Transcript MAI CAN REDUCE COST BY $105M AND INCREASE …

Makhteshim Agan Industries
Agenda
• Overview of 2007 results
• 2007 business environment
• Change and efficiency plan update
1
Strong 2007 growth achieved by most players led by MA Industries
FY Sales’ growth (07’ vs. 06’)
25.0%
20.2%
~12% Average
growth of leading
AgChem players
(published thus far)
20.0%
16.8%
16.2%
14.2%
15.0%
13.2%
11.2%
11.1%
10.8%
10.0%
8.6%
5.0%
0.5%
•
•
•
Source: Phillips McDougall, Companies’ disclosure; MAI analysis
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MAI Agro sales only
Dow results include Agricultural Science
DuPont sales include Ag & Nutrition (inc, Pioneer)
2
2007 results’ overview
2007
2006*
2005
2,081.2
1,778.8
1,740.7
Gross Profit
697.4
609.8
681.0
%
33.5%
34.3%
39.1%
Operating Profit
287.6
222.8
331.1
%
13.8%
12.5%
19.0%
Net Income
178.2
139.2
207.5
%
8.0%
7.8%
11.9%
EBITDA
354.5
280.6
377.5
%
17.0%
15.8%
21.7%
Sales
Record sales
Strongly improved profits
*2006 excludes one-time provisions
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MA Industries EBIT improvement leadership
40%
FY EBIT/Operating Profit Growth (07’ vs. 06’)
38.1%
33.3%
35%
30%
26.8%
23.3%
25%
22.5%
19.3%
20%
15%
12.5%
10%
5%
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0%
•Dow results include Agricultural Science
•DuPont sales include Ag & Nutrition (inc, Pioneer)
Source: Phillips McDougall, Companies’ disclosure; MAI analysis
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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
5
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
6
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
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Effectiveness and efficiency improvement targets as presented in
March 2007
2002
2003
2004
2005
2006
Operating Profit
139
212
289
330
223
%
16%
18%
19%
19%
13%
EBITDA
173
244
324
378
281
%
19%
21%
21%
22%
16%
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
2006 data excludes one-time provisions
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Effectiveness and efficiency improvement execution
2007
2006*
Gross Profit
697.4
609.8
%
33.5%
34.3%
Operating Profit
287.6
222.8
13.8%
12.5%
354.9
280.6
17.1%
15.8%
%
EBITDA
%
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
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Dividend and share buyback program
Board has approved $120m dividend
Launching share buyback program of up to $100m
Underpinned by continued strong collection and cash flow generation
Listing 2006 bonds for trading, while reducing coupon by 25bps;
shelf registration for future capital raising
Robust balance sheet continues to support performance
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External factors to watch into the year
Current
status
Competitors expected sales’ growth and selling prices
Farm output prices (agricultural commodities and other)
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Cost of other farm inputs (energy, seeds, fertilizers)
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Energy as it affects our cost of raw materials, production and logistics
~
Euro/$ rates (especially in Q1, Q2)
Brazilian farmer situation (esp. in Q3, Q4)
and, of course, the weather…
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www.ma-industries.com
For additional information please contact Ron Zakai:
E-mail: [email protected]
Office:
Cell:
972-7-32321910
972-52-7310002
Demand-driven agricultural economics support continued growth
2,100
30%
2,000
25%
20%
1,900
1,700
5%
1,600
0%
19
99
/0
20 0
00
/0
20 1
01
/0
20 2
02
/0
20 3
03
/0
20 4
04
/0
20 5
05
/0
20 6
06
20 /07
07
/0
8E
1,800
15%
10%
Global Grains Production
Stock To Use
 Declining stock-to-use ratio despite increased supply: acreage, yield
Source: USDA
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Resulting upward trend in soft-commodity prices
All Crops Price Index 1997 - Present
175
165
155
145
135
125
115
105
95
85
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Improved farm economics more than offset higher input costs
Source: USDA
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