1 PRESS CONTACT INVESTOR RELATIONS CONTACT Gadi Ohana Limor Gruber Debby Communication Head of Investor Relations, ICL +972-3-5683000 +972-3-684-4471 [email protected][email protected]ICL REPORTS Q3 2016 RESULTS -Third quarter 2016 sales of $1.38 billion similar to prior year - Quarterly results demonstrate ICL’s unique advantages: the diversified product mix, which includes Specialty Solutions and the competitive position -Reported operating loss of $331 million related to the termination of certain projects -Adjusted operating income of $164 million; 29% increase in Specialty Solutions mitigates commodity pressure - Free cash flow of $96 million, compared to a negative cash flow of $40 million in the comparable quarter - - Tel Aviv, Israel, November 23, 2016 – ICL (NYSE & TASE: ICL), a leading global specialty minerals and specialty chemicals company, today reported its financial results for the third quarter ended September 30, 2016. Consolidated sales of $1,383 million were similar to prior-year sales of $1,379 million. Higher quantities sold in the Company’s Essential Minerals division, as well as organic growth in the Specialty Solutions division were mostly offset by weaker pricing in the Essential Minerals division. In the third quarter, the Company reported an operating loss of $331 million, which includes write- offs resulting from the previously disclosed termination of projects totaling $489 million: $282 million related to the discontinuation of a global ERP project (“Harmonization Project”), and a $202 million charge related to the termination of a potash project in Ethiopia. In addition, an asset write-off of $5 million was recorded at ICL UK following the Company’s decision to accelerate its transition to producing Polysulphate®. Additional items totaling $6 million include provision for early retirement and prior periods’ royalties offset by the cancellation of provisions for retroactive electricity charges and legal claims. Excluding these items, adjusted operating profit totaled $164 million compared to $242 million in the prior-year. The decline derived mostly from lower Essential Mineral margins due to unfavorable pricing. Third quarter results benefitted from the Company’s strategy to grow its specialty business while reducing the impact of commodity pricing. ICL’s potash volume increased sequentially and year-over- year following the stabilization of the market as a result of contracts signed with Chinese and Indian customers. An average FOB price of $200/tonne, reflecting the Company’s advantageous geographic position, as well as the continued efforts to reduce ICL’s potash business cost per tonne, resulted in an operating profit of $81 million in the potash stand-alone business.
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1
PRESS CONTACT INVESTOR RELATIONS CONTACT
Gadi Ohana Limor Gruber
Debby Communication Head of Investor Relations, ICL
Capital loss (gain) from divestitures of non-core businesses and transaction expenses in connection with acquisition and divestitures of businesses - 6
Write-off and impairment of assets 489 -
Provision for early retirement and dismissal of employees 20 -
Provision in respect of prior periods resulting from an arbitration decision 10 5
Retroactive electricity charges (16) 12
Provision for legal claims (8) 5
Total adjustments to operating income
(loss) 495 45
Total adjusted operating income 164 242
Total tax impact on the above adjustments, and finance expenses
adjustments (2) 35 11
Total net income (loss) - shareholders of the Company (340) 121
Total adjusted net income - the shareholders of the Company 120 155
(1) Strike impact on 2015 potash sales quantities were not recovered in the first nine months of 2016 period due to the delayed contract signing in China and India.
(2) Finance expenses related to a provision in respect of prior periods resulting from an arbitration decision amounting to $26 million ($20 million net of tax).
Calculation of adjusted EBITDA:
7-9/2016 7-9/2015
$ millions $ millions
Net income attributable to the shareholders of the Company (340) 121
Depreciation and amortization 108 90
Financing expenses, net 45 49
Taxes on income (22) 34
Adjustments * 495 45
Total adjusted EBITDA 286 339
* See "Adjustments to reported operating and net income" above.
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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 and Adjusted EBITDA. We calculate our adjusted operating
income by adjusting our operating income to add certain items, as set forth in the reconciliation tables above.
We calculate our adjusted net income by adjusting our net income to add certain items, as set forth in the
reconciliation table above, excluding the total tax impact of such adjustments. Adjusted EBITDA is defined as
the net income to the Company shareholders plus depreciation and amortization plus financing expenses, net,
and taxes on income and plus the items as presented in the reconciliation table above which were adjusted for
in calculating the operating income and net income attributable to the Company’s s hareholders You should
not view adjusted operating income, adjusted net income or Adjusted EBITDA as substitutes for operating
income or net income determined in accordance with IFRS, and you should note that our definitions of adjusted
operating income, adjusted net income and Adjusted EBITDA may differ from those used by other companies.
Adjusted EBITDA should not be considered as the sole measure of our performance and should not be
considered in isolation from, or as a substitute for, operating income or other statement of operations or cash
flow data prepared in accordance with IFRS as a measure of our profitability or liquidity
Nonetheless, we believe adjusted operating income, adjusted net income and Adjusted EBTIDA provide useful
information to both management and investors. Our management uses these non-IFRS measures to evaluate the
Company's business strategies and management's performance. We believe that these non -IFRS measures
provide useful information to investors because they provide transparency of key measures used to evaluate our
performance and help compare operating performance from period to period. We also believe Adjusted EBITDA
facilitates company to company operating performance comparisons by backing out potential differences
caused by variations such as capital structures (affecting financing expenses, net), taxation (affecting taxes on
income) and the age and book depreciation of facilities, equipment and intangible assets (affecting relative
depreciation and amortization), which may vary for different companies for reasons unrelated to operating
performance. . Adjusted EBITDA does not take into account our debt service requirements and other
commitments, including capital expenditures, and, accordingly, is not necessarily indicat ive of amounts that
may be available for discretionary uses.
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Condensed Consolidated Statements of Income (In millions, except per share data)
For the three-month period ended
Sept. 30,
2016 Sept. 30,
2015
$ millions $ millions
Sales 1,383 1,379
Cost of sales 922 891
Gross profit 461 488
Selling, transport and marketing
expenses 197 166
General and administrative expenses 80 83
Research and development expenses 18 21
Other expenses (income), net 497 21
Operating income (loss) (331) 197
Finance expenses, net 45 49
Share in earnings of equity-
accounted investees 7 8
Income (loss) before income taxes (369) 156
Income taxes (22) 34
Net income (loss) (347) 122
Net loss attributable to the non-
controlling interests (7) 1
Net income (loss) attributable to the
shareholders of the Company (340) 121
Diluted earnings per share ($) ( 0.27) 0.10
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Condensed Consolidated Statements of Financial Position:
September 30,
2016 September 30,
2015
$ millions $ millions
Current assets
Cash and short term investments 207 293
Trade receivables 1,117 883
Inventories 1,351 1,184
Other receivables 232 324
Total current assets 2,907 2,684
Non-current assets
Investments in equity-accounted investees 162 164
Financial assets available for sale 235 -
Deferred tax assets 173 162
Property, plant and equipment 4,317 4,013
Intangible & other non-current assets 1,167 1,171
Total non-current assets 6,054 5,510
Total assets 8,961 8,194
Current liabilities
Short-term credit 477 501
Trade payables 801 544
Provisions 90 42
Other current liabilities 696 573
Total current liabilities 2,064 1,660
Non-current liabilities
Long-term debt and debentures 3,153 2,460
Deferred tax liabilities 198 339
Long-term employee provision 667 584
Provisions & other non-current liabilities 146 120
Total non-current liabilities 4,164 3,503
Total liabilities 6,228 5,163
Equity
Total shareholders’ equity 2,614 3,005
Non-controlling interests 119 26
Total equity 2,733 3,031
Total liabilities and equity 8,961 8,194
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Condensed Consolidated Statements of Cash Flows:
For the three-month
period ended
Sept. 30
2016 Sept.30
2015
$ millions $ millions
Cash flows from operating activities
Net income (loss) (347) 122
Adjustments for:
Depreciation and amortization 113 90
Revaluation of balances from financial institutions and
interest expenses, net 41 19
Share in earnings of equity-accounted investees, net (7) (8)
Other capital losses (gains), net 429 (1)
Share-based compensation 4 6
Loss (gain) from divestiture of subsidiaries - -
Deferred tax expenses (income) (60) 14
173 242
Change in inventories 14 (5)
Change in trade and other receivables (69) 11
Change in trade and other payables 95 30
Change in provisions and employee benefits 36 (94)
Net cash provided by operating activities 249 124
Cash flows from investing activities
Investments in shares and proceeds from deposits, net 29 (2)
Purchases of property, plant and equipment and
intangible assets (153) (164)
Other 1 5
Net cash used in investing activities (123) (161)
Cash flows from financing activities
Dividends paid (62) (53)
Receipt of long-term debt 213 140
Repayment of long-term debt (260) (2)
Short-term credit from banks and others, net (19) (57)
Net cash provided by (used in) financing activities (128) 28
Net change in cash and cash equivalents (2) (9)
Cash and cash equivalents as at beginning of the period 158 231
Net effect of currency translation on cash and cash
equivalents 1 (10)
Cash and cash equivalents as at the end of the period 157 212
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Sales by Main Countries:
7-9/2016 7-9/2015
$
millions % of sales
$ millions
% of sales
USA 315 23 328 24
China 152 11 123 9
Brazil 145 10 145 11
Germany 89 6 95 7
India 78 5 63 5
United Kingdom 77 6 75 5
Israel 64 5 61 4
Spain 55 4 66 5
France 51 4 71 5
Australia 50 4 25 2
All other 307 22 327 23
Total 1,383 100 1,379 100
Sales by Geographical Regions:
7-9/2016 7-9/2015
$
millions % of sales
$ millions
% of sales
Europe 437 31 467 34
North America 330 24 354 26
Asia 329 24 290 21
South America 162 12 158 11
Rest of the world 125 9 110 8
Total 1,383 100 1,379 100
The breakdown of the sales in the third quarter of 2016 indicates a decrease in sales in Europe,
stemming mainly from a decline in the selling prices of potash and phosphate fertilizers. The
decrease in sales in North America stems mainly from the sale of non -core businesses and a decrease
in the selling prices of potash and phosphate, which was partially offset by an increase in the sales
of fire safety products. The increase in sales in Asia stems mainly from consolidation of the joint
venture in China and from an increase in the quantities sold of potash, bromine -based flame
retardants and industrial solutions as well as elemental bromine. This increase was partly offset by a
decline in the selling prices of potash. The increase in sales in South America stems mainly from an
increase in the quantities sold of phosphate fertilizers and potash. This increase was partly offset by
a decrease in potash and phosphate selling prices and from a decrease in phosphoric acids
quantities sold due to the economic slowdown in Brazil.
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Operating Division Data:
Essential Minerals Division
Specialty Solutions Division
Other activities
Eliminations Consolidated
$ millions
For the three-month period ended September 30, 2016
Sales to external parties 552 821 10 - 1,383
Inter-division sales 69 10 1 (80) -
Total sales 621 831 11 (80) 1,383
Operating income (loss) attributed to divisions (100) 147 4 51
General, administrative and other unallocated income (expenses) and intercompany eliminations* (382)
Operating income (331)
Financing expenses, net (45)
Share in earnings of equity-accounted investee 7
Income before taxes on income (369)
Capital expenditures 117 21 2 - 140
Capital expenditures not allocated 20
Total capital expenditures 160
Depreciation and amortization 77 31 2 - 110
Depreciation and amortization not allocated 3
Total depreciation and amortization 113
*Including a provision of $282 related to the termination of the Harmonization project and $80 million of G&A expenses.
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Operating Division Data (cont'd):
Essential Minerals Division
Specialty Solutions Division
Other activities
Eliminations Consolidated
$ millions
For the three-month period ended September 30, 2015
Sales to external parties 552 796 31 - 1,379
Inter-division sales 68 7 - (75) -
Total sales 620 803 31 (75) 1,379
Operating income (loss) attributed to divisions 156 130 (12) 274
General, administrative and other unallocated income (expenses) and intercompany eliminations (77)
Operating income 197
Financing expenses, net (49)
Share in earnings of equity-accounted investee 8
Income before taxes on income 156
Capital expenditures 83 37 - 120
Capital expenditures as part of business combination (1) 6 - 5