Business Update Q4 and FY 2015...Sales of $650 million in Q4 and $3,064 million in 2015: ‒ Growth...
Transcript of Business Update Q4 and FY 2015...Sales of $650 million in Q4 and $3,064 million in 2015: ‒ Growth...
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Business Update
Q4 and FY 2015March 2016
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Legal notice
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This presentation is for marketing and information purposes only. By this presentation, ADAMA Agricultural Solutions Ltd.
(the “Company”) does not intend to give, and the presentation does not constitute, professional or business advice or an
offer or recommendation to perform any transaction in the Company’s securities. The accuracy, completeness and/or
adequacy of the content of this presentation, as well as any estimation and/or assessment included in this presentation, if
at all, is not warranted or guaranteed and the Company disclaims any intention and/or obligation to comply with such
content. The Company may make improvements and/or changes in the features or content presented herein at any time.
The Company shall not be liable for any loss, claim, liability or damage of any kind resulting from your reliance on, or
reference to, any detail, fact or opinion presented herein.
This presentation contains proprietary information of the Company and may not be reproduced, copied, disclosed or
utilized in any way, in whole or in part, without the prior written consent of the Company.
The Company’s assessments may not materialize, inter alia, due to factors out of the Company's control, including the
risk factors listed in the Company’s annual report, changes in the industry or potential operations of the Company's
competitors.
All information included in this presentation relates only to the date which it refers to, and the Company does not
undertake to update such information afterwards.
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2015 Financial Review
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Strong finish sees Adama deliver market leading performance in a challenging year
Sales of $650 million in Q4 and $3,064 million in 2015:
‒ Growth of 12.6% in Q4 and 7.4% in the full year, at constant exchange rates (CER)
‒ US dollar sales declined by 3.6% in Q4, and by 4.9% in the full year, due to strength of the dollar
Volumes +7% in Q4 and +5.3% in the full year, with volume growth across all regions
Marked improvement in all Q4 profit and profitability metrics, despite tough market conditions, driving
resilient margin performance in the full year:
‒ Gross margin +2.6 percentage points in Q4, stable in the full year
‒ Operating income tripled in Q4, with EBIT margin +3.2 percentage points; Full year EBIT margin +0.2pp
‒ EBITDA in the quarter increased by $23m, or 44.5%, with EBITDA margin +3.9 percentage points
‒ EBITDA in the full year of $474m, with EBITDA margin increasing from 14.9% to 15.5%
Continued evolution of the portfolio, launching differentiated, higher-margin products across all regions
Launch of direct sales in China, with Adama becoming the sole Chinese commercial platform for
formulated products of several CNAC companies
Significant improvement in both profits and profitability in Q4
capping a strong year
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Financial highlights
%Change
USD
% Change
CERFY 2014FY 2015
%Change
USD
% Change
CERQ4 2014Q4 2015Adjusted, ($ million)
-4.9+7.43,2213,064-3.6+12.6674650Sales
-5.41,025970+5.8185195Gross Profit
31.8%31.6%27.4%30.0%As % of Sales
-6.4712667-5.4174165Operating Expenses
-3.3313303+193.01130Operating Income (EBIT)
9.7%9.9%1.5%4.7%As % of Sales
-17.9151124+37.7-33-20Net Income
4.7%4.1%-4.8%-3.1%As % of Sales
-1.2480474+44.55376EBITDA
14.9%15.5%7.8%11.7%As % of Sales
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Note:
CER: Change in Constant Exchange Rate terms, estimated
Net income and EBITDA have been adjusted for certain one-time expenses
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Adama has consistently delivered above-industry growth
Source: PhillipsMcDougall6
Off-patent Industry Leader
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Crop Protection Market Adama
Sales 1998 – 2015, Indexed (1998 = 100), log scale
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FX Effect:
Sales growth
excluding FX:
7.4%
3,221 -395
68170 3,064
FY15 Sales bridge analysis
FY14 FX Price
Variance
Quantity
VarianceFY15
7
+5.3%+2.1%-12.3%
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FY15 Gross profit bridge analysis
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1,025 -311
6878
109 970
FY 2014 FY 2015FX Quantity
Variance
Price
Variance
Cost
Variance
31.8% 31.6%
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480
68
78
113 -8 -257
474
FY15 EBITDA bridge analysis
FY14 FY15
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14.9% 15.5%
Price
Variance
Cost
Variance
Quantity
Variance
FXOperating
Expenses
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Inventory reduction
Tight focus on operating cost control, inventory and receivables management
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1,241
1,185
Dec 2014 Dec 2015
Operating expense
reduction
Inventory ($mm)
-$57m
712 667
300
350
400
450
500
550
600
650
700
750
FY'14 FY'15
-$45m; down 0.3pp
Operating Expenses ($mm and % of Sales)
Receivables reduction
932
890
Dec 2014 Dec 2015
Receivables ($mm)
-$42m
FY 2015
FY 2014
22.1%21.8%
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Solid leverage profile
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($m) 2015 2014
Bonds 1,157 1,005
Bank debt 397 481
Bond hedge 30 109
Total balance sheet debt 1,584 1,595
Less: cash & equivalents (400) (416)
Net debt 1,184 1,178
Net debt / EBITDA (for bank covenants) 2.5x 2.5x
Securitization 192 155
Net debt (incl. securitization) 1,376 1,333
Net debt / EBITDA 2.9x 2.8x
EBITDA 474 480
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Bond principal maturity schedule
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Notes:
Bank debt is assumed to be consistently refinanced upon maturity.
Maturity amounts shown above are excluding estimated interest payments.
For more detail, see Notes 11, 14, 15 and 29 to the 2015 Financial Statements.
1,056
-62 -62 -62 -62 -62 -62 -62 -62 -62 -62 -62 -62 -62 -62 -62 -62 -62
101
-101
30
277
119
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036
Bond Series B Bond Series D Bond Hedge Long-term Loans Short-term Bank Credit
Current balances
($m)
1,584
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Leverage levels well within bank and securitization covenants
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Notes:
• Net debt excludes the off-balance sheet balance on receivables financing facility (securitization)
of $155m in 2014 and $192m in 2015
($m)
Net Debt /
EBITDA
Net Debt /
Equity
Minimum
Equity
Retained
Earnings
Securitization Program 4.0x 1.25x 1,000
Bank debt 4.0x 1.25x 1,220 700
Adama as at 31-12-2015 2.5x 0.8x 1,567 1,126
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2015 Business Highlights
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Significant progress on all fronts
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• Further portfolio differentiation and increased direction of R&D and registration
resources towards value-added, unique and differentiated products
• Launch of innovative, proprietary products such as NIMITZ™ and BREVIS™ in
several key countries in the Americas, Australia, Europe, and Israel
• Hundreds of new registrations worldwide
• Two main manufacturing sites in Israel connected to natural gas power stations
‒ Expected to lead to improvement in environmental footprint and reduction in
energy costs
• Launch of key facilities at Neot Hovav, including the NIMITZ™ production facility
and new production lines for RIMON™
• New go-to-market approach, increasing proximity to farmers, already implemented
in several key markets
‒ Expanding to 20 more countries over the next two years
• Marketing and Product Strategy functions recently combined into a single division,
headed by Walter Costa
‒ To ensure optimal coordination of demand creation, portfolio and demand
fulfilment arms going forward
Portfolio Transformation
Marketing & Product Strategy
Operations
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China Build-up and Integration
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1. China Market Access
Launching our direct sales
platform in China
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China’s agrochemical market:The third largest in the world, one of the fastest growing
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Source: ARN, ex provincial distributor value
$4bn
$6bn
2011 2017
7% CAGR
3x global growth
Solid currency
Reasonable credit terms
1.
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China’s agrochemical market:A vast, highly fragmented and diversified market
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Source: CCM, Kleffmann Group
>200,000,000Farms
1,000,000Shops
22,000Distributors
Consolidation of both farms and AgChem producers
Highly complexdistribution channels
One of the biggest and fastest growing markets
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China’s agrochemical market:Neither the multinationals nor local players have been able
to make a market breakthrough
Source: CCPIA, GFK, ARN 2014
6%4%
3%3%
3%
4%
9%
7%
6%
55%
Syngenta
Dow
Bayer
DP
BASF
Other MNC players
Redsun
Huifeng
Noposion
Other local players
23%Multinationalplayers
77%Localplayers
1.
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Adama China – Integrating the domestic sales of five CNAC entities
Adama becoming the exclusive salesplatform for formulated products of 5 CNAC entities
2017 OnwardsFull integration of both ADAMA platform company
and 5 CNAC entities’ sales
Continue the buildup ofAdama platform company + integrate 170 employees
Commercial collaboration with five CNAC entities
2016
1.
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2. Launch pad for differentiated
offering
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Launch pad for differentiated offering
Global R&D Center
in Nanjing
Part of Adama’s global R&D
A channel to introduce
advanced technologies within
and outside of China
Multi-purpose Synthesis Plant
in Huai’An
State-of-the-art multi-purpose
plant currently in planning and
design stages
Global Formulation Center
in Huai’An
State-of-the-art platform to
introduce cost-advantaged crop
protection solutions
2.
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3. Competitive cost position
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Competitive Cost Position
Adama is already:
o Increasing cost-competitive product
procurement from Sanonda and Anpon
o Obtaining new Adama registrations based
on these sources
o Selling key products such as PARAZON®
and ETHEPHON through Adama’s
commercial network in key markets,
including the US, India and Australia
3.
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4. Operational optimization
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Operational optimizationChina operations to increase supply chain flexibility and efficiency
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Our China operations to optimize China
and global formulation, inventories and
logistics
Supply chain efficiency drivers:
Shorten global supply lines
Higher inventory turns and improved
customer service
Global inventory days expected to
decrease; resulting in working capital
reduction and lower funding costs
Shipping costs to decrease vs. existing
routes via Israel
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Existing routes
Direct shipping routes
Europe
Europe
4.
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Adama-Sanonda Transaction
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From China ForwardBecoming the only China-Global player
Accomplishing our two key strategic objectives in one coordinated step
Integration Flotation
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~$350m
PUBLICKOORCNAC
Unresolved matters:
Sanonda remaining with majority (69%) in public shareholders’ hands, requiring:
Separate Board of Directors and governance structure
Key activities requiring constant approvals
Continual, potentially expensive, acquisitions of further stakes, over time, to reach majority and eventually full ownership of Sanonda by the group
Relatively small Adama public float of ~$350m
South Europe BrazilAPAC Latin America
North Europe IMA North America China
Eight Clusters
ADAMA (USD)
Previously intended structure following integration and IPO
China
Sanonda
31%
69% public
~$560m
30
Huai’An
Formulation
Center
Domestic
Distribution
Selected Chinese Businesses
Nanjing
R&D Center
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Our contemplated combined and publicly-traded structure
Huai’An
Formulation
Center
Domestic
Distribution
Selected Chinese Businesses
China
Nanjing
R&D Center
Sanonda
Operations
100%
PUBLICKOORCNAC
South Europe BrazilAPAC Latin America
North Europe IMA North America China
Eight Clusters
Renamed ADAMA (formerly
Sanonda)
Adama’s global management to lead the combined company
Full combined ownership of Sanonda from Day 1
Allowing accelerated commercial and operational integration
Smooth and simple alignment of business approach and management
Achieving a significant free float in both RMB and HKD, on the Shenzhen Exchange, one of the world’s largest31
Adama Agricultural Solutions Ltd.
100%