Tel-Aviv, Israel, November 10, 2013
The Makhteshim Agan Group (“MAI” or the “Company”), the world leader in branded off-patent crop protection solutions, today reported its financial results for the third quarter and first nine months ended September 30, 2013.
Commenting on the results, Mr. Yang Xingqiang, Makhteshim Agan’s Chairman of the Board, said, “During the third quarter, MAI recorded sales growth in every region, but especially in Latin America and Asia, as well as impressive YoY gains in our gross profit, EBITDA, operating profit and net income. During the quarter, we also announced a tender offer for the publicly traded shares of Hubei Sanonda Co. Ltd., a Chinese agrochemicals company, which is part of the ChemChina group this step reflects a significant step in building Makhteshim Agan's platform in China.
Building the a fully integrated platform in China together with key strategic processes that the management team of Makhteshim Agan is leading are important elements of our future development. Our initiatives are aimed at achieving profitable growth, and improving the global competitive position of the Company in the agrochemical sector."
Mr. Erez Vigodman, President and CEO of Makhteshim Agan, commented, “I am very pleased to report the highest third quarter sales by MAI in our history and significant growth in all financial indicators for the quarter and the first nine months of the year. We were able to improve our gross profit, operating profit, EBITDA and net income for the quarter, despite adverse weather conditions in North America and significant weakening of some of the key currencies in which the Company operates in the APAC region. Consistent improvement in our results throughout the last three years is evidence of the business transformation we have undergone. These enabled us to realize opportunities in our industry while taking an active role in helping to address the global food challenge. We are encouraged by our progress on various operational and commercial fronts as we advance our strategic plan to build a solid platform in China and to improve our portfolio allowing us to offer effective solutions to farmers worldwide."
Sales: Revenues for the third quarter of 2013 totaled $732.0 million compared with $643.5 million in the third quarter of 2012. The 13.8% increase derived from increased quantities sold and higher selling prices, which compensated for the weakening of various currencies in some of the regions in which the Company operates. For the nine-month period, sales totaled $2,420.7 million, a 7.3% increase compared with $2,255.0 million for the first nine months of 2013.
The quarter’s strongest sales growth was delivered in Latin America, where revenues increased by 26.4% to $237.6 million compared to $188.1 million in the third quarter of 2012. This reflected a significant increase in quantities sold and a rise in selling prices, primarily in Brazil.
Sales in Asia Pacific & Africa increased to $146.7 million over the $130.2 million in the comparable quarter of 2012, an increase of 12.6% stemming primarily from an increase in quantities sold and from higher selling prices, which were partially offset by a weakening of currencies in the region.
Sales in Europe increased by 7.5% to $227.5 million from $211.7 million in 2012 due to an increase in quantities sold and from higher selling prices, notwithstanding the effective exchange rate level of currency rates during the quarter which was lower than the level at which the Company operated in the corresponding quarter of 2012. Sales for the quarter in North America increased by 5.7% from $88.5 million in 2012 to $93.6 million, reflecting an increase in quantities sold which was partially offset by lower selling prices.
Gross Profit: Gross profit for the third quarter totaled $233.9 million (32.0% of sales), up 17.3% compared with $199.3 million (31.0% of sales) for the same period in 2012. For the nine-month period, gross profit totaled $782.1 million (32.3% of sales), up 5.6% compared with $740.9 million (32.9% of sales) in the first nine months of 2012. The increase in the amount and rate of the gross profit during the quarter stemmed primarily from an increase in quantities sold, a better product mix and from increasing selling prices, partially offset by an increase in raw materials prices and production costs, as well as by a weakening of several currencies in which the Company operates against the US dollar.
Operating Expenses: R&D, Selling and General and Administrative expenses for the quarter totaled $160.3 million (21.9% of sales) compared with $146.6 million (22.8% of sales) for the third quarter of 2012. For the nine-month period, operating expenses totaled $484.2 million (20.0% of sales), compared with $462.3 million (20.5% of sales) for the first nine months of 2012.
Operating Profit: Operating profit for the third quarter increased by 39.3% to $73.5 million (10.0% of sales), compared with $52.8 million (8.2% of sales) for the third quarter of 2012. For the nine-month period, operating profit increased by 6.9% to $297.9 million (12.3% of sales), compared with $278.6 million (12.4% of sales) for the first nine months of 2012.
Financing Expenses: Financing expenses totaled $38.9 million for the three months ended September 30, 2013 compared with $27.5 million for the third quarter of 2012. For the nine-month period, financing expenses totaled $102.8 million, compared with $83 million in the first nine months of 2012. The increase for the quarter and the nine months resulted primarily from an increase in the Company's debt resulting from its issuance of Series B debentures in January 2013, as well as the effect of changes in the CPI to which most of the Company’s debentures are linked.
Income Before Tax: Income before tax for the third quarter of 2013 increased 49.0% to $34.3 million from $23.0 million for the third quarter of 2012.
The increase in income before tax stemmed from the quarter’s higher sales and improved profitability. For the nine month period, income before tax increased by 6.1% to $199.8 million compared with $188.3 million for the first nine months of 2012.
Net Income: Net income for the third quarter of 2013 totaled $18 million, or 2.5% of sales, compared with $13.1 million, or 2.0% of sales, for the third quarter of 2012. For the nine-month period, net profit totaled $156.3 million, or 6.5% of sales, compared with $144.4 million, or 6.4% of sales, in the first nine months of 2012.
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization):
EBITDA for the third quarter of 2013 increased by 26.6% to $113.4 million (15.5% of sales), compared with $89.6 million (13.9% of sales) for the third quarter of 2012. For the nine-month period, EBITDA totaled $414.5 million (17.1% sales), compared with $388.7 million (17.2% of sales) in the first nine months of 2012.
Cash Flow: The Company recorded positive cash flow from operating activities of $99.6 million during the third quarter of 2013 compared with negative cash flow of $38.0 million in the third quarter of 2012. For the first nine months, positive cash flow totaled $166.6 million, compared with negative cash flow of $46.2 million in the first nine months of 2012. The change in cash flow stemmed primarily from improved working capital for operations.
China Integration Update
The Company is continuing to promote its strategic plan to build an operational and commercial infrastructure in China. In order to advance this goal MAI is in a process of examining the acquisition of all or part of the shares or assets of several companies, which are controlled by CNAC. In connection with the process, MAI published a partial tender offer to acquire up to 148,480,805 B Shares, representing 65% of the B Shares held by the public of Hubei Sanonda Co., Ltd., a public company controlled by CNAC. MAI is considering the possibility of acquiring additional shares or assets of several companies (or their subsidiaries) that are controlled by China National Agrochemical Corporation (“CNAC”), MAI’s controlling shareholder, as well as Sanonda’s Type A shares (“A Shares”), that are indirectly held by CNAC and which represent 20.15% of the issued and paid up capital of Sanonda.
Agan Makhteshim Agan Industries Ltd. is a leading manufacturer and distributor worldwide of crop-protection solutions and the largest off-patent player in the sector. The Company supplies efficient solutions to farmers that assist them in combating disease and increasing yields. In 2012, the Company’s revenues were over $2.83 billion, and it is ranked seventh in the world in the agro-chemicals industry. The Company is characterized by its know-how, high-level technological-chemical abilities, expertise in product registration, and observance of strict standards of environmental protection, stringent quality control and global marketing and distribution channels.
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