安道麦A(000553)_公司公告_安道麦B：关于开展衍生品套期保值业务的可行性分析报告(英文版)_公司公告

安道麦B：关于开展衍生品套期保值业务的可行性分析报告(英文版)（下载公告）
公告日期:2025-03-14
Transactions I. Background of Derivatives HedgingADAMA Ltd. and its subsidiaries (hereinafter combined as “the Company”) conduct crop protectionbusiness in dozens of countries. In many countries, the business is settled in local currencies whilethe relevant local subsidiaries are nominated in USD. In addition, one of the Company’s majorsubsidiaries issued corporate bonds denominated in Israeli Shekel and linked to Israeli ConsumerPrice Index (CPI). Given the global nature of its operational activities and the composition of itsassets and liabilities, the Company, in the ordinary course of its business, is expected to usederivatives to hedge exposures related to foreign exchange rates and CPI.II. Overview of Derivatives HedgingThe derivatives transactions of the Company are for the purpose of hedging only and will match thesize and term of the accounting exposure and economic exposure of the Company. All the Company’shedging transactions are expected to be through banks in certain countries where the Company ispresent. The hedging tools include (inter alia) Forwards, Swaps, Loans and Deposits, Options, ExoticOptions, and Options Strategies (including sell and buys). The Company expects that the maximumoutstanding contract value of derivatives transactions on any single trading day from its approval atthe 2024 Annual Shareholder Meeting till the next annual shareholder meeting (validity duration)should not exceed USD 5 billion. The transaction limits shall be valid and can be recycled within thevalidity duration.III. Necessity and Feasibility of Derivatives HedgingAs the Company’s business covers dozens of countries and is settled in local currencies in manycountries, volatility of foreign exchange rates and CPI, being affected by international political andeconomic environments, can have big impacts on the Company's business performance. The hedgingbusiness is expected to effectively offset the risks caused by exchange rate and CPI fluctuations andthus help to strengthen the Company’s financial stableness. Therefore, it is necessary to conductderivative hedging transactions. The hedging transactions are based on the Company’s ordinary course of business and match the sizeand term of the accounting exposure and economic exposure of the Company. The Company hasformulated the Derivatives Hedging Management Policy as the internal control system. The Policyspecified decision-making authority and procedures, operative organizations, reporting mechanismsand monitoring measures. The Company has professional teams for conducting the transactions andmonitoring risks. The Company has the funding and risk resistance capabilities aligned with hedgingtransactions.IV. Risk Analysis for Derivatives Hedging Transactions 1. Market risks: The current domestic and international political and economic situation, which hasbeen complicated and volatile with ongoing geopolitical conflicts escalating, may cause drasticfluctuations in exchange rates and consumer price index and result in significant increase in theCompany's hedging costs and consequently, potential losses. 2. Credit risks of default by customers: the Company’s sales to customers worldwide usuallyinvolve customer credit as is customary in each market. A portion of these credit lines is insured,while the remainder are exposed to risk, particularly during economic slowdowns in the relevantmarkets. Any overdue accounts receivable from customers, or failure of money collection within theforecasted payback period may affect the Company's cash flow and result in the actual cash flowincurred not being able to fully match the term or amount of the foreign exchange derivatives businessthat has been operated. 3. Liquidity risks: as the derivatives transactions are carried out with banks based on the Companyand its relevant subsidiaries’ collection and payment in foreign currency as well as assets andliabilities in local and foreign currencies. Such transactions do not take up the available funds, butthere is the risk of having to pay spreads to the banks due to losses on closing out and chopping downpositions for various reasons. 4. Risks of contract fulfillment: The counterparties of the Company's futures and derivatives tradingare banks with good credit and long-term business relationship, so the occurrence of such risk isrelatively low. 5. Legal risks: Changes to relevant laws or violation of relevant laws by the counterparties mayresult in improper execution of contracts and bring losses to the Company.V. Risk Control Measures 1. The Company has formulated the Derivatives Hedging Management Policy as the internal control system for managing foreign exchange and index risk hedging, which clearly stipulates theprinciples, approval authority, operating institutions and processes as well as risk control proceduresof the derivatives trading, to ensure a comprehensive supervision over each link from pre-emptiveprevention, in-process monitoring to post-processing. 2. The Company conducts derivatives trading with large domestic and overseas commercial bankswith compliant qualifications and good credibility, strictly follows the laws and regulations in therelevant fields in each country to avoid possible legal risks and fully takes into account settlement,liquidity and FX volatility related to the transactions. 3. The Company and its relevant subsidiaries follow up and evaluate their derivatives portfolio andtransactions in a timely manner through weekly, monthly and quarterly meetings; any significantchange in the market or significant floating losses, whenever it occurs, will be timely reported to theCompany's management team and the Board of Directors as appropriate, so as to activate acontingency mechanism to respond and handle the situation appropriately. 4. Conducting transactions shall be based, among other things, on an external expert (or othersystem) theoretical pricing and/or banks/brokers quotes, as the case may be. 5. The financial department shall keep the records and documentation with respect to the processand transactions. 6. The internal audit department of the Company is the supervisory institution for its derivativestransactions and is responsible for monitoring and checking the compliance of both the Company andits subsidiaries in the decision-making, management and execution of relevant transactions.VI. Conclusion of the Feasibility Study of Derivatives Hedging TransactionsThe Company has formulated the Derivatives Hedging Management Policy as the internal controlsystem for managing foreign exchange and index risk hedging. The hedging transactions are closelyrelated to the Company’s ordinary course of business and will match the size and term of theaccounting exposure and economic exposure of the Company. They are expected to enhance theCompany's financial soundness and reduce the adverse impact of foreign exchange rate and indexfluctuations on the Company's operating results. Therefore, the expected derivatives hedgingtransactions are necessary and feasible. ADAMA Ltd.March 12 th, 2025
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Transactions

I. Background of Derivatives HedgingADAMA Ltd. and its subsidiaries (hereinafter combined as “the Company”) conduct crop protectionbusiness in dozens of countries. In many countries, the business is settled in local currencies whilethe relevant local subsidiaries are nominated in USD. In addition, one of the Company’s majorsubsidiaries issued corporate bonds denominated in Israeli Shekel and linked to Israeli ConsumerPrice Index (CPI). Given the global nature of its operational activities and the composition of itsassets and liabilities, the Company, in the ordinary course of its business, is expected to usederivatives to hedge exposures related to foreign exchange rates and CPI.II. Overview of Derivatives HedgingThe derivatives transactions of the Company are for the purpose of hedging only and will match thesize and term of the accounting exposure and economic exposure of the Company. All the Company’shedging transactions are expected to be through banks in certain countries where the Company ispresent. The hedging tools include (inter alia) Forwards, Swaps, Loans and Deposits, Options, ExoticOptions, and Options Strategies (including sell and buys). The Company expects that the maximumoutstanding contract value of derivatives transactions on any single trading day from its approval atthe 2024 Annual Shareholder Meeting till the next annual shareholder meeting (validity duration)should not exceed USD 5 billion. The transaction limits shall be valid and can be recycled within thevalidity duration.III. Necessity and Feasibility of Derivatives HedgingAs the Company’s business covers dozens of countries and is settled in local currencies in manycountries, volatility of foreign exchange rates and CPI, being affected by international political andeconomic environments, can have big impacts on the Company's business performance. The hedgingbusiness is expected to effectively offset the risks caused by exchange rate and CPI fluctuations andthus help to strengthen the Company’s financial stableness. Therefore, it is necessary to conductderivative hedging transactions.

The hedging transactions are based on the Company’s ordinary course of business and match the sizeand term of the accounting exposure and economic exposure of the Company. The Company hasformulated the Derivatives Hedging Management Policy as the internal control system. The Policyspecified decision-making authority and procedures, operative organizations, reporting mechanismsand monitoring measures. The Company has professional teams for conducting the transactions andmonitoring risks. The Company has the funding and risk resistance capabilities aligned with hedgingtransactions.IV. Risk Analysis for Derivatives Hedging Transactions

1. Market risks: The current domestic and international political and economic situation, which hasbeen complicated and volatile with ongoing geopolitical conflicts escalating, may cause drasticfluctuations in exchange rates and consumer price index and result in significant increase in theCompany's hedging costs and consequently, potential losses.

2. Credit risks of default by customers: the Company’s sales to customers worldwide usuallyinvolve customer credit as is customary in each market. A portion of these credit lines is insured,while the remainder are exposed to risk, particularly during economic slowdowns in the relevantmarkets. Any overdue accounts receivable from customers, or failure of money collection within theforecasted payback period may affect the Company's cash flow and result in the actual cash flowincurred not being able to fully match the term or amount of the foreign exchange derivatives businessthat has been operated.

3. Liquidity risks: as the derivatives transactions are carried out with banks based on the Companyand its relevant subsidiaries’ collection and payment in foreign currency as well as assets andliabilities in local and foreign currencies. Such transactions do not take up the available funds, butthere is the risk of having to pay spreads to the banks due to losses on closing out and chopping downpositions for various reasons.

4. Risks of contract fulfillment: The counterparties of the Company's futures and derivatives tradingare banks with good credit and long-term business relationship, so the occurrence of such risk isrelatively low.

5. Legal risks: Changes to relevant laws or violation of relevant laws by the counterparties mayresult in improper execution of contracts and bring losses to the Company.V. Risk Control Measures

1. The Company has formulated the Derivatives Hedging Management Policy as the internal

control system for managing foreign exchange and index risk hedging, which clearly stipulates theprinciples, approval authority, operating institutions and processes as well as risk control proceduresof the derivatives trading, to ensure a comprehensive supervision over each link from pre-emptiveprevention, in-process monitoring to post-processing.

2. The Company conducts derivatives trading with large domestic and overseas commercial bankswith compliant qualifications and good credibility, strictly follows the laws and regulations in therelevant fields in each country to avoid possible legal risks and fully takes into account settlement,liquidity and FX volatility related to the transactions.

3. The Company and its relevant subsidiaries follow up and evaluate their derivatives portfolio andtransactions in a timely manner through weekly, monthly and quarterly meetings; any significantchange in the market or significant floating losses, whenever it occurs, will be timely reported to theCompany's management team and the Board of Directors as appropriate, so as to activate acontingency mechanism to respond and handle the situation appropriately.

4. Conducting transactions shall be based, among other things, on an external expert (or othersystem) theoretical pricing and/or banks/brokers quotes, as the case may be.

5. The financial department shall keep the records and documentation with respect to the processand transactions.

6. The internal audit department of the Company is the supervisory institution for its derivativestransactions and is responsible for monitoring and checking the compliance of both the Company andits subsidiaries in the decision-making, management and execution of relevant transactions.VI. Conclusion of the Feasibility Study of Derivatives Hedging TransactionsThe Company has formulated the Derivatives Hedging Management Policy as the internal controlsystem for managing foreign exchange and index risk hedging. The hedging transactions are closelyrelated to the Company’s ordinary course of business and will match the size and term of theaccounting exposure and economic exposure of the Company. They are expected to enhance theCompany's financial soundness and reduce the adverse impact of foreign exchange rate and indexfluctuations on the Company's operating results. Therefore, the expected derivatives hedgingtransactions are necessary and feasible.

ADAMA Ltd.March 12

th, 2025

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