Israel Chemicals Ltd. (TASE: ICL) today reported lower profits and revenue for the third quarter of 2012, due to fluctuations in the euro-dollar exchange rate, which were partly offset by acquisitions. Higher sales in North America, mainly for performance products and in South America, mainly for fertilizers, were offset by lower fertilizer and performance products sales in Europe and Asia.
Israel Chemicals said that its potash shipments were similar compared with the corresponding quarter, despite the decline in global potash trade. It added that the poor global economic climate affected its performance products and industrial products segments less in the third quarter than in previous cycles.
Israel Chemicals warns, however, "The completion of existing contracts coupled with delayed renewals of contracts in India and China is expected to reduce the company’s fourth quarter 2012 potash shipments as compared with the fourth quarter of 2011."
Revenue fell 4.3% to $1.82 billion for the third quarter from $1.9 billion for the corresponding quarter of 2011. Domestic sales totaled $109.9 million (6% of total third quarter sales), European sales totaled $571.5 million (31.5%), Asian sales totaled $496.7 million (27.3%), North American sales totaled $363.2 million (20%), and South American sales totaled $250.9 million (13.8%).
Net profit attributable to majority shareholders fell to $395 million ($0.31 per share) for the third quarter from $436 million ($0.34 per share) for the corresponding quarter.
Israel Chemicals beat the "Globes"-Psagot Investment House Ltd. analysts' revenue consensus of $1.72 billion and was in line with the earnings per share consensus of $0.31.
Fertilizer sales, including potash fell to $1.07 billion for the third quarter from $1.13 billion for the corresponding quarter, and the operating profit fell to $367 million from $416 million. Potash sales rose to 1.16 million tons in the third quarter from 1.12 million tons in the corresponding quarter, and inventory fell by 330,000 tons to 557,000 tons at the end of September 2012. Lower potash shipments to China were offset by higher shipments to Brazil and India.
Israel Chemicals says that severe drought in the US and Australia, dry weather in Russia and Ukraine, as well as too-wet weather in Europe have reduced crop yields and pushed up prices for corn, soy beans, and wheat. It believes that these conditions will boost demand for fertilizers in the next planting season. It adds that global potash demand was lower in the third quarter than in the corresponding quarter, because of delayed contracts with Chinese and Indian customers and the ongoing economic crisis in Europe.
Phosphate production rose to 845,000 tons in the third quarter from 762,000 tons in the corresponding quarter, but revenue fell to $438 million from $458 million, and the operating profit fell to $52 million from $56 million, due to lower prices. Revenue from industrial products (bromine-based flame retardants) also fell to $343 million for the third quarter from $377 million for the corresponding quarter, and the operating profit fell to $59 million from $76 million. The company attributed the lower results to the global economic slowdown, which reduced demand for flame retardants by the electronics and construction industries. The company consequently closed one of its production units, which will stay closed for the rest of the year.
Cash flow from operations rose 36% to $680 million for the third quarter from $499 million for the corresponding quarter. The company will distribute a $276 million dividend from its third quarter profits on December 19.
Israel Chemicals CEO Stefan Borgas said, “Despite the challenging global economic environment, Israel Chemicals continues to demonstrate resilience due to its numerous leading market positions and a balanced portfolio that counterbalances low economic growth. The products that we manufacture for the agriculture, food, water and materials markets are an answer to the essential, fundamental requirements of the world’s growing population. Israel Chemicals develops products and processes that will enable it to grow and strengthen the contribution that it makes to consumers in these critical areas.”
Published by Globes [online], Israel business news - www.globes-online.com - on November 21, 2012
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