ADAMA overcomes headwinds to conclude another quarter with billion- dollar sales
Continues gaining share, crossing the$2 billion mark year-to-date Q2 Sales of$1,002 million, in line with last year in local currencies, lower by2.1% in US dollar terms
‒ Continued robust growth in Latin America and Asia-Pacific, together with contribution of joiners, largely offsetting weather- and supply-related delays in North America, Europe and India
‒ Continued price increases, averaging3% across all regions
‒ Jingzhou old site gradually resuming operation, resulting in short supply of high-demand products
‒ H1 sales of$2,008 million, exceeding lastyear’s in constant currencies, lower by1.8% in US dollar terms
‒ Cumulative8% price increases across the portfolio since the beginning of 2018
‒ Lack of high-demand products due to Jingzhou old site disruption constraining H1 sales by approximately$100 million
‒ Sales of formulated, branded products in China, other than those from the Jingzhou old site, grew by more than20% in both the quarter and the half-year
 Q2 Gross Profit of$327 million
‒ Gross margin of32.6% vs.33.4% last year
‒ H1 gross profit of$673 million, with gross margin of33.5% vs.33.9% last year
‒ Robust prices largely offset lower volume, higher procurement costs and softer currencies‒ Jingzhou old site disruption constraining H1 gross profit by approximately$35 million Q2 EBITDA of$177 million
‒ EBITDA margin of17.7%, 0.8 p.p. below last year
‒ H1 EBITDA of$365 million, with EBITDA margin of18.2%, in line with H1 of last year‒ Strong containment of operating expenses while recording idleness cost at Jingzhou old site‒ Jingzhou old site disruption, including idleness cost, constraining H1 EBITDA by approximately$50 million
 Q2 Net Income of$51 million
‒ Net income margin of5.1%, 2.0 p.p. below last year
‒ H1 net income of$131 million, with net income margin of6.5%
‒ Jingzhou old site disruption, including expected lower resulting taxes, constraining H1 Net Income by approximately$40 million
BEIJING, CHINA and TEL AVIV, ISRAEL, August 21, 2019– ADAMA Ltd. (the “Company”) (SZSE 000553) today reported its financial results for the second quarter and six-month period ended June 30, 2019.
Table 1. Financial Performance Summary
||
|-|
|Adjusted, US$m|

|||||
|-|-|-|-|
||||%|
|||%||
|Q2 2019|Q2 2018||Change|
|||Change||
||||CER|

|||||
|-|-|-|-|
||||%|
|||%||
|H1 2019|H1 2018||Change|
|||Change||
||||CER|

 Revenues 1,002 1,023 -2.1% -0.6% 2,008 2,045 -1.8% +0.2% Gross profit 327 342 -4.3% 673 694 -3.0% Gross margin 32.6% 33.4% 33.5% 33.9%
Operating income (EBIT) 116 137-15.6% 242 273-11.2% EBIT margin 11.5% 13.4% 12.1% 13.3%
Net income 51 73-30.3% 131 157-16.5% Net income margin 5.1% 7.1% 6.5% 7.7%
EBITDA 177 189 -6.2% 365 379 -3.7% EBITDA margin 17.7% 18.5% 18.2% 18.5%
Earnings per share - USD 0.0208 0.0929 0.0535 0.0641
- RMB 0.1419 0.1905 0.3626 0.4083
All income statement items contained in this release are presented on an adjusted basis. A detailed description and analysis of differences between the adjusted income statement and that reported in the financial statements is contained in the “Analysis of Gaps between Adjusted Income Statement and Income Statement in Financial Statements” in the appendix to this release. EPS are the same for basic and diluted. Q2 and H1 2019 include the results of both Bonide and Anpon following the completion of their acquisition.
Commenting on the results, Yang Xingqiang, Chairman ofADAMA’s Board of Directors, said, “In challenging times, theCompany’s ability to successfully execute on its growth strategy anchors our strength. Our robust and expanding product portfolio, combined with our strong global market presence, has allowed us to overcome market and supply challenges and deliver a resilient performance.”
Chen Lichtenstein, President and CEO of ADAMA, added, “We now cross difficult market conditions, with adverse weather, industry-wide supply constraints and currency headwinds. In addition, as the gradual ramp-up of production at the Jingzhou old site is ongoing, we still lack sufficient supply of products in high demand. We drive our performance by capitalizing on growth markets, deepening our commercial presence and launching new and differentiated products, and continue to outgrow the market.”
Performance in Context of Market Environment
Significant precipitation in North America in the first quarter followed by unprecedented flooding in the second quarter, alongside extreme dry weather in Europe, India and parts of Asia-Pacific, delayed and reduced application of crop protection products in these regions. Latin America benefited from relatively strong demand in the southern hemisphere off-season.India’s monsoon season started late in the second quarter, delaying the sowing of several summer-planted crops.
Crop prices have generally remained subdued in the first half of 2019, with the exception of corn,
which continues to challenge farmer income in most regions, resulting in continued sluggish demand
for crop protection products.
The sustained supply-constrained environment, mostly owing to increased environmental focus in
China, has seen continued industry-wide shortages in certain raw materials and intermediates, and
resulted in procurement costs remaining elevated compared to the first half of last year. The Company continues to raise its prices in all regions and contain its manufacturing and other operating costs to mitigate this impact.
Looking toward the second half of the year, the Company expects robust growth, as the southern hemisphere regions, which are performing strongly, move into their peak season, as the Monsoon season progresses in India, and as supply constraints start alleviating.
Financial Highlights
Revenues in the second quarter were$1,002 million, in-line with the same period last year in constant currency terms, and somewhat lower in US dollar terms(5% up in RMB terms). Half-year sales reached$2,008 million, slightly above last year in constant currency terms, and somewhat below in US dollar terms(5% up in RMB terms), reflecting the lack of high-demand products due to the Jingzhou old site disruption, which constrained H1 sales by approximately$100 million.
The extended cold and wet conditions in North America, alongside dry weather in Europe, India and parts of Asia-Pacific, delayed and reduced application of crop protection products, while continued tight supply conditions prevented the Company from taking advantage of demand for certain products.
Strong growth in Latin America, led by Brazil, as well as resilient performance in APAC, notably Australia, alongside the contribution of joiners Bonide and Anpon, partially offset these weather- and supply-related delays. The continued supportive pricing environment allowed for the passing on of some of the impact of the constrained supply and higher procurement costs, while mitigating the impact of generally softer currencies. ADAMA continues to drive growth with new launches of differentiated product throughout all regions.
In China, continued strong demand for theCompany’s differentiated, formulated and branded products is supporting the shift towards sales through its own channels and away from sales of unformulated, technical active ingredients to intermediaries.
Gross profit in the second quarter was$327 million (gross margin of32.6%) and$673 million (gross margin of33.5%) in the half-year, compared to$342 million (gross margin of33.4%) and$694 million (gross margin of33.9%) in the corresponding periods last year, respectively (up by2% and3%, respectively, in RMB terms). The relatively modest decline in gross margin reflects the benefit of stronger pricing, which compensated for a large part of the impact of the lower available volumes, higher procurement costs and softer currencies. The Jingzhou old site disruption constrained H1 gross profit by approximately$35 million.
Operating expenses. Total operating expenses were$211 million(21.1% of sales) in the second quarter and$430 million(21.4% of sales) in the half-year, compared to$205 million(20.0% of sales) and$421 million(20.6% of sales) in the corresponding periods last year, respectively. These moderate increases reflect the ongoing containment of expenses, aided by softer currencies as well as net other operating income of$18 million in the half-year from expropriation of land, which offset the inclusion of joiners as well as the recording of a charge in the half-year of$20 million in respect of idleness costs at the Jingzhou old site, as it advances its gradual ramp-up in production.
Sales and Marketing expenses in the second quarter were$160 million(16.0% of sales), and$324 million(16.1% of sales) in the first half, compared to$157 million(15.4% of sales) and$319 million(15.6% of sales) in the corresponding periods last year, respectively. The moderate increase reflects the benefit of expense containment and softer currencies, offset by joiners' first-time inclusion. General and Administrative expenses in the second quarter were$36 million(3.6% of sales), and$68 million(3.4% of sales) in the first half, compared to$35 million(3.5% of sales) and$75 million
(3.6% of sales) in the corresponding periods last year, respectively.
R&D expenses in the second quarter were$15 million(1.5% of sales), and$31 million(1.5% of sales) in the first half, compared to$12 million(1.2% of sales) and$25 million(1.2% of sales) in the corresponding periods last year, reflecting higher spend on strategic research and development projects.
Operating income in the second quarter was$116 million(11.5% of sales) and$242 million(12.1% of sales) in the first half, compared to$137 million(13.4% of sales) and$273 million(13.3% of sales) in the corresponding periods last year, respectively.
EBITDA in the second quarter was$177 million(17.7% of sales) and$365 million(18.2% of sales) in the first half, compared to$189 million(18.5% of sales) and$379 million(18.5% of sales) in the corresponding periods last year, respectively (up by0.2% and2.5%, respectively in RMB terms). The Jingzhou old site disruption, including idleness costs, constrained H1 EBITDA by approximately$50 million.
Financial expenses and investment income. Total net financial expenses and investment income were$49 million in the second quarter and$87 million in the first half, compared to$33 million and$67 million in the corresponding periods last year, respectively. This reflects the impact of both the appreciation of the Israeli Shekel as well as the higher CPI on the Shekel-denominated, CPI-linked bonds, as well as higher interest and hedging costs, while the lower expenses in the corresponding periods last year reflect the benefit of foreign exchange income related to balance sheet positions. Tax expenses. Net tax expenses were$15 million in the second quarter and$24 million in the first half, compared to$31 million and$49 million in the corresponding periods last year, respectively. The lower tax expenses this year were largely due to the lower taxable income, while the higher tax expenses in the prior periods reflected the non-cash impact of the devaluation of the Brazilian Real, resulting in a lower value of local currency-denominated non-monetary assets.
Net income in the second quarter was$51 million(5.1% of sales) and$131 million(6.5% of sales) in the first half compared to$73 million(7.1% of sales) and$157 million(7.7% of sales) in the corresponding periods last year, respectively (lower by26% and11%, respectively, in RMB terms). The Jingzhou old site disruption, including the expected lower resulting taxes, constrained H1 Net Income by approximately$40 million.
Working capital at June 30, 2019 was$2,067 million, compared to$1,700 million at the same point last year. The higher level reflects increased trade receivables resulting from theCompany’s strong growth in Q4 2018 and the robust performance in Brazil in the first-half of 2019, alongside somewhat lower payable days, notably due to the inclusion of joiners. Inventory levels were higher due to the missing of sales resulting from the weather-related challenges as well as credit restraint in eastern Europe, alongside the build-up of inventory to prepare for the expected growth in the second half of 2019, as well as the first-time additions of joiners.
Cash Flow. Operating cash flow of$144 million was generated in the quarter and$47 million was consumed in the first half, compared to$156 million and$122 million generated in the corresponding periods last year, respectively, mainly reflecting the build-up of working capital and the impact of the partially operational Jingzhou old site.
Net cash used in investing activities was$44 million in the quarter and$203 million in the first half compared to cash outflows of$49 million and$41 million in the corresponding periods last year, respectively, with the higher 2019 outflow reflecting acquisitions, while in the first quarter of 2018, the Company recorded the one-time proceeds from the divestiture of several products in connection with the approval by the EU Commission of the acquisition of Syngenta by ChemChina, and outflow of a lesser net amount for the transfer of a similar portfolio of products. Investments in fixed assets,
net of investment grants, amounted to$25 million in the quarter and$47 million in the first half
compared to$29 million and$56 million in the corresponding periods last year, respectively.
Free cash flow of$59 million was generated in the second quarter compared to$72 million generated in the same period last year. In the first half, free cash flow consumed was$297 million compared to the$42 million that the Company generated in the corresponding period last year, noting the impact of net proceeds from divestitures in 2018, and outflow for acquisitions in 2019. Leverage: Balance sheet net debt at the end of the quarter was$866 million, compared to$447 million as of June 30, 2018, reflecting the aforementioned net consumption of cash, acquisitions, the assumption of their debt and dividend paid out.
Increasing collaboration activities. The Company continues to advance collaboration opportunities with other ChemChina group entities, as well as other entities of the Sinochem group, to make the most of its positioning.
Jingzhou Old Site
Following resumption of operations at the Jingzhou old site in late March, the Company is advancing the gradual ramp-up of production. The new state-of-the-art wastewater treatment facility is operational, and the upgraded biological-decomposition systems are being acclimated to the improved wastewater quality. As this progresses, the Company is still experiencing constrained supply in key products manufactured at the site, especially impacting the Americas, Asia-Pacific, China, and India, Middle-East and Africa, constraining sales and gross profit by approximately$100 million and$35 million, respectively, in the half-year, and recorded approximately$20 million in related idleness costs during the period, bringing the impact from the disruption on EBITDA to approximately$50 million and on Net Income to approximately$40 million. In recent weeks, the Ecological Protection Supervision Team of the central government commenced on-site inspections at many ChemChina group companies, including theCompany’s sites in China, as part of its strengthening ongoing environmental and safety focus. ADAMA is working in full cooperation, in the context of its 3-year relocation and upgrade process which is due to conclude next year, to identify and rectify any safety or environmental matter.
Table 2. Regional Sales Performance
|||||
|-|-|-|-|
|Q2 2019|Q2 2018|Change|Change|
|$m|$m|CER|USD|

|||||
|-|-|-|-|
|H1 2019|H1 2018|Change|Change|
|$m|$m|CER|USD|

 Europe 267 309 -16.7% -13.6% 628 702 -13.6% -10.6% North America 220 213 +3.7% +3.5% 400 407 -1.3% -1.6% Latin America 196 172 +20.0%+14.2% 355 311+22.6%+14.4% Asia Pacific 173 167 +7.8% +3.1% 358 356 +5.2% +0.7% Of which China 86 88 +1.7% -3.0% 179 173 +7.8% +3.9% India, Middle East& Africa 146 162 -6.2% -10.2% 267 270 +5.9% -1.4% Total 1,002 1,023 -0.6% -2.1% 2,008 2,045 +0.2% -1.8% CER: Constant Exchange Rates
Europe: Sales in Europe were lower by16.7% in the quarter and13.6% in the first half, in constant currency terms, compared to the corresponding periods last year. This is primarily due to tight supply conditions as well as unseasonably hot weather towards the end of the second quarter, which constrained sales in key countries.
In Northern Europe, sales continued to be impacted by credit restraint in Ukraine, with the
Company proactively restricting sales to only those customers with a proven ability to pay, as well
as by adverse weather conditions in Germany, reducing crop protection application in all major
crops, alongside the tight supply conditions.
In Southern Europe, weak disease pressure in key markets resulted in subdued demand for crop protection products, while supply-related constraints further impacted sales.
In the second quarter, ADAMA launchedMERKUR® in France, a differentiated, broad-spectrum three-way herbicide mixture in an innovative formulation, combating weed seed germination and growth. In addition, the Company obtained several new product registrations, includingMERPLUS®, a differentiated fungicide for pome fruits in Europe andFLUTEPRID®, a 3-way combination insecticide-fungicide seed dressing for control of diseases and pests in grain crops in Russia.
In US dollar terms, sales in Europe were lower by13.6% in the quarter and10.6% in the first half compared to the corresponding periods last year, reflecting positive hedging contribution.
North America: Sales increased by3.7% in the quarter and were1.3% lower in the first half, in constant currency terms, compared with the corresponding periods last year, with continued price increases partially offsetting adverse weather conditions.
Significant and extended precipitation in the first quarter, followed by unprecedented floodings in the second quarter, posed significant challenges for farmers, delaying the planting season and reducing planted acreage, impacting sales across key agricultural markets.
In Consumer and Professional Solutions, the Company saw a pleasing contribution from joiner Bonide, despite the challenging weather conditions which similarly impacted the non-crop market.BRAZEN®, a selective herbicide for grass control in spring wheat and barley in Canada, delivered a strong performance in its first quarter following its recent launch.
In US dollar terms, sales in North America increased by3.5% in the quarter and were1.6% lower in the first half, compared to the corresponding periods last year.
Latin America: Latin America delivered exceptionally strong growth in both the second quarter and half year period, with sales up by20.0% and22.6%, in constant currency terms, compared to the corresponding periods last year, respectively. Business growth in key countries across the region, alongside continued price increases, more than offset the impact of constrained supply. The Company continues to grow strongly in Brazil, where robust demand for its corn portfolio overcame supply shortages in certain products. The Company saw strong performance in the key soybean market, leveraging its distinctive product offering, including flagshipCRONNOS®, the triple-action fungicide for rust, while benefiting from an increase in planted areas.
Noteworthy performance was recorded in the second quarter in Argentina, despite adverse weather conditions.
During the quarter, the Company launched several new products, includingBREVIS®, a differentiated post-bloom fruit thinner in apples in Argentina, as well asKADABRA®, a broad- spectrum mixture insecticide for vegetables in Mexico, andUBERTOP® an insecticide used mainly for the control of a wide range of pests in tomato and cabbage in Central America, while the proprietaryNIMITZ® suite of nematicide products was launched in Peru.
In US dollar terms, sales in Latin America increased by14.2% in the quarter and14.4% in the first half, compared to the corresponding periods last year, reflecting the impact of softer currencies. Asia-Pacific: Sales in the region grew by7.8% in the second quarter and5.2% in the first half, in constant currency terms, compared to the corresponding periods last year, driven by business growth and continued price increases.
The second quarter saw a strong recovery in Australia, as long-awaited rain bolstered the winter crop season following the severe drought which significantly impacted sales in the country in the first quarter. However, drought conditions continued to impact the broader Asia-Pacific region in
the second quarter, reducing crop protection application and constraining sales in many countries.
During the quarter, the Company obtained a number of new registrations for differentiated products, including LEGACYMA-X® for controlling a wide range of broadleaf weeds in Australian winter cereals and pasture,APROPO® fungicide for rice in Philippines, andTOPNOTCH® to control various diseases in Australian wheat and barley.
In China, ADAMA continues to see strong demand for its differentiated, formulated and branded products, and prioritizes the sale of these products through its own channels by rapidly shifting away from selling unformulated, technical product to intermediaries, and in so doing benefiting from the full product positioning as well as end-to-end margin. Sales of these formulated, branded products other than those from the Jingzhou old site, grew by more than20% in both the quarter and first half.
ADAMA continues to make significant portfolio advances in China, with the launch in the second quarter ofLEIWANG®, a combination insecticide to help combat the fall army worm outbreak. Anpon delivered a solid performance in its first full quarter since joining, compensating for the interruption to supply resulting from the Jingzhou old site.
In US dollar terms, sales in Asia-Pacific grew by3.1% in the second quarter and by0.7% in the first half, compared to the corresponding periods last year, reflecting the impact of softer currencies. India, Middle East& Africa: Sales were lower by6.2% in the second quarter, yet up by5.9% in the first half, in constant currency terms, compared to the corresponding periods last year.
Sales in India were impacted by the late Monsoon rains, reducing planting areas and delaying crop protection application, as well as supply constraints in China-sourced products. In the half-year, growth in the region benefited from a strong performance in Turkey.
In US dollar terms, sales were lower by10.2% in the second quarter and1.4% in the first half, compared to the corresponding periods last year, reflecting the impact of softer currencies.
Table 3. Revenues by operating segment
Second quarter sales
|||
|-|-|
|Q2 2019||
||%|
|USD(m)||

|||
|-|-|
|Q2 2018||
||%|
|USD(m)||

Crop Protection 905 90.3% 957 93.5% Intermediates and Ingredients 97 9.7% 66 6.5% Total 1,002 100.0% 1,023 100.0% First half sales
|||
|-|-|
|H1 2019||
||%|
|USD(m)||

|||
|-|-|
|H1 2018||
||%|
|USD(m)||

Crop Protection 1,814 90.4% 1,905 93.1% Intermediates and Ingredients 194 9.6% 141 6.9% Total 2,008 100.0% 2,045 100.0%
Further Information
All filings of the Company, together with a presentation of the key financial highlights of the period, can be accessed through the Company website at www.adama.com.
##
About ADAMA
ADAMA Ltd. is one of the world's leading crop protection companies. We strive to Create Simplicity in Agriculture– offering farmers effective products and services that simplify their lives and help them grow. With one of the most comprehensive and diversified portfolios of differentiated, quality products, our more than 7,000-strong team reaches farmers in over 100 countries, providing them with solutions to control weeds, insects and disease, and improve their yields. For more information, visit us at www.ADAMA.com and follow us onTwitter® at@ADAMAAgri.
Contact
Ben Cohen Zhujun Wang
Global Investor Relations China Investor Relations
Email:ir@adama.com Email:irchina@adama.com
Abridged Consolidated Financial Statements
The following abridged consolidated financial statements and notes have been prepared as described in Note 1. While prepared based on the principles of PRC GAAP, they do not contain all of the information which either PRC GAAP or IFRS would require for a complete set of financial statements and should be read in conjunction with the consolidated financial statements of both ADAMA Ltd. and Adama Agricultural Solutions Ltd. as filed with the Shenzhen and Tel Aviv Stock Exchanges, respectively.
Table 4. Abridged Consolidated Income Statement for the Second Quarter
||||||
|-|-|-|-|-|
||Q2 2019|Q2 2018|Q2 2019|Q2 2018|
|Adjusted1|||||
||USD(m)|USD(m)|RMB(m)|RMB(m)|

 Revenues 1,002 1,023 6,828 6,527 Cost of Sales 672 679 4,577 4,330 Business taxes and surcharges 3 3 22 18 Gross profit 327 342 2,229 2,179% of revenue 32.6% 33.4% 32.6% 33.4% Selling and distribution expenses 160 157 1,092 1,003 General and administrative expenses 37 35 248 225 Research and development expenses 15 12 105 76 Other operating expenses / (income) -1 0.2 -4 1 Total Operating expenses 211 205 1,441 1,305 Operating income (EBIT) 116 137 788 873% of revenue 11.5% 13.4% 11.5% 13.4% Financial expenses and investment income 49 33 337 210 Income before taxes 66 104 451 663 Taxes on Income 15 31 104 197 Net income 51 73 347 466% of revenue 5.1% 7.1% 5.1% 7.1% EBITDA 177 189 1,207 1,204% of revenue 17.7% 18.5% 17.7% 18.5% Earnings per Share– Basic 0.0208 0.0299 0.1419 0.1907– Diluted 0.0208 0.0299 0.1419 0.1907 Earnings per share are the same for basic and diluted. The number of shares used to calculate earnings per share is 2,446.6 million shares.
1
For an analysis of the differences between the adjusted income statement items and the income statement items as reported in the
financial statements, see below “Analysis of Gaps between Adjusted Income Statement and Income Statement in Financial Statements”.
Table 5. Abridged Consolidated Income Statement for the First Half
||||||
|-|-|-|-|-|
||H1 2019|H1 2018|H1 2019|H1 2018|
|Adjusted2|||||
||USD(m)|USD(m)|RMB(m)|RMB(m)|

 Revenues 2,008 2,045 13,616 13,026 Cost of Sales 1,329 1,346 9,010 8,571 Business taxes and surcharges 7 6 46 37 Gross profit 673 694 4,560 4,418% of revenue 33.5% 33.9% 33.5% 33.9% Selling and distribution expenses 324 319 2,195 2,030 General and administrative expenses 69 75 464 474 Research and development expenses 31 25 211 156 Other operating expenses / (income) 7 3 49 21 Total Operating expenses 431 421 2,919 2,682 Operating income (EBIT) 242 273 1,641 1,735% of revenue 12.1% 13.3% 12.1% 13.3% Financial expenses and investment income 87 67 589 426 Income before taxes 155 206 1,052 1,309 Taxes on Income 24 49 165 310 Net income 131 157 887 999% of revenue 6.5% 7.7% 6.5% 7.7% EBITDA 365 379 2,471 2,411% of revenue 18.2% 18.5% 18.2% 18.5% Earnings per Share– Basic 0.0535 0.0641 0.3626 0.4083– Diluted 0.0535 0.0641 0.3626 0.4083 Earnings per share are the same for basic and diluted. The number of shares used to calculate earnings per share is 2,446.6 million shares.
2
For an analysis of the differences between the adjusted income statement items and the income statement items as reported in the
financial statements, see below “Analysis of Gaps between Adjusted Income Statement and Income Statement in Financial Statements”.
Table 6. Abridged Consolidated Balance Sheet
|||||
|-|-|-|-|
|June 30|June 30|June 30|June 30|
|2019|2018|2019|2018|
|USD (m)|USD (m)|RMB (m)|RMB (m)|

 Assets
Current assets:
Cash at bank and on hand 789 914 5,425 6,050 Bills and accounts receivable 1,201 1,087 8,254 7,194 Inventories 1,504 1,251 10,338 8,275 Other current assets, receivables and
285 306 1,959 2,026 prepaid expenses
Total current assets 3,779 3,558 25,976 23,544 Non-current assets:
Fixed assets, net 1,121 1,061 7,708 7,021 Rights of use assets 80 - 548 - Intangible assets, net 1,469 1,486 10,102 9,835 Deferred tax assets 112 94 768 624 Other non-current assets 103 84 708 554 Total non-current assets 2,885 2,726 19,834 18,034 Total assets 6,664 6,284 45,810 41,578 Liabilities
Current liabilities:
Loans and credit from banks and
397 132 2,730 872 others
Bills and accounts payable 662 660 4,554 4,366 Other current liabilities 767 825 5,270 5,460 Total current liabilities 1,826 1,617 12,555 10,699 Long-term liabilities:
Long-term loans 98 48 674 320 Debentures 1,186 1,141 8,153 7,549 Deferred tax liabilities 51 71 351 472 Employee benefits 94 95 644 631 Other long-term liabilities 139 55 954 363 Total long-term liabilities 1,567 1,411 10,775 9,336 Total liabilities 3,393 3,028 23,331 20,034 Equity
Total equity 3,270 3,256 22,479 21,543 Total equity 3,270 3,256 22,479 21,543 Total liabilities and equity 6,664 6,284 45,810 41,578
Table 7. Abridged Consolidated Cash Flow Statement for the Second Quarter
|||||
|-|-|-|-|
|Q2 2019|Q2 2018|Q2 2019|Q2 2018|
|USD (m)|USD (m)|RMB (m)|RMB (m)|

 Cash flow from operating activities:
Cash flow from operating activities 144 156 985 995 Cash flow from operating activities 144 156 985 995 Investing activities:
Acquisitions of fixed and intangible assets -47 -48 -319 -304 Cash received from disposal of investments 2 - 12 - Proceeds from disposal of fixed and intangible assets - - - 1 Acquisitions of a subsidiary - - -2 - Other investing activities 1 -1 9 -7 Cash flow used for investing activities -44 -49 -300 -310 Financing activities:
Receipt of loans from banks and other lenders 66 - 451 - Repayment of loans from banks and other lenders -30 -33 -205 -212 Other financing activities -50 -41 -343 -258 Cash flow from (used for) financing activities -14 -74 -98 -470 Effects of exchange rate movement on cash and cash -7 -14 57 209 equivalents
Net change in cash and cash equivalents 79 20 643 424 Cash and cash equivalents at the beginning of the period 704 890 4,739 5,597 Cash and cash equivalents at the end of the period 783 910 5,382 6,021 Free Cash Flow 59 72 404 453
Table 8. Abridged Consolidated Cash Flow Statement for the First Half
|||||
|-|-|-|-|
|H1 2019|H1 2018|H1 2019|H1 2018|
|USD (m)|USD (m)|RMB (m)|RMB (m)|

 Cash flow from operating activities:
Cash flow from operating activities -47 122 -305 780 Cash flow from operating activities -47 122 -305 780 Investing activities:
Acquisitions of fixed and intangible assets -89 -421 -606 -2,678 Cash received from disposal of investments 3 - 20 - Proceeds from disposal of fixed and intangible assets 5 380 31 2,413 Acquisitions of a subsidiary -123 - -827 - Other investing activities 2 - 12 1 Cash flow used for investing activities -203 -41 -1,370 -265 Financing activities:
Receipt of loans from banks and other lenders 294 - 1,988 - Repayment of loans from banks and other lenders -68 -322 -464 -2,048 Other financing activities -116 -48 -788 -308 Cash flow from (used for) financing activities 109 -370 736 -2,356 Effects of exchange rate movement on cash and cash -2 -4 -25 -2 equivalents
Net change in cash and cash equivalents -142 -294 -964 -1,843 Cash and cash equivalents at the beginning of the period 925 1,204 6,346 7,864 Cash and cash equivalents at the end of the period 783 910 5,382 6,021 Free Cash Flow -297 42 -1,996 254
Notes to Abridged Consolidated Financial Statements
Note 1: Basis of preparation
Basis of presentation and accounting policies: The abridged consolidated financial statements for the quarters ended June 30, 2019 and 2018 incorporate the financial statements of ADAMA Ltd. and of all of its subsidiaries (the “Company”), including Adama Agricultural Solutions Ltd. (“Solutions”) and its subsidiaries. The Company has adopted the Accounting Standards for Business Enterprises issued by the Ministry of Finance (the "MoF") and the implementation guidance, interpretations and other relevant provisions issued or revised subsequently by the MoF (collectively referred to as "CASBE").
The abridged consolidated financial statements contained in this release are presented in both Chinese Renminbi (RMB), as theCompany’s shares are traded on the Shenzhen Stock Exchange, as well as in United States dollars($) as this is the major currency in which theCompany’s business is conducted. For the purposes of this release, a customary convenience translation has been used for the translation from RMB to US dollars, with Income Statement and Cash Flow items being translated using the quarterly average exchange rate, and Balance Sheet items being translated using the exchange rate at the end of the period. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimated.
Note 2: Abridged Financial Statements
For ease of use, the Financial Statements shown in this release have been abridged as follows:
Abridged Consolidated Income Statement:
 “Operating expenses” includes selling and distribution expenses; general and administrative expenses; research and development expenses; asset and credit impairment losses; gain (loss) from disposal of assets and non-operating income and expenses
 “Financial expenses and investment income” includes net financing expenses; gains from changes in fair value; and investment income (including share of income of equity accounted investees)
Abridged Consolidated Balance Sheet:
 “Other current assets, receivables and prepaid expenses” includes financial assets held for trading, derivatives financial assets, receivables financing, prepayments, other receivables; and other current assets
 “Fixed assets, net” includes fixed assets, construction in progress and rights-of-use assets
 “Intangible assets, net” includes intangible assets and goodwill
 “Other non-current assets” includes other equity investments; long-term equity investments; long-term receivables; investment property; and other non-current assets
 “Loans and credit from banks and others” includes short-term loans and non-current liabilities due within one year
 “Other current liabilities” includes derivatives financial liabilities, payables for employee benefits, contract liabilities, taxes payable, other payables and other current liabilities
 “Other long-term liabilities” includes long-term payables, lease liability, provisions and other non- current liabilities
Table 9. Analysis of Gaps between Adjusted Income Statement and Reported Income Statement in Financial Statements
||||||||
|-|-|-|-|-|-|-|
|Q2|Adjusted||Adjustments||Reported||
|USD(m)|Q2 2019|Q2 2018|Q2 2019|Q2 2018|Q2 2019|Q2 2018|

 Revenues 1,002 1,023 - - 1,002 1,023 Gross profit 327 342 -1 - 328 342 Operating expenses 211 205 -22 -23 233 228 Operating income (EBIT) 116 137 21 23 95 114 Income before taxes 66 104 20 23 46 81 Net income 51 73 18 21 33 52 EBITDA 177 189 -3 2 180 187 Earnings per share 0.0208 0.0299 0.0133 0.0212
||||||||
|-|-|-|-|-|-|-|
|Q2|Adjusted||Adjustments||Reported||
|RMB(m)|Q2 2019|Q2 2018|Q2 2019|Q2 2018|Q2 2019|Q2 2018|

 Revenues 6,828 6,527 - - 6,828 6,527 Gross profit 2,229 2,179 -3 - 2,233 2,179 Operating expenses 1,441 1,305 -144 -148 1,586 1,453 Operating income (EBIT) 788 873 141 148 647 726 Income before taxes 451 663 137 148 314 515 Net income 347 466 125 135 222 331 EBITDA 1,207 1,204 -22 10 1,229 1,194 Earnings per share 0.1419 0.1905 0.0907 0.1352
||||||||
|-|-|-|-|-|-|-|
|H1|Adjusted||Adjustments||Reported||
|USD(m)|H1 2019|H1 2018|H1 2019|H1 2018|H1 2019|H1 2018|

 Revenues 2,008 2,045 - - 2,008 2,045 Gross profit 673 694 2 2 671 692 Operating expenses 430 421 -49 -63 479 140 Operating income (EBIT) 242 273 51 -281 191 553 Income before taxes 155 206 47 -280 108 486 Net income 131 157 44 -215 87 372 EBITDA 365 379 2 -310 363 689 Earnings per share 0.0535 0.0641 0.0355 0.1518
||||||||
|-|-|-|-|-|-|-|
|H1|Adjusted||Adjustments||Reported||
|RMB(m)|H1 2019|H1 2018|H1 2019|H1 2018|H1 2019|H1 2018|

 Revenues 13,616 13,026 - - 13,616 13,026 Gross profit 4,560 4,418 13 10 4,547 4,408 Operating expenses 2,919 2,682 -330 1,790 3,249 892 Operating income (EBIT) 1,641 1,735 343 -1,781 1,298 3,516 Income before taxes 1,052 1,309 323 -1,781 729 3,090 Net income 887 999 298 -1,364 589 2,363 EBITDA 2,471 2,411 10 -1,976 2,461 4,387 Earnings per share 0.3626 0.4083 0.2406 0.9658
Table 10. Income Statement Adjustments
In addition to the reported financial results that the Company prepares in accordance with PRC GAAP, theCompany’s management prepares non-GAAP, Adjusted financial results to present what the Company believes is a more useful view of the true economic performance of the business on an ongoing basis. These Adjusted results exclude items that are of a one-time or non-cash/non-operational nature that do not impact the ongoing performance of the business and reflects the way theCompany’s management and Board of Directors view the performance of the Company. The Company believes that excluding the effects of these items from its operating results allows an effective assessment and comparison of the underlying financial performance of its business from period to period and within the market.
|||||
|-|-|-|-|
|Q2 2019|Q2 2018|Q2 2019|Q2 2018|
|USD (m)|USD (m)|RMB (m)|RMB (m)|

 Net Income (Reported) 32.6 51.9 221.9 330.8 Adjustments to COGS& Operating Expenses:
1. Amortization of Legacy PPA of 2011 acquisition of Solutions (non- 11.5 11.5 78.1 73.0 cash)
2. One-time capital gain from Divestment of registrations due to 2017 - - - - ChemChina-Syngenta transaction
3. Amortization of Transfer assets received and written-up due to 2017 9.2 10.2 62.5 64.8 ChemChina-Syngenta transaction (non-cash)
4. Reinstatement of amortization expenses due to Divestment (non- - - - - cash)
5. Accelerated depreciation due to relocation (non-cash) 2.2 - 15.2 - 6. Non-core assets closure (non-cash) - 0.8 - 4.9 7. Long-term incentive classified on an equity-settled basis (non-cash) -3.3 0.8 -22.7 5.0 8. Amortization of acquisition PPA (non-cash) 1.2 - 8.1 - 9. Sanonda-ADAMA Combination transaction one-time stamp tax - - - - Total Adjustments to Operating Income (EBIT) 20.7 23.2 141.1 147.7 Total Adjustments to EBITDA -3.2 1.6 -21.6 9.9 Adjustments to Financing Expenses:
10. Revaluation of non-cash adjustment related to non-controlling -0.7 - -4.5 - interest
Total Adjustments to Income before Taxes 20.0 23.2 136.7 147.7 Adjustments to Taxes
1. Tax shield on Legacy PPA of 2011 acquisition of Solutions -1.9 -1.9 -13.3 -12.4 2. Tax expense due to capital gain from registrations Divestment - - - - 8. Deferred tax due to PPA 0.3 - 1.9 - Total adjustments to Net Income 18.4 21.2 125.3 135.3 Net Income (Adjusted) 50.9 73.1 347.2 466.1
|||||
|-|-|-|-|
|H1 2019|H1 2018|H1 2019|H1 2018|
|USD (m)|USD (m)|RMB (m)|RMB (m)|

 Net Income (Reported) 86.9 371.5 588.7 2,362.8 Adjustments to COGS& Operating Expenses:
1. Amortization of Legacy PPA of 2011 acquisition of Solutions (non- 22.9 22.9 155.3 145.8 cash)
2. One-time capital gain from Divestment of registrations due to 2017 - -314.3 - -1,998.5 ChemChina-Syngenta transaction
3. Amortization of Transfer assets received and written-up due to 2017 19.8 10.2 134.2 64.8 ChemChina-Syngenta transaction (non-cash)
4. Reinstatement of amortization expenses due to Divestment (non- - -2.6 - -16.5 cash)
5. Accelerated depreciation due to relocation (non-cash) 4.5 - 30.7 - 6. Non-core assets closure (non-cash) - 2.3 - 14.8 7. Long-term incentive classified on an equity-settled basis (non-cash) 1.4 -0.1 9.2 -0.9 8. Amortization of acquisition PPA (non-cash) 2.1 - 14.1 - 9. Sanonda-ADAMA Combination transaction one-time stamp tax - 1.5 - 9.4 Total Adjustments to Operating Income (EBIT) 50.7 -280.2 343.6 -1,781.0 Total Adjustments to EBITDA 1.6 -310.9 10.3 -1,976.7 Adjustments to Financing Expenses:
10. Revaluation of non-cash adjustment related to non-controlling -3.0 - -20.5 - interest
Total Adjustments to Income before Taxes 47.7 -280.2 323.0 -1,781.0 Adjustments to Taxes
1. Tax shield on Legacy PPA of 2011 acquisition of Solutions -3.9 -3.9 -26.4 -24.8 2. Tax expense due to capital gain from registrations Divestment - 69.5 - 441.8 8. Deferred tax due to PPA 0.3 - 1.9 - Total adjustments to Net Income 44.1 -214.6 298.5 -1,363.9 Net Income (Adjusted) 131.0 156.9 887.1 998.8 Notes:
1. Amortization of Legacy PPA of 2011 acquisition of Solutions (non-cash): Under PRC GAAP, the Company has inherited the historical “legacy” amortization charge from the first combined reporting for Q3 2017 that ChemChina previously was incurring in respect of its acquisition of Solutions in 2011. This amortization is done in a linear manner on a quarterly basis, most of which will be completed and removed in the second half of 2020.
2. One-time capital gain from Divestment of registrations due to 2017 ChemChina-Syngenta transaction: In the first quarter of 2018, the Company earned a one-time profit on the Divestment of crop protection products in connection with the approval by the EU Commission of the acquisition of Syngenta by ChemChina. This one-time profit is excluded from the Adjusted financial results due to its one-time nature, while the related tax expense is also adjusted for.
3. Amortization of Transfer assets received and written-up due to 2017 ChemChina-Syngenta transaction (non-cash): The proceeds from the Divestment of crop protection products in connection with the approval by the EU Commission of the acquisition of Syngenta by ChemChina, net of taxes and transaction expenses, were paid to Syngenta in return for the transfer of a portfolio of products in Europe of similar nature and economic value. Since the products acquired from Syngenta are of the same nature and with the same net economic value as those divested, and since the Company excludes the one-time gain that it made on the divested products, the additional amortization charge incurred due to the written-up of the acquired assets is also excluded to present a consistent view of Divestment and Transfer transactions, which had no net impact on the underlying economic performance of the Company. See note 2.
4. Reinstatement of amortization expenses, related to the Divestment (non-cash): Reinstatement of amortization expenses due to classification of to-be-divested European registrations as “Held-for-Sale”, related to 2017 ChemChina acquisition of Syngenta.
5. Accelerated depreciation due to relocation (non-cash): Production assets located in the old production sites in Jingzhou andHuai’An will
be relocated to the new sites in the coming years. Since some of the older production assets may not be able to be relocated, some of these
assets which are no longer operational are being written off (or impaired), while for others, their economic life has been shortened and
therefore will be depreciated over a shorter period. Since these are older assets that were built many years ago and will be replaced by newer
production facilities at the new sites, and since the ongoing operations of the business will not be impacted thereby, the Company adjusts for
the impact of the accelerated depreciation of these assets.
6. Non-core assets closure (non-cash): One-time charge due to closure of peripheral, non-material assets.
7. Long-term incentive classified on an equity-settled basis (non-cash): The Company granted its employees, who are mainly non-Chinese residents, a long term incentive (LTI) in the form of 'phantom' options, due to the complexity of granting Chinese-listed, equity-settled options to non-Chinese employees. As such, the Company records an expense, or recognizes income, depending on the fluctuation in theCompany’s share price, even though the Company will not incur any cash impact prior to exercise of the phantom options. To neutralize the impact of such share price movements on the measurement of theCompany’s performance and expected employee compensation, in theCompany’s adjusted financial performance, the LTI is presented on an equity-settled basis in accordance with the value of the plan at the grant date. 8. Amortization of acquisition PPA (non-cash): Related to the amortization of non-cash intangible assets created as part of acquisitions; has no impact on the ongoing performance of the companies acquired.
9. Sanonda-ADAMA Combination transaction one-time stamp tax: One-time stamp tax expense incurred related to the Combination. 10. Revaluation of non-cash adjustment related to non-controlling interest: Relates to put options issued to non-controlling interests as part of historical business combinations which took place before January 1, 2010. The put options are presented as a liability at the present value of the future exercise price. The revaluation of these put options in Solutions is recognized under IFRS to Goodwill, but due to the acquisition of Solutions by the Company in 2017, which is treated from an accounting perspective as a “Business Combination Under Common Control”, such revaluation is recorded as a profit or loss item in the financial reports of the Company. The revaluations of such put options have no bearing on the ongoing performance of the Company and are therefore adjusted for.
Table 11. Exchange Rate Data for the Company's Principal
Functional Currencies
||||||||||
|-|-|-|-|-|-|-|-|-|
|June 30|||Q2 Average|||H1 Average|||
|2019|2018|Change|2019|2018|Change|2019|2018|Change|

 EUR/USD 1.138 1.166 (2.4%) 1.124 1.193 (5.8%) 1.130 1.211 (6.7%) USD/BRL 3.832 3.856 0.6% 3.919 3.606 (8.7%) 3.845 3.425(12.3%) USD/PLN 3.734 3.744 0.3% 3.812 3.575 (6.6%) 3.801 3.487 (9.0%) USD/ZAR 14.140 13.701 (3.2%) 14.407 12.623(14.1%) 14.213 12.284(15.7%) AUD/USD 0.703 0.739 (4.9%) 0.700 0.757 (7.5%) 0.706 0.771 (8.4%) GBP/USD 1.270 1.317 (3.5%) 1.285 1.361 (5.6%) 1.294 1.376 (6.0%) USD/ILS 3.566 3.650 2.3% 3.595 3.570 (0.7%) 3.620 3.514 (3.0%) USD LIBOR 3M 2.32% 2.34% (0.9%) 2.51% 9..2% 9.2% 2.69% 9.22% 27.5%
||||||||||
|-|-|-|-|-|-|-|-|-|
|June 30|||Q2 Average|||H1 Average|||
|2019|2018|Change|2019|2018|Change|2019|2018|Change|

 USD/RMB 6.875 6.617 3.9% 6.816 6.376 3.9% 6.780 6.367 6.5% EUR/RMB 7.821 7.714 1.4% 7.661 7.605 0.7% 7.661 7.708 (0.6%) RMB/BRL 0.557 0.583 4.3% 0.575 0.565 (1.7%) 0.567 0.538 (5.4%) RMB/PLN 0.543 0.566 4.0% 0.559 0.561 0.3% 0.561 0.548 (2.3%) RMB/ZAR 0.486 0.483 (0.7%) 0.473 0.505 6.3% 0.477 0.518 8.0% AUD/RMB 4.832 4.892 (1.2%) 4.773 4.828 (1.1%) 4.790 4.912 (2.5%) GBP/RMB 8.734 8.715 0.2% 8.762 8.679 1.0% 8.773 8.761 0.1% RMB/ILS 0.519 0.552 6.0% 0.527 0.560 5.8% 0.534 0.552 3.3% RMB SHIBOR 3M2.708% 4.155%(34.8%) 2.867% 4.190%(31.6%) 2.866% 4.441%(35.5%)