ADAMA Reports First Quarter 2024 Results
ADAMA Ltd. has reported its financial results for the first quarter ended March 31, 2024.
Steve Hawkins, President and CEO of ADAMA, said, “As market conditions continue to be sluggish in the first quarter of 2024, the Company is focusing on the implementation of a cross-company transformation plan aimed at improving the quality of the business and repositioning ADAMA as a key player in the Value Innovation customer segment. This plan, the outcome of hundreds of employee-based initiatives, has a clear roadmap, deliverables and is focused on delivering profit and cash targets to be achieved over the period of the coming three years.
“While we expect the benefits of this plan to be gradual, we are continuing to respond to the current market situation. In the first quarter of 2024 the Company presented an improvement in the quality of the business, succeeding in improving its gross margin, despite a decline in sales, achieved through the positive impact of new inventory sold, priced at market levels and an improvement in the sales mix of higher margin products. The Company also continued to put strong focus on cash generation, presenting a significant improvement in cash flow, which is typically negative in the first quarter due to seasonality.”
The General Crop Protection (CP) Market Environment
Key commodity crop prices continued to decline in the first months of 2024 and global supply continued to improve. Crop prices remain above average historical levels but the current price level has a negative impact on farmer income compared to previous years. Despite this, farmer demand is expected to remain stable under the current conditions. The channel inventory situation is easing up, but there still remains above average inventories in several geographies, including Brazil. In addition, the high interest rate environment, continue to drive a just-in-time purchasing approach by the channel. Active ingredient prices from China remained low during Q1 with some molecules even experiencing further price declines, on one hand reducing input costs but on the other creating pricing pressure on crop protection products and supporting a “wait and see” approach in the market.
Update on the War Situation in Israel
ADAMA is headquartered in Israel and has three manufacturing sites in the country. Following October 7th, 2023, the Company continued the production in its global manufacturing sites and in Israel, with certain non-significant restrictions (which have been lifted in February 2024). This situation did not have a material impact on the Company’s ability to support its markets or on ADAMA’s consolidated financial results.
On the 14th of April, Israel was under an attack from Iran, with no consequences to the Company’s ongoing activities.
Update on Impact of Shipping Obstructions
In January 2024 some major shipping lines announced that they will suspend shipping to Israel through Israeli ports and through the Suez Canal due to tensions in the Red Sea. This has led to longer transportation times, with shipping lines being diverted around Africa.
As of the date of publication of this report, shipping time and costs have increased significantly, mainly in the Asia-Pacific Israel route in comparison to before January 2024. These cost increases impact only a small portion of the Company’s overall shipping costs and ADAMA has been ordering relevant materials ahead of time to ensure timely supply. Currently, the Company does not anticipate this to have a significant impact on its financial results or on the ongoing supply of materials to its production facilities, although this situation might impact the company’s ability to respond quickly to changing market demand.
Transformation Plan – Update
As announced in the Company’s full year 2023 financial results report, it initiated a plan in the first quarter of 2024 to revalue ADAMA through improving the quality of the business to turnaround the Company. The Company-wide transformation plan is aimed at gradually delivering profit and cash targets over a period of 3 years (2024-2026).
For ADAMA’s Product Development Update, click here.
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