ADAMA posted a 13% rise in fourth-quarter revenue to $821 million, driven by higher volumes of differentiated product sales, especially in the Asia-Pacific region.
In the quarter, sales benefited somewhat from the strengthening of local currencies against the dollar, mainly in Europe and China, compared to the corresponding quarter last year.
The company posted net earnings of $26 million in the period, reversing a $2 million loss in the year-ago quarter. Gross profit climbed 20% to $265 million.
Commenting on the results, Yang Xingqiang, Chairman of ADAMA, said, “Our continued growth across the globe and robust performance in the fourth quarter capped off our strongest year to date. During 2017, we achieved the milestone of becoming the only publicly traded, integrated, global-China crop protection leader. Our recent successful private placement, in which we raised $240 million in new equity from key institutional investors, reflects the warm welcome we received from the capital markets, and will be used to support our strategic growth initiatives in the coming years. Our business momentum in recent years, together with our strong foundations and unique positioning in the global and Chinese crop protection markets, provide confidence that we will be able to capitalize on the exciting opportunities that lie ahead.”
Chen Lichtenstein, President and CEO of ADAMA, added, “We are pleased to conclude another record year for ADAMA. With strong market share gains in all key markets worldwide, we delivered robust top-line, bottom-line and EBITDA growth. This performance has been accompanied by continued improvement in working capital, where we now reach industry-leading metrics, driving the generation of significant cash flow, which leads to our lowest debt and leverage levels ever. We continue to make significant investments in all areas of our business, moving along our strategic direction, engaging with our customers, enhancing our portfolio, leveraging our integrated commercial and operational platforms, and propelling our business forward.”
The company cited two themes on the current market environment:
- Continued subdued demand for crop protection products due to ongoing low soft commodity
prices and farmer incomes, combined with certain re-opening of distribution channels. While
most agricultural commodities’ prices are generally stable, grain inventories continued to remain high,
keeping pressure on prices. This environment continued to impact farmers’ incomes for the third
consecutive year. In some regions, the inventory levels in the crop protection distribution channels
are lower in comparison to 2016, which allow customary market activity levels to resume. Despite
these overall uneven market conditions, the combined company delivered robust volume growth in
the fourth quarter and in the full year, driven by the introduction of new and differentiated products,
and increased penetration in markets across the globe.
- Containment of manufacturing and reduction of procurement costs. Continued control of
manufacturing costs, combined with reduced raw material costs in the latter part of 2016 and in some
cases also in 2017, improved the costs of goods sold over the full year. However, due to shortages
in certain raw materials and intermediates, mostly owing to increased environmental focus in China,
procurement costs in the second half of 2017 were higher in comparison to 2016, which is expected
to impact production costs going forward.
In Asia-Pacific, sales increased by 31.6% in the quarter and by 21.5% in the full year, in constant currency terms, compared with the corresponding periods last year. The robust growth in the quarter was driven by a significant increase in differentiated product volumes, with strong performances in China, Vietnam, Indonesia, Australia and Korea, which were partially offset by record dry conditions in New Zealand and Indonesia, as well as low insect pressure affecting cotton insecticides in Australia.
During the quarter, the company obtained registrations for a number of new and differentiated products, including CORMORAN® for insect control in coffee in Vietnam, the herbicide IMPOSE® for peanut, sugarcane and fallow in Australia and the ready-mix herbicide KRAGAN® for pineapple in Thailand. New marketing initiatives in Thailand, focusing on fostering farmer engagement, successfully led to an increase in brand awareness and demand creation.
In China, ADAMA is growing its distinctive portfolio with dozens of new product registrations achieved over the past year, including BANG CHAO®, a mixture fungicide for late blight in potatoes, APROPO®, a broad-spectrum systemic fungicide for rice, and JICHU™, a differentiated herbicide for wheat, with multiple additional product launches underway. It is already seeing strong demand for its wheat herbicides as well as for other key backward-integrated products, and a significant increase in sales and profitability. This strong performance was driven by an increase in both volumes and prices, partly due to the tightened supply environment as a result of the increasingly stringent regulatory requirements.