ICL Group Ltd.’s agreement in March to acquire the South American plant nutrition business of Compass Minerals combined with its recently completed acquisition of Brazilian specialty plant nutrition company Fertiláqua, when added to its existing operations in Brazil, is set to make the Israeli company Brazil’s leading specialty plant nutrition company, ICL said.
“This will allow us to deliver the critical mass [of production distribution] we have been seeking in Brazil,” ICL President and CEO Raviv Zoller told analysts at a first-quarter earnings call last week.
“Our acquisitions in Brazil expand both our product portfolio and our profitability, while providing a seasonal balance of business between the Northern and Southern hemispheres. In addition, we expect to realize significant commercial and operational benefits,” he said.
“Brazil is the number one market in the world for specialty fertilizers. The country, together with China, accounts for 70 percent of the growth in global markets,” Zoller told analysts.
“In Brazil, it is not very effective to compete from outside going into a market that has volatility in exchange rate and local inflation. So in order to reach a critical mass of production distribution, it is clear we need significant production and distribution in Brazil,” he said.
“We targeted a few companies, but acquiring the Compass South American business – as the leading player in Brazil – makes our dream come true,” Zoller added. “This M&A is the basis for all our business in Brazil. So some of our traditional business in the country will be consolidated into this new acquisition.”
He said Fertiláqua plays into the biostimulants niche of the market, and “on that foundation, ICL intends to focus on organic growth in Brazil, because both businesses are growing at double-digit rates.”
ICL entered into a definitive agreement with Overland Park, Kan.-based Compass Minerals in late March to buy the South America Plant Nutrition business (Compass Minerals América do Sul SA) via subsidiary ICL Brasil Ltda. for approximately $418 million (GM March 26, p. 1).
The Compass South American business has an existing presence in 25 out of 26 Brazilian states. It serves more than 2,000 farms directly and more than 30,000 farms indirectly, with direct-to-farm sales accounting for approximately 50 percent of total sales. It also serves more than 250 ag-input retailers and co-operatives.
While closing of the transaction is anticipated in the third quarter, Zoller said ICL does not yet have any final clarity on when the closing of the Compass South American plant nutrition business will happen. But he is “optimistic” that the results of that Brazil acquisition will be consolidated for most of the second half of this year. If that happens, he said, there will be room for an additional update of ICL’s earnings guidance.
Last week the Israeli company, as part of its first-quarter earnings reporting, raised its full-year 2021 adjusted EBITDA guidance to between $1.09 billion and $1.18 billion, compared with the previous guidance of $1.02 billion to $1.12 billion, due to improved market conditions combined with prompt execution in the first quarter (GM May 7, p. 37).
ICL completed the acquisition of Fertiláqua in January for $122 million, which included the assumption of approximately $40 million of net debt (GM Jan. 8, p. 30). Fertiláqua operates in 24 Brazilian states with a staff of 350 employees and a portfolio of more than 100 products.
For China speciality fertilizer business, Zoller said ICL’s strategy is based more on organic growth and leveraging some of the capabilities of its YPH phosphate joint venture .