ICL
Group Ltd. reported a 56% decline in net income attributable to shareholders of
the company to $280 million for the first quarter to March 31, 2023, down from
$632 million the previous year.
Adjusted
net income attributable to shareholders came in 52% lower year-over-year, at
$292 million down from $613 million, while adjusted diluted earnings per share
were $0.23 versus $0.48 a year ago, beating the analyst consensus estimate of
$0.21.
Adjusted EBITDA was 39% lower year-over-year, at $610 million, down from $1.0 billion, while sales were down 17%, at $2.1 billion from the year-ago $2.53 billion.
“ICL
delivered another solid first quarter, even as prices pulled back significantly
from last year’s peak levels,” said ICL President and CEO Raviv Zoller in
the company’s May 10 earnings statement.
Commenting on the 17% drop in first-quarter sales, Zoller told analysts in a company earnings call on May 10 sales this time last year were “significantly influenced by sanctions on Belarus and the global reaction to the Ukraine war.”
In addition to an expected reduction in pricing this year, he said there was also a shipment of approximately 100,000 mt of potash to India that shifted to the second quarter.
On the
drop in EBITDA year-over-year, Zoller said high-cost inventory was part of the
reason behind the fall.
“Like
others in our space and business in other industries and end markets, we
continued to work through high-cost inventories in the first quarter. The
destocking began towards the end of last year, and we expect it to continue
through the second quarter. As such, we have implemented cost efficiencies
through our supply chain and are targeting additional initiatives during the
year,” said Zoller.
Nevertheless,
ICL reiterated its guidance for full-year 2023 adjusted EBITDA of between $2.2
billion to $2.4 billion, with approximately $1.1 billion of this amount to come
from the company’s specialties focused businesses.
Looking at individual business segments, the Potash segment reported a 27% fall year-over-year in first-quarter sales (including sales to internal customers) to $583 million, down from $795 million, and a 34% drop in segment EBITDA to $298 million from $450 million the previous year.
Potash
production in the first quarter was 2% off year-over-year at 1.07 million mt,
with the company citing “operational and geological challenges” that
continued to impact the mine ore output at ICL Iberia’s Cabanasses de Súria mine
in Spain during the quarter.
The
company also reminded that there was a fatal accident at the Cabanasses mine on
March 9 (GM March 10, p. 28). The incident, involving a tunnel
collapse some 900 meters underground, resulted in the death of three geologists.
ICLsaid following the accident it put in
place “extraordinary safety measures” before it gradually ramps
operations back up. Zoller put the resulting production loss at an estimated
approximate 30,000 mt.
The
company noted the improvement at the site’s flotation plant was completed and
is expected to enable ICL Iberia to increase its production capacity, while
lowering its cost per ton.
ICL
said in March a production shutdown for annual maintenance took place at its
Dead Sea operation, similar to last year. It reported that it additionally
completed the sealing project of the P-9 pumping station feeder canal at the
site in response to the unexpected flow of brine that was discovered in June
2022 at the outskirts of an alluvial fan area, which ICL reminded had created
“some concerns” for the company last year.
First-quarter
potash sales (including internal sales) were 16% lower year-over-year, falling
to 963,000 mt from 1.15 million mt in the comparable prior-year quarter, which
the company attributed mainly to lower sales volumes to India and China, mainly
reflecting the delay in the settlement of the Indian supply contract.
As
previously reported, ICL on May 1 signed a new supply contract with Indian
Potash Ltd. (IPL), India’s largest potash importer, for potash shipments
through September 2023, at a price of $422/mt CIFFO Indian ports (GM May 5, p. 13). The price was in line
with that set by Canpotex and Uralkali, which reached new supply deals with IPL
in April (GM April 7, p. 14).
Responding to an analyst’s question at a company earnings call, Zoller said the company is still targeting a 1 million mt/y run rate for potash at ICL Iberia by the end of this year, “but until we get there, we will have more pain.”
He explained that this doesn’t have to do with the accident in March, but the real issue is the geology at the Cabanasses mine. He said the company is working toward a mining area “that is going to last for a very long time and is richer in minerals than where mining currently is.” Zoller estimates the company has another nine to 10 months until it gets to where it wants in the mine.
“So
while we currently are a few thousand tons below our target in terms of over
overall potash sales forecast, the target sales forecast for full-year 2023 is
not going to change because we started this year with inventories. So we are going
to be able to sell the 4.7 million mt to 4.8 million mt that we forecasted for
this year.”
ICL Potash Production, Sales Volumes, Average Price
|
‘000 mt
|
1Q-2023
|
1Q-2022
|
% change
|
|
Production
|
1,070
|
1,093
|
(2)
|
|
Total
sales (including internal sales)
|
963
|
1,150
|
(16)
|
|
Average
potash price – CIF ($/mt)
|
541
|
642
|
|
In the
company’s Phosphate Solutions segment, ICL said higher raw material and
production costs negatively impacted the specialty phosphates business, amid a
re-balancing of global phosphates supply and demand.
The
segment posted a 31% fall in first-quarter segment EBITDA to $170 million on
sales of $714 million (including sales to internal customers), down from the
year-ago $247 million and $798 million, respectively.
ICL’s
Growing Solutions segment (formerly known as Innovative Agricultural
Solutions), which now includes ICL’s polyhalite mining operation at Boulby,
reported a slide in segment EBITDA to $45 million in the first quarter of this
year, down from the year-ago $110 million, while segment sales (including
internal sales) were marginally off, at $564 million versus $566 million in the
first quarter of 2022.
ICL
attributed the EBITDA fall primarily to lower sales volumes of specialty
agriculture products, which more than offset higher selling prices across most
of the segment’s business lines, mainly FertilizerpluS(which, like the company’s other
fertilizer plus products, are based on organic polysulfate, the marketed form
of polyhalite) and specialty agriculture products.
In
addition to higher prices, FertilizerpluSsales volumes also increased.
Speciality Agriculture sales decreased year-over-year, as lower volumes of straight fertilizers, biostimulants, micronutrients, and liquid NPKs, mainly to Europe and the US, offset the higher selling prices.
Turf
and Ornamental (T&O) sales also decreased year-over-year, as higher prices
were unable to offset lower ornamental and horticulture sales volumes, ICL
said.
Production
of polysulfate at Boulby increased by 9% in the first quarter of the year,
reaching a quarterly record of 259,000 mt, the company reported.
Responding
to an analyst’s question about the current profitability and outlook for the
company’s polysulfate business, Zoller reminded the drivers are good solubility,
sulfur content, and the fact that polysulfate is an organic fertilizer.
“More
customers are getting to know the product and it has gone through extensive
field trials. So we can guarantee good results,” he said.
However,
he said it was not “a gigantic market, … at less than a million mt a year.”
“Fortunately,
for us, we are alone in that market and we are developing it well. We see as
commodity prices are going down, the poly prices are going down marginally.
There is the potash component, so that tends to cause some reduction in price,
but in general, prices are holding up nicely,” said Zoller.
He
reminded that poly is not just a pure production, it is also “a whole
family of products” known as FertilizerpluS that ICL is developing, and
combined with the polysulfate with other micronutrients and other
characteristics.
Based
on the first-quarter results, ICL’s Board has declared a dividend of 11.32
cents per share, or approximately $146 million. This compares to 23.83 cents
per share, or approximately $306.5 million in the first quarter of the last
year. The dividend will be payable on June 14.
