ADAMA Reports First Quarter 2022 ResultsStrong performance in Q1, with continued price increases while maintaining volume
growth, significant increase in net profit
First Quarter 2022 Highlights:
? Sales up 28% to an all-time quarterly record-high of $1,420 million (RMB: +25%), driven by 18%
higher prices and 14% volume growth
? Improvement of Opex/Sales ratio of 19.8% vs. 20.1% in Q1 2021? Adjusted EBITDA up 28% to $201 million (RMB: +25%)? Adjusted net income up 44% to $75 million; Reported net income nearly tripled to $67 million(RMB: +187%)
BEIJING, CHINA and TEL AVIV, ISRAEL, April 27, 2022 – ADAMA Ltd. (the “Company”) (SZSE000553), today reported its financial results for the first quarter ended March 31, 2022.Ignacio Dominguez, President and CEO of ADAMA, said, "The first quarter has seen us deliveran extremely strong start to the year, with a combination of higher prices and continued volumegrowth. Indeed, over the past two years, we have seen robust demand for crop protection productsas a result of high agricultural commodity prices and strong farmer profitability. Now in the firstquarter, we are reminded once again that crop protection is a vital component in ensuring globalfood security. Uncertainties in the supply from Ukraine and Russia of agricultural inputs, such asfertilizers, as well as agricultural produce like wheat, barley and sunflowers, have increasedconcerns regarding food security. This encourages agricultural production in other geographies andexacerbates an already tight global supply of all agricultural inputs. We hope that the terriblesituation in Eastern Europe reaches a peaceful resolution as fast as possible, and ADAMA iscommitted to play its role in ensuring food security, in this region and globally, while continuing toprovide support to our people and our customers as they navigate through this very difficult time."Table 1. Financial Performance Summary
USD (m) | As Reported | Adjustments | Adjusted | ||||||||
Q1 2022 | Q1 2021 | % Change | Q1 2022 | Q1 2021 | Q1 2022 | Q1 2021 | % Change |
Revenues
Revenues | 1,420 | 1,109 | +28% | - | - | 1,420 | 1,109 | +28% | |||
Gross profit | 360 | 305 | +18% | 54 | 17 | 414 | 322 | +29% | |||
% of sales | 25.4% | 27.5% | 29.2% | 29.0% | |||||||
Operating income (EBIT) | 124 | 65 | +90% | 9 | 33 | 133 | 98 | +35% | |||
% of sales | 8.8% | 5.9% | 9.4% | 8.9% | |||||||
Income before taxes | 71 | 29 | +148% | 9 | 33 | 80 | 62 | +30% | |||
% of sales | 5.0% | 2.6% | 5.7% | 5.6% | |||||||
Net income | 67 | 23 | +193% | 8 | 29 | 75 | 52 | +44% | |||
% of sales | 4.7% | 2.1% | 5.3% | 4.7% | |||||||
EPS | |||||||||||
- USD | 0.0289 | 0.0099 | 0.0322 | 0.0223 | |||||||
- RMB | 0.1836 | 0.0639 | 0.2045 | 0.1447 | |||||||
EBITDA | 203 | 138 | +48% | (2) | 19 | 201 | 157 | +28% | |||
% of sales | 14.3% | 12.4% | 14.2% | 14.2% |
Notes:
“As Reported” denotes the Company’s financial statements according to the Accounting Standards for Business Enterprises and theimplementation guidance, interpretations and other relevant provisions issued or revised subsequently by the Chinese Ministry of Finance(the “MoF) (collectively referred to as “ASBE”). Note that in the reported financial statements, as a result of recent changes in the ASBEguidelines [IAS 37], certain items as of Q4 2021 (specifically certain transportation costs and certain idleness charges) have beenreclassified from Operating Expenses to COGS. Please see the appendix to this release for further information.Relevant income statement items contained in this release are also presented on an “Adjusted” basis, which exclude items that are of atransitory or non-cash/non-operational nature that do not impact the ongoing performance of the business, and reflect the way theCompany’s management and the Board of Directors view the performance of the Company internally. The Company believes 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 number of shares used to calculate both basic and diluted earnings per share in Q1 of both 2021 and 2022 is 2,329.8 million shares.The general crop protection market environmentCrop prices increased sharply during Q1 2022 as a result of concerns regarding supply, due mainlyto the Russia-Ukraine conflict, and also due to persistent dryness in parts of South America. Pricesare generally expected to remain high throughout 2022, incentivizing another year of increases inglobal planted areas. As a result, crop protection demand remains strong globally as farmers striveto maximize yields in this high crop price environment. Farmers continue to face elevated productioncosts, mainly from higher fertilizer prices resulting from disruption to supply and tight availabilitycaused by the Russia-Ukraine conflict, yet their farming activities are nevertheless still veryprofitable in most regions.The challenging cost environment of 2021 has extended into 2022. Global energy prices furtherincreased during the quarter, impacted by Russia's strong share of global gas exports. In addition,global freight and logistics costs have recently increased again due to oil prices going up, while theavailability of shipping resources continues to be limited. Despite some easing in procurement pricesfor raw materials, intermediates and active ingredients in China during the quarter, prices areexpected to remain generally elevated and could increase further due to production disruptions andtight supply in China as COVID-19 impacts the country. Strong global crop protection demand, aswell as the high energy prices, may exert additional upward pressure on such procurement prices.Additionally, the availability of certain intermediates, such as co-formulants, has become uncertainas higher energy prices have decreased the economic viability of their production, causing a spike intheir prices.
Portfolio Development UpdateIn line with ADAMA's efforts to differentiate its product portfolio through unique formulations, duringthe first quarter of 2022, ADAMA registered and launched multiple new products in markets acrossthe globe. Among these were:
? Launch in Canada of SORADUO?, a broad-spectrum, long-lasting fungicide againstFusarium in wheat and barley that includes ADAMA's unique formulation of Prothioconazoleand Tebuconazole. ADAMA is one of the first companies to produce in-house the recentlyoff-patent Prothioconazole;? Continued rollout in Europe of TIMELINE
?
FX, a three-way herbicide mixture in an advancedformulation for a wide range of weeds in cereals;? Launch in Canada of ZIVATA?, a broad-spectrum insecticide with an advanced, renewablysourced formulation using sustainable plant-based materials;? Registration in the USA of CORMORAN
?
, a broad range, dual mode, long-lasting insecticidefor use in tree nuts;? Registration in Australia of FIGHTBACK
?, a dual mode herbicide for use in fallow land,pastures and others;
? Registration in Mexico, Peru, Ecuador and other countries in Central America of MATTOK
?adual mode systematic broad-spectrum, long-lasting fungicide with unique anti-stresstechnology formulation for rice and corn.Financial HighlightsRevenues in the first quarter grew by 28% (+25% in RMB terms) to $1,420 million, driven by asignificant 18% increase in prices, a trend which started in the third quarter of 2021. The markedlyhigher prices were complemented by continued strong volume growth (+14%), including thecontribution of newly acquired companies, achieved despite supply challenges in the market, whichwere only slightly moderated by the adverse impact of exchange rate movements.
Table 2. Regional Sales Performance
CER: Constant Exchange Rates
Europe: A strong performance in France, Romania and Poland, bolstered by good demand andhigh prices, more than offset a decline in sales in Ukraine, drought conditions in parts of southernEurope, and the adverse impact of exchange rates. The Company benefited from the sales invarious countries of recently launched products POLEPOSITION
?
and TIMELINE
?FX.North America: The remarkably strong growth in sales in the first quarter was driven by theConsumer & Professional business, which experienced robust demand, allowing for price increasesin light of concerns regarding potential shortages. This was further complemented by continuedgrowth in US crop protection, driven both by higher volumes as well as higher prices, reflectinggenerally strong demand, especially in corn, soybeans, cereals and rice.Latin America: Strong growth was achieved in Brazil due to early demand from farmers and higherprices, supported by good soybean and corn planting seasons, and despite drought conditions in thesouth of the country. This was complemented by demand for the Company's differentiated products,including the fungicides ARMERO?, ACROSS
?
and the herbicide ARADDO
?, which are part ofADAMA's leading soybean protection offering.Sales also grew in most of the countries of the wider region, driven by price increases, as theCompany continues to strengthen its positioning throughout the region.Asia-Pacific: The Company's rapid growth in Asia Pacific during the first quarter was led by theparticularly strong increase in sales in China. The growth in China was led firstly by the sales of rawmaterials and intermediates, which continued to benefit from strong demand and high prices in lightof ongoing tight supply following shutdowns in competing facilities due to environmental inspections
Q1 2022 $m | Q1 2021 $m | Change USD | Change CER |
Europe
Europe | 357 | 344 | +3.6% | +5.7% |
North America
North America | 284 | 189 | +50.4% | +49.9% |
Latin America
Latin America | 234 | 177 | +32.5% | +31.5% |
Asia Pacific
Asia Pacific | 388 | 241 | +60.8% | +62.8% |
Of which China
Of which China | 237 | 124 | +90.6% | +87.7% |
India, Middle East & Africa
India, Middle East & Africa | 157 | 158 | -0.5% | +15.8% |
Total
Total | 1,420 | 1,109 | +28.0% | +31.2% |
and COVID-19, which has also disrupted and slowed down transportation. In addition, sales ofADAMA's branded, formulated portfolio in China also grew significantly, and were supported by apleasing performance from the commercial activities and portfolio acquired from Huifeng at the endof 2020.In the wider APAC region, strong sales were delivered in the Pacific region and in certain countriesin the Far East, benefiting from favorable seasonal conditions, and despite the impact of theweakening of the Australian dollar.India, Middle East & Africa: Sales in the region grew in constant exchange rate terms, mainly ledby India, and despite the cold and rainy season in the Middle East and Africa which brought lowinsect and disease pressure. This growth is particularly noteworthy in light of a very strong firstquarter in 2021 and was offset by the adverse impact of the depreciation of the Turkish Lira on theUSD denominated sales.Gross Profit reported in the first quarter was up 18% to $360 million (gross margin of 25.4%)compared to $305 million (gross margin of 27.5%) in the same quarter last year.
Adjustments to reported results: The adjusted gross profit includes all idleness costs andexcludes transportation costs to third parties and its marketing subsidiaries (classifiedunder operating expenses).In the reported results, as of Q4 2021, following recent changes in the guidelines inChina, the aforementioned transportations costs and opex idleness have beenreclassified from operating expenses to costs of goods (not impacting the operatingresults), while these expenses were not recorded in the cost of goods in Q1 2021, butrather in the operating expenses.Additionally, certain extraordinary charges related largely to a temporary disruption of theproduction of certain products, were adjusted in Q1 2021. These charges havesignificantly declined in Q1 2022, as the relocation and upgrade of the manufacturingJingzhou site in China has been completed and is now almost fully operational.Excluding the impact of the abovementioned extraordinary items, adjusted gross profit in the firstquarter was up 29% to $414 million (gross margin of 29.2%) compared to $322 million (gross marginof 29.0%) in the same quarter last year.In the quarter, the significantly higher gross profit and improvement in the adjusted gross marginwere mainly driven by the markedly higher prices, complemented by continued volume growth, all ofwhich more than offset higher logistics, procurement and production costs as well as the negativeFX impact.Operating expenses reported in the first quarter were $236 million (16.6% of sales) compared to$239 million (21.6% of sales) in the same quarter last year.
Adjustments to reported results: please refer to the explanation regarding adjustments tothe gross profit in respect to certain transportation costs and idleness.Additionally, the Company recorded certain non-operational, mostly non-cash, chargeswithin its reported operating expenses amounting to $5.7 million in Q1 2022 incomparison to $16.0 million in Q1 2021. These charges include mainly (i) non-cashamortization charges in respect of Transfer assets received from Syngenta related to the2017 ChemChina-Syngenta acquisition, (ii) 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 and (iii) non-cash, share-based compensation(incentive plans). For further details on these non-operational charges, please see theappendix to this release.
Excluding the impact of the abovementioned non-operational charges, adjusted operatingexpenses in the quarter were $281 million (19.8% of sales), compared to $223 million (20.1% ofsales) in the corresponding period last year.The higher operating expenses in the quarter primarily reflect a doubtful debt provision for tradereceivables in Ukraine, higher transportation and logistics costs driven by both volumes beingtransported and an increase in freight costs, as well as the inclusion of recent acquisitions.Operating income reported in the first quarter was up 90% to $124 million (8.8% of sales)compared to $65 million (5.9% of sales) in the same quarter last year.Excluding the impact of the abovementioned non-operational, mostly non-cash items, adjustedoperating income in the first quarter was up 35% to $133 million (9.4% of sales) compared to $98million (8.9% of sales) in the same quarter last year.EBITDA reported in the first quarter was up 48% to $203 million (14.3% of sales) compared to $138million (12.4% of sales) in the same quarter last year.Excluding the impact of the abovementioned non-operational, mostly non-cash items, adjustedEBITDA in the first quarter was up 28% to $201 million (14.2% of sales) compared to $157 million(14.2% of sales) in the same quarter last year.Financial expenses and investment income were $53 million in the first quarter, compared to $36million in the corresponding period last year. The higher financial expenses in the quarter weremainly driven by the net effect of the increase in the Israeli CPI on the ILS-denominated, CPI-linkedbonds, and higher non-cash charges related to put options in respect of minority interests on recentacquisitions.Taxes on income in the first quarter were $5 million, compared to $9 million in the correspondingperiod last year. The first quarter is generally characterized by a low effective tax rate compared tothe effective tax rate of the Company over the full year. This is mainly due to the generation ofprofits by subsidiary companies within ADAMA whose tax rates are lower relative to the Company’saggregate effective tax rate, as well as to the method of calculation of tax assets related tounrealized profits. In the first quarter of 2022, the low effective tax rate also reflects the tax incomedue to non-cash impact on the value of non-monetary tax assets of the significant strengthening ofthe BRL, while in the first quarter of 2021, the Company recorded tax expenses due to the impact ofthe weakening of the BRL.Net income attributable to the shareholders of the Company reported in the first quarter was$67 million (4.7% of sales), up 193% compared to $23 million (2.1% of sales) in the correspondingperiod last year.Excluding the impact of the abovementioned extraordinary and non-operational charges, adjustednet income in the first quarter was $75 million (5.3% of sales), up 44% compared to $52 million (4.7%of sales) in the corresponding period last year.Trade working capital at March 31, 2022 was $2,695 million compared to $2,604 million at thesame point last year. The slight increase in working capital was due to an increase in tradereceivables, driven largely by its strong sales growth as well as the inclusion of a recently acquiredcompany. The Company is holding higher inventory levels due mainly to the expectation of furthervolume growth in coming quarters as well as anticipated supply shortages and inventory costsincreases. This increase in inventory levels was offset by higher trade payables. The tradecapital/last twelve months sales ratio of 53% at March 31, 2022 in comparison to 61%, at March 31,2021 demonstrates the improved efficiency in the Company's management of its working capital.Cash Flow: Operating cash flow of $286 million was consumed in the quarter, compared to $129million consumed in the corresponding period last year. The negative operating cash flow, which is
seasonally 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 for supporting the growth of thebusiness.Net cash used in investing activities was $90 million in the quarter, compared to $109 million in thecorresponding period last year. The cash used in investing activities in the first quarter of 2022 islargely related to investments in our differentiated portfolio (Core Leap) in Israel and Brazil as well asin China relocations. In the first quarter of 2021, the Company also recorded such investments inaddition to the completion of the payment related to the acquisition of Jiangsu Huifeng’s domesticcommercial crop protection business.Free cash flow of $386 million was consumed in the first quarter compared to $248 millionconsumed in the corresponding period last year, reflecting the aforementioned operating andinvesting cash flow dynamics.
Table 3. Revenues by operating segmentFirst quarter sales by segment
Q1 2022 USD (m) | % | Q1 2021 USD (m) | % |
Crop Protection
Crop Protection | 1,271 | 89.5% | 1,007 | 90.8% |
Intermediates and Ingredients
Intermediates and Ingredients | 149 | 10.5% | 102 | 9.2% |
Total
Total | 1,420 | 100% | 1,109 | 100.0% |
First quarter sales by product category
Q1 2022 USD (m) | % | Q1 2021 USD (m) | % |
Herbicides
Herbicides | 659 | 46.4% | 477 | 43.0% |
Insecticides
Insecticides | 351 | 24.7% | 314 | 28.3% |
Fungicides
Fungicides | 261 | 18.4% | 216 | 19.5% |
Intermediates and Ingredients
Intermediates and Ingredients | 149 | 10.5% | 102 | 9.2% |
Total
Total | 1,420 | 100% | 1,109 | 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 of
active ingredients in the world, state-of-the art R&D, manufacturing and formulation facilities,together with a culture that empowers our people in markets around the world to listen to 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.
ContactRivka Neufeld Zhujun WangGlobal Investor Relations China Investor RelationsEmail: ir@adama.com Email: irchina@adama.com
Abridged Adjusted Consolidated Financial Statements
The 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 2022 USD (m) | Q12021 USD (m) | Q1 2022 RMB (m) | Q1 2021 RMB (m) |
Revenues
Revenues | 1,420 | 1,109 | 9,016 | 7,187 |
Cost of Sales
Cost of Sales | 989 | 782 | 6,282 | 5,069 |
Other costs
Other costs | 16 | 5 | 105 | 34 |
Gross profit
Gross profit | 414 | 322 | 2,630 | 2,085 |
% of revenue
% of revenue | 29.2% | 29.0% | 29.2% | 29.0% |
Selling & Distribution expenses
Selling & Distribution expenses | 199 | 178 | 1,263 | 1,156 |
General & Administrative expenses
General & Administrative expenses | 47 | 32 | 296 | 208 |
Research & Development expenses
Research & Development expenses | 21 | 17 | 130 | 110 |
Other operating expenses
Other operating expenses | 15 | -4 | 95 | -26 |
Total operating expenses
Total operating expenses | 281 | 223 | 1,785 | 1,448 |
% of revenue
% of revenue | 19.8% | 20.1% | 19.8% | 20.1% |
Operating income (EBIT)
Operating income (EBIT) | 133 | 98 | 844 | 637 |
% of revenue
% of revenue | 9.4% | 8.9% | 9.4% | 8.9% |
Financial expenses and investment income
Financial expenses and investment income | 53 | 36 | 335 | 236 |
Income before taxes
Income before taxes | 80 | 62 | 509 | 401 |
Taxes on Income
Taxes on Income | 5 | 9 | 33 | 58 |
Net Income
Net Income | 75 | 53 | 477 | 342 |
Attributable to:
Attributable to: |
Non-controlling interest
Non-controlling interest | 0 | 1 | 0 | 5 |
Shareholders of the Company
Shareholders of the Company | 75 | 52 | 477 | 337 |
% of revenue
% of revenue | 5.3% | 4.7% | 5.3% | 4.7% |
Adjustments
Adjustments | 8 | 29 | 49 | 188 |
Reported Net income attributable to theshareholders of the Company
Reported Net income attributable to the shareholders of the Company | 67 | 23 | 428 | 149 |
% of revenue
% of revenue | 4.7% | 2.1% | 4.7% | 2.1% |
Adjusted EBITDA
Adjusted EBITDA | 201 | 157 | 1,277 | 1,018 |
% of revenue
% of revenue | 14.2% | 14.2% | 14.2% | 14.2% |
Adjusted EPS
– Basic
Adjusted EPS2 – Basic | 0.0322 | 0.0223 | 0.2045 | 0.1447 |
– Diluted
– Diluted | 0.0322 | 0.0223 | 0.2045 | 0.1447 |
Reported EPS
– Basic
Reported EPS2 – Basic | 0.0289 | 0.0099 | 0.1836 | 0.0639 |
– Diluted
– Diluted | 0.0289 | 0.0099 | 0.1836 | 0.0639 |
For an analysis of the differences between the adjusted income statement items and the income statement items as reported in the
financial statements, see below “Analysis of Gaps between Adjusted Income Statement and Income Statement in Financial Statements”.
The number of shares used to calculate both basic and diluted earnings per share in in Q1 of both 2021 and 2022 is 2,329.8 millionshares.
Abridged Consolidated Balance Sheet
March 31 2022 USD (m) | March 31 2021 USD (m) | March 31 2022 RMB (m) | March 31 2021 RMB (m) |
Assets
Assets |
Current assets:
Current assets: |
Cash at bank and on hand
Cash at bank and on hand | 598 | 596 | 3,796 | 3,915 |
Bills and accounts receivable
Bills and accounts receivable | 1,857 | 1,707 | 11,789 | 11,220 |
Inventories
Inventories | 2,151 | 1,663 | 13,657 | 10,931 |
Other current assets, receivables andprepaid expenses
Other current assets, receivables and prepaid expenses | 333 | 383 | 2,117 | 2,516 |
Total current assets
Total current assets | 4,940 | 4,349 | 31,359 | 28,582 |
Non-current assets:
Non-current assets: |
Fixed assets, net
Fixed assets, net | 1,651 | 1,235 | 10,480 | 8,115 |
Rights of use assets
Rights of use assets | 74 | 80 | 467 | 528 |
Intangible assets, net
Intangible assets, net | 1,506 | 1,490 | 9,560 | 9,790 |
Deferred tax assets
Deferred tax assets | 157 | 133 | 994 | 874 |
Other non-current assets
Other non-current assets | 114 | 83 | 725 | 542 |
Total non-current assets
Total non-current assets | 3,501 | 3,021 | 22,227 | 19,849 |
Total assets
Total assets | 8,441 | 7,370 | 53,587 | 48,431 |
Liabilities
Liabilities |
Current liabilities:
Current liabilities: |
Loans and credit from banks and otherlenders
Loans and credit from banks and other lenders | 438 | 618 | 2,781 | 4,063 |
Bills and accounts payable
Bills and accounts payable | 1,324 | 781 | 8,404 | 5,131 |
Other current liabilities
Other current liabilities | 905 | 760 | 5,745 | 4,995 |
Total current liabilities
Total current liabilities | 2,667 | 2,159 | 16,931 | 14,190 |
Long-term liabilities:
Long-term liabilities: |
Loans and credit from banks and otherlenders
Loans and credit from banks and other lenders | 655 | 368 | 4,156 | 2,416 |
Debentures
Debentures | 1,211 | 1,195 | 7,690 | 7,851 |
Deferred tax liabilities
Deferred tax liabilities | 52 | 59 | 330 | 387 |
Employee benefits
Employee benefits | 121 | 100 | 770 | 657 |
Other long-term liabilities
Other long-term liabilities | 371 | 170 | 2,357 | 1,120 |
Total long-term liabilities
Total long-term liabilities | 2,411 | 1,892 | 15,303 | 12,431 |
Total liabilities
Total liabilities | 5,078 | 4,051 | 32,234 | 26,620 |
Equity
Equity |
Total equity
Total equity | 3,364 | 3,319 | 21,352 | 21,811 |
Total liabilities and equity
Total liabilities and equity | 8,441 | 7,370 | 53,587 | 48,431 |
Abridged Consolidated Cash Flow Statement for the First Quarter
Q1 2022 USD (m) | Q1 2021 USD (m) | Q1 2022 RMB (m) | Q1 2021 RMB (m) | |
Cash flow from operating activities: | ||||
Cash flow from operating activities | -286 | -129 | -1,814 | -838 |
Cash flow from operating activities | -286 | -129 | -1,814 | -838 |
Investing activities: | ||||
Acquisitions of fixed and intangible assets | -92 | -91 | -584 | -588 |
Proceeds from disposal of fixed and intangible assets | 1 | 1 | 3 | 9 |
Acquisition of subsidiaries | 0 | -8 | - | -55 |
Other investing activities | 1 | -11 | 7 | -71 |
Cash flow used for investing activities | -90 | -109 | -574 | -704 |
Financing activities: | ||||
Receipt of loans from banks and other lenders | 153 | 287 | 969 | 1,862 |
Repayment of loans from banks and other lenders | -27 | -38 | -172 | -244 |
Interest payment and other | -10 | -10 | -61 | -63 |
Dividends to shareholders | - | - | - | - |
Other financing activities | -65 | 5 | -410 | 26 |
Cash flow from (used for) financing activities | 51 | 244 | 327 | 1,581 |
Effects of exchange rate movement on cash and cash equivalents | 0 | -2 | -24 | 18 |
Net change in cash and cash equivalents | -325 | 4 | -2,085 | 57 |
Cash and cash equivalents at the beginning of the period | 903 | 588 | 5,759 | 3,835 |
Cash and cash equivalents at the end of the period | 579 | 592 | 3,674 | 3,892 |
Free Cash Flow | -386 | -248 | -2,448 | -1,605 |
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, 2022 and 2021 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”). Note that in the reported financialstatements, as a result of recent changes in the ASBE guidelines (IAS 37), certain items as of Q4 2021(specifically certain transportation costs and certain idleness charges) have been reclassified from OperatingExpenses to COGS. See the notes to the financial statements for more details in this regard.The abridged consolidated financial statements contained in this release are presented in both ChineseRenminbi (RMB), as the Company’s shares are traded on the Shenzhen Stock Exchange, as well as in UnitedStates dollars ($) as this is the major currency in which the Company’s business is conducted. For 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, inventory
impairment and other idleness charges (in addition to those already included in costs of goods sold);part of the idleness charges is removed in the Adjusted financial statements? “Other operating expenses” includes impairment losses (not including inventory impairment); gain(loss) from disposal of assets and non-operating income and expenses? “Operating expenses” in this release differ from those in the formally reported financial statements inthat in the reported financial statements, as a result of recent changes in the ASBE guidelines (IAS 37),certain items as of Q4 2021 (specifically certain transportation costs and certain idleness charges)have been reclassified from Operating Expenses to COGS.? “Financial expenses and investment income” includes net financing expenses; gains from changes in
fair value; and investment income (including share of income of equity accounted investees)
Abridged Consolidated Balance Sheet:
? “Other current assets, receivables and prepaid expenses” includes financial assets held for trading;financial assets in respect of derivatives; prepayments; other receivables; and other current assets? “Fixed assets, net” includes fixed assets and construction in progress? “Intangible assets, net” includes intangible assets and goodwill? “Other non-current assets” includes other equity investments; long-term equity investments; long-term
receivables; investment property; and other non-current assets? “Loans and credit from banks and other lenders” includes short-term loans and non-current liabilitiesdue within one year? “Other current liabilities” includes financial liabilities in respect of derivatives; payables for employeebenefits, 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 2022 USD (m) | Q1 2021 USD (m) | Q1 2022 RMB (m) | Q1 2021 RMB (m) |
Net Income (Reported)
Net Income (Reported) | 67.3 | 23.3 | 427.7 | 150.8 |
Adjustments to COGS & Operating Expenses:
Adjustments to COGS & Operating Expenses: |
1. Amortization of Legacy PPA of 2011 acquisition of Solutions (non-cash)
1. Amortization of Legacy PPA of 2011 acquisition of Solutions (non-cash) | 0.3 | 0.3 | 1.6 | 1.6 |
2. Amortization of Transfer assets received and written-up due to 2017 ChemChina-
Syngenta transaction (non-cash)
2. Amortization of Transfer assets received and written-up due to 2017 ChemChina-Syngenta transaction (non-cash) | 5.6 | 7.8 | 35.6 | 50.8 |
3. Upgrade & Relocation related costs
3. Upgrade & Relocation related costs | 1.9 | 15.4 | 12.0 | 99.8 |
4. Incentive plans (non-cash)
4. Incentive plans (non-cash) | (4.1) | 4.1 | (26.2) | 26.8 |
5. Amortization of acquisition-related PPA (non-cash), other acquisition-related costs
5. Amortization of acquisition-related PPA (non-cash), other acquisition-related costs | 5.1 | 3.7 | 32.4 | 24.3 |
6. Transportation classification COGS impact
6. Transportation classification COGS impact | 50.9 | - | 323.2 | - |
7. Transportation classification OPEX impact
7. Transportation classification OPEX impact | (50.9) | - | (323.2) | - |
8. Provisions in respect of prior years’ legal- and tax-related costs
8. Provisions in respect of prior years’ legal- and tax-related costs | - | 1.6 | - | 10.3 |
Total Adjustments to Operating Income (EBIT)
Total Adjustments to Operating Income (EBIT) | 8.7 | 33.0 | 55.5 | 213.6 |
Total Adjustments to EBITDA
Total Adjustments to EBITDA | (2.4) | 19.4 | (15.3) | 125.6 |
Adjustments to Taxes
Adjustments to Taxes |
1. Tax shield on Legacy PPA of 2011 acquisition of Solutions
1. Tax shield on Legacy PPA of 2011 acquisition of Solutions | 0.0 | 0.0 | 0.3 | 0.3 |
3. Taxes related to Upgrade & Relocation related costs
3. Taxes related to Upgrade & Relocation related costs | 0.1 | 2.4 | 0.4 | 15.6 |
5. Deferred tax on amortization of acquisition-related PPA, other acquisition-related costs
5. Deferred tax on amortization of acquisition-related PPA, other acquisition-related costs | 0.9 | 0.6 | 5.9 | 3.9 |
8. Provisions in tax expenses in respect of prior years’ legal- and tax-related costs
8. Provisions in tax expenses in respect of prior years’ legal- and tax-related costs | - | 0.4 | - | 2.5 |
Total adjustments to Net Income
Total adjustments to Net Income | 7.7 | 29.5 | 48.9 | 191.5 |
Net Income (Adjusted)
Net Income (Adjusted) | 75.0 | 52.8 | 476.5 | 342.3 |
Total adjustments to Net Income attributable to the shareholders of the Company
Total adjustments to Net Income attributable to the shareholders of the Company | 7.7 | 29.1 | 48.9 | 188.4 |
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 ofintangible assets created as part of the Purchase Price Allocation (PPA) on acquisitions, with no impact on the ongoing performance of thecompanies acquired, as well as other M&A-related costs.
6. Transportation classification COGS impact – as a result of recent changes in the ASBE guidelines [IAS 37], certain items as of Q4 2021(specifically certain transportation costs and certain idleness charges) have been reclassified from Operating Expenses to COGS.
7. Transportation classification OPEX impact – as a result of recent changes in the ASBE guidelines [IAS 37], certain items as of Q42021(specifically certain transportation costs and certain idleness charges) have been reclassified from Operating Expenses to COGS.
8. Provisions in tax expenses related to prior years’ activities: Provisions in respect of tax expenses related to activities of prior years.
Exchange Rate Data for the Company's Principal Functional Currencies
March 31 | Q1 Average | |||||||
2022 | 2021 | Change | 2022 | 2021 | Change | |||
EUR/USD | 1.109 | 1.174 | (5.5%) | 1.122 | 1.206 | (7.0%) | ||
USD/BRL | 4.738 | 5.697 | 16.8% | 5.233 | 5.473 | 4.4% | ||
USD/PLN | 4.180 | 3.968 | (5.4%) | 4.180 | 3.772 | (10.8%) | ||
USD/ZAR | 14.51 | 14.93 | 2.8% | 15.249 | 14.970 | (1.9%) | ||
AUD/USD | 0.749 | 0.761 | (1.7%) | 0.724 | 0.773 | (6.4%) | ||
GBP/USD | 1.312 | 1.376 | (4.6%) | 1.342 | 1.380 | (2.7%) | ||
USD/ILS | 3.176 | 3.334 | 4.7% | 3.198 | 3.270 | 2.2% | ||
USD LIBOR 3M | 0.96% | 0.20% | 380.5% | 0.53% | 0.20% | 164.4% |
March 31 | Q1 Average | |||||||
2022 | 2021 | Change | 2022 | 2021 | Change | |||
USD/RMB | 6.348 | 6.571 | (3.4%) | 6.351 | 6.481 | (2.0%) | ||
EUR/RMB | 7.043 | 7.712 | (8.7%) | 7.126 | 6.481 | 10.0% | ||
RMB/BRL | 0.746 | 0.867 | 13.9% | 0.824 | 0.844 | 2.4% | ||
RMB/PLN | 0.658 | 0.604 | (9.1%) | 0.649 | 0.604 | (7.5%) | ||
RMB/ZAR | 2.286 | 2.271 | (0.7%) | 2.401 | 2.271 | (5.7%) | ||
AUD/RMB | 4.752 | 5.003 | (5.0%) | 4.595 | 5.012 | (8.3%) | ||
GBP/RMB | 8.332 | 9.041 | (7.8%) | 8.520 | 9.041 | (5.8%) | ||
RMB/ILS | 0.500 | 0.507 | 1.4% | 0.504 | 0.507 | 0.7% | ||
RMB LIBOR 3M | 2.37% | 2.64% | (9.9%) | 2.42% | 2.71% | (10.8%) |