ADAMA Ltd. (000553) Earnings Call Transcript & Summary

Hello, everyone. I'm Ignacio Dominguez, CEO of ADAMA, one of the world's leading crop protection companies. Thank you for joining me in this review of our annual financial highlights. In this video, I will be sharing with you our fourth quarter and full year results, together with our CFO, Aviram Lahav. 2020 was a uniquely challenging year for all of humanity. We have had to completely change the way we live, work and communicate. In these unusual times, ADAMA has been creative, agile and responsive to the tough market conditions while focusing on protecting both our people and our business. During the year, the global COVID-19 pandemic caused disruptions to both the commercial and operational side of our business. In addition, the extreme currency volatility seen during the year was a heavy drag on our profitability. However, despite all these challenges, we were able, nevertheless, to achieve continued growth and end the year delivering our strongest fourth quarter ever. We delivered record high sales in the fourth quarter, driven by robust business growth across all the regions. The growth was led by North America, on one hand, which almost fully recovered from the severe weather and other challenges seen earlier in the year as well as a similarly strong performance in Europe, on the other hand. Our strong fourth quarter brought our full year sales to well above $4.1 billion for the first time in our history. Over 2020, we saw our strongest growth in the emerging markets of Latin America and the India, Middle East and Africa region. Our performance was further bolstered by various acquisitions that we completed in 2020 in China, in Greece and Paraguay. However, the widespread weakness of global currencies continued to constrain our sales growth and profitability in U.S. dollar terms. I'd like to turn over to our CFO, Aviram Lahav, who will provide more detail on our financials.

Thank you, Ignacio. I would like to share with you some highlights from our 2020 financial results. In the fourth quarter, sales grew by a significant 17% in constant exchange rate terms. However, due to an estimated $71 million negative impact from weaker currencies, our sales in U.S. dollar terms grew by somewhat more moderate but still very impressive 10%. Adjusted net income grew by 10% to $53 million despite an estimated $54 million in FX headwinds. We recorded reported net income of $19 million compared to a loss of $74 million in Q4 of 2019. In the full year period, sales grew by more than 10% in constant exchange rate terms and by more than 3% in U.S. dollar terms, reaching an all-time high of $4.128 billion despite the many COVID-19-related challenges. The moderate growth in U.S. dollar terms reflects an estimated $293 million negative impact from the weaker currencies. Adjusted net income was $176 million versus $258 million in 2019, largely reflecting an estimated negative FX impact of $252 million. Reported net income grew by 19% to $51 million compared to $43 million in 2019. I would like to take a minute to explain some of the differences between our adjusted and reported net income figures. As we continue to progress on the relocation and upgrade of our production and environmental facilities in China, we recorded largely relocation-related costs within our cost of goods sold and operating expenses. These relocation-related charges include mainly an increase in procurement costs, higher idleness charges, accelerated depreciation and asset impairment. A summary of these extraordinary charges and full reconciliation between the adjusted and reported financials appears in our investor materials. I am pleased to let you know that we are making good progress on the China relocation and upgrade projects, and we expect to resume production in the new site in Jingzhou within the next few months. Ignacio, back over to you.

Thank you, Aviram. In addition to our resilient business performance in 2020, I am very proud of the passion and commitment of our global teams to help farmers and the local communities in which we live and work. This support during the pandemic was shown in dozens of initiatives in local communities across the world. Looking forward, in 2021, we're seeing strong global demand for crop protection products, supported by the current positive crop price outlook. We are cautiously optimistic about the year ahead, and our teams are working hard to ensure that ADAMA continues to play a leading role in helping farmers across the world. Thank you all for your time and attention. Stay well and stay safe.