UBS cuts Israel Chemicals

Analyst Roni Biron has downgraded Israel Chemicals to "Neutral" following K+S's profit warning and potash price cut.

UBS has downgraded its recommendation for Israel Chemicals Ltd. (TASE: ICL), following the profit warning from Europe's largest potash producer K+S. The bank now rates Israel Chemicals "Neutral", and has cut its price target for Israel Chemicals shares from NIS 47 to NIS 44. On the Tel Aviv Stock Exchange, Israel Chemicals' share price is currently down 1.86% on yesterday's close, at NIS 39.50.

"K+S announced today it will lower its potash price in Europe to €435 per tonne from €555. This compares with prices of $735-750 in Brazil and $625 in India. While current spot prices have been expected to drop subsequent to a settlement in India or China, we are concerned that K+S stepping in ahead of BPC and Canpotex may indicate a weakening of the industry discipline at this crucial time," UBS analyst Roni Biron writes.

A year ago, Israel Chemicals' share price was at an all-time high of NIS 74. At the time, corn prices were at $7 per bushel and potash prices hovered around $1,000 per tonne. Corn prices are now around $4 per bushel, and potash prices have subsided.

Biron has reduced his price estimate for potash for the second half of 2009 and for 2010 to $570 per tonne from $650 per tonne, reflecting prices of $500 in China, $550 in India and $600 spot.

Biron notes that "ICL ships over 1.5 million tonnes to Europe in a typical year (c.30% of volume)."

Yesterday, Israel Chemicals' share price fell almost 8% in the wake of K+S's profit warning.

Published by Globes [online], Israel business news - www.globes.co.il - on June 18, 2009

© Copyright of Globes Publisher Itonut (1983) Ltd. 2009

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