Leading global producer of water treatment and filtration solutions Amiad has achieved 93.9% growth in profit before tax according to its interim results for the six months ended 30 June 2017.
In the first half of 2017, the Israel-headquartered company achieved growth in all of its core segments and in most geographies except the US, Singapore, Europe and Brazil.
Total revenue increased 6.2% year-on-year. However, Amiad said that thanks to progress made in 2016 in adjusting the cost structure, maintaining control over expenses and benefiting from its foreign exchange hedging over the period, the firm achieved 93.9% growth in profit before tax.
The company also completed its in-house metal fabrication facility, which is now fully operational and will contribute to improved efficiency during the second half of 2017 onwards. Amiad has continued to invest in R&D in line with its policy and is developing new products, particularly for the Irrigation segment, that will be launched from 2018.
In the US, the company has taken a strategic decision to restructure its Industrial segment sales team and channel partner network to support targeted growth in 2018 and beyond.
Revenues in Europe, the Middle East and Africa (EMEA) grew by 9.7% in aggregate over H1 2016, which was due to weakness in Europe being offset primarily by an increase in Israel but also Turkey.
The growth in Israel was principally across the Irrigation and Industrial segments as well generating sales in the Municipal segment.
In Europe, sales in the Irrigation segment continued to increase slightly as the sales office established in the region continued to build on the success of the previous year. The Municipal segment also experienced growth, however this was offset by sustained weakness in the Industrial and Oil & Gas segments in this region.
In Asia, sales in China and India grew by 22.1%and 15.3% respectively over the same period last year, primarily due to an increase in the Industrial segment. In China, the strengthening economy resulted in an increase in investment, especially in the steel industry that has traditionally been the strongest sector for Amiad in China. In India,the company won a number of large Municipal and Industrial projects that it commenced supplying during the first half of 2017.
However, overall sales in Asia decreased due to a significant reduction in revenues in Singapore as a result of delays in a few major projects that Amiad now expects to complete in the second half of the year.
In Australia, revenues were13.5%higher than the same period of the prior year, primarily due to growth in the Oil & Gas segment. The Irrigation segment also continued to perform well, with sales remaining level with the prior year, while the Industrial and Municipal segments declined slightly.
Revenue for the six months ended 30June2017 increased by 6.2% to $55.7m compared with $52.4m for H1 2016. Gross margin was 39.6% (H1 2016: 39.2%) -the slight improvement was attributed to continued tight cost control and gains from operational efficiencies. However, spending on R&D increased as Amiad invested in sustaining its product innovation to support future sales.
Operating profit increased by 51.0% to $2.8m(H1 2016: $1.9m) and profit before tax increased by 93.9% to $3.2m compared with $1.7m for the same period of the prior year.
Amiad has now concluded an internal review which started following the appointment of Dori Ivzori as its new Chief Executive Officer in Q4 2016 to assess the position of the company and determine the strategy for growth going forward.
The firm’s strategic aim is to be a profitable, growing business generating at least $150m in annual revenue within the next five years – which Amiad would expect to achieve both through organic growth as well as complementary acquisitions.
To achieve this, the company has three strategic areas of focus:
- Irrigation segment: Amiad will strengthen its position in this core segment through internal development and potentially by acquisition to ensure it has the right products and channels to market. The company intends to launch new products targeting this market from 2018.
- North America: The company will invest in all segments, including Irrigation, in the appropriate regions, and develop its offering to target new sectors within its segments. Amiad believes the North America region represents a substantial market opportunity for its products, and will offer a stronger and faster return on its investment than other geographies.
- Ballast water segment: Over the next six months, Amiad will focus on enhancing its offer to this market – which represents a significant opportunity – and gain the requisite certifications and partner approvals. Hoever, if the targets have not been met within this time period, the company will refocus these resources on other markets.
Amiad said it will continue to be active in the non-Irrigation segments, but will concentrate on fewer sectors and territories within its segments to focus its efforts on areas where it can be most successful.
The firm anticipates reporting full year growth for 2017 in line with market expectations. Looking further ahead, with the improvement in its core markets and with its new strategic plan in place, Amiad said it is confident of achieving sustained growth and delivering shareholder value over the medium to long term.
Amiad operates from its headquarters and R&D centre in Israel with nine subsidiaries – Australia, Brazil, China, Europe, India, Mexico, Singapore, UK, USA – and seven international manufacturing centres.
Commenting on the results, Dori Ivzori, Chief Executive Officer of Amiad, said:
“I am pleased to report this set of results that represents an inflection point for Amiad. We achieved sales growth across all of our core segments and saw a substantial increase in profitability thanks to the foundations that we laid last year and continued tight cost control. At the same time, we completed our in-house metal fabrication facility, which is now fully operational and will contribute to improved efficiency in the second half of the year and beyond.
“Looking ahead, we entered the second half of 2017 with a higher backlog than at the same time last year and are receiving increasing customer interest in our products. While we expect to be negatively impacted in the second half from the weakness of the US Dollar against the New Israeli Shekel, there is sufficient demand in the business to compensate for this and, consequently,we anticipate reporting full year growth for 2017 in line with market expectations. As a result, the Board looks to the future with confidence and to delivering shareholder value.”