ICL : Reports Solid First Quarter 2020 Results

TEL AVIV, Israel, May 12, 2020 /PRNewswire/ -- ICL (NYSE: ICL) (TASE: ICL), a leading global specialty minerals and specialty chemicals company, today reported its financial results for the first quarter ended March 31, 2020.

Highlights for the First Quarter of 2020

• Sales of $1.32 billion compared to $1.42 billion in the first quarter of 2019, a decrease of 7%, mainly due to declines in potash and phosphate commodity prices.
• Operating income of $132 million despite low commodity prices, driven by strong performance of ICL's specialty businesses, compared to $227 million in the first quarter of 2019.
• Adjusted EBITDA of $250 million, a decrease of 29%.
• Achieved record first quarter potash production at ICL Dead Sea following successful completion of the facilities upgrade in the prior quarter.
• Operating cash flow of $166 million, compared to $173 million in the same quarter in the prior year.
• Declared a quarterly dividend of about $30 million, or approximately 50% of $60 million net income recorded in the quarter.

The results for the first quarter of 2020 were impacted by a continued decline in potash and phosphate commodity prices and the continued delay in the signing of a potash supply contract in China, which has since been signed. The strong performance of ICL's specialty businesses partly offset the weaker commodity results. The emergence of the COVID-19 pandemic impacted operations but did not have a material impact on financial results.

ICL's President & CEO, Raviv Zoller, stated "The resilience of ICL's diversified business portfolio is reflected in the financial performance achieved even in difficult market conditions. In the first quarter of 2020, when potash and phosphate commodity prices fell to what we believe are cyclically low levels, our results were supported by record operating income in our Industrial Products segment and by strong sales of specialty phosphates. Our continued emphasis on a value-based strategy resulted in continued strong cash generation. The COVID-19 pandemic has created a new, unprecedented challenge that will affect our results in the short term. We are taking appropriate measures to further enhance our operational efficiency to mitigate the impact of the pandemic on our business, including new cross-segment cost efficiency initiatives. We believe ICL's strong financial position, diversified business and dominant position in key markets will also act as a buffer against expected market challenges and allow us to continue to pursue timely growth opportunities."

STATEMENT REGARDING COVID-19

The COVID-19 pandemic did not have a notable impact on ICL's financial performance in the first quarter of 2020, although it is anticipated that 2020 annual results could be impacted. There has been a significant decline in global economic activity due in part to preventative measures taken by various government organizations around the world, many of which are ongoing. We believe this will result in a decline in demand for certain flame retardants products of the Industrial Products segment. The significant decline in crude oil prices, related to COVID-19, is also expected to result in decreased demand for clean brine fluids, which are used in oil and gas production.

ICL has worked rapidly to ensure the health and safety of its employees, business partners and the communities in which we operate. ICL's global response was influenced by the early experience at its facilities in China, as mitigation efforts began in January when the spread of the pandemic was in its initial stage. As a provider of products and materials essential to food production and other industries. ICL's facilities have been operating at full capacity, except for our mining operations in the UK, which are currently operating at about 70% of capacity, and our mining operations in Spain, which were temporarily halted for 3 weeks, but have since been resumed at about 60% of capacity. ICL continues to gradually ramp up production in both sites, while ensuring the health and safety of its employees and complying with local regulations.

As a direct response to the pandemic, ICL drew funds from its credit facilities to increase its cash and deposit balances.  This was done to ensure the company would have significant flexibility to operate in a volatile business environment, as well as to seize opportunities.  As of March 31, 2020, ICL had total liquidity of $1.1 billion, including $524 million in cash and deposits and $590 million in unutilized credit facilities.

Financial Figures and Non-GAAP Financial Measures

 

	1-3/2020		1-3/2019		1-12/2019
	$ millions	% of sales	$ millions	% of sales	$ millions	% of sales
Sales	1,319	-	1,415	-	5,271	-
Gross profit	400	30	501	35	1,817	34
Operating income	132	10	227	16	756	14
Adjusted operating income (1)	132	10	241	17	760	14
Net income - shareholders of the Company	60	5	139	10	475	9
Adjusted net income - shareholders of the Company (1)	60	5	150	11	479	9
Diluted earnings per share (in dollars)	0.05	-	0.11	-	0.37	-
Diluted adjusted earnings per share (in dollars) (2)	0.05	-	0.12	-	0.37	-
Adjusted EBITDA (2)	250	19	350	25	1,198	23
Cash flows from operating activities	166	-	173	-	992	-
Purchases of property, plant and equipment and intangible assets (3)	139	-	131	-	576	-
(1)  See "Adjustments to reported operating and net income (Non-GAAP)" and corresponding disclaimer below.
(2)  See "Adjusted EBITDA and Diluted Adjusted Earnings Per Share for the periods of activity" below.
(3)  See "Condensed consolidated statements of cash flows (unaudited)" to the financial statements.

 

Consolidated Results Analysis

 

Results analysis for the period January – March 2020
	Sales	Expenses	Operating income
	$ millions
Q1 2019 figures	1,415	(1,188)	227
Total adjustments Q1 2019*	-	14	14
Adjusted Q1 2019 figures	1,415	(1,174)	241
Quantity	16	(11)	5
Price	(96)	-	(96)
Exchange rates	(16)	4	(12)
Raw materials	-	31	31
Energy	-	-	-
Transportation	-	3	3
Operating and other expenses	-	(40)	(40)
Adjusted Q1 2020 figures	1,319	(1,187)	132
Total adjustments Q1 2020*	-	-	-
Q1 2020 figures	1,319	(1,187)	132

^{* See "Adjustments to reported operating and net income (Non-GAAP)" and corresponding disclaimer below.}

-  Quantity – The positive impact on operating income was primarily related to an increase in the quantities sold of phosphate fertilizers, clear brine fluids, phosphorus-based flame retardants and acids. This was partially offset by a decrease in the quantities sold of phosphate rock and dairy proteins.

-  Price – The negative impact on operating income was primarily related to a $44 decrease in the average realized price per tonne of potash compared to the same quarter last year, the downward price adjustment with respect to certain potash quantities sold during 2019, in line with the recent supply contracts in China and a decrease in the selling prices of phosphate fertilizers and green phosphoric acid.

-  Exchange rates – The negative impact on operating income was primarily related to the appreciation of the average exchange rate of the shekel against the dollar, which increased operational costs. In addition, the devaluation of the average exchange rate of the euro against the dollar, decreased revenues by more than it contributed to operational cost-savings.

-  Raw materials – The positive impact of raw materials prices on operating income was primarily related to lower prices of sulphur consumed during the quarter.

-  Operating and other expenses - The negative impact on operating income was primarily related to capital gains recorded in the same quarter last year due to the sale and leaseback of office buildings in Israel, higher depreciation expenses and inventory write-offs, as well as higher operational costs in Spain and the UK due to reduced production as a result of COVID-19 pandemic disruption.

Financing expenses, net

Net financing expenses in the first quarter of 2020 amounted to $52 million, compared to $35 million in the same quarter last year, an increase of $17 million.

The increase relates mainly to losses from hedging transactions in the amount of $46 million, affected by the volatile business environment during the quarter, which includes a sharp decrease in energy and dry bulk shipping prices, a decrease in the USD interest rate curve and exchange rate fluctuations.

On the other hand, expenses related to long-term employee benefits provisions and long-term lease revaluation according to IFRS16 decreased by $25 million, mainly due to the shekel depreciation against the dollar at the end of the quarter. In addition, interest expenses decreased by $5 million due to a decrease in the average debt balance and the average interest rate.

Tax expenses

Tax expenses in the first quarter of 2020 and in the first quarter of 2019 amounted to $20 million and $51 million, reflecting an effective tax rate of about 25% and 27%, respectively. The Company's tax rate in the first quarter of 2020 was positively affected by the devaluation of the shekel against the dollar in the first quarter, while the tax rate in the corresponding quarter last year was negatively affected by the appreciation of the shekel against the dollar.

REVIEW OF OPERATING SEGMENTS

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, phosphorous-based flame retardants and functional fluids.

Segment sales in the first quarter of 2020 increased year-over-year by 4%, driven by strong sales in most product lines, including record sales of clear brine fluids. Operating income reached a quarterly record of $103 million, with an operating margin of 28%. Despite the year over year decrease in bromine prices in China, the segment's strategic shift to long-term contracts, its diverse portfolio and an increase in the selling prices of specialty minerals to the food and pharma markets led to a $3 million contribution from prices, adding to the $10 million contribution from sales volumes compared to the corresponding quarter last year.

Highlights and business environment

• During the first quarter of 2020, market prices of elemental bromine in China remained flat sequentially and were lower compared to the corresponding quarter last year, during which prices were significantly high.
• Sales of elemental bromine remained at the same level of the first quarter of 2019.
• Global demand for bromine-based flame retardants remained stable during the first quarter of 2020 and ICL's sales of bromine-based flame retardants remained at the same level as the corresponding quarter last year.
• Clear brine fluids sales increased in the first quarter of 2020 compared to the corresponding quarter last year, driven by higher activity in the Gulf of Mexico, the North Sea and Guyana. The recent drop in oil prices, in part due to the COVID-19 pandemic, is expected to reduce drilling operations, which, in turn, could negatively impact demand for clear brine fluids.
• Phosphorus-based flame retardants sales were higher compared to the corresponding quarter last year, partially due to a decrease in supply from China, following shutdown of chemical plants as a result of the COVID-19 pandemic.
• Higher sales prices and volumes resulted in an increase of specialty minerals sales compared to the corresponding quarter, mainly due to strong demand in the food and pharma markets.
• Due to the ongoing impact of the COVID-19 pandemic, sales in the second quarter of 2020 are expected to decrease, mainly due to substantially lower expected demand for clear brine fluids (due to the decrease in oil prices) and certain flame retardants to the automotive, building and construction industries, as well as uncertainty regarding demand for consumer products.

 

Results of Operations
	1-3/2020	1-3/2019
	$ millions	$ millions
Total Sales	364	350
Sales to external customers	361	347
Sales to internal customers	3	3
Segment profit	103	97
Depreciation and Amortization	17	16
Capital Expenditures*	21	19

^{* 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 January - March 2020
	Sales	Expenses	Operating income
	$ millions
Q1 2019 figures	350	(253)	97
Quantity	14	(4)	10
Price	3	-	3
Exchange rates	(3)	-	(3)
Raw materials	-	(2)	(2)
Energy	-	1	1
Transportation	-	(1)	(1)
Operating and other expenses	-	(2)	(2)
Q1 2020 figures	364	(261)	103

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 and sells Polysulphate® from its Boulby mine in the UK as well as salt and magnesium produced in the Dead Sea in Israel.

The Potash segment's sales decreased by 18% and operating income decreased by 82% in the first quarter of 2020 compared to the same period in the prior year. Business performance was negatively impacted mainly by a $44 decrease in the average potash realized price per tonne, as well as the downward price adjustment of $12 million with respect to certain quantities of potash sold during 2019, subject to an open price condition, in line with the recent potash supply contracts in China and higher operational costs, mostly due to production challenges related to the COVID-19 pandemic. The increased production in Israel was offset by lower production at ICL Iberia, mainly due to the COVID-19 pandemic operations disruption. Potash sales quantities were 18 thousand tonnes lower than in the same quarter last year, primarily due to a decrease in potash sales to China and US, partly offset by increased sales to Europe, Brazil and India. In addition, some projects, including the ramp (access tunnel) project in Spain, were temporarily halted following a force majeure notice issued by external contractors due to the COVID-19 pandemic.

Highlights and business environment

• Despite operational and logistical constraints related to the ongoing spread of COVID-19 pandemic, that impacted most global sectors, the segment's operations were not disrupted during most of the quarter. Furthermore, most governmental organizations deemed the agriculture market to be a provider of essential services. Towards the end of the quarter, the segment experienced a temporary suspension of operations in Spain, so as to maintain the health and safety of our employees, as well as delays in some projects due to reasons related to our external contractors. At this stage we estimate that the impact of COVID-19 on the segment's business performance in the second quarter will be between $10 to $20 million, until all of our production facilities in Spain and UK (re UK, see below) will fully ramp up.
• Potash spot prices continued to decrease during the first quarter of 2020 across global markets, due to high availability and due to the delay in the signing of new contracts in China and India. In late April 2020, a potash supply contract with Chinese customers was signed, at $220/tonne, a $70/tonne decline compared to the previous contract signed in September 2018. During May 2020, ICL signed contracts with its customers in China, to supply 910 thousand tonnes (with additional 490 thousand tonnes optional quantities) of potash by the end of 2020, at a price of $70/tonne below the previous contracts. In accordance, in the first quarter of 2020, we updated the price related to certain of our 2019 potash sales subject to an open price condition, resulting in a $12 million downward adjustment.
• According to CRU (Fertilizer Week Historical Prices, April 2020), the average price of granular potash imported to Brazil was $245 per tonne (CFR spot) in the first quarter of 2020, a decrease of 16.5% sequentially and 30.3% year-over-year. According to Brazil's customs data, potash imports to Brazil reached about 1.6 million tonnes in the first quarter of 2020, a decrease of approximately 16% compared to the same quarter last year.
• According to CRU (Fertilizer Week Historical Prices, April 2020), the average price of standard potash imported to Southeast Asia was $258 per tonne (CFR spot) in the first quarter of 2020, a decrease of 7% sequentially and 14.6% year-over-year.
• According to CRU (Fertilizer Week Historical Prices, April 2020) the average price of granular potash imported to Northwest Europe was €255 per tonne (CIF spot/contract) in the first quarter of 2020, a decrease of 6.5% sequentially and 13.5% year-over-year.
• According to Chinese customs data, potash imports to China in the first quarter of 2020 amounted to 2.07 million tonnes, a decrease of about 30% over the same quarter last year.  
• According to the FAI (Fertilizer Association of India), potash imports to India amounted to 0.7 million tonnes in the first quarter of 2020, a decrease of 36% compared to the same quarter last year.
• Market conditions led several major manufacturers, including Nutrien (Canada) and Mosaic (USA), to continue idling some of their production sites.
• Following the upgrade of ICL's Dead Sea facilities in the fourth quarter of 2019, ICL Dead Sea reached its best ever first quarter production.
• Due to the COVID-19 pandemic and out of concern for the health and well-being of our employees, starting on the last week of March, the production operations of ICL Iberia were temporarily halted. The Company renewed its operations at about 60% of production capacity and plans to continue to gradually increase production while maintaining the health and safety of the employees. Furthermore, construction of the ramp (access tunnel) to the Cabanasses mine was temporarily halted due to a force majeure notice issued by the external contractor. As a result, site consolidation completion is rescheduled to the beginning of 2021.
• ICL's new designated facility in the port of Barcelona started operations during the quarter and the first vessel was loaded in February 2020.
• Production of Polysulphate® increased by 34% to 177 thousand tonnes and sales increased by 3% to 136 thousand tonnes compared to the first quarter of 2019. Due to the COVID-19 pandemic and out of concern for the health and the wellbeing of ICL's employees, logistical and operational restrictions were implemented in ICL Boulby in the UK, starting in the last week of March, lowering production to about 70% of capacity.

 

Results of Operations
	1-3/2020	1-3/2019
	$ millions	$ millions
Total sales	314	384
Potash sales to external customers	226	275
Potash sales to internal customers	23	23
Other and eliminations*	65	86
Gross profit	96	166
Segment profit	14	79
Depreciation and Amortization	39	39
Capital Expenditures**	61	159
Average realized price (in $)***	250	294

^{* Primarily includes salt produced in underground mines in the UK and Spain, Polysulphate® and Polysulphate®-based products, magnesium-based products and sales of electricity produced in Israel.}

^{** For information regarding the effect of IFRS 16 implementation on 2019 capital expenditures, see "Note 3 – Operating segments" of the 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 marine transportation costs.}

 

Potash – Production and Sales
Thousands of tonnes	1-3/2020	1-3/2019
Production	1,145	1,148
Total sales (including internal sales)	996	1,014
Closing inventory	563	519

 

Results analysis for the period January – March 2020
	Sales	Expenses	Operating income
	$ millions
Q1 2019 figures	384	(305)	79
Quantity	(17)	15	(2)
Price	(51)	-	(51)
Exchange rates	(2)	(2)	(4)
Energy	-	1	1
Transportation	-	3	3
Operating and other expenses	-	(12)	(12)
Q1 2020 figures	314	(300)	14

 

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 and operating income decreased by 7% and 74%, respectively, year-over-year, mainly due to a sharp decrease in phosphate commodity market prices, that was partially offset by lower raw materials prices. Operating income was also negatively impacted by higher depreciation expenses and by the unfavorable impact of exchange rates due to the appreciation of the shekel against the dollar and the devaluation of the euro and the Chinese yuan against the dollar. The resilience of the segment was driven by strong phosphates specialties performance and continuous positive operating profit from the YPH JV in China despite market headwinds and challenges faced during the quarter related to the COVID-19 pandemic.

Sales of phosphate specialties and dairy proteins amounted to $279 million, approximately 2% lower than the first quarter of 2019. The overall decrease in specialty products sales was driven by lower demand for dairy proteins, as well as the devaluation of the euro against the US dollar.

Sales of phosphate commodities amounted to $223 million, approximately 12% lower than the first quarter of 2019, mostly due to a decline of over 25% in market sales prices of phosphate fertilizers, which more than offset the increase in sales volumes of phosphate fertilizers.

Highlights and business environment

• Despite the logistical and operational restrictions that were imposed in certain countries due to the ongoing spread of the COVID-19 pandemic, global phosphate specialties and commodities markets were not significantly disrupted during the quarter. Furthermore, these markets were deemed to be essential in most regions. Despite the pandemic spreading in China, our YPH JV operated throughout the quarter with no major disruptions. The robust and diversified customer portfolio and wide geographic reach of ICL's phosphate specialties business, as well as strong global demand for food products, prevented a material impact on business performance in the first quarter of 2020. At this stage, we do not expect significant impact on the segment's results in the second quarter, though the full effect of the pandemic on the global economy and our business is uncertain, and it may be difficult to assess or predict.
• Revenues of phosphate salts increased moderately compared to the corresponding quarter last year, mainly driven by higher prices of food-grade phosphates in the Americas. Industrial salts' volumes increased in Europe and in China at stable prices.
• Phosphoric acid revenues increased compared to the first quarter last year. Revenues in Europe were higher than in the first quarter last year due to increased volumes. Revenues in South America increased driven by higher sales volumes throughout the continent, primarily to large strategic customers. The competitive business environment in Europe and in North and South America resulted in lower market prices. The acid market in China, was impacted by the COVID-19 pandemic, which resulted in tight supply due to manufacturing and logistics restrictions. The pandemic led to lower demand and lower product availability but also to higher market prices.
• The new WPA food-grade plant in China is ramping up and still in testing mode. The plant is expected to add 70 thousand tonnes of food-grade acid production capacity, once fully ramped up, and is scheduled to begin producing commercial food-grade acid towards the second half of 2020.
• Dairy protein revenues were weaker compared to the first quarter last year, driven by decreased customer demand due to the softening of the infant formula market in China. ICL continues to focus on expanding its global leadership position in the organic cow and goat ingredients market for high end applications.
• According to CRU (Fertilizer Week Historical Prices, April 2020), the average price of DAP in the first quarter of 2020 (CFR India Spot) amounted to $302/tonne, a decrease of 5% compared to the fourth quarter of 2019 and 25% compared to the first quarter of 2019. In the first quarter of 2020, the average price of TSP (CFR Brazil Spot) amounted to $252/tonne, a decrease of 6% compared to the fourth quarter of 2019 and 28% compared to first quarter of 2019. The average price of SSP (CPT Brazil inland 18-20% P₂O₅ Spot) amounted to $185/tonne, a decrease of 10% compared to the fourth quarter of 2019 and 23% compared to the first quarter of 2019.
• The average price of sulphur in the first quarter of 2020 (bulk FOB Adnoc monthly contract) amounted to $44/tonne, a decrease of 5% compared to the fourth quarter of 2019 and 62% compared to the first quarter of 2019.
• As part of the Company's strategy to divest low synergy businesses and non-core business activities, in April 2020, the Company entered into an agreement with Solina Corporate SAS to sell Hagesüd Interspice Gewürzwerke GmbH's, including related real-estate assets. The closing date of the transaction is expected to occur during the second quarter of 2020. As at March 31, 2020, the net book value of the assets is about $36 million. No material impact on the Company's financial statements is expected from the said transaction.  

 

 

Results of Operations
	1-3/2020	1-3/2019
	$ millions	$ millions
Total Sales	502	537
Sales to external customers	483	514
Sales to internal customers	19	23
Segment profit	9	35
Depreciation and Amortization	49	43
Capital Expenditures*	61	143

^{* 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 January - March 2020
	Sales	Expenses	Operating income
	$ millions
Q1 2019 figures	537	(502)	35
Quantity	17	(13)	4
Price	(43)	-	(43)
Exchange rates	(9)	6	(3)
Raw materials	-	26	26
Energy	-	(2)	(2)
Transportation	-	-	-
Operating and other expenses	-	(8)	(8)
Q1 2020 figures	502	(493)	9

 

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 and the United States. ICL IAS segment markets its products worldwide, mainly in Europe, Asia, North America, Brazil and Israel.

The IAS segment's sales decreased by 3% year-over-year, driven by lower sales volumes due to unfavorable weather conditions, decreases in demand in the turf and ornamental markets due to the COVID-19 pandemic, lower sales of third-party products and unfavorable dollar-euro exchange rates. However, operating income increased by 8% to $14 million year-over-year, due to lower cost of raw materials and internal cost efficiency initiatives.

Highlights and business environment

• Sales of specialty fertilizers in the first quarter of 2020 were lower than in the corresponding quarter last year, mainly due to unfavorable exchange rates and delay in season start.
• Lower costs of raw materials and the successful implementation of efficiency and cost reduction initiatives contributed to the increase in operating margin compared to the first quarter of 2019.
• Sales to the specialty agriculture market were lower compared to the corresponding quarter due to unfavorable dollar-euro exchange rates and adverse weather conditions, mainly in Spain. This was partly offset by higher sales volumes of straight fertilizers, mainly MKP and peKacid, together with higher sales to emerging markets, including China (high demand since mid‑March) and Turkey. Sales in Israel were stable compared to the corresponding quarter.
• Sales to the Turf & Ornamental (T&O) market were lower compared to the corresponding quarter last year, mainly due to impacts of the COVID-19 pandemic quartering March. Sports grounds and garden centers all over Europe are closed, and we expect, at this stage and given the current environment, that it will continue to impact the T&O market in the near term.
• As part of ICL's goal to further enhance its digital capabilities and accelerate its global development roadmap, in February 2020, the Company acquired Growers Holdings, Inc., an innovator in the field of process and data-driven farming for a total consideration of $27 million. Growershas developed a platform that processes and analyzes data that is collected manually or through machine-generated farm data into focused plans that enhance decision-making capabilities for farmers, agronomists and other agro-professionals.

 

 

Results of Operations
	1-3/2020	1-3/2019
	$ millions	$ millions
Total Sales	199	205
Sales to external customers	196	199
Sales to internal customers	3	6
Segment profit	14	13
Depreciation and Amortization	5	5
Capital Expenditures*	3	11

^{* 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 January – March 2020
	Sales	Expenses	Operating income
	$ millions
Q1 2019 figures	205	(192)	13
Quantity	(3)	1	(2)
Price	(1)	-	(1)
Exchange rates	(2)	2	-
Raw materials	-	3	3
Energy	-	-	-
Transportation	-	-	-
Operating and other expenses	-	1	1
Q1 2020 figures	199	(185)	14

 

Dividend Distribution

In connection with ICL's first quarter 2020 results, the Board of Directors declared a dividend of 2.3 cents per share or about $30 million in the aggregate. The dividend will be paid on June 17, 2020.  The record date is June 3, 2020.

In the event of any discrepancy between the information provided herein and the Company's financial statements filed with the SEC, the reader should refer to the filed financial information as definitive.

About ICL

ICL GROUP LTD, formerly known as Israel Chemicals Limited, is a global specialty minerals and chemicals company operating bromine, potash and phosphate mineral value chains in a unique, integrated business model. ICL extracts raw materials from well-positioned mineral assets and utilizes technology and industrial know-how to add value for customers in key agricultural and industrial markets worldwide. ICL focuses on strengthening leadership positions in all of its core value chains. It also plans to strengthen and diversify its offerings of innovative agro solutions by leveraging ICL's existing capabilities and agronomic know-how, as well as the Israeli technological ecosystem.

Our operations are organized under four segments: Industrial Products, Potash, Phosphate Solutions and Innovative Ag Solutions.

ICL shares are dually listed on the New York Stock Exchange and the Tel Aviv Stock Exchange (NYSE and TASE: ICL). The Company employs more than 11,000 people worldwide, and its sales in 2019 totaled approximately $5.3 billion. For more information, visit the Company's website at www.icl-group.com[1].

Appendix:

 

Condensed Consolidated Statements of Income (Unaudited) (In millions except per share data)
	For the three-month period ended		For the year ended
	March 31, 2020	March 31, 2019	December 31, 2019
	$ millions	$ millions	$ millions
Sales	1,319	1,415	5,271
Cost of sales	919	914	3,454
Gross profit	400	501	1,817
Selling, transport and marketing expenses	188	195	767
General and administrative expenses	64	63	254
Research and development expenses	14	13	50
Other expenses	2	16	30
Other income	-	(13)	(40)
Operating income	132	227	756
Finance expenses	73	79	220
Finance income	(21)	(44)	(91)
Finance expenses, net	52	35	129
Share in earnings of equity-accounted investees	1	-	1
Income before income taxes	81	192	628
Provision for income taxes	20	51	147
Net income	61	141	481
Net income attributable to the non-controlling interests	1	2	6
Net income attributable to the shareholders of the Company	60	139	475
Earnings per share attributable to the shareholders of the Company:
Basic earnings per share (in dollars)	0.05	0.11	0.37
Diluted earnings per share (in dollars)	0.05	0.11	0.37
Weighted-average number of ordinary shares outstanding:
Basic (in thousands)	1,279,647	1,278,283	1,278,950
Diluted (in thousands)	1,280,168	1,282,689	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)
	March 31, 2020	March 31, 2019	December 31, 2019
	$ millions	$ millions	$ millions
Current assets
Cash and cash equivalents	434	103	95
Short-term investments and deposits	90	80	96
Trade receivables	939	1,071	778
Inventories	1,256	1,254	1,312
Other receivables	412	271	403
Total current assets	3,131	2,779	2,684
Non-current assets
Investments at fair value through other comprehensive income	100	201	111
Deferred tax assets	102	83	109
Property, plant and equipment	5,316	5,064	5,331
Intangible assets	652	664	652
Other non-current assets	247	326	286
Total non-current assets	6,417	6,338	6,489
Total assets	9,548	9,117	9,173
Current liabilities
Short-term credit	606	638	420
Trade payables	757	616	712
Provisions	43	36	42
Other current liabilities	637	649	587
Total current liabilities	2,043	1,939	1,761
Non-current liabilities
Long-term debt and debentures	2,353	2,072	2,181
Deferred tax liabilities	336	303	341
Long-term employee liabilities	522	524	575
Provisions	198	227	202
Other non-current liabilities	62	16	52
Total non-current liabilities	3,471	3,142	3,351
Total liabilities	5,514	5,081	5,112
Equity
Total shareholders' equity	3,903	3,897	3,925
Non-controlling interests	131	139	136
Total equity	4,034	4,036	4,061
Total liabilities and equity	9,548	9,117	9,173

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

Condensed Consolidated Statements of Cash Flows (Unaudited)
	For the three-month period ended		For the year ended
	March 31, 2020	March 31, 2019	December 31, 2019
	$ millions	$ millions	$ millions
Cash flows from operating activities
Net income	61	141	481
Adjustments for:
Depreciation and amortization	118	111	443
Reversal of impairment losses on fixed assets	-	-	(10)
Exchange rate and interest expenses, net	31	54	153
Share in earnings of equity-accounted investees	(1)	-	(1)
Loss from divestiture of businesses	2	-	-
Capital gain	-	(12)	(12)
Share-based compensation	3	2	12
Deferred tax expenses	6	41	67
	159	196	652
Change in inventories	28	13	(72)
Change in trade receivables	(186)	(82)	199
Change in trade payables	71	(81)	(58)
Change in other receivables	(6)	25	5
Change in other payables	64	(40)	(194)
Change in employee benefits	(25)	1	(21)
Net change in operating assets and liabilities	(54)	(164)	(141)
Net cash provided by operating activities	166	173	992
Cash flows from investing activities
Proceeds (investments) in deposits, net	12	14	(2)
Business combinations, net of cash acquired	(27)	-	-
Purchases of property, plant and equipment and intangible assets	(139)	(131)	(576)
Dividends from equity-accounted investees	1	-	3
Proceeds from sale of property, plant and equipment	-	35	50
Net cash used in investing activities	(153)	(82)	(525)
Cash flows from financing activities
Dividends paid to the Company's shareholders	(23)	(61)	(273)
Payments from transactions in derivatives used for hedging	(16)	-	-
Receipt of long-term debt	522	240	657
Repayment of long-term debt	(143)	(270)	(689)
Short-term credit from banks and others, net	(9)	(18)	(183)
Other	-	-	(2)
Net cash provided by (used in) financing activities	331	(109)	(490)
Net change in cash and cash equivalents	344	(18)	(23)
Cash and cash equivalents as at the beginning of the period	95	121	121
Net effect of currency translation on cash and cash equivalents	(5)	-	(3)
Cash and cash equivalents as at the end of the period	434	103	95

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited) (cont'd)
Additional Information
	For the three-month period ended		For the year ended
	March 31, 2020	March 31, 2019	December 31, 2019
	$ millions	$ millions	$ millions
Income taxes paid, net of refunds	10	23	120
Interest paid	20	21	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.  

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. 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.

 

 

Adjustments to reported operating and net income (Non-GAAP)
		1-3/2020		1-3/2019		1-12/2019
		$ millions		$ millions		$ millions
Operating income		132		227		756
(Reversal of) impairment losses on fixed assets (1)		-		-		(10)
Provision for legal proceedings (2)		-		14		7
Provision for prior periods waste removal and site closure costs (3)		-		-		7
Total adjustments to operating income		-		14		4
Adjusted operating income		132		241		760
Net income attributable to the shareholders of the Company		60		139		475
Total adjustments to operating income		-		14		4
Total tax impact of the above operating income & finance expenses adjustments		-		(3)		-
Total adjusted net income - shareholders of the Company		60		150		479

 

1. In 2019, due to an agreement for the sale of assets, a partial reversal of impairment loss related to assets in Germany which was incurred in 2015.
2. In 2019, an increase of the provision in connection with the finalization of the royalties' arbitration in Israel relating to prior periods, which was partly offset by a decrease in the provision relating to legal claims in Spain.
3. In 2019, an increase of the provision for the Sallent site closure costs as part of the restoration solution, together with an increase of the provision for the removal of prior periods waste in bromine production facilities in Israel.

 

 

Consolidated adjusted EBITDA and diluted adjusted Earnings Per Share for the periods of activity
Calculation of adjusted EBITDA was made as follows:
	01/03/2020	01/03/2019	01/12/2019
	$ millions	$ millions	$ millions
Net income attributable to the shareholders of the Company	60	139	475
Depreciation and Amortization	118	111	443
Financing expenses, net	52	35	129
Taxes on income	20	51	147
Adjustments*	-	14	4
Total adjusted EBITDA	250	350	1,198

^{* See "Adjustments to reported operating and net income (Non-GAAP)" above.}

 

Calculation of diluted adjusted earnings per share was made as follows:
	1-3/2020	1-3/2019	1-12/2019
	$ millions	$ millions	$ millions
Net income - shareholders of the Company	60	139	475
Adjustments*	-	14	4
Total tax impact of the above operating income & finance expenses adjustments	-	(3)	-
Adjusted net income - shareholders of the Company	60	150	479
Weighted-average number of diluted ordinary shares outstanding (in thousands)	1,280,168	1,282,689	1,282,056
Diluted adjusted earnings per share (in dollars)**	0.05	0.12	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).}

 

Operating Segments
	Industrial Products	Potash	Phosphate Solutions	Innovative Ag Solutions	Other Activities	Reconciliation	Consolidated
	$ millions
For the three months period ended March 31, 2020
Sales to external parties	361	271	483	196	8	-	1,319
Inter-segment sales	3	43	19	3	-	(68)	-
Total sales	364	314	502	199	8	(68)	1,319
Segment profit	103	14	9	14	-	(8)	132
Operating income							132
Financing expenses, net							(52)
Share in earnings of equity-accounted investees							1
Income before income taxes							81
Capital expenditures as part of business combination	-	-	-	-	27	-	27
Capital expenditures	21	61	61	3	4	1	151
Depreciation, amortization and impairment	17	39	49	5	7	1	118

 

Operating Segments (cont'd)

	Industrial Products	Potash	Phosphate Solutions	Innovative Ag Solutions	Other	Reconciliation	Consolidated
					Activities
	$ millions
For the three-month period ended March 31, 2019
Sales to external parties	347	346	514	199	9	-	1,415
Inter-segment sales	3	38	23	6	-	(70)	-
Total sales	350	384	537	205	9	(70)	1,415
Segment profit	97	79	35	13	13	4	241
Other expenses not allocated to the segments							(14)
Operating income							227
Financing expenses, net							(35)
Income before income taxes							192
Implementation of IFRS 16	6	95	103	7	86	9	306
Capital expenditures	13	64	40	4	-	2	123
Depreciation, amortization and impairment	16	39	43	5	6	2	111

Operating Segments (cont'd)

Information based on geographical location

The following table presents the distribution of the operating segments sales by geographical location of the customer:

 

	01/03/2020		01/03/2019
	$	% of	$	% of
	millions	sales	millions	sales
USA	232	18	245	17
China	141	11	205	14
United Kingdom	116	9	122	9
Germany	101	8	100	7
Brazil	94	7	98	7
Spain	72	5	73	5
France	65	5	59	4
Israel	59	4	54	4
India	48	4	43	3
Italy	37	3	35	2
All other	354	26	381	28
Total	1,319	100	1,415	100

Operating Segments (cont'd)

Information based on geographical location (cont'd)

The following table presents the distribution of the operating segments sales by geographical location of the customer:

 

	Industrial Products	Potash	Phosphate Solutions	Innovative Ag Solutions	Other	Reconciliation	Consolidated
					Activities
	$ millions
For the three months period ended March 31, 2020
Europe	127	148	188	107	8	(18)	560
Asia	106	65	108	32	-	(3)	308
North America	107	19	98	26	-	(1)	249
South America	11	34	62	5	-	-	112
Rest of the world	13	48	46	29	-	(46)	90
Total	364	314	502	199	8	(68)	1,319

 

 

	Industrial Products	Potash	Phosphate Solutions	Innovative Ag Solutions	Other	Reconciliation	Consolidated
					Activities
	$ millions
For the three-month period ended March 31, 2019
Europe	135	137	202	113	8	(19)	576
Asia	99	121	123	30	-	(5)	368
North America	91	46	97	28	-	-	262
South America	10	35	67	5	-	-	117
Rest of the world	15	45	48	29	1	(46)	92
Total	350	384	537	205	9	(70)	1,415

 

The following table sets forth sales by geographical regions based on the location of the customers:

	01/03/2020		01/03/2019
	$	% of	$	% of
	millions	Sales	millions	Sales
Europe	560	42	576	41
Asia	308	23	368	26
North America	249	19	262	19
South America	112	8	117	8
Rest of the world	90	8	92	6
Total	1,319	100	1,415	100

-  Europe – The decrease primarily relates to a decrease in the selling prices of phosphate fertilizers, potash and green phosphoric acid, a decrease in the quantities of phosphate rock sold, together with the negative impact of the devaluation of the average exchange rate of the euro against the dollar. The decrease was partly offset by higher sales volumes of potash, green phosphoric acid, clear brine fluids and acids.

-  Asia – The decrease primarily relates to a decrease in the selling prices and quantities of potash sold, a decrease in the selling prices of phosphate fertilizers, together with a decrease in quantities sold of green phosphoric acid, dairy proteins and phosphate rock. The decrease was partly offset by an increase in the quantities of phosphate fertilizers sold.  

-  North America – The decrease primarily relates to a decrease in the quantities sold of potash and magnesium, partly offset by an increase in the quantities sold of phosphorus-based flame retardants and clear brine fluids.

-  South America – The decrease primarily relates to a decrease in the selling prices of potash and a decrease in the quantities of phosphate fertilizers sold. The decrease was partly offset by an increase in the quantities of potash sold.

-  Rest of the world – The decrease primarily relates to a decrease in the quantities of dairy proteins sold.

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; ongoing COVID-19, 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 first 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"), 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, 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 up to the publication date of the Press Release.

^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.

INVESTOR RELATIONS CONTACT  
Dudi Musler   
Investor Relations Manager  
[phone]    
[e-mail]

PRESS CONTACT
Adi Bajayo
Scherf Communications
[phone]
[e-mail]

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SOURCE ICL