ICL Group (ICL) Q4 2015 earnings summary

Executive summary

• FY2015 sales fell 12% YoY to $5.405B; operating income was $765M and net income attributable to shareholders was $509M. Strike disruptions and currency translation weighed on sales, while divestiture gains supported reported income.

• Adjusted operating income rose to $994M from $960M, and adjusted net income reached $699M from $695M, excluding specified one-time items such as strike impacts, impairment charges and divestiture-related gains.

• March 2016 measures targeted $350M of annual savings by end-2016 versus 2013, an additional $50M annual cost reduction, $50M incremental cash flow and annual capex capped at $650M excluding acquisitions.

Financial highlights

• Sales were $5.405B versus $6.111B in 2014; gross profit was $1.803B versus $2.196B, while operating income was $765M versus $758M.

• Net income was $506M versus $466M; net income attributable to shareholders was $509M versus $464M. Basic and diluted EPS were each $0.40 versus $0.37.

• Operating cash flow was $573M versus $893M; investing cash outflow was $547M versus $996M, and financing cash flow was $15M versus $70M.

• Cash and equivalents were $161M at year-end; total assets were $9.077B and total equity was $3.188B.

• Reported operating income included $215M of divestiture gains; other expenses included $90M of impairment, $48M for early retirement/dismissal and $20M each for historical waste and retroactive electricity charges.

Outlook and guidance

• Savings target: $350M annual run-rate by end-2016 versus 2013, with $275M achieved by Dec. 31, 2015; additional 2016 cost reductions target $50M annually and working-capital measures target $50M cash flow.

• Capex excluding acquisitions targeted at no more than $650M annually over the next several years, down from the prior $700M–$800M target; debt targeted not to exceed current levels, with moderate reduction anticipated from 2016 if conditions hold.

• Board planned to reassess dividend policy; the existing policy targeted quarterly distributions of up to 70% of net income, but future payments or payout levels were not assured.

• Potash demand was forecast by IFA to grow at 3% annually from 35.5M tons K₂O in 2015 to 38.5M in 2019; phosphate demand forecasts also indicated growth, while weak near-term conditions persisted.

• Danakhil production was estimated to commence in 2020, subject to feasibility, infrastructure and license-extension outcomes; UK potash production was expected to end in 2018, with polysulphate output targeted at 1M tons by 2020.