Adama profit down despite record revenue

Chen Lichtenstein / Photo: Tamar Matsafi
Chen Lichtenstein / Photo: Tamar Matsafi

The Israeli-Chinese pesticides company attributed its profit decline to production at less than full capacity in 2019.

Pesticides manufacturer Adama says that its adjusted net profit in 2019 was in the $199.5-211.5 million range, 15-20% less than in 2018. The company added, however, that if $43 million in costs for production at less than full capacity on its old sites were excluded, its adjusted net profit would have been $242-254 million, similar to 2018.

Adama reported that its 2019 GAAP net profit would be much lower - $38-50 million, due to one-time debiting, most of it not in cash, relating to completion of upgrading and moving its old sites in Jinzu and Huai’an. The company said that upgrading and moving the sites would save $34-47 million in pre-tax costs, starting in 2020.

Adama published preliminary estimates of its 2019 financial results yesterday. The company said that costs for its production at less than full capacity would be almost completely eliminated in 2020, thanks to savings from upgrading and moving production sites in China from old sites to new facilities constructed by the company.

Adama's share price was down 3.5% today on the Shenzhen Stock Exchange, pushing its market cap down to $3.25 billion. The share has lost 6.5% of its value in the past year. <p<>Adama develops, manufactures, and markets herbicides, pesticides, and fungicides for agricultural use. The company's management says it will report all-time record orders in the fourth quarter, with over $1 billion in sales, over 7% more than in the corresponding quarter in 2018. Adama's 2019 revenue was nearly $4 billion, another all-time record, despite the major challenges that it faced during the year.

Adama says that its projected revenue growth in the fourth quarter is due to strong growth in its business, combined with some price increases, which were more than offset by the effect of lower sales of key products made at the old site in Jinzu caused by the restriction on production during the year, plus negative currency effects. Adama projects strong growth in Europe, with the early opening of the 2020 season, as well as in North America and the Asian-Pacific.

Strong performance in Latin America

Notable results were posted in Brazil, led by strong performance of the Cronnos preparation, and throughout Latin America, where the company's portfolio of differentiated products continues to grow with the introduction of its Armero preparation. Armero, Adama's first self-produced Prothioconazole-based preparation, was recently launched in Paraguay, and opened a $1 billion market.

Adama predicted that its adjusted fourth quarter EBITDA would be in the $138-150 million range, more than 10% higher than in the fourth quarter of 2018, and would reach $647-659 million for all of 2019, about the same as its 2018 record. The company said that the growth in its adjusted fourth quarter EBITDA had resulted from continued close management of its operating expenses.

Adama CEO Chen Lichtenstein is expected to leave his post soon and be appointed CFO of the Syngenta Group holding company, which will become the controlling shareholder in Adama under the ChemChina group. Lichtenstein's successor in Adama is expected to be Ignacio Dominguez, the company's chief commercial officer.

Published by Globes, Israel business news - en.globes.co.il - on January 23, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Chen Lichtenstein / Photo: Tamar Matsafi
Chen Lichtenstein / Photo: Tamar Matsafi
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