ADAMA in the first quarter: sales grew again, but cash tightened too

Company Overview

ADAMA opened 2026 with sales growth back on the page, but this was not a clean inflection quarter. Sales rose 8.4% to $950 million, mainly on a 7% volume increase and new product launches, while prices declined 4% and adjusted EBITDA fell to $120 million. This is the first quarter in which the transition from a cost-reduction year to a growth year starts to show up in the numbers, and the numbers are still mixed.

ADAMA is a global crop protection platform. Crop protection generated 96% of first-quarter sales, while intermediates, ingredients and other chemicals made up only 4%. The economics are driven by volume, active ingredient pricing, manufacturing efficiency, customer credit and inventory. This is not a single blockbuster molecule story. It is a broad geographic, registration, formulation, production and distribution business.

The part that is working now is demand by volume. Europe, Africa and the Middle East, and North America, delivered solid growth, and the company kept adjusted gross margin at 30.2% despite lower prices. The bottleneck is growth quality: higher sales did not flow through to EBITDA, adjusted operating expenses rose, and operating cash flow was negative by $166 million. The quarter shows that customers are buying more, but it still does not prove that every additional sales dollar is staying long enough in profit and cash.

For the local Israeli investor, the screen is different from a normal listed-equity story. ADAMA is 100% held by ADAMA Ltd, and the Israeli angle is mostly credit quality, bonds, liquidity and reliance on group financing. The practical question is not an equity multiple. It is whether profitability and cash flow are strong enough to reduce economic debt and keep a comfortable margin of safety even if market pricing remains weak.

The previous annual analysis framed 2026 around a simple test: return to growth without giving up margins, and translate operating improvement into real debt reduction. The first quarter closes only the first half of that sentence. Growth returned, but with lower prices, weaker adjusted EBITDA and a deeper seasonal cash outflow than in the comparable quarter.

Events And Triggers

The first quarter puts ADAMA back in a position where growth can be discussed, but it also shows what that growth is costing. The company is selling more, launching products and seeing better demand in several markets. At the same time, active ingredient prices remain low, industry overcapacity has not disappeared, and farmers are still buying cautiously.

The first trigger: volume returned. Sales rose by $73 million versus the comparable quarter, with volume contributing $66 million and positive currency effects adding $43 million. Lower prices reduced sales by $35 million. That split matters because it separates demand recovery from pricing power. Demand improved, pricing power has not.

The second trigger: Europe, Africa and the Middle East, and North America, drove the quarter. Sales in Europe, Africa and the Middle East rose to $405 million, up 14.2% in dollars and 5.2% in constant currency. North America rose to $236 million, up 9.4% in dollars and 8.8% in constant currency. These two regions hold the positive side of the quarter. Latin America, by contrast, declined to $144 million, mainly because of lower pricing against weak farmer profitability and high competition.

The third trigger: the sale of an Israeli logistics center boosted reported profit, but not recurring profitability. A subsidiary sold a logistics center in Israel for total consideration of about $49 million and recognized a capital gain of about $36.5 million. The asset is leased back for the first two years after closing. This brings in cash and improves the reported quarter, but it is not a substitute for stronger adjusted EBITDA.

The fourth trigger: the Neot Hovav damage appears limited, but it reminds investors why the production chain matters. In late March and early April 2026, the Neot Hovav site suffered limited and localized damage from falling debris after missile interceptions in southern Israel. The core production facilities were not meaningfully damaged, and the direct impact was mainly limited to a finished goods warehouse, ancillary equipment and systems, and an open storage area. The site mostly returned to normal operations, and the company expects the overall impact to be immaterial. That removes part of a short-term operating concern, but it does not change the core economic test.

The fifth trigger: management is already talking about the next stage after Fight Forward. The emphasis is moving from a stronger cost base to profitable top-line growth, better business quality, commercial capabilities, differentiated innovation and a tighter, more competitive production and supply network. That is an important shift in tone: less defense through cost cutting, more need to prove that the company can grow without eroding profitability.

Efficiency, Profitability And Competition

The growth itself is not weak. The problem is that it is not profitable enough yet. If sales rise 8.4% and adjusted EBITDA falls 5%, the company paid for part of that growth through expenses, mix or market terms. That is the number that stops the quarter from fully confirming the turnaround that started in 2025.

Gross margin held, EBITDA did not

Adjusted gross profit rose to $287 million from $265 million, and adjusted gross margin stayed at 30.2%. On the surface, that is a good result: the company absorbed price declines and cost increases while keeping the gross margin stable. The explanation is a combination of higher volume, favorable currency effects and better business quality.

But adjusted EBITDA fell to $120 million from $127 million. The margin declined to 12.7% from 14.5%. Management attributes this to higher operating expenses, including currency, salaries, logistics and expenses supporting sales growth. The company sold more, but had to spend more to do it.

Reported profit looks stronger than the recurring base

Reported net income jumped to $76.5 million from $9.1 million. Adjusted net income rose to $52.4 million from $29.2 million. This looks like a strong improvement, but it needs to be split into three layers: genuine improvement in financing costs, a capital gain from an asset sale, and accounting tax income.

Net financing expenses declined to $42.9 million from $52.2 million. The decrease mainly reflected favorable CPI and a better debt structure, despite higher FX hedging costs. That is a real positive side, and it continues the move that began with the bond buyback in 2025.

On the other hand, reported profit benefited from the $36.5 million capital gain on the logistics center sale and from tax income of $21.9 million. In a quarter like this, reported profit says less about recurring earnings power and more about a combination of a one-off transaction, tax accounting and financing improvement. That is the interesting reversal versus the 2025 adjusted-profit analysis: then, adjustments turned a reported loss into a small adjusted profit. This quarter, adjustments reduce reported profit to a lower adjusted base.

Competition is still coming through price

The crop protection market remains difficult. Channel inventories have largely returned to pre-pandemic norms, but active ingredient overcapacity continues to pressure prices. Crop commodity prices have stabilized at relatively low levels, and farmer profitability remains under pressure. That is why just-in-time purchasing still appears even as volumes recover.

This explains how ADAMA can deliver more volume and still lower adjusted EBITDA. In this industry, volume recovery is not enough if price remains weak, selling expenses rise and competition in commoditized products stays intense. The competitive test over the next few quarters is whether launches and differentiated products can protect margins if currency and volume contribution are not enough to absorb price and cost pressure.

Cash Flow, Debt And Capital Structure

The first-quarter cash picture needs careful framing. This is a seasonal quarter, and ADAMA normally consumes cash because of collection timing. So the quarter alone does not prove that annual cash generation has broken. But the depth of the outflow still matters: operating cash flow was negative by $166 million, compared with a $55 million outflow in the comparable quarter.

The right lens here is all-in cash flexibility, meaning how much cash remains after the quarter's actual operating, investing, financing, lease and debt movements. This is not normalized cash generation for the existing business, because the quarter includes seasonality, an asset sale and financing movements. That is exactly why it matters for balance-sheet pressure.

Working capital grew again

Trade working capital was $2.006 billion at the end of March, compared with $1.985 billion a year earlier. The increase came from higher receivables, reflecting sales growth, and higher inventory, which was built to capture market opportunities and support business continuity during the merger of Israeli entities. Higher payables, driven by procurement, partially offset the increase.

That is a yellow flag, not a failure. A strong first sales quarter almost always requires credit and inventory, especially in a seasonal sector. Still, after the 2025 receivables analysis, the question did not disappear. If sales growth requires more receivables, more inventory and more short-term funding, the quality of growth is weaker than the 8.4% top-line headline suggests.

The asset sale softened cash consumption

Operations consumed $166 million, but investing activities generated $26 million, mainly because proceeds from disposals of fixed and intangible assets reached $50.4 million. Fixed-asset investments were $19.2 million, and additions to intangible assets were $15.7 million. Without the logistics center sale, free cash flow would have looked weaker.

Financing activities generated $101 million net. The main support came from a $71 million increase in short-term liabilities to banks and others and $55 million of proceeds from hedging transactions on the debentures, offset by loan repayments, lease payments and a dividend to holders of non-controlling interests. Cash declined from $423 million to $385 million by quarter-end.

Covenants are far away, but debt is shorter

Total financial liabilities rose to $2.184 billion at the end of March from $2.118 billion at the end of 2025. This included $395 million of short-term bank credit and commercial paper, $490 million of short-term related-party loans, $187 million of long-term bank loans, $340 million of long-term related-party loans and $771 million of debentures.

The more concerning number is not the absolute debt, but the shift in tenor. Short-term debt represented 64.2% of financial liabilities at the end of the quarter, compared with 39.3% a year earlier. At the same time, cash and short-term investments declined to $396 million. The current ratio was 1.13, and the quick ratio was 0.64. These are not distress figures, but they show that the company is entering its proof year with limited operating room.

Against that, financial covenants remain comfortable. Net debt to equity was 0.6 versus a ceiling of 1.25, net debt to EBITDA was 2.1 versus a ceiling of 4, equity was $1.731 billion versus a $1.22 billion floor, and retained earnings were $1.339 billion versus a $700 million threshold. This is also where the point from the previous debt analysis still matters: covenant leverage excludes securitization and SG loans, so it cannot replace a full view of economic debt.

Outlook

Four findings should lead the next read of ADAMA.

• Growth returned through volume, not price. That is enough to lift sales, but not enough to prove that the industry is fully healthy again.
• Gross margin held, but adjusted EBITDA declined. If sales-supporting costs do not start to normalize, sales growth will remain less convincing.
• First-quarter cash outflow is seasonal, but deeper than a year earlier. The next quarters need to show stronger collections, not only more sales.
• Reported profit benefited from a capital gain and tax income, while short-term debt rose. The quarter therefore looks stronger in net income than in cash.

The 2026 year for ADAMA is a profitable-growth proof year. In 2025, the company proved it could cut costs, improve margins and generate more cash before pricing power returned. In the first quarter of 2026, it proved that volume can return. Now it needs to show that those volumes translate into higher EBITDA, better collections and lower economic debt.

Management is pointing to stronger commercial capabilities, differentiated innovation, portfolio quality and a tighter production and supply network. The strategic message makes sense, but the first quarter shows the friction: more sales require more selling expense, compensation, logistics and working capital. Growth becomes high quality only if it starts improving operating margin, not just revenue.

In the short term, the market is likely to watch three points. The first is pricing: whether the 4% price decline moderates or continues to eat into the volume benefit. The second is cash flow: whether the next quarters recover the cash consumed in Q1. The third is debt: whether the increase in short-term debt is only seasonal or the beginning of greater reliance on short-term funding and credit lines.

There is also room for a positive surprise. If Europe and North America keep growing, Latin America stabilizes, and sales-supporting expenses start falling as a percentage of sales, the first quarter will look like a transition step toward broader improvement. But if adjusted EBITDA keeps falling despite top-line growth, the market may read 2026 as a year in which the company is buying volume at the cost of profitability and cash.

Risks

The first risk is pricing. Active ingredient overcapacity and low raw-material prices continue to pressure market prices. Farmers are still operating under limited profitability, and crop commodity prices remain sensitive to geopolitical events. In that environment, volume recovery can remain limited in its profit contribution.

The second risk is that growth-supporting expenses stay high. In the first quarter, compensation, logistics, currency and selling expenses supported higher revenue, but lowered the adjusted EBITDA margin. If that repeats in the next quarters, sales improvement will look less like operating leverage and more like expensive commercial effort.

The third risk is working capital. Inventory and receivables are natural for a seasonal crop protection company, but they are also the route through which growth can consume cash. A $166 million operating cash outflow in the quarter is not a problem by itself if it reverses later in the year. It becomes a problem if collections are delayed, prices keep falling, or inventory built to capture market opportunities stays on the balance sheet too long.

The fourth risk is the funding structure. Covenants are far from breach, and the company has unused committed credit lines of about $462 million from banks and $260 million from related parties. Still, short-term debt is high, and related-party loans remain a major layer in the capital structure. Group support is an advantage, but it is also a dependency.

The fifth risk is that reported net income creates confidence too early. Reported net income of $76.5 million looks strong, but it includes a capital gain from an asset sale and accounting tax income. Adjusted profit is more useful for recurring performance, and even that benefited from lower financing expenses while adjusted EBITDA declined.

Finally, two external risks are not central in the numbers right now, but could change the interpretation quickly. The first is operating damage in Israel, which the company currently expects to be immaterial after the Neot Hovav events. The second is global tariff policy, for which management established a dedicated task force. Management expects the impact on operations and results to remain immaterial, but the need for a task force shows the risk is not purely theoretical.

Conclusions

The first quarter for ADAMA is better in sales than in cash quality. The company returned to growth, held gross margin, reduced financing expenses and reported higher net income. On the other hand, adjusted EBITDA declined, free cash flow was more negative than a year earlier, and short-term debt became a larger part of the funding structure.

ADAMA proved that demand is returning, but not yet that this growth produces enough profit and cash.

The change versus the prior view is clear. In 2025, most of the improvement came from efficiency, cheaper inventory and working-capital management. In the first quarter of 2026, top-line growth has already returned, but it arrived with lower prices, weaker adjusted EBITDA and heavier seasonal cash consumption. One follow-up test is partly closed, and the quality-of-growth test is now sharper.

The counter-thesis deserves attention. The first quarter is seasonal, negative cash flow is not unusual by itself, the asset sale strengthened liquidity, and covenants are far from breach. If the next quarters bring better collections, pricing stabilization and more moderate operating expenses, the first quarter will look like a reasonable transition cost on the path to more profitable growth.

What will change the market's interpretation in the short to medium term is a combination of three figures: adjusted EBITDA returning to growth, operating cash flow offsetting Q1 consumption, and short-term debt and economic debt declining or at least stabilizing. Without that, sales growth alone will not be enough.

Why this matters: in a leveraged crop protection company, growth that does not improve EBITDA and cash flow expands the balance sheet before it improves business quality. Over the next 2 to 4 quarters, ADAMA needs to show that higher volume was not bought at the cost of margins, receivables and short-term funding. That would support the view that 2025 was the starting point for a deeper improvement. Continued adjusted EBITDA decline or heavy cash consumption would turn 2026 from a proof year into a year in which the market rechecks the quality of growth.