Adama Ltd. Class A · SZSE:000553
Adama Ltd. Class A — FY2023 Earnings Presentation
40 slides from Adama Ltd. Class A's earnings presentation, Mar 27, 2024
Slide 1: ADAMA 2023 Summary
ADAMA 2023 Summary Earnings Call/ 27.3
Slide 2: Legal Notice
Legal Notice This presentation is for marketing and information purposes only. By this presentation, neither ADAMA Ltd. nor ADAMA Agricultural Solutions Ltd. (together the “Company” or “ADAMA”) intend to give, and the presentation does not constitute, professional or business advice or an offer or r
Slide 3: Crop Protection Industry Status
Crop Protection Industry Status Industry Channel destocking in High channel overstocking in light of global high inventories 2022 interest rates Good farmer profitability Lower China AI CP market prices supported by historically prices softening led by elevated commodity crop prices CP commodities &
Slide 4: Farmer consumption vs sell-into distribution market
Farmer consumption vs sell- into distribution market Farmer consumption market Sell-into distribution market CP market value 9M sales evolution of top 8 largest CP companies (USDb, ex-manufacturer value) (USDb, ex-manufacturer value) Flat 54.0 -13% 74.8 74.9 47.0 45.0 65.7 59.3 60.8 38.5 39.4 2019 2
Slide 5: Farmer margins more challenging but expected to remain reasonable
Farmer margins more challenging but expected to remain reasonable US Net Cash Farm Income in Nominal Terms (US$/b) U.S. farm production expenses 200 40 160 35 30 120 25 80 20 15 40 10 5 0 0 2015 2016 2017 2018 2019 2020 2021 2022 2023e 2024f Seed Pesticides Fertilizers Energy Net cash income Federal
Slide 6: ADAMA Ltd Q4 12M 2023 Review
A, ADAMA ADAMA Ltd Q4 12M 2023 Review
Slide 7: ADAMA LTD FY 2023: Sales & Profit Impacted by Channel Inventory & Destocking
ADAMA LTD FY 2023: Sales & Profit Impacted by Channel Inventory & Destocking 12M Highlights Adjusted FY 2023 FY 2022 %▲ $ million ▪ Sales down 16%, 15% in CER** to $4,661 million, 7% decrease in volume and Sales 8% decrease in prices, mainly driven by: Sales 4,661 5,570 (16%) • High channel inventor
Slide 8: ADAMA LTD Q4 2023: Sales & Profit Impacted by Channel Inventory & Destocking
ADAMA LTD Q4 2023: Sales & Profit Impacted by Channel Inventory & Destocking Adjusted Q4 Highlights Q4 2023 Q4 2022 %▲ $ million Sales ▪ Sales down 13%, 14% in CER** to $1,136 million, 1% increase in volume and 15% decrease in prices, mainly driven by: Sales 1,136 1,312 (13%) • High channel inventor
Slide 9: Regional Highlights
Regional Highlights (USD) Q4 ($) CER FY CER Q4 ($) CER FY CER North America 14% 14% 20% 20% EAME 20% 20% 8% 5% C&P Solutions: • Total market slowdown with demand also impacted by lower grain prices • Soft consumer demand impacted by a decline in disposable income, an outcome • In H2 pricing pressure
Slide 10: Regional Sales Performance
Regional Sales Performance Q4 2023 vs. Q4 2022 % Sales change by region Absolute Sales change (USD $m) Total $m (20%) Europe, Africa & Middle East (61) 241 (14%) North America (39) 252 (15%) Latin America (52) 379 of which, China: of which, China: -24% CER -25% USD -$33m (8%) Asia Pacific (24) 264 (
Slide 11: Regional Sales Performance
Regional Sales Performance FY2023 vs. FY 2022 % Sales change by region Absolute Sales change (USD $m) Total $m (5%) Europe, Africa & Middle East (112) 1,240 (20%) North America (207) 820 (22%) Latin America (301) 1,292 of which, China: of which, China: -21% CER -$185m -25% USD (14%) Asia Pacific (28
Slide 12: 12M 2023 Sales: Channel Inventory & Destocking put pressure on demand and pricing
12M 2023 Sales: Channel Inventory & Destocking put pressure on demand and pricing Sales bridge analysis 5,570 -417 -423 4,661 -69 7% 8% 16% 12M 2022 ∆ Volumes ∆ Prices FX 12M 2023 Notes – Numbers in million $; Denotes adjusted figures unless otherwise noted; 12 Parts may not sum due to rounding; FX
Slide 13: Q4 2023 Sales: Channel Inventory & Destocking put pressure on demand and pricing
Q4 2023 Sales: Channel Inventory & Destocking put pressure on demand and pricing Sales bridge analysis 1,312 10 -198 13 1,136 1% 15% 13% Q4 2022 ∆ Volumes ∆ Prices FX Q4 2023 Notes – Numbers in million $; Denotes adjusted figures unless otherwise noted; 13 Parts may not sum due to rounding; FX inclu
Slide 14: Q4 & 12M 2023: Gross Profit
Q4 & 12M 2023: Gross Profit Q4 Gross Profit bridge analysis 341 +23 -198 Gross profit impacted by weak pricing, moderated +17 245 +62 by an increase in volumes due to capture of opportunities in the market, an improvement in the sales mix of higher margin products, positive impact of new inventory s
Slide 15: Q4 & 12M 2023: EBITDA
Q4 & 12M 2023: EBITDA EBITDA bridge analysis • Improvement in the sales mix of higher margin products • Q4 increase in volumes due to capture of opportunities in the market • Weak Pricing -76 • Positive impact of new inventory sold, 740 -423 priced at market prices • Lower operating expenses +151 -5
Slide 16: Despite Near Term Market Headwinds ADAMA's Focus on Quality of Business Positions it Well
Despite Near Term Market Headwinds ADAMA’s Focus on Quality of Business Positions it Well for the Future 16
Slide 17: Taking Action – Short Term Measures
Taking Action – Short Term ▪ Third trailing quarter with positive Operating Cash Flow Measures ▪ Reduction of inventory ▪ Positive costs, benefiting from Successful market prices execution on ▪ Positive Sales Mix decisions despite ▪ Decline in Operating Expenses and their margin challenging market c
Slide 18: Laser Focus on Cash Flow Management
Laser Focus on Cash Flow Management Net Income* change YoY Operating Cash Flow Free Cash Flow -$321m +$250m +$270m 356 Steps to improve 96 106 Cash Flow: -147 • Decrease in procurement -225 -417 • Intensive collections • Prioritization of investments 2022 2023 *Reported Net Income (Loss) 18
Slide 19: Focus on Selective Procurement to Control Inventory
Focus on Selective Procurement to Control Inventory Third Party Purchases controlled and Leading to declining Inventory Levels reduced ($m) ($m) 2,512 2,448 2,431 1,200 2,307 24% 1,007 1,008 1,000 YOY Inventory decline Reduction 48% 864 2,320 $583m 47% 792 2,151 800 688 680YOY 37% 643YOY Reduction 6
Slide 20: OPEX Management A Cross Company Effort
OPEX Management A Cross Company Effort FY OPEX Saving $189m 17% 19.9% 1107 19.7% 918 ▪ OPEX discipline 15% 14% 16% 23% (Hiring freeze, travelling consultants etc.) 19.8% 18.1% 20.1% 21.8% 18.9% 18.7% 281 268 273 22.2% 286 19.4% ▪ Lower transportation costs 238 231 229 220 (volumes & prices) Q1 Q2 Q3
Slide 21: Business Update
A, ADAMA Business Update
Slide 22: Shaping our Future
Shaping our Future Focus on Value Innovation customer segment with high-value differentiated formulations Operational Efficiency| Margin Improvement| Cash Flow Generation| ▪ Market repositioning – focusing on Value Innovation, the market space where innovation is served not through new active ingred
Slide 23: Value Innovation
Value Innovation Creating value for us and our customers Leveraging Core Leap and Formulation Mastery to position ADAMA as an innovation company, proudly focused on traditional crop protection. Serving the unique needs of customers who are looking for an advanced, quality solution. 23
Slide 24: Innovation with off-patent AIs inside is the largest and fastest growing CP market segment
Innovation with off-patent AIs inside (formulation innovation), is the largest and fastest growing CP market segment 120 100 New AI Innovation True Generic Formulation Innovation >90% Expected market share of off-patent products Top 20 80 Market Share % 60 40 AIs in our market are 20 already off-pat
Slide 25: But It's Also Increasingly Crowded by:
But It’s Also Increasingly Crowded by: Research Based Chinese, Indian More Companies (RBCs) Generics entering Distributers moving into the off-patent space global markets buying direct What differentiates ADAMA in this space? Focus expanding from off-patent active ingredients to on-patent products 2
Slide 26: Improving the Quality of the Business
Improving the Quality of the Business – Leveraging Our Strong Capabilities and Global Market Reach to Serve the Unique Needs of the Value Innovation Customer Core Formulation Chosen Leap Mastery Customer Focus on select AIs in crop Novel formulation Segment strategic segments coming technologies to
Slide 27: Key 2023 Product Launches
Key 2023 Product Launches Launched in Brazil, LATAM & China Launched in Brazil Launched in Australia Q4’22-Q4 2023 Q3 2023 Q3 2023 27
Slide 28: Key 2024 Product Launches
Key 2024 Product Launches ® Avastel Maxentis® Forapro® Maganic® Launching a New Cereal Fungicide Portfolio in Europe All crop stages Major diseases Value segments Powered by Asorbital® Formulation Technology that Deliver Excellent Results and Respond to Diverse Farmer Needs 28
Slide 29: 2017
Slide 30: Fungicides | Cereals | Europe & Canada
Fungicides | Cereals | ADAMA’s 9% Market Europe & Canada Share (2017) is under identified as a Strategic Crop Segment risk due to: 1 Divestments 2 Product Bans 3 Competitive Pressure Fungicides | Cereals | Europe & Canada 30 CONFIDENTIAL
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Slide 32: Years of Dedicated Work: Driving Unmatched Success
Years of Dedicated Work: Driving Unmatched Success ▪ Folpet Impact ▪ Proprietary Molecule Access Breakthrough ▪ Building a Powerhouse Portfolio ▪ Revolutionary Innovation ▪ Delivered on Manufacturing Milestones 32 CONFIDENTIAL
Slide 33: Prothioconazole – Secure Reliable Supply
Prothioconazole – Secure Reliable Supply Israel India Brazil 33 CONFIDENTIAL
Slide 34: Portfolio Deployment: Never seen before!
Portfolio Deployment: Never seen before! Price /HA Avastel® Maganic ® Forapro® Maxentis® Soratel® Value Delivered 34 CONFIDENTIAL
Slide 35: The new reality… reaping the benefits of long-term strategic planning
The new reality… reaping the benefits of long-term strategic planning MS 9% Sales 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 35 CONFIDENTIAL
Slide 36: Shaping our Future
Shaping our Future Focus on Value Innovation customer segment with high-value differentiated formulations Operational Efficiency| Margin Improvement| Cash Flow Generation| ▪ Market repositioning – focusing on Value Innovation, the market space where innovation is served not through new active ingred
Slide 37: Leaner Global Leadership Team
Leaner Global Leadership Team President & CEO Steven Hawkins APAC* Formulation Supply CFO David Peters Elad Shabtai Efrat Nagar Latin America AI Production People Romeu Stanguerlin Bruce Morris Ruthie Zeltzer China Portfolio and An Liru Innovation Florian Wagner EAME** Sergio Dedominici Paz North Am
Slide 38: Thank you
A, ADAMA Thank you
Slide 39: Adjusted vs. Reported P&L
Adjusted vs. Reported P&L 12M 12M 12M 12M $ million Q4 2023 Q4 2022 %▲ Q4 2023 Q4 2022 %▲ %▲ %▲ Adjusted Adjusted Reported Reported 2023 2022 2023 2022 Adjusted Adjusted Reported Reported Sales 1,136 1,312 (13%) 1,136 1,312 (13%) 4,661 5,570 (16%) 4,661 5,570 (16%) Gross Profit 245 341 (28%) 220 304
Slide 40: Adjusted vs. Reported Financial Results
Adjusted vs. Reported Financial Results The financial results in this presentation are presented on an “Adjusted” basis, and differ to some extent from the “Reported” financials contained in the formal financial statements of the Company. ADAMA’s approach on the use of adjustments: • Adjusted result