ADAMA Provides Net Income Estimate for the First Half of 2020
Business growth in Q2 closes the sales gap from Covid-19 related challenges seen in
Q1; widespread global currency weakness impacting USD sales and margins
TEL AVIV, ISRAEL and BEIJING, CHINA, July 14, 2020 – ADAMA Ltd. (the “Company”) (SZSE 000553)
today provided an estimate regarding its financial performance for the first half of 2020.
The Company is expecting to deliver record second quarter sales, in both USD and RMB terms, driven by
strong business growth, enabling first half sales to finish in line with those of the same period last year,
crossing the $2 billion mark for the third consecutive year.
The solid sales performance in the quarter was achieved in the midst of the ongoing COVID-19 pandemic,
which continues to disrupt the global crop protection market, amongst many others. The pandemic has
contributed to the significant weakening of many global currencies against the US dollar in recent months,
most notably the Brazilian Real, Indian Rupee and Turkish Lira, as well as increased volatility in the Euro and
Australian dollar. These currency movements have negatively impacted the Company’s performance in the
first half of the year, as reflected in a lower sales growth in USD and RMB terms when compared to the
growth in constant exchange rate (CER) terms, as well as reduced profitability.
Sales
Sales in the second quarter are expected to increase by more than 12% in CER terms, driven by a strong,
double-digit increase in volumes alongside higher prices. In USD terms, sales are expected to grow by a
more moderate 3%, and by 7% in RMB terms, reflecting the significant impact of the weaker currencies.
Growth in the second quarter was led by a strong performance in Latin America, driven by Brazil and
Argentina, overcoming the material depreciation of regional currencies as well as robust growth in the India,
Middle East & Africa region, which benefited from favorable weather. ADAMA continues to grow strongly in
China, driven by sales of the Company’s branded, formulated products, and supporting an almost complete
recovery from the first quarter COVID-19 impact. ADAMA is expecting to deliver robust second-quarter
growth also in Asia-Pacific, led by a strong performance in Australia, benefiting from favorable rainfall in the
country.
Sales in Europe in the second quarter are expected to be in line with those of last year, with growth in North
Europe being offset by a challenging season in South Europe, where a severe drought over much of the
quarter caused a reduction in planted areas in some key crops. Sales in North America in the second quarter
are expected to be lower than those in the same quarter last year, with challenging weather reducing
purchasing from customers in key crops.
Over the first half of 2020, ADAMA generated sales growth of almost 7% in CER terms, but is expecting to
report sales in USD terms to be in line with those of the same period last year (+4% in RMB terms),
overcoming the shortfall from the first quarter to once again exceed $2 billion in sales. This was achieved
despite the various impacts of COVID-19, which continues to pose both numerous challenges to the way the
Company is able to do its business, as well as materially impacting global currencies. In the half year, growth
was led by Latin America, mainly driven by Argentina alongside a pleasing contribution from Peru following
an acquisition there in 2019. The Company grew strongly over the half year also in the India, Africa and
Middle East region, driven by continued robust growth in India and a return to supportive weather conditions
in South Africa, and also saw significant growth in Australia, benefiting from favorable weather conditions.
Gross Profit
In the second quarter, the Company is expecting to report lower gross profit compared to the same period
last year, with the material depreciation of global currencies more than offsetting the strong business growth
and moderate price increases. Similarly, over the half year period, the significant currency weakness in
recent months is expected to outweigh the Company’s resilient business growth, resulting in reduced gross
profit compared to the same period last year.
Operating Profit and EBITDA
In the second quarter, the Company is expecting to report a relatively moderate decline in Operating Profit
and EBITDA, driven by the lower gross profit. The Company continues to exercise tight control of its
operating expenses, which also benefited to some extent from the weaker currencies. Similarly, in the first
half of the year, the lower gross profit is expected to be only partially offset by a reduction in operating
expenses, reflecting the impact of COVID-19 constraints as well as the related weakening of currencies,
resulting in lower Operating Profit and EBITDA than those reported in the same period last year.
Net Income
Net income in the second quarter is expected to be somewhat be
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