Israel Chemicals signs more Chinese potash contracts

Israel Chemicals

The company renewed old deals, but for bigger quantities.

After signing potash supply deals last month with customers in China for up until June 2019, Israeli fertilizers and minerals producer Israel Chemicals (TASE: ICL: NYSE: ICL) yesterday signed new framework agreements with customers in China to supply them with potash in 2019-2021.

The contracts signed yesterday are renewals of agreements signed three years ago, but Israel Chemicals will now supply a total of three million tons of potash over three years (one million tons a year), 8.1% more than it supplied under the earlier agreements, with an option to increase the quantity by 750,000 tons.

The prices for the potash to be supplied will be determined according to the potash prices prevailing in the Chinese market on the relevant supply date.

In mid-October, following a three-month delay, Israel Chemicals signed new contracts to supply potash to its customers in China. Israel Chemicals, led by president and CEO Raviv Zoller, will supply customers in China with 905,000 tons of potash, with an option to add 375,000 tons more, by June 2019.

The agreed price of $290 per ton of potash is 26% more ($60) than the price set in previous contracts signed last year by Israel Chemicals with customers in China. The current framework agreements signed for the next three years are therefore worth $870 million at today's market prices.

A week ago, Israel Chemical reported its third quarter results, with a 53% increase to $129 million in net profit. The company recorded a 4.8% decline to $1.37 billion in sales caused by the delay in signing potash supply contracts with customers in both China and India. Operating profit amounted to $196 million in the third quarter, 9% more than in the third quarter of 2017.

Israel Chemicals benefited from high fertilizer prices in the third quarter. The price of potash per ton in the quarter was $286, $51 more than in the corresponding quarter last year. Per ton prices of phosphorite, fertilizers, and phosphate-based acids rose 12-31%. These price rises offset the negative effect of the drop in quantities sold and the higher costs of raw materials, energy, and transportation caused by increases in the prices of oil and fuel.

Israel Chemicals' share price has risen by over 60% over the past year, boosting its market cap to NIS 29.5 billion.

Published by Globes, Israel business news - en.globes.co.il - on November 8, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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