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Makhteshim Agan Industries
2
Agenda
•Overview of 2007 results
•2007 business environment
•Change and efficiency plan update
3
Strong 2007 growth achieved by most players led by MA Industries
20.2%
16.8%16.2%
14.2%13.2%
11.2% 11.1% 10.8%
0.5%
8.6%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
MAI
Mon
sant
oFM
C
Synge
nta
Chemtu
raDow
BASF
Bayer
DuPont
Isag
ro
~12% Average growth of leading AgChem players (published thus far)
Source: Phillips McDougall, Companies’ disclosure; MAI analysis
• MAI Agro sales only
• Dow results include Agricultural Science
• DuPont sales include Ag & Nutrition (inc, Pioneer)
FY Sales’ growth (07’ vs. 06’)
4
2007 results’ overview
Sales
Gross Profit
%
Operating Profit
%
Net Income
%
EBITDA
%
20052006*
2,081.2
697.4
33.5%
287.6
13.8%
178.2
8.0%
354.5
17.0%
2007
1,740.7
681.0
39.1%
331.1
19.0%
207.5
11.9%
377.5
21.7%
1,778.8
609.8
34.3%
* 2006 excludes one-time provisions
222.8
12.5%
139.2
7.8%
280.6
15.8%
Record sales
Strongly improved profits
5
MA Industries EBIT improvement leadership
FY EBIT/Operating Profit Growth (07’ vs. 06’)38.1%
23.3%
33.3%
26.8%
12.5%
19.3%
22.5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
FMC
MAI
Synge
nta
DuPont
Bayer
BASFDow
•Dow results include Agricultural Science
•DuPont sales include Ag & Nutrition (inc, Pioneer)
Source: Phillips McDougall, Companies’ disclosure; MAI analysis
6
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
7
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
8
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
9
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
Operating Profit
%
EBITDA
%
212
18%
244
21%
2003
330
19%
378
22%
2005
289
19%
324
21%
2004
139
16%
173
19%
2002
223
13%
281
16%
2006
2006 data excludes one-time provisions
10
Effectiveness and efficiency improvement execution
2006*2007
Gross Profit
%
Operating Profit
%
287.6
13.8%
222.8
12.5%
697.4
33.5%
609.8
34.3%
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
EBITDA
%
354.9 280.6
17.1% 15.8%
* 2006 excludes one-time provisions
11
Dividend and share buyback program
Board has approved $120m dividend
Launching share buyback program of up to $100m
Underpinned by continued strong collection and cash flow generation
Listing 2006 bonds for trading, while reducing coupon by 25bps; shelf registration for future capital raising
Robust balance sheet continues to support performance
12
External factors to watch into the year
Competitors expected sales’ growth and selling prices
Farm output prices (agricultural commodities and other)
Cost of other farm inputs (energy, seeds, fertilizers)
Energy as it affects our cost of raw materials, production and logistics
Euro/$ rates (especially in Q1, Q2)
Brazilian farmer situation (esp. in Q3, Q4)
and, of course, the weather…
Currentstatus
~
~
www.ma-industries.com
For additional information please contact Ron Zakai:
E-mail: [email protected]
Office: 972-7-32321910Cell: 972-52-7310002
14
Demand-driven agricultural economics support continued growth
Declining stock-to-use ratio despite increased supply: acreage, yield
1,600
1,700
1,800
1,900
2,000
2,100
1999
/00
2000
/01
2001
/02
2002
/03
2003
/04
2004
/05
2005
/06
2006
/07
2007
/08E
0%
5%
10%
15%
20%
25%
30%
Global Grains Production Stock To Use
Source: USDA
15
Resulting upward trend in soft-commodity prices
85
95
105
115
125
135
145
155
165
175
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
All Crops Price Index 1997 - Present
Improved farm economics more than offset higher input costs Source: USDA
