ICL Reveals New Growth Strategy, Announces Management Appointments And Reports Q2 Results

TEL - AVIV, Israel, Aug. 7, 2013 /PRNewswire/ -- ICL (TASE: ICL), a multinational fertilizer and specialty chemicals company, today revealed its new strategy to drive its next period of growth, announced a number of key management changes and appointments and reported its financial results for the second quarter and first half ended June 30, 2013. 

ICL's New Strategy: the "Next Step Forward"

• Focus on core: 3 primary minerals, 3 attractive end-markets: agriculture, food and engineered materials
• Pursue operational excellence: material impact over next 3 years
• Drive profitable growth: a number of attractive growth options ahead, including in potash
• Strengthen the balance among the Company's existing portfolio of products and sources of income
• Globalize: get closer to our strategic markets
• Great people, in an empowering environment: ONE ICL
• Pursue a dual listing of securities on a major international stock exchange in the near future
• Share repurchases or one-time dividend of up to $500 million under review

Q2 Results: Solid Performance in a Challenging Environment

• Strong cash flow; moderate decrease in gross margin
• ICL Fertilizers: high quantities sold of potash and phosphate fertilizers, but profits impacted by declining prices 
• ICL Industrial Products: Continued strong demand for clear brine drilling solutions compensated partially for weak flame retardant sales 
• ICL Performance Products: slightly improved results despite worldwide economic uncertainty 

New Appointments

• Mr. Dani Chen, currently President & CEO of ICL Fertilizers, has been appointed as Executive Vice President Global Institutional & Community Relations of ICL
• Mr. Nissim Adar, currently President & CEO of ICL Industrial Products, has been appointed as President & CEO of ICL Fertilizers
• Mr. Charles Weidhas, currently President & CEO of ICL Performance Products, has been appointed as President & CEO of ICL Industrial Products
• Mr. Mark Volmer, currently an executive at BASF, has been appointed as President & CEO of ICL Performance Products
• Ms. Osi Sessler, currently VP IR and Communications, will pursue, in addition to her IR role, the dual listing of the Company on a foreign stock exchange and lead the build-up of the Company's European Service Center.

ICL's New Strategy – "Next Step Forward"

ICL's Board of Directors yesterday approved the main elements of the Company's new strategy (the second of three stages). Following a decade of remarkable growth and business success, the new strategy,  "Next Step Forward", is designed to propel the Company into its next period of growth, enabling it to achieve increases in revenue and profits exceeding the market's average. The strategy will expand ICL's core beyond a product-focus and towards a  market-focus on agriculture, food and engineered materials markets.  It calls for the expansion of ICL's core businesses in these markets, which currently represent about 90% of the Company's activities, by strengthening its specialty mineral base and end market know-how, pursuing operations excellence, and innovation and advocacy capabilities. This will create a better balance among the Company's existing portfolio of products and its markets.     

The new strategy was formulated within the framework of an intensive, nine month process that involved the participation of hundreds of managers and employees throughout the world, as well as the assistance of a leading international consulting firm.  All of the Company's business activities were evaluated within the strategic framework, using in-depth analytical methodologies to gain insight into the markets in which the Company operates and its competitive positioning. The strategic plan has been "stress tested" under changed conditions in the potash market. The resulting strategy relies on three fields of execution: efficiency improvements of the core, attractive growth projects and the strengthening of the enabling platform. These fields are already in various stages of development and implementation.

Commenting on the strategy, Mr. Nir Gilad, ICL's Chairman of the Board, stated: "The Company's Board of Directors recognizes an opportunity for continued significant growth in light of ICL's existing business infrastructure, its global scope and its leading position in growing international businesses with relatively high barriers of entry, all of which provide ICL with the tools and potential to achieve significant growth driven by fundamental global trends. ICL's Board instructed Management to formulate a new strategy aimed at balancing the Company's sources of income, increasing and diversifying its sources of specialty minerals, broadening its global activities, utilizing growth engines in international markets, enhancing efficiency and savings, and reducing exposure to the uncertainty of Israel's business and regulatory environments.

"To this end, the Company intends to pursue a dual listing of its securities on a major international stock exchange, a step which would offer the potential of providing the Company with a financial infrastructure for further growth, proximity to international investors and greater flexibility for financings and M&A, while also better protecting the Company against the possible further deterioration of Israel's business environment and stock market.

"In addition, the Company's Board determined that the new strategy must enable the fulfillment of several financial parameters, including an attractive return on investment, the creation of higher-than-market-average growth and success, the maintaining of a high EBITDA and the regular distribution of dividends of up to 70% of net income depending on market conditions and project execution."

Mr. Gilad concluded, "On behalf of all of ICL's Directors, I would like to express my deep gratitude and appreciation for the outstanding professional work carried out by ICL's management. The strategy that they have proposed meets the needs of the Company, and, in particular, is relevant for developments currently occurring in the potash market. Following it, the Company will move forward to continued growth and success." 

Mr. Stefan Borgas, ICL's President and CEO, added, "ICL's new strategy will lead the Company another step forward and will strengthen ICL's position as a leading global specialty minerals company fulfilling essential needs  of the world's growing population, especially in three markets: agriculture, food and engineered materials.

"As part of the strategic process, we delineated the Company's advantages, and examined the unique challenges that it must deal with. ICL benefits from a number of unique advantages that clearly distinguish it from its competitors around the world. These advantages include its vertically integrated activities, which derive from its mineral mining and production operations, together with its complementary, synergistic downstream operations and processes for the production of unique end products; a balanced and varied product portfolio in three promising and growing markets; a global presence with production, storage, transportation and marketing activities with proximity to major global markets in developing regions; skilled workers and managers with unique knowledge and expertise; and an Israeli DNA characterized by courage, determination, creativity and openness.  ICL's new strategy  addresses our most critical challenges, including expansion of our mineral resources; insufficient competitiveness in the phosphate chain; strengthening innovation and expanding our emerging market footprint. At the same time, by establishing the newly created Global Institutional & Community Relations Group, ICL will connect in a closer fashion with its environment around the world.

"Even with current challenging market developments, ICL continues to believe in the potash market, both in the short term and in the long term, and will therefore explore options for increasing its potash production, both in its existing mines and in new locations around the world. We will focus our activity in the areas of agriculture and food by increasing our phosphate operations, while simultaneously increasing our position in markets for bromine-, phosphorus- and phosphate-based engineered materials."

Mr. Borgas concluded, "ICL's management thanks the Board for the multiple discussions and guidance which led to the approval of the Next Step Forward strategy. This result could not have been achieved without ICL's great employees who worked thousands of hours to gain an in-depth understanding of our positions and opportunities."

Basic global trends supporting the new strategy include the following:

• Significant growth in the agriculture and food markets: population growth and continuous improvement in nutrition, along with the increasingly limited availability of arable land, will lead to demand for fertilizers to supply sufficient food quantities and quality, and for food ingredients that make food healthier, taste better and give it a longer shelf life.
• A significant rise in the growth of the middle class: the increased spending capability of those entering the middle class is expected to double their consumption within a decade to reach more than $35 trillion.
• The quest for scarce mineral reserves - primarily for bromine, phosphate and potash.
• Concern for the environment: increased regulations and grass-roots community involvement.

ICL's strategy consists of 3 main fields of execution:

1. Creating operational excellence and improving efficiency: The strategy will pursue operational excellence through a program launched in the second quarter with an expected annual impact of a few hundred million dollars by 2016. In addition, the strategy's efficiency improvement projects are designed to make the organization more scalable and effective. They include building a process-oriented project organization; improving key processes in R&D, pricing, procurement, energy savings and CAPEX management; and reducing costs in major mineral-based and chemical value chains (potash and phosphates). The strategy also calls for achieving cost savings in each of ICL's plants by improving technical systems and manufacturing infrastructure.

2.  Engaging in new growth activities that encourage the expansion of its business in agriculture, food and engineered materials:

Agriculture: the strategy calls for investigating the expansion of potash production quantities within the Company's existing mining operations and by exploring international cooperative activities aimed at producing potash in new mines. In the phosphates area, the Company will attempt to ensure the continuation of its phosphate activities in Israel while simultaneously evaluating the possibility of cooperating with other international firms to mine phosphates in other global locations; lowering production costs at Rotem (MGA, WPA) and examining alternative sources for white acid (WPA); increasing the Company's marketing of compound fertilizers to emerging markets; and increasing sales of specialty fertilizers by leveraging ICL's leading position in the sector.

Food: the strategy calls for increasing ICL's technological and applications resources to create new solutions for improving the texture and shelf life of food; expanding ICL's business activities in developing markets; and expanding and diversifying the Company's food additive through targeted mergers and acquisitions.

Engineered Materials: the strategy calls for broadening ICL's activities and creating growth primarily through the development of new products; increasing activities in markets beyond existing ones; and positioning ICL as the leading player in the area of flame retardants technologies.

3.  Developing an enabling platform that supports efficiency and growth while improving governance.

The Company will also create new platforms aimed at enhancing innovation, harmonizing systems and processes, and managing and unifying the ICL team. These include process and system harmonization and global people management. The goal is to further foster a "People Empowering Culture" with programs focused on management and talent development, succession planning and long-term incentives for all employees that will transform the organization into ONE ICL. ICL is already taking steps to create effective, harmonized business platforms (e.g. one ERP system) and will launch programs that improve the Company's connection with the external world through R&D, innovation and advocacy.

Financial Guidelines 

The Company's high level financial aspirations include the following:

• Growing faster than the market
• Maintaining profitability levels
• Replacing CAPEX for infrastructure with CAPEX for growth over the next few years
• Maintaining the Company's investment grade level
• Pursuing a dual listing on a major foreign stock exchange to create flexibility for possible transactions
• Depending on project execution and market conditions, maintaining the Company's current dividend policy of up to 70%, as well as engaging in share repurchases or a one-time dividend up to $500 million, which are currently under review

For a detailed explanation of ICL's new strategy, please view the ICL Strategy Investor presentation which can be found on the Company's website at www.icl-group.com. 

Financial Results

Revenues: Sales for the second quarter of 2013 totaled $1,770 million, an 8% increase compared sequentially with $1,640 million in the first quarter of 2013, but down 7% compared with $1,907 million for the second quarter of 2012. This decrease reflected price declines for potash and phosphate fertilizers and reduced sales in China, together with decreased sales and prices of flame retardants and water treatment biocides, countered partially by increased quantities of clear brine solutions, reduced raw material and energy costs, the consolidation of companies acquired during the period, and favorable changes in exchange rates.

For the six-month period, sales totaled $3,411 million, up slightly compared with $3,406 million for the first half of 2012.

Gross profit: Gross profit for the second quarter of 2013 totaled $718 million, up 9% compared sequentially with $659 million in the first quarter of 2013, but down 15% compared with $840 million in the second quarter of 2012. Gross margin for the quarter was 40.6% compared with 40.2% for the first quarter of 2013 and 44.1% for the second quarter of 2012.

For the six-month period, gross profit totaled $1,377 million compared with $1,439 million for the first half of 2012. Gross margin for the period was 40.4% compared with 42.2% in the first half of 2012.

Operating income: Operating income for the second quarter of 2013 totaled $393 million, up 8% compared sequentially with $363 million for the first quarter of 2013, but down 27% compared with $537 million for the second quarter of 2012. This decrease reflected the reduced gross profit coupled with an increase in operating expenses.

For the six-month period, ICL's operating income totaled $756 million compared with $880 million for the first half of 2012.

Net income: Net income to shareholders for the second quarter of 2013 totaled $316 million, a 4% increase compared sequentially with $305 million for the first quarter of 2012, but down 23% compared with $408 million in the second quarter of 2012.

For the six-month period, ICL's net income to shareholders totaled $622 million compared with $697 million for the first half of 2012.

Highlights of Core Business Segments

• ICL Fertilizers: The segment's sales for the first half of 2013 totaled $2,081 million. Sales reflected an increase of quantities sold of the segment's products, countered by reduced selling prices.

During the period, ICL Fertilizers produced 2,531 thousand tons of potash, and sold 2,549 thousand tons to external customers. In addition, it sold 955 thousand tons of fertilizers, a 14% increase compared with the first half of 2012, reflecting the benefit of the Company's strong position in key emerging markets, including Brazil and others.

ICL Fertilizers' operating income for the first half of 2013 totaled $599 million, an 8% decline compared with $653 million for first half of 2012. Operating margin for the period was 28.8% compared with 32.1% for the first half of 2012.

Fertilizer market trends and ICL Fertilizers' strategic developments:

• Potash market dynamics: Announcements made by a key potash producer on July 30, 2013 may change potash market dynamics and create pressure on potash margins.
• Potash supply agreements: In the first quarter of 2013, ICL Fertilizers signed contracts with its customers in China to ship 660 thousand tons of potash under terms similar to the prevailing market price of other international suppliers (at $70 lower level than preceding contracts). In addition, ICL Fertilizers signed contracts with Indian customers to supply 920,000 tons of potash (including options in the amount of 50,000 tons).
• Fertilizer demand in Brazil: Brazil opened 2013 with strong demand for fertilizers. Brazil's fertilizer imports are expected to increase during the third quarter as the peak of the fertilizer season, which begins in September, approaches.
• Demand for phosphate fertilizers: The second quarter of 2013 was characterized by moderate demand for phosphate fertilizers.
• ICL's phosphate reserves: ICL Fertilizers' plan for mining phosphates in Israel's Barir Field (South Zohar) has reached the planning approval stages, however no decision has yet been made regarding its actualization. If approval is not granted, it is likely that the Company's phosphate reserves will be reduced significantly in the mid-term and long term, leading inevitably to the gradual phase-out of its phosphate operations in Israel. While continuing to advocate for the initiation of mining at the Barir Field, in light of this possibility, the Company has begun investigating alternative phosphate mining sites outside of Israel.

• ICL Industrial Products: ICL IP's sales for the first half of 2013 totaled $691 million, a 9% decrease compared with the first half of 2012. The decrease reflected lower quantities sold of flame retardants, which countered the strong demand for clear brine solutions for the oil and gas drilling industry.

The segment's operating income for the first half of 2013 totaled $98 million compared with $141 million for the first half of 2012.

Market trends:

• Economic environment's effect on the FR market: The global economic slowdown that characterized most of 2012 and the first half of 2013 has triggered a slowdown in the demand for electronic products, resulting in decreased demand for bromine-based flame retardants
• Demand for oil and gas drilling clear brine solutions: Demand for clear brine solutions for the oil and gas drilling industry continued to be strong during the first half of 2013.
• Demand for water treatment chemicals: In the beginning of 2013, the US Department of Commerce imposed a 30%-38% anti-dumping tax on manufacturers of chlorine-based biocides from China. In addition, demand for bromine-based water treatment biocides continued to rise during the first half of 2013.

• ICL Performance Products: ICL PP's sales for the first half of 2013 totaled $763 million, a 6% increase compared with $719 million for the first half of 2012. The increase reflects higher quantities sold, including the consolidation of companies acquired during the reporting period, offset partially by lower prices.

The segment's operating income for the period totaled $87 million, compared with $88 million in the first half of 2012.

Market trends: Most of ICL PP's products are strongly affected by the global economic situation.

Dividend
The Company's Board of Directors has declared that a dividend totaling $221 million will be paid on September 16, 2013 in respect of its second quarter 2013 results.

New Appointments

To execute the strategy, the Company has realigned its management, making a number of key management changes and appointments, effective as of October 1, 2013: 

Mr. Dani Chen, President & CEO of ICL Fertilizers since 2008, has been appointed as Executive Vice President Global Institutional & Community Relations of ICL. Mr. Chen has held a number of executive positions at ICL, both in Israel and overseas, in the areas of production and marketing, including as Senior Vice President of Marketing of ICL Fertilizers.

Mr. Nissim Adar, President & CEO of ICL Industrial Products since 2008, has been appointed as President & CEO of ICL Fertilizers. Mr. Adar was Executive Vice President of ICL Industrial Products from 2002 to 2007.

Mr. Charles Weidhas, President & CEO of ICL Performance Products since 2007, has been appointed as President & CEO of ICL Industrial Products and will relocate to Israel. Prior to joining ICL, Mr. Weidhas held various commercial, operational and general management roles with Monsanto and Solutia Inc. He also served as a board member of Astaris LLC prior to its acquisition by ICL in 2005.

Mr. Mark Volmer has been appointed as President & CEO of ICL Performance Products and will relocate to St. Louis. Mr. Volmer has been a business executive with BASF since 1990. From 2008 to 2013, he headed BASF's Construction Chemicals business in Asia Pacific and served as a member of its Asia Pacific Business Board. Prior thereto, from 2005 to 2008, Mr. Volmer served as head of the business unit of BASF's Acids and Specialty Intermediates segment based in Europe. Mr. Volmer is an entrepreneurial market-oriented global thinker who brings extensive international business experience as well as a deep knowledge of Asian growth markets to the Company.

Mr. Eli Glazer, currently President of ICL Performance Products Europe and Asia Pacific, has been appointed as Head of ICL Europe in addition to his current role as President of ICL Performance Products Europe & Asia Pacific.  

Ms. Osi Sessler, Vice President, Investor Relations and Communications since 2008, will assume, in addition to her Investor Relations role, responsibility for pursuing a dual listing of the Company's shares on a foreign stock exchange. Ms. Sessler will relocate to Europe and also lead the build-up of the Company's European Service Center. Previously, Ms. Sessler was an investment banker at CS First Boston and JP Morgan Chase in New York, England and Israel.

Ms. Miri Mishor, currently Head of IT of ICL Fertilizers, has been appointed as Chief Information Officer (CIO) of ICL and will report to Mr. Avi Doitchman, Executive Vice President Strategy and CFO of the Company. This, in addition to her current role as Vice President Information Systems ICL Fertilizers.

About ICL
ICL is one of the world's leading fertilizer and specialty chemicals companies. For a world challenged by the rapid growth rate of its population and the deterioration of its scarce resources, ICL makes products that increase global food supplies, improve industrial materials and processes, and making energy exploration activities more efficient and eco-friendly.

ICL produces approximately a third of the world's bromine and is the 6^th largest potash producer in the world. ICL is a leading supplier of fertilizers in Europe and a major player in specialty fertilizer market segments. One of the world's most integrated manufacturers and suppliers of phosphate products, ICL has become the world's leading provider of pure phosphoric acid and a major specialty phosphate player.

ICL is comprised of three core segments: ICL Fertilizers, ICL Industrial Products and ICL Performance Products. Its major production activities are located in Israel, Europe, the US, South America and China, and are supported by major global marketing and logistics networks. ICL extracts potash, bromine, magnesium chloride and sodium chloride from Israel's Dead Sea, mines phosphate rock from Israel's Negev Desert, and mines potash and salt in Spain and the UK.

ICL's shares are traded on the Tel Aviv Stock Exchange (TASE: ICL).

Forward Looking Statement

This press release contains forward-looking assessments and judgments regarding macro-economic conditions and the Group's markets, and there is no certainty as to whether, when and/or at what rate these projections will materialize. Management's projections are likely to change in light of market fluctuations, especially in ICL's manufacturing locations and target markets.  In addition, ICL is likely to be affected by changes in the demand and price environment for its products as well as the cost of shipping and energy, whether caused by actions of governments, manufacturers or consumers. ICL can also be affected by changes in the capital markets, including fluctuations in currency exchange rates, credit availability, interest rates, etc. 

* EBITDA is calculated as follows:

Fleisher Communications and Public Relations
Amiram Fleisher
+972-3-624-1241
[email protected]

SOURCE ICL

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