ICL Reports Early Publication Of Its Q4 And 2013 Results
February 12, 2014 (Source: PRNewswire) — ICL (TASE:ICL), a global manufacturer of products based on unique minerals that fulfill humanity’s essential needs in the agriculture, food and engineered materials markets, today reported its early publication of unaudited financial results for the fourth quarter and full year ended December 31, 2013.
Revenues: For the fourth quarter of 2013, sales totaled $1.42 billion, a 9% increase compared with $1.3 billion in the fourth quarter of 2012, reflecting an increase in quantities sold, primarily to China and India, as well as revenues derived from recent acquisitions.
For the full year 2013, ICL’s sales totaled $6.27 billion compared with $6.47 billion in 2012. The decrease derived primarily from lower selling prices.
Gross profit: Gross profit for the fourth quarter totaled $527 million compared with $501 million in the fourth quarter of 2012. The increase, which reflected higher quantities sold, and a decline mainly in raw material and energy costs, was somewhat offset by a decrease in selling prices. Gross margin for the period was 37.2% compared with 38.5% for the fourth quarter of 2012.
For the full year, gross profit totaled $2.41 billion compared with $2.71 billion in 2012. The decrease in gross profit derived primarily from lower selling prices. Gross margin for the year was 38.4% compared with 41.9% for 2012.
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Operating income: Operating income for the fourth quarter of 2013 was $123 million, a reduction of 35% from $190 million for the corresponding period last year. The decline derived mainly from increased expenses and from a $60 million expense in respect of an early retirement plan at Rotem. Adjusted operating income for the fourth quarter of 2013 was $218 million after excluding provisions for an early retirement plan at Rotem ($60M), waste removal at Bromine Compounds ($25M) and asset impairment at ICL-IP ($10M). This compared to $234 million for Q4 2012.
For the full year, operating income totaled $1.1 billion, a reduction of 29% compared with $1.55 billion in 2012. The decrease derived mainly from lower gross profit, increased expenses and expenses for the early retirement plan at Rotem. Operating margin for the year was 17.6% compared with 24.0% for 2012. Adjusted operating income for 2013 was $1.2 billion compared to $1.6 billion for 2012, a reduction of 25.2%.
Net income: Net income to shareholders for the fourth quarter of 2013 totaled $119 million, a reduction of 43% compared with $208 million in the parallel period of 2012. Adjusted net income for the fourth quarter of 2013 was $195 million after eliminating non-recurring effects, primarily taxes in respect of the release of trapped earnings, a provision for early retirement at Rotem, and a provision for removing waste at Rotem. The adjusted net income was 21% less than the $247 million recorded for Q4 2012.
For the full year, net income to shareholders totaled $819 million, a reduction of 37% compared with $1.3 billion recorded in 2012. The reduction in net income for the year derived primarily from the $60 million expense related to the early retirement plan at Rotem, as well as a one-time expense in the amount of $118 million in respect of the release of $1.07 billion in trapped earnings, and a higher rate of taxation on companies subject to Israel’s Companies Law. Adjusted net income for the year was $1.01 billion compared with $1.34 billion in 2012, a reduction of 24.4%.
Cash flow: During the fourth quarter of 2013, cash flow from current operations totaled $116 million. For the full year, cash flow totaled $1,127 million, a 35% decrease compared with $1,727 million for 2012.
Key Events in 2013
Strategic Process: During the fourth quarter, ICL further implemented its “Next Step Forward” strategy which it launched at the end of the second quarter. The strategy is designed to provide the Company with the infrastructure to continue its growth over the next decade and consists of three pillars:
- Efficiency and Competitiveness Program: The Company is leading a structured and organized process to improve its operational processes for the purpose of saving several hundred million dollars by 2016. This initiative is critical, especially under the current climate of weak markets, increased competition in the markets and an unstable business environment. This process involves improving and streamlining a number of key processes, such as R&D, pricing, procurement, energy, CAPEX, as well as reducing fixed, variable and labor costs. Within the framework of the above processes, ICL is conducting negotiations with union/labor council representatives at its Rotem Amfert Negev subsidiary, regarding the early retirement of 115 employees, and has recorded an expense of $60 million during the fourth quarter for this purpose. Israeli management has also notified employee representatives at its other sites in Israel that it is evaluating similar cost reduction measures.
- Growth Initiatives: Through both organic projects and acquisitions, ICL aims to expand the Company’s potash capacity, secure phosphate reserves, broaden its portfolio of next-generation bromine-based products and expand its leadership in functional foods. The strategy also calls for developing the Company’s R&D and innovation capabilities and improving its positioning in the agriculture, food and engineered materials markets. ICL’s M&A activity in 2013 and early 2014 consisted of the following transactions:
- In February 2013, ICL’s Performance Products segment (ICL-PP) acquired the assets and operations of Thermphos International B.V (NL), a Knapsack, Germany, manufacturer and marketer of phosphorus pentasulfide (P2S5). The transaction is part of ICL’s strategy to become the market’s leading provider of phosphorus-based products and solutions.
- In September 2013, ICL signed a memorandum of understanding with Duc Giang, a privately-owned Vietnamese company, to cooperate in mining phosphate and establishing factories to process phosphate in the Bao Thang province of Vietnam to cater to the South East Asian market.
- In December 2013, ICL-PP undertook to acquire Hagesud Group, a German producer of premium spice blends and food ingredients for meat processing. Hagesud will be integrated into ICL Food Specialties, strengthening its position in the global meat processing market.
- In December, ICL-PP signed a definitive agreement to acquire Vale Fertilizantes’s equity holding in Fosbrasil S.A., a Brazilian joint venture with ICL that produces purified phosphoric acid and raw materials for fertilizers. The purchase, subject to regulatory approval, will give ICL majority ownership of one of South America’s major producers of phosphoric acid.
- Enabling platforms: ICL is developing five organization-wide enabling platforms: 1) a harmonized information technology infrastructure; 2) a unified methodology for assessing human resources and identifying talent; 3) a “One ICL” branding initiative; 4) an enhanced R&D and Open Innovation platform; and 5) intensified efforts in community outreach and advocacy. Together, these programs will enable the Company to conduct its broad array of businesses as “One ICL”.
Dual Listing: ICL continues to prepare to dual list its shares on the New York Stock Exchange.
Highlights of Core Business Segments
ICL Fertilizers: During 2013 ICL sold 5.04 million tons of potash compared to 4.63 million tons in 2012. The increased volume of sales compensated for lower prices. The recovery in demand continued into 2014.
The segment’s sales for the fourth quarter of 2013 totaled $794 million, a 12% increase compared with $710 million for Q4 2012. This increase stems mainly from an increase in quantities sold, offset by reduced prices for potash.
For the full year, sales totaled $3.66 billion, a 4% decrease compared with $3.81 billion in 2012. The decrease is derived primarily from lower selling prices for potash.
ICL Fertilizers’ operating income for the fourth quarter of 2013 totaled $87 million compared to $139 million for the comparable period in 2012, representing an operating margin of 11%. For the full year, operating income totaled $821 million, a reduction of 29% compared to $1.16 billion in 2012, and representing an operating margin of 22.5%.
During 2013, ICL Fertilizers manufactured 5.16 million tons of potash, a 4.4% increase compared with 4.94 million tons in 2012, reflecting improved production at the Company’s European mines.
ICL continued to upgrade and streamline its potash mines in Spain and England in order to increase its competitiveness and profitability, even in lower prices than the current market prices. These efforts will enable ICL’s potash production costs at its Iberpotash unit in Spain to reach the levels achieved by the Company in Israel, and will allow the Company to increase its future production volumes in Spain.
Potash Supply Agreements
In the beginning of 2013, ICL Fertilizers signed three-year framework agreements with a number of customers in China for the sale of 3.3 million tons of potash. As part of these agreements, in January 2013, the segment signed contracts for the sale of 660,000 tons of potash in the first half of 2013 with a price reduction of $70 per ton CFR compared with contracts signed in 2012. The terms were similar to those agreed to by other Chinese potash importers. During the second half of the year, the segment completed a number of sales based on the current spot price rate.
Several potash manufacturers have signed contracts with China purchasers during the first half of 2014 at a price of $305 per ton, $95 less than supply contracts for the first half of 2013. ICL Fertilizers agreed to sell 380,000 tons to several of its Chinese customers during the first half of 2014 (including an option for an additional 140 thousand tons) on similar terms.
In 2013, ICL Fertilizers agreed to supply an aggregate of 820,000 tons of potash to its customers in India through February 2014 (including an option for an additional 50,000 tons). The selling price was about the same as prices set by other potash suppliers to the Indian market and represents a decline of $63 per ton compared with prior contract prices. Potash producers, including ICL, reduced their prices by a further $58 a ton as a result of declines in potash prices in the spot market during 2013, significant erosion in the exchange rate of the Indian rupee, as well as pressure on the part of the Indian importers due to reduced subsidies for fertilizers.
Potash market trends
In July 2013, the Russian potash manufacturer, Uralkali, announced its exit from the marketing company that is jointly owned by it and Belaruskali (BPC), through which the two manufacturers engaged in export activities. Uralkali also changed its selling strategy to favor quantity over price while taking full advantage of its production capacity. These events triggered falling prices in potash markets and resulted in a postponement of potash acquisitions by customers who anticipated additional price reductions. During the fourth quarter and in January 2014, demand for potash resumed and prices stabilized.
Import of potash to Brazil in 2013 reached about 7.6 million tons, constituting an increase of about 3.5% over last year, which was a record year for potash imports.
Based on a report published by the US Department of Agriculture (USDA) in January 2014, an increase is expected in the ratio of the inventories of grains to annual consumption, to a level of 20.15% at the end of the 2013/2014 agricultural year, compared with 19.60% in the prior agricultural year and 20.19% in the 2011/2012 agricultural year. Most of the increase stems from the inventory of corn.
The fourth quarter was characterized by a continuing reduction in prices that began at the end of the first quarter of 2013. Sales of phosphate fertilizers declined to $356 million during the fourth quarter from $366 million for the comparable period in 2012. Sales of phosphate fertilizers for the entire year were slightly higher, $1.75 billion compared to $1.73 billion for 2012, reflecting higher quantities sold.
Operating margins for the phosphate fertilizers business unit during the fourth quarter was 2.5%, based on an operating profit of $9 million, compared to 10.7% for the comparable period in 2012. The decrease in operating income derived primarily from lower selling prices, as well as from the $60 million provision for early retirement plan at Rotem.
2013 was characterized by a decline in the phosphate fertilizer trade together with erosion in prices for phosphate fertilizers. The phosphate market was adversely affected by a decline in purchases made by India, the primary importer, mainly due to a cut in subsidies for these products and erosion of the exchange rate of the Indian currency against the dollar. There was a modest recovery toward the end of the year with moderate price rises due to strong demand in South America, preparations in North America for the upcoming season and a return of buyers to the market.
ICL is currently at a crossroads with respect to its phosphate activities. Its Rotem Amfert Negev subsidiary is experiencing one of its most difficult periods in recent memory. Rotem’s production costs are substantially higher than its international competitors. In addition, phosphate reserves at its active mines in Israel will be depleted within a period of only seven to nine years. The only possible additional reserves in Israel are located at the Sde Barir field in the Negev, and ICL’s plan to mine phosphate in this field awaits governmental parties that have yet to conclude their investigation and render a decision regarding the matter. At the end of November, Israel’s Health Ministry requested the professional opinion of an objective, industry expert regarding phosphate mining at Sde Barir, which opinion is expected to be submitted to the Health Ministry soon.
To remain competitive in the current intensively competitive phosphate market environment, the Company must reduce costs at its facilities, invest hundreds of millions of dollars in advanced technology and R&D, as well as increase its production activities. ICL is prepared to undertake these activities assuming the government approves its request to mine the Sde Barir field. However, as a result of the uncertainty regarding Sde Barir, the Company has intensified its activities to increase and diversify its mining sources outside of Israel, as well as to broaden its global activities in the phosphate sector.
- ICL Industrial Products: The segment’s sales for the fourth quarter of 2013 totaled around $304 million, a 5.6% decrease compared with the fourth quarter of 2012, reflecting lower quantities and prices, primarily in the brominated flame retardant markets. The decline was partly offset by exchange rate fluctuations.
For the full year, sales totaled about $1.30 billion, a decrease of 8.5% from the $1.42 billion recorded in 2012. The decline reflected lower quantities sold mainly of bromine-based flame retardants, non-organic bromine products and chlorine-based biocides for water treatment, as well as a decrease in selling prices.
The operating loss in the fourth quarter totaled approximately $10 million, compared with operating income of approximately $24 million in the corresponding quarter last year, which stemmed primarily from a decrease in quantities sold and lower selling prices, as well as an expense relating to updating a provision for waste removal, an impairment of assets and the impact of exchange rate fluctuations. For the full year, operating income totaled $115 million, a reduction of 47% compared with $217 million in 2012. The decrease in operating income derived primarily from lower quantities sold and a reduction in selling prices.
IP’s operations are largely affected by the level of activity in the electronic devices, construction, automotive, oil drilling, furniture, pharmaceuticals, agriculture, textile and water treatment markets. The slowdown of the global economy that characterized most of 2012 and that continued into 2013 triggered a slowdown in demand for electronic devices, as well as in construction, which in turn resulted in a decline in demand for flame retardants products, mainly bromine‑based, for these markets.
In addition, pressure is being exerted by environmental protection organizations to reduce the use of certain flame retardants. Nevertheless, new product development and expanded applications of bromine and its related compounds continue.
In the market for clear brine fluids for oil and gas drilling, demand continued to be strong during 2013 due to an increase in the number of drilling rigs worldwide and in off-shore drilling, in particular. Demand for bromine‑based biocides used for water treatment also continued to be strong in 2013.
In the beginning of 2013, the U.S. Department of Commerce imposed an anti‑dumping tax on manufacturers of chlorine‑based biocides from China at the rate of about 30%–38% which was increased by a further 20% at the beginning of 2014.
- ICL Performance Products: The segment’s sales for the fourth quarter of 2013 totaled approximately $376 million, representing 26.5% of total revenues (before offsets of inter-segment sales), a 11% increase compared with $339 million for the fourth quarter of 2012. The increase reflected higher quantities sold and the consolidation of financial statements of companies acquired in 2013 which contributed $33 million.
For the full year, sales totaled $1.57 billion, a 7% increase compared with $1.47 billion for 2012 reflecting increased quantities sold, first-time consolidation of financial statements of companies acquired during 2013, and fluctuations in exchange rates.
The segment’s operating income for the quarter totaled $35 million, a 9% increase compared with $32 million in the fourth quarter of 2012. For 2013, operating income totaled $196 million compared with $179 million in 2012. The increases for the quarter and year reflected a decline in raw materials costs and an increase in quantities sold.
ICL‑PP performed well in 2013, primarily due to stable prices and a well‑balanced basket of products. The segment is strongly affected by the global economic situation, competition in target markets and price volatility in the fertilizers market which affect prices of ICL‑PP’s principal inputs and by fluctuations in energy prices.
The Company’s Board of Directors declared a special, one-time dividend in the amount of $500 million that will be paid on March 26, 2014.
ICL, a global manufacturer of products based on unique minerals, fulfills humanity’s essential needs, primarily in three markets: agriculture, food and engineered materials. ICL produces approximately a third of the world’s bromine, and is the sixth largest potash producer as well as the leading provider of pure phosphoric acid. It is a major manufacturer of specialty fertilizers and specialty phosphates, flame retardants and water treatment solutions. ICL’s mining and manufacturing activities are located in Israel, Europe, the Americas and China, and are supported by global distribution and supply networks.
The agricultural products that ICL produce help to feed the world’s growing population. The potash and phosphates that it mines and manufactures are used as ingredients in fertilizers and serve as an essential component in the pharmaceutical and food additives industries. The food additives ICL produces enable people to have greater access to more varied and higher quality food; ICL’s water treatment products supply clean water to millions of people as well as industry around the world; and other substances, based on bromine and phosphates help to create energy that is more efficient and environmentally friendly, prevent the spread of forest fires and allow the safe and widespread use of a variety of products and materials.
ICL benefits from a number of unique advantages, including its vertically integrated activities and complementary and synergistic downstream operations for the production of unique end products; its balanced and varied product portfolio in growing markets; and its worldwide presence with proximity to major global markets in developing regions.
ICL operates within a strategic framework of sustainability that includes a commitment to the environment, support of communities in which ICL’s manufacturing operations are located and where its employees live, and a commitment to all its employees, customers, suppliers and other stakeholders.
ICL is a public company whose shares are traded on the Tel Aviv Stock Exchange (TASE: ICL). The company currently employs around 12,000 people worldwide, including around 5,000 in Israel, most of them in the Negev. ICL’s sales in 2013 totaled $6.3 billion, 50% of which derived from production activities in Israel.
For more information, visit the company’s website at www.icl-group.com
Forward Looking Statement
This press release contains forward-looking assessments and judgments regarding macro-economic conditions and the Group’s markets, and there is no certainty as to whether, when and/or at what rate these projections will materialize. Management’s projections are likely to change in light of market fluctuations, especially in ICL’s manufacturing locations and target markets. In addition, ICL is likely to be affected by changes in the demand and price environment for its products as well as the cost of shipping and energy, whether caused by actions of governments, manufacturers or consumers. ICL can also be affected by changes in the capital markets, including fluctuations in currency exchange rates, credit availability, interest rates, etc.
(financial tables follow)
PRINCIPAL FINANCIAL RESULTS
THREE MONTHS AND TWELVE MONTHS ENDED DECEMBER 31, 2013
|3 months ended December 31,||12 months ended December 31,|
|$ millions||% of sales||$ millions||% of sales||$ millions||% of sales||$ millions||% of sales|
|Adjusted operating income**||218||15.4||234||17.8||1,196||19.1||1,598
|Net income to the
|Adjusted net income to the Company’s shareholders****||195||13.8||247||18.9||1,012||16.1||1,339||20.7|
|Operating cash flow||116||314||1,127||1,727|
|Investment in property, plant and equipment less grants received||
**Adjusted operating income excludes provisions for an early retirement plan at Rotem ($60M), waste removal at Bromine Compounds ($25M) and asset impairment at ICL-IP ($10M).
*** Excluding non-recurring items (primarily, taxes on trapped earnings, provision for early retirement at Rotem and provision for removal of waste at Bromine).
**** After elimination of non-recurring effects, primarily taxes in respect of the release of trapped earnings, a provision for early retirement at Rotem, and a provision for removing waste at Rotem.
*****EBITDA is calculated as follows:
|3 months ended December 31,||12 months ended December 31,|
|Amortization & depreciation||102||87||348||323|
|Financing expenses, net||6||(3)||27||61|
|Taxes on income||5||(12)||280||218|
|Unusual or one-time expenses||95||44||95||44|
PRINCIPAL RESULTS FROM CORE
THREE MONTHS AND TWELVE MONTHS ENDED
DECEMBER 31, 2013
|3 months ended December 31,||12 months ended December 31,|
|Sales CIF by segment||$ millions||% of gross sales||$ millions||% of gross sales||$ millions||% of gross
|$ millions||% of gross
|ICL Industrial Products||304.4||21.5%||322.2||24.7%||1,296.7||20.7%||1,417.4||21.9%|
|ICL Performance Products||375.9||26.5%||338.6||26.0%||1,574.7||25.1%||1472.1||22.7%|
|Other and offsets||(58.4)||(68.2)||(255.2)||(224.0)|
* Restated – retroactive application. Note: Segment sales data and their percentage of total sales are before offsets of inter-segment sales.
|3 months ended December 31,||12 months ended December 31,|
|Reported operating income by segment||$ millions||% of segment sales||$ millions||% of segment sales||$ millions||% of segment
|$ millions||% of segment
|ICL Industrial Products||(9.9)||(3.3%)||24.1||7.5%||114.5||8.8%||217.3||15.3%|
|ICL Performance Products||35.0||9.3%||31.9||9.4%||195.8||12.4%||179.3||12.2%|
|Other and offsets||10.5||(4.9)||(30.0)||(1.8)|
* Restated – retroactive application
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