ICL Group (ICL) Q4 2018 earnings summary

Executive summary

• 2018 sales rose to $5,556M from $5,418M; reported operating income reached $1,519M, including an $841M divestiture gain. Adjusted operating income was $753M and adjusted net income attributable to shareholders was $477M.

• Higher realized potash prices and stronger specialty product pricing supported performance, while lower potash and phosphate sales volumes, higher raw-material costs and freight expense weighed on results.

Financial highlights

• Gross profit was $1,854M versus $1,672M; net income attributable to shareholders was $1,240M versus $364M; basic and diluted EPS were both $0.97 versus $0.29.

• Operating income increased to $1,519M from $629M; excluding adjustments, operating income was $753M versus $652M and adjusted net income was $477M versus $389M.

• Net finance expense rose to $158M from $124M, mainly reflecting currency and hedge results and $10M of interest on past royalties; the tax expense was $129M, with an effective tax rate of about 9%.

• Sales increased $138M, reflecting pricing and currency benefits, partly offset by lower quantities and divestitures; gross profit rose 11% YoY.

Outlook and guidance

• Potash pricing remained firm into year-end and early 2019; phosphate fertilizer prices softened in Q4 2018, with market observers expecting further moderation in H1 2019 and stabilization in H2.

• 2019 investment priorities include Spain capacity and logistics, the P-9 pumping station, Dead Sea salt harvesting, Israeli clean-air projects and a white phosphoric acid plant in China.

• Polysulphate production is expected to reach full capacity toward end-2020; Potashplus and PKplus production and sales were planned to increase significantly in 2019.

• Environmental spending was projected at $171M for 2019, including $101M of capital projects and $70M of current expenses.