Makhteshim Agan Industries
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Makhteshim Agan Industries. Agenda. Overview of 2007 results 2007 business environment Change and efficiency plan update. Strong 2007 growth achieved by most players led by MA Industries. FY Sales’ growth (07’ vs. 06’). ~12% Average growth of leading AgChem players (published thus far).

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Makhteshim Agan Industries

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Makhteshim agan industries

Makhteshim Agan Industries


Agenda

Agenda

  • Overview of 2007 results

  • 2007 business environment

  • Change and efficiency plan update


Strong 2007 growth achieved by most players led by ma industries

Strong 2007 growth achieved by most players led by MA Industries

FY Sales’ growth (07’ vs. 06’)

~12% Average growth of leading AgChem players (published thus far)

  • MAI Agro sales only

  • Dow results include Agricultural Science

  • DuPont sales include Ag & Nutrition (inc, Pioneer)

Source: Phillips McDougall, Companies’ disclosure; MAI analysis


2007 results overview

2007 results’ overview

2006*

2005

2007

Sales

2,081.2

1,778.8

1,740.7

609.8

697.4

Gross Profit

681.0

%

33.5%

34.3%

39.1%

287.6

Operating Profit

222.8

331.1

13.8%

12.5%

19.0%

%

178.2

Net Income

139.2

207.5

11.9%

7.8%

%

8.0%

354.5

EBITDA

280.6

377.5

15.8%

21.7%

%

17.0%

  • Record sales

  • Strongly improved profits

* 2006 excludes one-time provisions


Ma industries ebit improvement leadership

MA Industries EBIT improvement leadership

FY EBIT/Operating Profit Growth (07’ vs. 06’)

  • Dow results include Agricultural Science

  • DuPont sales include Ag & Nutrition (inc, Pioneer)

Source: Phillips McDougall, Companies’ disclosure; MAI analysis


2007 business environment

2007 business environment

  • Strong AgChem demand

    • Supportive agricultural output price levels

    • Increased planted area and rate of application

    • Brazil recovering from 2006 to record levels

  • Increasing raw material prices

    • Oil price reaching record-highs, affecting intermediate prices, energy, transportation

    • Suppliers experiencing increased demand, lower Chinese export subsidies, appreciating labor costs and local currencies

  • Beginning of AgChem product price increases

    • Implemented as of Q4, for the first time in many years

  • Overall supportive currency environment

    • Euro appreciation has overall positive input

    • Other currencies such as Real, Shekel, Yuan offsetting some of positive Euro Effect


Change plan new organizational structure in place

Change plan: new organizational structure in place

  • Global leadership empowered

    • Regional managers made part of Global Leadership Group

    • Regional P&L established; Operating profit (not only sales) targets set for the first time; Pricing responsibility delegated

    • Full transparency of profitability system

  • Corporate functions integrated

    • New operational HQ created in Airport City

    • Significant 3-way duplications removed: unified Sales, Product Development, Purchasing, Finance and IT departments

  • Israel plant operations integrated

    • Unified management, for both Agan and MCW production sites

    • Duplications removed at executive level

    • New collective employment agreements signed and voluntary retirement schemes underway


  • Change plan continued

    Change plan: continued

    • Product portfolio being replenished

      • Unified product development division created

      • Work launched to enhance portfolio

    • Critical functions established

      • Supply Chain: group-wide supply chain created to maximize and economies of scale

      • Talent Management: newly appointed head deploying performance-based global talent compensation program

      • Legal Department: created to centralize and streamline legal services

    • Management compensation based on Key Performance Indicators

      • 2008 budget broken down by manager responsibility rather than legal structures

      • Underpinned by improved data systems: products’ profitability system, purchase monitoring module


    Effectiveness and efficiency improvement targets as presented in march 2007

    Effectiveness and efficiency improvement targets as presented in March 2007

    • In 2006 key profitability margins declined ~5 percentage points vs. last years

    • Efficiency plan to recapture some of lost ground and bring our margins in line with sector leaders

    • Fully phased effect by 2009, with most part achieved by YE 2008

    2002

    2003

    2004

    2005

    2006

    223

    289

    Operating Profit

    212

    330

    139

    13%

    19%

    18%

    19%

    16%

    %

    281

    324

    EBITDA

    244

    378

    173

    16%

    21%

    21%

    22%

    19%

    %

    2006 data excludes one-time provisions


    Effectiveness and efficiency improvement execution

    Effectiveness and efficiency improvement execution

    2006*

    2007

    609.8

    697.4

    Gross Profit

    %

    34.3%

    33.5%

    Operating Profit

    222.8

    287.6

    12.5%

    13.8%

    %

    354.9

    280.6

    EBITDA

    %

    17.1%

    15.8%

    Despite slight decline of gross margin, cost reduction/containment and robust demand result in improved operating margins

    • Progress ahead of 2007 targets

    • Cost savings derived from reduction of purchasing spend, increased throughput and reduced labor costs

    • Cost saving in purchasing spend mitigated by increase in raw material prices

    • Continuing cost saving efforts include, according to plan, alternative energy sources, supply chain improvements, overhead and production efficiencies

    * 2006 excludes one-time provisions


    Dividend and share buyback program

    Dividend and share buyback program

    • Board has approved $120m dividend

    • Launching share buyback program of up to $100m

      • Underpinned by continued strong collection and cash flow generation

      • Listing 2006 bonds for trading, while reducing coupon by 25bps; shelf registration for future capital raising

      • Robust balance sheet continues to support performance


    External factors to watch into the year

    External factors to watch into the year

    Current

    status

    • Competitors expected sales’ growth and selling prices

    • Farm output prices (agricultural commodities and other)

    • Cost of other farm inputs (energy, seeds, fertilizers)

    • Energy as it affects our cost of raw materials, production and logistics

    • Euro/$ rates (especially in Q1, Q2)

    • Brazilian farmer situation (esp. in Q3, Q4)

    • and, of course, the weather…

    ~

    ~


    Makhteshim agan industries

    www.ma-industries.com

    For additional information please contact Ron Zakai:

    E-mail: [email protected]

    Office: 972-7-32321910Cell: 972-52-7310002


    Demand driven agricultural economics support continued growth

    Demand-driven agricultural economics support continued growth

    • Declining stock-to-use ratio despite increased supply: acreage, yield

    Source: USDA


    Resulting upward trend in soft commodity prices

    Resulting upward trend in soft-commodity prices

    All Crops Price Index 1997 - Present

    • Improved farm economics more than offset higher input costs

    Source: USDA


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