Company Description
Business Risk
Overview
|
Key strengths | Key risks | |
One of the leading global potash producers and the largest global bromine producer. |
Cyclical and competitive nature of the fertilizer industry.
| |
Competitive advantage from mining in the Dead Sea, which provides access to unique high-quality raw materials, logistical benefits, proximity to ports, and a more favorable cost position for potash and bromine than peers.
|
Exposure to regulatory changes and political pressure in Israel pertaining to extending the Dead Sea mining concession, which is valid until 2030.
| |
Sound global demand for fertilizer products is supporting current high prices and the industry has proven relatively resilient to the COVID-19-related recessionary macroeconomic environment.
|
Large nondiscretionary capital expenditure (capex) requirements at the Dead Sea concession.
| |
Synergies between manufacturing processes for different specialty chemicals products, which provide added value.
|
Some exposure of the bromine segment to cyclical end markets such as oil and gas, auto, and construction.
| |
Prudent financial policy and adequate liquidity.
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ICL Group Ltd.
|
ICL Group Ltd.
|
ICL Group Ltd.
|
Outlook: Stable
|
The stable outlook reflects our expectation that ICL will maintain S&P Global Ratings-adjusted debt to EBITDA of about 2.9x-3.0x in 2021, factoring in additional volumes in bromine markets, along with tight conditions across fertilizer markets, leading to high prices for potash and phosphate.
We anticipate that ICL will generate adjusted EBITDA of $1.20 billion-$1.24 billion in 2021, supported by its strong position in the fertilizer markets and low production costs in Israel. We consider adjusted debt to EBITDA of 3.0x at the top of the business cycle and 4.0x at the bottom of the cycle to be commensurate with the current rating.
Downside scenario
We would consider a negative rating action if the company's debt to EBITDA is close to 4.0x without near-term prospects of recovery, and its operating performance deteriorates. In the first instance, this could occur due to weaker market conditions, for example, as a result of prolonged low potash or phosphate prices due to sluggish demand or ongoing oversupply in both markets. We could also lower the rating if ICL deviates from its publicly stated dividend policy or embarks on sizable leveraged acquisitions.
Over the medium term, the rating could come under pressure if uncertainty regarding the renewal of the Dead Sea concession continues. In this scenario, we expect the company's business risk to increase, since it currently benefits from inherent advantages of operating in the Dead Sea.
Upside scenario
We would consider a positive rating action if ICL strengthens its financial risk profile such that its adjusted debt to EBITDA remains below 2.5x on a sustainable basis. Rating upside would also depend on our view on the credit quality of Israel Corp., ICL's main shareholder with a 46% stake.
|
• |
Global GDP to rebound to 5.5% growth in 2021 and 4.2% in 2022. We expect the U.S. economy to rebound to 6.5% growth in 2021 and 3.1% in 2022. We expect the eurozone's GDP to recover to 4.2% growth in 2021 and 4.4% in 2022. We see Latin America's GDP reaching 4.9% growth in 2021 and 2.8% in 2022, with Brazil expanding 3.4% in 2021.
|
• |
ICL's revenue at $5.9 billion-$6.0 billion in 2021, increasing to $6.0 billion-$6.2 billion in 2022. The increase in phosphate and potash fertilizer prices over first-quarter 2021 should continue to support ICL's sales during the second half and into 2022. On average, both phosphate and potash fertilizer demand increases 1%-3% annually, partly due to increasing global population, global GDP growth, and changing diets.
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• |
An improvement in the adjusted EBITDA margin toward 21% by 2021 from 19% in 2020. ICL's reported EBITDA during first-quarter 2021 was $295 million with a 19.5% margin, compared with $250 million with an about 19% margin last year.
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ICL Group Ltd.
|
• |
The acquisition of Compass Minerals America Do Sul S.A. (Compass Minerals) is expected to close during third-quarter 2021. Together with the acquisition of Agro Fertilaqua Participações S.A. (Fertilaqua), which closed in the first quarter, we anticipate an additional full-year EBITDA contribution of $55 million in 2021.
|
• |
Capex of about $560 million-$580 million in 2021, and close to $600 million in 2022, which is lower than in 2020. We note that ICL decides investment levels depending on business confidence and the industry outlook.
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• |
The $375 million acquisitions of Compass Minerals and Fertilaqua (excluding net debt and earnouts) are anticipated to be partially funded by the disposal of equity in a publicly traded company in China.
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• |
No other material transactions over the remainder of 2021, but potential for selective complementary bolt-on acquisitions.
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• |
Annual dividends of up to 50% of adjusted net profit, in accordance with the company's policy. Dividends are paid quarterly, which allows for some flexibility in the level of distributions.
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ICL Group Ltd.--Key Metrics*
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--Fiscal year end Dec. 31--
| ||||||||||||||||
(Mil. $)
|
2019a
|
2020a
|
2021e
|
2022f
| ||||||||||||
Revenue
|
5,271
|
5,043
|
5,900-6,000
|
6,000-6,200
| ||||||||||||
EBITDA
|
1,201
|
964
|
1,200-1,240
|
> 1,300
| ||||||||||||
EBITDA margin (%)
|
23.0
|
19.1
|
20-21
|
> 21
| ||||||||||||
Capital expenditure
|
557
|
602
|
560-580
|
580-600
| ||||||||||||
Free operating cash flow (FOCF)
|
419
|
185
|
> 200
|
> 350
| ||||||||||||
Debt to EBITDA (x)
|
2.5
|
3.3
|
2.9-3.1
|
2.6-2.8
|
ICL Group Ltd.
|
• |
Industrial products (24% of 2020 sales and 24% operating profit margin). Through this key division, ICL manufactures elemental bromine for a wide range of applications in flame retardants, magnesia and salt products, and energy storage. ICL's Dead Sea operations offer the world's largest reserves with the highest bromine concentration. Together with its two main competitors, Albemarle and Lanxess, ICL accounted for the majority of global bromine production in 2020. Barriers to entry in this market are high, due to access to economically viable reserves of bromine, and stringent requirements for the logistics system (special containers are required for bromine transportation). ICL uses about 80% of its elemental bromine production internally to produce higher-margin bromine compounds.
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• |
Potash (25% of sales and 9% operating profit margin). In this segment, ICL produces and markets potash fertilizers and salt extracted from the Dead Sea through a cost-efficient evaporation process, and from a conventional underground mine in Spain. It also transitioned its U.K.-based Boulby mine to the production of advanced polyhalite-based fertilizer (marketed by ICL as polysulphate) from the production of potash. Even though ICL's potash operations are smaller than those of key competitors Nutrien, Uralkali, or Mosaic, the company benefits from low production costs, thanks to the evaporation method at the Dead Sea site and the logistical advantage of being close to customers.
|
• |
Phosphate solutions (37% of sales and 3% operating profit margin). Through this division, ICL operates four open pit mines, three of which are located in the Negev Desert in Israel and one in China. The division uses commodity phosphate as a raw material to develop specialty phosphate products with higher added value, where ICL has 24% market share globally.
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• |
Innovative agricultural solutions (14% of sales and 5% operating profit margin). Through this division, ICL offers specialty nitrogen-, potash-, and phosphate-based fertilizers, including water soluble, liquid, and controlled-release products. The product offering and geographical diversification of this business will be strengthened by the acquisitions of Compass and Fertilaqua. The division is also ICL's innovative arm responsible for research and development, and digital innovation.
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ICL Group Ltd.
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ICL Group Ltd.
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ICL Group Ltd.
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ICL Group Ltd.--Peer Comparison
|
ICL Group Ltd. Mosaic Co. (The) PhosAgro PJSC EuroChem Group AG K+S AG
| |||||
Ratings as of June 23, 2021
|
BBB-/Stable/--
|
BBB-/Stable/--
|
BBB-/Stable/--
|
BB-/Positive/--
|
B/Negative/B
|
--Fiscal year ended Dec. 31, 2020--
| |||||
(Mil. $)
| |||||
Revenue
|
5,043.0
|
8,681.7
|
3,433.2
|
6,166.0
|
2,975.1
|
EBITDA
|
964.0
|
1,568.0
|
1,147.1
|
1,800.0
|
311.7
|
Funds from operations (FFO)
|
800.0
|
1,320.2
|
987.5
|
1,434.0
|
128.7
|
Interest expense
|
129.0
|
304.2
|
82.5
|
270.0
|
122.2
|
Cash interest paid
|
133.0
|
241.6
|
72.2
|
246.0
|
159.3
|
Cash flow from operations
|
787.0
|
1,622.2
|
1,124.7
|
1,295.0
|
36.8
|
Capital expenditure
|
602.0
|
1,137.3
|
536.3
|
1,154.0
|
641.5
|
ICL Group Ltd.
|
ICL Group Ltd.--Peer Comparison (cont.)
|
ICL Group Ltd.
|
Mosaic Co. (The)
|
PhosAgro PJSC
|
EuroChem Group AG
|
K+S AG
| |
Free operating cash flow (FOCF)
|
185.0
|
484.9
|
588.4
|
141.0
|
(604.7)
|
Discretionary cash flow (DCF)
|
67.0
|
409.1
|
62.6
|
140.0
|
(614.1)
|
Cash and short-term investments
|
314.0
|
574.0
|
114.4
|
546.0
|
182.6
|
Debt
|
3,172.8
|
4,675.1
|
2,175.9
|
5,744.4
|
5,522.1
|
Equity
|
4,088.0
|
9,755.2
|
1,430.0
|
4,683.0
|
2,718.9
|
Adjusted ratios
| |||||
EBITDA margin (%)
|
19.1
|
18.1
|
33.4
|
29.2
|
10.5
|
Return on capital (%)
|
6.6
|
4.0
|
22.2
|
12.8
|
(1.0)
|
EBITDA interest coverage (x)
|
7.5
|
5.2
|
13.9
|
6.7
|
2.6
|
FFO cash interest coverage (x)
|
7.0
|
6.5
|
14.7
|
6.8
|
1.8
|
Debt/EBITDA (x)
|
3.3
|
3.0
|
1.9
|
3.2
|
17.7
|
FFO/debt (%)
|
25.2
|
28.2
|
45.4
|
25.0
|
2.3
|
Cash flow from operations/debt (%)
|
24.8
|
34.7
|
51.7
|
22.5
|
0.7
|
FOCF/debt (%)
|
5.8
|
10.4
|
27.0
|
2.5
|
(10.9)
|
DCF/debt (%)
|
2.1
|
8.7
|
2.9
|
2.4
|
(11.1)
|
• |
ICL's adjusted EBITDA margins have historically lagged those of Eurochem and PhosAgro, which benefit from a first-quartile position in phosphate, thanks to access to lower natural gas prices for Russian producers and a high degree of vertical integration.
|
• |
In comparison with K+S, ICL displays higher margins, reflecting its highly advantageous cost position in potash with access to high-quality raw materials in the Dead Sea, and notwithstanding its high cost position in Spain. By comparison, K+S' profitability has been declining in recent years due to production challenges and the high cost position of its German mines.
|
ICL Group Ltd.
|
• |
Direct access to a concentrated source of unique high-quality raw materials in the Dead Sea;
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• |
A good cost position for potash and bromine mining compared with competitors;
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• |
Low storage costs and easier inventory maintenance, due to the dry weather in the Dead Sea area;
|
• |
Proximity to ports and strategic clients (notably China and India); and
|
• |
Synergies between the manufacturing processes for different specialty chemicals products.
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ICL Group Ltd.
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ICL Group Ltd.
|
ICL Group Ltd.--Financial Summary
|
--Fiscal year ended Dec. 31--
| |||||
2020
|
2019
|
2018
|
2017
|
2016
| |
(Mil. $)
| |||||
Revenue
|
5,043.0
|
5,271.0
|
5,556.0
|
5,418.0
|
5,363.0
|
EBITDA
|
964.0
|
1,201.0
|
1,181.0
|
1,087.0
|
1,006.5
|
Funds from operations (FFO)
|
800.0
|
947.0
|
981.8
|
810.7
|
776.0
|
Interest expense
|
129.0
|
140.0
|
165.2
|
175.3
|
187.5
|
Cash interest paid
|
133.0
|
134.0
|
143.2
|
149.3
|
146.5
|
Cash flow from operations
|
787.0
|
976.0
|
631.8
|
859.7
|
987.0
|
Capital expenditure
|
602.0
|
557.0
|
550.0
|
434.0
|
610.0
|
Free operating cash flow (FOCF)
|
185.0
|
419.0
|
81.8
|
425.7
|
377.0
|
Discretionary cash flow (DCF)
|
67.0
|
146.0
|
(159.2)
|
188.7
|
215.0
|
Cash and short-term investments
|
314.0
|
191.0
|
213.0
|
173.0
|
116.0
|
Gross available cash
|
284.0
|
161.0
|
183.0
|
146.0
|
96.0
|
Debt
|
3,172.8
|
3,034.5
|
3,044.0
|
3,959.9
|
4,052.0
|
Equity
|
4,088.0
|
4,061.0
|
3,915.0
|
2,930.0
|
2,659.0
|
Adjusted ratios
| |||||
EBITDA margin (%)
|
19.1
|
22.8
|
21.3
|
20.1
|
18.8
|
Return on capital (%)
|
6.6
|
10.7
|
11.0
|
9.1
|
8.1
|
EBITDA interest coverage (x)
|
7.5
|
8.6
|
7.1
|
6.2
|
5.4
|
FFO cash interest coverage (x)
|
7.0
|
8.1
|
7.9
|
6.4
|
6.3
|
Debt/EBITDA (x)
|
3.3
|
2.5
|
2.6
|
3.6
|
4.0
|
FFO/debt (%)
|
25.2
|
31.2
|
32.3
|
20.5
|
19.2
|
Cash flow from operations/debt (%)
|
24.8
|
32.2
|
20.8
|
21.7
|
24.4
|
FOCF/debt (%)
|
5.8
|
13.8
|
2.7
|
10.8
|
9.3
|
DCF/debt (%)
|
2.1
|
4.8
|
(5.2)
|
4.8
|
5.3
|
ICL Group Ltd.
|
ICL Group Ltd.--Reconciliation Of Reported Amounts With S&P Global Ratings' Adjusted Amounts (Mil. $)
|
--Fiscal year ended Dec. 31, 2020--
| ||||||||
ICL Group Ltd. reported amounts
| ||||||||
S&P Global Ratings'
|
Cash flow
| |||||||
Shareholders'
|
Operating
|
Interest
|
adjusted
|
from
|
Capital
| |||
Debt
|
equity
|
EBITDA
|
income
|
expense
|
EBITDA
|
operations
|
expenditure
| |
Reported
|
2,407.0
|
3,930.0
|
781.0
|
202.0
|
96.0
|
964.0
|
804.0
|
626.0
|
S&P Global Ratings' adjustments
| ||||||||
Cash taxes paid
|
--
|
--
|
--
|
--
|
--
|
(31.0)
|
--
|
--
|
Cash interest paid
|
--
|
--
|
--
|
--
|
--
|
(109.0)
|
--
|
--
|
Reported lease liabilities |
325.0
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
Postretirement benefit obligations/deferred compensation
|
510.0
|
--
|
7.0
|
7.0
|
9.0
|
--
|
--
|
--
|
Accessible cash and liquid investments
|
(284.0)
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
Capitalized interest
|
--
|
--
|
--
|
--
|
24.0
|
(24.0)
|
(24.0)
|
(24.0)
|
Share-based compensation expense
|
--
|
--
|
8.0
|
--
|
--
|
--
|
--
|
--
|
Dividends received from equity investments
|
--
|
--
|
7.0
|
--
|
--
|
--
|
--
|
--
|
Asset-retirement obligations
|
214.8
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
Nonoperating income (expense)
|
--
|
--
|
--
|
12.0
|
--
|
--
|
--
|
--
|
Reclassification of interest and dividend cash flows
|
--
|
--
|
--
|
--
|
--
|
--
|
7.0
|
--
|
Noncontrolling interest/minority interest
|
--
|
158.0
|
--
|
--
|
--
|
--
|
--
|
--
|
EBITDA: Other
|
--
|
--
|
161.0
|
161.0
|
--
|
--
|
--
|
--
|
Depreciation and amortization: Asset valuation gains/(losses)
|
--
|
--
|
--
|
90.0
|
--
|
--
|
--
|
--
|
Total adjustments
|
765.8
|
158.0
|
183.0
|
270.0
|
33.0
|
(164.0)
|
(17.0)
|
(24.0)
|
S&P Global Ratings' adjusted amounts
| ||||||||
Interest
|
Funds from
|
Cash flow
from
|
Capital
| |||||
Debt
|
Equity
|
EBITDA
|
EBIT
|
expense
|
operations
|
operations
|
expenditure
| |
Adjusted
|
3,172.8
|
4,088.0
|
964.0
|
472.0
|
129.0
|
800.0
|
787.0
|
602.0
|
ICL Group Ltd.
|
Principal liquidity sources
|
Principal liquidity uses
| |
• Available unrestricted cash and cash equivalents of about $256 million on March 31, 2021;
• Availability of about $895 million under a $1.1 billion long-term RCF maturing beyond one year, along with about $120 million capacity under its $300 million securitization facility maturing in 2025; and
• Our forecast of reported cash funds from operations of $950 million.
|
• Short-term debt maturities of about $548 million;
• Capex of $580 million-$590 million;
• Working capital outflows (including intrayear) of about $100 million;
• Acquisitions of $400 million; and
• Dividend distributions of about $200 million.
|
• |
2021: $412 million
|
• |
2022: $161 million
|
• |
2023: $200 million
|
• |
2024: $526 million
|
• |
2025-2030: $242 million
|
• |
After 2030: $881 million
|
• |
Total shareholders' equity greater than $2 billion;
|
• |
An EBITDA net interest cover ratio equal to, or greater than, 3.5x;
|
• |
Net financial debt to EBITDA less than 3.5x; and
|
• |
A ratio of certain subsidiaries' loans to total consolidated assets of less than 10%.
|
ICL Group Ltd.
|
ICL Group Ltd.
|
• |
Country risk: Intermediate
|
• |
Industry risk: Intermediate
|
• |
Competitive position: Satisfactory
|
• |
Cash flow/leverage: Significant
|
• |
Diversification/portfolio effect: Neutral (no impact)
|
• |
Capital structure: Neutral (no impact)
|
• |
Financial policy: Neutral (no impact)
|
• |
Liquidity: Adequate (no impact)
|
• |
Management and governance: Fair (no impact)
|
• |
Comparable rating analysis: Neutral (no impact)
|
• |
General Criteria: Group Rating Methodology, July 1, 2019
|
• |
Criteria | Corporates | General: Corporate Methodology: Ratios And Adjustments, April 1, 2019
|
• |
General Criteria: Methodology For National And Regional Scale Credit Ratings, June 25, 2018
|
• |
Criteria | Corporates | General: Reflecting Subordination Risk In Corporate Issue Ratings, March 28, 2018
|
• |
Criteria | Corporates | General: Methodology And Assumptions: Liquidity Descriptors For Global Corporate
|
ICL Group Ltd.
|
Issuers, Dec. 16, 2014 |
• |
General Criteria: Methodology: Industry Risk, Nov. 19, 2013
|
• |
Criteria | Corporates |General: Corporate Methodology, Nov. 19, 2013
|
• |
General Criteria: Country Risk Assessment Methodology And Assumptions, Nov. 19, 2013
|
• |
General Criteria: Methodology: Management And Governance Credit Factors For Corporate Entities, Nov. 13, 2012
|
• |
General Criteria: Principles Of Credit Ratings, Feb. 16, 2011
|
Business And Financial Risk Matrix
| ||||||
Business Risk Profile
|
Financial Risk Profile
| |||||
Minimal
|
Modest
|
Intermediate
|
Significant
|
Aggressive
|
Highly leveraged
| |
Excellent
|
aaa/aa+
|
aa
|
a+/a
|
a-
|
bbb
|
bbb-/bb+
|
Strong
|
aa/aa-
|
a+/a
|
a-/bbb+
|
bbb
|
bb+
|
bb
|
Satisfactory
|
a/a-
|
bbb+
|
bbb/bbb-
|
bbb-/bb+
|
bb
|
b+
|
Fair
|
bbb/bbb-
|
bbb-
|
bb+
|
bb
|
bb-
|
b
|
Weak
|
bb+
|
bb+
|
bb
|
bb-
|
b+
|
b/b-
|
Vulnerable
|
bb-
|
bb-
|
bb-/b+
|
b+
|
b
|
b-
|
Ratings Detail (As Of June 23, 2021)*
| |
ICL Group Ltd.
| |
Issuer Credit Rating
| |
Foreign Currency
|
BBB-/Stable/--
|
Senior Unsecured
|
BBB-
|
Issuer Credit Ratings History
| |
27-Oct-2016 Foreign Currency
|
BBB-/Stable/--
|
20-Jun-2016
|
BBB/Watch Neg/--
|
29-Oct-2015
|
BBB/Negative/--
|
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Disclaimer
ICL - Israel Chemicals Ltd. published this content on 23 June 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 24 June 2021 18:30:02 UTC.