Fertilizer company Israel Chemicals (TASE: ICL: NYSE: ICL) today reported $1.3 billion in first quarter sales, a 2.3% rise, compared with the first quarter of 2016.
Israel Chemicals said that the increase resulted mainly from sales of transparent solutions; phosphoric acid, primarily due to the joint YPH venture; and an increase in the quantities of potash sold, mainly to North America. The increase was offset by lower prices for phosphate fertilizers and phosphoric acid and falling prices for acids, special supplements, and potash, as well as a drop in the exchange rates of euro and Chinese yuan against the dollar.
Operating profit was up 8.4% to $116 million, while net profit rose just 3% to $68 million, among other things resulting from a technical malfunction on the company website in the UK that reduced its profit by $19 million.
The average price per ton of potash sold by Israel Chemicals in the quarter was $216, compared with $235 in the first quarter of 2016. The first quarter price, however, was 1% higher than in the fourth quarter of 2016.
Israel Chemicals says that despite the delay in signing a contract with the company's customers in China, the company's potash deliveries grew by over 5% in the first quarter of 2017, compared with the corresponding quarter last year. Supply contracts for 2017 with Chinese customers have yet to be signed; signing is expected to take place during the current quarter.
The increase in operating profit was primarily a result of larger quantities, especially of phosphates and industrial products; lower raw material costs, mostly caused by lower sulfur prices; and savings in management and general expenses, due to streamlining measures. On the other hand, a decline in commodity fertilizer prices, higher transportation costs, and the depreciation of the euro and pound sterling against the dollar detracted from profit.
Israel Chemicals' first quarter cash flow totaled $104 million, compared with $38 million in the corresponding quarter last year. The company will distribute a $34 million dividend to its shareholders.
Acting Israel Chemicals CEO Asher Grinbaum commented, "The first quarter saw continued good performance by some of our special solutions division, in particular bromide deals. Our joint venture in China, YPH, began to benefit from operational improvements, including streamlining measures and measures for reducing exposure to phosphate prices, which reduced the venture's operating loss. Despite the moderate increase in the quantities of potash sold in the first quarter, the essential minerals division continues to be affected by the challenging business environment, especially in the phosphate fertilizers market, and by technical problems in Israel Chemicals' mine in the UK, which were solved after the end of the quarter.
"In the first two months of 2018, we also continued our determined effort to generate a strong cash flow by cutting back on management and general expenses and capital expenses. At the same time, we're continuing to invest in plans for reinforcing our competitive positioning, which offer a fine return on our investment. The cash flow generated as a result of these efforts will enable us to continue to report an improved balance sheet, and will support future growth. We believe that these efforts are putting the company in a good position to succeed in the continually challenging environment facing us and the industry, and that they will improve our long-term stability and profit margin," Grinbaum added.
Published by Globes [online], Israel Business News - www.globes-online.com - on May 10, 2017
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