PR Newswire
TEL AVIV, Israel, Nov. 12, 2020 /PRNewswire/ — ICL (NYSE: ICL) (TASE: ICL), a leading global specialty minerals and specialty chemicals company, today reported its financial results for the third quarter ended September 30, 2020.
Highlights for the Third Quarter of 2020
- Sales of $1.20 billion, unchanged compared to the previous quarter and 9% lower than the third quarter of 2019.
- Implementation of efficiency plans on track, including in the potash and phosphate operations.
- Operating income of $100 million and adjusted operating income of $106 million, a decrease of 50% and 47%, respectively, compared to the third quarter of 2019. Adjusted EBITDA of $226 million, a decrease of 26% compared to the third quarter of 2019.
- Continued strong cash generation, with operating cash flow of $203 million, increasing by $26 million compared to the previous quarter, and free cash flow of $60 million.
- Achieved record nine-month potash production at the Dead Sea, offsetting the impact of the early closure of the Villafruns mine at ICL Iberia.
- Continued focus on growing specialty business reflected in a record $34 million operating income from phosphate specialties, a 13% increase compared to the third quarter of 2019.
- Third consecutive quarter of improved year-over-year results for the Innovative Ag Solutions (IAS) division, driven by strong sales volumes and cost reduction initiatives.
- Strong liquidity position of approximately $1.25 billion, including cash, deposits and unutilized credit facilities.
- Declared a quarterly dividend of $29 million, in line with ICL’s balanced approach to capital allocation.
- As part of the Company’s strategy to grow its crop nutrition businesses organically and through M&A, subsequent to the end of the quarter, ICL agreed to acquire Fertiláqua, a leading Brazilian specialty plant nutrition company, providing ICL a strong foothold in a market where demand growth for specialty plant nutrition products is rapidly increasing.
ICL’s
President
&
CEO,
Raviv
Zoller,
stated “ICL’s ability to execute on strategic priorities is reflected in our consistent delivery of positive results in all operating segments, as well as continuous solid cash generation, while commodity prices remain at cyclically low levels and dislocations persist in many of our end markets. The diversity and breadth of our products, as well as our continued cost efficiency initiatives, partly offset the impact of COVID-19 and lower commodity prices in the third quarter of 2020. Despite these ongoing challenges, we remain focused on important growth initiatives across our segments, as we announced in our recent capital markets day, and are pleased with the progress we are making. ICL’s strong financial position and balanced capital priorities will help us navigate through the current global market challenges and position ICL to execute on timely opportunities, as we have demonstrated with our recently announced agreement to acquire Fertiláqua, one of Brazil’s leading specialty plant nutrition companies. This acquisition will unlock immediate synergies for distribution in Brazil and further expands ICL’s product portfolio with higher margin products, and we intend to continue executing on our specialty businesses’ growth strategy, both organically and inorganically. Although COVID-19 may continue to impact our results in the near term, we are very well-positioned for the future. As conditions begin to normalize, which we expect to occur during 2021, we will see further benefits from our strategic efficiency plans, which were accelerated by COVID-19 and implemented across all of our business segments and will result in annualized savings of about $50 million, driving margin expansion and cash flow generation.”
Results for the third quarter of 2020 were impacted by the COVID-19 pandemic and the resulting decline in industrial activity and crude oil production, as well as continued lower prices of commodity fertilizers, which impacted sales and operating income. Notwithstanding the market environment, ICL maintained profitability in each of its operating segments due to its diverse business mix, the impact of cost efficiency initiatives and ICL’s ongoing focus on increasing its specialties businesses. In the Phosphate Solutions segment, operating income from phosphate specialties increased by 13% compared to the third quarter of 2019, reaching a record level. The recent increase in phosphate commodity market prices and an optimized geographical sales mix, as well as record operating profits from the YPH JV in China, decreased the operating loss from phosphate commodities by $16 million compared to the prior quarter. In the Potash segment, total production from ICL Dead Sea reached a record level for the first nine months of the year, offsetting decreased production from ICL Iberia and positively contributing to the segment’s results. Our Industrial Products segment was impacted by lower sales volumes of bromine-based flame retardants due the impact of COVID-19 on global industrial activity and by lower demand for clear brine fluids due to lower oil and gas drilling activity. Demand in certain end markets, including building and construction and electronics manufacturing began to recover towards the end of the third quarter of 2020. The IAS segment reported its third consecutive quarterly year-over-year increase in operating income, due to higher sales volumes, lower costs of raw materials and the continuous implementation of efficiency and cost reduction initiatives.
Financial Figures and Non-GAAP Financial Measures
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|
|
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|
|
|
|
|
|
|
|
Sales |
|
|
1,325 |
– |
|
|
4,165 |
– |
5,271 |
– |
|
Gross profit |
|
|
472 |
36 |
|
|
1,481 |
36 |
1,817 |
34 |
|
Operating income |
|
|
201 |
15 |
|
|
668 |
16 |
756 |
14 |
|
Adjusted operating |
|
|
201 |
15 |
|
|
672 |
16 |
760 |
14 |
|
Net income (loss) – |
|
|
130 |
10 |
|
|
427 |
10 |
475 |
9 |
|
Adjusted net income – |
|
|
130 |
10 |
|
|
431 |
10 |
479 |
9 |
|
Diluted earnings (loss) per share (in dollars) |
|
|
0.10 |
– |
|
|
0.33 |
– |
0.37 |
– |
|
Diluted adjusted earnings per share (in dollars) (2) |
|
|
0.10 |
– |
|
|
0.34 |
– |
0.37 |
– |
|
Adjusted EBITDA (2) |
|
|
307 |
23 |
|
|
997 |
24 |
1,198 |
23 |
|
Cash flows from operating activities |
|
|
368 |
– |
|
|
780 |
– |
992 |
– |
|
Purchases of property, plant and equipment and intangible assets (3) |
|
|
147 |
– |
|
|
419 |
– |
576 |
– |
|
(1) See “Adjustments to reported operating and net income (Non-GAAP)” below. |
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(2) See “Adjusted EBITDA and Diluted Adjusted Earnings Per Share for the periods of activity” below. |
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(3) See “Condensed consolidated statements of cash flows (unaudited)” to the accompanying financial statements. |
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ConsolidatedResults Analysis
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Total adjustments Q3 2019* |
– |
– |
– |
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|
|
|
|
Quantity |
(50) |
29 |
(21) |
|
|
Price |
(92) |
– |
(92) |
|
|
Exchange rates |
21 |
(21) |
– |
|
|
Raw materials |
– |
18 |
18 |
|
|
Energy |
– |
(2) |
(2) |
|
|
Transportation |
– |
5 |
5 |
|
|
Operating and other expenses |
– |
(3) |
(3) |
|
|
|
|
|
|
|
|
Total adjustments Q3 2020* |
– |
(6) |
(6) |
|
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|
|
* See “Adjustments to reported operating and net income (Non-GAAP)”.
- Quantity – The negative impact on operating income was primarily related to a decrease in the quantities sold of bromine-based industrial solutions, mainly clear brine fluids and elemental bromine, as well as bromine–based flame retardants, mainly due to a decrease in global demand related to the COVID–19 pandemic. This was partly offset by improved potash site mix, as well as higher sales volumes of phosphate fertilizers, specialty fertilizers and dairy proteins.
- Price – The negative impact on operating income was primarily related to a $64 decrease in the average realized price per tonne of potash, compared to the same quarter last year, and a decrease in the selling prices of phosphate commodities products.
- Exchange rates – The appreciation of the average exchange rate of the euro against the dollar, which contributed to revenue more than it increased operational costs and the devaluation of the average exchange rate of the Brazilian real against the dollar, which contributed to operational cost-savings, were fully offset by the appreciation of the average exchange rate of the Israeli shekel, which increased operational costs.
- Raw materials – The positive impact of raw material prices on operating income was primarily related to lower prices of sulphur consumed during the quarter, as well as a decrease in the prices of various raw materials used for products of the Innovative Ag Solutions segment.
- Transportation – The positive impact on operating income was primarily related to a decrease in marine transportation costs.
- Operating and other expenses – The negative impact on operating income was primarily related to higher operating costs, mainly due to decreased production in Spain and costs related to the COVID-19 pandemic.
Financing expenses, net
Net financing expenses in the third quarter of 2020 amounted to $29 million, compared to $32 million in the same quarter last year – a decrease of $3 million, mainly related to lower interest expenses due to our ability to reduce the average interest rate we pay on our debt.
Tax expenses
Tax expenses in the third quarter of 2020 and 2019 amounted to $14 million and $35 million, reflecting an effective tax rate of about 19% and 21%, respectively. The Company’s lower effective tax rate in the current quarter is mainly due to utilization of prior-year tax losses in China.
IMPACT OF COVID-19
In order to manage rapidly evolving conditions related to the COVID-19 pandemic and to enable an immediate response to new and frequently changing health and safety requirements, a special COVID-19 response team was established. Directed by the senior management of the Company, the team is responsible for the constant monitoring of new guidelines and instructions issued by global and local health organizations, daily monitoring of operations across the Company’s facilities, quick implementation of necessary adjustments to our operations, management of internal communications to inform our employees on a regular basis, and support our employees to adapt to this challenging environment.
During the first nine months of 2020, most of our manufacturing facilities in Israel and around the world continued to operate undisturbed and have been deemed to be essential businesses by most of the relevant local government authorities. The emergence of the COVID-19 pandemic had a negative impact on our business performance during the first nine months of the year, as revenues decreased, primarily due to lower demand for some of our Industrial Products segment products such as clear brine fluids, as a result of a significant decline in oil prices and demand, and certain flame retardants, due to lower activity in the automotive and electronics industries. In addition, our operating results were negatively impacted, primarily due to lower production in Europe and other operational costs related to the COVID-19 pandemic. Nevertheless, these were partially mitigated by efficiency initiatives and measures implemented by the Company.
As the ultimate impact of the pandemic on the global economy remains unclear at this stage, we anticipate that it will have a continuing impact on our results for the next few quarters, including but not limited to, affecting our revenues and operating income due to the decline in global demand in the end markets for some of our products, as well as health and safety restrictions and measures affecting our operations.
As of the end of September 2020, the Company had approximately $1.25 billion in cash, deposits and unutilized credit facilities.
Segment Information
Industrial Products
The Industrial Products segment produces bromine out of a highly concentrated solution in the Dead Sea, as well as bromine–based compounds at its facilities in Israel, the Netherlands and China. In addition, the segment produces salts, magnesium chloride, magnesia-based products, phosphorus–based flame retardants and functional fluids.
Segment sales and operating income in the third quarter of 2020 decreased by 20% and 43% year–over-year, respectively, due to lower sales volumes, slightly offset by a positive price contribution. Lower demand for elemental bromine, clear brine fluids and bromine-based flame retardants, resulting from the negative impact of the COVID-19 pandemic on global industrial activity and demand for oil and gas, was partly offset by higher sales volumes of phosphorus–based flame retardants. The moderate recovery in demand for certain flame retardants for the building and construction and electronics industries in the fourth quarter of 2020 could partially mitigate the usual seasonal fourth quarter pattern.
Significant highlights and business environment
- Market prices of elemental bromine in China gradually increased during the third quarter of 2020 to a U.S. dollar 12-month high. The increase was due to a combination of higher resource taxes imposed by the Chinese government, relatively lower bromine production by several producers and a favorable impact of the appreciation of the Chinese yuan against the dollar. The positive pricing momentum has so far continued into the fourth quarter.
- Sales of elemental bromine decreased compared to the third quarter of 2019 due to lower demand as a result of the COVID–19 pandemic.
- Global demand for bromine-based flame retardants softened during the third quarter of 2020, as a result of the COVID-19 pandemic. ICL’s sales of bromine-based flame retardants decreased compared to the third quarter of 2019, mainly due to lower demand for printed circuit boards, electronics and textile. This was partly offset by higher demand, both sequentially and compared to the third quarter of 2019, for bromine-based flame retardants to the building and construction industry.
- The sharp decline in demand for oil and gas for transportation and industry, caused by the COVID–19 pandemic, led to a decline in drilling activities and resulted in a significant decrease in demand and sales of clear brine fluids compared to the third quarter of 2019.
- Phosphorus-based flame retardants sales were higher year-over-year and sequentially. This is mainly due to higher demand from the building and construction industry in Europe and the US, which coincided with supply constraints from Chinese producers, as Chinese regulatory authorities required the shutdown and potential relocation of several production facilities located in high-density populated areas.
- Sales of specialty minerals decreased as strong performance of the magnesia and calcium businesses, supported by high demand for food supplements and pharmaceuticals markets was more than offset, primarily by weaker pre-season sales of MgCl for de-icing.
- The impact of the COVID-19 pandemic on the Industrial Products segment is expected to continue through the fourth quarter of 2020 and to result in lower demand for clear brine fluids and certain brominated flame retardants for the automotive industry. At the same time, a gradual recovery in the demand for certain flame retardants for the building and construction and electronics industries, could partly offset the overall negative impact.
- In September 2020, a new collective labor agreement was signed between the Company’s subsidiary, Bromine Compounds Ltd. and the Bromine Compounds workers’ union, in effect until April 2025. The main terms of the agreement include, among other things, salary increases for employees to whom it applies, a retirement plan for permanent employees and a reduction of FTE’s.
Results of Operations
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|
339 |
|
Sales to external customers |
|
337 |
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Sales to internal customers |
|
2 |
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Segment profit |
|
88 |
|
Depreciation and Amortization |
|
17 |
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Capital expenditures* |
|
26 |
|
* For information regarding the effect of IFRS 16 implementation on 2019 capital expenditures, see “Note 3 – Operating segments” of the financial statements. |
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Results analysis for the period July – September 2020
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Quantity |
(76) |
31 |
(45) |
|
Price |
3 |
– |
3 |
|
Exchange rates |
4 |
(6) |
(2) |
|
Raw materials |
– |
1 |
1 |
|
Energy |
– |
1 |
1 |
|
Transportation |
– |
– |
– |
|
Operating and other expenses |
– |
4 |
4 |
|
|
|
|
|
Potash
The Potash segment produces and sells mainly potash, using an evaporation process to extract potash from the Dead Sea in Israel and conventional mining from an underground mine in Spain. The segment also produces Polysulphate® in its Boulby mine in the UK and magnesium in the Dead Sea in Israel. In addition, the segment sells salt produced in its facilities, and has a power plant in Sodom, which supplies electricity to ICL’s companies in Israel (electricity surplus is sold to external customers) and steam to all facilities in the Sodom site.
The Potash segment’s sales and operating income decreased in the third quarter of 2020 by 17% and 66%, respectively, compared to the same quarter in the prior year. Business performance was primarily impacted by a $64 decrease in the average potash realized price per tonne, mainly due to higher sales volumes to India and China at low contract prices, and higher operating costs, mainly due to decreased production in Spain and costs related to COVID-19. As of the date of the report, production sites are operating as planned, with ICL Dead Sea reaching a record high production level for the first nine months of the year, and we do not expect a very significant impact from the COVID-19 pandemic on the segment’s results in the fourth quarter of 2020, although the full effect of the pandemic on our operations is uncertain and difficult to assess or predict.
Highlights and business environment
- Toward the end of the third quarter, potash price sentiment improved, mainly in Brazil, where prices were quoted at higher levels compared to the second quarter, supported by favorable exchange rate, supply concerns from Belarus and solid demand despite seasonality challenges. Prices in Southeast Asia also increased due to higher prices of Crude Palm Oil (CPO). However, in other spot markets, mainly in Europe, prices decreased due to high availability. For additional information on potash prices and imports to key markets, see ‘Global potash market – average prices and imports’ in the appendix.
- Following ICL’s Dead Sea facilities upgrade in the fourth quarter of 2019, ICL Dead Sea reached record production for the first nine months of the year, despite the operational challenges caused by the COVID-19 pandemic.
- The closure of the Sallent potash site (Vilafruns mine) toward the end of the second quarter of 2020, in accordance with ICL’s strategic decision to concentrate its production in the Suria site (Cabanasses mine), will allow the Company to speed up development in Suria, and to improve its cost per tonne in future periods. However, for the short term, we are incurring certain costs related to the site closure and higher operating costs due to the overall decreased production in Spain, which are expected to continue during the fourth quarter.
- Production of Polysulphate® increased by 10% to 191 thousand tonnes in the third quarter of 2020, and sales volumes increased by 49% to 113 thousand tonnes compared to the third quarter of 2019.
- Global end market demand for magnesium started to show initial signs of recovery in the third quarter of 2020, mainly due to a gradual restart of the automotive sector and strong demand from the aluminum packaging industry. However, this positive trend was partly offset by continued decreased demand in the aerospace and other aluminum sectors, along with high levels of inventory among both producers and consumers.
- The segment is implementing efficiency initiatives, including early retirement of Dead Sea Magnesium employees. See Note 4 to the Company’s condensed consolidated interim financial statements as at September 30, 2020.
Results of Operations
|
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|
|
|
|
|
|
|
|
|
376 |
|
Potash sales to external customers |
|
280 |
|
Potash sales to internal customers |
|
26 |
|
Other and eliminations* |
|
70 |
|
Gross profit |
|
176 |
|
Segment profit |
|
83 |
|
Depreciation and Amortization |
|
37 |
|
Capital expenditures** |
|
93 |
|
Average realized price (in $)*** |
|
284 |
* Primarily includes salt produced in underground mines in the UK and Spain, Polysulphate® and Polysulphate®-based products, magnesium-based products and sales of excess electricity produced by our power plants in Israel.
** For information regarding the effect of IFRS 16 implementation on 2019 capital expenditures, see “Note 3 – Operating segments” of the accompanying Financial Statements.
*** Potash average realized price (dollar per tonne) is calculated by dividing total potash revenue by total sales quantities. The difference between FOB price and average realized price is primarily due to marine transportation costs.
Potash – Production and Sales
|
|
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Production |
|
1,050 |
|
Total sales (including internal sales) |
|
1,079 |
|
Closing inventory |
|
355 |
Results analysis for the period July – September 2020
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|||
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|
|
|
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|
Quantity |
(1) |
18 |
17 |
|
Price |
(66) |
– |
(66) |
|
Exchange rates |
4 |
(5) |
(1) |
|
Energy |
– |
(2) |
(2) |
|
Transportation |
– |
4 |
4 |
|
Operating and other expenses |
– |
(7) |
(7) |
|
|
|
|
|
Phosphate Solutions
The Phosphate Solutions segment operates ICL’s phosphate value chain, using phosphate rock and fertilizer-grade phosphoric acid to produce phosphate-based specialty products with higher added value, as well as to produce and sell phosphate-based fertilizers.
The segment’s sales were stable, while operating income decreased by 13%, year–over–year, mainly due to lower phosphate commodity market prices, which started to gradually recover during the third quarter, partly offset by lower raw materials prices and efficiency initiatives. Strong phosphate specialties performance, despite global challenges related to the COVID-19 pandemic, ongoing positive operating income of the YPH JV in China and a recovery in phosphate commodity prices resulted in a significant sequential improvement in operating income. Fourth quarter results for both the commodities and the specialties phosphate businesses are expected to decrease, compared to the current quarter, due to the usual seasonal pattern.
Phosphate specialties sales of $295 million and operating income of $34 million in the third quarter of 2020 were approximately 2% and 13% higher, respectively, compared to the third quarter of 2019. The increase in operating income was driven mainly by strong volumes, lower costs and a positive exchange rates impacts.
Sales of phosphate commodities amounted to $211 million, approximately 3% lower than the third quarter of 2019, mostly due to significantly lower market prices which was partly offset by higher sales volumes and favorable exchange rates. Operating loss of $6 million in the third quarter of 2020, compared to operating income of $2 million in the third quarter of 2019, is attributed to a decrease in prices, partly offset by lower raw materials costs and higher sales volumes, mainly to Asia and North America.
Highlights and business environment
- Revenues of phosphate salts in the third quarter of 2020 were stable year-over-year. Higher sales volumes of food grade phosphates were partly offset by a decrease in sales volumes of industrial salts. The positive trend in food grade phosphates was driven by strong sales volumes in South America and Europe, which were partly related to a shift of sales from the food service sector to the retail sector, including supermarkets, caused by the COVID-19 pandemic. The decrease in sales of industrial salts, mainly in Europe and North America, was the result of slowdowns in various key industries and was partly offset by increased sales volumes to the dental hygiene industry in China.
- White phosphoric acid (WPA) revenues in the third quarter of 2020 increased slightly year–over-year. Revenues in China increased, despite seasonal slowdown and general weakness in the industrial market. Revenues in Europe and North America remained stable. Revenues in South America decreased compared to the third quarter of 2019, due to lower sales volumes to key industrial markets, though volumes improved sequentially. Market prices for food grade WPA decreased modestly in Europe, North and South America due to a competitive business environment.
- Dairy protein revenues in the third quarter of 2020 were significantly higher compared to the third quarter of 2019, mainly due to strong sales of the new goat milk powders business and organic cow products. ICL continues to focus on expanding its global leadership position in the organic cow and goat ingredients market for high end applications.
- Phosphate fertilizers prices recovered significantly across most markets during the third quarter of 2020 compared to the second quarter. Prices increased due to tightened supply by major manufacturers in China, Morocco and Russia. The US market registered the sharpest price increases, mainly at the beginning of the third quarter, following the petition by Mosaic (US) to the US International Trade Commission (ITC) and to the US Department of Commerce (DoC) to impose countervailing duties on phosphate imports from Morocco and Russia. Following the DoC decision to postpone its preliminary decision from September to November 2020 and toward the seasonal demand slowdown, price increases in the US began to ease during the second half of the third quarter and shifted to eastern markets, mainly to India. Prices also increased in Brazil, supported by an increase in soybean prices and a favorable exchange rate. For additional information on phosphate prices, see ‘Global phosphate commodities market – average prices’ in the appendix.
- OCP (Morocco) concluded its phosphoric acid supply contracts to India for the fourth quarter of 2020 at $689/tonne (CFR 100% P2O5), a $64/tonne increase compared to the previous quarter. The accumulated price increase of $99/tonne since the first quarter of 2020 reflects the positive global sentiment in the phosphate commodity market. A similar price increase was reported in OCP’s phosphoric acid supply contracts in Brazil and in Europe.
- The normalization agreement between Israel and the United Arab Emirates has opened up commercial and economic opportunities for both countries. ICL signed its first contract to buy 35 thousand tonnes of sulphur from Abu Dhabi National Oil Company, in order to add a supply source for the purchase of Sulphur and to leverage its relatively low transportation costs compared to deliveries from Russia, Canada or Kazakhstan.
Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales to external customers |
|
491 |
|
Sales to internal customers |
|
17 |
|
Segment profit |
|
32 |
|
Depreciation and Amortization |
|
44 |
|
Capital expenditures* |
|
51 |
* For information regarding the effect of IFRS 16 implementation on 2019 capital expenditures, see “Note 3 – Operating segments” of the financial statements.
Results analysis for the period July – September 2020
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|||
|
|
|
|
|
|
Quantity |
16 |
(14) |
2 |
|
Price |
(30) |
– |
(30) |
|
Exchange rates |
12 |
(9) |
3 |
|
Raw materials |
– |
16 |
16 |
|
Energy |
– |
– |
– |
|
Transportation |
– |
1 |
1 |
|
Operating and other expenses |
– |
4 |
4 |
|
|
|
|
|
Innovative Ag Solutions
The Innovative Ag Solutions (IAS) segment develops, manufactures, markets and sells specialty fertilizers based primarily on nitrogen, potash and phosphate. The segment produces water soluble specialty fertilizers, liquid fertilizers, soluble fertilizers and controlled–release fertilizers in its plants in Israel, Europe, China and the United States. The segment markets its products worldwide, mainly in Europe, Asia, North America, Brazil and Israel.
Sales in the third quarter of 2020 increased by 8% year-over-year, driven by higher sales volumes of both specialty agriculture and turf and ornamental products, mainly in Europe and North America, as well as favorable exchange rates, partly offset by lower prices. Operating income amounted to $6 million in the third quarter of 2020, compared to an operating loss of $2 million in the third quarter of 2019, primarily due to lower cost of raw materials, higher sales volumes and cost-saving initiatives. Fourth quarter results are expected to follow the usual seasonal pattern.
Highlights and business environment
- The segment reported its third consecutive quarterly year-over-year increase in operating income. The increase in operating income in the third quarter of 2020 is mainly attributed to higher sales volumes, lower costs of raw materials and the continuous implementation of efficiency and cost reduction initiatives.
- Sales to the specialty agriculture market increased compared to the corresponding quarter last year,mainly due to increased demand for straight fertilizers and controlled-release fertilizers products, as well as the positive impact of exchange rates. Sales of Liquid NPK fertilizers in Israel were higher year-over-year due to a delay in the main fertigation season. Higher sales were also recorded in the chemicals business.
- Sales of specialty agriculture products continued to increase in fast-growing emerging markets such as India and Turkey.
- Following the negative impact of the COVID-19 pandemic in the second quarter of 2020, sales to the Turf and Ornamental (T&O) markets started to recover and increased compared to the corresponding quarter last year. The increase in sales was mainly due to strong demand in the turf and landscape markets, which were supported by favorable early Autumn conditions, higher demand for fungicides and the re-opening of sports fields and golf courses.
- Subsequent to the end of the quarter, the Company entered into a definitive agreement to acquire Agro Fertiláqua Participações S.A. (“Fertiláqua”), one of Brazil’s leading specialty plant nutrition companies, for a consideration of approximately $120 million. For more information, see “Other Information” in the accompanying third quarter financial reports.
Results of Operations
|
|
|
|
|
|
|
|
|
|
|
160 |
|
Sales to external customers |
|
156 |
|
Sales to internal customers |
|
4 |
|
Segment profit |
|
(2) |
|
Depreciation and Amortization |
|
5 |
|
Capital expenditures* |
|
5 |
* For information regarding the effect of IFRS 16 implementation on 2019 capital expenditures, see “Note 3 – Operating segments” of the financial statements.
Results analysis for the period July – September 2020
|
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|
|
|
|||
|
|
|
|
|
|
Quantity |
13 |
(9) |
4 |
|
Price |
(4) |
– |
(4) |
|
Exchange rates |
4 |
(4) |
– |
|
Raw materials |
– |
6 |
6 |
|
Energy |
– |
– |
– |
|
Transportation |
– |
– |
– |
|
Operating and other expenses |
– |
2 |
2 |
|
|
|
|
|
Dividend Distribution
In connection with ICL’s third quarter 2020 results, the Board of Directors declared a dividend of 2.3 cents per share, or approximately $29 million in the aggregate. The dividend will be paid on December 16, 2020. The record date is December 2, 2020.
About ICL
ICL Group Ltd. is a leading global specialty minerals and chemicals company that creates impactful solutions for humanity’s sustainability challenges in global food, agriculture, and industrial markets. ICL leverages its unique bromine, potash and phosphate resources, its passionate team of talented employees, and its strong focus on R&D and technological innovation to drive growth across its end markets. ICL shares are dually listed on the New York Stock Exchange and the Tel Aviv Stock Exchange (NYSE and TASE: ICL). The Company employs over 11,000 people worldwide, and its 2019 revenues totaled approximately $5.3 billion.
For more information, visit the Company’s website at www.icl-group.com[1].
ICL makes its financial results easily accessible to investors through an interactive data tool available in the ‘Investors’ section of the Company’s website. The Interactive Analyst Center will provide the company’s historical financial, operational and ESG data in the context of an easy-to-access online web platform. Data drills/views are customizable based on time periods and various parameters. The information is available for download at any time. To access the Interactive Data Tool, click here.
To access ICL’s interactive Corporate Social Responsibility Report, please click here.
You can also learn more about ICL on Facebook, LinkedIn and Instagram.
Appendix:
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Condensed Consolidated Statements of Income (Unaudited) |
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(In millions except per share data) |
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|
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|
|
|
|
|
|
Sales |
|
1,325 |
|
4,165 |
5,271 |
|
Cost of sales |
|
853 |
|
2,684 |
3,454 |
|
|
|
472 |
|
1,481 |
1,817 |
|
Selling, transport and marketing expenses |
|
199 |
|
590 |
767 |
|
General and administrative expenses |
|
62 |
|
190 |
254 |
|
Research and development expenses |
|
13 |
|
38 |
50 |
|
Other expenses |
|
2 |
|
23 |
30 |
|
Other income |
|
(5) |
|
(28) |
(40) |
|
|
|
201 |
|
668 |
756 |
|
Finance expenses |
|
67 |
|
195 |
220 |
|
Finance income |
|
(35) |
|
(91) |
(91) |
|
|
|
32 |
|
104 |
129 |
|
Share in earnings of equity-accounted investees |
|
– |
|
1 |
1 |
|
|
|
169 |
|
565 |
628 |
|
Provision for income taxes |
|
35 |
|
132 |
147 |
|
|
|
134 |
|
433 |
481 |
|
Net income attributable to the non-controlling interests |
|
4 |
|
6 |
6 |
|
|
|
130 |
|
427 |
475 |
|
|
|||||
|
Basic earnings (loss) per share (in dollars) |
|
0.10 |
|
0.33 |
0.37 |
|
Diluted earnings (loss) per share (in dollars) |
|
0.10 |
|
0.33 |
0.37 |
|
|
|||||
|
Basic (in thousands) |
|
1,280,586 |
|
1,279,146 |
1,278,950 |
|
Diluted (in thousands) |
|
1,283,675 |
|
1,283,401 |
1,282,056 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
|
Condensed Consolidated Statements of Financial Position as at (Unaudited) |
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|
|
|
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|
|
|
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Cash and cash equivalents |
|
96 |
95 |
|
Short-term investments and deposits |
|
91 |
96 |
|
Trade receivables |
|
979 |
778 |
|
Inventories |
|
1,205 |
1,312 |
|
Other receivables |
|
324 |
403 |
|
|
|
2,695 |
2,684 |
|
|
|||
|
Investments at fair value through other comprehensive income |
|
144 |
111 |
|
Deferred tax assets |
|
97 |
109 |
|
Property, plant and equipment |
|
5,068 |
5,331 |
|
Intangible assets |
|
641 |
652 |
|
Other non-current assets |
|
468 |
286 |
|
|
|
6,418 |
6,489 |
|
|
|
9,113 |
9,173 |
|
|
|||
|
Short-term credit |
|
476 |
420 |
|
Trade payables |
|
691 |
712 |
|
Provisions |
|
34 |
42 |
|
Other current liabilities |
|
578 |
587 |
|
|
|
1,779 |
1,761 |
|
|
|||
|
Long-term debt and debentures |
|
2,101 |
2,181 |
|
Deferred tax liabilities |
|
357 |
341 |
|
Long-term employee liabilities |
|
576 |
575 |
|
Provisions |
|
221 |
202 |
|
Other non-current liabilities |
|
45 |
52 |
|
|
|
3,300 |
3,351 |
|
|
|
5,079 |
5,112 |
|
|
|||
|
Total shareholders’ equity |
|
3,901 |
3,925 |
|
Non-controlling interests |
|
133 |
136 |
|
|
|
4,034 |
4,061 |
|
|
|
9,113 |
9,173 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
|
Condensed Consolidated Statements of Cash Flows (Unaudited) |
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|
|
|
|
|
|
|
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|
|
|
|
|
|
|||||
|
Net income (loss) |
|
134 |
|
433 |
481 |
|
Adjustments for: |
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Depreciation and amortization and impairment of fixed assets |
|
110 |
|
320 |
433 |
|
Exchange rate and interest expenses, net |
|
68 |
|
146 |
153 |
|
Share in earnings of equity-accounted investees |
|
– |
|
(1) |
(1) |
|
Loss from divestiture of businesses |
|
– |
|
– |
– |
|
Capital loss (gain) |
|
– |
|
(12) |
(12) |
|
Share-based compensation |
|
3 |
|
9 |
12 |
|
Deferred tax expenses (income) |
|
14 |
|
90 |
67 |
|
|
195 |
|
552 |
652 |
|
|
Change in inventories |
|
(26) |
|
– |
(72) |
|
Change in trade receivables |
|
70 |
|
(11) |
199 |
|
Change in trade payables |
|
27 |
|
(9) |
(58) |
|
Change in other receivables |
|
(15) |
|
(4) |
5 |
|
Change in other payables |
|
(19) |
|
(184) |
(194) |
|
Change in provisions and employee benefits |
|
2 |
|
3 |
(21) |
|
|
|
39 |
|
(205) |
(141) |
|
|
|
368 |
|
780 |
992 |
|
|
|||||
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Proceeds (investments) in deposits, net |
|
(7) |
|
4 |
(2) |
|
Business combinations, net of cash acquired |
|
– |
|
– |
– |
|
Purchases of property, plant and equipment and intangible assets |
|
(147) |
|
(419) |
(576) |
|
Proceeds from divestiture of businesses net of transaction expenses |
|
– |
|
– |
– |
|
Dividends from equity-accounted investees |
|
– |
|
1 |
3 |
|
Proceeds from sale of property, plant and equipment |
|
1 |
|
36 |
50 |
|
|
|
(153) |
|
(378) |
(525) |
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Dividends paid to the Company’s shareholders |
|
(73) |
|
(209) |
(273) |
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Payments from transactions in derivatives used for hedging |
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– |
|
– |
– |
|
Receipt of long-term debt |
|
50 |
|
457 |
657 |
|
Payments of long-term debt |
|
(138) |
|
(550) |
(689) |
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Receipts (payments) of short-term credit from banks and others, net |
|
(90) |
|
(120) |
(183) |
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Other |
|
(2) |
|
(2) |
(2) |
|
|
|
(253) |
|
(424) |
(490) |
|
|
|
(38) |
|
(22) |
(23) |
|
Cash and cash equivalents as at the beginning of the period |
|
137 |
|
121 |
121 |
|
Net effect of currency translation on cash and cash equivalents |
|
(3) |
|
(3) |
(3) |
|
|
|
96 |
|
96 |
95 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Condensed Consolidated Statements of Cash Flows (Unaudited) (cont’d)
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Additional Information |
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Income taxes paid (received), net of refunds |
|
20 |
|
78 |
120 |
|
Interest paid |
|
17 |
|
77 |
115 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
We disclose in this Press Release non-IFRS financial measures titled adjusted operating income, adjusted net income attributable to the Company’s shareholders, diluted adjusted earnings per share and adjusted EBITDA. Our management uses adjusted operating income, adjusted net income attributable to the Company’s shareholders, diluted adjusted earnings per share and adjusted EBITDA to facilitate operating performance comparisons from period to period. We calculate our adjusted operating income by adjusting our operating income to add certain items, as set forth in the reconciliation table under “Adjustments to reported operating and net income (Non-GAAP)”
below
. Certain of these items may recur. We calculate our adjusted net income attributable to the Company’s shareholders by adjusting our net income attributable to the Company’s shareholders to add certain items, as set forth in the reconciliation table under “Adjustments to reported operating and net income (Non-GAAP)” below, excluding the total tax impact of such adjustments and adjustments attributable to the non-controlling interests. We calculate our diluted adjusted earnings per share by dividing adjusted net income by the weighted-average number of diluted ordinary shares outstanding. We calculate our adjusted EBITDA by adding back to the net income attributable to the Company’s shareholders the depreciation and amortization, financing expenses, net, taxes on income and the items presented in the reconciliation table under “Consolidated adjusted EBITDA and diluted adjusted Earnings Per Share for the periods of activity (non-GAAP)” below which were adjusted for in calculating the adjusted operating income and adjusted net income attributable to the Company’s shareholders. Other companies may calculate similarly titled non–IFRS financial measures differently than the Company.
You should not view adjusted operating income, adjusted net income attributable to the Company’s shareholders, diluted adjusted earnings per share or adjusted EBITDA as a substitute for operating income or net income attributable to the Company’s shareholders determined in accordance with IFRS, and you should note that our definitions of adjusted operating income, adjusted net income attributable to the Company’s shareholders, diluted adjusted earnings per share and adjusted EBITDA may differ from those used by other companies. Additionally, o
ther companies may use other measures to evaluate their performance, which may reduce the usefulness of our non-IFRS financial measures
as tools for comparison. However, we believe adjusted operating income, adjusted net income attributable to the Company’s shareholders, diluted adjusted earnings per share and adjusted EBITDA provide useful information to both management and investors by excluding certain items that management believes are not indicative of our ongoing operations. Our management uses these non-IFRS measures to evaluate the Company’s business strategies and management’s performance. We believe that these non–IFRS measures provide useful information to investors because they improve the comparability of our financial results between periods and provide for greater transparency of key measures used to evaluate our performance.
We present a discussion in the period-to-period comparisons of the primary drivers of change in the Company’s results of operations. This discussion is based in part on management’s best estimates of the impact of the main trends on its businesses. We have based the following discussion on our financial statements. You should read such discussion together with our financial statements.
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|
201 |
|
668 |
756 |
|
Impairment of assets, provision for site closure and restoration costs (1) |
|
– |
|
(10) |
(3) |
|
Provision for early retirement (2) |
|
– |
|
– |
– |
|
Provision for legal proceedings (3) |
|
– |
|
14 |
7 |
|
|
|
– |
|
4 |
4 |
|
|
|
201 |
|
672 |
760 |
|
|
|
130 |
|
427 |
475 |
|
Total adjustments to operating income |
|
– |
|
4 |
4 |
|
Total tax impact of the above operating income |
|
– |
|
– |
– |
|
|
|
130 |
|
431 |
479 |
- For 2020, this reflects an impairment and write-off of certain assets in Israel (Rotem Amfert Israel), related to continued low phosphate prices and the Company’s plan to discontinue unprofitable phosphate rock production and sale, which also resulted in an increase in the provision for assets retirement obligation (ARO) as well as an increase in facilities restoration costs. Also reflects an impairment of assets and an increase in the Sallent site (Vilafruns) closure costs in Spain (ICL Iberia). For 2019, this represents a partial reversal of an impairment loss related to assets in Germany – due to an agreement for the sale of assets – which was incurred in 2015, partly offset by an increase in the provision for the Sallent site closure costs, together with an increase in the provision for the removal of prior periods waste in bromine production facilities in Israel.
- For 2020, this reflects an increase in the provision related to headcount reduction, which was implemented as part of the Company’s efficiency initiatives and measures, primarily through an early retirement plan for the Israeli production facilities (Rotem Amfert Israel, Bromine Compounds and Dead Sea Magnesium).
- For 2019, this reflects an increase in the provision for the finalization of the royalties’ arbitration in Israel related to prior periods, which was partly offset by a decrease in the provision related to legal claims in Spain.
For more information, see Note 4 to the Company’s condensed consolidated interim financial statements as at September 30, 2020.
Consolidated adjusted EBITDA and diluted adjusted Earnings Per Share for the periods of activity
Calculation of adjusted EBITDA was made as follows:
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|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to the shareholders of the Company |
|
130 |
|
427 |
475 |
|
Depreciation and Amortization |
|
110 |
|
330 |
443 |
|
Financing expenses, net |
|
32 |
|
104 |
129 |
|
Taxes on income |
|
35 |
|
132 |
147 |
|
Adjustments* |
|
– |
|
4 |
4 |
|
|
|
307 |
|
997 |
1,198 |
* See “Adjustments to reported operating and net income (Non-GAAP)” above.
Calculation of diluted adjusted earnings per share was made as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
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Net income (loss) – shareholders of the Company |
|
130 |
|
427 |
475 |
|
Adjustments* |
|
– |
|
4 |
4 |
|
Total tax impact of the above operating income & finance expenses adjustments |
|
– |
|
– |
– |
|
Adjusted net income – shareholders of the Company |
|
130 |
|
431 |
479 |
|
Weighted-average number of diluted ordinary shares outstanding (in thousands) |
|
1,283,675 |
|
1,283,401 |
1,282,056 |
|
Diluted adjusted earnings per share (in dollars)** |
|
0.10 |
|
0.34 |
0.37 |
* See “Adjustments to reported operating and net income (Non-GAAP)” above.
** The diluted adjusted earnings per share is calculated as follows: dividing the adjusted net income–shareholders of the Company by the weighted-average number of diluted ordinary shares outstanding (in thousands).
Global potash market – average prices and imports:
|
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|
|
|
|
|
|
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Granular potash – Brazil |
CFR spot ($ per tonne) |
|
327 |
(27%) |
222 |
8% |
|
Granular potash – Northwest Europe |
CIF spot/contract
(€ per tonne) |
|
280 |
(14%) |
245 |
(2%) |
|
Standard potash -Southeast Asia |
CFR spot
($ per tonne) |
|
293 |
(18%) |
243 |
(1%) |
|
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To Brazil |
million tonnes |
|
3.4 |
(3%) |
3.1 |
6% |
|
To China |
million tonnes |
|
2.3 |
26% |
1.7 |
71% |
|
To India |
million tonnes |
|
1.0 |
50% |
0.9 |
67% |
Sources: CRU (Fertilizer Week Historical Price: October 2020), FAI, Brazil and Chinese customs data.
Global phosphate commodities market – average prices:
|
|
|
|
|
|
|
|
|
DAP |
CFR India Spot |
|
342 |
(1.2%) |
316 |
7.0% |
|
TSP |
CFR Brazil Spot |
|
306 |
(19.6%) |
245 |
0.4% |
|
SSP |
CPT Brazil inland 18-20% P2O5 Spot |
|
221 |
(23.1%) |
173 |
(1.7%) |
|
Sulphur |
Bulk FOB Adnoc monthly contract |
|
84 |
(29.8%) |
60 |
(1.7%) |
Source: CRU (Fertilizer Week Historical Prices, October 2020).
Operating Segments
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Sales to external parties |
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Inter-segment sales |
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Total sales |
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Segment profit (loss) |
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Other expenses not allocated to the segments |
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Operating income |
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Financing expenses, net |
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Share in earnings of equity-accounted investees |
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Income before income taxes |
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Depreciation and amortization |
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Capital expenditures |
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Operating Segments (cont’d)
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Sales to external parties |
337 |
333 |
491 |
156 |
8 |
– |
1,325 |
|
Inter-segment sales |
2 |
43 |
17 |
4 |
2 |
(68) |
– |
|
Total sales |
339 |
376 |
508 |
160 |
10 |
(68) |
1,325 |
|
Segment profit (loss) |
88 |
83 |
32 |
(2) |
5 |
(5) |
201 |
|
Other income not allocated to the segments |
– |
||||||
|
Operating income |
201 |
||||||
|
Financing expenses, net |
(32) |
||||||
|
Income before income taxes |
169 |
||||||
|
Depreciation, amortization and impairment |
17 |
37 |
44 |
5 |
4 |
3 |
110 |
|
Implementation of IFRS 16 |
– |
– |
– |
– |
5 |
1 |
6 |
|
Capital expenditures |
26 |
93 |
51 |
5 |
1 |
2 |
178 |
FORWARD-LOOKING STATEMENTS
This announcement contains statements that constitute “forward–looking statements”, many of which can be identified by the use of forward–looking words such as “anticipate”, “believe”, “could”, “expect”, “should”, “plan”, “intend”, “estimate” and “potential”, among others.
Forward–looking statements appear in a number of places in this announcement and include, but are not limited to, statements regarding our intent, belief or current expectations. Forward–looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Such statements are subject to risks and uncertainties, and the actual results may differ materially from those expressed or implied in the forward–looking statements due to various factors, including, but not limited to
:
Loss or impairment of business licenses or mineral extractions permits or concessions; volatility of supply and demand and the impact of competition; the difference between actual reserves and our reserve estimates; natural disasters; failure to raise the water level in evaporation Pond 5 in the Dead Sea; construction of a new pumping station; disruptions at our seaport shipping facilities or regulatory restrictions affecting our ability to export our products overseas; general market, political or economic conditions in the countries in which we operate; price increases or shortages with respect to our principal raw materials; delays in the completion of major projects by third party contractors and/or termination of engagements with contractors and/or governmental obligations; the inflow of significant amounts of water into the Dead Sea could adversely affect production at our plants; labor disputes, slowdowns and strikes involving our employees; pension and health insurance liabilities; the ongoing COVID-19 pandemic, which has impacted, and may continue to impact our sales, operating results and business operations by disrupting our ability to purchase raw materials, by negatively impacting the demand and pricing for some of our products, by disrupting our ability to sell and/or distribute products, impacting customers’ ability to pay us for past or future purchases and/or temporarily closing our facilities or the facilities of our suppliers or customers and their contract manufacturers, or restricting our ability to travel to support our sites or our customers around the world; changes to governmental incentive programs or tax benefits, creation of new fiscal or tax related legislation; changes in our evaluations and estimates, which serve as a basis for the recognition and manner of measurement of assets and liabilities; higher tax liabilities; failure to integrate or realize expected benefits from mergers and acquisitions, organizational restructuring and joint ventures; currency rate fluctuations; rising interest rates; government examinations or investigations; disruption of our, or our service providers’, information technology systems or breaches of our, or our service providers’, data security; failure to retain and/or recruit key personnel; inability to realize expected benefits from our cost reduction program according to the expected timetable; inability to access capital markets on favorable terms; cyclicality of our businesses; changes in demand for our fertilizer products due to a decline in agricultural product prices, lack of available credit, weather conditions, government policies or other factors beyond our control; sales of our magnesium products being affected by various factors that are not within our control; our ability to secure approvals and permits from the authorities in Israel to continue our phosphate mining operations in Rotem; volatility or crises in the financial markets; uncertainties surrounding the proposed withdrawal of the United Kingdom from the European Union; hazards inherent to mining and chemical manufacturing; the failure to ensure the safety of our workers and processes; cost of compliance with environmental legislative and licensing restrictions; laws, regulations and physical impacts of climate change and greenhouse gas emissions; litigation, arbitration and regulatory proceedings; exposure to third party and product liability claims; product recalls or other liability claims as a result of food safety and food-borne illness concerns; insufficiency of insurance coverage; closing of transactions, mergers and acquisitions; war or acts of terror and/or political, economic and military instability in Israel and its region; filing of class actions and derivative actions against the Company, its executives and Board members; and other risk factors discussed under “Item 3 – Key Information— D. Risk Factors” in the Company’s Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission (SEC) on March 5, 2020.
Forward–looking statements speak only as at the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events.
This press release for the third quarter of 2020 (hereinafter – “the Press Release”) should be read in conjunction with the Annual Report published by the Company on Form 20–F as at and for the year ended December 31, 2019 (hereinafter – the “Annual Report”), the report for the third quarter of 2020 (hereinafter – “the Quarterly Report”) and the report for the first quarter and second quarter of 2020 published by the Company (the “prior quarterly reports”), including the description of the events occurring subsequent to the date of the statement of financial position, as filed with the U.S. Securities and Exchange Commission. As part of the Press Release and Quarterly Report, the Company updated the disclosures provided in the Annual Report, to the extent there were material developments since the publication date of the Annual Report, on March 5, 2020 and the prior quarterly reports, on May 12, 2020 and July 29, 2020, and up to the publication date of the Quarterly Report.
[1] The reference to our website is intended to be an inactive textual reference and the information on, or accessible through, our website is not intended to be part of this Form 6-K.
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