Form 20-F ☒        Form 40-F ☐

ICL Reports Second Quarter 2023 Results

 

Delivers sales of $1.8 billion, adjusted EBITDA of $441 million, adjusted EBITDA margin of 24%

 

Financial Results and Business Overview

 

This Financial Results and Business Overview is based on the Company’s unaudited interim condensed consolidated financial statements as of and for the six and three-month periods ended June 30, 2023 (hereinafter - Interim Financial Statements), and is prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting”, unless otherwise stated. The Financial Results and Business Overview contains certain non‑IFRS financial measures and forward-looking statements, which are described in the “Financial Figures and non‑GAAP Financial Measures” section and the “Forward-looking Statements” section, respectively.

 

About ICL

 

ICL Group Ltd. is a leading global specialty minerals company which creates impactful solutions for humanity’s sustainability challenges in the food, agriculture, and industrial markets. ICL leverages its unique bromine, potash, and phosphate resources, its global professional workforce, and its sustainability focused R&D and technological innovation capabilities, to drive the Company's growth across its end markets. ICL shares are dual listed on the New York Stock Exchange and the Tel Aviv Stock Exchange (NYSE and TASE: ICL). The Company employs more than 12,500 people worldwide, and its 2022 revenues totaled approximately $10 billion. For more information, visit the Company's website at www.icl-group.com^[1].

 

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We disclose in this quarterly report non-IFRS financial measures titled adjusted operating income, adjusted net income attributable to the Company’s shareholders, diluted adjusted earnings per share, and adjusted EBITDA. Our management uses adjusted operating income, adjusted net income attributable to the Company’s shareholders, diluted adjusted earnings per share, and adjusted EBITDA to facilitate operating performance comparisons from period to period. We calculate our adjusted operating income by adjusting our operating income to add certain items, as set forth in the reconciliation table under “Adjustments to reported operating, and net income (non-GAAP)” below. Certain of these items may recur. We calculate our adjusted net income attributable to the Company’s shareholders by adjusting our net income attributable to the Company’s shareholders to add certain items, as set forth in the reconciliation table under “Adjustments to reported operating, and net income (non-GAAP)” below, excluding the total tax impact of such adjustments. We calculate our diluted adjusted earnings per share by dividing adjusted net income by the weighted-average number of diluted ordinary shares outstanding. Our adjusted EBITDA is calculated as net income before financing expenses, net, taxes on income, share in earnings of equity-accounted investees, depreciation and amortization, and certain adjustments presented in the reconciliation table under “Consolidated adjusted EBITDA, and diluted adjusted Earnings Per Share for the periods of activity” below, which were adjusted for in calculating the adjusted operating income. Commencing with the year 2022, the Company’s “adjusted EBITDA” calculation is no longer adding back “minority and equity income, net". While “minority and equity income, net” reflects the share of an equity investor in one of our owned operations, since adjusted EBITDA measures the Company’s performance as a whole, its operations and its ability to satisfy cash needs before profit is allocated to the equity investor, management believes that adjusted EBITDA before deduction of such item is more reflective.

 

 

You should not view adjusted operating income, adjusted net income attributable to the Company’s shareholders, diluted adjusted earnings per share or adjusted EBITDA as a substitute for operating income or net income attributable to the Company’s shareholders determined in accordance with IFRS, and you should note that our definitions of adjusted operating income, adjusted net income attributable to the Company’s shareholders, diluted adjusted earnings per share, and adjusted EBITDA may differ from those used by other companies. Additionally, other companies may use other measures to evaluate their performance, which may reduce the usefulness of our non-IFRS financial measures as tools for comparison. However, we believe adjusted operating income, adjusted net income attributable to the Company’s shareholders, diluted adjusted earnings per share, and adjusted EBITDA provide useful information to both management, and investors by excluding certain items that management believes are not indicative of our ongoing operations. Our management uses these non-IFRS measures to evaluate the Company's business strategies and management performance. We believe that these non‑IFRS measures provide useful information to investors because they improve the comparability of our financial results between periods and provide for greater transparency of key measures used to evaluate our performance.

 

(1a) The Company only provides guidance on a non-GAAP basis. The Company does not provide a reconciliation of forward-looking adjusted EBITDA (non-GAAP) to GAAP net income (loss), due to the inherent difficulty in forecasting, and quantifying certain amounts that are necessary for such reconciliation, in particular, because special items such as restructuring, litigation, and other matters, used to calculate projected net income (loss) vary dramatically based on actual events, the Company is not able to forecast on a GAAP basis with reasonable certainty all deductions needed in order to provide a GAAP calculation of projected net income (loss) at this time. The amount of these deductions may be material, and therefore could result in projected GAAP net income (loss) being materially less than projected adjusted EBITDA (non-GAAP). The guidance speaks only as of the date hereof. We undertake no obligation to update any of these forward-looking statements to reflect events or circumstances after the date of this news release or to reflect actual outcomes, unless required by law. Specialties focused businesses are represented by the Industrial Products, and Growing Solutions segments, and the specialties part of the Phosphate Solutions segment. We present EBITDA from the phosphate specialties part of the Phosphate Solutions segment as we believe this information is useful to investors in reflecting the specialty portion of our business.

 

We present a discussion in the period-to-period comparisons of the primary drivers of change in the Company’s results of operations. This discussion is based in part on management’s best estimates of the impact of the main trends on our businesses. We have based the following discussion on our financial statements. You should read such discussion together with our financial statements.

 

 

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Calculation of adjusted EBITDA was made as follows:

 

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Calculation of diluted adjusted earnings per share was made as follows:

 

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Consolidated Results Analysis

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* See "Adjustments to reported Operating and Net income (non-GAAP)" above.

 

 

 

 

 

 

 

The following table sets forth sales by geographical regions based on the location of the customers:

 

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Europe – The decrease in sales was primarily due to lower selling prices and sales volumes of potash, phosphate fertilizers, white phosphoric acid (WPA), FertilizerpluS products and phosphorous-based flame retardants, as well as lower sales volumes of bromine-based flame retardants, salts and turf and ornamental products, together with lower selling prices of specialty agriculture products. The decrease was partially offset by higher sales volumes of specialty agriculture products and higher selling prices of elemental bromine.

 

 

 

 

   ICL Group Limited Q2 2023 Results 8

Financing expenses, net

 

Net financing expenses in the second quarter of 2023 amounted to $49 million compared to $14 million in the corresponding quarter last year, an increase of $35 million.

 

Tax expenses

 

In the second quarter of 2023, the Company’s reported tax expenses amounted to $84 million, reflecting an effective tax rate of 33%, compared to $540 million in the corresponding quarter of last year. For this quarter, the effective tax rate was slightly higher than usual, due to a withholding tax on dividends in the amount of $8 million, representing an increase of 3% in the effective tax rate. For the corresponding quarter of last year, the tax expenses included an adjustment of $188 million. Excluding this amount, the effective tax rate was 31%.

 

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* See "Adjustments to reported operating and net income (non-GAAP)" above.

 

 

 

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Exchange rates – The favorable impact on operating income was primarily related to the positive impact on operational costs resulting from the depreciation of the average exchange rate of the Israeli shekel and the Chinese yuan against the US dollar, which was almost entirely offset by the negative impact on sales, resulting mainly from the depreciation of the average exchange rate of the euro and the Chinese yuan against the US dollar.

 

 

 

 

   ICL Group Limited Q2 2023 Results 10

The following table sets forth sales by geographical regions based on the location of the customers:

 

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Europe – The decrease in sales was primarily due to lower sales volumes of bromine and phosphorous-based flame retardants, white phosphoric acid (WPA), salts, phosphate fertilizers and turf and ornamental products, as well as lower selling prices of potash, specialty agriculture and FertilizerpluS products, together with the negative impact of the depreciation of the average exchange rate of the euro against the US dollar. The decrease was partially offset by higher sales volumes of potash.

 

 

 

Financing expenses, net

 

Net financing expenses in the first half of 2023 amounted to $93 million compared to $48 million in the corresponding period last year, an increase of $45 million.

 

Tax expenses

 

For the six-month period ended June 30, 2023, the Company's reported tax expenses amounted to $211 million reflecting an effective tax rate of 31%.

 

 

Segment Information

 

Industrial Products

 

The Industrial Products segment produces bromine from a highly concentrated solution in the Dead Sea and bromine‑based compounds at its facilities in Israel, the Netherlands and China. In addition, the segment produces several grades of salts, magnesium chloride, magnesia-based products, phosphorus-based products and functional fluids.

 

 

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    ICL Group Limited Q2 2023 Results 13

 

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Potash

 

The Potash segment produces and sells mainly potash, salts, magnesium and electricity. Potash is produced in Israel using an evaporation process to extract potash from the Dead Sea at Sodom, and in Spain using conventional mining from an underground mine. The segment also produces and sells pure magnesium, magnesium alloys and chlorine. In addition, the segment sells salt products produced at its potash site in Spain. The segment operates a power plant in Sodom which supplies electricity and steam to ICL facilities in Israel (surplus electricity is sold to external customers).

 

 

 

 

 

 

 

 

 

Global potash market - average prices and imports:

 

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Sources: CRU (Fertilizer Week Historical Price: July 2023), FAI, Brazilian and Chinese customs data.

 

 

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Second quarter 2023

 

 

 

First half 2023

 

 

 

 

 

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Phosphate Solutions

 

The Phosphate Solutions segment operates ICL's phosphate value chain and uses phosphate rock and fertilizer-grade phosphoric acid to produce phosphate-based specialty products with higher added value, as well as to produce and sell phosphate-based fertilizers.

 

Phosphate specialties sales of $395 million and operating income of $68 million in the second quarter of 2023 were approximately 20% and 42% lower, respectively, compared to the second quarter of 2022. The decrease in operating income was driven mainly by higher costs of raw materials, lower selling prices as well as higher energy and other production costs. While sales of acids and salts in technical applications decreased, food specialty sales increased year-over-year.

 

Sales of phosphate commodities amounted to $210 million, approximately 50% lower than in the second quarter of 2022, due to a decrease in quantities sold and lower prices. Operating income of $3 million, a year-over-year decrease of $148 million, was primarily due to lower prices, partially offset by lower costs of raw materials, mainly sulphur.

 

 

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* For Q2 2023, comprised of $15 million in phosphate specialties and $44 million in phosphate commodities. For Q2 2022, comprised of $14 million in phosphate specialties and $33 million in phosphate commodities.

 

 

 

 

 

 

 

 

 

 

 

 

 

Global phosphate commodities market - average prices:

 

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Source: CRU (Fertilizer Week Historical Prices, June 2023).

 

 

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Growing Solutions

 

The Growing Solutions segment aims to achieve global leadership in plant nutrition by enhancing its position in its core markets of specialty agriculture, ornamental horticulture, turf and landscaping, fertilizers and FertilizerpluS, and by targeting high-growth markets such as Brazil, India, and China. The segment also looks to leverage its unique R&D capabilities, substantial agronomic experience, global footprint, backward integration to potash, phosphate and polysulphate and its chemistry know-how, as well as its ability to integrate and generate synergies from acquired businesses. ICL is continuously working to expand its broad portfolio of specialty plant nutrition, plant stimulation and plant health solutions, which consist of enhanced efficiency and controlled release fertilizers (CRF), water-soluble fertilizers (WSF), liquid fertilizers and straights (MKP/MAP/PeKacid), FertilizerpluS, soil and foliar micronutrients, secondary nutrients, biostimulants, soil conditioners, seed treatment products, and adjuvants.

 

 

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Liquidity and Capital Resources

 

 

In the quarter, cash flow provided by operating activities amounted to $391 million compared to $627 million in the corresponding quarter last year. This decrease was mainly due to stronger operating results in the corresponding quarter last year.

 

 

In the quarter, net cash used in investing activities amounted to $205 million compared to $264 million in the corresponding quarter last year. This reduction was mainly due to lower investments in property, plant and equipment during the current quarter.

 

 

In the quarter, net cash used in financing activities amounted to $348 million compared to $351 million in the corresponding quarter last year.

 

In March 2023, the Company repaid, as scheduled, NIS 392 million (approximately $108 million) of its Series E Bond.

 

As of June 30, 2023, ICL’s net financial liabilities amounted to $2,253 million, a decrease of $63 million compared to December 31, 2022.

 

 

In April 2023, the Company entered into a Sustainability-Linked Revolving Credit Facility Agreement made between ICL Finance B.V. and a consortium of twelve international banks for a $1,550 million credit facility. The Sustainability-Linked RCF replaced a previous revolving credit facility that was entered into in 2015, as amended and extended in 2018, and which was due to expire in 2025.

 

As of June 30, 2023, the Company had utilized $478 million of the credit facility. For further information, please see Note 4 to the Company’s Interim Financial Statements.

 

 

The total amount of the Company's committed securitization facility framework is $300 million with an additional $100 million uncommitted. As of June 30, 2023, ICL had utilized approximately $251 million of the facility’s framework.

 

Ratings and financial covenants

 

 

In June 2023, Fitch Ratings reaffirmed the Company’s long-term issuer default rating and senior unsecured rating at 'BBB-'. The outlook on the long-term issuer default rating is stable.

 

 

As of July 2023, the S&P credit rating agency reaffirmed the Company’s international credit rating and senior unsecured rating of 'BBB-'. In addition, the S&P Maalot credit rating agency reaffirmed the Company’s credit rating of 'ilAA' with a stable rating outlook.

 

 

As of June 30, 2023, the Company was in compliance with all of its financial covenants stipulated in its financing agreements.

 

 

In the six and three month periods ended June 30, 2023, there were no material changes in the critical accounting estimates previously disclosed in our Annual Report on Form 20-F for the year ended December 31, 2022.

 

 

On May 10, 2023, the Company’s 2023 Annual General Meeting of Shareholders (the "AGM") approved the re-election of Yoav Doppelt, Aviad Kaufman, Avisar Paz, Sagi Kabla, Reem Aminoach, Lior Reitblatt, Tzipi Ozer Armon, Gadi Lesin and Michal Silverberg to serve as directors, effective as of the date of the AGM, until the next annual general meeting of shareholders of the Company or until any of their earlier resignation or removal. The AGM further approved the reappointment of Somekh Chaikin, a Member Firm of KPMG International, as the Company’s independent auditor until the next annual general meeting of shareholders of the Company. As of May 10, 2023, Ovadia Eli is no longer a director of the Company, after serving as a director since August 2011.

 

On June 8, 2023, the Company disclosed its Annual Corporate Responsibility (ESG) web-report for 2022.

 

 

In the six and three month periods ended June 30, 2023, there were no material changes in the risk factors previously disclosed in our Annual Report on Form 20-F for the year ended December 31, 2022.

 

 

Reference is made to “Item 11 – Quantitative and Qualitative Disclosures about Market Risks” in our Annual Report on Form 20-F for the year ended December 31, 2022.

 

 

Applications of derivative actions

 

 

 

For further information regarding legal proceedings and other contingencies, see Note 6 to the Company's Interim Financial Statements.

 

 

This announcement 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”, “strive”, “forecast”, “targets” and “potential”, among others. The Company is relying on the safe harbor provided in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, in making such forward-looking statements.

 

Forward‑looking statements appear in a number of places in this announcement and include, but are not limited to, statements regarding our intent, belief or current expectations. Forward‑looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Such statements are subject to risks and uncertainties, and the 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 mineral extractions permits or concessions; volatility of supply and demand and the impact of competition; the difference between actual reserves and our reserve estimates; natural disasters and cost of compliance with environmental regulatory legislative and licensing restrictions including laws and regulation related to, and physical impacts of climate change and greenhouse gas emissions; failure to "harvest" salt which could lead to accumulation of salt at the bottom of the evaporation Pond 5 in the Dead Sea; litigation, arbitration and regulatory proceedings; disruptions at our seaport shipping facilities or regulatory restrictions affecting our ability to export our products overseas; changes in exchange rates or prices compared to those we are currently experiencing; general market, political or economic conditions in the countries in which we operate; price increases or shortages with respect to our principal raw materials; pandemics may create disruptions, impacting our sales, operations, supply chain and customers; delays in termination of engagements with contractors and/or governmental obligations; the inflow of significant amounts of water into the Dead Sea which could adversely affect production at our plants; labor disputes, slowdowns and strikes involving our employees; pension and health insurance liabilities; changes to governmental incentive programs or tax benefits, creation of new fiscal or tax related legislation; and/or higher tax liabilities; changes in our evaluations and estimates, which serve as a basis for the recognition and manner of measurement of assets and liabilities; failure to integrate or realize expected benefits from mergers and acquisitions, organizational restructuring and joint ventures; currency rate fluctuations; rising interest rates; government examinations or investigations; information technology systems or breaches of our, or our service providers', data security; failure to retain and/or recruit key personnel; inability to realize expected benefits from our cost reduction program according to the expected timetable; inability to access capital markets on favorable terms; cyclicality of our businesses; The Company is exposed to risks relating to its current and future activity in emerging markets; 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; disruption of our, or our service providers', sales of our magnesium products being affected by various factors that are not within our control; our ability to secure approvals and permits from the authorities in Israel to continue our phosphate mining operations in Rotem Amfert Israel; volatility or crises in the financial markets; hazards inherent to mining and chemical manufacturing; the failure to ensure the safety of our workers and processes; exposure to third party and product liability claims; product recalls or other liability claims as a result of food safety and food-borne illness concerns; insufficiency of insurance coverage; war or acts of terror and/or political, economic and military instability in Israel and its region; filing of class actions and derivative actions against the Company, its executives and Board members; closing of transactions, mergers and acquisitions; and other risk factors discussed under ”Item 3 - Key Information— D. Risk Factors" in the Company's Annual Report on Form 20-F for the year ended December 31, 2022, filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 28, 2023 (the “Annual Report”).

 

Forward‑looking statements speak only as of the date they are made, and, except as otherwise required by law, we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements, targets or goals in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events. Investors are cautioned to consider these risk and uncertainties and to not place undue reliance on such information. Forward-looking statements should not be read as a guarantee of future performance or results and are subject to risks and uncertainties, and the actual results may differ materially from those expressed or implied in the forward-looking statements.

 

This report for the second quarter of 2023 (the “Quarterly Report”) should be read in conjunction with the Annual Report and the report for the first quarter of 2023 published by the Company (the "prior quarterly report"), including the description of events occurring subsequent to the date of the statement of financial position, as filed with the US SEC.