SOURCE: Agria Corporation

Agria Corporation

March 01, 2016 07:00 ET

Agria Reports Financial Results for First Half of Fiscal Year 2016

Significant Impacts From Strength of US Dollar, Unusual Weather; On "Constant Currency" Basis, Revenue Down 5%, Net Income Down 61%

HONG KONG, CHINA--(Marketwired - Mar 1, 2016) - Agria Corporation (NYSE: GRO) (the "Company" or "Agria"), a global agricultural company, today announced its financial results for the six months ended December 31, 2015.

Note: All figures refer to the first half of fiscal year 2016 (i.e. six months ended December 31, 2015) unless otherwise noted. Comparisons of Consolidated Statements of Profit or Loss are to the first half of fiscal 2015 (i.e. six months ended December 31, 2014). Comparisons of Consolidated Statements of Financial Position are to June 30, 2015 unless otherwise noted. While the Company reports results in US Dollars, it transacts the majority of its business in New Zealand dollars. To assist in understanding the underlying economic trends of the business, the presentation below reports results both in USD in conformity with IFRS, and on a "constant currency" basis that removes the significant impact of volatility in the average USD/NZD foreign currency exchange rates during the reporting period (0.6627) by using prior period rates (0.8094) on current period results.

Financial Highlights:

Revenue was $420.2 million, a decrease of 22%. Gross profit of $109.4 million declined by 17%, however gross profit margin increased to 26%, a 150 basis point expansion. Operating expenses were $96.1 million, a 13% decline. Operating profit was $13.6 million, or 3% of revenue, a decline of 39%. Net profit was $2.5 million, or $0.023 per share, down 80%. Net loss attributable to shareholders was $3.8 million, or $(0.035) per share.

During the reporting period, the average US dollar/New Zealand dollar exchange rate appreciated by 22%. The following "constant currency" analysis reports results as if the USD/NZD exchange rate was unchanged during the period. This pro forma analysis does not conform to IFRS, and is offered strictly to aid in understanding the factors driving the Company's results.

On a "constant currency" basis, revenue was $511.6 million, a decrease of 5%. Gross profit of $133.1 million increased by 1%, gross profit margin increased to 26%, a 150 basis point expansion. Operating expenses were $115.8 million, a 5% increase. Operating profit was $17.6 million, or 3% of revenue, a decline of 21%. Net profit was $4.9 million, or $0.044 per share, down 61%. Net loss attributable to shareholders was $2.9 million, or $(0.026) per share on a "constant currency" basis.

The table below summarizes the impact of exchange rate changes on consolidated results.

                                     
    H1
FY2016
    H1
FY2015
    Y/Y Change     Constant Currency     Y/Y Change     Proportion
of Change
Due to F/X
 
Revenue   $ 420.2     $ 538.9     (22 %)   $ 511.6     (5 %)   77 %
Gross Profit   $ 109.4     $ 131.8     (17 %)   $ 133.1     1 %   106 %
Gross Margin     26 %     24.5 %   +150 bps       26 %   +150 bps     -  
Operating Expenses   $ 96.1     $ 109.9     (13 %)   $ 115.8     5 %   143 %
Operating Profit   $ 13.6     $ 22.2     (39 %)   $ 17.6     (21 %)   46 %
Net Profit   $ 2.5     $ 12.6     (80 %)   $ 4.9     (61 %)   23 %
                                           

Balance sheet changes during the period were mixed. Cash increased by approximately $7.7 million, mostly impacted by an inventory decline of $22.8 million, payables increase of $28.6 million, and debt increase of $53.1 million. The major offsetting use of cash was receivables and prepayments, which were up $79.2 million, and non-current assets, mainly in equity accounted investees, which were up $19.3 million. Balance sheet items were not materially affected by exchange rates, since the point measurements of the USD/NZD foreign currency rates were relatively unchanged between the start and end of the period.

Mr. Alan Lai, Agria's Executive Chairman, commented, "Our first half results are modestly disappointing, but not necessarily surprising, given the challenges faced by the global agriculture industry. An exceptionally strong El Niño weather pattern -- the most extreme in 70 years -- is wreaking havoc for growers around the world. Volatility in the foreign exchange markets is doing equal damage, impacting commodity prices and making trade and business planning more difficult for farmers. Those macro factors as well as lower dairy impacted results in the half."

Business Highlights:

Seed and Grain
Operating profit of $6.8 million was 24% of the group total before corporate overhead, and was down 34%. Revenue was $118.3 million, which constituted 28% of group revenue, and was down 25%. On a constant currency basis, revenue of $142.8 million was down 9%, and operating profit of $8.3 million was 19% lower. Lower revenue was primarily driven by soft conditions in South America as wet weather and falling soybean prices impacted demand. Softness in South America was somewhat offset by strong trading conditions in New Zealand, where demand is increasing for the Company's premium forage and crop seeds.

Crop Protection, Nutrients, and Merchandise
Operating profit of $16.7 million was 59% of the group total before corporate overhead, and was down 15%. Revenue was $207.1 million, which constituted 49% of group revenue, and was down 19%. On a constant currency basis, revenue of $252.9 million was down only 1%, and operating profit of $20.4 million was 4% higher. The slightly lower revenue reflected cautious spending by New Zealand farmers, as they react to lower dairy prices. Despite sluggish spending, sales of horticultural products were strong, as were sales of the Company's Fruitfed products.

Rural Services
Operating profit of $4.8 million was 17% of the group total before corporate overhead, and was down 28%. Revenue was $94.9 million, which constituted 23% of group revenue, and was down 25%. On a constant currency basis, revenue of $115.9 million was down 8%, while operating profit of $5.8 million was 12% lower. Results were most impacted by mixed trends in in livestock: domestic beef and sheep volumes were higher, but sheep prices were down and live cattle export activity was soft. Revenue and operating profit from other rural services were down slightly.

Mr. Lai concluded, "We remain optimistic about the prospects for our business. At the highest level, both absolute demand for food and changing composition of diets will cause agricultural industry growth for decades to come. We are also cautiously optimistic that the recently concluded Trans Pacific Partnership can open up new markets for our New Zealand and Australian farmer customers. Finally, we can see internally the traction from our multi-year restructuring efforts. We have rebuilt Agria to be a resilient industry leader, able to manage profitably in tough periods such as today, and thrive when weather and market conditions are better."

About Agria Corporation
Agria (NYSE: GRO) is a global agricultural company with three principal business segments: Seed and Grain; Crop Protection, Nutrients and Merchandise; and Rural Services. The Seed and Grain segment is engaged in research and development, production and sale of a broad range of seed products and trading of seed and grain products globally. The Crop Protection, Nutrients and Merchandise segment operates an extensive chain of retail stores that supply farm input materials. The Rural Services segment provides livestock trading, wool trading, irrigation and pumping, real estate agency and other agriservices. For more information about Agria Corporation, please visit www.agriacorp.com.

Safe Harbor Statement:
This announcement contains forward-looking statements. These statements, including the management's commentary, are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Agria may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on Forms 20-F and 6-K, etc., in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Agria's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, those risks outlined in Agria's filings with the U.S. Securities and Exchange Commission. All information provided in this press release is as of the date of this announcement unless otherwise stated and Agria does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

     
CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS  
(UNAUDITED)  
(In conformity with IFRS as issued by the IASB)   For the six months ended December 31,  
    2015     2014  
    US$'000     US$'000  
             
  Revenue   420,212     538,940  
  Cost of sales   (310,822 )   (407,104 )
  Gross profit   109,390     131,836  
  Other income   257     272  
  Operating expenses   (96,051 )   (109,877 )
  Operating profit   13,596     22,231  
  Equity accounted (loss) earnings of associates   (162 )   129  
  Non-operating items   (924 )   903  
  Fair value adjustments   265     228  
  Profit before interest and income tax   12,775     23,491  
  Net interest and finance costs   (5,886 )   (3,968 )
  Profit before income tax   6,889     19,523  
  Income tax   (4,365 )   (6,934 )
  Profit for the period   2,524     12,589  
               
  Attributable to:            
  Equity holders of the Company   (3,832 )   3,211  
  Non-controlling interests   6,356     9,378  
      2,524     12,589  
  Earnings/(loss) per ordinary share (US$)            
  Basic   (0.035 )   0.03  
  Diluted   (0.035 )   0.03  
               
  No. of ordinary shares outstanding   110,766,600     110,766,600  
               
 
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
(In conformity with IFRS as issued by the IASB)   As at
December 31,
  As at
June 30,
    2015   2015
    US$'000   US$'000
ASSETS        
Current assets:        
  Cash and cash equivalents   17,589   9,886
  Accounts receivable, prepayments and other current assets   269,139   189,938
  Inventories and biological assets   157,833   180,644
Total current assets   444,561   380,468
         
Non-current assets:        
  Property, plant and equipment, net   94,562   88,993
  Intangible assets   7,056   6,899
  Goodwill   3,105   3,299
  Other non-current assets   24,645   10,846
  Deferred tax assets   8,360   8,386
Total non-current assets   137,728   118,423
Total assets   582,289   498,891
         
LIABILITIES AND EQUITY        
Current liabilities:        
  Short-term bank borrowings and current portion of long-term bank borrowings   77,205   54,160
  Accounts payable, accrued expenses and other liabilities   232,962   201,310
Total current liabilities   310,167   255,470
         
Non-current liabilities:        
  Long-term bank borrowing, net of current portion   90,795   60,785
  Other long-term liabilities   17,320   15,118
Total non-current liabilities   108,115   75,903
Total liabilities   418,282   331,373
         
Equity:        
  Equity of the Company   49,754   56,602
  Non-controlling interests   114,253   110,916
Total equity   164,007   167,518
Total liabilities and equity   582,289   498,891
         

Statement Regarding Unaudited Financial Information

The unaudited financial information set forth above is subject to adjustments that may be identified when audit work is completed on our year-end financial statements, which could result in significant differences from this unaudited financial information.

Contact Information

  • Contact:
    The Blueshirt Group Asia
    Gary Dvorchak, CFA
    Phone (China): +86 (138) 1079-1480
    Phone (U.S.): +1 (323) 240-5796
    Email: gary@blueshirtgroup.com