TEL-AVIV, Israel, November 24 /PRNewswire-FirstCall/ -- ICL (TASE:ICL), a multinational fertilizer and specialty chemicals company, today reported results for the third quarter and nine months ended September 30, 2009.
Financial Results for the Third Quarter
Revenues: Revenues for the third quarter of 2009 were $1,347 million, up 24% as compared sequentially with $1,083 million for the second quarter of 2009. Revenues for the third quarter of 2008 were $2,178 million, reflecting the exceptional demand and prices that characterized that “spike” year for the fertilizers industry. The steady sequential increase in sales may be an indication that ICL’s markets have begun to recover and that demand has begun a return to normal levels.
*Note: the Company’s gross profit, operating profit and net profit for Q3 and 2009 reflect several one-time events. Results including the influence of one-time events are presented in financial tables beginning on page 6 below. To provide investors with better insight into the Group’s operating performance, the following discussion relates to adjusted results that exclude these one-time provisions.
Gross profit: Gross profit for the third quarter of 2009 was $575 million, up 50% as compared sequentially with $382 million for the second quarter of 2009. Gross margin for the third quarter of 2009 was 42.7%, compared with 35.3% for the second quarter of 2009. Gross profit for the third quarter of 2008 was $1.2 billion, reflecting the extraordinary sales and 57.0% gross margin achieved during that “spike” year. The sequential increase in gross profit derived from the higher level of sales, together with a significant reduction in some input costs as compared with 2008 (especially sulfur and energy), countered partially by a reduction in the production of some of the Company’s products. Profitability was also enhanced by the period’s weakening of the shekel as compared to the dollar, which reduced shekel-based expenses as expressed in dollar terms.
Operating income: Operating income for the third quarter of 2009 was $357 million, up 87% as compared sequentially with $191 million for the second quarter of 2009. Operating margin for the third quarter of 2009 was 26.5%, compared with 17.6% for the second quarter of 2009. Operating income for the third quarter of 2008 was $963.6 million, with an Operating margin of 44.2%, both all-time records for the Company reflecting the year’s steep climb of fertilizer prices, which peaked during the third quarter.
The sequential increase in operating income during 2009 reflects the increased sales and gross profit, together with the combined effect of reduced shipping rates and overhead costs, which benefited both from the weakening of the shekel and the Company’s ongoing cost savings and efficiency efforts.
Net income: Net income to the Company’s shareholders for the third quarter of 2009 was $279 million, up 83% compared sequentially with $152 million in the second quarter of 2009. Net income for the third quarter of 2008 was $846 million, a record for the Company reflecting the year’s extraordinary fertilizer prices and profit levels.
Cash flow: Cash flow from operating activities for the first nine months of 2009 totaled $881 million. Cash flow from operating activities for the third quarter of 2009 totaled $242 million.
Debt: As of September 30, 2009, the Company’s net debt totaled $700 million, a reduction of $253 million compared to the end of 2008. Further, on September 9, 2009, the Company completed a successful placement of three series of debentures to institutional investors, raising NIS 898 million ($235 million). The Company’s ability to reduce its net debt and place its debentures despite the period’s challenging economic environment underscores its financial strength and stability.
Market Trends
- Grain inventory levels: Although inventories of grain, corn
and soy increased towards the end of 2008, global inventory
levels remain historically low. Current supplies represent
approximately 20% of annual demand.
- Grain & fertilizer market dynamics: Demand and prices for
both grain and fertilizers remain low compared to their levels in
mid-2008. However, they rose somewhat from their lowest points
during the first quarter of 2009 and have remained stable during the
second and third quarters.
- Fertilizer supply: With demand low and difficult to project,
many producers of potash and phosphate fertilizers curtailed production
during the nine months of 2009. During the third quarter, demand
increased in India and Brazil, and, to a lesser extent, in North
America and Western Europe. This may lead to a resumption of
production. With virtually unlimited storage capacity at the Dead Sea,
ICL has been able to continue manufacturing throughout this period of
reduced demand, taking advantage of the opportunity to stockpile
inventory.
- Fuel prices: The global financial crisis led to a reduction
in the price of energy which began in the third quarter of 2008.
As a result, the Company’s average prices paid for oil and fuel oil
during 2009 have been approximately 50% lower than their average
levels before the crisis.
Highlights of Core Business Segments
- ICL Fertilizers: sales for the third quarter of 2009 were $677 million, a 46% increase compared with the second quarter of 2009, representing 50.6% of total revenues (before offsets of inter-segment sales). The increase reflects the resumption of shipments to primary customers in India and an accelerated rate of shipments to Brazil. Operating income for the third quarter was $261 million, a 134% increase compared to the second quarter of 2009. Operating margin for the period was 38.6%. For the third quarter of 2008, revenues were $1,440 million and operating income was $799 million.
- ICL Industrial Products: sales for the third quarter of 2009 were $281 million, an increase of 13% compared to the second quarter of 2009, representing 21.0% of total revenues (before offsets of inter-segment sales). The increase reflects a rise in demand for the segment’s flame retardants and other products during the third quarter as compared to their levels in the fourth quarter of 2008 and the first half of 2009. Operating income for the third quarter was $26.7 million, an increase of 242% compared to the second quarter of 2009. This reflected the period’s higher sales, lower input costs, cost-savings efforts and the weakening of the dollar, countered partially by the curtailment of production made in response to low demand. For the third quarter of 2008, revenues were $342 million and operating income was $44 million.
- ICL Performance Products: sales for the third quarter of 2009 were $381 million, an increase of 15% compared to the second quarter of 2009, representing 28.5% of total revenues (before offsets of inter-segment sales). The increase reflects a rise in demand for some of the segment’s products and improved prices as compared to their levels in the fourth quarter of 2008 and the first half of 2009. Nonetheless, demand remains low as customers continue to draw down existing inventories, leading the segment to continuously re-evaluate its product pricing. Operating income for the quarter was $63 million, an increase of 24% compared with the second quarter of 2009, reflecting the higher sales and lower input costs (especially phosphoric acid). For the third quarter of 2008, revenues were $467 million and operating income was $122 million.
About ICL
ICL is one of the world’s leading fertilizer and specialty chemicals companies. For a world challenged by population growth and scarce resources, ICL makes products that increase global food and water supplies and improve industrial materials and processes.
ICL produces approximately a third of the world’s bromine and approximately 9% of its potash. ICL is a leading supplier of fertilizers in Europe and a major player in specialty fertilizer market segments. One of the world’s most integrated manufacturers and suppliers of phosphate products, ICL has become the world’s leading provider of pure phosphoric acid and a major specialty phosphate player.
ICL is comprised of three core segments: ICL Fertilizers, ICL Industrial Products and ICL Performance Products. Its major production activities are located in Israel, Europe, the US, South America and China, and are supported by major global marketing and logistics networks. ICL benefits from exclusive concessions to extract minerals from Israel’s Dead Sea, a vast source of high-quality and low-cost potash, bromine, magnesium chloride and sodium chloride. ICL also mines phosphate rock from Israel’s Negev Desert and potash and salt from its mines in Spain and the UK.
ICL’s shares are traded on the Tel Aviv Stock Exchange (TASE:ICL).
Forward Looking Statement
This press release contains forward-looking assessments and judgments regarding macro-economic conditions and the Group’s markets, and there is no certainty as to whether, when and/or at what rate these projections will materialize. Management’s projections are likely to change in light of market fluctuations, especially in ICL’s manufacturing locations and target markets. In addition, ICL is likely to be affected by changes in the demand and price environment for its products as well as the cost of shipping and energy, whether caused by actions of governments, manufacturers or consumers. ICL can also be affected by changes in the capital markets, including fluctuations in currency exchange rates, credit availability, interest rates, etc.
** During the reporting period, the Company’s gross profit, operating profit and net profit were affected by one-time charges and provisions including:
To facilitate meaningful comparisons between the Company’s operating results for all periods, the Company has presented adjusted gross profit, operating profit and net profit which exclude these one-time factors.
CONTACT: PRESS CONTACT: Fleisher Communications and Public Relations,
Amiram Fleisher, +972-3-6241241, amiram@fleisher-pr.com
