ADAMA Reports First Quarter 2021 ResultsRobust business growth yields increased profits in the first quarter? Sales grew by 14% to a Q1 record-high of $1,109 million, driven by continued robust 15%volume growth? Adjusted EBITDA higher by 2%, reaching $157 million? Reported net income of $23 million (Q1 2020: loss of $2 million)? Adjusted net income up 25% to $52 millionBEIJING, CHINA and TEL AVIV, ISRAEL, April 28, 2021 – ADAMA Ltd. (the “Company”) (SZSE000553), today reported its financial results for the first quarter ended March 31, 2021.Ignacio Dominguez, President and CEO of ADAMA, said, “In the first quarter, we continued ourstrong growth to achieve another Q1 record high sales performance, with robust demand for ourcrop protection products supported by generally higher crop prices. Although our growth wassomewhat mitigated by a softer pricing environment in many regions, and further offset by higherprocurement costs and a growth-driven increase in operating expenses, we nevertheless were ableto deliver a pleasing improvement in our bottom line. Our strong Q1 performance reflects ourcontinued ability to weather the ongoing pandemic-related challenges, and to provide much neededcrop protection solutions to growers around the world.”Financial Performance Summary
| USD (m) | | As Reported | | Adjustments | | Adjusted |
| | | | | | | | | | |
| Q1 2021 | Q1 2020 | % Change | | Q1 2021 | Q1 2020 | | Q1 2021 | Q1 2020 | % Change |
| Revenues | | 1,109 | 973 | +14% | | - | - | | 1,109 | 973 | +14% |
| Gross profit | | 305 | 277 | +10% | | 17 | 19 | | 322 | 296 | +9% |
| % of sales | | 27.5% | 28.5% | | | | | | 29.0% | 30.5% | |
| Operating income (EBIT) | | 65 | 51 | +29% | | 33 | 47 | | 98 | 97 | +1% |
| % of sales | | 5.9% | 5.2% | | | | | | 8.9% | 10.0% | |
| Income before taxes | | 29 | 20 | +47% | | 33 | 47 | | 62 | 66 | -7% |
| % of sales | | 2.6% | 2.0% | | | | | | 5.6% | 6.8% | |
| Net income attributable to the shareholders of the company | | 23 | -2 | | | 29 | 44 | | 52 | 42 | +25% |
| % of sales | | 2.1% | -0.2% | | | | | | 4.7% | 4.3% | |
| EPS | | | | | | | | | | | |
| - USD | | 0.0098 | -0.0010 | | | | | | 0.0223 | 0.0170 | +31% |
| - RMB | | 0.0639 | -0.0068 | | | | | | 0.1447 | 0.1182 | +22% |
| EBITDA | | 138 | 133 | +3% | | 19 | 20 | | 157 | 153 | +2% |
| % of sales | | 12.4% | 13.7% | | | | | | 14.2% | 15.8% | |
Notes:
“As Reported” denotes the Company’s financial statements according to the Accounting Standards for Business Enterprises and theimplementation guidance, interpretations and other relevant provisions issued or revised subsequently by the Chinese Ministry of Finance(the “MoF) (collectively referred to as “ASBE”). Please see the appendix to this release for further information.Relevant income statement items contained in this release are also presented on an “Adjusted” basis, which exclude items that are of aone-time or non-cash/non-operational nature that do not impact the ongoing performance of the business, and reflect the way theCompany’s management and the Board of Directors view the performance of the Company internally. The Company believes thatexcluding the effects of these items from its operating results allows management and investors to effectively compare the true underlyingfinancial performance of its business from period to period and against its global peers. A detailed summary of these adjustments appearsin the appendix below.
The Q1 2020 Adjusted Income Statement has been amended from that presented at the time to include additional adjustments in order toconsistently reflect largely the treatment of China Relocation & Upgrade Program-related costs amongst other adjustments that theCompany has deemed non-operational and one-time in nature, as well as to reflect a change in allocation of certain costs between thoseimpacting Operating Expenses and those impacting Gross Profit.The number of shares used to calculate both basic and diluted earnings per share in 2020 is 2,446.6 million shares. The number of sharesused to calculate both basic and diluted earnings per share in 2021 is 2,329.8 million shares, reflecting the buyback and cancellation of
102.4 million shares from CNAC in July 2020 and repurchase of 14.3 million B shares during the second half of 2020.The general crop protection market environment
In the first quarter of 2021, commodity crop prices continued to increase as global demand remainedstrong, fueled by pandemic-related food security concerns, a recovery in biofuel demand and higherfeed demand, especially from China. Weather-related agricultural supply challenges also contributedto the high crop prices, which are expected to remain elevated throughout the rest of the year. Thepositive crop price environment, along with associated expectations of higher planted areas, arecombining to drive global demand for crop protection products.During the quarter, prices of intermediates and active ingredients sourced from China increasedcompared to the same period last year, due in part to the recovery of oil prices alongside higher rawmaterial costs and stronger demand.As global economies start to reopen following pandemic-related shutdowns over the past year,global trade markets are experiencing scarcity of transportation resources leading to higher freightcosts, a situation that has been exacerbated by the recent Suez Canal incident and other portcongestions all over the globe.The Company actively manages its procurement and supply chain activities in order to mitigatethese higher procurement and logistics costs, and endeavors to adjust its pricing wherever possibleto compensate.Financial HighlightsRevenues grew 14% (+6% in RMB terms) to hit a first quarter record-high of $1,109 million,
driven by a robust 15% increase in volumes. This strong volume-driven growth was somewhatmitigated by a softer pricing environment in a number of key regions.ADAMA delivered particularly strong performances in the Asia Pacific and India, Middle-East &Africa regions, benefiting from strong demand and favorable seasonal conditions. The Companyalso grew strongly in North America, driven by its Consumer and Professional business, as well asin Latin America. Sales in Europe were somewhat lower due to a slow start to the season in thenorthern and eastern parts of the region.Gross Profit in the first quarter was $305 million (27.5% of sales), up 10% compared to $277million (28.5% of sales) reported in the corresponding period last year.The Company recorded certain extraordinary charges within its reported cost of goodssold, totaling approximately $17 million in the first quarter (Q1 2020: $19 million). Thesecharges were largely related to its Relocation & Upgrade program, and include mainly (i)excess procurement costs incurred as the Company continued to fulfill demand for itsproducts in order to protect its market position, through replacement sourcing atsignificantly higher costs from third-party suppliers, and (ii) elevated idleness chargeslargely related to suspensions at the facilities being relocated as well as to the temporarysuspension of the Jingzhou site in Q1 2020 at the outbreak of COVID-19 in HubeiProvince. For further details on these extraordinary charges, please see the appendix tothis release.Excluding the impact of the abovementioned extraordinary items, adjusted gross profit in the quarterwas $322 million (29.0% of sales), up 9% compared to $296 million (30.5% of sales) in the
corresponding period last year. The higher gross profit was driven by the strong volume growthalongside positive seasonal changes in product offering, more than offsetting the impacts of thegenerally softer prices and higher procurement and logistics costs.Operating expenses in the first quarter were $239 million (21.6% of sales), compared to $226million (23.3% of sales) reported in the corresponding period last year.The Company recorded certain non-operational, mostly non-cash, charges within itsreported operating expenses, totaling approximately $16 million in the first quarter (Q12020: $27 million). These charges include mainly (i) $8 million in Q1 2021 (Q1 2020: $8million) in non-cash amortization charges in respect of Transfer assets received fromSyngenta related to the 2017 ChemChina-Syngenta acquisition, (ii) $4 million in Q12021 (Q1 2020: $1 million) in non-cash charges related to incentive plans, and (iii) $4million in Q1 2021 (Q1 2020: $3 million) in charges related mainly to the non-cashamortization of intangible assets created as part of the Purchase Price Allocation (PPA)on acquisitions, with no impact on the ongoing performance of the companies acquired,as well as other M&A-related costs. The higher aggregate amount of non-operationalcharges in Q1 2020 also included $11 million in non-cash amortization charges relatedto the legacy PPA of the 2011 acquisition of Adama Agricultural Solutions, which havenow largely finished, and $9 million in respect of early retirement expenses. For furtherdetails on these non-operational charges, please see the appendix to this release.Excluding the impact of the abovementioned non-operational charges, adjusted operating expensesin the quarter were $223 million (20.1% of sales), compared to $199 million (20.5% of sales) in thecorresponding period last year.The higher operating expenses reflect primarily an increase in sales and marketing teams in growinggeographies to drive and support the strong sales growth, higher transportation and logistics costsdriven by both an increase in freight costs and the increased volumes being moved, as well as theinclusion of recent acquisitions in Greece, Paraguay and China. Despite the higher operatingexpenses in absolute terms, the Company continued to improve its expense-to-sales ratio.Operating income in the first quarter was $65 million (5.9% of sales), compared to $51 million (5.2%of sales) reported in the corresponding period last year. Excluding the impact of theabovementioned extraordinary and non-operational charges, adjusted operating income in thequarter was $98 million (8.9% of sales), compared to $97 million (10.0% of sales) in thecorresponding period last year. The slightly higher operating income in the quarter was driven by thehigher gross profit, but reflects also the growth-driven increase in operating expenses.EBITDA in the first quarter was $138 million (12.4% of sales), up 3.5% compared to $133 million(13.7% of sales) reported in the corresponding period last year. Excluding the impact of theabovementioned extraordinary and non-operational charges, adjusted EBITDA in the quarter was$157 million (14.2% of sales), up 2.4% compared to $153 million (15.8% of sales) in the first quarterof 2020.Financial expenses and investment income in the first quarter were $36 million, compared to $31million in the corresponding period last year. The higher financial expenses were mainly due to anincrease in financing costs on the NIS-denominated, CPI-linked bonds due to a higher CPI in Israel.Taxes on income reported in the first quarter were $6 million, compared to $22 million reported inthe corresponding period last year. The first quarter is generally characterized by a low effective taxrate compared to the effective tax rate of the Company over the full year. This is mainly due to thegeneration of profits by subsidiary companies within ADAMA whose tax rates are lower relative tothe Company’s aggregate effective tax rate, as well as to the method of calculation of tax assetsrelated to unrealized profits. However, in Q1 2020, the Company recorded higher tax expenseslargely due to the impact of the significant weakening of currencies in that quarter against the US
dollar, most notably that of the Brazilian Real, driving higher non-cash tax expenses due todifferences between the functional (US dollar) and tax (local) currencies regarding the value of non-monetary assets.Net income attributable to the shareholders of the company in the first quarter was $23 million(2.1% of sales), compared to a loss of $2 million reported in the corresponding period last year.Excluding the impact of the abovementioned extraordinary and non-operational charges, adjustednet income in the quarter was $52 million (4.7% of sales), up 25% compared to $42 million (4.3% ofsales) achieved in the corresponding period last year.The improvement in net income in the quarter was driven by the slightly higher operating incomeand lower taxes, which were partially offset by the higher financial expenses.Trade working capital at March 31, 2021 was $2,604 million compared to $2,178 million at thesame point last year. The Company is holding higher inventory levels due mainly to a shift ingeographic and portfolio sales mix, as well as due to the anticipation of further volume growth incoming quarters. The Company also saw an increase in trade receivables, driven largely by itsstrong growth over recent quarters in emerging markets, most notably in Latin America and Brazil,where customer credit terms are generally longer, as well as the stretching of credit terms in certaincountries most impacted by COVID-19 related challenges. These increases were partially offset byhigher trade payables.Cash Flow: Operating cash flow of $129 million was consumed in the quarter, compared to $55million consumed in the corresponding period last year. The negative operating cash flow, which isseasonally typical for ADAMA in the first quarter, also reflects the higher build-up of working capitalin the first quarter compared to the parallel quarter last year.Net cash used in investing activities was $109 million in the quarter, compared to $54 million in thecorresponding period last year. The higher level of cash used in investing activities in the quarterlargely reflects an increase in investments in fixed assets, mainly driven by the upgrading andrelocation of manufacturing facilities in China and Israel, the acquisition of a majority stake inJiangsu Huifeng’s domestic commercial crop protection business, as well as investments in theadvancement of the Company’s differentiated product portfolio.Free cash flow of $248 million was consumed in the first quarter compared to $116 millionconsumed in the corresponding period last year, reflecting the aforementioned operating andinvesting cash flow dynamics.Portfolio Development UpdateIn the first quarter, ADAMA continued to advance the development of its differentiated productportfolio. The Company obtained multiple new product registrations in the quarter, includingVERITAS
?, a unique broad-spectrum fungicide for control of foliar disease in Australia, as well asHEYDAY
?, a herbicide for control of broadleaf and grass weeds in Thailand.New product launches in the quarter included BARROZ
?, a uniquely convenient granular solution forrice growers to gain effective control of stemborer in India, as well as EMPHASIS
?, an innovativeherbicide co-pack that provides a versatile and effective pre-seed burn-off solution in Canada.
Regional Sales Performance Review
CER: Constant Exchange Rates
Europe: Sales were lower by 4.1% in the first quarter, in CER terms, compared with thecorresponding period last year.Growth in the southern part of the region, where favorable market conditions drove good demand,was outweighed by a slow start to the season in the northern and eastern parts of the region,especially when compared to Q1 2020 which then saw strong orders from distribution in anticipationof the COVID-related shutdowns that soon followed.In US dollar terms, sales in Europe were lower by 3.5% in the quarter, compared to thecorresponding period last year.North America: Sales grew by 11.8% in the quarter, in CER terms, compared with thecorresponding period last year.Growth in the region was driven by a strong performance from the Company’s Consumer andProfessional business, benefiting from the reopening of the economy after COVID-19 relatedrestrictions in 2020. This more than offset a somewhat softer performance in the US crop protectionbusiness.In US dollar terms, sales in North America grew by 12.4% in the quarter, compared to thecorresponding period last year, reflecting a moderate strengthening of the Canadian Dollar in thequarter.Latin America: Sales grew by a robust 22.1% in the quarter, in CER terms, compared to thecorresponding period last year.The Company continues its growth trajectory in Latin America, driven by solid volume growth andgood performance from recent product launches in the region.In US dollar terms, sales in Latin America grew by 11.3% in the quarter, compared to thecorresponding period last year, as the robust business growth was partially offset by weakercurrencies in the region, in particular the Brazilian Real.Asia-Pacific: Sales grew by 39.3% in the quarter, in CER terms, compared to the correspondingperiod last year.The strong growth in the Asia-Pacific region was seen both in China and beyond. In China, ADAMAsaw significant growth in the quarter both from its branded, formulated portfolio, which was driven byhigher cereal demand due to an increase in field crop planted areas and an early start to the Q2season, as well as from its sales of raw materials and intermediates. Sales in the country were
| | Q1 2021 $m | Q1 2020 $m | | Change USD | Change CER |
| North America | | 189 | 168 | | +12.4% | +11.8% |
| Latin America | | 177 | 159 | | +11.3% | +22.1% |
| Asia Pacific | | 241 | 158 | | +52.7% | +39.3% |
| Of which, China | | 124 | 68 | | +81.6% | +71.0% |
| India, Middle East & Africa | | 158 | 131 | | +20.4% | +23.0% |
| Total | | 1,109 | 973 | | +14.0% | +13.6% |
further bolstered by the inclusion of the Company’s recent acquisition of Jiangsu Huifeng’s domesticcommercial crop protection business.In the rest of Asia-Pacific, the Company benefited from favorable seasonal conditions and deliveredstrong growth, despite a slower recovery from COVID-19 challenges in Asia.In US dollar terms, sales in Asia-Pacific grew by 52.7% in the quarter, compared to thecorresponding period last year, reflecting mainly the strengthening of the Chinese Renminbi and theAustralian dollar against the US dollar.India, Middle East & Africa: Sales grew by 23.0% in the quarter, in CER terms, compared to thecorresponding period last year, driven by strong volume growth alongside price increases amidcontinued positive weather conditions.During the quarter, ADAMA launched a new pilot formulation R&D facility in India, complementingthe Company’s leading formulation development capabilities in its main R&D hubs in Israel, Chinaand India. The new facility, equipped with state-of-the-art technologies, will bridge the path from theR&D lab to commercial stage production, developing processes for the scale-up of liquid and solidformulation.In US dollar terms, sales in the India, Middle East & Africa region grew by 20.4% in the quarter,compared to the corresponding period last year, reflecting mainly the weaker level of the TurkishLira, partially offset by a stronger Israeli Shekel.Table 3. Revenues by operating segmentFirst quarter sales by segment
| Q1 2021 USD (m) | % | | Q1 2020 USD (m) | % |
| Crop Protection | 1,007 | 90.8% | | 885 | 91.0% |
| Intermediates and Ingredients | 102 | 9.2% | | 88 | 9.0% |
| Total | 1,109 | 100.0% | | 973 | 100.0% |
First quarter sales by product category
| Q1 2021 USD (m) | % | | Q1 2020 USD (m) | % |
| Herbicides | 477 | 43.0% | | 441 | 45.3% |
| Insecticides | 314 | 28.3% | | 217 | 22.3% |
| Fungicides | 216 | 19.5% | | 227 | 23.3% |
| Intermediates and Ingredients | 102 | 9.2% | | 88 | 9.0% |
| Total | 1,109 | 100.0% | | 973 | 100.0% |
Note: the sales split by product category is provided for convenience purposes only and is not representative of the way the Company ismanaged or in which it makes its operational decisions.
Further InformationAll filings of the Company, together with a presentation of the key financial highlights of the period,can be accessed through the Company website at www.adama.com.
##About ADAMAADAMA Ltd. is a global leader in crop protection, providing solutions to farmers across the world tocombat weeds, insects and disease. ADAMA has one of the widest and most diverse portfolios ofactive ingredients in the world, state-of-the art R&D, manufacturing and formulation facilities,together with a culture that empowers our people in markets around the world to listen to farmersand ideate from the field. This uniquely positions ADAMA to offer a vast array of distinctivemixtures, formulations and high-quality differentiated products, delivering solutions that meet localfarmer and customer needs in over 100 countries globally. For more information, visit us atwww.ADAMA.com and follow us on Twitter
?at @ADAMAAgri.ContactBen Cohen Zhujun WangGlobal Investor Relations China Investor RelationsEmail: ir@adama.com Email: irchina@adama.com
Abridged Adjusted Consolidated Financial StatementsThe following abridged consolidated financial statements and notes have been prepared as described in Note 1 in thisappendix. While prepared based on the principles of Chinese Accounting Standards (ASBE), they do not contain all of theinformation which either ASBE or IFRS would require for a complete set of financial statements, and should be read inconjunction with the consolidated financial statements of both ADAMA Ltd. and Adama Agricultural Solutions Ltd. as filedwith the Shenzhen and Tel Aviv Stock Exchanges, respectively.Relevant income statement items contained in this release are also presented on an “Adjusted” basis, which exclude itemsthat are of a one-time or non-cash/non-operational nature that do not impact the ongoing performance of the business, andreflect the way the Company’s management and the Board of Directors view the performance of the Company internally.The Company believes that excluding the effects of these items from its operating results allows management andinvestors to effectively compare the true underlying financial performance of its business from period to period and againstits global peers.
Abridged Consolidated Income Statement for the First Quarter
| Adjusted1 | Q1 2021 USD (m) | Q1 2020 USD (m) | Q1 2021 RMB (m) | Q1 2020 RMB (m) |
| Revenues | 1,109 | 973 | 7,187 | 6,782 |
| Cost of Sales | 782 | 673 | 5,069 | 4,696 |
| Gross profit | 322 | 296 | 2,085 | 2,066 |
| % of revenue | 29.0% | 30.5% | 29.0% | 30.5% |
| Selling & Distribution expenses | 178 | 159 | 1,156 | 1,106 |
| General & Administrative expenses | 32 | 27 | 208 | 188 |
| Research & Development expenses | 17 | 17 | 110 | 116 |
| Other operating expenses | -4 | -3 | -26 | -23 |
| Total operating expenses | 223 | 199 | 1,448 | 1,387 |
| % of revenue | 20.1% | 20.5% | 20.1% | 20.5% |
| Operating income (EBIT) | 98 | 97 | 637 | 679 |
| % of revenue | 8.9% | 10.0% | 8.9% | 10.0% |
| Financial expenses and investment income | 36 | 31 | 236 | 217 |
| Income before taxes | 62 | 66 | 401 | 462 |
| Non-controlling interest | 1 | - | 5 | - |
| Shareholders of the Company | 52 | 42 | 337 | 289 |
| % of revenue | 4.7% | 4.3% | 4.7% | 4.3% |
| Adjustments | -29 | -44 | -188 | -306 |
| Reported Net income attributable to the shareholders of the Company | 23 | -2 | 162 | -17 |
| Adjusted EBITDA | 157 | 153 | 1,018 | 1,069 |
| % of revenue | 14.2% | 15.8% | 14.2% | 15.8% |
| Adjusted EPS2 – Basic | 0.0223 | 0.0170 | 0.1447 | 0.1182 |
| – Diluted | 0.0223 | 0.0170 | 0.1447 | 0.1182 |
| Reported EPS2 – Basic | 0.0098 | -0.0010 | 0.0639 | -0.0068 |
For an analysis of the differences between the adjusted income statement items and the income statement items as reported in thefinancial statements, see below “Analysis of Gaps between Adjusted Income Statement and Income Statement in Financial Statements”.
The number of shares used to calculate both basic and diluted earnings per share in 2021 is 2,329.8 million shares, reflecting thebuyback and cancellation of 102.4 million shares from CNAC in July 2020 and repurchase of 14.3 million B shares during the secondhalf of 2020. The number of shares used to calculate both basic and diluted earnings per share in 2020 is 2,446.6 million shares.
| – Diluted | 0.0098 | -0.0010 | 0.0639 | -0.0068 |
Abridged Consolidated Balance Sheet
| March 31 2021 USD (m) | March 31 2020 USD (m) | | March 31 2021 RMB (m) | March 31 2020 RMB (m) |
| Cash at bank and on hand | 596 | 602 | | 3,915 | 4,264 |
| Bills and accounts receivable | 1,707 | 1,414 | | 11,220 | 10,019 |
| Inventories | 1,663 | 1,424 | | 10,931 | 10,091 |
| Other current assets, receivables and prepaid expenses | 383 | 461 | | 2,516 | 3,264 |
| Total current assets | 4,349 | 3,901 | | 28,582 | 27,639 |
| Fixed assets, net | 1,235 | 1,099 | | 8,115 | 7,786 |
| Rights of use assets | 80 | 75 | | 528 | 534 |
| Intangible assets, net | 1,490 | 1,455 | | 9,790 | 10,308 |
| Deferred tax assets | 133 | 118 | | 874 | 833 |
| Other non-current assets | 83 | 96 | | 542 | 681 |
| Total non-current assets | 3,021 | 2,843 | | 19,849 | 20,142 |
| Total assets | 7,370 | 6,743 | | 48,431 | 47,780 |
| Loans and credit from banks and other lenders | 618 | 507 | | 4,063 | 3,595 |
| Bills and accounts payable | 781 | 680 | | 5,131 | 4,814 |
| Other current liabilities | 760 | 813 | | 4,995 | 5,760 |
| Total current liabilities | 2,157 | 2,000 | | 14,189 | 14,169 |
| Loans and credit from banks and other lenders | 368 | 167 | | 2,416 | 1,181 |
| Debentures | 1,195 | 1,101 | | 7,851 | 7,804 |
| Deferred tax liabilities | 59 | 63 | | 387 | 448 |
| Employee benefits | 100 | 97 | | 657 | 687 |
| Other long-term liabilities | 170 | 140 | | 1,120 | 991 |
| Total long-term liabilities | 1,892 | 1,568 | | 12,431 | 11,111 |
| Total liabilities | 4,051 | 3,568 | | 26,620 | 25,280 |
| Total equity | 3,319 | 3,175 | | 21,811 | 22,500 |
| Total liabilities and equity | 7,370 | 6,743 | | 48,431 | 47,780 |
Abridged Consolidated Cash Flow Statement for the First Quarter
| Q1 2021 USD (m) | Q1 2020 USD (m) | | Q1 2021 RMB (m) | Q1 2020 RMB (m) |
| Cash flow from operating activities: | | | | | |
| Cash flow from operating activities | -129 | -55 | | -838 | -385 |
| Cash flow from operating activities | -129 | -55 | | -838 | -385 |
| | | | | |
| Investing activities: | | | | | |
| Acquisitions of fixed and intangible assets | -91 | -51 | | -588 | -357 |
| Proceeds from disposal of fixed and intangible assets | 1 | 1 | | 9 | 9 |
| Acquisition of subsidiaries | -8 | - | | -55 | - |
| Other investing activities | -11 | -3 | | -71 | -25 |
| Cash flow used for investing activities | -109 | -53 | | -704 | -373 |
| | | | | |
| Financing activities: | | | | | |
| Receipt of loans from banks and other lenders | 287 | 171 | | 1,862 | 1,194 |
| Repayment of loans from banks and other lenders | -38 | -61 | | -244 | -429 |
| Interest payment and other | -10 | -7 | | -63 | -46 |
| Other financing activities | 5 | -13 | | 26 | -90 |
| Cash flow from (used for) financing activities | 244 | 90 | | 1,581 | 629 |
| Effects of exchange rate movement on cash and cash equivalents | -2 | -3 | | 18 | 47 |
| Net change in cash and cash equivalents | 4 | -21 | | 57 | -82 |
| Cash and cash equivalents at the beginning of the period | 588 | 619 | | 3,835 | 4,320 |
| Cash and cash equivalents at the end of the period | 592 | 598 | | 3,892 | 4,238 |
| | | | | |
| Free Cash Flow | -248 | -116 | | -1,605 | -805 |
Notes to Abridged Consolidated Financial StatementsNote 1: Basis of preparationBasis of presentation and accounting policies: The abridged consolidated financial statements for thequarters ended March 31, 2021 and 2020 incorporate the financial statements of ADAMA Ltd. and of all of itssubsidiaries (the “Company”), including Adama Agricultural Solutions Ltd. (“Solutions”) and its subsidiaries.The Company has adopted the Accounting Standards for Business Enterprises (ASBE) issued by the Ministryof Finance (the "MoF") and the implementation guidance, interpretations and other relevant provisions issuedor revised subsequently by the MoF (collectively referred to as “ASBE”).The abridged consolidated financial statements contained in this release are presented in both ChineseRenminbi (RMB), as the Company’s shares are traded on the Shenzhen Stock Exchange, as well as in UnitedStates dollars ($) as this is the major currency in which the Company’s business is conducted. For thepurposes of this release, a customary convenience translation has been used for the translation from RMB toUS dollars, with Income Statement and Cash Flow items being translated using the quarterly averageexchange rate, and Balance Sheet items being translated using the exchange rate at the end of the period.The preparation of financial statements requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements, and the reported amounts of revenues and expenses during the reporting period.Actual results could differ from those estimated.Note 2: Abridged Financial StatementsFor ease of use, the financial statements shown in this release have been abridged as follows:
Abridged Consolidated Income Statement:
? “Gross profit” in this release is revenue less costs of goods sold, taxes and surcharges, inventoryimpairment and other idleness charges (in addition to those already included in costs of goods sold);part of the idleness charges is removed in the Adjusted financial statements? “Other operating expenses” includes impairment losses (not including inventory impairment); gain
(loss) from disposal of assets and non-operating income and expenses? “Operating expenses” in this release differ from those in the formally reported financial statements in
that in this release certain idleness charges have been reclassified to impact gross profit, in line with
the approach taken by the Company with respect to idleness charges generally? “Financial expenses and investment income” includes net financing expenses; gains from changes in
fair value; and investment income (including share of income of equity accounted investees)
Abridged Consolidated Balance Sheet:
? “Other current assets, receivables and prepaid expenses” includes financial assets held for trading;
financial assets in respect of derivatives; prepayments; other receivables; and other current assets? “Fixed assets, net” includes fixed assets and construction in progress? “Intangible assets, net” includes intangible assets and goodwill? “Other non-current assets” includes other equity investments; long-term equity investments; long-term
receivables; investment property; and other non-current assets? “Loans and credit from banks and other lenders” includes short-term loans and non-current liabilities
due within one year? “Other current liabilities” includes financial liabilities in respect of derivatives; payables for employee
benefits, taxes, interest, dividends and others; advances from customers and other current liabilities? “Other long-term liabilities” includes long-term payables, provisions, deferred income and other non-
current liabilities
Income Statement Adjustments
| Q1 2021 USD (m) | Q1 2020 USD (m) | | Q1 2021 RMB (m) | Q1 2020 RMB (m) |
| Net Income (Reported) | 23.3 | -2.4 | | 150.8 | -16.7 |
| Adjustments to COGS & Operating Expenses: | | | | | |
| 1. Amortization of Legacy PPA of 2011 acquisition of Solutions (non-cash) | 0.3 | 11.5 | | 1.6 | 79.9 |
| 2. Amortization of Transfer assets received and written-up due to 2017 ChemChina-Syngenta transaction (non-cash) | 7.8 | 7.9 | | 50.8 | 54.9 |
| 3. Upgrade & Relocation related costs | 15.4 | 15.4 | | 99.8 | 107.6 |
| 4. Incentive plans (non-cash) | 4.1 | 0.7 | | 26.8 | 5.1 |
| 5. Amortization of acquisition-related PPA (non-cash) and other acquisition-related costs | 3.7 | 2.6 | | 24.3 | 17.8 |
| 6. Employee early retirement expenses | - | 8.6 | | - | 59.8 |
| 7. Provisions in tax expenses related to prior years’ activities | 1.6 | - | | 10.3 | - |
| Total Adjustments to Operating Income (EBIT) | 33.0 | 46.6 | | 213.6 | 325.1 |
| Total Adjustments to EBITDA | 19.4 | 20.2 | | 125.6 | 140.9 |
| 1. Tax shield on Legacy PPA of 2011 acquisition of Solutions | 0.0 | 1.9 | | 0.3 | 13.6 |
| 3. Taxes related to restructuring costs | 2.4 | 0.5 | | 15.6 | 3.5 |
| 5. Deferred tax due to amortization of acquisition-related PPA and other acquisition-related costs | 0.6 | 0.3 | | 3.9 | 2.2 |
| 7. Provisions in tax expenses related to prior years’ activities | 0.4 | - | | 2.5 | - |
| Total adjustments to Net Income | 29.5 | 43.9 | | 191.5 | 305.8 |
| Net Income (Adjusted) | 52.8 | 41.5 | | 342.3 | 289.2 |
| Total adjustments to Net Income attributable to the shareholders of the Company | 29.1 | 43.9 | | 188.4 | 305.8 |
Notes:
1. Amortization of Legacy PPA of 2011 acquisition of Solutions (non-cash): Under ASBE, since the first combined reporting for Q3 2017, theCompany has inherited the historical “legacy” amortization charge that ChemChina previously was incurring in respect of its acquisition ofSolutions in 2011. This amortization is done in a linear manner on a quarterly basis, most of which will have been completed by the end of 2020.
2. Amortization of Transfer assets received and written-up due to 2017 ChemChina-Syngenta transaction (non-cash): The proceeds fromthe Divestment of crop protection products in connection with the approval by the EU Commission of the acquisition of Syngenta byChemChina, net of taxes and transaction expenses, were paid to Syngenta in return for the transfer of a portfolio of products in Europe ofsimilar nature and economic value. Since the products acquired from Syngenta are of the same nature and with the same net economic valueas those divested, and since in 2018 the Company adjusted for the one-time gain that it made on the divested products, the additionalamortization charge incurred due to the written-up value of the acquired assets is also adjusted to present a consistent view of Divestment andTransfer transactions, which had no net impact on the underlying economic performance of the Company. These additional amortizationcharges will continue until 2032 but at a reducing rate, yet will still be at a meaningful level until 2028.
3. Upgrade & Relocation-related costs: These charges all relate to the multi-year Upgrade & Relocation program in China. As part of thisprogram, production assets located in the old production sites in Jingzhou and Huai’An are being relocated to the new sites, both in 2020 andin the coming years. Since some of the older production assets may not be able to be relocated, some of these assets which are no longeroperational are being written off (or impaired), while for others, their economic life has been shortened and therefore will be depreciated over ashorter period. Since these are older assets that were built many years ago and will be replaced by newer production facilities at the new sites,and since the ongoing operations of the business will not be impacted thereby, the Company adjusts for the impact of all charges related to theChina Upgrade & Relocated program, which include mainly: (i) excess procurement costs incurred as the Company continued to fulfill demandfor its products, in order to protect its market position, through replacement sourcing at significantly higher costs from third-party suppliers (ii)elevated idleness charges largely related to suspensions at the facilities being relocated as well as to the temporary suspensions of theJingzhou site in Q1 2020 (at the outbreak of COVID-19 in Hubei Province).
4. Incentive plans (non-cash): The Company granted its employees, who are mainly non-Chinese residents, a long-term incentive (LTI) in theform of 'phantom' options, due to the complexity of granting Chinese-listed, equity-settled options to non-Chinese employees. As such, theCompany records an expense, or recognizes income, depending on the fluctuation in the Company’s share price, even though the Companywill not incur any cash impact prior to exercise of the phantom options. To neutralize the impact of such share price movements on themeasurement of the Company’s performance and expected employee compensation and to reflect the existing phantom options, in theCompany’s adjusted financial performance, the LTI is presented on an equity-settled basis in accordance with the value of the existing plan atthe grant date.
5. Amortization of acquisition-related PPA (non-cash) and other acquisition-related costs: Related mainly to the non-cash amortization of
intangible assets created as part of the Purchase Price Allocation (PPA) on acquisitions, with no impact on the ongoing performance of thecompanies acquired, as well as other M&A-related costs.
6. Employee early retirement expenses: Provision for early retirement plan of employees at the Company’s Israeli manufacturing sites.
7. Provisions in tax expenses related to prior years’ activities: Provisions in respect of tax expenses related to activities of prior years.
Exchange Rates of the Company's Principal Functional Currencies
| March 31 | | Q1 Average | |
| 2021 | 2020 | Change | | 2021 | 2020 | Change | |
| EUR/USD | 1.174 | 1.094 | 7.3% | | 1.206 | 1.102 | 9.4% | |
| USD/BRL | 5.697 | 5.199 | (9.6%) | | 5.473 | 4.458 | (22.8%) | |
| USD/PLN | 3.968 | 4.147 | 4.3% | | 3.772 | 3.920 | 3.8% | |
| USD/ZAR | 14.93 | 17.89 | 16.6% | | 14.970 | 15.351 | 2.5% | |
| AUD/USD | 0.761 | 0.609 | 25.0% | | 0.773 | 0.658 | 17.6% | |
| GBP/USD | 1.376 | 1.234 | 11.5% | | 1.380 | 1.234 | 11.8% | |
| USD/ILS | 3.334 | 3.565 | 6.5% | | 3.270 | 3.565 | 8.3% | |
| USD LIBOR 3M | 0.20% | 1.45% | (86.2%) | | 0.20% | 1.53% | (86.9%) | |
| March 31 | | Q1 Average | |
| 2021 | 2020 | Change | | 2021 | 2020 | Change | |
| USD/RMB | 6.571 | 7.085 | (7.3%) | | 6.481 | 6.974 | (7.1%) | |
| EUR/RMB | 7.712 | 7.751 | (0.5%) | | 6.481 | 7.687 | (15.7%) | |
| RMB/BRL | 0.867 | 0.734 | (18.2%) | | 0.844 | 0.639 | (32.1%) | |
| RMB/PLN | 0.604 | 0.585 | (3.2%) | | 0.604 | 0.562 | (7.4%) | |
| RMB/ZAR | 2.271 | 2.525 | 10.0% | | 2.271 | 2.201 | (3.2%) | |
| AUD/RMB | 5.003 | 4.317 | 15.9% | | 5.012 | 4.586 | 9.3% | |
| GBP/RMB | 9.041 | 8.742 | 3.4% | | 9.041 | 8.926 | 1.3% | |
| RMB/ILS | 0.507 | 0.503 | (0.8%) | | 0.507 | 0.501 | (1.2%) | |
