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Share Name | Share Symbol | Market | Type |
---|---|---|---|
ICL Group Ltd | NYSE:ICL | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.08 | 1.73% | 4.71 | 4.7696 | 4.65 | 4.69 | 445,757 | 01:00:00 |
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Credit Highlights
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Overview
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Key strengths
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Key risks
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Relative resilience of the fertilizer industry to the recessionary macroeconomic environment caused by the COVID-19 pandemic.
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Cyclical and competitive nature of the fertilizer industry.
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One of the leading global potash producers and the largest global bromine producer.
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Exposure to regulatory changes and political pressure in Israel pertaining to extending the Dead Sea mining concession, which is valid until 2030.
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Competitive advantage from mining in the Dead Sea, which provides access to unique high-quality raw materials, logistical advantages, proximity to ports, and a more favorable cost position for potash and
bromine than peers.
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Large nondiscretionary capital expenditure (capex) requirements at the Dead Sea concession.
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Synergies between the manufacturing processes for different specialty chemicals products, which provide added value.
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Some exposure of the bromine segment to cyclical end-markets such as oil and gas, automotive, and construction.
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Prudent financial policy and adequate liquidity.
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S&P Global Ratings forecasts that ICL Group Ltd.'s (ICL's) credit metrics will remain commensurate with the
rating in 2020, despite COVID-19-related pressures. The company's operations were minimally disrupted by the coronavirus pandemic in the first
quarter of the year. In Spain, mining operations were stopped for about three weeks as restrictions to contain the COVID-19 pandemic were implemented in the country, while in the U.K. operating rates were down about 30% to realign shifts
and maintain social-distancing measures. All operations, including those in China, are now back or close to normal levels. We anticipate that the demand for fertilizers will remain generally stable in 2020, while recognizing farmers'
tight inventory management and weaker agricultural commodity prices. That said, we also assume that the impact of the pandemic on the agriculture sector and demand for fertilizers will be much lower than for broader chemicals. This
reflects the indispensable role of the sector in security of food supply, a factor recognized by the governments by designating it as critical. In bromine, while about 25% of sales are exposed to cyclical oil and gas, automotive, and
construction end markets, we anticipate that profits should be supported by resilient demand from pharmaceutical, food, and health care industries, which account for about 8% of sales. We note ICL's proactive measures to bolster cash
balances, including drawing $300 million from its $1.1 billion revolving credit facility (RCF), and strict management of capex and working capital.
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WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
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JUNE 29, 2020 2
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ICL Group Ltd.
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JUNE 29, 2020 3
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ICL Group Ltd.
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JUNE 29, 2020 4
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ICL Group Ltd.
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Outlook: Stable
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The stable outlook reflects our expectation that ICL will maintain S&P Global Ratings-adjusted debt
to EBITDA of 3.2x-3.4x, factoring in weak prices for potash and phosphate and the recessionary macroeconomic environment hampering fertilizer and bromine end markets.
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We anticipate that ICL will generate adjusted EBITDA of $920 million-$960 million in 2020, supported by
its strong position in the fertilizer markets and low production costs in Israel. We consider an adjusted debt-to-EBITDA ratio of 3.0x at the top of the business cycle and 4.0x at the bottom of the cycle to be commensurate with the
current rating.
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Downside scenario
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We would consider a negative rating action if the company's debt to EBITDA was close to 4.0x without
near-term prospects of recovery, and its operating performance deteriorated. In the first instance, this could occur due to weakening market conditions, for example as a result of prolonged low prices of potash or phosphate due to
sluggish demand or ongoing oversupply in both markets. We could also lower the rating if ICL deviated from its publicly stated dividend policy or embarked on sizable leveraged acquisitions.
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Over the medium term, the rating could come under pressure if uncertainty regarding the renewal of the
Dead Sea concession continues. In this scenario, we expect the company's business risk to increase, since it currently benefits from inherent advantages of operating in the Dead Sea.
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Upside scenario
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We would consider a positive rating action if ICL strengthened its financial risk profile such that its
adjusted debt to EBITDA remained below 2.5x on a sustainable basis. Rating upside would also depend on our view on the credit quality of Israel Corp., ICL's main shareholder with a 46% stake.
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Our Base-Case Scenario
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Assumptions
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• North America GDP contraction of 5.2% in 2020 and 6.2% growth in 2021; Latin
America GDP decline of 5.1% in 2020 and 3.8% growth in 2021; Europe GDP contraction of 6.4% in 2020 and 5.1% growth in 2021; and Asia-Pacific GDP growth of 0.7% in 2020 and 6.3% in 2021.
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• Brent crude prices of $30 per barrel (bbl) in 2020, $50/bbl in 2021, and
$55/bbl in 2022 and beyond.
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• On average, both phosphate and potash fertilizer demand increases in the
low-single-digit percent area annually, partly due to a growing global population, global GDP growth, and changing diets.
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• ICL's revenue at $4.8 billion-$5.0 billion in 2020, recovering to $5.1
billion-$5.2 billion in 2021.
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• Annual dividends of up to 50% of the adjusted net profit, in accordance with the
dividend policy. Dividends are paid quarterly, which allows for some flexibility in the level of distributions.
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JUNE 29, 2020 5
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ICL Group Ltd.
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• Capex of about $570 million in 2020, in line with that in 2019, and $550 million in 2021. We note that ICL decides the level
of investments depending on business confidence and the industry outlook.
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• Minimal acquisition of $27 million in February of Growers Holdings, Inc, and no sizable leveraged acquisitions in 2020 or
2021.
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ICL Group Ltd.--Key Metrics*
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||||||||||||||||
--Fiscal year end Dec 31, 2019--
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||||||||||||||||
(Mil. $)
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2018A
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2019A
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2020E
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2021F
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Revenue
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5,556
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5,271
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4,800-5,000
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5,100-5,200
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EBITDA
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1,181
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1,201
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920-960
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1,000-1,100
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EBITDA margin (%)
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21%
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23%
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~19%
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20%-21%
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Capital expenditure
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550
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557
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570
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550
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Free operating cash flow (FOCF)
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81.8
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419.0
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80-120
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> 200
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Debt to EBITDA (x)
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2.6
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2.5
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3.2-3.4
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< 3.0
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Company Description
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ICL is a multinational company that operates in the manufacturing and marketing of basic and specialty fertilizers based on potash, phosphate, and bromine. The
company is organized into four main divisions:
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• Industrial Products (25% of 2019 sales, 26% operating profit margin). Through this key division, ICL manufactures elemental
bromine for a wide range of applications in flame retardants, magnesia and salt products, and energy storage. ICL's Dead Sea operations offer the world's largest reserves with the highest bromine concentration. Together with its two
main competitors, Albemarle and Lanxess, ICL accounted for the majority of global bromine production in 2019. Barriers to entry in this market are high, due to access to economically viable reserves of bromine, and stringent
requirements for the logistics system (special containers are required for transporting the bromine). ICL uses about 80% of its elemental bromine production internally for the production of higher margin bromine compounds.
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JUNE 29, 2020 6
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ICL Group Ltd.
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• Potash (26% of sales, 21% operating profit margin). In this segment, ICL produces and markets potash fertilizers and salt extracted from the
Dead Sea through a cost-efficient evaporation process, and from a conventional underground mine in Spain. It also transitioned its U.K.-based Boulby mine to the production of advanced polyhalite-based fertilizer (marketed by ICL as
Polysulphate) from the production of potash. Even though ICL's potash operations are smaller than key competitors Nutrien, Uralkali, or Mosaic, the company benefits from low production costs, thanks to the evaporation method at the
Dead Sea site and the logistical advantage of being close to customers.
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• Phosphate Solutions (36% of sales, 5% operating profit margin). Through this division, ICL operates four open pit mines, three
of which are located in the Negev Desert in Israel and one in China. The division uses commodity phosphate as a raw material to develop specialty phosphate products with higher added value, where ICL has 24% of market share globally.
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• Innovative Ag Solutions (13% of sales, 3% operating profit margin). Through this division, ICL offers specialty nitrogen-,
potash-, and phosphate-based fertilizers, including water soluble, liquid, and controlled-release products. The division is also ICL's innovative arm responsible for research and development, and digital innovation.
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ICL Group Ltd.
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ICL Group Ltd.
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ICL Group Ltd.--Peer Comparison
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Industry sector: Chemical companies
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ICL
Group Ltd.
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K+S AG
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The Mosaic Co.
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Uralkali OJSC
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EuroChem Group AG
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(BBB-)/(Stable)/--
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B/Negative/B
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BBB-/Negative/NR
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BB-/Stable/--
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BB-/Positive/--
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--Fiscal year ended Dec. 31, 2019--
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(Mil. $)
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Revenue
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5,271.0
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4,568.1
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8,906.3
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2,781.9
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6,184.0
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|||||||||||||||
EBITDA
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1,201.0
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730.5
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1,501.4
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1,561.2
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1,578.0
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Funds from operations (FFO)
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947.0
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535.5
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1,211.8
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986.8
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1,106.3
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|||||||||||||||
Interest expense
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140.0
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182.6
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296.9
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276.1
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257.4
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|||||||||||||||
Cash interest paid
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134.0
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143.5
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243.1
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377.3
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291.9
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|||||||||||||||
Cash flow from operations
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976.0
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701.9
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1,153.5
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656.5
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906.1
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|||||||||||||||
Capital expenditure
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557.0
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551.7
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1,243.7
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329.4
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868.7
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|||||||||||||||
Free operating cash flow (FOCF)
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419.0
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150.3
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(90.2
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)
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327.0
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37.4
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ICL Group Ltd.
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ICL Group Ltd.--Peer
Comparison (cont.)
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||||||||||||||||||||
Industry sector: Chemical companies
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ICL Group Ltd.
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K+S AG
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The Mosaic Co.
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Uralkali OJSC
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EuroChem Group AG
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Discretionary cash flow (DCF)
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146.0
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96.5
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(307.3
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)
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316.9
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(747.6
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)
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Cash and short-term investments
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191.0
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373.9
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519.1
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482.7
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313.4
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Debt
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3,034.5
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4,837.2
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4,657.1
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5,606.4
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5,828.4
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Equity
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4,061.0
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5,044.3
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9,367.6
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2,105.5
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4,983.1
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Adjusted ratios
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||||||||||||||||||||
EBITDA margin (%)
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22.8
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16.0
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16.9
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56.1
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25.5
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Return on capital (%)
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10.7
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2.6
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3.3
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19.2
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12.0
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|||||||||||||||
EBITDA interest coverage (x)
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8.6
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4.0
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5.1
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5.7
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6.1
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FFO cash interest coverage (x)
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8.1
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4.7
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6.0
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3.6
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4.8
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|||||||||||||||
Debt/EBITDA (x)
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2.5
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6.6
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3.1
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3.6
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3.7
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|||||||||||||||
FFO/debt (%)
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31.2
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11.1
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26.0
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17.6
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19.0
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|||||||||||||||
Cash flow from operations/debt (%)
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32.2
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14.5
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24.8
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11.7
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15.5
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FOCF/debt (%)
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13.8
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3.1
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(1.9
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)
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5.8
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0.6
|
||||||||||||||
DCF/debt (%)
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4.8
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2.0
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(6.6
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)
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5.7
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(12.8
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)
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ICL Group Ltd.
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ICL Group Ltd.
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WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
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JUNE 29, 2020 13
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ICL Group Ltd.
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ICL Group Ltd.--Financial Summary
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||||||||||||||||||||
Industry sector: Chemical companies
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||||||||||||||||||||
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--Fiscal year ended Dec. 31--
|
|||||||||||||||||||
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2019
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2018
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2017
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2016
|
2015
|
|||||||||||||||
(Mil. $)
|
||||||||||||||||||||
Revenue
|
5,271.0
|
5,556.0
|
5,418.0
|
5,363.0
|
5,405.0
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|||||||||||||||
EBITDA
|
1,201.0
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1,181.0
|
1,087.0
|
1,006.5
|
1,224.9
|
|||||||||||||||
Funds from operations (FFO)
|
947.0
|
981.8
|
810.7
|
776.0
|
1,086.8
|
|||||||||||||||
Interest expense
|
140.0
|
165.2
|
175.3
|
187.5
|
132.1
|
|||||||||||||||
Cash interest paid
|
134.0
|
143.2
|
149.3
|
146.5
|
118.1
|
|||||||||||||||
Cash flow from operations
|
976.0
|
631.8
|
859.7
|
987.0
|
595.8
|
|||||||||||||||
Capital expenditure
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557.0
|
550.0
|
434.0
|
610.0
|
598.0
|
|||||||||||||||
Free operating cash flow (FOCF)
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419.0
|
81.8
|
425.7
|
377.0
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(2.2
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)
|
||||||||||||||
Discretionary cash flow (DCF)
|
146.0
|
(159.2
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)
|
188.7
|
215.0
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(350.2
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)
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Cash and short-term investments
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191.0
|
213.0
|
173.0
|
116.0
|
248.0
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|||||||||||||||
Gross available cash
|
161.0
|
183.0
|
146.0
|
96.0
|
248.0
|
|||||||||||||||
Debt
|
3,034.5
|
3,044.0
|
3,959.9
|
4,052.0
|
3,883.1
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|||||||||||||||
Equity
|
4,061.0
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3,915.0
|
2,930.0
|
2,659.0
|
3,188.0
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ICL Group Ltd.--Reconciliation Of Reported Amounts With S&P Global Ratings' Adjusted Amounts (Mil. $)
|
||||||||||||||||||||||||||||||||
|
--Fiscal year ended Dec. 31, 2019--
|
|||||||||||||||||||||||||||||||
ICL Group Ltd. reported amounts
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||||||||||||||||||||||||||||||||
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Debt
|
Shareholders' equity
|
EBITDA |
Operating income
|
Interest expense
|
S&P Global Ratings' adjusted EBITDA
|
Cash flow from operations
|
Capital expenditure
|
||||||||||||||||||||||||
Reported
|
2,301.0 |
3,925.0
|
1,189.0
|
756.0
|
109.0
|
1,201.0
|
992.0
|
576.0
|
||||||||||||||||||||||||
S&P Global Ratings' adjustments
|
||||||||||||||||||||||||||||||||
Cash taxes paid
|
--
|
--
|
--
|
--
|
--
|
(120.0
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)
|
--
|
--
|
|||||||||||||||||||||||
Cash interest paid
|
--
|
--
|
--
|
--
|
--
|
(115.0
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)
|
--
|
--
|
|||||||||||||||||||||||
Reported lease liabilities
|
300.0
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
||||||||||||||||||||||||
Postretirement benefit obligations/deferred compensation
|
439.0
|
--
|
9.0
|
9.0
|
12.0
|
--
|
--
|
--
|
||||||||||||||||||||||||
Accessible cash and liquid investments
|
(161.0
|
)
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
|||||||||||||||||||||||
Capitalized interest
|
--
|
--
|
--
|
--
|
19.0
|
(19.0
|
)
|
(19.0
|
)
|
(19.0
|
)
|
|||||||||||||||||||||
Share-based compensation expense
|
--
|
--
|
12.0
|
--
|
--
|
--
|
--
|
--
|
ICL Group Ltd.
|
ICL
Group Ltd.--Reconciliation Of Reported Amounts With S&P Global Ratings' Adjusted Amounts (Mil. $) (cont.)
|
||||||||||||||||||||||||||||||||
Dividends received from equity investments
|
--
|
--
|
3.0
|
--
|
--
|
--
|
--
|
--
|
||||||||||||||||||||||||
Asset-retirement obligations
|
155.5
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
||||||||||||||||||||||||
Nonoperating income
(expense)
|
--
|
--
|
--
|
9.0
|
--
|
--
|
--
|
--
|
||||||||||||||||||||||||
Reclassification of interest and dividend cash flows
|
--
|
--
|
--
|
--
|
--
|
--
|
3.0
|
--
|
||||||||||||||||||||||||
Noncontrolling interest/minority interest
|
--
|
136.0
|
--
|
--
|
--
|
--
|
--
|
--
|
||||||||||||||||||||||||
EBITDA: Other
|
--
|
--
|
(12.0
|
)
|
(12.0
|
)
|
--
|
--
|
--
|
--
|
||||||||||||||||||||||
Depreciation and amortization: Asset valuation gains/(losses)
|
--
|
--
|
--
|
(10.0
|
)
|
--
|
--
|
--
|
--
|
|||||||||||||||||||||||
Total adjustments
|
733.5
|
136.0
|
12.0
|
(4.0
|
)
|
31.0
|
(254.0
|
)
|
(16.0
|
)
|
(19.0
|
)
|
||||||||||||||||||||
S&P Global Ratings' adjusted amounts
|
Interest
|
Funds from
|
Cash flow from
|
Capital
|
|||||||||||||||||||||||||||||
|
Debt |
Equity
|
EBITDA
|
EBIT
|
expense
|
operations
|
operations
|
expenditure
|
||||||||||||||||||||||||
Adjusted
|
3,034.5 |
4,061.0
|
1,201.0
|
752.0
|
140.0
|
947.0
|
976.0
|
557.0
|
ICL Group Ltd.
|
Environmental, Social, And Governance
|
|
We see ESG credit factors for ICL as more exposed in comparison with industry peers', given that it
operates a unique natural resource asset in a region facing water scarcity and significant geopolitical tensions. The company conducts its Dead Sea operations under a concession agreement with the Israeli government.
|
|
The minerals from the Dead Sea are produced by means of solar evaporation, in which salt sinks to the
bottom of one of the pools. As a result of this process, raising the water above a certain level may cause damage to the foundations and hotel buildings located near the shoreline and to other infrastructure on the beach. ICL also draws
water from the northern basin of the Dead Sea and transfers it to pools at the southern part of the sea. As a result, the water level has decreased in the Dead Sea's northern basin over the years, most recently at an average annual rate
of about 110 centimeters, leading to the creation of sinkholes.
|
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We note that ICL's share of responsibility for the Dead Sea's water depletion is about 23%, with the
balance due to evaporation, increased use of upstream water by neighboring countries (including Israel), and less rain in general. Over the longer term, we believe this situation may create pressure on ICL to reduce its use of Dead Sea
minerals, which could have an adverse effect on its business.
|
|
In addition, ICL is exposed to lawsuits in connection with malfunctions at its plants resulting in an
ecological environmental impact. For example, in 2017, a pool used to store water gypsum formed in production processes in the Negev collapsed. This event led to severe environmental pollution. Class action suits were filed against ICL
and it was required to bear long-term costs relating to rehabilitation programs. Such costs are hard to predict but could influence the financial and credit metrics of the company if incurred.
|
ICL Group Ltd.
|
ICL Group Ltd.
|
Business And Financial Risk Matrix
|
||||||
Business Risk Profile
|
Financial Risk Profile
|
|||||
Minimal
|
Modest
|
Intermediate
|
Significant
|
Aggressive
|
Highly leveraged
|
|
Excellent
|
aaa/aa+
|
aa
|
a+/a
|
a-
|
bbb
|
bbb-/bb+
|
Strong
|
aa/aa-
|
a+/a
|
a-/bbb+
|
bbb
|
bb+
|
bb
|
Satisfactory
|
a/a-
|
bbb+
|
bbb/bbb-
|
bbb-/bb+
|
bb
|
b+
|
Fair
|
bbb/bbb-
|
bbb-
|
bb+
|
bb
|
bb-
|
b
|
Weak
|
bb+
|
bb+
|
bb
|
bb-
|
b+
|
b/b-
|
Vulnerable
|
bb-
|
bb-
|
bb-/b+
|
b+
|
b
|
b-
|
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
|
JUNE 29, 2020 18
|
ICL Group Ltd.
|
Ratings Detail (As Of June 29, 2020)*(cont.)
|
||||||
Issuer Credit Ratings History
|
|
|
|
|
|
|
27-Oct-2016
|
Foreign Currency
|
|
|
BBB-/Stable/-- |
|
|
20-Jun-2016
|
|
|
|
BBB/Watch Neg/--
|
|
|
29-Oct-2015
|
|
|
|
BBB/Negative/--
|
|
|
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
|
JUNE 29, 2020 19
|
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
|
JUNE 29, 2020 20
|
ICL Group Ltd.
|
|||
|
By:
|
/s/ Kobi Altman | |
Name: Kobi Altman | |||
Title: Chief Financial Officer |
ICL Group Ltd.
|
|||
|
By:
|
/s/ Aya Landman | |
Name: Aya Landman | |||
Title: Global Company Secretary |
1 Year ICL Chart |
1 Month ICL Chart |
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