Israel Chemicals (ICL) reported a sharp drop in third-quarter net profits and revenues, with net profits falling by 50 percent, to $196 million versus $395 million in the third quarter of 2012. Revenues were down 18 percent, to $1.445 billion versus $1.762 billion in the corresponding quarter last year.
ICL attributed the decline to weakness and instability in the potash market, which led to a reduction in volumes sold and to lower fertilizer prices. Operating profit for the quarter fell to $222 million, compared with $483 million in the third quarter of 2012.
The company also noted that its tax expenses rose in the third quarter due to a non-recurring $118 million payment to the Israel Tax Authority, as well as an increase in the corporate tax rate. The one-time payment was for ‘”trapped profits” amounting to more than $1 billion from various tax breaks that expired on Nov. 12.
Sales at its largest division, ICL Fertilizers, declined to $780 million for the quarter, down from last year’s $1.06 billion. ICL attributed the drop to a decrease in potash sold to China and India and lower potash and phosphate prices. The main factor in the potash sector was the delay in purchases by customers following Uralkali’s announcement in late July that it would no longer direct export sales through Belarusian Potash Co. (BPC).
The company reported some improvement in potash demand toward the end of the quarter, with sales to India picking up following a cut in prices. Potash production during the quarter rose by 9 percent, to 1.27 million mt versus 1.16 million mt in the same quarter last year, due to improved efficiency at the company’s mine in England.
Operating profit in the phosphate fertilizer sector was down sharply for the quarter due to lower demand in India and increases competition, which led to lower prices. ICL said operating profit was approximately 5 percent, or $22 million out of $421 million in revenues, down from last year’s 12 percent, or $52 million out of $436 million in revenues.
ICL said its Rotem Amfert subsidiary is going through one of its most difficult crises in years due to the phosphate fertilizer downturn. The company noted that its competitiveness is well below the average of its competitors. ICL also reported that current resources will last only 6-9 years as the Israeli government has yet to grant a license for mining at the Barir field, which would enable the company to improve its competitive position. ICL said it is working to advance approval of Barir and is also evaluating phosphate mines outside of Israel.
In August ICL announced a new strategic program aimed at enabling the company to continue its growth over the next decade. The plan calls for streamlining key processes, reducing production costs, and increase competitiveness, which ICL hopes will lead to $400 million in savings over the next three years.
ICL also noted that it is moving ahead with plans to dual list its shares on the New York Stock Exchange. No timetable was given, but the company believes dual listing will improve ICL’s access to the international financial markets and provide greater flexibility in financing future M&A activities.