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Makhteshim Agan Announces Fourth Quarter and Full Year 2011 Financial Results

Record Sales and Significant Improvement in Gross Profit, Operating Profit, EBITDA and Net Income for the Year

TEL-AVIV, ISRAEL, March 11, 2012 /PRNewswire/ -- The Makhteshim Agan Group ("MAI" or the "Company"), the world leader in branded off-patent crop protection solutions, today reported financial results for the fourth quarter and fiscal year ended December 31, 2011.

FINANCIAL HIGHLIGHTS

Below are key financial metrics for the twelve months ended 31/12/11:


In millions of US$


1-12/ 2011

As reported*

1-12/ 2010

As reported**

% Change

(as reported)


1-12/ 2011

Non-GAAP+

1-12/ 2010

Non-GAAP+

  % Change

Non-GAAP

Sales

2,691.4

2,362.2

14%


2,691.4

2,368.2

14%

EBITDA

372.8

141.7

163%


384.6

258.1

49%

Gross profit

841.5

649.2

30%


841.5

673.1

25%

Gross margin

31.3%

27.5%



31.3%

28.4%


Operating profit

243.1

6.2

NM


255.1

147.9

72%

Net income

120.7

(131.9)

NM


132.7

20.8

537%




Below are key financial metrics for 4Q 11:


In millions of US$


4Q 2011

As reported*

4Q 2010

As reported

Change

(as reported)


4Q 2011

Non-GAAP+

4Q 2010

Non-GAAP

Change

(Non-GAAP)

Sales

549.3

505.1

9%


549.3

511.1

7%

EBITDA

26.6

(85.4)

NM


38.6

17.4

122%

Gross profit

149.8

106.1

41%


149.8

121.5

23%

Gross margin

27.3%

21.0%



27.3%

23.8%


Operating profit (loss)

(6.2)

(139.7)

NM


5.8

(11.6)

NM

Net income

(26.7)

(159.2)

NM


(14.7)

(39.7)

NM


*2011 as reported numbers include non-recurring expenses of $12 million relating to the ChemChina merger transaction.

**2010 as reported numbers include $153.0 million of one-time charges.

+ Non-GAAP numbers exclude aforementioned one-time charges.



Commenting on the results, Mr. Yang Xingqiang, Makhteshim Agan's Chairman of the Board, said, "2011 was a transformational year for MAI with noticeable improvement in our financial performance. Among the Company's achievements during 2011 was its successful completion of a merger transaction with ChemChina. This groundbreaking transaction in the crop protection market promises to create a strong foundation for continued growth of MAI, as well as the financial solidity to secure the Company's continued growth and leading position in the global crop protection market for the future."

"I am optimistic that the Company's strategic direction and leadership, as well as its broad product portfolio, strong manufacturing capabilities, global marketing and distribution system and unparallel registration, development and service capabilities coupled with ChemChina's support and capabilities, will foster continued growth and improved profitability in the coming years," concluded Xingqiang.  

Mr. Erez Vigodman, President and CEO of Makhteshim Agan, commented: "2011 marked a year of remarkable achievements for Makhteshim Agan. We delivered strong financial results for the year while successfully executing our operational strategies and also completing our transformational merger with ChemChina. Our revenues, which grew by 14% to reach nearly $2.7 billion, resulted from double digit gains across all of our operating regions, especially the APAC region and North America."  

"Our higher sales are derived from volume growth driven by favorable climatic conditions, increase in planting areas in 2011 and higher prices for agricultural commodities. During the same period we witnessed a relatively stable pricing environment. The strengthening of some of the currencies in which we operate also contributed to our sales growth.

"Gross profit for 2011 jumped by 30% over 2010 and our gross margins improved. This achievement is a reflection of our continued progress in executing on our strategic operational plan and our successful efforts to improve and broaden our operations in key markets like Brazil and the APAC region, as well as to integrate previous acquisitions in Mexico and Korea."

Vigodman continued, "more than ever, we are committed to offering effective and reliable crop protection solutions to farmers around the world. This year, we made significant progress on this front through the expansion of our product portfolio. In addition to our on-going development and registration activities, we entered into a collaboration with Monsanto in the area of weed resistance, we acquired the rights and licenses of the active ingredient diuron and launched fipronil-based products in the US.  Our newly established agricultural technologies division will also support this strategic direction by scouting and developing our offering beyond crop protection."

"Following the conclusion of our merger with ChemChina in October, we have initiated intensive activities to exploit its potential, including the possibility of creating a significant operational and commercial infrastructure in China based on ChemChina's agrochemical assets, ramping up our presence in China, as well as the entire Asia Pacific region, and selling ChemChina products through our global sales and distribution channels."

"As we move forward, we are confident that the Company will continue to grow and prosper as we pursue our business strategy, reinforce and establish our global presence, broaden our product portfolio, steadily improve our Company's operational capacities and exploit the benefits arising from our merger with ChemChina," concluded Vigodman.

SALES

2011 revenues rose to $2,691.4 million from $2,362.2 million in 2010, an increase of 13.9%. Fourth quarter 2011 revenues increased to $549.3 million from $505.1 million for the corresponding period in 2010, an increase of 8.7%. The primary contributors to growth in sales were new operations, higher selling prices and favorable currency exchange rates.  

Below are sales for the fourth quarter of 2011 and for the year by geographic region:

Breakdown of Sales

Millions of US$

4Q 2011

4Q 2010

% Change


1-12/ 2011

1-12/ 2010

% Change

Europe

137.5

140.6

(2.2%)


1,049.3

965.6

8.7%

Latin America

189.1

168.4

12.3%


609.3

539.6

12.9%

North America

104.7

83.7

25.1%


478.4

404.3

18.3%

Asia Pacific

93.6

86.1

8.7%


451.9

363.3

24.4%

Israel

24.4

26.3

(7.3%)


102.6

89.4

14.7%



On a geographic basis, the strongest sales increases were in the Company's Asia Pacific region which contributed $451.9 million for the year, a 24.4% increase from $363.3 million in 2010. The increase stems from increased sales volume, particularly in India, Korea and Australia, partially offset by currency exchange rates and a decrease in selling prices. For the fourth quarter of 2011, sales in the region rose to $93.6 million compared to $86.1 million for the comparable period in 2010, an increase of 8.7%.

Sales in Latin America for fiscal year 2011 amounted to $609.3 million compared with $539.6 million in 2010, a 12.9% increase, primarily due to increases in selling prices and higher sales volume derived from the inclusion of sales by the Company's subsidiary in Mexico. For the fourth quarter of 2011, sales in Latin America totaled $189.1 million compared to $168.4 million for the comparable period in 2010, an increase of 12.3%. Increased sales resulted from increased selling prices, as well as the inclusion of the Mexican operation's sales.

North American sales for FY 2011 rose to $478.4 million from $404.3 million for 2010, an increase of 18.3% arising from increased volume of sales, partially offset by a decrease in selling prices. During the fourth quarter of 2011, sales in North America rose to $104.7 million from $83.7 million for the corresponding period in 2010, an increase of 25.1%, due to increased selling volumes and higher prices in North America.

European sales for 2011 were $1,049.3 million compared to $965.6 million for 2010, an increase of 8.7%, attributable to increased sales volume. During the fourth quarter of 2011, sales in Europe totaled $137.5 million compared to $140.6 million for the same period in 2010, a decrease of 2.2%, resulting from decreased sales in Europe which were partially offset by higher selling prices and the strengthening of the Euro against the US dollar which increased the dollar value of sales.

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

Excluding one-time charges, EBITDA for FY 2011 was $372.8 million (13.8% of sales) compared to $258.1 million (10.9% of sales) for FY 2010, an increase of 44.4%.  EBITDA for the fourth quarter of 2011 was $26.6 million (4.8% of sales) compared to $17.4 million (3.4% of sales) for the comparable period in 2010. Including one-time charges, FY 2011 EBITDA was $372.8 million compared to $141.7 million in FY 2010, and fourth quarter EBITDA was $26.6 million compared to ($85.4) million for the comparable period in 2010.  

GROSS PROFIT  

Gross profit in 2011 amounted to $841.5 million compared with gross profit (less one-time charges) of $673.1 million in 2010, and $649.2 million, including one-time charges in 2010. The improvement in gross profit and gross margins during FY 2011 derived from increased sales volume, as well as an improved product mix, improved results by the Company's Brazilian subsidiary, new operations in Mexico and Asia, the Company's acquisition the active ingredient diuron and streamlining measures undertaken by the Company.

Gross profit for the fourth quarter of 2011 amounted to $149.8 million compared to $106.1 million, including one-time charges during the fourth quarter of the previous year, and compared to $121.5 million, less one-time charges, for the corresponding quarter of the previous year. The improvement in gross profit for the quarter was due primarily to increased selling prices and an improved product mix, offset partially by increased raw material and energy costs as well as unfavorable exchange rates.

OPERATING PROFIT

Operating profit in 2011 amounted to $243.1 million compared with operating profit less one-time charges in the amount of $147.9 million for 2010, and $649.2 million, including one-time charges in 2010.

Operating loss in the fourth quarter of 2011 amounted to $6.2 million compared with an operating loss in the amount of $11.6 million during the corresponding quarter of the previous year, less one time charges, and an operating loss of $139.7 million, including one-time charges, in the corresponding quarter of 2010.  The decrease in operating loss during the quarter was due primarily to the non-recurrence of the one-time charges in the fourth quarter of 2010.

OPERATING EXPENSES

Operating expenses for the year totaled $598.4 million (22.2% of sales), compared with $643.0 million (20.9% of sales) for 2010. For the fourth quarter of 2011, operating expenses amounted to $156.1 million (28.4% of turnover), compared with $245.8 million (48.7% of turnover) for the corresponding period in 2010. The decrease in operating expenses for the quarter derived primarily from one-time charges during the fourth quarter of 2010.

NET INCOME (LOSS)

Net income for 2011 was $120.7 million, excluding the aforementioned one-time charges. This compares with $21.1 million for 2010, or a net loss of $131.9 million, including one-time charges in 2010.

The Company recorded a loss of $26.7 million for the fourth quarter of 2011 compared to a loss of $39.8 million, less one-time charges, for the corresponding period in 2010, and a loss of $159.3 million, including one-time charges during Q4 2010.

CASH FLOW

During the twelve months ended on December 31, 2011 operating cash flow amounted to $306.2 million compared with $162.4 million during the corresponding period last year.  The increased cash flow resulted from increased profitability and an improvement in working capital. The Company recorded positive cash flow from operating activities of $53.7 million during the fourth quarter of 2011, compared to negative cash flow from operating activities of $5.8 million in the fourth quarter of 2010.

STRATEGIC UPDATE

Progress in Comprehensive Change Plan

During 2011, the Company continued to implement its strategic change plan, approved by the Board of Directors in 2010, to adapt the Company's business operating model to changes in the competitive environment of its industry, strengthen its areas of operation in order and ensure that MAI remains a leading, sustainable and profitable player in the crop protection products market.

Merger with ChemChina

In October 2011, the Company completed its merger transaction with China National Agrochemical Corporation ("ChemChina"), after which the Company's shares were delisted from the TASE and the Company became a private company, 60% held by ChemChina and 40% by Koor Corporations. The Company has begun to take intensive action to exploit the potential derived from the merger.

Continued Focus on Asia-Pacific, Africa and the Middle East

During the year, the Company continued its strategic focus on the region by opening a formulation and packing plant in Dahej, India, that will serve the Company's operations in India and the region. This follows the Company's decision in 2010 to establish a new operating region for Asia-Pacific, Africa and the Middle East to better expand commercial activities and streamline production and logistics in the region.  

Establishment of Agriculture Technology Division

In 2011, the Company formed a new agricultural technologies division which will be incorporated into the Company's core businesses. The division will initially focus on developing and promoting the Company's operations in the seed and biotechnological sector, and eventually will examine other supplementary agriculture areas.

Further information

All financial fillings and a presentation with key financial highlights can be accessed through the Company's website at http://www.ma-industries.com.

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 sector. The Company supplies efficient solutions to farmers that assist them in combating disease and increasing yields. In 2010, the Company's revenues were over $2.37 billion, and it is ranked seventh in the world in the agro-chemicals sector. 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 www.ma-industries.com

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

SOURCE Makhteshim Agan Group

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