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Israel Chemicals Q3 profit beats estimates
Fertilizers and specialty chemicals maker posts lower third-quarter net profit and revenue than a year ago, but says results better than expected as markets slowly recover. Company records net profit of $256.6 million, down from $778.6 million
Israel Chemicals, a fertilizers and specialty chemicals maker, posted lower third-quarter net profit and revenue than a year ago but said results were better than expected as markets slowly recover.
ICL, the second-largest company listed on the Tel Aviv stock exchange and the world's sixth-largest producer of potash, said on Tuesday demand and prices for grain and fertilizers had risen somewhat from the lowest point during the first quarter but remained low compared to mid-2008.
"The steady sequential increase in sales may be an indication that ICL's markets have begun to recover and that demand has begun a return to normal levels," the company said.
Third-quarter net profit and revenue were up sharply from the first and second quarters, when the global recession led to a drop in demand for fertilizers.
Citi analyst Sophie Jourdier said fertilizer demand should recover in 2010, given low stocks and a robust grain price environment. But pricing risk remains on the downside as China, the world's biggest potash buyer, has yet to sign an agreement.
"Nonetheless, ICL's low-cost position and solid balance sheet allow a confident outlook into 2010," Jourdier said in a clients' note. "We expect the third-quarter results to drive consensus earnings upgrades."
Jourdier rates ICL as "hold".
"ICL's quarterly results are better than expected but should not have a significant impact on the share price, which is largely driven by exogenous factors such as the price of oil and soft commodities, the Chinese contract and ethanol blending rates," said Gilad Alper, an analyst at Excellence Nessuah.
"Until the direction of these factors... becomes apparent we stick with our 'market perform' recommendation."
He said the price of potash could continue to decline, "especially if China continues to play hardball in the negotiations".
A major challenge for ICL remains Europe, the company's main region, which still shows no signs of improvement, Alper said.
Profit, revenue fall
ICL recorded quarterly net profit of $256.6 million or 20 cents a share, down from $778.6 million or 60 cents a share a year earlier. Excluding one-off items, net profit in the quarter was $279 million.
Revenue fell to $1.347 billion from $2.178 billion a year earlier. Analysts had expected ICL to earn $226 million on revenue of $1.298 billion, according to a Reuters poll.
"The beat was broadly based, with lower input costs, efficiency measures, the weakening shekel versus the dollar and a low tax rate being key factors," Jourdier said.
Potash sales of 979,000 tons were higher than analysts expected and far higher than 369,000 tons in the second quarter. Prices were also higher than expected, Jourdier said.
"ICL has benefited from an increase in demand from India and Brazil," she said.
The board declared a dividend of $175 million or NIS 0.53 (14 cents) a share to be paid on December 22. This is up from $100 million paid in both the first and second quarters.
ICL is controlled by holding company Israel Corp while Potash Corp of Saskatchewan owns 12%.
