Makhteshim Agan Industries Ltd. (TASE: MAIN) today published good results for the first quarter of 2011, after reporting hundreds of millions of shekels in losses for the two preceding quarters. Sales by the agrochemicals company, controlled by Nochi Dankner-controlled IDB Holding Corp. Ltd. (TASE:IDBH) unit Koor Industries Ltd. (TASE:KOR), rose 8% and net profit rose 29.3%.
The financial report is one of the last the company will publish before it will become a private company. In October, Dankner signed the agreement to sell the company to China National Agrochemical Corporation (ChemChina), which will acquire 60% of Makhteshim at a company value of $2.4 billion. Koor will own the remaining 40%.
Makhteshim CEO Erez Vigodman told "Globes", "First quarter trends were positive. The growing season in Europe is starting well, and even earlier than usual. The weather was also good. The financial crisis in Europe did not affect farmers, and prices for food commodities are high and even boosting profits, which drives demand for our products. However, this is not reflected in higher prices."
Makhteshim's revenue rose 8% to $780.5 million for the first quarter from $723.1 million for the corresponding quarter. During the fourth quarter of 2010, Makhteshim acquired two companies, one in Mexico and the other in South Korea, and their results are included for the first time in the first quarter financial report. The two companies contributed an estimated $20 million to Makhteshim's revenue.
Even as Makhteshim reported steady growth in sales from year to year, its gross profit fell. Gross profit margin narrowed by half a percentage point in the first quarter to 32.7% of sales. "In the past year, we took major steps to optimize production plants and processes in Israel and in Brazil, in order to improve our production cost structure, which we've set as primary importance," Vigodman said.
Net profit rose $92.7 million for the first quarter from $70.1 million for the corresponding quarter. Cash flow from operations rose to $19.4 million for the first quarter from $8.4 million for the corresponding quarter.
Bank Hapoalim analyst Yaron Friedman said, "It seems that Makhteshim's restructuring plan last year is beginning to achieve results, albeit premature to rely on just one quarter to say whether this is a sustainable turnaround." He added, "The importance of the business results is less important at this point in time, and the company's share is much more affected by developments related to its sale."
After initial gains, Makhteshim's share price fell 0.2% to NIS 19.07, giving a market cap of NIS 8.3 billion.
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