Makhteshim Agan Announces 2nd Quarter 2010 Financial Results

TEL-AVIV, Israel, Aug. 11 /PRNewswire/ -- The Makhteshim Agan Group (TASE: MAIN), the world leader in branded off-patent crop protection solutions, today reported financial results for the 2010 second quarter and first half, ended June 30, 2010.

Below are key financial metrics for 2Q 10 and 1H10:

Mr. Avraham Bigger, Makhteshim Agan's Chairman of the Board, commented, "Despite challenging weather conditions and a competitive pricing environment in the quarter and during the first half on the year, we posted some of the better financial results in our industry.

"At the same time, we recognize that Makhteshim Agan faces significant operational and strategic challenges in the coming years.  Consequently, we are taking all the necessary actions to strengthen our ability to compete and succeed in growing but competitive markets."

Mr. Erez Vigodman, President and CEO of Makhteshim Agan, added: "Two thousand and ten (2010) is a particularly challenging year for us. Alongside our day-to-day activities, in an industry that has not fully recovered yet, we are making progress towards our goals of improving our global operational platform and cost structure, the results of which will begin to bear fruit in 2011.

"Despite an industry-wide price decline in the first half of 2010, we managed to grow our business. Emerging markets in Asia Pacific and South America played a significant role in this growth, and I expect this trend to continue in the coming years.  We also increased our market share in Europe and North America, while coping with tough weather conditions that reduced overall market size, leading to challenging competitive conditions.  At the same time, we improved profitability and cash flow generation, and reduced working capital and inventory levels.  

"I am convinced that our day-to-day processes, combined with the on-going operational changes that we are undertaking, will enable the Company to continually improve its competitive position and deliver profitable growth in the years to come."

Financial Results for Second Quarter and First Six Months of 2010:

Second quarter 2010 gross profit totaled $175.1 million compared with $154.8 million in the same period last year. Gross profit for the first six months of the year was $407.9 million, a 9% increase compared with $372.2 million in the same period of 2009.  The increases in gross profit and profit margin for both 2Q and 1H 2010 stemmed from an increase in sales volume and a decline in raw material prices which led to a decrease in sales costs. Value of Inventory for the quarter declined to $931.7, a 4.4% reduction compared to the corresponding quarter last year.

Second quarter 2010 sales of $600.9 million were driven by an increase in sales volume of crop protection products in most of the Company's areas of operations. The increase in sales amounted mostly from volume increase which was partially offset by a decline in selling prices compared with the corresponding quarter last year, as well as the devaluation of the Euro against the USD. Sales for the first six months ended June 30, 2010 were $1.32 billion, a 3.2% increase compared with $1.28 billion in the same period last year.

Below are sales for the 2Q 10 and 1H 10 by geographic region:

On a geographic basis, the strongest sales increases were in the Company's Asia Pacific & Africa region, which contributed $85.4 million in the second quarter of 2010, a 62.9% increase from $52.4 million in the same quarter last year.  For the first six months of 2010, sales in this region amounted to $179.2 million, compared to $118.0 million in the corresponding period of the previous year, an increase of $61.2 million.  For both periods, these improvements were driven by improved weather conditions in Australia and the expansion of operations in India slightly offset by lower selling prices, compared to the corresponding quarter last year.

Sales in Latin America for the second quarter of 2010 amounted to $105.1 million, compared with $98.8 million in the corresponding period of the previous year, an increase of $6.3 million mostly driven by supportive weather conditions in the region. For the first six months of 2010, sales in Latin America amounted to USD 221.7 million compared to USD 242.7 million in the same period of the previous year, an 8.6% decrease. This decrease derived mainly from the decline in prices, particularly of Glyphosate, which was offset, in part, by the increase in sales volume.

North American sales for the second quarter of 2010 amounted to $126.4 million, compared with $120.0 million in the same quarter of the previous year, an increase of $6.4 million. During the first six months of 2010, sales in North America amounted to $246.0 million compared to $244.4 million in the corresponding period of the previous year, an increase of $1.6 million. Growth for both periods stemmed mainly from the increase in sales volume of crop protection products, which was offset by the decline in the average sales prices.

European sales in the second quarter of 2010 amounted to $261.2 million, compared with the amount of $265.7 million in the corresponding period of the previous year. The decrease stemmed mainly from: (1) devaluation of currencies, partially offset by hedging in Europe, particularly the Euro against the USD; and (2) decline in average sales prices of the Company's products. This was partially offset by an increase in sales volume and the initial incorporation of companies acquired in Eastern Europe during the course of the corresponding quarter last year.  During the first six months of 2010, sales in Europe amounted to $633.7 million compared to $633.3 million in the same period of the previous year.

In Israel, the Company's sales in the second quarter of 2010 amounted to $22.9 million, a slight decrease from sales of $23.3 million reported in the same period of the previous year. During the first six months of the year, sales in Israel totaled $43.5 million similar to sales of $44.2 million in the corresponding period of the previous year.

EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization): EBITDA for the second quarter 2010 was $70.9 million, or 11.8% of sales. This was a 17.2% increase compared with EBITDA of $60.5 million, or 10.8% of sales, recorded in the first quarter of 2009.  Excluding extraordinary items, EBITDA for the second quarter of 2009 amounted to $87.2 million (15.6% of the turnover).  EBITDA for the first six months of 2010 was $203.6 million, or 15.4% of sales. This was a 7.8% increase compared with EBITDA of $188.9 million, or 14.7% of sales for the same period last year. Excluding extraordinary items, EBITDA for the first half of 2009 amounted to USD 215.6 million (16.8% of the turnover).

Gross Profit: Gross Profit for the quarter totaled $175.1 million, a 13.1% increase compared with $154.8 million for the second quarter 2009. Gross margin for the period increased to 29.1% from 27.6 % in the second quarter 2009.

Gross profit for the six months ended June 30, 2010 totaled $407.9 million, a 9.6% increase compared with $372.2 million for the same period last year. Six month gross margin for 2010 was 30.8% compared with 29.0% for the same period in 2009.

The increase in both gross profit and gross margin during the second quarter and first six months of 2010 was due to an increase in sales volume and a decline in raw material prices which led to a decrease in sales costs. Excluding extraordinary items taken in the corresponding quarter last year, there was no change in the gross profit in the year-over-year quarterly comparison.

Operating Profit: Operating Profit for the period totaled $44.1 million, an increase of 17.3% compared with $37.6 million in the second quarter of 2009. This yielded an operating margin for the period of 7.3% compared with 6.7% in the second quarter 2009. Excluding extraordinary items, second quarter 2009 operating profit amounted to USD 64.3 million (11.5% of the turnover).

Operating Profit for the six-month period ended June 30, 2010 totaled $150.6 million, an increase of 5.2% compared with $143.2 million in the same period of 2009. This yielded an operating margin of 11.4% for the first six months of 2010 compared with 11.2% in the same period of 2009. Excluding extraordinary items, operating profit for the first six months of 2009 amounted to $169.9 million (13.2% of the turnover).

Operating expenses for the quarter totaled $131.0 million, representing 21.8% of sales, compared with $117.2 million, or 20.9% of sales, during the second quarter of 2009. Operating expenses for the first six months of 2010 totaled $257.3 million, representing 19.4% of sales, compared with $228.9 million, or 17.8% of sales, during the first six months of 2009.

The increase in operating expenses and in the operating expenses to sales ratio is due mainly to:  (1) the revaluation of the currencies in which the Company operates in relation to the USD; (2) the increased operations through new companies (particularly in India); and (3) an increase in R&D expenses.

Net income: Net Income for the quarter totaled $12.4 million, representing a net margin of 2.1%.  This compared with net income of $1.7 million for the second quarter 2009, representing a net margin of 0.3%.  Excluding extraordinary items, the net profit during the corresponding quarter last year amounted to $36.3 million (6.5% of the turnover).

Net Income for the six months ended June 30, 2010 totaled $83.3 million, representing a net margin of 6.3%.  This compared to net income of $79.9 million for the same period in 2009, representing a net margin of 6.2%.  Excluding extraordinary items, net profit during the corresponding period last year amounted to $114.5 million (8.9% of the turnover).

Cash Flow: The Company recorded positive cash flow from operating activities of $268.2 million during the second quarter of 2010, compared to cash flow from operating activities of $222.1 million in the second quarter 2009. The improvement in the operating cash flow during the quarter stemmed primarily from the decrease in customer balances.

During the first six months of 2010, operating cash flow amounted to $286.0 million compared with $159.4 million during the corresponding period last year. The improvement in the cash flow during the first six months of the year stemmed from the decrease in accounts receivable, reduction in inventory and increase in accounts payable.

The Company also recorded an improvement in free cash flow. Excluding short-term investments, the Company recorded cash flow of $222.7 million during the reporting period, a 29.3% improvement from free cash flow of $172.3 million in the second quarter 2009. The increase in free cash flow was due to the improvement in the current operating cash flows.

During the first six months of the year, the free cash flow (less short-term investments) amounted to $191.6 million compared with $84.5 million during the corresponding period last year. The increase in free cash flow was due to the aforementioned improvement in the current operating cash flows.

Cost of Goods Sold: The Company recorded cost of goods sold of $425.9 during the second quarter of 2010, an increase of 5.0% compared with $405.5 million recorded in the same period of 2009. This represented 70.9% of sales for the second quarter of 2010 compared with 72.4% for the same period in 2009.

Cost of goods sold were $916.1 million during the first six months of 2010, an increase of 0.6% compared with $910.4 million recorded in the same period of 2009. This represented 69.2% of sales for the first half of 2010 compared with 71.0% for the same period in 2009.

Financing Expenses: Financial expenses totaled $29.3 million for the second quarter of 2010, a 6.9% decrease compared with $31.4 million in the second quarter of 2009. The decrease in financing expenses during the quarter stemmed from financing income recorded from the revaluation of employee funds (mainly for compensation and vacation), the revaluation of the USD in relation to NIS compared with the previous quarter, which was partially offset by the increase in the Company's debt commitments.

Financial expenses totaled $59.8 million for the first half of 2010, a 43.2% increase compared with $41.8 million in the first half of 2009. The increase in financing expenses stemmed mainly from the increase in the Company's debt commitments.

Conference Call

Makhteshim Agan will host a conference call to discuss the Company's second quarter 2010 results, on Wednesday, 11 August 2010 at 2:00 PM (Israel); 12:00 PM (London); 7:00 AM (New York).  Conference Call details are as follows:  UK: 0 800 694 0257;  USA: 1 866 966 9439; Israel: 1 809 216 057;  International: +44 1452 555 566.

Conference ID: 89828205

The call will be followed by a presentation which can be accessed through the Company's website at http://www.ma-industries.com. Following the conclusion of the call, a replay of the call will be available within 24 hours at the Company's website.

About Makhteshim Agan

Makhteshim Agan Industries (TASE: MAIN) is the world leading manufacturer and distributor of branded off-patent crop protection chemicals, ranking seven among the world's agrochemical companies. For additional information on Makhteshim Agan Industries, please access our website: www.ma-industries.com.

SOURCE Makhteshim Agan