Earnings
Incitec Pivot Returns to Black in FY2020, Sees Positive Outlook for Fertilizer
Incitec Pivot Ltd.’s (IPL) Fertiliser Asia Pacific segment swung back to the black in fiscal 2020 ending Sept. 30, posting EBIT of A$26.2 million (approximately US$19.1 million at current exchange rates), versus a year-ago A$79.7 million EBIT loss. Revenue increased 6 percent to A$1.50 billion, up from 1.42 billion.
IPL described the result as “a positive outcome given the very low commodity prices during the first half of FY2020.”
The group said the segment’s performance in the first four months of the year was impacted by severe drought, with improved conditions creating a good uplift in demand for the remainder of the year, underpinning a 37 percent increase in earnings from the distribution business.
Distribution volumes contributed A$20 million to the segment’s FY2020 EBIT increase, driven by strong fertilizers sales volumes and favorable product mix following much improved weather conditions across Eastern Australia.
Higher production and improved plant performance at the Phosphate Hill operation in Queensland provided a A$135 million increase.
Phosphate Hill and the Gibson Island ammonia and urea production site in Brisbane benefited from a lower contracted gas cost of A$13 million, and A$9 million from lower third party charges due to improved gas supply reliability and operating efficiencies. These lower charges overall contributed A$22 million to Fertiliser Asia Pacific’s FY2020 EBIT increase.
The permanent closure of the Portland SSP plant in FY2019 provided a $13 million boost to EBIT, while insurance payments of A$7 million received related to the FY2019 Queensland rail outage, and A$2 million benefits from efficiency gains from the company’s COVID-19 Response plan and non-essential spend savings provided a A$9 million increase.
There was also a A$88 million net decrease due to lower global fertilizer prices of A$103 million, partially offset by A$15 million of benefits from the lower Australian dollar-U.S. dollar exchange rate compared to FY2019.
IPL reported FY2020 domestic fertilizer sales volumes were 14 percent up in FY2020 at 2.21 million mt, versus the year-ago 1.95 million mt
FY2020 Phosphate Hill ammoniated phosphates production increased 45 percent, to 979,000 mt from FY2019’s 675,000 mt. The company cited mainly improved plant performance and efficiencies after extended production outages in FY2019 associated with the Queensland rail outages and the phosphoric acid reactor failure (GM Nov. 15, 2019). It reported the plant operated reliably at 93 percent during FY2020 versus 75 percent in the prior year, with more than 1 million mt annual equivalent ammonium phosphates production during the second half of the year.
“The Gibson Island plant produced 401,500 mt of urea equivalent product, up 8 percent from the year-ago 369,700 mt. The planned major turnaround that was required to enable the plant to operate efficiently through 2022 (GM Nov. 15, 2019) was successfully completed in March 2020,” IPL said. The new gas supply from Australia Pacific LNG, which started in April 2020 and continues through to the end of December 2022, delivered a reduction in gas cost of A$5 million in FY2020.
IPL in April announced it had decided to retain its Fertilizer business (Fertilisers Asia Pacific business segment), having concluded a strategic review of the business that was launched in September 2019 (GM April 24, p.1; Sept. 6, 2019). Three possible outcomes had been envisaged – sale, demerger, or retain and invest.
But IPL concluded, given the extraordinary market uncertainty and travel restrictions caused by the COVID-19 pandemic, that the right outcome for its shareholders was for the company to retain Incitec Pivot Fertilisers and focus on its core operations as an industry leader in the supply of fertilizers and services to Australian agriculture.
In its earnings report this week, IPL said its fertilizer business is “well placed to benefit from the growth of new value-added products and services for precision agriculture, as well as any future improvements in commodity prices.”
Group-wide, IPL reported a 29 percent decline in FY2020 net profit after tax (NPAT) of A$123.4 million on revenue of A$3.94 billion, down from the year-ago A$152.4 million and A$3.92 billion, respectively. NPAT excluding individually material items (IMIs) was A$188.2 million, versus FY2019’s A$152.4 million.
In total, the group reported A$64.8 million of IMIs, which related to the write-down of obsolete technology and software, an implementation costs of IPL’s Response Plan, a program designed to reduce costs to mitigate the earnings impacts of softer commodity prices, and COVID-19. The group booked zero IMIs in its FY2019′ earnings.
Earnings per share excluding IMIs was 10.9 Australian cents, up 15 percent from 9.5 cents in FY2019.
Year-on-year, group revenues showed a 24 percent increase.
“While 2020 has been a challenging year on many fronts, our businesses have delivered a strong operating performance and we have made good progress on our strategic agenda,” said IPL Managing Director and CEO Jeanne Johns. “We acted quickly to implement new control measures to keep our people and customers safe throughout the pandemic, which enabled us to provide uninterrupted supply to customers in the essential resources and agricultural sectors.
“We also put in place a company-wide COVID-19 Response Plan to deliver approximately A$60m cash savings over the years, with A$20m delivered this financial year,” she said.
Johns highlighted that IPL’s explosives business has performed well, with the group’s premium technology offering continuing to underpin strong margins in the U.S. business, while demand held up well in Australia.
“Our Manufacturing Excellence strategy is progressing well, with our key plants operating at 86 percent reliability during FY2020,” said Johns. “Phosphate Hill also delivered a strong second-half performance at an equivalent production of 1 million mt/y. We have completed two of four turnarounds scheduled for FY2021, and are on track to deliver our reliability target of 95 percent by FY2022.
“Our businesses are well placed in the current COVID-19 environment. Our premium technology will continue to underpin the growth of our Explosives business, and there is significant upside in our Fertilisers business when commodity prices recover,” she said. “Our balance sheet has been significantly strengthened following the equity raising in the second half, increasing our financial resilience and providing financial flexibility to continue to deliver our strategic agenda.”
Dyno Nobel Americas (DNA) reported a 1 percent drop in EBIT, to A$230.8 million on revenues of A$1.51 billion, down from FY2019’s A$234.0 million and A$1.57 billion, respectively.
In U.S. dollars, DNA EBIT was off 5 percent to US$154.8 million on revenue of US$1.02 billion, down from FY2019’s US$163.5 million and US$1.10 billion, respectively.
Within DNA, the Waggaman ammonia facility in Louisiana saw a 69 percent rise in EBIT to US$32.4 million on revenue of US$164.5 million, versus FY2019’s US$19.2 million and US$193.0 million, respectively. IPL reported a US$21 million increase in EBIT from improved production and higher plant efficiencies compared with a year ago.
But there was a US$2 million net decrease in EBIT from lower ammonia prices of US$23 million, which was mostly offset by the positive impact from lower gas pricing of US$21 million. There was also a US$6 million EBIT decrease, with US$3 million due to temporary cost increases until after the FY2021 plant turnaround to drive plant reliability improvement, and US$3 million of additional operating costs, including higher insurance cost.
The Waggaman plant produced 15 percent more ammonia in FY2020, at 729,000 mt, up from the year-ago 634,400 mt, with IPL reporting the plant operated at 91 percent of nameplate capacity in FY2020 compared with 79 percent in the prior year. It cited improved plant reliability and efficiencies as driving the output increase, highlighting that the plant recorded its second longest uninterrupted production run of 210 days through August 2020.
Waggaman ammonia sales volumes were largely flat year-on-year, at 730,000 mt.
DNA’s Agricultural & Industrial Chemicals (AG & IC) EBIT for FY2020 was US$1.3 million, up from the year-ago US$0.2 million. Manufacturing performance was boosted by US$12 million in net benefits over FY2019 from a lower gas costs and improved plant efficiencies, and an absence of third-party gas supply interruptions that occurred in FY2019 (GM Nov. 15, 2019). There was also a US$3 million increase driven by operational productivity and efficiency gains related to IPL’s COCID-19 Response Plan.
The unit saw a US$12 million decrease, mainly due to a US$7 million impact from lower urea prices, and lower nitrogen prices also had a US$5 million impact on the pricing of products produced at the Cheyenne, Wyo., plant, and the St Helens, Ore., plant.
AG&IC’s sales volumes saw a US$2 million decrease on a year ago, as softer industrial demand from COVID-19 impacted sales volumes.
IPL said the Cheyenne plant produced 3 percent less nitric acid in FY2020 versus the prior year, and ammonia production was down 7 percent due to a planned maintenance outage and unplanned downtime caused by a third-party power supply interruption in the first half of FY2020.
The group’s urea production from the St Helen’s plant increased 20 percent in FY2020, mainly due to improved uptime and efficiencies at the plant and an absence of the gas supply interruptions seen in FY2019. IPL said a major six-week turnaround campaign at the plant started at the end of September 2020.
DNA’s Explosives unit saw an 11 percent decrease in EBIT, to US$121.1 million on revenue of US$768.4 million, down from FY2019’s 136.1 million and US$824.5 million, respectively. Among other factors, IPL cited lower volumes to U.S. iron ore and Mexico customers and lower volumes to the coal sector due to structural demand declines, exacerbated by low U.S. natural gas prices, and lower industrial demand due to COVID-19.
Dyno Nobel Pacific (DNP) reported a 17 percent decline in FY2020 EBIT to A$149.3 million on revenue of A$999.2 million, down from the year-ago A$179.2 million and A$990.7 million respectively. Revenues had a 1 percent uptick. DNP’s ammonium nitrate (AN) output at the Moranbah, Queensland, plant increased 2 percent to 371,300 mt, up from 365,000 mt. But DNP’s total AN sales dipped 3 percent to 762,600 mt, down from 785,700 mt in FY2019.
IPL said it continues to actively manage the risks arising from COVID-19 on its people and operations, including a financial response plan that is expected to deliver cost savings of A$60 million per year by FY2022, of which A$30 million will be delivered in FY2021, heavily weighted to Australian fertilizer manufacturing.
For its Fertilizer business, the group expects favorable weather conditions for the East Coast of Australia to drive strong demand for fertilizers in FY2021, while distribution margins for FY2021 are expected to be largely in line with FY2020, subject to global fertilizer prices and favorable weather conditions.
Phosphate Hill production for FY2021 is expected to be lower due to a planned three-week maintenance shutdown at Mt Isa that reduced sulfuric acid availability to the Phosphate Hill site. The shutdown was completed in October 2020.
IPL expects higher production at the Gibson Island site in FY2021, with no planned outages. It also expects additional benefits of approximately A$5 million in FY2021 from the full-year impact of lower gas supply cost to its Gibson Island production site under the Australia Pacific LNG contract that started in April 2020.
In Dyno Nobel Americas, lower first-half 2021 ammonia production is expected at Waggaman due to an unplanned output outage this November due to hurricane-related power outages, as well as a planned seven-week major turnaround scheduled to begin in January 2021. The EBIT impact of the turnaround is expected to be about US$25 million (including depreciation). Plant reliability is expected to improve following the completion of the turnaround.
In Dyno Nobel Pacific, Australian customer demand is expected to remain solid in FY2021. But the group expects lower second-half 2021 production at the Moranbah plant due to a planned major turnaround scheduled to start in May 2021. The EBIT impact is expected to be approximately A$15 million.
IPL said, as an exception to its dividend policy, its board has determined not to pay a final dividend for FY2020 in light of the ongoing uncertainty due to COVID-19 and the group’s equity raising in May (IPL raised A$600 million in an institutional placement and $57.5 million in a share purchase plan (GM June 12, p. 28). However, IPL said its dividend policy, which is to pay between 30 percent and 60 percent of NPAT, remains unchanged.
K+S 3Q EBITDA Beats Estimates; Looming Impairment Hit on FY Earnings
K+S Group, Kassel, has reported a 19 percent rise in third-quarter EBITDA to €96 million (approximately $113.2 million at current exchange rates), up from the year-ago €80.6 million, and beating the average analyst estimate of €83.2 million (Bloomberg).
Earnings include one-time non-cash income to compensate for COVID-19-related efficiency losses.
Revenues fell 9 percent to €821.7 million, down from the prior year’s €904.9 million.
The Europe+ Operating Unit saw a 26 percent increase in third-quarter EBITDA, to €84.8 million, up from the previous year’s €67.3 million. The company said a one-off effect of €30 million related to a package of cost-cutting measures more than compensated for a price-related weaker earnings environment.
Increased earnings contributions in the Industry and Consumers customer segments in the Americas Operating Unit, together with strict cost discipline, almost completely offset the effects of lower de-icing salt fills, K+S said.
The company announced in October that it had agreed to a deal to sell the Americas unit to Stone Canyon Industries Holdings LLC (SCIH), Mark Demetree, and affiliates, for $3.2 billion (GM Oct. 9, p. 32). SCIH owns Overland Park, Kansas-headquartered ice melt manufacturer and salt supplier Kissner Group Holdings LP.
K+S reported that as the currency risk is now fully hedged, the company expects net proceeds of around €2.5 billion, and said its goal was to pay down upcoming debt maturities with the proceeds. The transaction closing remains expected in the summer of 2021.
But, in response to an analyst’s question at a company earnings call on Nov. 12, K+S Executive Chairman of the Board Burkhard Lohr conceded that U.S. antitrust clearance of the deal is “the main step K+S has to take between signing and closing,” and also confirmed there is break-up fee in the sales contract.
K+S confirmed its previous full-year 2020 EBITDA guidance of about to €480 million, after taking into account one-off restructuring expenses of up to €40 million. Full-year 2019 EBITDA was €640 million.
However, the company said as a result of the impairment loss on assets in the Europe+ Operating Unit of about €2 billion announced by the company on Nov. 4 (GM Nov. 6, p. 38), adjusted group earnings after taxes for the full year will fall to “a significantly negative” figure. (The impairment loss on assets of the Europe+ operating unit is not reflected in EBITDA).
For the first nine months of 2020, K+S posted adjusted group earnings after taxes of a negative €1.98 billion, versus the year-ago positive €68.5 million. FY2019 adjusted group earnings after taxes were €77.8 million
The impairment is due to K+S adjusting its long-term assumptions, mainly regarding the long-term potash price assumption, but also partly to do with a higher cost of capital rate.
Germany’s Baader said this week it is still “struggling” with the timing of K+S’ €2 billion impairment, according to a Bloomberg report. Analyst Markus Mayer expects two-thirds of the impairment to be Bethune-related, and one-third related to the company’s German mines. Responding to the analyst at a company earnings call on Nov. 12, Lohr confirmed this split.
K+S said the positive effects in connection with the signing of the sales agreement for the Americas operating unit will no longer affect 2020; consulting costs related to the agreed sale are already included in EBITDA with about €20 million.
The company is not assuming any significant adverse effects on business as a result of the COVID-19 pandemic, which, it noted, is again becoming increasingly widespread.
It also said its restructuring of the administration functions is proceeding according to plan and will be completed by the end of this year. It sees a reduction of administrative expenses by 30 percent, or a total of about €60 million to €140 million a year from 2021 onward.
Agriculture, K+S’ largest customer segment, posted a 75 percent decline in third-quarter EBITDA to €11.5 million, down from the year-ago €46.1 million. Revenues were also lower, down 12 percent on the year at €373.0 million versus €425.0 million.
The company said higher sales volumes were unable to offset lower average prices.
“Due to lower potash prices in Agriculture, we lost a good €50 million compared to the previous year,” Lohr told analysts. “We were able to partly compensate this decline by showing strong operational performance of our plants, to which Bethune in particular made a significant contribution.”
Third-quarter revenues from sales in Europe fell 4 percent to €176.2 million, down from €182.6 million, while revenues from sales overseas declined 19 percent, to €196.8 million from the year-ago €242.4 million.
Of the Agriculture customer segment’s total revenue in the third quarter, potassium chloride sales contributed €212.7 million (3Q 2019: €269.5 million), a 21 percent decline. Fertilizer specialities contributed €160.3 million (3Q 2019:155.5 million), a 3 percent uptick.
Agriculture’s third-quarter sales volumes increased 9 percent on the year at 1.66 million mt, up from 1.52 million mt. Third-quarter 2019’s sales volumes were impacted by a reduction in potash production. Potassium chloride sales volumes increased 7 percent, to 1.07 million mt, while fertilizer specialties sales increased 14 percent from a year-ago. reaching 0.58 million mt.
Sales to Europe amounted to 690,000 mt in the third quarter, a near 5 percent increase on the year-ago 660,000 mt, while overseas sales volumes rose 13 percent, to 970,000 mt, up from 860,000 mt.
Agriculture Customer Segment sales volumes (million mt) and average prices
| 3Q-2020 | 3Q-2019 | %change | 9M-2020 | 9M-2019 | % change | |
| Total | 1.66 | 1.52 | +9 | 5.31 | 4.77 | +11 |
| Of which: | ||||||
| Potassium chloride | 1.07 | 1.01 | +7 | 3.44 | 3.00 | +15 |
| Fertilizer specialties | 0.58 | 0.51 | +14 | 1.87 | 1.77 | +5 |
| Average price | 225.0 | 279.7 | – | 232.2 | 278.0 | – |
| Europe (€/mt) | 255.4 | 277.5 | – | 267.5 | 280.0 | – |
| Overseas ($/mt) | 237.7 | 312.9 | – | 231.7 | 309.9 | – |
Agriculture saw nine-month EBITDA decline 44 percent, to €147.8 million on revenues of €1.23 billion, down from the year-ago €265.6 million and €1.33 million, respectively.
K+S said it expects global potash sales volumes for 2020 as a whole to increase by around 2 million mt to around 70 million mt. This total includes just under 5 million tons of potassium sulfate and potash types with lower reusable material content.
K+S said it expects “a slight recovery” in potassium chloride prices in the remaining weeks of the year.
“After potassium chloride prices in Brazil bottomed out following the conclusion of contracts in China and India in the second quarter of this year, we continue to assume a slight recovery of potassium chloride prices in the remaining months of 2020 compared to the price level of the third quarter,” the company said. It had previously expected “a moderate recovery” in prices to the price level of the second quarter (GM May 15, p. 1). It continues to expect prices for fertilizer specialties to remain largely stable.
K+S continues to expect full-year sales volumes in the Agriculture customer segment of more than 7 million mt, driven in particular by the return of normal production in Germany and a continued stable production in Bethune with no production cuts, against the backdrop of the good sales performance in the first nine months of 2020. Sales volumes in FY2019 were 6.30 million mt.
However, the company expects Agriculture’s higher sales volumes to be offset by negative price effects. It therefore expects “a noticeable decline” in the segment’s full-year EBITDA. FY2019 EBITDA was €437.0 million.
Commenting on the company’s goal for its plants in Germany and Canada to generate sustainable cash in the future, “even with low potash prices and green winters,” Lohr said K+S will reach this with “an optimized production footprint and an optimized product portfolio.”
Responding to an analyst’s question whether that might include closing down of locations, Lohr said he would not like to rule anything out, but emphasized it didn’t look probable that the company would close down any operation earlier than anyway assumed. However, he reminded the next operation for potential closure would be Unterbreizbach in Germany in the mid-2030s.
“All the German mines deliver nice specialty products with nice premiums, and we will find a way to have [an optimized production footprint and an optimized product portfolio], most probably without closing something earlier,” said Lohr.
Given the company’s improved financial situation following the sale of the Americas operating unit, he said the company will also have “sufficient headroom” to grow in specialties.
In response to an analyst’s question whether K+S was still shipping the same volume of potassium sulfate to China this year as it did in 2019, given China has lowered its export tariff, Lohr believes there has not been a major disruption in the market and as a result, “neither on a volume base or on a price base for the volumes K+S is shipping to its core markets in that nation.”
K+S’ Industry customer segment, which comprises potash and salt products, saw third-quarter EBITDA increased 136 percent to €105.6 million on revenues of €282.1 million, up from the year-ago €44.8 million and €292.9 million, respectively. The company cited a positive one-off effect as largely driving the EBITDA increase.
Revenues declined 4 percent. The company said while sales in the Europe+ operating unit remained stable due to the favourable product mix, positive price effects in the Americas operating unit could not fully offset lower volumes and negative currency effects.
Sales volumes fell 5 percent to 2.53 million mt, down from 2.66 million mt.
Industry’s nine-month EBITDA increased 36 percent, to €216.7 million, while revenues dipped 1 percent to €845.4 million. Nine-month sales volumes were close to 3 percent off, at 7.38 million mt versus the year-ago 7.57 million mt.
For the nine months, K+S reported a group-wide EBITDA of €384.8 million, a 20 percent decrease on the year-ago €480.6 million. Nine-month revenues fell 10 percent, to €2.75 billion, down from €3.05 billion.
ICL 3Q Profit Falls, Sees Post COVID-19 Recovery
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.
PhosAgro Reports 3Q Boost on Higher Sales Volumes, FX
PhosAgro, Moscow, reported a third-quarter IFRS net loss of RUB1.33 billion (approximately $17.2 million at current exchange rates), compared with a year-ago net profit of RUB9.76 billion. However, net income adjusted for non-cash foreign exchange items came in 53 percent up, at RUB18.1 billion ($246 million) versus the previous year’s RUB11.8 billion.
EBITDA increased 27 percent to RUB27.05 billion ($368 million), up from RUB21.3 billion, while revenue grew 10 percent, to RUB70.99 billion ($965 million), up from the year-ago’s RUB64.55 billion.
“In the third quarter, PhosAgro’s revenue and EBITDA increased year-on-year on the back of higher production volumes, while global prices for key raw materials remained low,” said PhosAgro CEO Andrey Guryev.
“Despite the lower prices for phosphate-based and nitrogen fertilizers in the quarter compared with the same prior year period, EBITDA margin increased to 38 percent [up from 33 percent a year ago],” he said, citing improved operating efficiencies of the group’s production facilities, as well as the decrease in global prices for basic raw materials and the increase in sales volumes.
The group said a 10 percent increase in sales volumes and a 14 percent devaluation of the Russian ruble drove third-quarter revenue growth, noting revenue growth was limited by lower prices for phosphate-based and nitrogen fertilizers, which were down 4 percent and 6 percent, respectively, on a year-over-year basis.
Third-quarter sales volumes reached 2.717 million mt, up from the year-ago 2.471 million mt.
Gross profit in the group’s phosphate-based fertilizer segment increased 26 percent in the third quarter, to RUB29.9 billion ($407 million), boosted by the decrease in global raw materials prices and the devaluation of the rouble.
But third-quarter gross profit in the nitrogen fertilizer segment fell 8 percent to RUB4.9 billion ($67 million).
For the nine-months, PhosAgro posted a 91 percent IFRS net-profit drop to RUB3.96 billion, down from the previous year’s RUB42.71 billion, but net income adjusted for non-cash foreign exchange items increased 14 percent, coming in at RUB39.31 billion ($557 million) versus the prior-year’s RUB34.53 billion.
Nine-month EBITDA grew 2 percent to RUB65.9 billion ($928 million), up from RUB64.4 billion, while revenue was essentially flat year-on-year, at RUB195 billion ($2.8 billion).
PhosAgro highlighted the strong increase in its fertilizer export sales in the first nine months of the year, with export sales volumes rising by 12 percent year-on-year. It cited the group’s robust sales system and the high quality of its fertilizers.
“Sales volumes were also boosted by favorable weather conditions, the affordability of fertilizers for end-users, and the temporary halt in fertilizer production in India and China in the spring due to the introduction of restrictive measures in connection with the coronavirus pandemic,” said Guryev.
“All these factors enabled PhosAgro to increase sales volumes in its priority markets of Latin America and Europe. At the same time, sales volumes in the group’s domestic market also increased by 6.4 percent, thanks to the growth of the entire agricultural sector in the Russian Federation.”
Regarding the group’s outlook on market developments, the CEO said markets look balanced at the present time, and he believes this balance may be maintained during the fourth quarter.
“Slower seasonal demand in South Asia and Latin America is likely to be offset by rising imports in the U.S., Western Europe, and Africa, while exports from China will remain limited,” he said.
PhosAgro sales volumes (‘000 mt)
| 3Q-2020 | 3Q-2019 | % change | 9M-2020 | 9M-2019 | % change | |
| Phosphate-based fertilizers | 2,247 | 1,959 | +15 | 6,124 | 5,517 | +11 |
| Nitrogen fertilizers | 470 | 512 | (8) | 1,776 | 1,660 | +7 |
| Total sales | 2,717 | 2,471 | +10 | 7,900 | 7,177 | +10 |
Chemtrade 3Q Loss Increases
Chemtrade Logistics Income Fund, Toronto, reported a third-quarter loss of C$48.3 million on revenues of $345.9 million, compared to the year-ago net loss of $163,000 on sales of $395.7 million. Adjusted EBITDA was $64.6 million, down from $90 million.
The company cited higher finance costs, lower selling prices, and sales volumes for hydrochloric acid and caustic soda, as well as lower sales volumes of regen and merchant sulfuric acid.
Chemtrade reported a nine-month net loss of $141.7 million on revenues of $1.1 billion, compared to the year-ago loss of $87 million and $1.2 billion, respectively. Adjusted EBITDA was $221 million, down from $225.3 million.
The company added there will be two major turnarounds in the fourth quarter that will impact results, one at a North Vancouver chlor-alkali plant and another at a regen plant.