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AgroFresh Solutions reports results for second Quarter and First Half of 2019

AgroFresh Solutions, Inc., today announced its financial results for the second quarter and six months ended June 30, 2019.

“Our second quarter marked the conclusion of a strong southern hemisphere season. We were able to generate a 15% increase in net sales for the second quarter, which was positively impacted by the delay in the southern hemisphere harvest that muted our first quarter growth of 1.5%. Net sales were driven by diversification initiatives to expand our Tecnidex platform, which grew 29% during the second quarter versus the prior year period due to targeted expansion into new southern hemisphere markets, and new sales of Harvista following regulatory approvals. We were pleased with the performance of SmartFresh, which experienced slight growth in spite of the smaller apple crop in the southern hemisphere versus the prior year,” commented Jordi Ferre, Chief Executive Officer.

“Looking forward, we will accelerate our cost optimization measures in support of our broader efforts to demonstrate improved financial execution and enhance our ability to reduce debt. Notably, we anticipate a meaningful reduction in our non-recurring expenses, such as those related to litigation, with trial in our largest litigation matter scheduled for October. The resiliency of our business model is only enhanced by the greater diversification of our platform and we intend to leverage our new product pipeline to expand our presence in new and existing markets and drive organic growth.”

Financial Highlights for the Second Quarter of 2019
Net sales for the second quarter of 2019 increased 15%, to $21.2 million, compared to $18.4 million in the second quarter of 2018. Excluding the impact of foreign currency exchange, which reduced revenue by $0.5 million compared to the second quarter of 2018, revenue grew approximately 17%.

Within the Company’s core business, the increase in net sales was primarily driven by growth of Harvista in North America and Latin America, followed by growth of SmartFresh in Latin America due to a delayed harvest which shifted sales from the first quarter to the second. Tecnidex, the Company’s growing fungicides, waxes and coatings platform, realized 29% growth, with an emphasis in Europe. Additionally, the Company also experienced growth in its EthylBloc product and traction within its new FreshCloud analytics platform during the second quarter.

In the second quarter of 2019, gross profit increased 14.4% to $14.9 million compared to $13.0 million in the prior year period. Gross profit margin was 70.3% in the second quarter of 2019 versus 70.7% in the second quarter of 2018. The lower gross margin was primarily a function of sales mix shift with growth of Harvista and Tecnidex during the quarter.
Research and development costs were $3.3 million in the second quarter of 2019, compared to $3.7 million in the prior year period. This decrease was driven primarily by timing of projects.

Selling, general and administrative expenses were $16.1 million in the second quarter of 2019 as compared to $15.6 million in the prior year period. Included in selling, general and administrative expenses were $2.0 million in the current quarter and $0.9 million in the prior year quarter of costs associated with non-recurring items that included M&A and litigation along with severance. Excluding these items, selling general and administrative expenses decreased approximately 3.7% in the second quarter which reflects the Company's ongoing cost optimization initiatives.

Second quarter of 2019 net loss was $22.3 million, compared to net loss of $18.4 million in the prior year period. Excluding the $2.5 million loss on foreign currency exchange in the second quarter of 2019 and the $3.3 million gain in the prior year period, net loss on a year over year basis improved 9% for the second quarter.

Adjusted EBITDA improved $1.9 million to $(1.4) million in the second quarter of 2019 as compared to $(3.3) million in the prior year period. The increase was driven by higher sales coupled with lower operating expenses, after adjusting for non-recurring items.

As of June 30, 2019, cash and cash equivalents were $35.9 million.

Financial Highlights for the First Half of 2019
Net sales for the first half of 2019 were $60.1 million, an increase of 6% versus the prior year period. Foreign currency exchange reduced revenue by $1.1 million for the first half of 2019; excluding this impact, revenue increased approximately 8%.

Gross profit margin was 70.7% for the year-to-date period, which compares to 71.4% in the year-ago period, which was in line with the Company’s expectation. The year over year change was a function of sales mix shift with growth of Harvista and Tecnidex.

Research and development expenses increased $0.4 million to $7.2 million in the first half of 2019 as a result of $0.5 million of severance costs associated with ongoing cost optimization initiatives.

Selling, general and administrative expenses were essentially flat at $32.0 million for the six months ended June 30. There were non-recurring costs associated with M&A, litigation and severance in the amount of $5.2 million in the current year and $3.0 million in the prior year period. Excluding these items, selling general and administrative expenses decreased approximately 7.4% over the same period last year driven by ongoing cost optimization initiatives.

Net loss was $34.9 million in the first half of 2019 as compared to net loss of $31.4 million in the same period prior year, primarily due to changes in foreign currency exchange. There was a negative impact on foreign exchange of $2.9 million in the first half of 2019 versus a gain of $5.2 million on foreign exchange in the prior year period.

Adjusted EBITDA improved by $3.2 million, or 41%, to $11.1 million in the first half of 2019 as compared to the prior year period. The increase was driven by higher sales coupled with lower operating expenses, after adjusting for non-recurring items.

For the full financial results including all statistics, please click here.

For more information:
Jeff Sonnek
AgroFresh Solutions, Inc.
Email: Jeff.Sonnek@icrinc.com 
Tel: +1 646-277-1263


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