ADAMA Ltd. (000553) Earnings Call Transcript & Summary

[Interpreted] Good afternoon. I am Guo Zhi, Corporate Secretary of ADAMA Ltd. You are most welcome to join in this session of ADAMA Ltd. to present to you our full year and Q4 performance of 2024. You will see a channel selection function at the right bottom side of your screen to choose the language you would like to listen to our session. And now you can see on the screen all the distinguished guests today. First, our CEO and President, Mr. Gaël Hili; then our Madam CFO, Efrat Nagar; then Mr. Ge Ming; Mr. Jeff Huang; and Professor Yang Guangfu, who are all our independent directors. And we have Alex Mills, who is responsible for our fungicide business globally. And we also have our Global Investor Relations, Mr. Joshua Phillipson. They all join us online, and they are based overseas. So in this session, you will see the performance presentation, and then it will be followed by Q&A session. You can raise up your questions through the communication platform on the right-hand side of your screen. And you are kindly reminded to read carefully the legal disclaimer at the beginning of our presentation. So now without more further ado, I will give the floor to our President and CEO, Mr. Gaël Hili, to walk you through the tour of ADAMA's performance.

Thank you. Thank you, Guo Zhi. It's my pleasure, good evening, everyone, good afternoon. It's my pleasure to be here with you to talk about ADAMA's 2024 results that we published a few days ago. I'll start by giving you a bit of an overview of the situation of the market, the crop protection industry as a whole when we look at 2024 as a year. There are a few things that you've been hearing from me for those of you who have attended previous call that remain true in the market. The first one is that the grower profitability across the world continues to be pressured and below average level for the last few years. That's the first factor that is affecting the market. The other thing which remains true that you've heard, we've seen in the previous quarters is the overcapacity in terms of production from Chinese producers. So the market continues to be in an overcapacity situation for active ingredients, and this is obviously affecting the prices globally. In terms of crop commodity, the prices have been softening. And that explains also -- it's one of the factors that explains the pressure that is on the grower P&L globally. And we see continuous purchasing behavior from the channel to just in time. We've been seeing that for the last few quarters. It continues towards Q4. And for the full year, at the end, we saw purchasing behavior from channels across the world, very attentive, very careful on the working capital, just-in-time type of behavior. The thing that has changed toward the second half of the year in 2024 versus the first half is the amount of inventory in the channel. This inventory has been easing, has been reducing, is now back to most of the market. Not all of them. There's still a little bit more inventory in the channel than average in Brazil. But for the rest of the important market in the world, whether it's North America or Europe or Australia or India, the channel inventory are now back to normal level compared to historical averages. Next slide, please. I will now share at a high level and Efrat, the CFO of ADAMA will give you more details, but at a high level, how Q4 and the full year number look like. I think there are a lot of good news in there for 2024. First of all, starting with the quarter, we see both the gross profit for Q4 and the EBITDA significantly up the quarter by 14% and the EBITDA by 45% versus the same period in the previous year. Now I would say, even more importantly, if we look at the full year, we also see some significant achievement. Full year EBITDA is 15% above last year. ADAMA will be, in 2024, one of the few companies in the industry who will be showing a growth in EBITDA, probably from the data we have so far, probably the only one with a double-digit growth of EBITDA in 2024 versus 2023. So this is a proof that what we've been doing all across 2024, our Fight Forward transformation is starting to pay off. It's real. It's showing in the EBITDA. It's also showing in the cash flow performance, which was significantly stronger than previous year. Both the operating cash flow and the free cash flow performance are significantly higher than 2024. This is on the back of very careful inventory management. We've reduced significantly our inventories, both the value of those inventories and the quantity of these inventories versus previous year. This has been a trend that was continuous throughout the year. We've been very attentive also in terms of credit to the markets and managing both our account payables and account receivables. So all this has transformed into a very, very strong performance on cash flow. And so this is -- and last but not least, 2024 was also a year of a very strict OpEx discipline. We have reduced the number of employees of the company, and we've also been very careful how to spend our OpEx. And this results in an overall EBITDA performance, as I was saying before, that is significantly better than last year. Next slide, I think it's for Efrat.

Thank you, Gaël. Okay, so thank you, Gaël. So Gaël gave us some information or high-level information of our results. Looking on Q4 P&L, we can see that our sales were down by 2% to $1.1 billion. However, at CER, they are up 2%. The main reason behind this reduction is although we see in the fourth quarter, high volume, this is as continued from Q3. We see still pressure on prices, 4% lower prices and negative FX, mainly due to the strengthening of the dollar versus the BRL, the Brazilian currency. This brings us to gross profit. Although sales have reduced by 2% in dollar terms, the gross profit has increased by 14%, and it reflects the better quality of business in Q4 2024, 25.2% gross margin versus 21.5% in Q4 2023. And this is mainly because of the improvement on our costing. We took a decision already in Q1 2023 to manage our inventory in a very strict way. This enabled us to start the year with low level of inventory, while we are benefiting from market cost, and we see the benefit versus 2023. And also very important, positive mix of product. We sold more profitable product and less nonprofitable product, which also contributes to our gross margin, which is basically the quality of business. With a very tight OpEx management, as mentioned by Gaël, we are succeeding to finish Q4 2024 with $137 million EBITDA, which is 45% higher than what we achieved last year, which is 12.3% quality of business EBITDA-to-sales ratio versus 8.3% and with significantly better financial expenses that we will see also for the full year, mainly due to our very tight cash and loan management, we are succeeding to decrease our net loss by 43% from losses of $101 million to $58 million only in Q4 2024. Next, please. So if we are looking on the full year, we can see here that our sales down by 11% to $4.1 billion, in CER it's 8%. It's due to 8% lower prices and stable volume, more or less. As I mentioned, in H1, we see negative volume impact. And in H2, we see some movement in the market, which reflected by higher volume, but for the full year, they are flat. From a gross profit perspective, although our sales reduced by 11%, we are succeeding to achieve more or less in dollar terms the same gross profit, $1.06 billion. And this is again because of our better cost management and better mix. We'll see it later on in the bridge, which resulted by 25.6% gross margin in 2024, significantly higher than the 22.7% gross margin in 2023. And also, for the full year, because we started with our tight OpEx management already at the beginning of 2024, so we see this benefit of OpEx management also for the full year, which is reflected in our EBITDA, $469 million EBITDA in 2024, 15% more than in 2023. And as mentioned by Gaël, probably we are the only player in the industry that presenting in 2024 higher EBITDA dollar, and it's also reflected in our EBITDA margin, 11.3% versus 8.7% last year. From net losses, we are losing $206 million versus $236 million last year, 13% low. And again, this is mainly because of our lower financial expenses, which are due to the improved efficiencies on the way that we are managing our cash and of course, as a result from our positive cash flow in 2024. Next, Gaël?

Yes. This is the picture that shows Q4 2024 versus Q4 2023 with the regional split on sales. Efrat was saying, I think sometimes the quarter picture is a bit misleading. On an annual basis, just as a reminder, the overall company was down 11% on sales. We'll come in a moment with Efrat on where this is coming from. You'll see an analysis between volume, price, currency. But what I can say is that you can see that for the full quarter, we were up 2% in local currency and minus 2% in dollar, which is much better than the average of the year because we started seeing some recoveries in terms of volume in some markets already in Q4. These markets, you can see them on the slide. Europe was flat to previous year. There was a significant increase in North America. Now North America is we have a relatively small market share. So we're a bit disconnected from the market there compared to other regions. In Latin America, you see it's a very interesting phenomenon there because we were up 4% in local currency and our volumes were up in Latin America in Q4, but our sales in dollars were down 8%, and this shows the significant impact of the currency. There is also a price impact. We'll show that in a moment. But you can see here the negative impact of currency in Brazil really didn't help our sales in Q4 2024. In Asia Pacific, we were down 6% or 7%, depending if you look at local currency or dollars. There, it's more a phasing thing. Especially in India, where we decided to -- for good strategic, logical reasons, we decided to get our sales closer to the point of use by the grower. We were having too many returns in India. And some of these returns were actually returned as counterfeit products. So we took the decision to actually voluntarily limit the sales we're doing in Q4 in order to get our sales closer to the actual agricultural season, which is more end of Q1 and Q2. So that's overall the situation by region for Q4. Next slide, please. Things back to you, Efrat.

Yes. Thank you. Okay. So how it looks on a bridge point of view? So we can see here that, as I mentioned, we achieved $1.1 billion sales in Q4, 2% lower than what we sold in 2023. 7% are coming from volume. We see some recovery in the market, and this is although we took a decision to defocus from selected low-profit product that will be translated into better mix when we will discuss about the gross profit. And unfortunately, as I mentioned, still pressure on prices, 4% down. This is mainly due to the lower crop protection and active ingredient market prices and the AI capacity -- active ingredient overcapacity, and of course, the interest rates that created all the market to procure just in time. And as I mentioned, also exchange rate impact significantly in Q4, mainly due to the depreciation of the Brazilian currency versus the dollar. If we look on the gross profit bridge and the EBITDA bridge, I will jump to the EBITDA bridge. You can see here that the volumes contribute $41 million to our EBITDA, while costs contributed $87 million in Q4, which are higher than the $50 million reduction in prices as we saw in the sales bridge. And together with OpEx management, which you can see here that more or less the same OpEx, we are succeeding to get to $137 million, 45% higher than last year, which also 12.3% EBITDA-to-sales ratio is higher than what we achieved last year. If you are looking in the next slide on the full year picture, we can see here that we have reached to $4.1 billion sales in 2024, 11% lower than 2023. Main impact is the prices, as we mentioned, just-in-time approach together with the low prices and the overcapacity of product in the market. Again, some impact on the strong dollar during 2024, $131 million and more or less flat volume versus 2023. H1, we had negative, but now H2, because we see some relief on the market on the level of inventory, we see positive volumes. In the next slide, we can see the gross profit bridge and the EBITDA bridge. So more or less the same bridge, although our sales are significantly lower, 11% lower. And as you can see here, it's because of quantity. What we cannot see here, and I can tell you that this higher quantity, including also better mix. As I mentioned, we are selling more profitable product, which generating higher gross margin and less nonprofitable product, which -- and this is also supporting our gross margin; high pressure on sales, $369 million. But fortunately, because of our decision already in 2023 to have tight procurement management, which continued also in 2024, our cost benefit is higher than the prices. Again, FX also impact us. But all in all, we are keeping the same gross profit on lower sales, which means that we are selling more profitable product, 25.6% versus 22.7% in 2023. If we are looking on the EBITDA bridge, so it's more or less the same. However, here, we can see OpEx reduced by $31 million. This is due to our tight OpEx management, as already explained, part of our Fight Forward plan in order to make sure that we are adjusting the company to the market conditions, and this has led us to reach to $469 million EBITDA, 11.3% EBITDA-to-sales ratio versus $407 million, 8.7% EBITDA-to-sales ratio in 2023. We spoke about the cash flow, which is one of our, I think, proud in 2023 -- 2024. So bottom line, we succeeded, although it was another challenging year in the industry, we succeeded to generate free cash flow of $364 million higher than last year, $217 million free cash flow generated in 2024 by ADAMA. This supported our lower financial expenses, as I explained before. And this is although our lost sales -- sorry, our net losses are higher by $182 million, we are succeeding together with a better operating cash flow of $172 million. This is mainly because of our inventory management, we will see in the next slide, but also due to better supplier management no, no, go back, better supplier management and better collection, tight and close management of collection. We are succeeding to generate operating cash flow of $172 million higher than last year, which is $528 million. And as I mentioned, free cash flow, positive cash flow, although higher losses of $217 million. One last sentence about the free cash flow; we succeeded to achieve it also because our focusing and prioritization of CapEx investment; CapEx in plant production site, but also on intangible assets. We are really trying to focus in only on the best product, which will bring us the maximum ROI. Now we can go to the inventory slide, and we can see here that this is going to be the second year in a row that we have significantly reduced our inventory from $2.4 billion end of 2022, which reduced to $1.5 billion in 2024. This is $300 million lower than what we started 2023. And if you are looking on the days, it's also reflected in our inventory days, 177 million -- 177 days, which is significantly lower than what we faced in the last quarters. Again, this is to demonstrate how efficient our inventory management is in order to maximize our working capital and our cash flow management. And I think we finish here with the financial slide, and we are going to move to the Fight Forward, Gaël?

Yes. Thanks, Efrat. So look, Fight Forward is going to be a bit of a reminder of everything we're doing to get the company fit, both to succeed in the short term but also in the mid- to long term. And there's one slide I'm usually using with many audiences to summarize what is the strategic endeavor we've embarked into with ADAMA, and this is the next slide. There are basically 2 parts to our transformation here as a company. The first part -- and these 2 parts -- by adding those 2 parts, that's how we will be able, as a company, to be competitive in a market that has changed over the last years and that became in our space, the space where ADAMA is present, which is the space of off-patent, high-value chemicals that became much more competitive than before. So the first pillar is the one on the left is getting financially fit. If you see even in the result of 2024, we see better EBITDA. We see lower operational costs. We see better cost of products. So we really put a lot of emphasis over all the year of 2024, and we will continue in 2025 to go after any possible opportunity either to reduce cost or to both operational costs or cost of our products we sell. We went after any opportunity in the market to increase prices or decrease them less than the market wherever it was possible. And this is nearly 1,000 initiatives. They're called the Fight Forward transformation or the Fight Forward plan that across the company that we've been working on, and you heard me talking about them already last quarter. This continues, is not over, but it's already having a real impact on our P&L. By the way, it's also having a real impact on our cash flow, as Efrat was saying, we've been tracking 2 type of initiatives this year, initiatives that improve the EBITDA and initiatives that improve the cash flow. On the EBITDA side, you saw that we grew the EBITDA by 14% this year. Now a big part or a major part of that is coming from all these efforts that we did as part of this Fight Forward transformation, which triggered a more than $200 million of value in our 2024 P&L. Now this has been offset by some headwinds coming from the market. I told you earlier that 2024 was still, and you saw it also on the bridge that Efrat showed a few minutes ago, 2024 was still a year very much of price pressure where we lost on price. You saw it on the previous graph. We have more volume, but more volume, better cost but a significant price downside. And this is something that without those headwinds, the result would have been even more adverse. But this more than $200 million of EBITDA contribution coming from the Fight Forward transformation is there, is on our P&L. It's real money. It's been audited, and we are controlling each and every of these initiatives to make sure that the number are real and they're truly impacting our P&L. Now the second pillar of the transformation is more the structural one. The one that is necessary, as I was saying before, to compete for ADAMA to be competitive, a competitive company in the years to come in a market that is tougher and we believe is meant to remain tougher than what we've seen in the last 5 or 10 years. There are 4 pillars to that structural transformation of the company. The first one is that we are recentralizing some of the activities in our company, especially when it comes to corporate functions like finance, like HR, like supply chain. These were very decentralized in ADAMA, and we are recentralizing them to create more excellence, functional excellence in finance, in HR, in supply chain to support better our businesses. By doing that, we also want the general managers in the countries, ADAMA general managers all over the world in the countries to spend more time and more focus on the commercial part of their role, okay, leaving it to professionals in finance, in HR, in legal, in supply chain to support the business. That's the first pillar. It's an operating model transformation. Then we're optimizing our geographical presence. If you've been attending some of these calls in the past, you've heard that over 2024, we've decided to exit some markets that were either too small or not profitable enough or both. We're doing that actually, optimization both on the geographical footprint in order to focus in the future our resources, especially our innovation resources on to a few big country and markets. We call them the anchor countries or anchor markets. And we're doing the same on our product. We did the same in 2024 on our product portfolio by cleaning up from a lot of products that were commodities and not really bringing value or at least not enough return on the investment and resources we're putting to market them. So we exited a significant number of products. I think it's more than 400 in globally, in order to improve the profitability of our business and also improve the focus of our teams on a smaller number of products, bigger ones and more profitable. Last but not least, in order to be successful in the future, ADAMA needs to be competitive on costs. No secret, as an off-patent company, chemical company, we do not have any choice but to be competitive versus the market. And the market became much more competitive over the last years. So certain AIs that we are producing and we have been producing for years, we were competitive against the buy option or the buy options available in the market until a couple of years ago. And some of them, for some of them, we are not competitive anymore. And we need to solve that. And that has -- that means that we -- and we did it already in the second half of 2024. We relooked at all our assets across the globe. ADAMA is a company with a real global asset footprint, industrial footprint. We have assets in Brazil, we have assets in China, in Israel, in Poland, so in Europe. So we looked at all our assets when it comes to active ingredient production. And for the one who are not competitive anymore, we are looking at various options, some of them being improving those assets to bring them back into competitiveness. For some of them, it's not possible. So we'll go from a make strategy to a buy strategy. And so in order to, at the end, to end up with an optimized asset footprint that will make us competitive with our key produce AI in the future. Now all these 2 pillars, the one which is getting financially fit and the one of evolving our, some of our structural ways of working in the company, all this is meant to be able as a company to win in the value innovation segment. This value innovation segment is the segment where growers are looking for innovation, but at an acceptable price at a good return on investment. And this is where we, with ADAMA, with our history and our capabilities, we can really continue to bring value to growers. We want our portfolio in that part of the market to grow. And in order to do that, we're doing what I said before, getting the company financially fit and evolving our operating model. I think now it's Alex, who's taking over, correct?

Yes. Thanks, Gaël. So now I'll take you some -- through some great portfolio examples of what value innovation looks like in ADAMA at the moment. Next slide, please. In 2024, ADAMA launched 16 new products. The colors here indicate the sector, the green being herbicide, purple being insecticide and blue being fungicide. And also, the font size represents the magnitude relative of the sales. Next slide, please. So let's talk about a couple of key products in these key anchor markets that Gaël mentioned. ALMADA is a triple-mode fungicide powered by T.O.V. formulation technology, a premium soybean fungicide and also the winner 2x of the Embrapa soybean fungicide evaluation trials. Next slide, please. T.O.V. technology delivers 3 attributes. The first being better rainfastness, reduced contact angle and reduced droplet surface tension, reduce the droplet role while ultimately improve the product or the active ingredient staying where it counts on the leaf. Next slide, please. The second being better penetration. T.O.V. formulation technology has an increased ability to dissolve the leaf cuticle and facilitate a rapid diffusion of the active ingredient into the leaf. Here, we see over 72 hours, ALMADA's penetration to the target is over 80% compared to 62% with the tank mix without T.O.V. technology. Next slide, please. And the third being less filter clogging. Filter clogging is a major issue for farmers in Brazil because of one of the active ingredients that is core to the fungicide spray program and ALMADA shows less filter clogging. It does this due to the T.O.V. technology. Compared to tank mixes, the active ingredients stay freely in solution, opposed to coming together and thus improves the spray solution quality for the farmer, less clogging. Next slide, please. The next product is TRASSID, again, a key product in an anchor market and TRASSID is powered by Ayalon formulation technology. Next slide, please. Ayalon also has 3 attributes we can talk about. The first is better spreading. Increased spreading equals a higher opportunity for interaction between TRASSID and its intended targets on the leaf. Next slide, please. And again, better penetration in a different way and a different formulation, the combination of the active ingredients and Ayalon formulation technology. Here in the graph, you can see better penetration of over 25% compared to the tank mix in a 24-hour period. Next slide, please. And here, we have a great photo of our Indian team in the field with the farmers. Ayalon technology in TRASSID creates a physical or greening effect, which again is the interaction between the active ingredients and the Ayalon technology to create a greener, healthier looking crop. Next slide, please. And the last for today is a future-looking NPI. ADAMA's Folpet 500 SC Novel is a new formulation that will form one of the building blocks of the ADAMA's fungicide portfolio in Europe. Following the success of reregistration of both Folpet and Captan, we will be launching -- ADAMA will be launching a new Folpet with increased usability, increased preventative and protective efficacy. Next slide, please. So valuation -- value innovation in summary, the unique space between new active ingredients and commodity products and ADAMA's products: ALMADA, TRASSID and Folpet Novel will form just a part of ADAMA's portfolio success into the future. And there, I hand back to Gaël.

Next slide, please. We're supposed...

I think now we can go to Q&A, yes.

Yes. I think we're supposed to go to Q&A.

[Interpreted] Thanks for all our speakers to take us, finish this tour of performance. And now let's enter into the Q&A session, and we have seen multiple questions. The first one, question number one is about the recent price of pesticides. It says CP products have been under pressure in terms of pricing, but there has been significant increase of some AI such as Chlorothalonil and chlorpyrifos. On one hand, it is because of the decrease of supply. And on the other hand, do you think it reflects the current market demand is strong or growing stronger? How do you see the demand of crop protection markets in various regions around the world?

Okay. So thanks for the question. I think it's a great question. I think the important word in the question is some. Yes, there are a few, but it's only a few AIs in prices out of China that saw an increase recently. But the vast majority of AIs produced and marketed out of China are still at historical low, okay? And we've been seeing that for the whole of 2024. And as we speak today, we're still in that situation. Now what is also true, and you've seen it also in the number we shared today is that in terms of volume, the grower consumption has continued to be healthy in 2024 with even in some markets, significant increases like Brazil. But what is eating all this good news on the side of volumes in the markets is being eaten by prices. Why? Because the market continued to be flooded with product. And honestly, I'm not aware of a lot of reduction in production from China in 2024 or so far. So long story short, we see the market which continues to be healthy from a volume point of view at a grower level. At a distributor level, it's also getting healthier in most places with one exception for now, which is Brazil, which is an important exception because it's the biggest market in the world and very, very important for ADAMA. But from a price point of view, we don't see the pressure releasing, we didn't see it releasing at all in 2024. Opposite, okay? We saw a downward trend all along 2024. And we don't see that changing anytime soon because those capacity of production continues to flood the market with cheap products.

[Interpreted] So the second question, according to the company's annual reports for '23 and '24, the NPI rate for both years was 22%. And compared to '23, the rate of '24 did not increase. Considering the sales reduction in '24, it means that the corresponding sales of new products were also declining. Does this mean the differentiated portfolio of your company are not performing as your expectation? What additional efforts have you done in promoting these differentiated products?

Thanks for the question. A stable NPI rate reflects ADAMA's consistent and strong commitment to R&D investment over time. 2024 also saw a mix improvement. As the year went through, there was plus $53 million in sales in the full year and plus $17 million in sales in the last quarter. This reflects a commitment to focus on differentiated products, bringing higher value. Strong launches are planned in 2024 with new product introductions and with a strategic focus on formulation platforms, delivering differentiated products.

And let me -- Alex, thanks for this. Let me add one element to this. The structural transformation of the company that I mentioned earlier in my strategy slide is also very much supporting the objective of getting, of launching more new products, but also getting better in terms of commercial capabilities by more focus of the commercial team on that market segment, getting better at selling these types of products versus selling commodities, okay? And this is a journey, let's be honest. We started in 2024. It's about raising the capability bar of our commercial organization to be even more competitive, even better at selling these types of products. So we've done a lot. We're happy with our launches. We're happy with our portfolio. Can we do better? Yes, and we will do better.

[Interpreted] Question number three, if we look at the regional sales, apart from the North America, all the other regional sales are declining. If we see separately non-ag and ag, how do you see the CP business development of yours in North America?

First, thanks for the question. First, I would like to, before I go specifically on North America, to make a comment regarding our overall sales in 2024. Yes, we saw a year-on-year sales decline in 2024, but the market declined by about the same amount. So those key markets where we saw a sales decline, LatAm, APAC, Europe, the overall market decreased in value. So we don't believe that ADAMA lost market share in 2024. I think it's important to understand that. Now specifically in North America and in North America ag, we had -- actually, it's the only region, even if you exclude the non-crop business that saw a growth in sales in 2024, which despite the fact the market in North America also declined. And to be completely transparent, this is also due to our relatively low position in terms of market share in North America. We have a situation, a position in North America that is relatively opportunistic. And in North America, there are 5 big distributors, and we managed to make the right deals in 2024 or some good deals with those 5 distributors, which resulted in this number that looks abnormal for North America. I wouldn't get too excited about it because our market share, it's a good news. I'm not disliking it, but I wouldn't get too excited because our market share in North America is the smallest amongst the big markets. But the important message is ADAMA is at minimum holding share in 2024. We're not losing share. And where we lost it is on, in the market where we had small losses in market share is because of our own decision of walking away from some commodities, as I was saying earlier and Efrat was saying, too, we decided consciously to stop some products, stop selling them, okay? And that's obviously having a negative impact on our sales, too.

[Interpreted] Question number four, recently, there has been news about Bayer. News mentions that due to lawsuit, Bayer might withdraw from the glyphosate market in North America. So what industrial trend does this reflect? Is it conducive to optimizing the competitive landscape of the industry?

Look, we don't comment actions of this type with our competitors. What I can tell you is that -- and sorry if it's a repetition, in ADAMA, we made the conscious decision to walk away from these highly volatile, which in the last 2 years, have been very low profit products. It's a strategic decision. It's not a tactical decision. So we are very selective when deciding to sell commodities. It has to make sense for our overall global P&L or we will not come back into those markets. When I mean it has to make sense, I'll give you one example. If we are, if, like in certain markets, you need a full portfolio in front of a grower that includes certain commodities, we will take a minimum amount of commodities to be able to be relevant in front of those growers. Another example is when we produce ourselves the active ingredients, sometimes it makes sense of some of these commodity active ingredients we produce. So sometimes it makes sense to actually continue to sell them to better utilize our assets. But we are being very, very careful strategically in what product we sell. And once again, when it's a commodity product, especially when we're not producing them, we're walking away from those markets to focus on value innovation products on the type of innovation that Alex was presenting earlier.

[Interpreted] Question number five, in Q4 2024, the decline of ADAMA sales was significantly reduced. So can we see a rebound in the overall sales and profit of ADAMA in 2025? If yes, which quarter will be the expected turning point for ADAMA?

So we do not give any guidance for 2025. However, looking on specifically on Q4 and as rightly mentioned, excluding FX impact, you may see our terms, we are plus 2% in terms of sales, and we also saw our better quality of business reflected in higher EBITDA and higher EBITDA margin. And this is not only for Q4, it's for the full year. And this is, as mentioned, supported by our Fight Forward initiatives that we took during 2024. So looking on this improvement in our performance and numbers in 2024, this provide us to believe on the momentum towards further success also in 2025.

[Interpreted] Question number six, ADAMA's Fight Forward aims to optimize the financial health status and also to reduce costs as well as to streamline the business structure. However, from the P&L statement, the selling expenses, management expenses and also other corresponding expenses all increased year-on-year. So how can we evaluate the actual effectiveness of Fight Forward plan from this perspective?

Thank you for the question, a very important one. So the Fight Forward plan, including, as mentioned, also streamlining our operational model, managerial processes, organization and workforce. And we are also in the process of optimizing our assets, fixed and intangible. So all these activities, initiatives generate additional onetime expenses in our reported expenses. And this is the reason that we see reported OpEx increase versus 2023. Specifically, we see the restructuring and advisory costs, these are $44 million for this 2024 year. And in addition to this transformation initiatives that caused us more expenses, we also had a onetime claim from last year, which is the one-off product liability claim and expense of $36 million that belongs to previous years and we settled in this year. So if we are taking into consideration these onetime impacts on our P&L, some of them, of course, related to our Fight Forward initiatives. Our OpEx are basically lower by $68 million versus 2023 to demonstrate that our Fight Forward is also reflected in our better OpEx dollar.

[Interpreted] Next question, with the tariff increase in the United States, the agrochemical AI supply chain in the U.S. may be reshaped. So what is your view on ADAMA's future business in each of the regions against the background of higher U.S. tariffs?

Okay. So that's a very interesting and in a way, difficult question, difficult because as you all know, as we all know, the situation is liquid, okay? It's still -- there are still moving parts all over the places. There's not really clarity around where this is exactly going to land. Now the direction though is clear that we're going to see an era, a moment in business history of more tariffs than before. And yes, they could, they will or they are already affecting chemical products from China going into the U.S. Now it has an impact, obviously, on the U.S. market, on the U.S. value chain, as the question was alluding to, and on the U.S. grower competitiveness, which is going to become more challenging. Now once again, am I worried about that, about how the U.S. market is going to shape because of those tariffs? Yes and no. Yes, because it's still a very important market globally, and we need American farmers to be successful. But no, in the sense that ADAMA, as I said before, is relatively small, has a relatively small market share in the U.S. This is not a market where we are the most exposed across the 10 biggest markets in the world, it is the market where we are the least exposed because of our small size. If something like this was happening in Brazil or in India or in Australia or in Europe, I would be more worried, obviously. Now that's the first point related to U.S. only. Now generally speaking, the -- I would say that as ADAMA, I feel that, do I think that all these tariff wars are good news? Definitely not, not for ADAMA, but not for anyone in the industry or not for anyone in any industry to that extent. But I feel good about how we can and we will and we have already mitigated those types of risks because of our industrial footprint, which is diverse, okay? ADAMA has assets, production assets all over the world. And in terms of active ingredients, which is the biggest part of the cost of our products, we have assets in China, true, but we also have assets, important ones in Israel. We have one asset in Brazil, we have one asset in Poland, as I said before. So we are a bit more diversified in our geographical asset, production asset footprint than some of our competitors. So in a way, I feel that we are in a better position than several of our competitors to resist and to mitigate the type of risks that are coming our way because of tariffs.

[Interpreted] Question number eight, you may have heard about the policy of one product or one registration. So will the gradual implementation of this policy in China benefit the sales of ADAMA's formulations? What is your price outlook for formulated products?

Sorry, I'm using myself. So the policy is not implemented yet in ADAMA China, but we're preparing, we've been preparing for the implementation of this policy. If you ask about pricing in China, no difference, honestly, than anywhere else in the world, maybe sometimes even worse. So the pricing pressure in China remains very, very, very high across product range. The branded business of ADAMA in China follows the same strategy than the rest of the company. China is one of our anchor markets. Anchor markets is the way we describe these 6 markets in the world, which will be our focus in the future. And as such, so we are investing in launching new differentiated product in China, too. And our expectation is that there will be opportunities for us to grow in China through this renewed or strengthened focus on differentiated product innovation in China.

[Interpreted] Question number nine, any guidance on short and also midterm targets for the decline of selling expenses?

So as already mentioned, we do not give guidance. But as we discussed about the OpEx reduction in 2024, we are taking out all the one-off and expenses, which are more related to the Fight Forward. Our ways of streamlining our operating model, optimizing our product portfolio and regional layout, we will continue also to allocate resources to more profitable areas and product. We believe that this is a plan that we will benefit from it also in the next few years.

[Interpreted] Question number 10, we are seeing many management structure adjustments. So has this kind of management structure adjustment been completed? And what is the company's competitive strategy for the agrochemical market in different regions as well as what is your KPI assessment strategy following all those adjustments?

This is many questions in one question. First of all, no. Our transformation is not over as a company. I was mentioning earlier, the Fight Forward transformation is a 2-year program that covered the whole of 2024 and will continue to cover 2025. So clearly, it's not over. We're in the middle of it. Now what is our competitive strategy in our -- in the key markets for ADAMA to win in the future? I think I described it earlier. It's our value innovation strategy. And it's also building a structure of a company, both in terms of production, commercial and functional support that is able to compete in the market successfully against other player in that segment of value innovation, okay? That's basically our strategy. Now what KPIs we are looking at for that? Obviously, no surprise, no secret, market share is a KPI we're looking at. We're also looking at EBITDA. We're looking at quality of the business, EBITDA percent, so EBITDA in dollar, EBITDA percent. We're looking at cash generation. And ultimately, we're also looking at net profit, which obviously, is affected by the current period. We're going through in restructuring time, you're obliged to make certain investments that are affecting negatively your net income. But this is clearly a KPI we're also looking at, and we'll continue to look at.

[Interpreted] Next question. In 2024, ADAMA made a large sum of asset impairment. Is it likely that there will still be additional impairment of a similar amount in 2025?

So this is a tricky question because according to the accounting rules, when we are preparing our financial reports every quarter, if we see signs for, which require a warning sign around assets, if it's intangible assets or fixed assets, we need to check and to evaluate what is the value or what is the real value of an asset versus what we are having in the books. End of 2024, this made us to record these, those impairments around registration and fixed assets, and we keep reviewing every quarter in the next year.

[Interpreted] The next question is about the gross profit of the company in 2024. Your gross profit increased by 2.1 percentage points. But why did the loss increase significantly?

Okay. So if we are looking on the adjusted net losses, we are basically seeing lower losses of 13%. However, looking indeed on the reported losses, we see significantly higher losses. This is due to the Fight Forward initiatives, the impairment that we discussed and one-off that we saw, one-off expenses that we saw in 2024 due to the product liability issue that we faced and signed some cleaning of soil on our factories in Israel. So this is basically the one-off, which is not specifically related to 2024 that impact our reported net losses. But again, if you're looking on the adjusted net losses, we can see 13% lower, which reflects the higher margin that is mentioned.

[Interpreted] So next question is also our last question we've received for today's session. The question is about the effectiveness of Fight Forward plan. How can we see or feel the values of this transformation plan?

So it's pretty simple. We see them because we measure them line by line. The Fight Forward plan, you remember the left part of my slides earlier, which is getting financially healthy, is made of nearly 1,000 initiatives. And these initiatives are audited by our finance organization before we validate the fact that they have or they have not impacted the P&L through dollars, okay? So for example, if it's a project that is about reducing the cost of a certain product by buying differently or producing differently, we go and check and make sure that this is actually happening before we report it as an impact of the Fight Forward plan. And when you make the sum for 2024 on the sum of all these projects in terms of EBITDA impact, you get to a number, I think the right number is $236 million by summing all these hundreds of initiatives. So it's real, it's audited. The impact is there of the financial part of the plan, and it will continue in 2025 with incremental additional value hitting our bottom line. For the structural part of Fight Forward, which is all these organizational changes, cleaning our portfolio, cleaning our geographical base, reducing or optimizing our asset footprint, all this is work in progress. So have we seen all the impact of that second part, the second pillar, the second part of my slide earlier? No, probably we've seen 10% of the impact of that part. So there is much more positive impact for the company to come because of all these structural changes. And by definition, structural changes take more time and are more complex, but they're as important as the operational tactical changes we're making to generate EBITDA impact over the last year.

[Interpreted] Okay. That's great, and thanks for all your answers. That concluded our Q&A session. We're about to reach to the time, but we would like to give the floor to Gaël again to close our session today.

So thanks to all the speakers. Thanks, obviously, to all the attendees of the meeting today. I would like to conclude by saying that ADAMA in 2024 evolved in a market that was very challenging. And in those very challenging conditions, I'm very pleased, proud to report that our Fight Forward transformation is starting to show up. The results are starting to come to our P&L. Do they come everywhere? Not yet. For example, net income is not the case yet. You look at cash, you look at EBITDA, you look at EBITDA percent. These are starting to move for several quarters in a row, and they are, we know why, okay? We know why because behind all this financial impact, there are -- there is the Fight Forward transformation, which is tracked in a very disciplined way by the leadership team of the company. And honestly, all the employees of the company are behind this transformation. So I have a lot of trust in the fact that we're doing the right thing for this company, both in the short term, but also the medium and the long term in order to deliver on our value innovation strategy. Thank you very much.

[Interpreted] Thank you for joining us, and we are about to say goodbye, and your support is expected. Thanks very much. Let's see you in next session. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]