Makhteshim Agan Announces 1Q 2011 Financial Results

TEL AVIV, Israel, May 16, 2011 /PRNewswire-FirstCall/ -- The Makhteshim Agan Group (TASE: MAIN), the world leader in branded off-patent crop protection solutions, today reported financial results for the 2011 first quarter, ended March 31, 2011.

    FINANCIAL HIGHLIGHTS
    Below are key financial metrics for 1Q 11:

    In millions of US$  1Q 2011  1Q 2010  Change

    Sales                780.5    723.1     8.0%
    EBITDA               143.2    132.8     8.0%
    Gross profit         255.5    232.9     9.7%
    Gross margin          32.7%    32.2%
    Operating profit     112.1    106.5     5.3%
    Net income            91.7     70.9    29.4%

Mr. Ami Erel, Makhteshim Agan's Chairman of the Board, commented, "Fundamentals in our industry are recovering. Our growth and business performance in the quarter were aided by stable weather in the Northern Hemisphere and focused execution discipline across all regions. We are pleased to see the significant progress made in our operational change plan and that we were able to benefit from it already this quarter. On the ChemChina business combination, ChemChina, Koor and we have made meaningful progress towards closing the transaction in-line with the agreement and its expected timeline."

Mr. Erez Vigodman, President and CEO of Makhteshim Agan, added "Our financial results for the quarter are the outcome of significant actions which we have taken over the last nine months, coupled with positive market trends, as we currently see them.

Our operations benefited from the combination of a number of important measures including: reconfiguring our organizational structure, changing our global manufacturing and supply-chain operations and a major restructuring of our Brazilian operation. At the same time, we strengthened our business in the U.S. and established a platform for further growth in APAC& ME. We remained focused on expanding our global network and product portfolio via add-on acquisitions completing transactions in Mexico and Korea together with the acquisition of an important product from DuPont which we completed this quarter.

The completion of the ChemChina business combination, which also kept us busy during 2010, is progressing according to the agreements' timeline." Mr. Vigodman concluded.

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 has 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. The Company continues to expect closing of the transaction in line with earlier indications.

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 Company reported on May 15, 2011, that an interim ruling was handed down by the court whereby Koor is not entitled to surplus consideration in respect of the benefit of the non-recourse loan that Koor was to have received as part of the Sales Transaction, and the value of said consideration must be divided between all the Company's shareholders - both shareholders from among the public and Koor in respect of all its holdings in the Company.

The court also ruled that there would be an additional hearing on the Petition on June 13, 2011.

Koor has informed the Company that it is studying the said ruling and is assessing the implications of the ruling and the steps it will take.

SALES

Fourth quarter 2011 sales were $780.5 million, compared with $723.1 million in the corresponding period of 2010, an increase of 8.0%. The main contributor to sales growth was an increase in volumes sold as well as the consolidation of new activities in Korea and Mexico. This increase was partially offset by exchange rates.

    Below are sales for the 1Q 11 by geographic region:

    Breakdown of Sales
    Millions of US$       1Q 2011  1Q 2010  % Change

    Europe                 388.9    372.5      4.4%
    Latin America          113.5    116.6     (2.6%)
    North America          126.9    119.6      6.1%
    Asia Pacific & Africa  126.7     93.8     35.1%
    Israel                  24.5     20.6     19.1%

On a geographic basis, the strongest sales growth was in the Company's Asia Pacific & Africa region, which contributed $126.7 million in the first quarter year of 2011, a 35.1% increase from $93.8 million in first quarter of 2010. This improvement was due to an increase in sales volume, particularly in India and Australia and an appreciation of the Australian currency.

Sales in Latin America for first quarter of 2011 amounted to $113.5 million, compared with $116.6 million for the same quarter last year, a 2.6% reduction. Increased sales volume in Latin America excluding Brazil were offset by continued implementation of Brazil restructuring, which led to more selective sales.

North American sales for 1Q 2011 amounted to $126.9 million, compared with $119.6 million in the same period of the previous year, an increase of 6.1%. Increased volumes were slightly offset by competitive pricing pressures in some products.

European sales for the first quarter of 2011 were $388.9 million, compared with $372.5 million in the corresponding period of the previous year, an increase of 4.4%. The growth stemmed mainly from increased sales of crop protection products in the region resulting from favorable weather conditions.

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

EBITDA during 1Q 2011 was $143.2 million equal to 18.3% of sales compared to $132.8 million EBITDA for the same period in the prior year, representing an 8.0% growth rate.

GROSS PROFIT

Gross profit for 1Q 2011 totaled $255.5 million, compared to $232.9 million in the same period of 2010, an increase of 9.7%. Gross margin for the quarter was 32.7%, compared with 32.2% for the same period in 2010.

The growth both in gross profit and in gross margin during the first quarter of 2011 was due to an increase in sales volume coupled with the positive effect of the Company's implementation of its organizational change plan initiated in 2010. Also contributing to the positive results were an improved product mix, as well as the sale of lower cost inventory compared to inventory costs in the first quarter of 2010. This was partially offset by the decline in average sales price.

OPERATING PROFIT

Operating profit for the first quarter of 2011 was $112.1 million (14.4% of sales) compared with a profit of $106.5 million (approximately 14.7% of sales) in the same quarter of last year.

OPERATING EXPENSES

Operating expenses for the quarter totaled $143.3 million (18.4% of sales), compared with $12631 million (17.5% of sales) during 1Q 2010.

NET INCOME

Net income for the first three months of 2011 was $91.7 million, this compares with $70.9 million for the first quarter of 2010.

CASH FLOW

The Company recorded positive cash flow from operating activities of $19.4 million during the first quarter of 2011, compared to positive cash flow from operating activities of $17.9 million in the first quarter of 2010. The improvement in cash flow from operations resulted mostly from improved profitability in the quarter which was partially off-set by an increase in operating expenses mainly driven by currency effect.

Free cash flows (excluding short-term investments) in the first quarter of 2011 amounted to negative cash flow of $51.4 million compared with negative cash flows of $31.2 million in the corresponding quarter last year. Declining cash flow during the quarter was attributable to an increase in investing activities.

FINANCING EXPENSES

Financing expenses totaled $22.5 million for the three months ended March 31, 2011 compared with $30.5 million last year. The decrease in financing expenses in the quarter is mainly attributable to the appreciation of the European currencies and the Brazilian real which was partially off-set by increase in Israeli CPI. This decrease partially off-sets the increase in operating expenses that was driven by currency effect.

Conference Call

Makhteshim Agan will host a conference call to discuss the Company's Q1 2011 results, on Monday, 16 May 2011 at 3:00 PM (Israel); 1:00 PM (London); 8:00 AM (New York). Conference Call details as follows: UK: 0 800 694 0257; USA: 1 866 966 9439; Israel: 1 809 216 057; International: +44 1452 555 566; Conference ID: 64118831.

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, 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
    +972-73-232111
    [email protected]

SOURCE Makhteshim Agan Industries Ltd