ICL Group Ltd. reported that higher production and selling prices at ICL Boulby, the company’s polysulfate operation in northeast England, helped the operation achieve a quarterly profit contribution for the very first time in the first quarter of 2022 (see Earnings Story).
Responding to an analyst’s question at a company earnings call on May 11 about whether ICL expects to continue to achieve profits long-term at Boulby when commodity price cycles inevitably turn down, ICL President and CEO Raviv Zoller said pricing of polysulfate increased to about $210/mt in the first quarter of 2022, up from about $115/mt in the same quarter last year.
He said while the price increase has to do with the commodities upside, the increase has much more to do with the positioning of the product.
He reminded that ICL brands the line of products as polysulfate FertilizerS, which is an organic product that has some potash, a lot of sulfur, and micronutrients such as magnesium and calcium.
“We expect the premium that some markets will pay will be higher due to the organic certification that we now have both from the E.U. and from the U.S., and the growing appreciation of the product that we are selling,” he said, reiterating it took the company three-to-four years to penetrate markets.
ICL expects to maintain profitability at Boulby, possibly even “grow profitability” in the second half of this year, “as long as no dramatic changes happen,” said Zoller.
“Over time, we will build additional premium because of two reasons. One, because of the positioning of the product as a high value organic product, and second, because we are developing a whole line of products that involves the combinations of polysulfate with other nutrients – a granulated product – that create better use efficiency for plants and those additional products are being accepted very well,” he said.
“So the product portfolio success, together with the acceptability of the branding, is going to give us an additional premium and higher prices in the future that will enable us to grow our margin,” said Zoller.
“The reality is that it may not be a high margin business on its own. But given the results that we have so far, we know that in combination with other nutrients, we get some tremendous results,” he said, adding that the embedded value of the potash will go down (in down pricing cycles) but the premium and acceptance of polysulfate products will go up.
However, Zoller conceded it is unlikely to be “a multi-million ton” market, with ICL believing the global annual requirement is 1-2 million mt.
“Our assessment of the market is that we are nicely sized for a niche market, and that is why we are treating it as a specialties market and a specialties product,” he said.
“We don’t think it can be profitable selling as a commodity business and competing with SOP or other like type products,” he added.
Zoller also conceded ICL has “a long way to go” to get the premiums it wants for polysulfate products and to get long-term stability where the company feels it is safe making a nice margin in this business.
ICL reported it recently became the first fertilizer producer globally to obtain “Fertilizing Products Regulation” certification from the European Union (EU).
“This certificate, which is based on the new EU fertilizer regulation, addresses the biodegradability of polymer coatings for controlled release fertilizers, or when combining mineral fertilizers with biostimulants,” the company said.
Meanwhile, Zoller told analysts that ICL continues to look at M&A opportunities, but has found the past year and a half “frustrating” in this respect due to “the crazy valuations,”
“If valuations rationalize, then definitely that creates more opportunity for us. We do have the liquidity and we are generating plenty of cash, so we want to be opportunistic,” he said.
ICL does have its eyes on “a few interesting targets”, said Zoller, but did not elaborate further.