Potash price rise boosts Israel Chemicals

Israel Chemicals

The potash price in the company's new supply contracts is 21% higher than in its previous contracts and ICL's share price is up 30% in the past 3 months.

The share price of Israel Chemicals (TASE: ICL: NYSE: ICL), which works with fertilizers and mineral products, is up 2% today on a lively turnover, following a wider arbitrage gap with its price on the New York Stock Exchange. The share price rose 3.6% on the TASE on Monday.

The share price of Israel Chemicals, whose controlling shareholder is Idan Ofer-controlled Israel Corporation (TASE: ILCO), has risen 30% in the past three months, pushing its market cap up to NIS 28 billion.

The main reason for the surge of the past two trading days is a contract signed by Belarus company BPC with China for the supply of potash at $290 a ton, 25% higher than the price at which BPC, ICL, and other companies supplied potash to the Chinese market in the past two year. The new contract follows a rise in potash market prices over the past year.

ICL reported in late August that it had signed a contract to supply 550 tons of potash to a customer in India in September 2018-June 2019. The quantities agreed are the same as those agreed in the preceding year, but the price for this deal was also $290 a ton, 21% ($50 a ton) higher than the price in the earlier contracts and similar to the sales prices in the Indian market recently announced by other potash producers.

In its report, Israel Chemicals said that it expects to sign additional contracts with its customers in India in the near future amounting to 225,000 tons more of potash in the same period (until June 2019) at the same price.

The global fertilizer market, especially the price of potash, Israel Chemicals' main product, has been low for several years, due to a drop in global demand from farmers that caused surpluses and a sharp drop in prices. Over the past year, however, potash prices have recovered, reflected in Israel Chemicals' business results (the company also conducted large-scale streamlining).

Israel Chemicals, managed by CEO Raviv Zoller, who was appointed four months ago, finished the second quarter with $1.37 billion in revenue, 3.7% more than in the second quarter of 2017. Higher prices throughout the company's value chain and the appreciation of the euro against the dollar contributed to the increase, offset by the contribution of business that was sold.

Potash prices averaged $247 a ton in the second quarter, compared with a $216 a ton average in the second quarter last year.

Operating profit was up 19% to $172 million, while net profit soared 77% to $101 million, among other things due to a sharp drop in the company's corporate tax expenses.

Published by Globes [online], Israel business news - www.globes-online.com - on September 20, 2018

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

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