
| 8,402,609 | 100 | 398,452 | 5 | 8,004,157 | |
| June 30, 2020 | |
| Within 1 year (inclusive) | 8,564,893 |
| Over 1 year but within 2 years | 192,265 |
| Over 2 years but within 3 years | 79,439 |
| Over 3 years but within 4 years | 38,626 |
| Over 4 years but within 5 years | 14,301 |
| Over 5 years | 124,953 |
| 9,014,477 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
V. Notes to the consolidated financial statements – (cont'd)
5. Accounts Receivable – (cont'd)
Main groups of account receivables assessed collectively for impairment based on geographicallocation:
Geographical location A:
Account receivables in geographical location A are grouped based on similar credit risk:
| June 30, 2020 | |||
| Book value | Provision for expected credit loss | Percentage (%) | |
| A | 1,098,319 | 3,922 | 0.03-0.75 |
| B | 409,756 | 5,037 | 1.23 |
| C | 181,019 | 9,510 | 5.25 |
| D | 53,073 | 1,654 | 3.12 |
| 1,742,167 | 20,123 | 1.16 | |
| June 30, 2020 | |||
| Book value | Provision for expected credit loss | Percentage (%) | |
| Accounts receivable that are not overdue | 349,885 | 3,145 | 0.9 |
| Debts overdue less than 60 days | 19,725 | 592 | 3.0 |
| Debts overdue less than 180 days but more than 60 days | 30,484 | 3,048 | 10.0 |
| Debts overdue above 180 days | 19,969 | 7,987 | 40.0 |
| Legal Debtors | 38,214 | 38,214 | 100.0 |
| 458,277 | 52,986 | 11.2 | |
| June 30, 2020 | ||||
| Book value | Provision for expected credit loss | Percentage (%) | ||
| Other account receivables assessed collectively for impairment | 6,322,846 | 11,663 | 0-6.84 | |
V. Notes to the consolidated financial statements – (cont'd)
5. Accounts Receivable – (cont'd)
c. Addition, written-back and written-off of provision for expected credit losses during the period
Addition of provision for expected credit loss during the period
| Lifetime expected credit loss (credit losses has not occurred) | Lifetime expected credit loss (credit losses has occurred) | Total | |
| January 1, 2020 | 47,908 | 350,544 | 398,452 |
| Addition during the period, net | - | 14,664 | 14,664 |
| Write back during the period | (4,843) | (15,601) | (20,444) |
| Write-off during the period | - | (671) | (671) |
| Exchange rate effect | (8,134) | (46,782) | (54,916) |
| Balance as of June 30, 2020 | 34,931 | 302,154 | 337,085 |
| Name | Closing balance | Proportion of Accounts receivable (%) | Allowance of expected credit losses (credit losses has occurred) |
| Party 1 | 189,320 | 2 | - |
| Party 2 | 156,922 | 2 | - |
| Party 3 | 128,104 | 1 | - |
| Party 4 | 122,603 | 1 | - |
| Party 5 | 102,837 | 1 | 2,011 |
| Total | 699,786 | 7 | 2,011 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
V. Notes to the consolidated financial statements – (cont'd)
5. Accounts Receivable – (cont'd)
e. Derecognition of accounts receivable due to transfer of financial assets - (cont'd)
The maximum scope of the securitization is adjusted for the seasonal changes in the scope of the Company’sactivities, as follows: during the months March through June the maximum scope of the securitization is$350 million (as of June 30, 2020 - 2,478 million RMB), during the months July through September themaximum scope of the securitization is $300 million (as of June 30, 2020 - 2,124 million RMB) and duringthe months October through February the maximum scope of the securitization is $250 million (as of June30, 2020 - 1,770 million RMB). The proceeds received from those customers whose debts were sold are usedfor acquisition of new trade receivables.
The price at which the trade receivables debts are sold is the amount of the debt sold less a discount calculatedbased on, among other things, the expected length of the period between the date of sale of the tradereceivable and its anticipated repayment date. In the month following acquisition of the debt, the AcquiringCompany pays in cash most of the debt while the remainder is recorded as a subordinated note and ascontinuing involvement that is paid after collection of the debt sold. If the customer does not pay its debt onthe anticipated repayment date, the Company bears interest up to the earlier of the date on which the debt isactually repaid or the date on which debt collection is transferred to the insurance company (the actual costsare not significant and are not expected to be significant).
The Acquiring Company bears 95% of the credit risk in respect of the customers whose debts were sold andwill not have a right of recourse to the Company in respect of the amounts paid in cash, except regardingdebts with respect to which a commercial dispute arises between the companies and their customers, that is,a dispute the source of which is a claim of non-fulfillment of an obligation of the seller in the supplyagreement covering the product, such as: a failure to supply the correct product, a defect in the product,delinquency in the supply date, and the like.
The Acquiring Company appointed a policy manager who will manage for it the credit risk involved withthe trade receivables sold, including an undertaking with an insurance company.
Pursuant to the Receivables Servicing Agreement, the Group subsidiaries handle collection of the tradereceivables as part of the Securitization Transaction for the benefit of the Acquiring Company.
As part of the agreement, Solutions is committed to comply with certain financial covenants, mainly the ratioof the liabilities to equity and profit ratios. As of June 30, 2020, Solutions was in compliance with thefinancial covenants.
The accounting treatment of sale of the trade receivables included as part of the Securitization Program is:
The Company is not controlling the Acquiring Company, therefore the Acquiring Company is notconsolidated in the financial statements.
The Company continues to recognize the trade receivables included in the Securitization Program based onthe extent of its continuing involvement therein.
In respect of the part of the trade receivables included in the securitization Program with respect to whichcash proceeds were not yet received, however regarding which the Company has transferred the credit risk,a subordinated note is recorded.
The continuing involvement and subordinated note recorded in the balance sheet as part of the “otherreceivables” line item.
V. Notes to the consolidated financial statements – (cont'd)
5. Accounts Receivable – (cont'd)
e. Derecognition of accounts receivable due to transfer of financial assets - (cont'd)
The loss from sale of the trade receivables is recorded at the time of sale in the statement of income in the“financing expenses” line item.
In the third quarter of 2019, a subsidiary in Brazil (hereinafter - “the subsidiary”) renewed a 3 yearssecuritization agreement with Rabobank Brazil for sale of trade receivables. Under the agreement, thesubsidiary will sell its trade receivables to a securitization structure (hereinafter - “the entity”) that wasformed for this purpose where the subsidiary has subordinate rights of 5% of the entity's capital.
During June 2020 the maximum securitization scope increased up to BRL 560 million (as of June 30, 2020- 724 million RMB).
On the date of the sale of the trade receivables, the entity pays the full amount which is the debt amount soldnet of discount calculated, among others, over the expected length of the period between the date of sale ofthe customer receivable and its anticipated repayment date.
The entity bears 95% of the credit risk in respect of the customers whose debts were sold such that the entityhas the right of recourse of 5% of the unpaid amount. The subsidiary should make a pledged deposit equalto the amount the entity’s right of recourse.
The subsidiary handles the collection of receivables included in the securitization for the entity.
The subsidiary does not control the entity and therefore the entity is not consolidated in the group's financialstatements.
The subsidiary continues to recognize the trade receivables sold to the entity based on the extent of itscontinuing involvement therein (5% right of recourse) and also recognizes an associated liability in the sameamount.
The loss from the sale of the trade receivables is recorded at the time of sale in the statement of income inthe “financing expenses” category.
| June 30 | December 31 | |
| 2020 | 2019 | |
| Accounts receivables derecognized | 3,299,603 | 2,994,917 |
| Continuing involvement | 140,995 | 134,243 |
| Subordinated note in respect of trade receivables | 777,145 | 808,807 |
| Liability in respect of trade receivables | 286,642 | 26,370 |
| Six months ended June 30 | ||
| 2020 | 2019 | |
| Loss in respect of sale of trade receivables | 36,790 | 33,129 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
V. Notes to the consolidated financial statements – (cont'd)
6. Receivables financing
| June 30 | December 31 | ||
| 2020 | 2019 | ||
| Bank acceptance draft | 35,552 | 78,948 | |
| 35,552 | 78,948 |
| June 30 | December 31 | |||
| 2020 | 2019 | |||
| Amount | Percentage (%) | Amount | Percentage (%) | |
| Within 1 year (inclusive) | 341,413 | 97 | 370,607 | 98 |
| Over 1 year but within 2 years (inclusive) | 7,418 | 2 | 3,691 | 1 |
| Over 2 years but within 3 years (inclusive) | 665 | - | 621 | - |
| Over 3 years | 2,501 | 1 | 2,889 | 1 |
| 351,997 | 100 | 377,808 | 100 | |
| Amount | Percentage of prepayments (%) | |
| June 30, 2020 | 87,497 | 25 |
V. Notes to the consolidated financial statements – (cont'd)
8. Other Receivables
(1) Other receivables by nature
| June 30 | December 31 | |
| 2020 | 2019 | |
| Dividends receivable | 10,768 | - |
| Others | 1,224,550 | 1,195,253 |
| 1,235,318 | 1,195,253 |
| June 30 | December 31 | |
| 2020 | 2019 | |
| Trade receivables as part of securitization transactions not yet eliminated | 140,995 | 134,243 |
| Subordinated note in respect of trade receivables | 777,145 | 808,807 |
| Financial institutions | 31,150 | 5,107 |
| Receivables in respect of disposal of fixed assets | 23,951 | 28,762 |
| Other | 266,404 | 233,238 |
| Sub total | 1,239,645 | 1,210,157 |
| Provision for expected credit losses - other receivables | (15,095) | (14,904) |
| 1,224,550 | 1,195,253 |
| June 30 | |
| 2020 | |
| Within 1 year (inclusive) | 1,195,783 |
| Over 1 year but within 2 years | 15,494 |
| Over 2 years but within 3 years | 3,124 |
| Over 3 years but within 4 years | 2,307 |
| Over 4 years but within 5 years | 11,090 |
| Over 5 years | 11,847 |
| 1,239,645 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
V. Notes to the consolidated financial statements – (cont'd)
8. Other Receivables - (cont'd)
(2) Additions, recovery or reversal and written-off of provision for expected credit losses during theperiod:
| Six months ended | ||
| June 30, 2020 | ||
| Balance as of January 1 2020, | 14,904 | |
| Addition during the period | 191 | |
| Written back during the period | - | |
| Write-off during the period | - | |
| Balance as of June 30, 2020 | 15,095 |
| Name | Closing balance | Proportion of other receivables (%) | Allowance of expected credit losses |
| Party 1 | 777,145 | 63 | - |
| Party 2 | 31,150 | 3 | - |
| Party 3 | 18,329 | 1 | - |
| Party 4 | 13,324 | 1 | - |
| Party 5 | 10,627 | 1 | - |
| Total | 850,575 | 69 | - |
| June 30, 2020 | |||
| Book value | Provision for impairment | Carrying amount | |
| Raw materials | 3,956,321 | 31,492 | 3,924,829 |
| Work in progress | 495,996 | 4,167 | 491,829 |
| Finished goods | 6,058,038 | 167,373 | 5,890,665 |
| Others | 321,216 | 9,745 | 311,471 |
| 10,831,571 | 212,777 | 10,618,794 | |
| December 31, 2019 | |||
| Book value | Provision for impairment | Carrying amount | |
| Raw materials | 3,100,027 | 22,344 | 3,077,683 |
| Work in progress | 633,731 | 5,351 | 628,380 |
| Finished goods | 6,131,386 | 184,900 | 5,946,486 |
| Others | 288,794 | 8,689 | 280,105 |
| 10,153,938 | 221,284 | 9,932,654 | |
V. Notes to the consolidated financial statements – (cont'd)
9. Inventories - (cont'd)
(2) Provision for impairment of inventories:
For the six months ended June 30, 2020
| January 1, 2020 | Provision | Reversal or write-off | Other | June 30, 2020 | |
| Raw material | 22,344 | 12,704 | (3,869) | 313 | 31,492 |
| Work in progress | 5,351 | - | (1,193) | 9 | 4,167 |
| Finished goods | 184,900 | 53,233 | (72,580) | 1,820 | 167,373 |
| Others | 8,689 | 1,091 | (159) | 124 | 9,745 |
| 221,284 | 67,028 | (77,801) | 2,266 | 212,777 |
| June 30 | December 31 | |
| 2020 | 2019 | |
| Deductible VAT | 441,875 | 459,209 |
| Current tax assets | 140,713 | 170,505 |
| Others | 28,708 | 29,481 |
| 611,296 | 659,195 |
| June 30 | December 31 | |
| 2020 | 2019 | |
| Long term account receivables from sale of goods | 120,550 | 170,896 |
| 120,550 | 170,896 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
V. Notes to the consolidated financial statements – (cont'd)
12. Long-Term Equity Investments
(1) Long-term equity investments by category:
| June 30 | December 31 | |
| 2020 | 2019 | |
| Investments in joint ventures | 93,419 | 92,695 |
| Investments in associates | 41,001 | 40,403 |
| 134,420 | 133,098 |
| June 30 | December 31 | |
| 2020 | 2019 | |
| Company A | 85,495 | 85,495 |
| Company B | 68,784 | 67,781 |
| Company C | 1,813 | 1,786 |
| 156,092 | 155,062 |
| January 1, 2020 | Investment income (loss) | Other Comprehensive income | Declared distribution of cash dividend | Capital investment | Other | Balance at the end of the period | |
| Joint ventures | |||||||
| Company A | 75,924 | 11,118 | 1,070 | (62,600) | 51,435 | 2,404 | 79,351 |
| Company B | 5,441 | 57 | 83 | (2,480) | - | - | 3,101 |
| Company C | 1,046 | - | (119) | - | - | - | 927 |
| Company D | 10,284 | 3,217 | (3,461) | - | - | - | 10,040 |
| Sub-total | 92,695 | 14,392 | (2,427) | (65,080) | 51,435 | 2,404 | 93,419 |
| Associates | |||||||
| Company E | 40,403 | - | 598 | - | - | - | 41,001 |
| Sub-total | 40,403 | - | 598 | - | - | - | 41,001 |
| 133,098 | 14,392 | (1,829) | (65,080) | 51,435 | 2,404 | 134,420 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
V. Notes to the consolidated financial statements – (cont'd)
14. Fixed assets
| Land & Buildings | Machinery & equipment | Motor vehicles | Office & other equipment | Total | |
| Cost | |||||
| Balance as at January 1, 2020 | 3,377,533 | 14,383,742 | 119,900 | 365,798 | 18,246,973 |
| Purchases | 46,231 | 110,441 | 7,981 | 16,006 | 180,659 |
| Transfer from construction in progress | 37,001 | 134,640 | 1,546 | 337 | 173,524 |
| Disposals | (2,432) | (48,359) | (7,841) | (2,608) | (61,240) |
| Currency translation adjustment | 3,892 | 133,054 | (1,264) | 155 | 135,837 |
| Balance as at June 30, 2020 | 3,462,225 | 14,713,518 | 120,322 | 379,688 | 18,675,753 |
| Accumulated depreciation | |||||
| Balance as at January 1, 2020 | (1,667,208) | (8,690,076) | (60,679) | (276,110) | (10,694,073) |
| Charge for the period | (55,955) | (307,076) | (8,719) | (19,198) | (390,948) |
| Disposals | 1,329 | 39,193 | 6,535 | 2,411 | 49,468 |
| Currency translation adjustment | (6,241) | (80,105) | 992 | (25) | (85,379) |
| Balance as at June 30, 2020 | (1,728,075) | (9,038,064) | (61,871) | (292,922) | (11,120,932) |
| Provision for impairment | |||||
| Balance as at January 1, 2020 | (196,295) | (416,011) | (733) | (251) | (613,290) |
| Charge for the period | - | - | - | - | - |
| Disposals | - | 2,452 | 82 | - | 2,534 |
| Currency translation adjustment | (139) | (1,179) | - | (4) | (1,322) |
| Balance as at June 30, 2020 | (196,434) | (414,738) | (651) | (255) | (612,078) |
| Carrying amounts | |||||
| As at June 30, 2020 | 1,537,716 | 5,260,716 | 57,800 | 86,511 | 6,942,743 |
| As at January 1, 2020 | 1,514,030 | 5,277,655 | 58,488 | 89,437 | 6,939,610 |
V. Notes to the consolidated financial statements - (cont'd)
15. Construction in Progress
(1) Construction in progress
| June 30 | December 31 | ||||
| 2020 | 2019 | ||||
| Book value | Provision for impairment | Carrying amount | Book value | Provision for impairment | Carrying amount |
| 1,023,800 | (25,740) | 998,060 | 814,126 | (25,740) | 788,386 |
| Budget | December 31, 2019 | Additions | Currency translation differences | Transfer to fixed assets | Provision for impairment * | June 30, 2020 | Actual cost to budget (%) | Project progress (%) | Source of funds | |
| Project A | 1,509,420 | 376,996 | 166,700 | - | (86,956) | - | 456,740 | 38 | 38 | Bank loan |
| Project B | 505,643 | 13,064 | 8,139 | - | - | - | 21,203 | 4 | 4 | Bank loan |
| Project C | 172,055 | 18,434 | 10,120 | - | (1,783) | - | 26,771 | 16 | 16 | Internal finance |
| Project D | 80,924 | 45,073 | 2,990 | 689 | - | - | 48,752 | 60 | 60 | Internal finance |
| Project E | 70,035 | 14,344 | 8,782 | - | - | - | 23,126 | 33 | 33 | Internal finance |
| Project F | 32,000 | 31,912 | 1,176 | - | - | - | 33,088 | 100 | 100 | Bank loan |
| Project G | 146,900 | 5,246 | 22,542 | 812 | - | - | 28,600 | 19 | 19 | Internal finance |
| Project H | 29,153 | 18,867 | 4,007 | 29 | - | - | 22,903 | 79 | 79 | Internal finance |
V. Notes to the consolidated financial statements - (cont'd)
16. Right-of-use assets
| Land & Buildings | Machinery & equipment | Motor vehicles | Office & other equipment | Total | |
| Cost | |||||
| Balance as at January 1, 2020 | 456,983 | 46,714 | 178,402 | 3,187 | 685,286 |
| Additions | 29,392 | 27 | 33,651 | - | 63,070 |
| Disposals | (3,423) | (998) | (14,862) | (7) | (19,290) |
| Currency translation adjustment | (630) | 415 | 865 | 41 | 691 |
| Balance as at June 30, 2020 | 482,322 | 46,158 | 198,056 | 3,221 | 729,757 |
| Accumulated depreciation | |||||
| Balance as at January 1, 2020 | (77,196) | (7,820) | (63,238) | (998) | (149,252) |
| Charge for the period | (40,534) | (893) | (36,557) | (584) | (78,568) |
| Disposals | 963 | 984 | 12,914 | 14 | 14,875 |
| Currency translation adjustment | (631) | (9) | (438) | 45 | (1,033) |
| Balance as at June 30, 2020 | (117,398) | (7,738) | (87,319) | (1,523) | (213,978) |
| Provision for impairment | |||||
| Balance as at January 1, 2020 | - | - | - | - | - |
| Balance as at June 30, 2020 | - | - | - | - | - |
| Carrying amounts | |||||
| As at June 30, 2020 | 364,924 | 38,420 | 110,737 | 1,698 | 515,779 |
| As at January 1, 2020 | 379,787 | 38,894 | 115,164 | 2,189 | 536,034 |
ADAMA LTD.(Expressed in RMB '000)Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
17. Intangible Assets
(1) Include land parcel in Israel that has not yet been registered in the name of the Group subsidiaries at the Land Registry Office, mostly due to registration procedures or technical problems.
(2) Mainly non-compete.
| Product registration | Intangible assets on Purchase of Products | Software | Marketing rights, tradename and trademarks | Customers relations | Land use rights (1) | Others(2) | Total | |
| Costs | ||||||||
| Balance as at January 1, 2020 | 10,769,146 | 4,189,417 | 761,236 | 743,734 | 399,193 | 344,917 | 326,115 | 17,533,758 |
| Purchases | 223,712 | - | 79,789 | 162 | - | 1,513 | 6,769 | 311,945 |
| Currency translation adjustment | 146,007 | 62,035 | 10,066 | 9,859 | 4,220 | 10 | 4,550 | 236,747 |
| Disposal | (50,463 ) | - | - | (169) | - | (441) | (8,660) | (59,733) |
| Balance as at June 30, 2020 | 11,088,402 | 4,251,452 | 851,091 | 753,586 | 403,413 | 345,999 | 328,774 | 18,022,717 |
| Accumulated amortization | ||||||||
| Balance as at January 1, 2020 | )7,873,186 ( | )2,278,371 ( | )513,028( | )441,587 ( | )196,458 ( | (65,271 ) | )164,844 ( | )11,532,745( |
| Charge for the period | (408,542) | (176,314) | (31,746) | (13,384) | (18,654) | (4,180) | (20,285) | (673,105) |
| Currency translation adjustment | (114,605) | (34,999) | (6,607) | (5,580) | (1,351) | (3) | (1,826) | (164,971) |
| Disposal | 29,361 | - | (7) | - | - | - | 3,939 | 33,293 |
| Balance as at June 30, 2020 | (8,366,972) | (2,489,684) | (551,388) | (460,551) | (216,463) | (69,454) | (183,016) | (12,337,528) |
| Provision for impairment | ||||||||
| Balance as at January 1, 2020 | )108,075( | )52,182 ( | - | - | - | - | )4,971 ( | )165,228( |
| Charge for the period | (21 ) | - | - | - | - | - | (387 ) | (408 ) |
| Currency translation adjustment | (1,450 ) | (773 ) | - | - | - | - | - | (2,223 ) |
| Disposal | 21,088 | - | - | - | - | - | 5,108 | 26,196 |
| Balance as at June 30, 2020 | (88,458 ) | (52,955 ) | - | - | - | - | (250 ) | (141,663 ) |
| Carrying amount | ||||||||
| As at June 30, 2020 | 2,632,972 | 1,708,813 | 299,703 | 293,035 | 186,950 | 276,545 | 145,508 | 5,543,526 |
| As at January 1, 2020 | 2,787,885 | 1,858,864 | 248,208 | 302,147 | 202,735 | 279,646 | 156,300 | 5,835,785 |
V. Notes to the consolidated financial statements - (cont'd)
18. Goodwill
Changes in goodwill
The Group identified two cash generating units ("CGU "), Crop Protection (Agro) and Intermediates andingredients (formerly known as “Other”) units. Operations are allocated into either one of the two cash generatingunits according to their business.
At the end of the year, or more frequently whether indicators for impairment exists, the Group estimates therecoverable amount of Crop Protection and Intermediates and ingredients units, which are the cash generatingunits of the Group that contain goodwill.
For the purpose of evaluating the groups Goodwill, the Group used a comparable trading multiple as well as theDCF model analysis in order to benchmark each of its CGU’s valuation against that of the markets peer companies.
As of December 31, 2019 the fair value of the cash generating units to which the goodwill relates exceeds itscarrying amount.
As at the reporting period, there were no indicators for impairment.
| January 1, 2020 | Additions | Currency translation adjustment | Balance at June 30, 2020 | |
| Book value | 4,511,193 | 49,338 | 66,800 | 4,627,331 |
| Impairment provision | - | - | - | - |
| Carrying amount | 4,511,193 | 49,338 | 66,800 | 4,627,331 |
| June 30 | December 31 | |||
| 2020 | 2019 | |||
| Deductible temporary differences | Deferred tax assets | Deductible temporary differences | Deferred tax assets | |
| Deferred tax assets | ||||
| Deferred tax assets in respect of carry forward losses | 860,435 | 211,514 | 611,496 | 136,594 |
| Deferred tax assets in respect of inventories | 1,544,685 | 409,030 | 1,552,766 | 413,713 |
| Deferred tax assets in respect of employee benefits | 860,296 | 110,922 | 973,434 | 135,422 |
| Other deferred tax asset | 1,554,284 | 345,401 | 1,606,933 | 387,109 |
| 4,819,700 | 1,076,867 | 4,744,629 | 1,072,838 | |
V. Notes to the consolidated financial statements - (cont'd)
19. Deferred Tax Assets and Deferred Tax Liabilities - (cont’d)
(2) Deferred tax liabilities without taking into consideration of the offsetting of balances within the
same tax jurisdiction
| June 30 | December 31 | |||
| 2020 | 2019 | |||
| Taxable temporary differences | Deferred tax liabilities | Taxable temporary differences | Deferred tax liabilities | |
| Deferred tax liabilities | ||||
| Deferred tax liabilities in respect of fixed assets and intangible assets | 3,730,231 | 636,003 | 3,551,402 | 569,446 |
| 3,730,231 | 636,003 | 3,551,402 | 569,446 | |
| June 30 | December 31 | |||
| 2020 | 2019 | |||
| The offset amount of deferred tax assets and liabilities | Deferred tax assets or liabilities after offset | The offset amount of deferred tax assets and liabilities | Deferred tax assets or liabilities after offset | |
| Presented as: | ||||
| Deferred tax assets | 219,554 | 857,313 | 246,142 | 826,696 |
| Deferred tax liabilities | 219,554 | 416,449 | 246,142 | 323,304 |
| June 30 | December 31 | |||
| 2020 | 2019 | |||
| Deductible temporary differences | 595,321 | 515,589 | ||
| Deductible losses carry forward | 176,911 | 142,042 | ||
| 772,232 | 657,631 |
| June 30 | December 31 | |||
| 2020 | 2019 | |||
| 2020 | 16,410 | 16,171 | ||
| 2021 | 13,069 | 13,031 | ||
| 2022 | 1,423 | 1,402 | ||
| 2023 | 27,793 | 27,767 | ||
| After 2023 | 118,216 | 83,671 | ||
| 176,911 | 142,042 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
19. Deferred Tax Assets and Deferred Tax Liabilities - (cont'd)
(6) Unrecognized deferred tax liabilities
When calculating the deferred taxes, taxes that would have applied in the event of realizing investmentsin subsidiaries were not taken into account since it is the Company’s intention to hold these investmentsand not realize them.
20. Other Non-Current Assets
| June 30 | December 31 | ||
| 2020 | 2019 | ||
| Assets related to securitization | 43,836 | 38,648 | |
| Advances in respect of non-current assets | 75,311 | 58,689 | |
| Judicial deposits | 91,134 | 56,347 | |
| Call option in respect of business combination | - | 9,216 | |
| Others | 85,607 | 83,283 | |
| 295,888 | 246,183 |
| June 30 | December 31 | |
| 2020 | 2019 | |
| Guaranteed loans | 528,000 | 414,000 |
| Unsecured loans | 1,365,876 | 1,595,882 |
| 1,893,876 | 2,009,882 |
| June 30 | December 31 | |
| 2020 | 2019 | |
| Economic hedge | 867,381 | 603,009 |
| Accounting hedge derivatives | 197,653 | 88,466 |
| 1,065,034 | 691,475 |
V. Notes to the consolidated financial statements - (cont'd)
23. Bills Payables
| June 30 | December 31 | |
| 2020 | 2019 | |
| Post-dated checks payables | 136,089 | 224,878 |
| Note payables draft | 119,328 | 96,796 |
| 255,417 | 321,674 |
| June 30 | December 31 | |
| 2020 | 2019 | |
| Within 1 year (including 1 year) | 4,729,959 | 4,172,996 |
| 1-2 years (including 2 years) | 17,041 | 10,458 |
| 2-3 years (including 3 years) | 6,776 | 2,881 |
| Over 3 years | 19,932 | 19,566 |
| 4,773,708 | 4,205,901 |
| June 30 | December 31 | |
| 2020 | 2019 | |
| Discount for customers | 857,186 | 522,614 |
| Advances from customers | 195,147 | 141,614 |
| 1,052,333 | 664,228 |
| June 30 | December 31 | |
| 2020 | 2019 | |
| Short-term employee benefits | 406,604 | 656,272 |
| Post-employment benefits* | 180,318 | 224,035 |
| Share based payment (See note XIII) | 54,158 | - |
| Other benefits within one year | 305,390 | 304,366 |
| 946,470 | 1,184,673 | |
| Current maturities | 39,063 | 27,040 |
| 985,533 | 1,211,713 |
V. Notes to the consolidated financial statements - (cont'd)
27. Taxes Payable
| June 30 | December 31 | |
| 2020 | 2019 | |
| Corporate income tax | 201,764 | 157,548 |
| VAT | 164,029 | 180,818 |
| Others | 20,277 | 30,672 |
| 386,070 | 369,038 |
| June 30 | December 31 | |
| 2020 | 2019 | |
| Dividends payables | 23,916 | 750 |
| Other payables | 1,318,549 | 1,048,844 |
| 1,342,465 | 1,049,594 |
| June 30 | December 31 | |
| 2020 | 2019 | |
| Accrued expenses | 596,202 | 613,183 |
| Liability in respect of securitization transactions | 286,642 | 26,370 |
| Payables in respect of intangible assets | 132,606 | 130,329 |
| Financial institutions | 61,847 | 1,137 |
| Other payables | 241,252 | 277,825 |
| 1,318,549 | 1,048,844 |
| June 30 | December 31 | |
| 2020 | 2019 | |
| Long-term loans due within one year | 651,027 | 420,086 |
| Lease liabilities due within one year | 144,736 | 148,287 |
| Debentures payable due within one year | 540,612 | 497,870 |
| 1,336,375 | 1,066,243 |
V. Notes to the consolidated financial statements - (cont'd)
30. Other Current Liabilities
| June 30 | December 31 | |
| 2020 | 2019 | |
| Put options to holders of non-controlling interests | 148,974 | 148,886 |
| Provision in respect of returns | 217,411 | 191,065 |
| Provision in respect of claims | 14,407 | 14,901 |
| Others | 396 | 391 |
| 381,188 | 355,243 |
| June 30 | December 31 | |||
| 2020 | Interest range | 2019 | Interest range | |
| Long term loans | ||||
| Loan secured by tangible assets other than monetary assets | - | - | 2,860 | 2.4%-2.7% |
| Unsecured loans | 2,875,705 | 1.6%-4.8% | 1,344,385 | 1.5%-6.2% |
| Total Long term loans | 2,875,705 | 1,347,245 | ||
| Less: Long term loans due within 1 year | (651,027) | (420,086) | ||
| Long term loans, net | 2,224,678 | 927,159 | ||
| June 30 | December 31 | |
| 2020 | 2019 | |
| Debentures Series B | 9,204,385 | 8,463,812 |
| Current maturities | (540,612) | (497,870) |
| 8,663,773 | 7,965,942 |
| June 30 | |
| 2020 | |
| First year (current maturities) | 540,612 |
| Second year | 540,612 |
| Third year | 540,612 |
| Fourth year | 540,612 |
| Fifth year and thereafter | 7,041,937 |
| 9,204,385 |
- 125 -
V. Notes to the consolidated financial statements - (cont'd)
32. Debentures Payable - (cont'd)
Movements of debentures payable:
For the six months ended June 30, 2020
| Maturity period | Face value in RMB | Face value NIS | Issuance date | Maturity period | Issuance amount | Balance at January 1, 2020 | Issuance during the period | Amortization of discounts or premium | CPI and exchange rate effect | Repayment during the period | Currency translation adjustment | Balance at June 30, 2020 | |||||
| Debentures Series B | 2,673,640 | 1,650,000 | 4.12.2006 | November 2020-2036 | 3,043,742 | 3,839,289 | - | 124 | (35,993) | - | 54,569 | 3,857,989 | |||||
| Debentures Series B | 843,846 | 513,527 | 16.1.2012 | November 2020-2036 | 842,579 | 1,137,246 | - | 5,481 | (10,724) | - | 16,271 | 1,148,274 | |||||
| Debentures Series B | 995,516 | 600,000 | 7.1.2013 | November 2020-2036 | 1,120,339 | 1,417,383 | - | 2,404 | (13,301) | - | 20,210 | 1,426,696 | |||||
| Debentures Series B | 832,778 | 533,330 | 1.2.2015 | November 2020-2036 | 1,047,439 | 1,335,461 | - | (1,507) | (12,535) | - | 18,957 | 1,340,376 | |||||
| Debentures Series B | 418,172 | 266,665 | 1-6.2015 | November 2020-2036 | 556,941 | 734,433 | - | (4,140) | (6,894) | - | 10,363 | 733,762 | |||||
| Debentures Series B | 497,989 | 246,499 | 5.5.2020 | November 2020-2036 | 692,893 | - | 692,896 | (1,445) | 4,549 | - | 1,288 | 697,288 | |||||
| 8,463,812 | 692,896 | 917 | (74,898) | - | 121,658 | 9,204,385 | |||||||||||
V. Notes to the consolidated financial statements - (cont'd)
33. Lease liabilities
| June 30 | December 31 | |||
| 2020 | Interest range | 2019 | Interest range | |
| Lease liabilities | 532,371 | 1.3% - 6.1% | 554,645 | 1.9% - 6.1% |
| Less: Lease liabilities due within one year | (144,736) | (148,287) | ||
| Long term lease liabilities, net | 387,635 | 406,358 | ||
| June 30 | December 31 | |
| 2020 | 2019 | |
| Total present value of obligation | 580,853 | 651,803 |
| Less: fair value of plan's assets | (92,565 ) | (104,448) |
| Net liability related to Post-employment benefits | 488,288 | 547,355 |
| Termination benefits | 114,543 | 70,128 |
| Total recognized liability for defined benefit plan, net (1) | 602,831 | 617,483 |
| Share based payment (See note XIII) | 59,549 | 94,104 |
| Other long-term employee benefits | 53,308 | 54,307 |
| Total long-term employee benefits, net | 715,688 | 765,894 |
| Including: Long-term employee benefits payable due within one year | 39,064 | 27,040 |
| 676,624 | 738,854 |
| Defined benefit obligation and early retirement | Fair value of plan's assets | Total | ||||
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |
| Balance as at January 1, | 721,931 | 638,355 | 104,448 | 87,492 | 617,483 | 550,863 |
| Expense/income recognized | ||||||
| in profit and loss: | ||||||
| Current service cost | 65,096 | 11,429 | - | - | 65,096 | 11,429 |
| Interest costs | 9,532 | 10,931 | 1,399 | 1,749 | 8,133 | 9,182 |
| Changes in exchange rates | (2,209 ) | 22,709 | (260 ) | 4,265 | (1,949 ) | 18,444 |
| Actuarial gain (losses) due to early retirement | (1,822 ) | 707 | - | - | (1,822 ) | 707 |
| Included in other comprehensive income: | ||||||
| Actuarial gain (losses) as a result of changes in actuarial assumptions | (55,882 ) | 17,515 | (8,449 ) | 1,953 | (47,433 ) | 15,562 |
| Foreign currency translation differences in respect of foreign operations | 8,906 | 1,359 | 1,218 | 350 | 7,688 | 1,009 |
| Additional movements: | ||||||
| Benefits paid | (50,156 ) | (33,628) | (8,153 ) | (5,404) | (42,003 ) | (28,224) |
| Contributions paid by the Group | - | - | 2,362 | 3,180 | (2,362 ) | (3,180) |
| Balance as at June 30, | 695,396 | 669,377 | 92,565 | 93,585 | 602,831 | 575,792 |
V. Notes to the consolidated financial statements - (cont'd)
34. Long-Term Employee Benefits Payable - (cont'd)
Post-employment benefit plans – defined benefit plan and early retirement - (cont'd)
(2) Actuarial assumptions and sensitivity analysis
The principal actuarial assumptions at the reporting date for defined benefit plan
| June 30 | December 31 | |
| 2020 | 2019 | |
| Discount rate (%)* | 3.3%-1.2% | 0.4%-3.3% |
| As of June 30, 2020 | ||
| Increase of 1% | Decrease of 1% | |
| Discount rate | (47,302 ) | 58,230 |
| June 30 | December 31 | |
| 2020 | 2019 | |
| Liabilities in respect of contingencies* | 79,479 | 90,051 |
| Provision in respect of site restoration | 80,475 | 84,211 |
| Other | 2,591 | 2,560 |
| 162,545 | 176,822 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
36. Other Non-Current Liabilities
| June 30 | December 31 | |
| 2020 | 2019 | |
| Put options to holders of non- controlling interests | 221,072 | 207,472 |
| Long term transactions in derivatives | 2,996 | 25,582 |
| Long term loans - others | 171,770 | 171,770 |
| 395,838 | 404,824 |
| Balance at January 1, 2020 | Issuance of new shares | Cancellations of shares | Balance at June 30, 2020 | |
| Share capital | 2,446,554 | - | - | 2,446,554 |
| Balance at January 1, 2020 | Additions during the period | Reductions during the period | Balance at December 31, 2019 | |
| Share premiums | 12,550,177 | - | - | 12,550,177 |
| Other capital reserve | 352,991 | - | - | 352,991 |
| 12,903,168 | - | - | 12,903,168 |
| Attributable to shareholders of the company | |||||||
| Balance at January 1, 2020 | Before tax amount | Less: transfer to profit or loss | Less: Income tax expenses | Net-of-tax amount | Less: transfer to retained earnings | Balance at June 30, 2020 | |
| Items that will not be reclassified to profit or loss | 13,824 | 47,433 | - | 8,060 | 39,373 | - | 53,197 |
| Re-measurement of changes in liabilities under defined benefit plans | (34,876) | 47,433 | - | 8,060 | 39,373 | - | 4,497 |
| Changes in fair value of other equity investment | 48,700 | - | - | - | - | - | 48,700 |
| Items that may be reclassified to profit or loss | 1,178,857 | 187,982 | 83,672 | (3,690) | 108,000 | - | 1,286,857 |
| Effective portion of gain or loss of cash flow hedge | (45,532) | 1,697 | 83,672 | (3,690) | (78,285) | - | (123,817) |
| Translation difference of foreign financial statements | 1,224,389 | 186,285 | - | - | 186,285 | - | 1,410,674 |
| 1,192,681 | 235,415 | 83,672 | 4,370 | 147,373 | - | 1,340,054 | |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
40. Surplus reserve
| Balance at January 1, 2020 | Additions during the period | Reductions during the period | Balance at June 30, 2020 | |
| Statutory surplus reserve | 236,348 | - | - | 236,348 |
| Discretional surplus reserve | 3,814 | - | - | 3,814 |
| 240,162 | - | - | 240,162 |
| 2020 | 2019 | |
| Retained earnings as at December 31 of preceding year | 5,574,173 | 5,513,466 |
| Adjustment for business combination under common control (Note 1) | - | 115,826 |
| Retained earnings as at January 1 | 5,574,173 | 5,629,292 |
| Net profits for the period attributable to shareholders of the Company | 204,649 | 588,638 |
| Dividends to non-controlling Interest | (26,828) | (28,936) |
| Dividend to the shareholders of the company (Note 2) | (29,359) | (293,628) |
| Transfer from other comprehensive income | - | 4,511 |
| Retained earnings as at June 30 | 5,722,635 | 5,899,877 |
V. Notes to the consolidated financial statements - (cont'd)
42. Operating Income and Cost of Sales
| Six months ended June 30 | Six months ended June 30 | |||
| 2020 | 2019 | |||
| Income | Cost of sales | Income | Cost of sales | |
| Principal activities | 14,100,337 | 9,894,415 | 13,579,047 | 8,999,083 |
| Other businesses | 20,703 | 10,055 | 36,985 | 24,159 |
| 14,121,040 | 9,904,470 | 13,616,032 | 9,023,242 | |
| Six months ended June 30 | |||
| 2020 | 2019 | ||
| Tax on turnover | 11,087 | 8,285 | |
| Others | 35,030 | 37,941 | |
| 46,117 | 46,226 | ||
| Six months ended June 30 | |||
| 2020 | 2019 | ||
| Salaries and related expense | 804,371 | 811,280 | |
| Depreciation and amortization | 712,432 | 703,980 | |
| Transportation and Commissions | 384,906 | 372,574 | |
| Advertising and sales promotion | 161,027 | 178,645 | |
| Travel expenses | 42,169 | 68,795 | |
| Warehouse expenses | 77,121 | 75,558 | |
| Registration | 81,676 | 74,483 | |
| Professional services | 45,113 | 38,998 | |
| Insurance | 36,863 | 41,668 | |
| Others | 122,890 | 133,793 | |
| 2,468,568 | 2,499,774 | ||
V. Notes to the consolidated financial statements - (cont'd)
45. General and Administrative Expenses
| Six months ended June 30 | |||
| 2020 | 2019 | ||
| Salaries and related expenses | 263,523 | 248,290 | |
| Idleness expenses | 87,755 | 155,214 | |
| Professional services | 56,030 | 64,171 | |
| Depreciation and amortization | 44,550 | 45,283 | |
| IT systems | 46,259 | 41,929 | |
| Office rent, maintenance and expenses | 17,759 | 25,925 | |
| Other | 37,310 | 47,447 | |
| 553,186 | 628,259 | ||
| Six months ended June 30 | |||
| 2020 | 2019 | ||
| Salaries and related expenses | 91,566 | 90,220 | |
| Field trial | 17,652 | 33,143 | |
| Professional services | 31,068 | 27,519 | |
| Depreciation and amortization | 13,942 | 18,826 | |
| Materials | 3,251 | 14,860 | |
| Office rent, maintenance and expenses | 3,631 | 4,316 | |
| Other | 27,075 | 21,815 | |
| 188,185 | 210,699 | ||
| Six months ended June 30 | |||
| 2020 | 2019 | ||
| Interest expenses on debentures and loans | 352,342 | 349,941 | |
| CPI expense (income) in respect of debentures | (63,213) | 96,329 | |
| Loss in respect of sale of trade receivables | 36,790 | 33,129 | |
| Interest expense in respect of post-employment benefits and early retirement, net | 8,133 | 9,182 | |
| Revaluation of put option, net | 8,566 | (14,954) | |
| Interest income from customers, banks and others | (29,625) | (41,104) | |
| Exchange rate differences, net | 507,673 | 481,676 | |
| Interest expense on lease liabilities | 11,955 | 12,894 | |
| Other expenses | 10,171 | 11,103 | |
| 842,792 | 938,196 | ||
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
48. Investment income, net
| Six months ended June 30 | |||
| 2020 | 2019 | ||
| Investment income (expenses) from disposal of derivatives | 37,737 | (536,167) | |
| Income from long-term equity investments accounted for using the equity method | 14,392 | 21,724 | |
| 52,129 | (514,443) | ||
| Six months ended June 30 | |||
| 2020 | 2019 | ||
| Gain from changes in fair value of derivative financial instruments | 267,775 | 881,007 | |
| Others | (2,265) | 3,128 | |
| 265,510 | 884,135 | ||
| Six months ended June 30 | |||
| 2020 | 2019 | ||
| Bills receivable and accounts receivable | 5,780 | 3,356 | |
| Other receivables | (191) | (9) | |
| 5,589 | 3,347 | ||
| Six months ended June 30 | |||
| 2020 | 2019 | ||
| Inventories | (24,724) | (19,371) | |
| Intangible asset | (21) | - | |
| Other | (631) | (4,438) | |
| (25,376) | (23,809) | ||
| Six months ended June 30 | Included in non-recurring items | |||
| 2020 | 2019 | |||
| Gain from disposal of fixed assets | 720 | 115,730 | 720 | |
| Gain (loss) from disposal of intangible assets | 6,974 | (216) | 6,974 | |
| 7,694 | 115,514 | 7,694 | ||
V. Notes to the consolidated financial statements - (cont'd)
53. Income Tax Expenses
| Six months ended June 30 | |||
| 2020 | 2019 | ||
| Current year | 211,779 | 192,289 | |
| Deferred tax expenses (income) | 17,036 | (54,959) | |
| Adjustments for previous years, net | 15,383 | 3,207 | |
| 244,198 | 140,537 | ||
| Six months ended June 30 | |||
| 2020 | 2019 | ||
| Profit before taxes | 448,847 | 729,175 | |
| Statutory tax in china | 25% | 25% | |
| Tax calculated according to statutory tax in china | 112,212 | 182,294 | |
| Tax benefits from Approved Enterprises | (30,179 ) | (29,962) | |
| Difference between measurement basis of income for financial statement and for tax purposes | 138,291 | 870 | |
| Taxable income and temporary differences at other tax rate | (41,814 ) | (6,378) | |
| Taxes in respect of prior years | 15,383 | 3,207 | |
| Utilization of tax losses prior years for which deferred taxes were not created | (771 ) | - | |
| Temporary differences and losses in the report year for which deferred taxes were not created | 33,094 | 897 | |
| Non-deductible expenses and other differences | 12,994 | (5,907) | |
| Neutralization of tax calculated in respect of the Company’s share in results of equity accounted investees | (3,889 ) | (6,304) | |
| Effect of change in tax rate in respect of deferred taxes | 15,435 | 442 | |
| Creation and reversal of deferred taxes for tax losses and temporary differences from previous years | (6,558 ) | 1,378 | |
| Income tax expenses | 244,198 | 140,537 | |
V. Notes to the consolidated financial statements - (cont'd)
55. Notes to items in the cash flow statements
(1) Cash received relating to other operating activities
| Six months ended June 30 | |||
| 2020 | 2019 | ||
| Derivatives transactions | 404,824 | 44,546 | |
| Financial institutions | 126,770 | - | |
| Interest income | 26,314 | 29,257 | |
| Government subsidies | 6,236 | 363 | |
| Others | 66,371 | 184,212 | |
| 630,515 | 258,378 | ||
| Six months ended June 30 | |||
| 2020 | 2019 | ||
| Transportation, Commissions and Warehouse | 389,972 | 386,468 | |
| Advertising and sales promotion | 145,267 | 159,574 | |
| Professional services | 134,480 | 141,127 | |
| Financial institutions | 136,897 | 39,402 | |
| IT and Communication | 94,321 | 77,596 | |
| Registration and Field trials | 81,576 | 92,911 | |
| Derivatives transactions | 90,297 | 54,030 | |
| Travel | 51,360 | 69,405 | |
| Insurance | 36,663 | 29,015 | |
| Others | 297,735 | 325,262 | |
| Net cash flow from operating activities | 1,458,568 | 1,374,790 | |
| Six months ended June 30 | |||
| 2020 | 2019 | ||
| Proceeds from loan to affiliate company | - | 7,491 | |
| Investment grant | - | 1,808 | |
| Other | - | 28 | |
| - | 9,327 | ||
| Six months ended June 30 | |||
| 2020 | 2019 | ||
| Increase in securitization facility | 31,483 | - | |
| Other | 15,357 | 778 | |
| 46,840 | 778 | ||
V. Notes to the consolidated financial statements - (cont'd)
55. Notes to items in the cash flow statements - (cont'd)
(5) Cash received from other financing activities
| Six months ended June 30 | |||
| 2020 | 2019 | ||
| Cash received in respect of hedging transactions on debentures | - | 41,144 | |
| Deposit for issuing bills payables | 4,449 | 20,557 | |
| 4,449 | 61,701 | ||
| Six months ended June 30 | |||
| 2020 | 2019 | ||
| Payment in respect of hedging transactions on debentures | 154,335 | 325,474 | |
| Repayment of lease liability | 81,915 | 74,182 | |
| Realization of call option | - | 35,625 | |
| Deposit for issuing bills payable | 13,036 | 8,610 | |
| 249,286 | 443,891 | ||
| Six months ended June 30 | ||||
| 2020 | 2019 | |||
| Net profit | 204,649 | 588,638 | ||
| Add: Impairment provisions for assets | 25,376 | 23,809 | ||
| Credit impairment loss | (5,589) | (3,347) | ||
| Depreciation of fixed assets and investment property | 391,110 | 413,802 | ||
| Depreciation of right-of-use asset | 78,568 | 75,529 | ||
| Amortization of intangible asset | 673,105 | 670,019 | ||
| Gains on disposal of fixed assets, intangible assets, and other long-term assets, net | (7,694) | (115,514) | ||
| Gains from changes in fair value | (265,510) | (884,135) | ||
| Financial expenses | 245,591 | 806,091 | ||
| Investment loss (income), net | (245,248) | 900,426 | ||
| Decrease (increase) in deferred tax assets | (43,845) | (50,833) | ||
| Increase (decrease) in deferred tax liabilities | 60,881 | (4,126) | ||
| Decrease (increase) in inventories, net | (717,127) | (777,827) | ||
| Increase in operating receivables | (701,359) | (1,263,516) | ||
| Increase (decrease) in operating payables | 1,525,228 | (751,460) | ||
| Others | 16,395 | 67,494 | ||
| Net cash flow from operating activities | 1,234,531 | (304,950) | ||
V. Notes to the consolidated financial statements - (cont'd)
56. Supplementary Information on Cash Flow Statement - (cont'd)
b. Net increase (decrease) in cash and cash equivalents
| Six months ended June 30 | |||
| 2020 | 2019 | ||
| Closing balance of cash | 6,256,107 | 5,381,820 | |
| Less: Opening balance of cash | 4,319,907 | 6,346,196 | |
| Net increase (decrease) in cash and cash equivalents | 1,936,200 | (964,376) | |
| June 30 | January 1 | ||
| 2020 | 2020 | ||
| Cash on hand | 3,651 | 6,265 | |
| Bank deposits available on demand without restrictions | 6,252,456 | 4,313,642 | |
| 6,256,107 | 4,319,907 |
| June 30 | ||
| 2020 | Reason | |
| Cash | 37,068 | Pledged |
| Other non-current assets | 109,312 | Guarantees |
| 146,380 |
V. Notes to the consolidated financial statements - (cont'd)
58. Foreign currencies denominated items
(1) Foreign currencies denominated items
| As at June 30, 2020 | |||
| Foreign currency at the end of the period | Exchange rate | RMB at the end of the period | |
| Cash and bank balances | |||
| EUR | 69,566 | 7.9366 | 552,116 |
| ILS | 247,542 | 2.0440 | 505,986 |
| BRL | 239,855 | 1.2938 | 310,316 |
| USD | 39,157 | 7.0846 | 277,417 |
| PLN | 125,210 | 1.7798 | 222,849 |
| ZAR | 184,159 | 0.4109 | 75,673 |
| Other | 395,822 | ||
| Total | 2,340,179 | ||
| Bills and Accounts receivable | |||
| BRL | 791,834 | 1.2938 | 1,024,446 |
| EUR | 119,802 | 7.9366 | 950,821 |
| CAD | 74,365 | 5.1731 | 384,693 |
| RON | 233,146 | 1.6387 | 382,059 |
| TRY | 247,993 | 1.0354 | 256,781 |
| HUF | 7,416,257 | 0.0223 | 165,313 |
| RUB | 1,347,746 | 0.1013 | 136,500 |
| ZAR | 236,432 | 0.4109 | 97,152 |
| USD | 37,490 | 7.0846 | 265,604 |
| ILS | 33,980 | 2.0440 | 69,457 |
| Other | 305,004 | ||
| Total | 4,037,830 | ||
| Other receivables | |||
| EUR | 52,928 | 7.9366 | 420,068 |
| AUD | 59,549 | 4.8491 | 288,759 |
| ILS | 120,764 | 2.0440 | 246,846 |
| GBP | 15,050 | 8.6956 | 130,872 |
| BRL | 16,909 | 1.2938 | 21,876 |
| Other | 77,684 | ||
| Total | 1,186,105 | ||
| Other current assets | |||
| ILS | 59,308 | 2.0440 | 121,229 |
| BRL | 42,578 | 1.2938 | 55,086 |
| EUR | 6,372 | 7.9366 | 50,569 |
| ARS | 291,633 | 0.1005 | 29,323 |
| UAH | 89,541 | 0.2654 | 23,766 |
| Other | 72,522 | ||
| Total | 352,495 | ||
V. Notes to the consolidated financial statements - (cont'd)
58. Foreign currencies denominated items - (cont'd)
(1) Foreign currencies denominated items - (cont'd)
| As at June 30, 2020 | |||
| Foreign currency at the end of the period | Exchange rate | RMB at the end of the period | |
| Long-term receivables | |||
| BRL | 93,178 | 1.2938 | 120,550 |
| Total | 120,550 | ||
| Other non-current assets | |||
| BRL | 71,580 | 1.2938 | 92,607 |
| Other | 8,453 | ||
| Total | 101,060 | ||
| Short-term loans | |||
| EUR | 45,454 | 7.9366 | 360,750 |
| TRY | 153,940 | 1.0354 | 159,395 |
| UAH | 397,692 | 0.2654 | 105,555 |
| Total | 625,700 | ||
| Bills and Accounts payable | |||
| ILS | 311,163 | 2.0440 | 636,029 |
| EUR | 51,014 | 7.9366 | 404,877 |
| USD | 18,843 | 7.0846 | 133,497 |
| BRL | 61,883 | 1.2938 | 80,062 |
| COP | 30,537,740 | 0.0019 | 57,556 |
| RON | 19,324 | 1.6387 | 31,667 |
| Other | 57,684 | ||
| Total | 1,401,372 | ||
| Other payables | |||
| ILS | 139,454 | 2.0440 | 285,050 |
| AUD | 24,913 | 4.8491 | 120,805 |
| BRL | 37,248 | 1.2938 | 48,190 |
| OTHER | 19,049 | ||
| TOTAL | 473,094 | ||
| Contract liabilities | |||
| EUR | 40,015 | 7.9366 | 317,586 |
| CAD | 16,209 | 5.1731 | 83,850 |
| BRL | 49,057 | 1.2938 | 63,468 |
| TRY | 37,912 | 1.0354 | 39,256 |
| USD | 2,125 | 7.0846 | 15,058 |
| Other | 58,675 | ||
| Total | 577,893 | ||
V. Notes to the consolidated financial statements - (cont'd)
58. Foreign currencies denominated items - (cont'd)
(1) Foreign currencies denominated items - (cont'd)
| As at June 30, 2020 | |||
| Foreign currency at the end of the period | Exchange rate | RMB at the end of the period | |
| Non-current liabilities due within one year | |||
| ILS CPI | 282,703 | 2.0440 | 577,857 |
| EUR | 23,891 | 7.9366 | 189,610 |
| USD | 1,303 | 7.0846 | 9,232 |
| Other | 36,565 | ||
| Total | 813,264 | ||
| Other current liabilities | |||
| EUR | 4,638 | 7.9366 | 36,813 |
| Other | 2,768 | ||
| Total | 39,581 | ||
| Long-term loan | |||
| EUR | 55,302 | 7.9366 | 438,908 |
| Total | 438,908 | ||
| Debentures payable | |||
| ILS CPI | 4,238,551 | 2.0440 | 8,663,772 |
| Total | 8,663,772 | ||
| Provision and Long-term payables | |||
| BRL | 45,566 | 1.2938 | 58,951 |
| EUR | 372 | 7.9366 | 2,952 |
| Total | 61,903 | ||
| Other non-current liabilities | |||
| EUR | 7,852 | 7.9366 | 62,321 |
| USD | 5,577 | 7.0846 | 39,511 |
| ILS CPI | 18,647 | 2.0440 | 38,116 |
| GBP | 1,038 | 8.6956 | 9,026 |
| Other | 49,387 | ||
| Total | 198,361 | ||
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
V. Notes to the consolidated financial statements - (cont'd)
58. Foreign currencies denominated items - (cont'd)
(2) Major foreign operations
| Name of the Subsidiary | Registration & Principal place of business | Business nature | Functional currency |
| ADAMA France S.A.S | France | Distribution | USD |
| ADAMA Brasil S/A | Brazil | Manufacturing; Distribution; Registration | USD |
| ADAMA Deutschland GmbH | Germany | Distribution; Registration | USD |
| ADAMA India Private Ltd. | India | Manufacturing Distribution; Registration | INR |
| Makhteshim Agan of North America Inc. | United States | Manufacturing; Distribution; Registration | USD |
| Control Solutions Inc. | United States | Manufacturing; Distribution; Registration | USD |
| ADAMA Agan Ltd. | Israel | Manufacturing; Distribution; Registration | USD |
| ADAMA Makhteshim Ltd. | Israel | Manufacturing; Distribution; Registration | USD |
| ADAMA Australia Pty Limited | Australia | Distribution | AUD |
| ADAMA Italia SRL | Italy | Distribution | USD |
| ADAMA Northern Europe B.V. | Netherlands | Distribution | USD |
| Alligare LLC | United States | Manufacturing; Distribution; Registration | USD |
VII. Interest in Other Entities
1. Interests in subsidiaries
Composition of the largest subsidiaries of the Group in respect of assets and operating income
| Name of the Subsidiary | Registration & Principal place of business | Business nature | Direct | Indirect | Method of obtaining the subsidiary |
| ADAMA France S.A.S | FRANCE | Distribution | 100% | Established | |
| ADAMA Brasil S/A | BRAZIL | Manufacturing; Distribution; Registration | 100% | Purchased | |
| ADAMA Deutschland GmbH | GERMANY | Distribution; Registration; | 100% | Established | |
| ADAMA India Private Ltd. | INDIA | Manufacturing; Distribution; Registration | 100% | Established | |
| Makhteshim Agan of North America Inc. | UNITED STATES | Manufacturing; Distribution; Registration | 100% | Established | |
| Control Solutions Inc. | UNITED STATES | Manufacturing; Distribution; Registration | 67% | Purchased | |
| ADAMA Agan Ltd. | ISRAEL | Manufacturing; Distribution; Registration | 100% | Restructure | |
| ADAMA Makhteshim Ltd. | ISRAEL | Manufacturing; Distribution; Registration | 100% | Restructure | |
| ADAMA Australia Pty Limited | AUSTRALIA | Distribution | 100% | Purchased | |
| ADAM Italia SRL | ITALY | Distribution | 100% | Established | |
| ADAMA Northern Europe B.V. | NETHERLANDS | Distribution | 55% | Purchased | |
| Alligare LLC | UNITED STATES | Manufacturing; Distribution; Registration | 100% | Purchased | |
| Adama Anpon (Jiangsu) Ltd. | CHINA | Manufacturing; Distribution | 100% | Purchased |
| June 30 | December 31 | |
| 2020 | 2019 | |
| Joint ventures | 93,419 | 92,695 |
| Associates | 41,001 | 40,403 |
| 134,420 | 133,098 |
| June 30, 2020 and six months then ended | June 30, 2019 and six months then ended | |
| Joint ventures: | ||
| Total carrying amount | 93,419 | 95,258 |
| The Group's share of the following items: | ||
| Net profit | 14,392 | 21,740 |
| Other comprehensive income | (2,427) | 158 |
| Total comprehensive income | 11,965 | 21,898 |
| Associates: | ||
| Total carrying amount | 41,001 | 39,817 |
| The Group's share of the following items: | ||
| Net profit | - | (16) |
| Other comprehensive income | 598 | 67 |
| Total comprehensive income | 598 | 51 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
VIII. Risk Related to Financial Instruments
A. General
The Group has extensive international operations, and, therefore, it is exposed to credit risks, liquidity risksand market risks (including currency risk, interest risk and other price risk). In order to reduce the exposure tothese risks, the Group uses financial derivatives instruments, including forward transactions and options(hereinafter - “derivatives”).
Transactions in derivatives are undertaken with major financial institutions, and therefore, in the opinion ofGroup Management the credit risk in respect thereof is low.
This note provides information on the Group’s exposure to each of the above risks, the Group’s objectives,policies and processes regarding the measurement and management of the risk. Additional quantitativedisclosure is included throughout the consolidated financial statements.
The Board of Directors has overall responsibility for establishing and monitoring the framework of the Group'srisk management policy. The Finance Committee is responsible for establishing and monitoring the Group'sactual risk management policy. The Chief Financial Officer reports to the Finance Committee on a regularbasis regarding these risks.
The Group’s risk management policy, established to identify and analyze the risks facing the Group, to setappropriate risk limits and controls, and to monitor risks and adherence to limits. The policy and methods formanaging the risks are reviewed regularly, in order to reflect changes in market conditions and the Group'sactivities. The Group, through training, and management standards and procedures, aims to develop adisciplined and constructive control environment in which all the employees understand their roles andobligations.
B. Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument failsto meet its contractual obligations, and derives mainly from trade receivables and other receivables as well asfrom cash and deposits in financial institutions.
Accounts and other receivables
The Group’s revenues are derived from a large number of widely dispersed customers in many countries.Customers include multi-national companies and manufacturing companies, as well as distributors,agriculturists, agents and agrochemical manufacturers who purchase the products either as finished goods oras intermediate products for their own requirements.
The Company entered into an agreement for the sale of trade receivables in a securitization transaction, fordetails see note V.5.e.
In April 2019, a two-years agreement with an international insurance company was renewed. The amount ofthe insurance coverage was fixed at $150 million cumulative per year. The indemnification is limited to about90% of the debt.
The Group’s exposure to credit risk is influenced mainly by the personal characterization of each customer,and by the demographic characterization of the customer’s base, including the risk of insolvency of theindustry and geographic region in which the customer operates. No single customer accounted for greater than5% of total accounts receivable.
VIII. Risk Related to Financial Instruments - (cont’d)
B. Credit risk - (cont’d)
The Company management has prescribed a credit policy, whereby the Company performs current ongoingcredit evaluations of existing and new customers, and every new customer is examined thoroughly regardingthe quality of his credit, before offering him the Group’s customary shipping and payment terms. Theexamination made by the Group includes an outside credit rating, if any, and in many cases, receipt ofdocuments from an insurance company. A credit limit is prescribed for each customer, outstanding amount ofthe accounts receivable balance. These limits are examined annually. Customers that do not meet the Group’scriteria for credit quality may do business with the Group on the basis of a prepayment or against furnishingof appropriate collateral.
Most of the Group’s customers have been doing business with it for many years. In monitoring customer creditrisk, the customers were grouped according to a characterization of their credit, based on geographical location,industry, aging of receivables, maturity, and existence of past financial difficulties. Customers defined as “highrisk” are classified to the restricted customer list and are supervised by management. In certain countries,mainly, Brazil, customers are required to provide property collaterals (such as agricultural lands and equipment)against execution of the sales, the value of which is examined on a current ongoing basis by the Company. Inthese countries, in a case of expected credit risk, the Company records a provision for the amount of the debtless the value of the collaterals provided and acts to realize the collaterals.
The Group closely monitors the economic situation in Eastern Europe and South America on an ongoing basis.As a result of the Covid-19 pandemic, the Group also closely monitors the economic situation worldwide.Where necessary, the Group operates to limit its exposure to customers.
The Group recognizes an impairment provision, which reflects its assessment regarding the credit risk ofaccount receivables, Other receivables and investments on a lifetime expected credit loss basis. See also notesⅢ.10 – Financial instruments and Ⅲ.11 – Receivables.
Cash and deposits in banks
The Company holds cash and deposits in banks with a high credit rating. These banks are also required tocomply with capital adequacy or maintain a level of security based on different situations.
Guarantees
The Company’s policy is to provide financial guarantees only to investee companies.
Aging of receivables and expected credit risk
Presented below is the aging of the past due trade receivables:
| June 30, 2020 | |
| Past due by less than 90 days | 490,268 |
| Past due by more than 90 days | 591,410 |
| 1,081,678 |
VIII. Risk Related to Financial Instruments - (cont’d)
B. Credit risk - (cont’d)
The company measure the provision for credit losses on a collective group basis, where receivables sharesimilar credit risk characteristics based on geographical locations. The examination for expected credit lossesis performed using model including aging analysis and historical loss experiences, and adjusted by theobservable factors reflecting current and expected future economic conditions.When credit risk on a receivable has increased significantly since initial recognition, the group records specificprovision or general provision which is determined for groups of similar assets in countries in which there arelarge number of customers with immaterial balances.The Group has credit risk exposures for accounts receivables amounted to RMB 8,414,898 thousand relate tocategory of "Lifetime expected credit losses (credit losses has not occurred)" and amounted to RMB 599,579thousand related to category of "Lifetime expected credit losses (credit losses occurred)". The Group has creditrisk exposures for other receivables amounted to RMB 15,095 thousand related to category of "Lifetimeexpected credit losses (credit losses occurred)". The credit risk exposures for all remaining balance of financialassets at amortised cost and financial assets at FVTOCI are related to "12-month expected credit losses".
C. Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial obligation when theycome due. The Group's approach to managing its liquidity risk is to assure, to the extent possible, an adequatedegree of liquidity for meeting its obligations timely, under ordinary conditions and under pressure conditions,without sustaining unwanted losses or hurting its reputation.
The cash-flow forecast is determined both at the level of the various entities as well as of the consolidatedlevel. The Company examines the current forecasts of its liquidity requirements in order to ascertain that thereis sufficient cash for the operating needs, including the amounts required in order to comply with the financialliabilities, while taking strict care that at all times there will be unused credit frameworks so that the Companywill not exceed the credit frameworks granted to it and the financial covenants with which it is required tocomply with. These forecasts take into consideration matters such as the Company’s plans to use debt forfinancing its activities, compliance with required financial covenants, compliance with certain liquidity ratiosand compliance with external requirements such as laws or regulation.
The surplus cash held by the Group subsidiaries, which is not required for financing the current ongoingoperations, is invested in short-term interest-bearing investment channels.
VIII. Risk Related to Financial Instruments - (cont’d)
C. Liquidity risk - (cont’d)
(1) Presented below are the contractual maturities of the financial liabilities at undiscounted amounts,including estimated interest payments:
| As at June 30, 2020 | ||||||
| Third- | Fifth year | Contractual | Carrying | |||
| First year | Second year | Fourth year | and above | Cash flow | amount | |
| Non-derivative financial liabilities | ||||||
| Short-term loans | 1,918,865 | - | - | - | 1,918,865 | 1,893,876 |
| Bills payables | 255,417 | - | - | - | 255,417 | 255,417 |
| Accounts payables | 4,773,708 | - | - | - | 4,773,708 | 4,773,708 |
| Other payables | 1,342,465 | - | - | - | 1,342,465 | 1,342,465 |
| Other current liabilities | 148,974 | - | - | - | 148,974 | 148,974 |
| Debentures payable | 959,646 | 970,651 | 1,857,907 | 9,366,047 | 13,154,251 | 9,204,385 |
| Long-term loans | 719,769 | 680,316 | 1,401,467 | 314,685 | 3,116,237 | 2,875,705 |
| Long-term payables | 64 | 64 | 128 | 26,612 | 26,868 | 26,860 |
| Lease Liabilities | 162,885 | 126,886 | 133,534 | 236,625 | 659,930 | 532,371 |
| Other non-current liabilities | 2,061 | 30,690 | 281,420 | 87,946 | 402,117 | 392,842 |
| Derivative financial liabilities | ||||||
| Foreign currency derivatives | 1,044,945 | 2,996 | - | - | 1,047,941 | 1,047,941 |
| CPI/shekel forward transactions | 20,089 | - | - | - | 20,089 | 20,089 |
| 11,348,888 | 1,811,603 | 3,674,456 | 10,031,915 | 26,866,862 | 22,514,633 | |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
VIII. Risk Related to Financial Instruments - (cont’d)
D. Market risks - (cont’d)
(1) CPI and foreign currency risks - (cont’d)
The Group hedged a part of the estimated currency exposure to anticipate sales and purchases for thesubsequent year. Likewise, the Group hedges most of its monetary assets and liabilities denominated in anon- U.S. dollar currency. The Group uses foreign currency derivatives to hedge its currency risk, mostly withmaturity dates of less than one year from the reporting date.
Solutions debentures are linked to the NIS-CPI and, therefore, an increase in the NIS-CPI, as well as changesin the NIS exchange rate, could cause significant exposure with respect to the subsidiary functional currency– the U.S. dollar. As of the approval date of the financial statements, the subsidiary had hedged most of itsexposure deriving from issuance of the debentures, in options and forward contracts.
(A) The Group’s exposure to NIS-CPI and foreign currency risk, except in respect of derivative financialinstruments is as follows:
| June 30, 2020 | ||
| Total assets | Total liabilities | |
| In US Dollar | 1,483,757 | 1,355,563 |
| In Euro | 2,074,195 | 1,763,078 |
| In Brazilian real | 1,634,318 | 193,476 |
| CPI-linked NIS | - | 9,316,928 |
| In New Israeli Shekel | 943,518 | 929,318 |
| Denominated in or linked to other foreign currency | 4,326,664 | 990,532 |
| 10,462,452 | 14,548,895 | |
| June 30, 2020 | ||||||
| Currency/linkage receivable | Currency/linkage payable | Average expiration date | USD thousands Par value | RMB thousands Par value | Fair value | |
| Forward foreign currency | USD | EUR | 2020/08/30 | 202,693 | 1,434,967 | (208,857) |
| Contracts and call options | USD | PLN | 2020/09/14 | 71,275 | 504,593 | (15,478) |
| USD | BRL | 2020/09/19 | 377,868 | 2,675,116 | 194,775 | |
| USD | GBP | 2020/08/12 | 31,482 | 222,880 | 1,090 | |
| USD | ZAR | 2020/07/30 | 22,749 | 161,050 | (12,747) | |
| ILS | USD | 2021/01/31 | 1,395,087 | 9,876,519 | 152,787 | |
| USD | OTHER | 523,287 | 3,704,608 | (135,455) | ||
| CPI forward contracts | CPI | ILS | 2020/11/06 | 577,034 | 4,085,113 | (23,172) |
VIII. Risk Related to Financial Instruments - (cont’d)
D. Market risks - (cont’d)
(1) CPI and foreign currency risks - (cont’d)
(C) Sensitivity analysis
The appreciation or depreciation of the Dollar against the following currencies as of June 30, 2020 andthe increase or decrease in the CPI would increase (decrease) the equity and profit or loss by the amountspresented below. This analysis assumes that all the remaining variables, among others interest rates,remains constant.
| June 30, 2020 | ||||
| Decrease of 5% | Increase of 5% | |||
| Equity | Profit (loss) | Equity | Profit (loss) | |
| New Israeli shekel | 67,527 | 55,863 | (14,957) | (4,407) |
| British pound | (1,369) | 698 | 1,369 | (698) |
| Euro | (101,708) | 792 | 103,565 | 2,335 |
| Brazilian real | (55,508) | 22,957 | 43,005 | (29,116) |
| Polish zloty | (18,054) | (6,391) | 15,441 | 4,890 |
| South African Rand | (1,080) | (427) | 218 | (372) |
| Chinese Yuan Renminbi | (11,098) | (11,098) | 11,098 | 11,098 |
| CPI-linked NIS | 255,959 | 255,959 | (255,959) | (255,959) |
VIII. Risk Related to Financial Instruments - (cont’d)
D. Market risks - (cont’d)
(2) Interest rate risks - (cont’d)
(A) Type of interest
The interest rate profile of the Group’s interest-bearing financial instruments was as follows:
| June 30, 2020 | |
| Fixed-rate instruments – unlinked to the CPI | |
| Financial assets | |
| Cash at banks | - |
| Other non-current assets | 44,346 |
| Financial liabilities | |
| Long-term loans | 1,439,374 |
| Long-term payables | 21,345 |
| Other non-current liabilities | 171,770 |
| (1,588,143) | |
| Fixed-rate instruments – linked to the CPI | |
| Financial liabilities | |
| Debentures payable | 9,204,385 |
| Variable-rate instruments | |
| Financial assets | |
| Cash at banks | 1,239,860 |
| Financial assets at fair value through profit or loss | 12,609 |
| Other non-current assets | 24,502 |
| Financial liabilities | |
| Short-term loans and credit from banks | 1,893,876 |
| Long-term loans(1) | 1,436,331 |
| (2,053,236) |
| Profit or loss | Equity | |||
| Increase in interest | Decrease in interest | Increase in interest | Decrease in interest | |
| As at June 30, 2020 | 1,467 | (1,425) | 1,467 | (1,425) |
IX. Fair Value
The fair value of forward contracts on foreign currency is based on their listed market price, if available. In theabsence of market prices, the fair value is estimated based on the discounted difference between the statedforward price in the contract and the current forward price for the residual period until redemption, using anappropriate interest rate.
The fair value of foreign currency options is based on bank quotes. The reasonableness of the quotes is evaluatedthrough discounting future cash flow estimates, based on the conditions and duration to maturity of each contract,using the market interest rates of a similar instrument at the measurement date and in accordance with the Black& Scholes model.
1. Financial instruments measured at fair value for disclosure purposes only
The carrying amount of certain financial assets and liabilities, including cash at bank and on hand, bills andaccounts receivable, receivables financing, other receivables, derivatives financial assets, short-term loans, billsand accounts payable and other payable, are the same or proximate to their fair value.
The following table details the carrying amount in the books and the fair value of groups of non-current financialinstruments presented in the financial statements not in accordance with their fair values:
| June 30, 2020 | ||
| Carrying amount | Fair value | |
| Financial assets | ||
| Other non-current assets (a – Level 2) | 65,783 | 61,900 |
| Financial liabilities | ||
| Long-term loans and others (b – Level 2) | 3,609,306 | 3,628,893 |
| Debentures (c – Level 1) | 9,204,384 | 11,227,319 |
| June 30, 2020 | |
| % | |
| U.S. dollar interest | 0.15 – 0.88 |
| Euro | (0.51) – 0.21 |
IX. Fair Value - (cont’d)
3. Fair value hierarchy of financial instruments measured at fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transactionbetween market participants at the measurement date. The table below presents an analysis of financialinstruments measured at fair value. The various levels have been defined as follows:
? Level 1: quoted prices (unadjusted) in active market for identical instrument.? Level 2: inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly.? Level 3: inputs that are not based on observable market data (unobservable inputs).
The Company’s forward contracts and options are carried at fair value and are evaluated by observable inputsand therefore are concurrent with the definition of level 2.
| June 30 | |
| 2020 | |
| Forward contracts and options used for hedging the cash flow (Level 2) | (132,245) |
| Forward contracts and options used for economic hedging (Level 2) | 85,188 |
| Other equity investment (Level 2) | 156,092 |
| Other non-current asset (Level 2) | 35,235 |
| Receivables financing (Level 2) | 35,552 |
| Call option in respect of business combination (Level 2) | 7,179 |
| Other (Level 2) | 12,609 |
| Financial Instrument | Fair value |
| Forward contracts | Fair value measured on the basis of discounting the difference between the stated forward price in the contract and the current forward price for the residual period until redemption using an appropriate interest rates. |
| Foreign currency options | The fair value is measured based on the Black&Scholes model. |
X. Related parties and related party transactions
1. Information on parent Company
| Company name | Registered place | Business nature | Registered capital (Thousand RMB) | Shareholding percentage | Percentage of voting rights |
| Syngenta Group | Shanghai, China | Production and sales of agrochemicals, fertilizers and GM seeds | 10,000,000 | 74.02% | 74.02% |
| Name of entity | Relationship with the Company |
| Alfa Agricultural Supplies S. | Joint venture of the Group |
| Innovaroma SA | Joint venture of the Group |
| Agribul Ltd. | Joint venture of the Group |
X. Related parties and related party transactions - (cont’d)
4. Information on other related parties
| Name of other related parties | Related party relationship |
| Jingzhou Sanonda holdings Co., Ltd. | Common control |
| CNAC International Co., Ltd. (SPV Company) | Common control |
| ChemChina Asset Management Co., Ltd. | Common control |
| ChemChina Information Center Co., Ltd. | Common control |
| Syngenta (China) Investment Co.Ltd | Common control |
| Syngenta Crop Protection AG | Common control |
| Syngenta Crop Protection S.A. | Common control |
| Syngenta Supply AG | Common control |
| Syngenta Crop Protection LLC. | Common control |
| Syngenta Romania SRL | Common control |
| Syngenta France SAS | Common control |
| Syngenta Australia Pty Ltd | Common control |
| Syngenta Agro Sociedad Anonima | Common control |
| Syngenta Protecao De Cultivos LTDA | Common control |
| Syngenta Canada Inc. | Common control |
| Syngenta Korea Ltd. | Common control |
| Syngenta Vietnam Ltd. | Common control |
| Syngenta Czech s.r.o. | Common control |
| Syngenta Espana S.A. | Common control |
| Syngenta India Limited | Common control |
| Syngenta South Africa (Pty) Ltd. | Common control |
| PT Syngenta Indonesia | Common control |
| Syngenta Agro AG | Common control |
| Syngenta Agro S.A. | Common control |
| Syngenta Agro S.r.l. | Common control |
| Syngenta Polska Sp. z o.o. | Common control |
| Syngenta Agro, S.A. DE C.V. | Common control |
| Syngenta Italia S.p.A. | Common control |
| Syngenta Crop Protection Lda. | Common control |
| Syngenta Crop Protection B.V. | Common control |
| Syngenta Crop Protection NV | Common control |
| Syngenta Nordics A.S. | Common control |
| Syngenta Tarim Sanayi ve Ticaret A.S. | Common control |
| Syngenta Agro GmbH | Common control |
| Syngenta Kazakhstan Limited Liability Partnership | Common control |
| Syngenta Slovakia S.R.O. | Common control |
| Syngenta Hungary Kft. | Common control |
| Syngenta UK Ltd | Common control |
| Syngenta Ireland Ltd | Common control |
| Syngenta Comercial Agricola Ltda | Common control |
| Syngenta S.A. (Colombia) | Common control |
| Bluestar Engineering Co.,Ltd. | Common control |
| China National Bluestar Co., Ltd. | Common control |
| China Bluestar Chengrand | Common control |
| Bluestar (Beijing) Chemical Machinery Co., Ltd. | Common control |
| Hangzhou (Torch) Xidoumen Membrane Industry Co., Ltd | Common control |
| Shandong Dacheng International Trading | Common control |
| Shandong Dacheng agricultural chemical co. LTD. | Common control |
| Southwest Chemical Research and Design Institute Co., Ltd. | Common control |
| Beijing Guangyuan Yinong Chemical Co., Ltd. | Common control |
X. Related parties and related party transactions - (cont’d)
4. Information on other related parties - (cont’d)
| Name of other related parties | Related party relationship |
| Anhui Research Institute of Chemical Industry | Common control |
| Bluestar Engineering Co.,Ltd. | Common control |
| Elkem Silicones Brasil Ltda. | Common control |
| Shanghai branch of China blue lianhai design and research institute. | Common control |
| Jiangsu Huaihe Chemical Co.,Ltd. | Common control |
| Sinochem Fertilizer Co., Ltd Jiangsu Branch | Common control |
| Sinochem Fertilizer Co., Ltd Fujian Branch | Common control |
| Sinochem Fertilizer Co., Ltd Guangxi Branch | Common control |
| Sinochem Agriculture Biotechnology Co. LTD Xinjiang Branch | Common control |
| Sinochem Fertilizer Co., Ltd Southwest Branch | Common control |
| Sinochem Modern Agriculture Xinjiang Co. LTD | Common control |
| Sinochem Modern Agriculture Co. LTD. Anhui Branch | Common control |
| Zhonglan Lianhai Design & Research Institute Co.,Ltd. | Common control |
| Zhonglan International Chemical Co., Ltd | Common control |
| Jiangsu Youshi Chemical Co., Ltd. | Associate of the Group |
| Jiangsu Ruixiang Chemical Co., Ltd. | Associate of the Group |
| Jiangsu Yangnong Chemical Co., Ltd. | Associate of the Group |
| Jiangsu Yangnong Chemical Group Co., Ltd. | Associate of the Group |
| Six months ended June 30 | |||
| Type of purchase | Related Party Relationship | 2020 | 2019 |
| Summary of purchase of goods/services: | |||
| Purchase of goods/services received | Common control under ChemChina | 618,225 | 734,273 |
| Joint venture | 1,891 | 3,332 | |
| Purchase of fixed assets and other assets | Common control under ChemChina | 163,931 | 13,098 |
| Summary of Sales of goods: | |||
| Sale of goods/ Service rendered | Common control under ChemChina | 408,470 | 408,089 |
| Joint venture | 96,378 | 108,664 | |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
X. Related parties and related party transactions - (cont’d)
5. Transactions and balances with related parties
(2) Guarantee
The Group as the guarantee receiver
| Guarantee provider | Amount of guaranteed loan | Inception date of guaranty | Maturity date of guaranty | Guaranty completed (Y / N) |
| Parent company | 300,000 | 20/11/2017 | 20/11/2022 | N |
| 30,000 | 01/08/2019 | 30/07/2020 | N | |
| 2,000 | 11/02/2020 | 11/08/2020 | N | |
| 20,000 | 28/06/2019 | 18/06/2020 | Y | |
| 20,000 | 01/03/2019 | 20/02/2020 | Y | |
| 50,000 | 01/06/2019 | 29/05/2020 | Y | |
| 50,000 | 28/06/2019 | 27/06/2020 | Y | |
| 64,000 | 19/02/2019 | 18/02/2020 | Y | |
| 80,000 | 02/02/2019 | 30/01/2020 | Y |
| Periods ended June 30 | ||
| 2020 | 2019 | |
| Remuneration of key management personnel and directors | 22,043 | 32,756 |
| June 30 | December 31 | ||||
| 2020 | 2019 | ||||
| Items | Related Party Relationship | Book Balance | Expected credit losses | Book Balance | Expected credit losses |
| Trade receivables | Common control under ChemChina | 156,809 | - | 153,197 | - |
| Joint venture | 43,645 | - | 24,026 | - | |
| Associates | 5,694 | - | - | - | |
| Other receivables | Common control under ChemChina | 416 | - | 25,346 | - |
| Prepayments | Common control under ChemChina | 41,032 | - | 69,610 | - |
| Associates | 669 | - | - | - | |
| Dividends receivable | Joint venture | 10,768 | - | - | - |
| Other assets | Joint venture | - | - | 314 | - |
X. Related parties and related party transactions - (cont’d)
5. Transactions and balances with related parties - (cont'd)
(4) Receivables from and payables to related parties (including loans) - (cont'd)
Payable Items
| June 30 | December 31 | ||
| Items | Related Party Relationship | 2020 | 2019 |
| Trade payables | Common control under ChemChina | 282,447 | 239,360 |
| Joint venture | 637 | 258 | |
| Associates | 28,042 | - | |
| Other payables | Common control under ChemChina | 29,118 | 23,195 |
| Joint venture | 538 | - | |
| Other non-current liabilities * | Common control under ChemChina | 171,770 | 171,770 |
| June 30 | December 31 | ||
| Related Party | Related Party Relationship | 2020 | 2019 |
| Parent | Acquisition of a subsidiary | - | 415,000 |
XI. Commitments and contingencies
1. Significant commitments
| June 30 | December 31 | |
| 2020 | 2019 | |
| Investment in Fixed assets | 710,474 | 588,243 |
XI. Commitments and contingencies - (cont’d)
2. Commitments and Contingent Liabilities - (cont’d)
Claims against subsidiaries
In the ordinary course of business, legal claims are filed against subsidiaries, including lawsuits, regardingclaims for patent infringement. Inter alia, from time to time, the Company, similar to other companies operatingin the plant protection industry, is exposed to class actions for large amounts, which it must defend against whileincurring considerable costs, even if these claims, from the start, have no basis. In the estimation of theCompany’s management, based, inter alia, on opinions of its legal counsel regarding the prospects of theproceedings, the financial statements include appropriate provisions where necessary to cover the exposureresulting from the claims.
Various immaterial claims have been filed against Group companies in courts throughout the world, inimmaterial amounts, for causes of action involving mainly employee-employer relations and various civil claims,for which the Company did not record a provision in the financial statements. Furthermore, claims were filedfor product liability damages, for which the Company has appropriate insurance coverage, such that theCompany’s exposure in respect thereof is limited to the amount its deductible requirement or the amount thereofdoes not exceed the deductible amount.
Performance Compensation Agreement
Within the context of the 2017 combination between the Company and Solutions, the Company entered into aPerformance Compensation Agreement with CNAC, then the 100% owner of Solutions and the controllingshareholder of the Company, according to which, CNAC made a commitment regarding Solutions’ aggregatenet profit in the years 2017-2019 (the “Compensation Period”). In case of failure to meet such commitment,CNAC committed to compensate the Company either through shares or cash according to a predeterminedformula.
The calculated net profit of Solutions for the Compensation Period was lower than committed. As a result,Syngenta Group (the current direct shareholder of the Company since June 15, 2020), executed suchcompensation commitment, which consists of two parts: (1) the buyback and cancellation of 102,432,280 Ashares for a consideration of RMB 1, executed on July 13, 2020, and (2) the return of the cumulative dividenddeclared during the Compensation Period from the Compensation Shares amounting to RMB 17.6 million freeof charge, executed on July 14, 2020.
As a result, the Company's total share and registered capital was reduced from 2,446,553,582 to 2,344,121,302,and CNAC’s effective ownership in the Company was reduced from 78.9% to 78.0%.
XI. Commitments and contingencies - (cont’d)
2. Commitments and Contingent Liabilities - (cont’d)
COVID-19 pandemic
During the first half of 2020, the global agrochemical market, amongst many others, was impacted by theunprecedented COVID-19 pandemic. As a result, farmers’ incomes have been, and continue to be, negativelyimpacted in most regions by lower crop prices, reduced demand due to the relative shutdown of the food sector,and labor shortages owing to mobility restrictions, all leading to increased costs for farmers. Governments acrossthe world continue to include farmers in extensive support programs, partially offsetting lost income due to thepandemic.
One of the most widespread economic consequences of the pandemic is the significant weakening of manyglobal currencies against the US dollar, which started abruptly towards the end of the first quarter and throughoutthe duration of the second quarter. This has been seen most notably in the Brazilian Real, Indian Rupee andTurkish Lira, and has contributed to increased volatility in the Euro and Australian dollar.
Following tight supply in the first quarter due to COVID-19 disruptions, chemical production in China haslargely returned to prior levels and prices of raw materials and intermediates are starting to reflect such increasein supply.
The ongoing spread of the COVID-19 pandemic is expected to continue to negatively impact the performanceand profitability of the Company in the coming months. The Company continues to actively manage its responseto the pandemic in order to ensure the safety of its employees and limit its impact on the Company’s businessand its financial performance.
XII. Events subsequent to the balance sheet date
Subsequent to the report date, the Company’s Board of Directors has approved a limited B-share repurchaseprogram. In terms of this program, the Company intends to repurchase up to 26 million of its B-shares(constituting up to 15.6% of the Company's B-shares and up to 1.1% of its total shares outstanding), at anexpected cost in the range of approximately RMB 66.3 million to RMB 132.6 million. This proposal will besubmitted to the Shareholders’ Meeting for confirmation in the coming weeks. If confirmed, the program willbe completed within three months. The actual timing, number and value of B-shares to be repurchased underthe share repurchase program will be determined by the Company’s management at its discretion and willdepend on a variety of factors.
XIII. Share-based Payments
1. In February 2019, the remuneration committee and the Company's Board of Directors (and the General
Meeting with respect to the CEO and Vice President who also serves as a director) approved the allocation of77,864,910 phantom warrants to officers and employees in accordance with the long-term phantomcompensation plan (hereinafter - "the 2019 Plan"). The allocation date is February 21, 2019.
The warrants will vest in four equal portions, where the first and second quarters are exercisable after twoyears, the third quarter after three years and the fourth quarter after four years from January 1, 2019. Thewarrants will be exercisable, in whole or in part, in accordance with the terms of the 2019 plan, and subject toachieving financial targets as determined in the plan. The warrants will be exercisable until the end of 2025.
Upon exercise of each warrant, the offeree will be entitled to receive cash payment equal to the differencebetween the base price as determined at the time of the grant and the closing price of one share the companyon the Shenzhen Stock Exchange, as it will be on the exercise date up to the ceiling that was determined underthe plan.
The fair value of the granted warrants as aforesaid was estimated using the binomial pricing model.
The cost of the benefit embodied in the warrants that were allocated as aforesaid, based on the fair value at thegrant date, amounted to a total of approximately 186 million RMB. The liability at the end of the reportingperiod was recorded according to the vesting period as determined in the plan, taking into account the extentof the service that the employees provided until that date.
| Statement of share based payments in the period | Phantom warrants |
| Total number of Phantom warrants at the beginning of the period | 67,226,416 |
| Total number of Phantom warrants granted in current period | 1,613,348 |
| Total number of Phantom warrants exercised in current period | - |
| Total number of Phantom warrants forfeited in current period | (4,963,172) |
| Total number of Phantom warrants at the end of the period | 63,876,592 |
| The exercise prices and the remainder of the contractual period for Phantom warrants outstanding at the end of period | RMB 9.92 – 10.85 5.5 years |
| The parameters used in implementing the model are as follows: | |
| Stock price (RMB) | 10.85 |
| Exercise increment (RMB) | 10.03/10.85 |
| Expected volatility | 43.97% |
| Risk-free interest rate | 3.06 % |
| Economic value as of February 21, 2019 (in thousands RMB) | 186,206 |
| The methods for the determination of the fair value of liabilities arising from cash-settled share-based payments | The binomial pricing model |
| Accumulated amount of liabilities arising from cash-settled share-based payments (in thousands RMB) | 82,667 |
| Expenses arising from cash-settled share-based payments in current period (in thousands RMB) | 15,358 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
XIII. Share-based Payments - (cont’d)
2. In September 2019, the remuneration committee and the Company's Board of Directors (and the General
Meeting with respect to the CEO and Vice President who also serves as a director) approved the cancellationof 2017 Plan against the allocation of 28,258,248 warrants in accordance with the long-term phantomcompensation plan (hereinafter - "The Alternative Warrants" and "The Alternative Plan"). The cancellationand allocation date is September 26, 2019.
The alternative warrants will vest in four equal portions, where the first quarter is exercisable after one year,the second quarter after two years, the third quarter after three years and the fourth quarter after four yearsfrom October 1, 2019. The warrants will be exercisable, in whole or in part, in accordance with the terms ofthe Alternative Plan, and subject to achieving financial targets as determined in the plan. The warrants will beexercisable until October 1, 2026.
Upon exercise of each warrant, the offeree will be entitled to receive cash payment equal to the differencebetween the base price as determined at the time of the grant and the closing price of one share of the parentcompany on the Shenzhen Stock Exchange, as it will be on the exercise date up to the ceiling that wasdetermined under the plan.
The fair value of the total granted alternative Warrants at the allocated date is equal to the fair value of thetotal warrants canceled from the 2017 plan.
The cost of the benefit embodied in the warrants that were allocated as aforesaid, based on the fair value at thecancellation and allocation date, amounted to a total of approximately 69 million RMB. The liability in thefinancial statements at the end of the reporting period was recorded at the fair value estimated using thebinomial option pricing model and by the vesting period from the original grant date of the 2017 plan to theend of the service period determined by the alternative plan, taking into account the extent of the service thatthe employees provided until that date and the stock price at the reporting date.
Statement of share based payments in the period
| Phantom warrants | |
| Changes in the number of 2017 Plan: | |
| Total number of Phantom warrants at the beginning of the period | 24,266,876 |
| Total number of Phantom warrants granted in current period | - |
| Total number of Phantom warrants exercised in current period | - |
| Total number of Phantom warrants forfeited in current period | (1,842,443) |
| Total number of Phantom warrants at the end of the period | 22,424,433 |
| The range of the exercise prices and the remainder of the contractual period for Phantom warrants outstanding at the end of period | RMB 9.42 6.25 years |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
XIII. Share-based Payments - (cont’d)
| The parameters used in implementing the model are as follows: | |
| Stock price (RMB) | 9.23 |
| Exercise increment (RMB) | 9.43 |
| Expected volatility | 40.29% |
| Risk-free interest rate | 3.14 % |
| Economic value as of September 26, 2019 (in thousands RMB) | 68,836 |
| The methods for the determination of the fair value of liabilities arising from cash-settled share-based payments related to the alternative plan | The binomial pricing model |
| Accumulated amount of liabilities arising from cash-settled share-based payments related to the alternative plan (in thousands RMB) | 31,041 |
| Expenses arising from cash-settled share-based payments in current period related to the alternative plan (in thousands RMB) | 1,036 |
XIV. Other significant items - (cont'd)
1. Segment reporting - (cont’d)
Information regarding the results and assets and liabilities of each reportable segment is included below:
| Crop Protection | Intermediates and ingredients | Elimination among segments | Total | |||||
| Six months ended June 30 | Six months ended June 30 | Six months ended June 30 | Six months ended June 30 | |||||
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |
| Operating income from external customers | 12,834,364 | 12,302,544 | 1,286,676 | 1,313,488 | - | - | 14,121,040 | 13,616,032 |
| Inter-segment operating income | - | - | 665 | 692 | (665) | (692) | - | - |
| Interest in the profit or loss of associates and joint ventures | 11,118 | 11,462 | 3,274 | 10,262 | - | - | 14,392 | 21,724 |
| Segment's results | 927,549 | 1,244,460 | 60,843 | 74,943 | - | - | 988,392 | 1,319,403 |
| Financial expenses, net | 842,792 | 938,196 | ||||||
| Gain (loss) from changes in fair value | 265,510 | 884,135 | ||||||
| Investment income | 37,737 | (536,167) | ||||||
| Profit before tax | 448,847 | 729,175 | ||||||
| Income tax expense | (244,198) | 140,537 | ||||||
| Net profit | 204,649 | 588,638 | ||||||
| Crop Protection | Intermediates and ingredients | Unallocated assets and liabilities | Total | |||||
| June 30 | December 31 | June 30 | December 31 | June 30 | December 31 | June 30 | December 31 | |
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |
| Total assets | 36,682,597 | 35,506,894 | 2,497,137 | 2,392,909 | 9,916,445 | 7,389,137 | 49,096,179 | 45,288,940 |
| Total liabilities | 5,105,591 | 4,682,416 | 311,169 | 286,109 | 21,009,641 | 17,948,750 | 26,426,401 | 22,917,275 |
XIV. Other significant items - (cont'd)
1. Segment reporting - (cont’d)
Geographic information
The following tables sets out information about the geographical segments of the Group’s operating incomebased on the location of customers (sales target) and the Group's non-current assets (including fixed assets,right-of-use assets, construction in progress, investment properties intangible assets and goodwill). In the caseof investment property, fixed assets, right of used assets and construction in progress, the geographical locationof the assets is based on its physical location. In case of intangible assets and goodwill, the geographicallocation of the company which owns the assets.
| Operating income from external customers | ||
| Six months ended June 30 | ||
| 2020 | 2019 | |
| Europe | 4,275,020 | 4,252,479 |
| North America | 2,622,636 | 2,715,528 |
| Latin America | 2,669,490 | 2,411,530 |
| Asia Pacific | 2,456,818 | 2,426,931 |
| Africa, Middle East (including Israel) and India | 2,097,076 | 1,809,564 |
| 14,121,040 | 13,616,032 | |
| Specified non-current assets | ||
| June 30 | December 31 | |
| 2020 | 2019 | |
| Europe | 1,055,760 | 1,047,505 |
| Latin America | 2,259,179 | 2,298,654 |
| North America | 1,272,965 | 1,282,267 |
| Asia Pacific | 2,825,394 | 2,709,786 |
| Africa, Middle East (including Israel) and India | 11,468,388 | 11,512,105 |
| 18,881,686 | 18,850,317 | |
XIV. Other significant items - (cont'd)
2. Calculation of Earnings per share and Diluted earnings per share
| Amount for the current period | Amount for the prior period | |
| Net profit from continuing operations attributable to ordinary shareholders | 204,649 | 588,638 |
| Thousands shares | Amount for the current period | Amount for the prior period |
| Number of ordinary shares outstanding at the beginning of the year | 2,446,554 | 2,446,554 |
| Add: weighted average number of ordinary shares issued during the year | - | - |
| Less: weighted average number of ordinary shares repurchased during the year | - | - |
| Weighted average number of ordinary shares outstanding at the end of the year | 2,446,554 | 2,446,554 |
| Amount for the current period | Amount for the prior period | |
| Calculated based on net profit attributable to ordinary shareholders | ||
| Basic earnings per share | 0.08 | 0.24 |
| Diluted earnings per share | N/A | N/A |
| Calculated based on net profit from continuing operations attributable to ordinary shareholders: | ||
| Basic earnings per share | 0.08 | 0.24 |
| Diluted earnings per share | N/A | N/A |
| Calculated based on net profit from discontinued operations attributable to ordinary shareholders: | ||
| Basic earnings per share | N/A | N/A |
| Diluted earnings per share | N/A | N/A |
XV. Notes to major items in the Company's financial statements
1. Cash at bank and on hand
| June 30 | December 31 | |
| 2020 | 2019 | |
| Deposits in banks | 1,423,296 | 1,395,994 |
| Other cash and bank | 22,608 | 27,057 |
| 1,445,904 | 1,423,051 |
| June 30, 2020 | |||||
| Book value | Provision for expected credit losses | ||||
| Amount | Percentage (%) | Amount | Percentage (%) | Carrying amount | |
| Account receivables assessed individually for impairment | 131,888 | 25 | 131,888 | 100 | - |
| Account receivables assessed collectively for impairment | 400,047 | 75 | 18 | - | 400,029 |
| 531,935 | 100 | 131,906 | 27 | 400,029 | |
| December 31, 2019 | |||||
| Book value | Provision for expected credit losses | ||||
| Amount | Percentage (%) | Amount | Percentage (%) | Carrying amount | |
| Account receivables assessed individually for impairment | 131,375 | 27 | 131,375 | 100 | - |
| Account receivables assessed collectively for impairment | 349,157 | 73 | 48 | - | 349,109 |
| 480,532 | 100 | 131,423 | 27 | 349,109 | |
| June 30, 2020 | |
| Within 1 year (inclusive) | 402,496 |
| Over 1 year but within 2 years | 74,629 |
| Over 2 years but within 3 years | 40,933 |
| Over 3 years but within 4 years | 1,700 |
| Over 4 years but within 5 years | 2,634 |
| Over 5 years | 9,543 |
| 531,935 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
XV. Notes to major items in the Company's financial statements - (cont'd)
2. Accounts receivable - (cont'd)
c. Addition, written-back and written-off of provision for expected credit losses during the period
| Six months ended June 30, 2020 | |
| Balance as of January 1, | 131,423 |
| Addition during the year, net | 518 |
| Write back during the year | (35) |
| Write-off during the year | - |
| Exchange rate effect | - |
| Balance as of June 30 | 131,906 |
| Name | Closing balance | Proportion of Accounts receivable (%) | Allowance of expected credit losses |
| Party 1 | 270,467 | 51 | - |
| Party 2 | 118,009 | 22 | 118,009 |
| Party 3 | 95,472 | 18 | - |
| Party 4 | 8,788 | 2 | 5 |
| Party 5 | 7,650 | 1 | 4 |
| 500,386 | 94 | 118,018 |
| June 30 | December 31 | ||
| 2020 | 2019 | ||
| Bank acceptance draft | 8,512 | 11,722 | |
| 8,512 | 11,722 |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
XV. Notes to major items in the Company's financial statements - (cont'd)
4. Other Receivables
| June 30 | December 31 | |
| 2020 | 2019 | |
| Interest receivable | - | 64 |
| Other receivables | 45,492 | 13,987 |
| 45,492 | 14,051 |
| June 30 | December 31 | |
| 2020 | 2019 | |
| Other | 51,350 | 19,655 |
| Provision for expected credit losses | (5,858) | (5,668) |
| 45,492 | 13,987 |
| June 30, 2020 | |
| Within 1 year (inclusive) | 32,606 |
| Over 1 year but within 2 years | 13,679 |
| Over 2 years but within 3 years | - |
| Over 3 years but within 4 years | - |
| Over 4 years but within 5 years | 10 |
| Over 5 years | 5,055 |
| 51,350 |
XV. Notes to major items in the Company's financial statements - (cont'd)
4. Other Receivables - (cont'd)
(2) Other receivables - (cont'd)
c. Additions, recovery or reversal and written-off of provision for expected credit losses during theperiod:
| Six months ended June 30, 2020 | ||
| Balance as of January 1, 2020 | 5,668 | |
| Addition during the period | 262 | |
| Written back during the period | (72) | |
| Write-off during the period | - | |
| Balance as of June 30, 2020 | 5,858 |
| Name | Closing balance | Proportion of other receivables (%) | Credit loss provision |
| Party 1 | 16,985 | 33 | - |
| Party 2 | 13,322 | 26 | - |
| Party 3 | 12,716 | 25 | - |
| Party 4 | 3,125 | 6 | 3,125 |
| Party 5 | 1,053 | 2 | - |
| 47,201 | 92 | 3,125 |
XV. Notes to major items in the Company's financial statements - (cont'd)
5. Long-term equity investments
| June 30, 2020 | December 31, 2019 | |||||
| Amount balance | Impairment loss | Book value | Amount balance | Impairment loss | Book value | |
| Invest in subsidiaries. | 16,390,275 | 18,864 | 16,371,411 | 16,390,275 | 18,864 | 16,371,411 |
| 16,390,275 | 18,864 | 16,371,411 | 16,390,275 | 18,864 | 16,371,411 | |
| Invested unit | Opening balance | Increase | Decrease | Closing balance | Current provision Impairment loss | Balance provision Impairment loss |
| Jingzhou Hongxiang Chemical Co. Ltd. | 18,756 | - | - | 18,756 | - | 18,864 |
| Hubei Sanonda Foreign Trade Co. Ltd. | 11,993 | - | - | 11,993 | - | - |
| Adama Anpon (Jiangsu) Ltd. | 450,449 | - | - | 450,449 | - | - |
| ADAMA Agricultural Solutions Ltd. | 15,890,213 | - | - | 15,890,213 | - | - |
| 16,371,411 | - | - | 16,371,411 | - | 18,864 |
| Six months ended June 30, 2020 | Six months ended June 30, 2019 | |||
| Revenue | Operating costs | Revenue | Operating costs | |
| Main operations | 653,055 | 526,904 | 704,594 | 493,979 |
| Other operations | 20,591 | 10,410 | 30,832 | 24,582 |
| 673,646 | 537,314 | 735,426 | 518,561 | |
ADAMA Ltd.(Expressed in RMB '000)
Notes to the Financial Statements
XV. Notes to major items in the Company's financial statements - (cont'd)
7. Notes to items in the cash flow statements
(1) Other cash received relevant to operating activities
| Six months ended June 30, 2020 | Six months ended June 30, 2019 | |
| Interest income | 8,507 | 14,333 |
| Government subsidies | 4,992 | 4,414 |
| Other | 1,564 | 211 |
| 15,063 | 18,958 |
| Six months ended June 30, 2020 | Six months ended June 30, 2019 | |
| Professional services | 56,487 | 44,848 |
| Transportation and Commissions | 13,067 | 28,438 |
| Other | 21,253 | 16,284 |
| 90,807 | 89,570 |
| Six months ended June 30, 2020 | Six months ended June 30, 2019 | |
| Deposit for issuing bills payables | 4,449 | 11,947 |
| Six months ended June 30, 2020 | Six months ended June 30, 2019 | |
| Other | 200 | 200 |
| 200 | 200 |
XV. Notes to major items in the Company's financial statements - (cont'd)
8. Supplementary information to cash flow statement
(1) Reconciliation of net profit to net cash flows generated from operating activities:
| Six months ended June 30 | ||
| 2020 | 2019 | |
| Net profit | (42,764) | (37,789) |
| Add: Assets impairment loss | 2,864 | 272 |
| Credit impairment loss | 674 | 1,633 |
| Depreciation of fixed assets | 76,057 | 99,602 |
| Depreciation of-right-of use assets | 233 | 209 |
| Amortization of intangible assets | 2,222 | 2,347 |
| Loss on disposal of fixed assets, intangible assets and other long-term assets | (101) | 293 |
| Financial expenses | 3,518 | 12,588 |
| Decrease (increase) in deferred income tax assets | 27,873 | (11,220) |
| Decrease (increase) in inventory | 11,596 | 39,895 |
| Increase in accounts receivable from operating activities | (102,463) | 411,591 |
| Increase in payables from operating activities | (41,958) | (236,900) |
| Net cash flows generated from operating activities | (62,249) | 282,521 |
| Closing balance of cash | 1,423,296 | 2,132,174 |
| Less: Opening balance of cash | 1,395,994 | 2,005,313 |
| Net increase in cash and cash equivalents | 27,302 | 126,861 |
XV. Notes to major items in the Company's financial statements - (cont'd)
9. Related parties and related parties transactions
(1) Information on parent Company
| Company name | Registered place | Business nature | Registered capital (Thousand RMB) | Shareholding percentage | Percentage of voting rights |
| Syngenta Group | Shanghai, China | Production and sales of agrochemicals, fertilizers and GM seeds | 10,000,000 | 74.02% | 74.02% |
| Six months ended June 30 | |||
| 2020 | 2019 | ||
| Summary of Purchase of goods/services received: | Related Party Relationship | ||
| Purchase of goods/services received | Common control under ChemChina | 2,063 | 7,571 |
| Subsidiary | 45,630 | 48,064 | |
| Purchase of fixed assets and other assets | Common control under ChemChina | 155,616 | 12,766 |
| Subsidiary | 136 | - | |
| Summary of Sales of goods: | |||
| Sale of goods | Subsidiary | 450,283 | 260,266 |
| Sale of raw materials | Subsidiary | - | 331 |
XV. Notes to major items in the Company's financial statements - (cont'd)
9. Transactions and balances with related parties - (cont'd)
(3) Transactions with related parties - (cont'd)
b. Guarantees
The Company as the guarantor
| Amount of guaranteed loan | Inception date of guaranty | Maturity date of guaranty | Guaranty completed (Y/ N) | ||||
| Subsidiary | 20,000 | 26/12/2019 | 25/12/2020 | N | |||
| 40,000 | 10/10/2019 | 09/10/2020 | N | ||||
| 50,000 | 30/12/2019 | 25/12/2020 | N | ||||
| 50,000 | 12/12/2019 | 09/12/2020 | N | ||||
| 50,000 | 21/11/2019 | 18/11/2020 | N | ||||
| 50,000 | 19/11/2019 | 18/11/2020 | N | ||||
| 64,000 | 26/02/2020 | 25/02/2021 | N | ||||
| 20,000 | 27/02/2020 | 18/02/2021 | N | ||||
| 20,000 | 16/06/2020 | 11/06/2021 | N | ||||
| 30,000 | 19/05/2020 | 18/05/2021 | N | ||||
| 50,000 | 27/05/2020 | 05/02/2021 | N | ||||
| 50,000 | 29/06/2020 | 27/06/2021 | N |
| Guarantee provider | Amount of guaranteed loan | Inception date of guaranty | Maturity date of guaranty | Guaranty completed (Y/ N) | |||
| Parent | 300,000 | 20/11/2017 | 20/11/2022 | N | |||
XV. Notes to major items in the Company's financial statements - (cont'd)
9. Transactions and balances with related parties - (cont'd)
(3) Transactions with related parties - (cont'd)
c. Receivables from and payables to related parties (including loans)
Receivable Items
| June 30 | December 31 | ||||
| 2020 | 2019 | ||||
| Items | Related Party Relationship | Book Balance | Expected credit losses | Book Balance | Expected credit losses |
| Trade receivables | Subsidiary | 483,948 | 118,009 | 424,182 | 117,491 |
| Associates of ChemChina | 3,401 | 2 | - | - | |
| Other receivables | Subsidiary | 29,701 | - | - | - |
| June 30 | December 31 | ||
| Items | Related Party Relationship | 2020 | 2019 |
| Trade payables | Common control under ChemChina | 115,589 | 9,195 |
| Other payables | Subsidiary | 163,510 | 163,877 |
| Common control under ChemChina | 97 | 97 | |
| Other non-current liabilities* | Common control under ChemChina | 171,770 | 171,770 |
| Six months ended June 30 | |||
| Related Party | Related Party Relationship | 2020 | 2019 |
| Parent | Acquisition of a subsidiary | - | 415,000 |
ADAMA Ltd. Semi-Annual Report 2020
Supplementary information(Expressed in RMB '000)
1. Extraordinary Gain and Loss
| Six months ended | |
| June 30, 2020 | |
| Disposal of non-current assets | 7,694 |
| Government grants recognized through profit or loss | 17,834 |
| Recovery or reversal of expected credit losses which is assessed individually during the years | 15,508 |
| Other non-operating income or expenses other than the above | 19,274 |
| Other profit or loss that meets the definition of non-recurring profit or loss | (66,192) |
| Tax effect | (9,241) |
| (15,123) |
| Profit during the reporting period | Weighted average rate of return on net assets | ||||
| Basic EPS (RMB/share) | Diluted EPS (RMB/share) | ||||
| Net profit attributable to ordinary shareholders of the Company | 0.91% | 0.08 | N/A | ||
| Net profit after deduction of extraordinary gains/losses attributable to ordinary shareholders of the Company | 0.98% | 0.09 | N/A | ||
ADAMA Ltd. Semi-Annual Report 2020
Section XII - Documents Available for Reference(I) Financial Statements carried with signatures and seals of Legal Representative and Accounting Principal as well asHead of the Accounting Organ;(II) In the Reporting Period, originals of all documents of the Company ever disclosed publicly in media designated byChina Securities Regulatory Commission as well as the originals of all the public notices were deposited in the office ofthe Company.
ADAMA Ltd.Legal Representative:
Ignacio Dominguez
August 19, 2020