TEL AVIV, Israel, May 12, 2020 /PRNewswire/ -- ICL (NYSE: ICL) (TASE: ICL), a leading global specialty minerals and specialty chemicals company, today reported its financial results for the first quarter ended March 31, 2020.
Highlights for the First Quarter of 2020
The results for the first quarter of 2020 were impacted by a continued decline in potash and phosphate commodity prices and the continued delay in the signing of a potash supply contract in China, which has since been signed. The strong performance of ICL's specialty businesses partly offset the weaker commodity results. The emergence of the COVID-19 pandemic impacted operations but did not have a material impact on financial results.
ICL's President & CEO, Raviv Zoller, stated "The resilience of ICL's diversified business portfolio is reflected in the financial performance achieved even in difficult market conditions. In the first quarter of 2020, when potash and phosphate commodity prices fell to what we believe are cyclically low levels, our results were supported by record operating income in our Industrial Products segment and by strong sales of specialty phosphates. Our continued emphasis on a value-based strategy resulted in continued strong cash generation. The COVID-19 pandemic has created a new, unprecedented challenge that will affect our results in the short term. We are taking appropriate measures to further enhance our operational efficiency to mitigate the impact of the pandemic on our business, including new cross-segment cost efficiency initiatives. We believe ICL's strong financial position, diversified business and dominant position in key markets will also act as a buffer against expected market challenges and allow us to continue to pursue timely growth opportunities."
STATEMENT REGARDING COVID-19
The COVID-19 pandemic did not have a notable impact on ICL's financial performance in the first quarter of 2020, although it is anticipated that 2020 annual results could be impacted. There has been a significant decline in global economic activity due in part to preventative measures taken by various government organizations around the world, many of which are ongoing. We believe this will result in a decline in demand for certain flame retardants products of the Industrial Products segment. The significant decline in crude oil prices, related to COVID-19, is also expected to result in decreased demand for clean brine fluids, which are used in oil and gas production.
ICL has worked rapidly to ensure the health and safety of its employees, business partners and the communities in which we operate. ICL's global response was influenced by the early experience at its facilities in China, as mitigation efforts began in January when the spread of the pandemic was in its initial stage. As a provider of products and materials essential to food production and other industries. ICL's facilities have been operating at full capacity, except for our mining operations in the UK, which are currently operating at about 70% of capacity, and our mining operations in Spain, which were temporarily halted for 3 weeks, but have since been resumed at about 60% of capacity. ICL continues to gradually ramp up production in both sites, while ensuring the health and safety of its employees and complying with local regulations.
As a direct response to the pandemic, ICL drew funds from its credit facilities to increase its cash and deposit balances. This was done to ensure the company would have significant flexibility to operate in a volatile business environment, as well as to seize opportunities. As of March 31, 2020, ICL had total liquidity of $1.1 billion, including $524 million in cash and deposits and $590 million in unutilized credit facilities.
Financial Figures and Non-GAAP Financial Measures
1-3/2020 | 1-3/2019 | 1-12/2019 | ||||
$ millions | % of sales | $ millions | % of sales | $ millions | % of sales | |
Sales | 1,319 | - | 1,415 | - | 5,271 | - |
Gross profit | 400 | 30 | 501 | 35 | 1,817 | 34 |
Operating income | 132 | 10 | 227 | 16 | 756 | 14 |
Adjusted operating income (1) | 132 | 10 | 241 | 17 | 760 | 14 |
Net income - shareholders of the Company | 60 | 5 | 139 | 10 | 475 | 9 |
Adjusted net income - shareholders of the | 60 | 5 | 150 | 11 | 479 | 9 |
Diluted earnings per share (in dollars) | 0.05 | - | 0.11 | - | 0.37 | - |
Diluted adjusted earnings per share (in | 0.05 | - | 0.12 | - | 0.37 | - |
Adjusted EBITDA (2) | 250 | 19 | 350 | 25 | 1,198 | 23 |
Cash flows from operating activities | 166 | - | 173 | - | 992 | - |
Purchases of property, plant and equipment | 139 | - | 131 | - | 576 | - |
(1) See "Adjustments to reported operating and net income (Non-GAAP)" and corresponding disclaimer below. | ||||||
(2) See "Adjusted EBITDA and Diluted Adjusted Earnings Per Share for the periods of activity" below. | ||||||
(3) See "Condensed consolidated statements of cash flows (unaudited)" to the financial statements. |
Consolidated Results Analysis
Results analysis for the period January ? March 2020 | ||||
Sales | Expenses | Operating income | ||
$ millions | ||||
Q1 2019 figures | 1,415 | (1,188) | 227 | |
Total adjustments Q1 2019* | - | 14 | 14 | |
Adjusted Q1 2019 figures | 1,415 | (1,174) | 241 | |
Quantity | 16 | (11) | 5 | |
Price | (96) | - | (96) | |
Exchange rates | (16) | 4 | (12) | |
Raw materials | - | 31 | 31 | |
Energy | - | - | - | |
Transportation | - | 3 | 3 | |
Operating and other expenses | - | (40) | (40) | |
Adjusted Q1 2020 figures | 1,319 | (1,187) | 132 | |
Total adjustments Q1 2020* | - | - | - | |
Q1 2020 figures | 1,319 | (1,187) | 132 |
* See "Adjustments to reported operating and net income (Non-GAAP)" and corresponding disclaimer below.
- Quantity ? The positive impact on operating income was primarily related to an increase in the quantities sold of phosphate fertilizers, clear brine fluids, phosphorus-based flame retardants and acids. This was partially offset by a decrease in the quantities sold of phosphate rock and dairy proteins.
- Price ? The negative impact on operating income was primarily related to a $44 decrease in the average realized price per tonne of potash compared to the same quarter last year, the downward price adjustment with respect to certain potash quantities sold during 2019, in line with the recent supply contracts in China and a decrease in the selling prices of phosphate fertilizers and green phosphoric acid.
- Exchange rates ? The negative impact on operating income was primarily related to the appreciation of the average exchange rate of the shekel against the dollar, which increased operational costs. In addition, the devaluation of the average exchange rate of the euro against the dollar, decreased revenues by more than it contributed to operational cost-savings.
- Raw materials ? The positive impact of raw materials prices on operating income was primarily related to lower prices of sulphur consumed during the quarter.
- Operating and other expenses - The negative impact on operating income was primarily related to capital gains recorded in the same quarter last year due to the sale and leaseback of office buildings in Israel, higher depreciation expenses and inventory write-offs, as well as higher operational costs in Spain and the UK due to reduced production as a result of COVID-19 pandemic disruption.
Financing expenses, net
Net financing expenses in the first quarter of 2020 amounted to $52 million, compared to $35 million in the same quarter last year, an increase of $17 million.
The increase relates mainly to losses from hedging transactions in the amount of $46 million, affected by the volatile business environment during the quarter, which includes a sharp decrease in energy and dry bulk shipping prices, a decrease in the USD interest rate curve and exchange rate fluctuations.
On the other hand, expenses related to long-term employee benefits provisions and long-term lease revaluation according to IFRS16 decreased by $25 million, mainly due to the shekel depreciation against the dollar at the end of the quarter. In addition, interest expenses decreased by $5 million due to a decrease in the average debt balance and the average interest rate.
Tax expenses
Tax expenses in the first quarter of 2020 and in the first quarter of 2019 amounted to $20 million and $51 million, reflecting an effective tax rate of about 25% and 27%, respectively. The Company's tax rate in the first quarter of 2020 was positively affected by the devaluation of the shekel against the dollar in the first quarter, while the tax rate in the corresponding quarter last year was negatively affected by the appreciation of the shekel against the dollar.
REVIEW OF OPERATING SEGMENTS
Industrial Products
The Industrial Products segment produces bromine out of a highly concentrated solution in the Dead Sea, as well as bromine?based compounds at its facilities in Israel, the Netherlands and China. In addition, the segment produces salts, magnesium chloride, magnesia-based products, phosphorous-based flame retardants and functional fluids.
Segment sales in the first quarter of 2020 increased year-over-year by 4%, driven by strong sales in most product lines, including record sales of clear brine fluids. Operating income reached a quarterly record of $103 million, with an operating margin of 28%. Despite the year over year decrease in bromine prices in China, the segment's strategic shift to long-term contracts, its diverse portfolio and an increase in the selling prices of specialty minerals to the food and pharma markets led to a $3 million contribution from prices, adding to the $10 million contribution from sales volumes compared to the corresponding quarter last year.
Highlights and business environment
Results of Operations | ||
1-3/2020 | 1-3/2019 | |
$ millions | $ millions | |
Total Sales | 364 | 350 |
Sales to external customers | 361 | 347 |
Sales to internal customers | 3 | 3 |
Segment profit | 103 | 97 |
Depreciation and Amortization | 17 | 16 |
Capital Expenditures* | 21 | 19 |
* For information regarding the effect of IFRS 16 implementation on 2019 capital expenditures, see "Note 3 ? Operating segments" of the financial statements.
Results analysis for the period January - March 2020 | |||
Sales | Expenses | Operating income | |
$ millions | |||
Q1 2019 figures | 350 | (253) | 97 |
Quantity | 14 | (4) | 10 |
Price | 3 | - | 3 |
Exchange rates | (3) | - | (3) |
Raw materials | - | (2) | (2) |
Energy | - | 1 | 1 |
Transportation | - | (1) | (1) |
Operating and other expenses | - | (2) | (2) |
Q1 2020 figures | 364 | (261) | 103 |
Potash
The Potash segment produces and sells mainly potash, using an evaporation process to extract potash from the Dead Sea in Israel and conventional mining from an underground mine in Spain. The segment also produces and sells Polysulphate® from its Boulby mine in the UK as well as salt and magnesium produced in the Dead Sea in Israel.
The Potash segment's sales decreased by 18% and operating income decreased by 82% in the first quarter of 2020 compared to the same period in the prior year. Business performance was negatively impacted mainly by a $44 decrease in the average potash realized price per tonne, as well as the downward price adjustment of $12 million with respect to certain quantities of potash sold during 2019, subject to an open price condition, in line with the recent potash supply contracts in China and higher operational costs, mostly due to production challenges related to the COVID-19 pandemic. The increased production in Israel was offset by lower production at ICL Iberia, mainly due to the COVID-19 pandemic operations disruption. Potash sales quantities were 18 thousand tonnes lower than in the same quarter last year, primarily due to a decrease in potash sales to China and US, partly offset by increased sales to Europe, Brazil and India. In addition, some projects, including the ramp (access tunnel) project in Spain, were temporarily halted following a force majeure notice issued by external contractors due to the COVID-19 pandemic.
Highlights and business environment
Results of Operations | ||
1-3/2020 | 1-3/2019 | |
$ millions | $ millions | |
Total sales | 314 | 384 |
Potash sales to external customers | 226 | 275 |
Potash sales to internal customers | 23 | 23 |
Other and eliminations* | 65 | 86 |
Gross profit | 96 | 166 |
Segment profit | 14 | 79 |
Depreciation and Amortization | 39 | 39 |
Capital Expenditures** | 61 | 159 |
Average realized price (in $)*** | 250 | 294 |
* Primarily includes salt produced in underground mines in the UK and Spain, Polysulphate® and Polysulphate®-based products, magnesium-based products and sales of electricity produced in Israel.
** For information regarding the effect of IFRS 16 implementation on 2019 capital expenditures, see "Note 3 ? Operating segments" of the financial statements.
*** Potash average realized price (dollar per tonne) is calculated by dividing total potash revenue by total sales quantities. The difference between FOB price and average realized price is primarily marine transportation costs.
Potash ? Production and Sales | ||
Thousands of tonnes | 1-3/2020 | 1-3/2019 |
Production | 1,145 | 1,148 |
Total sales (including internal sales) | 996 | 1,014 |
Closing inventory | 563 | 519 |
Results analysis for the period January ? March 2020 | |||
Sales | Expenses | Operating | |
$ millions | |||
Q1 2019 figures | 384 | (305) | 79 |
Quantity | (17) | 15 | (2) |
Price | (51) | - | (51) |
Exchange rates | (2) | (2) | (4) |
Energy | - | 1 | 1 |
Transportation | - | 3 | 3 |
Operating and other expenses | - | (12) | (12) |
Q1 2020 figures | 314 | (300) | 14 |
Phosphate Solutions
The Phosphate Solutions segment operates ICL's phosphate value chain, using phosphate rock and fertilizer-grade phosphoric acid to produce phosphate-based specialty products with higher added value, as well as to produce and sell phosphate-based fertilizers.
The segment's sales and operating income decreased by 7% and 74%, respectively, year-over-year, mainly due to a sharp decrease in phosphate commodity market prices, that was partially offset by lower raw materials prices. Operating income was also negatively impacted by higher depreciation expenses and by the unfavorable impact of exchange rates due to the appreciation of the shekel against the dollar and the devaluation of the euro and the Chinese yuan against the dollar. The resilience of the segment was driven by strong phosphates specialties performance and continuous positive operating profit from the YPH JV in China despite market headwinds and challenges faced during the quarter related to the COVID-19 pandemic.
Sales of phosphate specialties and dairy proteins amounted to $279 million, approximately 2% lower than the first quarter of 2019. The overall decrease in specialty products sales was driven by lower demand for dairy proteins, as well as the devaluation of the euro against the US dollar.
Sales of phosphate commodities amounted to $223 million, approximately 12% lower than the first quarter of 2019, mostly due to a decline of over 25% in market sales prices of phosphate fertilizers, which more than offset the increase in sales volumes of phosphate fertilizers.
Highlights and business environment
Results of Operations | ||
1-3/2020 | 1-3/2019 | |
$ millions | $ millions | |
Total Sales | 502 | 537 |
Sales to external customers | 483 | 514 |
Sales to internal customers | 19 | 23 |
Segment profit | 9 | 35 |
Depreciation and Amortization | 49 | 43 |
Capital Expenditures* | 61 | 143 |
* For information regarding the effect of IFRS 16 implementation on 2019 capital expenditures, see "Note 3 ? Operating segments" of the financial statements.
Results analysis for the period January - March 2020 | |||
Sales | Expenses | Operating income | |
$ millions | |||
Q1 2019 figures | 537 | (502) | 35 |
Quantity | 17 | (13) | 4 |
Price | (43) | - | (43) |
Exchange rates | (9) | 6 | (3) |
Raw materials | - | 26 | 26 |
Energy | - | (2) | (2) |
Transportation | - | - | - |
Operating and other expenses | - | (8) | (8) |
Q1 2020 figures | 502 | (493) | 9 |
Innovative Ag Solutions
The Innovative Ag Solutions (IAS) segment develops, manufactures, markets and sells specialty fertilizers based primarily on nitrogen, potash and phosphate. The segment produces water soluble specialty fertilizers, liquid fertilizers, soluble fertilizers and controlled?release fertilizers in its plants in Israel, Europe and the United States. ICL IAS segment markets its products worldwide, mainly in Europe, Asia, North America, Brazil and Israel.
The IAS segment's sales decreased by 3% year-over-year, driven by lower sales volumes due to unfavorable weather conditions, decreases in demand in the turf and ornamental markets due to the COVID-19 pandemic, lower sales of third-party products and unfavorable dollar-euro exchange rates. However, operating income increased by 8% to $14 million year-over-year, due to lower cost of raw materials and internal cost efficiency initiatives.
Highlights and business environment
Results of Operations | ||
1-3/2020 | 1-3/2019 | |
$ millions | $ millions | |
Total Sales | 199 | 205 |
Sales to external customers | 196 | 199 |
Sales to internal customers | 3 | 6 |
Segment profit | 14 | 13 |
Depreciation and Amortization | 5 | 5 |
Capital Expenditures* | 3 | 11 |
* For information regarding the effect of IFRS 16 implementation on 2019 capital expenditures, see "Note 3 ? Operating segments" of the financial statements.
Results analysis for the period January ? March 2020 | |||
Sales | Expenses | Operating income | |
$ millions | |||
Q1 2019 figures | 205 | (192) | 13 |
Quantity | (3) | 1 | (2) |
Price | (1) | - | (1) |
Exchange rates | (2) | 2 | - |
Raw materials | - | 3 | 3 |
Energy | - | - | - |
Transportation | - | - | - |
Operating and other expenses | - | 1 | 1 |
Q1 2020 figures | 199 | (185) | 14 |
Dividend Distribution
In connection with ICL's first quarter 2020 results, the Board of Directors declared a dividend of 2.3 cents per share or about $30 million in the aggregate. The dividend will be paid on June 17, 2020. The record date is June 3, 2020.
In the event of any discrepancy between the information provided herein and the Company's financial statements filed with the SEC, the reader should refer to the filed financial information as definitive.
About ICL
ICL GROUP LTD, formerly known as Israel Chemicals Limited, is a global specialty minerals and chemicals company operating bromine, potash and phosphate mineral value chains in a unique, integrated business model. ICL extracts raw materials from well-positioned mineral assets and utilizes technology and industrial know-how to add value for customers in key agricultural and industrial markets worldwide. ICL focuses on strengthening leadership positions in all of its core value chains. It also plans to strengthen and diversify its offerings of innovative agro solutions by leveraging ICL's existing capabilities and agronomic know-how, as well as the Israeli technological ecosystem.
Our operations are organized under four segments: Industrial Products, Potash, Phosphate Solutions and Innovative Ag Solutions.
ICL shares are dually listed on the New York Stock Exchange and the Tel Aviv Stock Exchange (NYSE and TASE: ICL). The Company employs more than 11,000 people worldwide, and its sales in 2019 totaled approximately $5.3 billion. For more information, visit the Company's website at www.icl-group.com[1].
Appendix:
Condensed Consolidated Statements of Income (Unaudited) | |||
For the three-month | For the | ||
March 31, 2020 | March 31, 2019 | December 31, 2019 | |
$ millions | $ millions | $ millions | |
Sales | 1,319 | 1,415 | 5,271 |
Cost of sales | 919 | 914 | 3,454 |
Gross profit | 400 | 501 | 1,817 |
Selling, transport and marketing expenses | 188 | 195 | 767 |
General and administrative expenses | 64 | 63 | 254 |
Research and development expenses | 14 | 13 | 50 |
Other expenses | 2 | 16 | 30 |
Other income | - | (13) | (40) |
Operating income | 132 | 227 | 756 |
Finance expenses | 73 | 79 | 220 |
Finance income | (21) | (44) | (91) |
Finance expenses, net | 52 | 35 | 129 |
Share in earnings of equity-accounted investees | 1 | - | 1 |
Income before income taxes | 81 | 192 | 628 |
Provision for income taxes | 20 | 51 | 147 |
Net income | 61 | 141 | 481 |
Net income attributable to the non-controlling interests | 1 | 2 | 6 |
Net income attributable to the shareholders of the Company | 60 | 139 | 475 |
Earnings per share attributable to the shareholders of the | |||
Basic earnings per share (in dollars) | 0.05 | 0.11 | 0.37 |
Diluted earnings per share (in dollars) | 0.05 | 0.11 | 0.37 |
Weighted-average number of ordinary shares outstanding: | |||
Basic (in thousands) | 1,279,647 | 1,278,283 | 1,278,950 |
Diluted (in thousands) | 1,280,168 | 1,282,689 | 1,282,056 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Condensed Consolidated Statements of Financial Position as at (Unaudited) | |||
March 31, 2020 | March 31, 2019 | December 31, 2019 | |
$ millions | $ millions | $ millions | |
Current assets | |||
Cash and cash equivalents | 434 | 103 | 95 |
Short-term investments and deposits | 90 | 80 | 96 |
Trade receivables | 939 | 1,071 | 778 |
Inventories | 1,256 | 1,254 | 1,312 |
Other receivables | 412 | 271 | 403 |
Total current assets | 3,131 | 2,779 | 2,684 |
Non-current assets | |||
Investments at fair value through other comprehensive | 100 | 201 | 111 |
Deferred tax assets | 102 | 83 | 109 |
Property, plant and equipment | 5,316 | 5,064 | 5,331 |
Intangible assets | 652 | 664 | 652 |
Other non-current assets | 247 | 326 | 286 |
Total non-current assets | 6,417 | 6,338 | 6,489 |
Total assets | 9,548 | 9,117 | 9,173 |
Current liabilities | |||
Short-term credit | 606 | 638 | 420 |
Trade payables | 757 | 616 | 712 |
Provisions | 43 | 36 | 42 |
Other current liabilities | 637 | 649 | 587 |
Total current liabilities | 2,043 | 1,939 | 1,761 |
Non-current liabilities | |||
Long-term debt and debentures | 2,353 | 2,072 | 2,181 |
Deferred tax liabilities | 336 | 303 | 341 |
Long-term employee liabilities | 522 | 524 | 575 |
Provisions | 198 | 227 | 202 |
Other non-current liabilities | 62 | 16 | 52 |
Total non-current liabilities | 3,471 | 3,142 | 3,351 |
Total liabilities | 5,514 | 5,081 | 5,112 |
Equity | |||
Total shareholders' equity | 3,903 | 3,897 | 3,925 |
Non-controlling interests | 131 | 139 | 136 |
Total equity | 4,034 | 4,036 | 4,061 |
Total liabilities and equity | 9,548 | 9,117 | 9,173 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Condensed Consolidated Statements of Cash Flows (Unaudited) | |||
For the three-month period ended | For the year ended | ||
March 31, 2020 | March 31, 2019 | December 31, 2019 | |
$ millions | $ millions | $ millions | |
Cash flows from operating activities | |||
Net income | 61 | 141 | 481 |
Adjustments for: | |||
Depreciation and amortization | 118 | 111 | 443 |
Reversal of impairment losses on fixed assets | - | - | (10) |
Exchange rate and interest expenses, net | 31 | 54 | 153 |
Share in earnings of equity-accounted investees | (1) | - | (1) |
Loss from divestiture of businesses | 2 | - | - |
Capital gain | - | (12) | (12) |
Share-based compensation | 3 | 2 | 12 |
Deferred tax expenses | 6 | 41 | 67 |
159 | 196 | 652 | |
Change in inventories | 28 | 13 | (72) |
Change in trade receivables | (186) | (82) | 199 |
Change in trade payables | 71 | (81) | (58) |
Change in other receivables | (6) | 25 | 5 |
Change in other payables | 64 | (40) | (194) |
Change in employee benefits | (25) | 1 | (21) |
Net change in operating assets and liabilities | (54) | (164) | (141) |
Net cash provided by operating activities | 166 | 173 | 992 |
Cash flows from investing activities | |||
Proceeds (investments) in deposits, net | 12 | 14 | (2) |
Business combinations, net of cash acquired | (27) | - | - |
Purchases of property, plant and equipment and intangible assets | (139) | (131) | (576) |
Dividends from equity-accounted investees | 1 | - | 3 |
Proceeds from sale of property, plant and equipment | - | 35 | 50 |
Net cash used in investing activities | (153) | (82) | (525) |
Cash flows from financing activities | |||
Dividends paid to the Company's shareholders | (23) | (61) | (273) |
Payments from transactions in derivatives used for hedging | (16) | - | - |
Receipt of long-term debt | 522 | 240 | 657 |
Repayment of long-term debt | (143) | (270) | (689) |
Short-term credit from banks and others, net | (9) | (18) | (183) |
Other | - | - | (2) |
Net cash provided by (used in) financing activities | 331 | (109) | (490) |
Net change in cash and cash equivalents | 344 | (18) | (23) |
Cash and cash equivalents as at the beginning of the period | 95 | 121 | 121 |
Net effect of currency translation on cash and cash equivalents | (5) | - | (3) |
Cash and cash equivalents as at the end of the period | 434 | 103 | 95 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Condensed Consolidated Statements of Cash Flows (Unaudited) (cont'd) | |||
Additional Information | |||
For the three-month period | For the year | ||
March 31, | March 31, | December 31, | |
$ millions | $ millions | $ millions | |
Income taxes paid, net of refunds | 10 | 23 | 120 |
Interest paid | 20 | 21 | 115 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
We disclose in this Press release non-IFRS financial measures titled adjusted operating income, adjusted net income attributable to the Company's shareholders, diluted adjusted earnings per share and adjusted EBITDA. Our management uses adjusted operating income, adjusted net income attributable to the Company's shareholders, diluted adjusted earnings per share and adjusted EBITDA to facilitate operating performance comparisons from period to period. We calculate our adjusted operating income by adjusting our operating income to add certain items, as set forth in the reconciliation table under "Adjustments to reported operating and net income (Non-GAAP)" below. Certain of these items may recur. We calculate our adjusted net income attributable to the Company's shareholders by adjusting our net income attributable to the Company's shareholders to add certain items, as set forth in the reconciliation table under "Adjustments to reported operating and net income (Non-GAAP)" below, excluding the total tax impact of such adjustments and adjustments attributable to the non-controlling interests. We calculate our diluted adjusted earnings per share by dividing adjusted net income by the weighted-average number of diluted ordinary shares outstanding. We calculate our adjusted EBITDA by adding back to the net income attributable to the Company's shareholders the depreciation and amortization, financing expenses, net, taxes on income and the items presented in the reconciliation table under "Consolidated adjusted EBITDA and diluted adjusted Earnings Per Share for the periods of activity (non-GAAP)" below which were adjusted for in calculating the adjusted operating income and adjusted net income attributable to the Company's shareholders.
You should not view adjusted operating income, adjusted net income attributable to the Company's shareholders, diluted adjusted earnings per share or adjusted EBITDA as a substitute for operating income or net income attributable to the Company's shareholders determined in accordance with IFRS, and you should note that our definitions of adjusted operating income, adjusted net income attributable to the Company's shareholders, diluted adjusted earnings per share and adjusted EBITDA may differ from those used by other companies. However, we believe adjusted operating income, adjusted net income attributable to the Company's shareholders, diluted adjusted earnings per share and adjusted EBITDA provide useful information to both management and investors by excluding certain items that management believes are not indicative of our ongoing operations. Our management uses these non-IFRS measures to evaluate the Company's business strategies and management's performance. We believe that these non?IFRS measures provide useful information to investors because they improve the comparability of our financial results between periods and provide for greater transparency of key measures used to evaluate our performance.
We present a discussion in the period-to-period comparisons of the primary drivers of change in the Company's results of operations. This discussion is based in part on management's best estimates of the impact of the main trends on its businesses. We have based the following discussion on our financial statements. You should read such discussion together with our financial statements.
Adjustments to reported operating and net income (Non-GAAP) | ||||||
1-3/2020 | 1-3/2019 | 1-12/2019 | ||||
$ millions | $ millions | $ millions | ||||
Operating income | 132 | 227 | 756 | |||
(Reversal of) impairment losses on fixed assets (1) | - | - | (10) | |||
Provision for legal proceedings (2) | - | 14 | 7 | |||
Provision for prior periods waste removal and site closure costs (3) | - | - | 7 | |||
Total adjustments to operating income | - | 14 | 4 | |||
Adjusted operating income | 132 | 241 | 760 | |||
Net income attributable to the shareholders of the Company | 60 | 139 | 475 | |||
Total adjustments to operating income | - | 14 | 4 | |||
Total tax impact of the above operating income & finance expenses adjustments | - | (3) | - | |||
Total adjusted net income - shareholders of the Company | 60 | 150 | 479 | |||
Consolidated adjusted EBITDA and diluted adjusted Earnings Per Share for the periods of | ||||
Calculation of adjusted EBITDA was made as follows: | ||||
01/03/2020 | 01/03/2019 | 01/12/2019 | ||
$ millions | $ millions | $ millions | ||
Net income attributable to the shareholders of the | 60 | 139 | 475 | |
Depreciation and Amortization | 118 | 111 | 443 | |
Financing expenses, net | 52 | 35 | 129 | |
Taxes on income | 20 | 51 | 147 | |
Adjustments* | - | 14 | 4 | |
Total adjusted EBITDA | 250 | 350 | 1,198 | |
* See "Adjustments to reported operating and net income (Non-GAAP)" above.
Calculation of diluted adjusted earnings per share was made as follows: | |||
1-3/2020 | 1-3/2019 | 1-12/2019 | |
$ millions | $ millions | $ millions | |
Net income - shareholders of the Company | 60 | 139 | 475 |
Adjustments* | - | 14 | 4 |
Total tax impact of the above operating income & finance | - | (3) | - |
Adjusted net income - shareholders of the Company | 60 | 150 | 479 |
Weighted-average number of diluted ordinary shares | 1,280,168 | 1,282,689 | 1,282,056 |
Diluted adjusted earnings per share (in dollars)** | 0.05 | 0.12 | 0.37 |
* See "Adjustments to reported operating and net income (Non-GAAP)" above.
** The diluted adjusted earnings per share is calculated as follows: dividing the adjusted net income?shareholders of the Company by the weighted-average number of diluted ordinary shares outstanding (in thousands).
Operating Segments | |||||||
Industrial | Potash | Phosphate | Innovative Ag | Other | Reconciliation | Consolidated | |
$ millions | |||||||
For the three months period ended | |||||||
Sales to external parties | 361 | 271 | 483 | 196 | 8 | - | 1,319 |
Inter-segment sales | 3 | 43 | 19 | 3 | - | (68) | - |
Total sales | 364 | 314 | 502 | 199 | 8 | (68) | 1,319 |
Segment profit | 103 | 14 | 9 | 14 | - | (8) | 132 |
Operating income | 132 | ||||||
Financing expenses, net | (52) | ||||||
Share in earnings of equity-accounted | 1 | ||||||
Income before income taxes | 81 | ||||||
Capital expenditures as part of business | - | - | - | - | 27 | - | 27 |
Capital expenditures | 21 | 61 | 61 | 3 | 4 | 1 | 151 |
Depreciation, amortization and | 17 | 39 | 49 | 5 | 7 | 1 | 118 |
Operating Segments (cont'd)
Industrial Products | Potash | Phosphate Solutions | Innovative Ag Solutions | Other | Reconciliation | Consolidated | |
Activities | |||||||
$ millions | |||||||
For the three-month period ended | |||||||
Sales to external parties | 347 | 346 | 514 | 199 | 9 | - | 1,415 |
Inter-segment sales | 3 | 38 | 23 | 6 | - | (70) | - |
Total sales | 350 | 384 | 537 | 205 | 9 | (70) | 1,415 |
Segment profit | 97 | 79 | 35 | 13 | 13 | 4 | 241 |
Other expenses not allocated to the segments | (14) | ||||||
Operating income | 227 | ||||||
Financing expenses, net | (35) | ||||||
Income before income taxes | 192 | ||||||
Implementation of IFRS 16 | 6 | 95 | 103 | 7 | 86 | 9 | 306 |
Capital expenditures | 13 | 64 | 40 | 4 | - | 2 | 123 |
Depreciation, amortization and impairment | 16 | 39 | 43 | 5 | 6 | 2 | 111 |
Operating Segments (cont'd)
Information based on geographical location
The following table presents the distribution of the operating segments sales by geographical location of the customer:
01/03/2020 | 01/03/2019 | |||
$ | % of | $ | % of | |
millions | sales | millions | sales | |
USA | 232 | 18 | 245 | 17 |
China | 141 | 11 | 205 | 14 |
United Kingdom | 116 | 9 | 122 | 9 |
Germany | 101 | 8 | 100 | 7 |
Brazil | 94 | 7 | 98 | 7 |
Spain | 72 | 5 | 73 | 5 |
France | 65 | 5 | 59 | 4 |
Israel | 59 | 4 | 54 | 4 |
India | 48 | 4 | 43 | 3 |
Italy | 37 | 3 | 35 | 2 |
All other | 354 | 26 | 381 | 28 |
Total | 1,319 | 100 | 1,415 | 100 |
Operating Segments (cont'd)
Information based on geographical location (cont'd)
The following table presents the distribution of the operating segments sales by geographical location of the customer:
Industrial Products | Potash | Phosphate Solutions | Innovative Ag Solutions | Other | Reconciliation | Consolidated | |
Activities | |||||||
$ millions | |||||||
For the three months period ended | |||||||
Europe | 127 | 148 | 188 | 107 | 8 | (18) | 560 |
Asia | 106 | 65 | 108 | 32 | - | (3) | 308 |
North America | 107 | 19 | 98 | 26 | - | (1) | 249 |
South America | 11 | 34 | 62 | 5 | - | - | 112 |
Rest of the world | 13 | 48 | 46 | 29 | - | (46) | 90 |
Total | 364 | 314 | 502 | 199 | 8 | (68) | 1,319 |
Industrial Products | Potash | Phosphate Solutions | Innovative Ag Solutions | Other | Reconciliation | Consolidated | |
Activities | |||||||
$ millions | |||||||
For the three-month period ended | |||||||
Europe | 135 | 137 | 202 | 113 | 8 | (19) | 576 |
Asia | 99 | 121 | 123 | 30 | - | (5) | 368 |
North America | 91 | 46 | 97 | 28 | - | - | 262 |
South America | 10 | 35 | 67 | 5 | - | - | 117 |
Rest of the world | 15 | 45 | 48 | 29 | 1 | (46) | 92 |
Total | 350 | 384 | 537 | 205 | 9 | (70) | 1,415 |
The following table sets forth sales by geographical regions based on the location of the customers:
01/03/2020 01/03/2019 $ % of $ % of millions Sales millions Sales Europe 560 42 576 41 Asia 308 23 368 26 North America 249 19 262 19 South America 112 8 117 8 Rest of the world 90 8 92 6 Total 1,319 100 1,415 100
- Europe ? The decrease primarily relates to a decrease in the selling prices of phosphate fertilizers, potash and green phosphoric acid, a decrease in the quantities of phosphate rock sold, together with the negative impact of the devaluation of the average exchange rate of the euro against the dollar. The decrease was partly offset by higher sales volumes of potash, green phosphoric acid, clear brine fluids and acids.
- Asia ? The decrease primarily relates to a decrease in the selling prices and quantities of potash sold, a decrease in the selling prices of phosphate fertilizers, together with a decrease in quantities sold of green phosphoric acid, dairy proteins and phosphate rock. The decrease was partly offset by an increase in the quantities of phosphate fertilizers sold.
- North America ? The decrease primarily relates to a decrease in the quantities sold of potash and magnesium, partly offset by an increase in the quantities sold of phosphorus-based flame retardants and clear brine fluids.
- South America ? The decrease primarily relates to a decrease in the selling prices of potash and a decrease in the quantities of phosphate fertilizers sold. The decrease was partly offset by an increase in the quantities of potash sold.
- Rest of the world ? The decrease primarily relates to a decrease in the quantities of dairy proteins sold.
FORWARD-LOOKING STATEMENTS
This announcement contains statements that constitute "forward?looking statements", many of which can be identified by the use of forward?looking words such as "anticipate", "believe", "could", "expect", "should", "plan", "intend", "estimate" and "potential", among others.
Forward?looking statements appear in a number of places in this announcement and include, but are not limited to, statements regarding our intent, belief or current expectations. Forward?looking statements are based on our management's beliefs and assumptions and on information currently available to our management. Such statements are subject to risks and uncertainties, and the actual results may differ materially from those expressed or implied in the forward?looking statements due to various factors, including, but not limited to:
Loss or impairment of business licenses or mineral extractions permits or concessions; volatility of supply and demand and the impact of competition; the difference between actual reserves and our reserve estimates; natural disasters; failure to raise the water level in evaporation Pond 5 in the Dead Sea; construction of a new pumping station; disruptions at our seaport shipping facilities or regulatory restrictions affecting our ability to export our products overseas; general market, political or economic conditions in the countries in which we operate; price increases or shortages with respect to our principal raw materials; delays in the completion of major projects by third party contractors and/or termination of engagements with contractors and/or governmental obligations; the inflow of significant amounts of water into the Dead Sea could adversely affect production at our plants; labor disputes, slowdowns and strikes involving our employees; pension and health insurance liabilities; ongoing COVID-19, which has impacted, and may continue to impact our sales, operating results and business operations by disrupting our ability to purchase raw materials, by negatively impacting the demand and pricing for some of our products, by disrupting our ability to sell and/or distribute products, impacting customers' ability to pay us for past or future purchases and/or temporarily closing our facilities or the facilities of our suppliers or customers and their contract manufacturers, or restricting our ability to travel to support our sites or our customers around the world; changes to governmental incentive programs or tax benefits, creation of new fiscal or tax related legislation; changes in our evaluations and estimates, which serve as a basis for the recognition and manner of measurement of assets and liabilities; higher tax liabilities; failure to integrate or realize expected benefits from mergers and acquisitions, organizational restructuring and joint ventures; currency rate fluctuations; rising interest rates; government examinations or investigations; disruption of our, or our service providers', information technology systems or breaches of our, or our service providers', data security; failure to retain and/or recruit key personnel; inability to realize expected benefits from our cost reduction program according to the expected timetable; inability to access capital markets on favorable terms; cyclicality of our businesses; changes in demand for our fertilizer products due to a decline in agricultural product prices, lack of available credit, weather conditions, government policies or other factors beyond our control; sales of our magnesium products being affected by various factors that are not within our control; our ability to secure approvals and permits from the authorities in Israel to continue our phosphate mining operations in Rotem; volatility or crises in the financial markets; uncertainties surrounding the proposed withdrawal of the United Kingdom from the European Union; hazards inherent to mining and chemical manufacturing; the failure to ensure the safety of our workers and processes; cost of compliance with environmental legislative and licensing restrictions; laws, regulations and physical impacts of climate change and greenhouse gas emissions; litigation, arbitration and regulatory proceedings; exposure to third party and product liability claims; product recalls or other liability claims as a result of food safety and food-borne illness concerns; insufficiency of insurance coverage; closing of transactions, mergers and acquisitions; war or acts of terror and/or political, economic and military instability in Israel and its region; filing of class actions and derivative actions against the Company, its executives and Board members; and other risk factors discussed under "Item 3 - Key Information? D. Risk Factors" in the Company's Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission (SEC) on March 5, 2020.
Forward?looking statements speak only as at the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events.
This Press Release for the first quarter of 2020 (hereinafter ? "the Press Release") should be read in conjunction with the Annual Report published by the Company on Form 20?F as at and for the year ended December 31, 2019 (hereinafter ? the "Annual Report"), including the description of the events occurring subsequent to the date of the statement of financial position, as filed with the U.S. Securities and Exchange Commission. As part of the Press Release, the Company updated the disclosures provided in the Annual Report, to the extent there were material developments since the publication date of the Annual Report, on March 5, 2020 and up to the publication date of the Press Release.
1. The reference to our website is intended to be an inactive textual reference and the information on, or accessible through, our website is not intended to be part of this Form 6-K.
INVESTOR RELATIONS CONTACT
Dudi Musler
Investor Relations Manager
+972-3-684-4448
[email protected]
PRESS CONTACT
Adi Bajayo
Scherf Communications
+972-52-4454789
[email protected]
SOURCE ICL
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