Makhteshim Agan Announces Continued Strong Positive Momentum in Q2 2012

TEL-AVIV, Israel, August 12, 2012 /PRNewswire/ --

9.6% Growth in Gross Profit Leading to Record operating profit, profit before tax and EBITDA for the Quarter and the First Half of the Year

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 second quarter and first six months ended June 30, 2012.

FINANCIAL HIGHLIGHTS

     In millions of
          US$         Q2 2012 Q2 2011 Change  H1 2012 H1 2011 Change
    Sales               783.4   723.0   8.4%  1,611.5 1,503.6   7.3%
    Gross profit        254.6   238.5   6.8%    541.6   494.0   9.6%
    Gross margin        32.5%   33.0%           33.6%   32.9%
    Operating profit    100.8    87.1  15.7%    225.8   199.2  13.3%
    Profit before
    tax                  63.7    59.8   6.5%    165.3   147.8  11.8%
    Tax on income        21.7    14.4  50.7%     33.9    10.5 222.9%
    Net income           42.0    45.5 (7.6)%    131.3   137.2 (4.3%)
    EBITDA              136.1   119.4  14.0%    299.3   262.7  13.9%

Commenting on the results, Mr. Yang Xingqiang,Makhteshim Agan's Chairman of the Board, said, "We are pleased to report another quarter of strong positive momentum as demonstrated by increased sales in all territories, rising EBITDA and improved operating profit. We are fully focused on executing a strategic work plan designed to enhance our differentiation in the market place and increase our penetration. At the same time we continue to work diligently to execute on the business potential of the integration between MAI and ChemChina's business."

Mr. Erez Vigodman, President and CEO of Makhteshim Agan, commented, "Our solid results for the second quarter and first half of 2012, demonstrate the Company's steady progress in line with our strategic objectives. We continue to build our position in key markets and to improve our customer focus and product portfolio differentiation, thereby achieving a steady improvement in our top-line and bottom-line performance.

Mr. Vigodman concluded, "We have recently announced a number of organizational changes aimed at enhancing our commercial focus, and continue to conduct our ChemChina asset assessment in line with our business integration plan. I am confident that these and other measures that we have been carrying out are positioning us to take the business to the next level in line with the new strategic direction we have set for ourselves and to accomplish our long term objectives.  

FINANCIAL REVIEW

Sales: Sales for the second quarter of 2012 totaled $783 million, up 8.4%(11.2% excluding currency effect)compared with $723 million in the second quarter of 2011. The increase reflected a rise in quantities sold, particularly in the Americas and in Asia Pacific together with higher selling prices that compensated for higher costs of raw materials, offset partially by the negative impact of fluctuating exchange rates.

For the six-month period, sales totaled $1,612 million; an increase of 7.3%(8.5% excluding currency effect)compared with $1,504 million for the first half of 2011.

The sales growth derived from increased revenues from all territories for both the three-month and six-month periods, as illustrated below:

    Breakdown of
    Sales
 
    (Millions of $US)
                      Q2 2012 Q2 2011 % Change H1 2012 H2 2012 % Change
    Europe              320.6   315.9     1.5%   744.2   704.8     5.6%
    Latin America       137.3   114.6    19.8%   244.7   228.1     7.3%
    North America       169.6   151.1    12.3%   301.5   278.0     8.4%
    Asia Pacific &
    Africa              127.6   114.0    12.0%   268.8   240.7    11.7%
    Israel               28.3    27.5     2.8%    52.3    52.0     0.6%

The quarter's strongest sales growth was delivered by Latin America, whose revenues increased by 19.8% to $137.3 million compared with $114.6 million in the second quarter of 2011. This reflected the continued improvement in the Company's Brazilian operations; this is in spite of draught conditions in Argentina.

Sales in North America increased by 12.3%, reflecting a rise in quantities sold, partially offset by the erosion of selling prices as compared with the previous-year period. Sales in Asia Pacific and Asia increased by 12.0% despite the challenging economic environment in India, reflecting the contribution of continuous product introductions and solid business performance in Australia, which offset the erosion in the value of the Indian rupee and other local selling currencies. Sales in Europe increased slightly despite the erosion of European currency rates, reflecting increased sales to North European countries.  

Gross Profit: Gross profit for the second quarter totaled $254.6 million (32.5% of sales), up 6.8% compared with $238.5 million (33.0% of sales) for the same period in 2011. The increased gross profit reflected mainly the rise in quantities sold, countered by erosion of some of the dollar exchange rates of currencies in which the Company operates, resulting in a slightly lower gross margin.

For the six-month period, gross profit totaled $541.6 million (33.6% of sales), up 10% compared with $494.0 million (32.9% of sales) in the first half of 2011.

Operating Expenses: R&D, Selling and General and Administrative expenses for the quarter totaled $153.9 million (19.6% of sales), compared with $151.4 million (20.9% of sales) for the second quarter of 2011. This 2% rise derived primarily from increased selling expenses designated to support organic sales growth, together with R&D investments targeted to support the Company's further growth and expansion.

For the six-month period, operating expenses totaled $315.8 million (19.6% of sales), compared with $294.8 million (19.6% of sales) in the first half of 2011.

Operating Profit: Operating profit for the second quarter increased by 16% to $100.8 million (12.9% of sales), compared with $87.1 million (12.0% of sales) for the second quarter of 2011. For the six-month period, operating profit increased by 13% to $225.8 million (14.0% of sales), compared with $199.2 million (13.2% of sales) for the first half of 2011.

Financing Expenses: Financing expenses totaled $34.2 million for the three months ended June 30, 2012 compared with $25.5 million for the second quarter of 2011. This 34% increase reflects the Company's issuance of additional Series B and D debentures in January 2012, together with the effect of NIS indexation costs.

For the six-month period, financing expenses totaled $55.5 million, compared with $48.0 million in the first half of 2011.

Income Before Tax: Income before tax for the second quarter of 2012 increased 7% to $63.7 million as compared with $59.8 million for the second quarter of 2011. The increase in income before tax stemmed from the quarter's improved profitability and higher sales.

For the six month period, income before tax increased by 12% to $165.3 million, as compared with $147.8 million for the first half of 2011.

Net Income: Net income for the second quarter of 2012 was $42.0 million, or 5.4% of sales, compared with $45.5 million, or 6.3% of sales, for the second quarter of 2011. The reduction reflected the 51% rise in taxes paid during the second quarter of 2012 as compared with the parallel period of 2011, during which the company recorded some tax gains.

For the six-month period, net profit totaled $131.3 million, or 8.1% of sales, compared with $137.2 million, or 9.1% of sales, in the first half of 2011. The reduction reflected the more than tripling of the period's taxes on income as compared with the first half of 2011.

EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization): EBITDA for the second quarter of 2012 increased by 14% to $136.1 million (17.4% of sales), compared with $119.4 million (16.5% of sales) for the second quarter of 2011. For the six-month period, EBITDA totaled $299.3 million (18.6% of sales), compared with $262.7 million (17.5% of sales) in the first half of 2011.

Cash Flow: The Company recorded cash flow from operating activities of $176.4 million during the second quarter of 2012 compared with $268.9 million in the second quarter of 2011. For the first six months, cash flow totaled $136.5 million compared with $288.3 million in the first half of 2011.

Free cash flow (excluding short-term investments) for the second quarter of 2012 totaled $130.9 million compared to $198.6 million for the corresponding period of 2011.   For the first six months of 2012, free cash flow (excluding short-term investments) totaled $29.4 million compared to $147.2 million in the first half of 2011.

About Makhteshim Agan

Makhteshim Agan Industries Ltd. is a leading manufacturer and distributor worldwide of crop-protection solutions and the largest off-patent player in the industry. The Company supplies efficient solutions to farmers that assist them in combating disease and increasing yields. In 2011, the Company's revenues were over $2.69 billion, and it is ranked seventh in the world in the overall 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. For more information, visit us at http://www.ma-industries.com.

Contact:
Rony Patishi-Chillim
SVP of Global Corporate Communications
Email: [email protected]
Phone: +972-73-232-1941

SOURCE Makhteshim Agan Group