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ICL Reports Q4 2015 ResultsTEL AVIV, Israel, Feb. 9, 2016 /PRNewswire/ -- ICL (NYSE & TASE: ICL), a leading global specialty minerals and specialty chemicals company, today reported its financial results for the fourth quarter and year ended December 31, 2015.
*See adjusted EBITDA calculation, reconciliation between operating income and adjusted operating income and reconciliation between net income attributable to the Company's shareholders and adjusted net income attributable to the Company's shareholders in the Financial Appendix to this release. Note: All financial figures in this press release are unaudited. ICL's President & CEO, Stefan Borgas, stated, "ICL's fourth quarter was marked by tangible benefits from our operational excellence programs which we began in early 2014 as part of our 'Next Step Forward' strategy. These efficiency initiatives, which we expect to continue beyond 2016, reduced our production costs and led to record potash production at ICL Dead Sea and drove incremental profitability despite a difficult operating environment. I am also gratified by ICL's other achievements during the quarter and the year, including the completion of our YPH phosphates joint venture in China, the divesture of nearly all of our non-core businesses, the performance of our bromine business, the integration of the whey proteins business into our Food Specialties operations and ICL Iberia's strategic cooperation agreement with the Catalan government. These milestones reflect our adherence to our strategic focus. In 2016, we will continue to create greater balance between our commodity and specialty businesses in order to optimally position ICL for further growth and profitability." Nir Gilad, Chairman of ICL, added, "During 2015 we continued to execute our strategy for future growth and development, the first fruits of which we harvested during the year. The directors are satisfied with the major progress achieved in implementing the strategy. Within this strategic framework, ICL has worked diligently to diversify its sources of raw materials, strengthen and deepen its presence in large, growing markets and engage in substantial production activities in our core markets of agriculture, food and engineered materials. In parallel, the company is executing fundamental and impressive efficiency improvements to improve our overall competitiveness. All of these measures are instilling optimism and enthusiasm in the directors regarding ICL's fundamental strength and its future." Financial Results Sales: For the fourth quarter of 2015, sales totaled $1.43 billion, compared to $1.40 billion in the prior-year, an increase of 1.7%. The increase was primarily related to an increase in quantities of potash sold as well as the first-time consolidation of companies acquired. This increase was partly offset by the sale of non-core businesses, an unfavorable foreign exchange impact (primarily from the devaluation of the euro against the dollar), a decline in selling prices of potash, as well as a decrease in sales due to the impact of a fire in a fertilizers production facility in Israel. For the twelve months ended December 31, 2015, sales totaled $5.4 billion compared to $6.1 billion in the prior year, a decrease of about 12%. This decrease was primarily related to lower quantities of potash and bromine sold as a result of the strike at ICL Dead Sea and ICL Neot Hovav, currency exchange rate fluctuations and the sale of non-core businesses, offset primarily by the first time consolidation of companies acquired, an increase in quantities in certain products sold, mainly potash, and an increase in selling prices, mainly of phosphate fertilizers. Reported operating income and adjusted operating income: Reported operating income for the fourth quarter of 2015 totaled $146 million, about 17% less than the fourth quarter of 2014. Adjusted operating income for the fourth quarter of 2015 totaled $233 million, approximately 16% higher than Q4 2014. Q4 2015 adjusted operating income excludes primarily the impairment of assets and a provision for historical waste removal. Growth in adjusted operating income is attributed to higher quantities produced and sold, mainly of potash, as well as lower operating expenses. Both were achieved by implementing our operational excellence initiatives following the strike. The contribution of operational excellence measures more than offset the negative impact of lower fertilizer prices. Reported operating income for the twelve months ended December 31, 2015 totaled $765 million compared to $758 million in 2014. Adjusted operating income for the twelve months ended December 31, 2015 totaled $994 million, an increase of approximately 3.5% over $960 million recorded in 2014. 2015 adjusted operating income excludes primarily the impact of the strike at ICL Dead Sea and ICL Neot Hovav. (See table, "Adjustments to Reported Operating and Net Income" in the Appendix.) Operational excellence: During the quarter the company continued to execute on its cost-cutting efforts and efficiency plan with a $275 million actual savings for the year (vs. 2013). This resulted from improved potash and phosphate margins through labor reduction and improved production, as well as improved performance in the bromine operations through labor reductions and a value oriented marketing strategy. ICL's efficiency efforts led to record production of potash by ICL Fertilizers which compensated for lower potash prices. Reduced costs at ICL Rotem helped to partially offset the impact of a fire at its SSP facility, and record production of phosphoric acid and near record production of phosphate rock also contributed to lower costs per tonne. ICL's efficiency program is well on track to achieve total saving of about $350 million in 2016 (vs. 2013). Net income and adjusted net income: Net income for the fourth quarter of 2015 totaled $96 million compared to $86 million for the comparable period in 2014, an increase of 12%. Adjusted net income for Q4 2015 was $180 million compared to $108 million for Q4 2014, an increase of 67%, mainly due to operational excellence initiatives and higher prices in the bromine value chain. Net income for the twelve months ended December 31, 2015, totaled $509 million compared to $464 million for the comparable period in 2014, and adjusted net income for the twelve months of 2015 was $699 million compared to $695 million for 2014. Net financing expenses in the fourth quarter of 2015 amounted to $29 million, compared with $66 million in the corresponding quarter last year. The decrease derived mostly from a decline in expenses in respect of the fair value of foreign currency hedging transactions, energy and marine shipping, as well as a revaluation of short-term financial liabilities. This was partially offset by an increase in net interest expenses and provisions for employee benefits. Tax expenses in the fourth quarter of 2015 amounted to $23 million, compared with $36 million in the corresponding quarter last year. The tax rate on pre-tax income was 20%, compared with a pre-tax income rate of 29% in the corresponding quarter last year. The decrease stems mainly from the adjustment of the deferred taxes in ICL Rotem to the tax rates provided in the Law for the Encouragement of Capital Investments, in the amount of approximately $18 million, which was almost entirely offset by non-recurring tax expenses stemming from the write-off of a tax asset in respect of carryforward losses in the magnesium operations, in the amount of approximately $19 million. In addition, in the fourth quarter of 2015, as a result of the filing of final tax returns by ICL subsidiaries in the United States and Europe, the Company reduced its tax provision in connection with prior years. Furthermore, the effective tax rate in the quarter was favorably impacted by recognition of deferred taxes at high tax rates in respect of losses recognized from the bromine activities in Israel and the United States. The tax rate in the corresponding quarter last year was impacted by non-recurring tax expenses due to an additional deduction for tax purposes relating to investments made by ICL Spain in previous periods and a tax deduction in respect of dividends between foreign subsidiaries. Cash flow: Cash flow from operating activities in Q4 2015 was $56 million, compared to $310 million in Q4 in the prior year. The decrease stemmed mainly from an increase in working capital, mainly in the trade receivables category, as a result of increased sales of potash upon the conclusion of the strike, an increase in current interest payments in the quarter, payment in respect of an operating lease on the concession site acquired in China and payments relating to retirement of employees. Cash flow used in investing activities increased by $68 million compared with the corresponding quarter last year. This stems mainly from payment in respect of the acquisition transaction of the joint venture in China in the amount of $163 million, offset by a decrease in investments in property, plant and equipment in the amount of $53 million. Segment Review ICL Fertilizers Key Developments and Business Environment:
Results of Operations
*Percentage of the total sales by areas of operation. Potash: The adjusted operating income excludes compensation received from the Manufacturers Association of Israel for the strike, in the amount of approximately $8 million, a provision for early retirement at ICL UK, which resulted from the implementation of an efficiency program, in the amount of approximately $6 million and an update of the provision for the arbitration on downstream products' royalties in respect of prior years, in the amount of approximately $5 million. Increased adjusted operating income in Q4 2015 stems primarily from an increase in quantities sold and a decrease in operating expenses, including energy and shipping prices, as well as a result of a reduction in the number of employees and of maintenance expenses as part of ICL's operational excellence initiatives. This increase was partially offset by a decrease in selling prices.
The increase in the quantity of potash sold in the fourth quarter of 2015 stems mainly from an increase in quantities sold to China. Production increased due to improved production at ICL Dead Sea following conclusion of the strike as well as increased production in Europe.
Fertilizers and Phosphates: Adjusted operating income excludes a provision for system-wide electricity costs in Israel for previous periods in the amount of approximately $2 million, costs related to the closing of the YPH JV transaction in the amount of about $2 million and a $1 million gain from an equity divestment. The increase in adjusted operating income from phosphate fertilizers in Q4 derives mainly from lower production costs and proceeds from insurance in connection with the fire at ICL Rotem offset by a decrease in quantities sold as a result of the fire at the fertilizer production plant and costs related to the consolidation of the YPH JV.
* To external customers. The quantity of fertilizers sold in Q4 2015 was lower than in the corresponding period last year primarily due to a decrease in quantities sold in Brazil. Manufacture of phosphate fertilizers increased in the fourth quarter of 2015 compared with the corresponding period in 2014 as a result of the consolidation of the YPH JV, offset by the impact of the fire at the ICL Rotem SSP facility during Q2 2015. The reconstruction of the facility is expected to be completed during the first quarter of 2016. The production and sales of phosphate rock were higher due to the consolidation of the YPH JV and increased production at Israeli mines. ICL Industrial Products Key Developments and Business Environment:
Results of Operations:
* Including revenue from inter-segment sales. The decrease in sales in the fourth quarter stems from the impact of currency exchange rates and a decrease in quantities sold, mainly of phosphorous-based flame retardants and elemental bromine, partly offset by an increase in selling prices, mainly of bromine-based flame retardants. Adjusted operating income excludes impairment in the value of assets in Israel and the United States, in the amount of approximately $56 million, and a provision for treatment of historical waste in the amount of $20 million, net of compensation from the Manufacturer's Association of Israel for the strike, in the amount of approximately $9 million. Adjusted operating income was favorably impacted mainly by a decrease in labor costs, lower energy and raw-material prices, as well as higher selling prices. ICL Performance Products Key Developments and Business Environment:
Results of Operations:
* Including revenue from inter-segment sales. The decrease in sales is attributed to the sale of non-core businesses and devaluation of the euro and the Brazilian real against the dollar, offset by an increase in quantities sold, including the first-time consolidation of companies acquired and an increase in selling prices. Adjusted operating income excludes transaction costs related to non-core divestitures, in the amount of $7 million. The decline in operating income in the fourth quarter stems mainly from an increase in operating expenses which, among other things, derives from salary expenses due to expansion of the marketing set-up in ICL Food Specialties as a result of implementation of the Company's strategy, an increase in personnel in some of the assembly lines due to an increase in quantities sold and as a result of a shortage of raw materials and purchases from third parties, due to the shutdown of the ammonia tank caused by the fire in the fertilizers production facility in Israel. This was offset primarily by increased quantities sold, including from the first time consolidation of acquisitions, lower raw material and energy prices and an increase in selling prices. Debt movement: As of December 31, 2015, ICL's net financial liabilities amounted to $3.2 billion, an increase of $571 million compared to the balance at the end of 2014. The increase stems from, among other things, investment in the YPH JV and the first-time consolidation of its financial liabilities. The total amount of the securitization framework and credit facility deriving therefrom amounts to $405 million. As of December 31, 2015, ICL had used $285 million of the securitization facility. ICL also has long-term credit facilities of approximately $1.7 billion and €100 million, of which $519 million remains unused as of December 31, 2015. About ICL ICL is a global manufacturer of products based on specialty minerals that fulfill humanity's essential needs primarily in three markets: agriculture, food and engineered materials. ICL produces approximately a third of the world's bromine, and is the sixth largest potash producer, as well as the leading provider of pure phosphoric acid. It is a major manufacturer of specialty fertilizers, specialty phosphates and flame retardants. ICL's mining and manufacturing activities are located in Israel, Europe, the Americas and China, and are supported by global distribution and supply networks. The agricultural products that ICL produces help to feed the world's growing population. The potash and phosphates that it mines and manufactures are used as ingredients in fertilizers and serve as an essential component in the pharmaceutical and food additives industries. The food additives that ICL produces enable people to have greater access to more varied and higher quality food. ICL's water treatment products supply clean water to millions of people as well industry around the world. Other substances, based on bromine and phosphates help to create energy that is more efficient and environmentally friendly, prevent the spread of forest fires and allow the safe and widespread use of a variety of products and materials. ICL benefits from a number of unique advantages, including its vertically integrated activities and complementary and synergistic downstream operations for the production of unique end products; its balanced and varied product portfolio in growing markets; broad presence throughout the world and proximity to large markets, including in emerging regions. ICL operates within a strategic framework of sustainability that includes a commitment to the environment, support of communities in which ICL's manufacturing operations are located and where its employees live, and a commitment to all its employees, customers, suppliers and other stakeholders. ICL is a public company whose shares are dual listed on the New York Stock Exchange and the Tel Aviv Stock Exchange (NYSE and TASE: ICL). Approximately 46% of ICL's equity is held by Israel Corp., 13.8% by Potash Corporation of Saskatchewan and the remainder by the public. The company employs approximately 14,000 people worldwide, and its sales in2015 totaled US$5.4 billion. For more information, visit the company's website at www.icl-group.com. Forward Looking Statement This press release 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 include, but are not limited to assessments and judgments regarding macro-economic conditions, including demands and prices and the Group's markets, operations, production levels and financial results, as well as, our savings expectations pursuant to ICL's efficiency program; our expectations to increase ICL's phosphate platform by 50%, secure long-term phosphate resources and expand ICL's phosphate end-to-end business model with a focus on China and other Asian markets; our expectations regarding the long-term continuation of ICL Iberia's potash mining activities in the Bages region of Catalonia, Spain; the expected timetable to complete the reconstruction of the ICL Rotem SSP facility and our plans to expand globally the efficiency plan that it implemented in Israel. Forward-looking assessments and judgments are based on our management's current beliefs and assumptions and on information currently available to our management. Such statements are subject to risks and uncertainties, and 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 mining permits or concessions; natural disasters; failure to raise the water level in evaporation Pond 5 in the Dead Sea; accidents or disruptions at our seaport shipping facilities or regulatory restrictions affecting our ability to export our products overseas; labor disputes, slowdowns and strikes involving our employees; currency rate fluctuations; rising interest rates; general market, political or economic conditions in the countries in which we operate; market fluctuations, among others in the YPH JV's manufacturing locations and target markets, changes in the demand and price environment for the YPH JV's products; shipping and energy costs; pension and health insurance liabilities; price increases or shortages with respect to our principal raw materials; volatility of supply and demand and the impact of competition; changes to laws or regulations (including environmental protection and safety and tax laws or regulations), or the application or interpretation of such laws or regulations; government examinations or investigations; the difference between actual resources and our resource estimates; failure to integrate or realize expected benefits from acquisitions and joint ventures; volatility or crises in the financial markets; 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; decreases in demand for bromine-based products and other industrial products; litigation, arbitration and regulatory proceedings; closing of transactions, mergers and acquisitions; third party service providers' financial condition; war or acts of terror; and other risk factors described in "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 on March 20, 2015. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update or revise them or any other information contained in this press release, whether as a result of new information, future developments or otherwise. (Financial tables follow) Financial appendix (unaudited):
*See "Adjustments to Reported Operating and Net Income" below.
(1) Non- recurring deferred tax adjustments at DSM in 2015 and at ICL Spain in 2014 We disclose in this press release financial measures entitled adjusted EBITDA, adjusted operating income and adjusted net income attributable to the Company's shareholders. We use adjusted EBITDA, adjusted operating income and adjusted net income attributable to the Company's shareholders to facilitate operating performance comparisons from period to period. Adjusted EBITDA is defined as the net income to Company shareholders plus depreciation and amortization plus financing expenses, net, and taxes on income and plus certain items as presented in the reconciliation table which were adjusted for the operating income and net income attributable to the Company's shareholders. We believe adjusted EBITDA facilitates company-to-company operating performances comparisons by backing out potential differences caused by variations such as capital structures (affecting financing expenses, net), taxation (affecting taxes on income) and the age and book depreciation of facilities, equipment and intangible assets (affecting relative depreciation and amortization), which may vary for different companies for reasons unrelated to operating performance. Adjusted EBITDA is a non-IFRS measure for reporting our total Company performance. Our management believes, however, that disclosure of adjusted EBITDA provides useful information to investors, financial analysts and the public in their evaluation of our operating performance. Adjusted EBITDA should not be considered as the sole measure of our performance and should not be considered in isolation from, or as a substitute for, operating income or other statement of operations or cash flow data prepared in accordance with IFRS as a measure of our profitability or liquidity. Adjusted EBITDA does not take into account our debt service requirements and other commitments, including capital expenditures, and, accordingly, is not necessarily indicative of amounts that may be available for discretionary uses. In addition, adjusted EBITDA, as presented in this press release by the Company, may not be comparable to similarly titled measures reported by other companies due to differences in the way that these measures are calculated.
The increase in sales in Asia stems mainly from the increase in the quantities of potash sold in China and the impact of the first-time consolidation of the YPH JV in China. This increase was partially offset by the sale of non-core businesses in the ICL Performance Products segment and a decrease in the quantities sold of elemental bromine and bromine-based flame retardants. The decrease in Europe stems mainly from a decline in the quantities sold, mainly as a result of the sale of non-core businesses, a decline in the quantities sold of elemental bromine, bromine-based and phosphorous-based flame retardants and a weakening of the exchange rate of the euro against the dollar. Sales in South America declined mainly as a result of a decline in the quantities of potash sold in Brazil. Lower quantities of potash sold impacted the sales in North America. This was partially offset by an increase in sales of clear brine fluids used for oil and gas drillings. Operating segments data:
* Includes capital gain in the amount of $214 million, from sale of non-core businesses.
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