ICL, Tel Aviv, reported a sharp downturn in third-quarter net income attributable to shareholders of the company to $54 million on sales of $1.20 billion, down from the year-ago $130 million and $1.33 billion, respectively. Adjusted net income was $58 million, versus $130 million a year ago.
Diluted adjusted earnings per share came in at $0.05, compared with third-quarter 2019’s $0.10. Adjusted EBITDA fell 23 percent to $226 million, down from the year-ago $307 million.
Sales were 9 percent lower versus the previous year’s numbers.
“Results for the third quarter of 2020 were impacted by the COVID-19 pandemic and the resulting decline in industrial activity and crude oil production, as well as lower prices of commodity fertilizers, which impacted sales and operating income,” said ICL President and CEO Raviv Zoller.
“Although COVID-19 may continue to impact our results in the near term, we are very well-positioned for the future,” he said. “As conditions begin to normalize, which we expect to occur during 2021, we will see further benefits from our strategic efficiency plans, which were accelerated by COVID-19 and implemented across all of our business segments and will result in annualized savings of about $50 million, driving margin expansion and cash flow generation.”
As part of its strategy to grow its crop nutrition businesses organically and through M&A, the company earlier this month announced that it had entered into a definitive agreement to acquire Brazilian specialty plant nutrition company Agro Fertiláqua Participaçôes SA for about $120 million (GM Oct. 30, p. 1).
ICL said the acquisition would provide it with “a strong foothold” in a market where demand growth for specialty plant nutrition products is rapidly increasing.
“We expect this acquisition to be highly accretive and to unlock immediate synergies for the distribution of our specialty and commodity fertilizers in Brazil,” Zoller told analysts at a company earnings call on Nov. 12. “It also further expands our product portfolio with higher growth, higher margin product.”
The company saw its third-quarter Potash segment profit drop to $28 million, down from the year-ago $83 million, while total sales (including sales to internal customers) fell 17 percent to $313 million, down from $376 million.
ICL said the segment’s performance was primarily impacted by a $64/mt decrease in the average realized potash price, mainly due to higher sales volumes to India and China “at low contract prices.” The business was also negatively impacted by higher operating costs, mainly due to decreased production in Spain following the early closure of the Salient site (Villafruns mine) at ICL Iberia towards the end of the second quarter, as well as costs related to COVID-19. However, the company said it expects a higher average realized sales price for potash in the fourth quarter due to an improving geographical sales mix.
The company said as of Nov. 12 its production sites were operating as planned. ICL Dead Sea reached a record high production level for the first nine months of this year, which it said has offset the early closure of the Salient site, positively contributing to the Potash business segment’s results. ICL highlighted it remains on track to achieve record production at the Dead Sea for full-year 2020.
Company-wide potash production in the third quarter was 1.06 million mt, a small uptick on the year-ago 1.05 million mt. Potash sales volumes (including internal sales) increased 3 percent, to 1.11 million mt, up from 1.08 million mt in third quarter 2019.
Production of polysulfate at the Boulby operation in northeast England increased by 10 percent to 191,000 mt, while third-quarter polysulfate sales volumes increased 49 percent to 113,000 mt from a year-ago.
The company reported its potash production in Spain is currently about 600,000 mt/y and will continue at that level through the first half of 2021. Zoller told analysts the company would need 4-5 months at the end of the construction of the access tunnel (ramp) project to get “the next lift” to the next targeted level of 1 million mt/y
The Phosphate Solutions segment posted a 13 percent fall in third quarter profit to $28 million, down from the year-ago $32 million, while total sales (including sales to internal customers) dipped to $506 million, down from $508 million.
ICL cited lower phosphate commodity prices as mainly behind the segment profit decrease, but noted the start of a gradual price recovery during the third quarter. It said the price decline was partly offset by lower raw materials prices and efficiency initiatives.
The company highlighted the strong phosphate specialties performance despite global challenges related to the COVID-19 pandemic, as well as ongoing positive operating income at the YPH phosphates joint venture in China.
Third-quarter phosphates specialties sales increased 2 percent to $295 million, and operating income was up 13 percent to $34 million versus a year-ago. The company cited mainly strong volumes, lower costs, and a positive exchange rates impact as behind the income boost.
Sales of phosphate commodities dipped 3 percent to $211 million from the prior year, mostly due to “significantly lower” market prices, which were partly offset by higher sales volumes and favorable exchange rates, the company said. But the phosphate commodities business reported a third-quarter operating loss of $6 million, versus an operating income of $2 million in third quarter 2019. The latter was largely attributed to the decrease in prices, which was partly offset by lower raw materials costs and higher sales volumes, mainly to Australia and North America.
ICL expects the fourth-quarter results for both the commodities and the specialties phosphates businesses to decrease, compared with the third quarter, due to the usual seasonal pattern.
The Innovative Ag Solutions (IOS) segment reported a third-quarter segment profit of $6 million versus a $2 million loss a year ago, while sales (including to internal customers were up 8 percent, at $173 million from $160 million.
ICL cited higher sales volumes of both specialty agriculture and turf and ornamental products, mainly in Europe and North America, as well as favorable exchange rates, partly offset by lower prices. The improved segment profit was driven mainly by the lower cost of raw materials, the higher sales volumes, and cost-saving initiatives.
The company expects IOS’ fourth-quarter results to follow the usual seasonal pattern.
IOS develops, manufactures, and sells specialty fertilizers, including water-soluble, liquid and soluble, and controlled-release fertilizers, at its plants in Israel, Europe, and the U.S.
Sales to the specialty agriculture market increased in the third quarter compared with a year ago, the company said mainly due to increased demand for straight fertilizers and controlled-release fertilizer products, as well as the positive impact of exchange rates. Sales of liquid NPK fertilizers in Israel were higher year-over-year due to a delay in the main fertigation season. Higher sales were also seen in the chemicals business.
The company reported sales of specialty agriculture products continued to increase in fast-growing emerging markets such as India and Turkey.
Following the negative impact of the COVID-19 pandemic in the second quarter, sales to the Turf and Ornamental (T&O) markets started to recover and increased in the third quarter compared to the same year-ago quarter. The sales increase was mainly due to strong demand in the turf and landscape markets, which were supported by favorable early autumn conditions, higher demand for fungicides, and the re-opening of sports fields and golf courses, the company said.
For the first nine months of 2020, ICL reported a net loss attributable to shareholders of the company of $54 million, versus a year-ago net income of $427 million. However, adjusted net income was $190 million, down from $431 million the previous year.
Nine-month diluted adjusted earnings per share came in at $0.15, compared with the year-ago $0.34. Adjusted EBITDA fell 28 percent to $722 million, down from $997 million.
Sales were 11 percent lower versus the previous year’s numbers, at $3.73 billion versus $4.17 billion.
In relation to its third-quarter results, ICL will pay a dividend of 2.3 cents per share, or about $29 million in aggregate. The dividend will be paid on Dec. 16, 2020. The record date is Dec. 2, 2020.