Citi Capital Markets expects Israel Chemicals Ltd. (TASE: ICL) to post lower profits in 2012 and 2013 compared with 2011, and cut its target price to NIS 48 from NIS 50. Citi today published a middling forecast for the company, ahead of the publication of its financial report for the fourth quarter and full of 2011 on March 27.
Citi cut its 2012 earnings per share forecast for Israel Chemicals by 8% to $1.13 from $1.22, and cut its forecast for 2013 by 4% to $1.12 from $1.16. Citi estimates that potash prices will fall to $475 per ton from $500, and it cites India's decision to stop fertilizer imports in the first quarter of 2012 to contain subsidy costs, and the lack of pre-season buying by dealers in Europe as key factors affecting volumes in the first quarter, and Israel Chemicals will have been affected.
For the fourth quarter, Citi says that Israel Chemicals was affected by the lack of dealer pre-season buying in Europe, especially for phosphate fertilizers, and that Brazilian demand was also weak.
Citi reiterated its "Buy" recommendation for Israel Chemicals, citing robust fundamentals for the fertilizer industry, although it cautions that the economic downturn has provoked dealer destocking and subsidy changes have limited Indian demand. "Nonetheless, the valuation is undemanding, the scope for cash flow remains strong and we still see the shares as being undervalued on a mid-term basis," it says.
Citi predicts that the company will report earnings per share of $0.27 for the fourth quarter, 10% more than for the corresponding quarter, mainly to higher potash prices mitigated by weakness in phosphate fertilizers and industrial products destocking. It therefore predicts that Israel Chemicals will reduce its dividend for the fourth quarter to $0.17 per share from $0.24 for the third quarter.
Israel Chemicals' share price fell 0.7% in morning trading to NIS 38.92 giving a market cap of NIS 49.8 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on March 7, 2012
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