Tel Aviv—Israel Chemicals Ltd. (ICL) has decided on additional measures to strengthen the company’s financial position in light of a downgrade by the international rating agency Fitch, the significant deterioration in the potash market, and the continued weak outlook for the sector. ICL announced that it will pay out $67 million in the form of a cash dividend of $0.05 per share for the fourth quarter. However, the company’s board of directors will re-examine ICL’s dividend policy at its upcoming meeting. ICL is also planning a $320 million bond issue on the Tel Aviv Stock Exchange. ICL has decided on cost-cutting measures designed to reduce operating costs by a further $50 million in 2016. This is in addition to the previously announced measures designed to cut costs by $350 million in 2016. Capital expenditures will be reduced to $650 million in the coming years, down from the previous target of $700 to $800 million. In January the company had estimated operating profits of $800 to $1.1 billion, but this appears unrealistic in light of a decline in potash prices. ICL is seeking to stabilize its debt level. Fitch cited uncertainly in the potash market when it lowered its ratings for ICL. Fitch questioned whether a change in ICL’s investment policy and or a dividend cut would be sufficient to reduce its debt level. Fitch also estimated that potash prices would drop by 3 to 5 percent in 2016. Amir Arad, a chemical industry analyst at the Meitav Dash investment bank in Tel Aviv, expects ICL’s board will wait to see at what price the potash supply agreements with China are signed before taking action on the dividend. He also speculated that the decision to reduce capital expenditures would impact the Ethiopian potash project. Arad noted that the Ethiopian project was based on a potash price of $430/mt, which is currently far higher than current levels.
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