[三季报]安道麦B(200553):2022年第三季度报告（英文版）
Stock Code: 000553(200553) Stock Abbreviation: ADAMA A(B) Announcement No.2022-29 The Company and all members of its board of directors hereby confirm that all information disclosed herein is true, accurate and complete with no false or misleading statement or material omission. ADAMA LTD. THIRD QUARTER REPORT 2022 ADAMA Ltd. (hereinafter referred to as “the Company”) is a global leader in crop protection, providing solutions to farmers across the world to combat weeds, insects and disease. ADAMA has one of the widest and most diverse portfolios of active ingredients in the world, state-of-the art R&D, manufacturing and formulation facilities, together with a culture that empowers our people in markets around the world to listen to farmers and ideate from the field. This uniquely positions ADAMA to offer a vast array of distinctive mixtures, formulations and high-quality differentiated products, delivering solutions that meet local farmer and customer needs in over 100 countries globally. Please see important additional information and further details included in the Annex. October 2022 Important Notice The Company’s Board of Directors, Board of Supervisors, directors, supervisors and senior managers confirm that the content of the Report is true, accurate and complete and contains no false statements, misleading presentations or material omissions, and assume joint and several legal liability arising therefrom. Ignacio Dominguez, the person leading the Company (President and Chief Executive Officer) as well as its legal representative, and Shahar Florentz, the person leading the accounting function (Chief Financial Officer), hereby assert and confirm the truthfulness, accuracy and completeness of the Financial Report. The Third Quarter Report has not been audited. This Report has been prepared in both Chinese and English. Should there be any discrepancy between the two versions, the Chinese version shall prevail.
Reason for retroactive adjustments: According to ASBE 22 - Financial Instruments Recognition and Measurement, starting from 2022 the Group recorded the gain or loss from the disposal of derivative instruments in the “Gain(loss) from Changes in Fair Value”. Before 2022, the Group recorded the abovementioned gain of loss in the “Investment income, net”. The Company reclassified the “Gain(loss) from Changes in Fair Value” and the “Investment income, net” in the corresponding period in 2021. Such change has no impact on the operating results or net assets.
Explanation of other profit or loss that meets the definition of non-recurring profit or loss √ Applicable □ Not applicable Mainly provisions for early retirement plan of employees at the Company’s Israeli manufacturing facilities as explained above in the note. Explanation of why the Company classified an item as non-recurring profit/loss according to the definition in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering their Securities to the Public. Non-recurring Profit and Loss, and reclassified any non-recurring profit/loss items are given as examples in the said explanatory announcement to recurrent profit/loss □ Applicable √ Not applicable No such cases in the Reporting Period. 3. Changes in main accounting statement items and financial indicators in the Reporting Period, as well as reasons for the changes √ Applicable □ Not applicable General Crop Protection Market Environment 1 Preliminary projections estimate the global crop protection industry to increase by 14.5% in 2022 . High crop prices incentivized another year of increases in global planted areas, which drove higher crop protection volumes as well as by higher pricing. Crop prices remain elevated above historic averages despite decreasing somewhat in the last two quarters, after reaching historically high levels in Q1 2022. Prices are expected to remain elevated into 2023, supported by key fundamentals including very low stocks, unfavorable weather conditions in the Americas and parts of Europe and continued supply disruptions exacerbated by the conflict in Ukraine as well as the energy crisis in Europe. However, weaker economic conditions and broad-based monetary tightening could weigh on consumer demand, softening prices further. Farmer profitability continues to face pressures from high production costs, mainly from high fertilizer prices, driven by a surge in energy costs and the application of international economic sanctions to Russia and Belarus (both large fertilizer exporters), as well as supply disruption and tight availability caused by the conflict in Ukraine. Despite this, farming activities are nevertheless still very profitable in most regions. Crude oil prices continued to decline in the third quarter of 2022 from the peak levels reached in the first quarter of 2022, mainly due to concerns regarding the global economic outlook. Prices are, however, expected to remain elevated into the fourth quarter of 2022 and beyond, due to low global inventory levels, uncertainty of Russia’s oil exports as well as the OPEC+ decision to further limit oil production. European gas prices and indirectly Asian spot LNG prices reached record highs in the third quarter of 2022 following the sharp decline in Russian gas flows to Europe and a tight energy market. Meanwhile, prices in the United States reached their highest summer levels since 2008. Global container freight rates have dropped significantly in the third quarter of 2022, driven by a further weakening in demand in the light of high inflation and slower-than-expected economic growth, easing port congestion. A large amount of scheduled new deliveries of container vessel capacity, starting from the end of 2022, is expected to further soften port congestion and put container shipping rates under pressure. Prices for raw materials, intermediates and active ingredients reached peak levels towards the end of 2021; however, since then there has been a general softening of prices in China and an increase in prices of such products in other geographies. With strong global crop protection demand, and supply shortages driven by the energy crisis in Europe and the ongoing conflict in Ukraine, as well as the ongoing "Zero COVID" policy in China, overall prices are expected to remain above levels in recent years. In China, an increase in production capacity and an ease in logistic disruptions led to softening of prices of many key raw materials, intermediates and active ingredients from China. In other geographies cost inflation, energy prices, supply shortages and logistic challenges are driving procurement prices upward and impacting availability of raw materials and intermediates. 1
Europe: Increase in sales in the third quarter in constant exchange rate terms following distributors securing inventory for the autumn season in the UK, Czech Republic, France, Romania, Benelux and Baltics. This growth in constant exchange rate terms was achieved despite drought conditions across European countries such as Spain, France, Italy and Germany impacting demand, as well as supply issues, high channel inventories in some countries and a loss of sales due to the Ukraine-Russia conflict. North America: In the US Ag market, sales decreased in the third quarter as the Company was negatively impacted by the record low harvest of cotton as farmers abandoned non-irrigated fields due to extreme drought conditions across Texas and other southwest regions. Drought in California continued to impact demand. With the North American market in the midst of harvest season, renewed demand for crop protection is expected in anticipation of the upcoming Q1 2023 planting season. Very strong growth in sales in Canada enabled by the in-house production of cereal herbicide which supported the cereal season before harvest. The Consumer & Professional business presented slower sales in the quarter. On the professional side, initial market price reductions, high levels of inventory in the channel and anticipation of decreases in costs of goods led to a slowdown in the market. On the consumer side, inflationary pressures are softening overall market demand. Latin America: Strong growth in sales in Brazil, driven by prices and volume supporting the anticipated soybean, corn, sugarcane and cotton fourth quarter crop seasons; sales which in 2021 were also included in the fourth quarter. In other LATAM countries the higher sales reflect the strong demand across the region and were achieved despite some adverse weather conditions and inventory in the channel. Asia Pacific: The Company's strong growth in Asia Pacific was led by the sales of raw material, intermediates and fine chemicals in China, driven by continued strong demand, in light of the strong global demand for crop protection and achieved despite an ease in fine chemical prices. The sales in China of ADAMA's branded portfolio also continued to grow nicely, despite the strong competition in the market. In the wider APAC region, growth in sales in the quarter was also achieved led by strong sales in Asian countries such as Thailand, Korea and Indonesia due to favorable seasonal conditions and with the return of face-to-face business post- COVID. In the Pacific region fungicide sales grew nicely following favorable seasonal conditions. This growth was achieved despite high channel inventories in parts of Asia. India, Middle East and Africa: Sales in the third quarter were led by India and represent the peak season for sales in this country due to the monsoon season. Despite this, heavy rainfall negatively impacted insecticide and fungicide sales in certain crops and overall sales were also impacted by some supply constraints. (2) Cost of Goods and Gross Profit In the reported results, as of Q4 2021, following recent changes in the guidelines in China, the transportations costs to third parties and its marketing subsidiaries and opex idleness have been reclassified from operating expenses to costs of goods (not impacting the operating results), while these expenses were not recorded in the cost of goods in the third quarter and first nine months of 2021, but rather in the operating expenses. Additionally, certain extraordinary charges related largely to a temporary disruption of the production of certain products were adjusted in the third quarter and first nine months of 2021. These charges have significantly declined since Q1 2022, as the relocation and upgrade of the manufacturing Jingzhou site in China has been completed and is now at a high level of operation. Excluding the impact of the abovementioned items, the higher gross profit was mainly driven by the markedly higher prices, complemented by continued volume growth, which offset the higher logistic, procurement and production costs, as well as the negative impact of exchange rates. (3) Operating Expenses: Operating expenses include Sales and Marketing, General and Administration and R&D. Please refer to the explanation above regarding the reclassification of certain transportation costs and idleness from operating expenses to COGs. Additionally, the Company recorded certain non-operational charges within its operating expenses amounting to RMB 20 million ($ 3 million) in Q3 2022 in comparison to RMB 41 million ($ 6 million) in Q3 2021, and RMB 202 million ($ 31 million) in 9M 2022 in comparison to RMB 210 million ($ 32 million) in 9M 2021, mainly as follows: (i) Non-cash amortization charges in respect of Transfer assets received and written-up related to the 2017 ChemChina-Syngenta acquisition. The proceeds from the Divestment of crop protection products in connection with the approval by the EU Commission of the acquisition of Syngenta by ChemChina, net of taxes and transaction expenses, were paid to Syngenta in return for the transfer of a portfolio of products in Europe of similar nature and economic value. Since the products acquired from Syngenta are of the same nature, and with the same net economic value as those divested, the Divestment and Transfer transactions had no net impact on the underlying economic performance of the Company. These additional amortization charges will continue until 2032 but at a reducing rate, yet will still be at a meaningful level until 2028; (ii) Charges related mainly to the non-cash amortization of intangible assets created as part of the Purchase Price Allocation (PPA) on acquisitions, with no impact on the ongoing performance of the companies acquired; and (iii) Incentive plans - share-based compensation. Excluding the impact of the abovementioned non-operational charges, the higher operating expenses in the quarter and first nine months reflect the strong growth of the business, higher transportation and logistics costs driven by both an increase in freight costs and volumes transported, an increase in expenses attributed to company success- based employee compensation, the inclusion of a recent acquisition (in the nine-month period) and moderated by the positive impact of exchange rates. In addition, in the first quarter of 2022 the Company recorded a doubtful debt provision for trade receivables in Ukraine. (4) Financial Expenses “Financial Expenses” alone mainly reflect interest payments on corporate bonds and bank loans as well as foreign exchange gains/losses on the bonds and other monetary assets and liabilities before the Company carries out any hedging. The impact of Financial Expenses (before hedging) is an expense of RMB 132 million ($15 million) for the nine months of 2022 compared with an expense of RMB 1,108 million ($171 million) for the corresponding period in 2021. Given the global nature of its operational activities and the composition of its assets and liabilities, the Company, in the ordinary course of its business, uses foreign currency derivatives (forwards and options) to hedge the cash flow risks associated with existing monetary assets and liabilities that may be affected by exchange rate fluctuations. The impact of the hedging transactions which is recorded in “Gains/Losses from Changes in Fair Value” is a net loss of RMB 1,365 million ($210 million) in the nine months of 2022 compared with a net gain of RMB 174 million ($27 million) in the corresponding period in 2021. The aggregate of Financial Expenses and Gains/Losses from Changes in Fair Value (hereinafter as “Total Net Financial Expenses”), which more comprehensively reflects the financial expenses of the Company in supporting its main business and protecting its monetary assets/liabilities, amounts to RMB 1,497 million ($226 million) in the nine months of 2022 compared with RMB 934 million ($145 million) in the corresponding period in 2021. The higher financial expenses were mainly driven by the net effect of the high Israeli CPI on the ILS-denominated, CPI-linked bonds and higher hedging costs on exchange rates. In the nine-month period in 2022, these expenses also included the valuation of put options attributed to minority stakes of a subsidiary fully consolidated from Q3 2021. (5) Income Tax Expenses In 2022, the Company recognized a higher deferred tax asset, related to inter-group sales, that led to a decline in the tax on income. The significantly higher tax expenses in the third quarter of 2021 reflected the high growth in end-market sales, which incur higher tax rates, as well as the impact of a significantly weaker BRL on non-monetary tax assets.
II. Information regarding the Shareholders 1. Total number of ordinary shareholders and preference shareholders who had resumed their voting rights, and shareholdings of top 10 shareholders at the period-end Unit: share
2. Total number of preference shareholders and shareholdings of the top 10 of such at the period-end □ Applicable √ Not applicable III. Other Significant Events □ Applicable √ Not applicable IV. Financial Statements i. Financial Statements 1. Consolidated balance sheet Prepared by ADAMA Ltd. 30 September 2022 Unit: RMB’000
Ignacio Dominguez Shahar Florentz Shahar Florentz Legal representative Chief of the accounting work Chief of the accounting organ 2. Consolidated income statement for the period from the year-beginning to the end of the Reporting Period Unit: RMB’000
Ignacio Dominguez Shahar Florentz Shahar Florentz Legal representative Chief of the accounting work Chief of the accounting organ 3. Consolidated cash flow statement for the period from the year-beginning to the end of the Reporting Period Unit: RMB’000
ii. Auditor’s report Is this Report audited? □ Yes √ No This Report is unaudited. Board of Directors ADAMA Ltd. October 27, 2022 中财网
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