Makhteshim Agan Reports Record Financial Results for 2Q 2011

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Makhteshim Agan Industries Ltd

Aug 09, 2011, 03:06 ET

TEL-AVIV, Israel, August 9, 2011 /PRNewswire/ --

Record Sales Supported by Strong Performance in All Regions

20.3% Top Line Growth Driven by Solid Business Performance, Continued Product Launches and Integration of New Activities

Enhanced Profitability with Operating Profit Almost Doubling in the Quarter Aided by Continued Progress in MAI's Comprehensive Change Plan

ChemChina Transaction Expected to Close by October 31, 2011

The Makhteshim Agan Group ("MAI") (TASE:  MAIN), the world leader in branded off-patent crop protection solutions, today reported its financial results for the three-month and six-month periods ended June 30, 2011.

FINANCIAL HIGHLIGHTS

    In millions of US$   Q2 2011  Q2 2010  Change  H1 2011  H1 2010  Change
    Sales                 723.1    600.9    20.3%  1,503.6  1,324.1   13.6%
    Gross profit          238.5    175.1    36.2%    494.0    407.9   21.1%
    Gross margin           33.0%    29.1%             32.9%    30.8%
    Operating profit       87.1     44.1    97.5%    199.2    150.6   32.3%
    Net income             45.4     12.4   266.1%    137.2     83.3   64.7%
    EBITDA                119.4     70.9    68.4%    262.7    203.6   29.0%


Mr. Ami Erel, Makhteshim Agan's Chairman of the Board, commented, "We are pleased to report that MAI has achieved strong revenues for the second quarter and first six months of 2011. These are a product of the effective measures the Company has taken during the last 18 months, which have culminated in significantly improved profitability and record sales."

Mr. Erel continued, "Our business combination with ChemChina is progressing well. We expect the transaction to close before the end of October 2011."

Mr. Erez Vigodman, President and CEO of Makhteshim Agan, said, "Our top and bottom line results in the second quarter and first six months of 2011 are clear reflection of the progress we have made with our organization-wide streamlining initiative. Our change plan has been transforming MAI, solidifying our competitive position in a growing market place, creating the platform for continued geographical expansion and profitable growth. The potential business combination with ChemChina, which we have been accommodating and progressing, will complement the overall strategic and operational transformation of MAI.

Our top line growth was driven by strong performance of each of our regions enabling us to gain market share in key geographies while fully integrating our recent acquisitions in Mexico and Korea.

We remain committed to deliver simple, reliable and effective solutions to farmers around the world. During the last six months we continued to expand and differentiate our offering through the acquisition of diuron, the launch of fipronil-based products in the U.S and of over 25 new products across the globe. By coupling solutions with continued focus on our operations we were able to improve our profitability."

BUSINESS COMBINATION WITH CHEMCHINA: UPDATE

On January 8, 2010, the Company announced that an agreement was signed with a subsidiary of the China National Chemical Corporation to carry out a merger that will result in the Company becoming private under joint ownership of ChemChina (60%) and Koor (40%).  The Company's shares shall be purchased at a price that reflects a value of the Company of USD 2.4 billion and payment for them will be in US dollars. Accordingly, the price per share is USD 5.57 prior to dilution in a negligible amount likely to be caused by the exercise of employee options. On May 8th, 2011 the Company announced that ChemChina had obtained all required regulatory approvals for the transaction. At the same time, Koor announced that it is actively engaged in finalizing and approving its loan agreement with a Chinese bank.

Pursuant to the Immediate Report dated January 16, 2011 in respect of an application to the Tel-Aviv District Court against the Company and its controlling shareholder, Koor Industries Ltd ("Koor") for the removal and prevention of discrimination, and a petition to have it recognized as a class action in accordance with the Class Actions Law, 2006,  (together "the Petition") in respect of the merger agreement dated January 8, 2011 between a subsidiary of the China National Agrochemical Corporation ("ChemChina"), Koor and the Company. The parties signed a settlement agreement which was approved by court.

On July 31, 2011 the parties to the merger agreement agreed to extend the deadline for the agreement to October 31, 2011. In addition, the Company reported that its general shareholders meeting approved the merger agreement with ChemChina on August 7, 2011.

SALES

MAI's sales for the second quarter of 2011 totaled $723.1 million, their highest level for a second quarter in MAI's history, reflecting strong revenue growth for each of the Group's regions. This is a 20.6% increase compared with $600.9 million recorded in the second quarter of 2010, reflecting a 15% rise in overall sales volumes together with the consolidation, for the first time, of the Group's activities in Korea and Mexico. In addition, sales were enhanced by the weakening of the US dollar, which increased the value of the Group's European and Australian sales as expressed in US dollar terms.

Sales for the first half of 2011 totaled $1,503.6 million, a 13.6% increase compared with $1,324.1 million for the first half of 2010.

Regional highlights: Following is a breakdown of sales by geographic region:

    Millions of US$       Q2 2011  Q2 2010  Change  H1 2011  H1 2010  Change
    Europe                 315.9    261.2    20.9%   704.8    633.7    11.2%
    Latin America          114.6    105.1     9.1%   228.1    221.7     2.9%
    North America          151.1    126.4    19.5%   278.0    246.0    13.0%
    Asia Pacific & Africa  114.0     85.4    33.5%   240.7    179.2    34.3%
    Israel                  27.5     22.9    20.1%    52.0     43.5    19.5%


  • North America: Despite challenging weather conditions, the Group's North American sales increased by 19.5% year-over-year, demonstrating the success of the Group's strategic initiatives, including its partnership with Monsanto and the launch of fipronil based products in the US.

  • Asia Pacific & Africa: Sales of the Group's Asia Pacific & Africa region grew by 33.5% year-over-year, driven by increased sales volumes in India and Australia, strong momentum in the activities of the newly-integrated JK Korea, and the appreciation of the Australian currency.

  • Europe: Sales of the Group's European region grew by 20.9% year-over-year, driven by significant market share gains, higher volume sales and the strengthening of the Euro as compared to the dollar. This was offset partially by lower selling prices in Eastern Europe.

  • Latin America: Sales of the Group's Latin American region grew by 9.1% year-over-year, reflecting the integration of the Mexico acquisition, offset partially by the continued implementation of the Group's restructuring of its Brazilian operations, which led to more selective sales and therefore reduced overall sales quantities.  

EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)

EBITDA for the second quarter of 2011 totaled $119.4 million, or 16.5% of sales, a 68.4% increase compared with $70.9 million, or 11.8% of sales, for the second quarter of 2010. For the first half of 2011, EBITDA totaled $262.7 million compared with $203.6 million for the first half of 2010.

GROSS PROFIT  

Gross profit for the second quarter of 2011 increased by 36.2% to $238.5 million from $175.1 million for the same period of 2010. Gross margin for the quarter was 33.0%, compared with 29.1% for the same period in 2010. For the first half of 2011, gross profit increased by 21.1% to $494.0 million from $407.9 million for the first half of 2010. Gross margin for the period was 32.9%, compared with 30.8% for the first of 2010.

The increase in both gross profit and gross margin reflected the increase in sales volumes and the positive effect of organizational change activities implemented during the prior 12 months. This was compounded by further improvements to the mix of products sold, and by the sale of inventory originally purchased at lower prices, on average, than inventory sold in the prior-year period.

OPERATING PROFIT

Operating profit for the second quarter of 2011 totaled $87.1 million (12.0% of sales) compared with $44.1 million (7.3% of sales) for the second quarter of 2010.  For the first half of 2011, operating profit totaled $199.2 million (13.2% of sales) compared with $150.6 million (11.4% of sales) for the first half of 2010.

OPERATING EXPENSES

Operating expenses for the quarter totaled $151.4 million (20.9% of sales), compared with $131.0 million (21.8% of sales) during the second quarter of 2010. For the first half of 2011, operating expenses totaled $294.8 million (19.6% of sales) compared with $257.3 million (19.4% of sales) in the first half of 2010.

The increase reflects a rise in the Group's sales and marketing expenses, due primarily to the consolidation of Mexican and Korean activities and to fluctuations in the value of the Group's local operating currencies as expressed in dollar terms.

NET INCOME

Net income for the second quarter of 2011 increased by 266.9% to $45.4 million (6.3% of sales) from $12.4 million (2.1% of sales) in the second quarter of 2010. For the first half of 2011, net income totaled $137.2 million (9.1% of sales), an increase of 64.7% compared with $83.3 million (6.3% of sales) for the first half of 2010.

CASH FLOW

During the second quarter of 2011, the Group generated cash flow from operating activities of $268.9 million compared with $268.2 million in the second quarter of 2010.  For the first half of 2011, cash flow from operating activities totaled $288.3 million compared with $286.0 million for the first half of 2010.

Free cash flow (excluding short-term investments) in the first quarter of 2011 totaled $198.6 million compared with $222.7 million in the second quarter of 2010. The decline in free cash flow reflects increasing investment activities during the period. For the first half of 2011, free cash flow (excluding short-term investments) totaled $147.2 million compared with $191.6 million for the first half of 2010.

FINANCING EXPENSES

For the second quarter of 2011, financing expenses totaled $25.5 million compared with $29.3 million for the second quarter of 2010. For the first half of 2011, financing expenses totaled $48.0 million compared with $59.8 million for the first half of 2010.

The decrease in financing expenses attributable primarily to the appreciation of European currencies and the Brazilian real, together with financing agreements signed with customers, offset partially by increased interest due on loans linked to the Israeli CPI, which increased during the period, which mitigated the increase in operating expenses driven by currency effect.

Additional Information

A presentation with financial highlights can be accessed through the Company's website at http://www.ma-industries.com.

About Makhteshim Agan

Makhteshim Agan Industries, Ltd. (TASE: MAIN), http://www.ma-industries.com, is a world-leading manufacturer and distributor of branded off-patent crop protection products.  With sales of US$2.38 billion in 2010, MAI ranks seventh in global agrochemical companies, fourth in Europe, with a global share of over 5%.  The Company is characterized by its knowhow, high-level technological-chemical abilities, expertise in product registration, the observance of strict standards of environmental protection, stringent quality control and global marketing and distribution channels. The Company is well positioned to deliver effective and reliable solutions to farmers globally.  

Contact:
Rony Patishi-Chillim
Head of Global Corporate Communications
Email: [email protected]

SOURCE Makhteshim Agan Industries Ltd