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ICL Reports Financial Results For The Third Quarter Of 2012

 

  • ICL Fertilizers: The segment's sales for the third quarter of 2012 totaled $1.1 billion, representing 55.7% of total revenues (before offsets of inter-segment sales), a decline of approximately 5% compared with Q3 2011. This moderate decline during a period of low overall potash demand reflected primarily the impact of unfavorable exchange rate fluctuations, as explained above, and the segment's strong potash sales to Indian and Brazilian customers during the quarter, which compensated for weak sales to customers in China and other markets. During the third quarter and also in October 2012, the Company's potash deliveries to India that had been called for under the framework of supply agreements signed during the second half of 2011 (but that had been delayed beyond the original agreed-upon dates) were completed.

Despite declining world sales of potash during the quarter, the segment sold 1,390 thousand tons of potash (including internal sales) during the third quarter of 2012, a quantity that was almost unchanged from that sold during the third quarter of 2011. However,   the completion of existing contracts coupled with delayed renewals of contracts in India and China is expected to reduce the Company ' s Q4 2012 potash shipments as compared with Q4 2011. The quantity of phosphate fertilizers sold during Q3 2012 totaled 458 thousand tons compared with 456 tons in Q3 2011.

For the nine-month period, sales totaled $3.1 billion, representing 55.1% of total revenues (before offsets of inter-segment sales), a 1% increase compared with the first nine months of 2011. The increase derived from a rise in the segment's prices, on average, during the year, together with the consolidation, for the first time, of companies acquired during the past 12 months. This was countered partially by unfavorable fluctuations of key exchange rates, as explained above, and reduced quantities sold during the period. During the period, the Company sold 3,821 thousand tons of potash (including internal sales) and 1,298 thousand tons of phosphate fertilizers.

ICL Fertilizers' operating income for the third quarter of 2012 totaled $367 million, representing an operating margin of 34%. For the nine-month period, operating income totaled $1,019 million, representing an operating margin of 33%.

Fertilizer market trends: World potash markets during Q3 2012 exhibited low demand as compared with Q3 2011. This decline derived primarily from delays in the renewal of potash supply agreements with China and India, Europe's ongoing financial crisis and droughts in North America. In contrast, Brazil exhibited strong demand for potash, with the total quantities imported during the first nine months of 2012 nearly reaching the record levels recorded in 2011.

In India, demand for phosphate fertilizers has begun to decline due to reduced government subsidies, which result in increased fertilizer prices to the end-user, together with the devaluation of the Indian rupee as compared with the U.S. dollar, and the delay of the monsoon season. During the last several weeks, the rainy season has begun, resulting in an increase in fertilizer demand and a stabilization of the market.

In October 2012, the US Department of Agriculture published its 2012/13 Agricultural Outlook, and once again reduced its forecast regarding the quantity of crops expected to be harvested due to the year's hot and dry weather, the severe draught in U.S. growing regions and dryer-than-normal weather in Russia, the Ukraine and Kazhakstan. These developments have led to continued rises in the prices of corn, wheat and soy and a further decline in grain stock-to-use ratios, developments that are expected to improve demand for fertilizer in the next agricultural season. According to the report, the global grain stock-to-use ratio is forecast to decline to 18.5% at the end of the 2012/2013 agricultural season, compared with 20.48% at the end of the 2011/12 season and 20.7% at the end of the 2010/11 season.

  • ICL Industrial Products: The segment's sales for the third quarter of 2012 totaled $347 million, representing 18.1% of total revenues (before offsets of inter-segment sales), compared with $381 million for the third quarter of 2011. The decline reflected lower quantities sold coupled with unfavorable fluctuations in exchange rates, countered partially by increased selling prices.  For the nine-month period, sales totaled $1,110 million, a 6% decrease compared with the first nine months of 2011.

The segment's operating income for the third quarter of 2012 totaled $59 million compared with $76 million for the third quarter of 2011. The decrease in operating income derived from the reduced quantities sold, coupled with higher raw material and energy costs and unfavorable exchange rate fluctuations. For the first nine months of 2012, operating income totaled $204 million compared with $234 million in the parallel period of 2011.

Market developments: During the past year, the economic slowdown throughout the world and especially in China has led to reduced demand for the brominated flame retardants that are used in electronics and products for the building industry. In parallel, China's demand for elemental bromine has declined, leading to reduced selling prices there.

In contrast, demand for drilling fluids has been rising throughout 2012 due to an increase in the deep-water gas and oil exploration activities in the Gulf of Mexico.

  • ICL Performance Products: The segment's sales for the third quarter of 2012 totaled $416 million, representing 21.7% of total revenues (before offsets of inter-segment sales), a 3% increase compared with $403 million for the third quarter of 2011. The increase reflects higher quantities sold, coupled with the consolidation, for the first time, of companies that were acquired during the past 12 months. The increase was countered partially by the negative impact of exchange rate fluctuations, especially the Euro vs. the U.S. dollar. For the nine-month period, sales totaled $1,137 million, a 2% decrease compared with the first nine months of 2011.

The segment's operating income for the quarter totaled $60 million, a 13% increase compared with $53 million in the third quarter of 2011. The increase derived from the increased sales, countered partially by the increased costs of raw materials and energy. For the first nine months of 2012, operating income totaled $148 million compared with $166 million in the parallel period of 2011.

Market developments: During the third quarter, the trends that characterized the global market throughout the year, including the lack of certainty regarding global economic stability, political instability in the Middle East, the slow recovery of markets in the U.S., continued to affect markets for the majority of products that use the segment's offerings. In addition, the slowdown of fertilizer markets, whose by-products are raw materials for the segment's products, increased the price of the segment's inputs, primarily in Europe. However, prices of these components in the U.S. remained stable.

Dividends:

  • On April 30, 2012, the Company paid a dividend totaling $260 million in respect of its fourth quarter 2011 results. This brought the total dividend paid in respect of 2011 results to $1,053 million.
  • On June 26, 2012, the Company paid a dividend totaling $200 million in respect of its first quarter 2011 results.
  • On September 12, 2012, the Company paid a dividend totaling $285 million in respect of its second quarter 2012 results.
  • The Company's Board of Directors today declared that a dividend totaling $276 million will be paid on December 19, 2012 in respect of its third quarter 2012 results.

About ICL

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