6-K 1 dp53451_6k.htm FORM 6-K


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934


For the month of February, 2015

Commission File Number: 001-13742

ISRAEL CHEMICALS LTD.
(Exact name of registrant as specified in its charter)

Israel Chemicals Ltd.
Millennium Tower
23 Aranha Street
P.O. Box 20245
Tel Aviv, 61202 Israel
(972-3) 684-4400
(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F
X
 
Form 40-F
 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes
   
No
X

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes
   
No
X



 
 
 
 


ISRAEL CHEMICALS LTD.

1.
Q4 2014 Results presentation.
 
 
 

 
 
Item 1
 


Q4 2014 Results

Mr. Stefan Borgas | President & CEO

February 11, 2015



 
 
 

 
 
 


Important Legal Notes

The information delivered or to be delivered to you does not constitute an
offer or a recommendation to do any transaction in Israel Chemicals Ltd. (ICL)
securities.

Certain statements in this presentation and other oral and written statements
made by ICL from time to time, are forward-looking statements, including, but
not limited to, those that discuss strategies, goals, outlook or other
non-historical matters; or project revenues, income, returns or other financial
measures.  These forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially from those
contained in the statements, including, among others, the following: (a) Crisis
in financial markets;(b) War or terror operations;(c) Impacts on sales of
fertilizers (product prices, government policies and weather); (d) Subjection
to legislative and licensing restrictions;(e) Exposure relating to
environmental protection and safety;(f) Third party liability and product
liability; (g) Volatility in the markets that affects the demand for some of
the products; (h) Concessions and permits; (i) Natural disasters; (j) Water
level in Pond 150 in Dead Sea;(k) Dependence on seaports, transportation and
loading in Israel. We caution you that the above list of important factors is
not comprehensive. We refer you to filings that we have made and shall make
with the TASE and the U.S. SEC, including under "Risk Factors" in our
prospectus. They may discuss new or different factors that may cause actual
results to differ materially from this information.

All information included in this document speaks only as of the date on which
they are made, and we do not undertake any obligation to update such
information afterwards.

Some of the market and industry information is based on independent industry
publications or other publicly available information, while other information
is based on internal studies. Although we believe that these independent
sources and our internal data are reliable as of their respective dates, the
information contained in them has not been independently verified and we can
not assure you as to the accuracy or completeness of this information.

Readers and viewers are cautioned to consider these risks and uncertainties and
to not place undue reliance on such information.



 
 
 

 
 
 


Highlights & Financial Results

* Financial results y/y impacted by potash price decline and accumulating
one-time effects


Strategic milestones achieved:

* Delivered efficiency improvement $100M in 2014, partially offsetting the
impact of the labor interruption in Israel

* Divestitures on track to achieve estimated net proceeds* of $300-500M

* Growing ICL's core: strategic alliance with Yunnan Yuntianhua, acquisition of
Prolactal, EU- based functional dairy proteins leader


$ millions                Q4 14    Q4 13   % change    FY2014    FY2013    % change
Revenues                  1,403    1,416        (0.9)%    6,111     6,272       (2.6)%
Operating Income              174      123       41.5%       758    1,101     (31.2)%
Adjusted Operating Income     200      218      (8.3)%       960    1,196     (19.7)%
Adjusted Operating margin 14.3%    15.4%                 15.7%     19.1%
Net income                      85     119    (28.6)%        464       819    (43.3)%
Adjusted net income           108      195    (44.6)%        695    1,012     (31.3)%

* Net proceeds: enterprise value net of taxes


[] Q4 2014 adjusted operating income excludes a one-time  write off in the
AntiGerm business ($22M), in Clearon ($40M)  and in Medentech ($9M), as well as
one-time  income as a result of the Fosbrasil financial consolidation ($36M)
and a one-time  reimbursement from the Strike Fund ($9M) .
[] Q4 2014 adjusted net income exclude the above (net of tax effect) and a
non-recurring tax expense related to investments made by a subsidiary in Europe
in prior periods, at the amount of $11M.
[] Net income in Q4 2014 impacted by higher financial expenses and effective
tax rate due to exchange rate fluctuation (mainly dollar appreciation vs.  the
shekel)



 
 
 

 
 
 


Business Environment & Major Developments

* Strong potash volume year negatively impacted by labor actions in Israel in
Q4

* Very satisfying phosphate performance supported by volumes, price increases
and strong operating step-up

* In Specialty Fertilizers, weak environment in Eastern Europe was strongly
offset by significant efficiency gains

* Continued solid demand in phosphates and operational improvements can balance
short term potash and Specialty Fertilizers uncertainties


* Stable demand for flame retardants and bromine biocides will continue whereas
clear brine fluids business is expected to be negatively impacted by lower oil
prices as of 2H2015 * Improved operating profit supported by mix effect and
efficiencies, offset by the impact of labor interruption in the inefficient
compound plant in Israel * Margin expansion through implementation of cost
reduction and selective price increases expected to take effect in 2015
Engineered Materials & Processed Food

* Q4 results impacted by lower demand in Europe, increased competition in the
US and the depreciation of the Euro

* In the last 5 months, Food Specialties launched 30 new multi ingredient
solutions demonstrating growth of the core business

* Acquisitions of Fosbrasil and Prolactal will contribute to portfolio and
geographic expansions



 
 
 

 
 
 


ICL's Efficiency and Excellence Initiatives Contribution -- 2014

Efficiency initiatives contribution to operating income

Contribution by project

Contribution by segment

[] Total efficiency and excellence initiatives contribution in 2014 - $100M

[] Total annual contribution by 2016 Year End - $350M



 
 
 

 
 
 


Macro-Economic Developments Affecting ICL

[] Excess costs in shekel - $1B  in USD terms
[] ILS/$  exchange rate today 10% lower than 2014 average [] Negative ILS/$
exchange rate impact on net income in 2014 will turn positive in 2015

[] Excess revenues in Euro -- $150M  in USD terms [] []/$  exchange rate today
16% lower than 2014 average

[] Oil prices plunged more than 50% LTM
[] Oil at $50/barrel  to contribute $50-100M  to ICL's OP
[] Lower transportation costs in ICL Fertilizer more than offset negative
impact on ICL Industrial Products clear brine fluids business

[] Ruble/$  exchange rate today 38% lower than 2014 average [] Mainly impacting
ICL Performance Products Food business in Russia.
[] Moderate impact on ICL Specialty Fertilizers
[] Significant cost advantage to Russian competitors in the potash and
magnesium markets 6



 
 
 

 
 
 


2014 -- A Strong Fertilizer Year

2014 Imports to key markets - thousand tonnes

1 Full year phosphate fertilizers in P205 terms

2 Full year DAP imports


Sources: China Fertilizer Weekly Market Report, Sindicaro Da Industria DE
Adubose Corretivos Agricolas No Estado De Sao Paulo, GTIS, Fertilizer Week and
Company estimates

* Percentage may not match the numbers due to rounding



 
 
 

 
 
 


Strategic Alliance with Yunnan Yuntianhua -- Supporting ICL's Fertilizers,
Specialty Fertilizers, Food Specialties & Advanced Additives

1 50% in a fully vertically integrated phosphate business including a world
scale phosphate rock mine and downstream operations -- with effective control

2 A 15% stake in Yunnan Yuntianhua Co. Ltd., China's leading producer of
phosphate rock and fertilizers



 
 
 

 
 
 


Strategic Alliance with Yunnan Yuntianhua

Secure cost competitive resources for Asian markets


Financial Highlights

[] Revenues: JV sales  to increase  from ~$550M to ~$700M

[] Commodity / Specialty sales volumes ratio  to improve from 90%/10% to
50%/50%

[] Margin expansion: expand EBITDA margins from low teens to high teens within
5 years [] JV valuation reflects approximately 7.4x EV/EBITDA multiple (year 2
estimates) [] Cash EPS accretive from the first full year of operations []
Synergies: at least $30M per year, achieved within 5 years, with a potential to
double this amount [] Deal value for the JV and the listed company: $452
million [] Additional CAPEX: ~$350M spread over 5 years starting from the
closing



 
 
 

 
 
 


Key Milestone in ICL's Food Strategy: Acquisition of Prolactal -- A leading
European Producer of Dairy Proteins

Transforming ICL Food Specialties into a global formulator of texture and
stability solutions

 Deal highlights

[]2014 annual revenues of approx.  []100 million, 200 employees []Market growth
approx.  10%/annum []Cash EPS accretive from the first year of consolidation
with an EV/EBITDA ratio of 9x []Acquisition will contribute substantial sales
and marketing synergies []Closing is expected by Q2 2015

 Dairy proteins fulfills consumer needs

Essential protein source in emerging markets and important ingredient to
health, sports and infant food. Proteins are easy to digest and are better
absorbed by the human body
10



 
 
 

 
 
 


Expand Footprint in Brazil: Completion of 100% Acquisition Of Fosbrasil for
~$65M

[] Latin America's main producer of purified phosphoric acid

[] More than $100M  in sales, 90 employees

[] Benefits:

[] Almost 50% increase of ICL's purified phosphoric acid volumes

[] ICL to become South America's market leader in specialty products for Food,
Engineered Materials and Specialty Fertilizers [] Synergies utilization and
improved competitiveness



 
 
 

 
 
 


Divestitures on Track to Achieve Net Proceeds $300-500M

2014 divestitures to generate more than $300M in net proceeds*:

[] Total revenues of divested businesses in 2014 - about $350M  with high
single digit operating margin, lower than ICL's average

[] Additional divestiture opportunities :

[] Proceeds to be used for growth opportunities in the Agriculture, Food and
Engineered Materials

* Net proceeds: enterprise value net of taxes



 
 
 

 
 
 


Ethiopia -- Potash for Growth

Following positive results in India, ICL expands farmers' global education
programs, launching "Potash for Growth" in Ethiopia to promote balanced
fertilization to maximize agriculture productivity and to improve economic
benefit.

Outreach to farmers:
600 demonstration plots in 2014, several hundred additional plots in 2015

Soil fertility mapping:
The mapping will enable Potash for Growth to recommend the most appropriate
fertilizer applications in each area

Research and validation:
Supports research on potassium in soil and plants by graduate students,
developing their skills as plant nutrition specialists.



 
 
 

 
 
 


Inauguration of ICL's European Headquarters in Amsterdam

Benefits:

[] $10-20M   efficiency contribution annually

[] Strengthening our business activities as well as our long-standing
relationships with our European customers, suppliers and other stakeholders []
Excellent business and regulatory environment in the Netherlands [] Creating
attractive positions for more than 300 professionals



 
 
 

 
 
 


ICL Branding Website

        Launched globally on Jan 27 Available in 7 languages!

 Demonstrates our vision and strategy

The website offers:

ICL "Minute to 8" video clips

The thinking behind the brand story Branding examples & ICL brand book

 The brand's graphic and textual language ICL new site names search engine

And more!

 Visit the website: www.iclbranding.com



 
 
 

 
 
 


Financial Results

 (Mr. Avi Doitchman)Executive VP, CFO & Strategy



 
 
 

 
 
 


Q4 2014 Results

$ millions                Q4 14   Q4 13   % change   FY2014   FY2013   % change
Revenues                  1,403   1,416       (0.9)%   6,111    6,272      (2.6)%
Operating Income             174     123      41.5%       758   1,101    (31.2)%
Adjusted Operating Income    200     218      (8.3)%      960   1,196    (19.7)%
Adjusted Operating margin 14.3%   15.4%               15.7%    19.1%
Financial Expenses, net        66       6                 156       27
Net income                     85    119    (28.6)%       464      819   (43.3)%
Adjusted net income          108     195    (44.6)%       695   1,012    (31.3)%

Adj. Net Income Bridge Analysis



 
 
 

 
 
 


Potash Bridge Analysis

 Sales ($M)

 Operating Profit ($M)

Numbers may not add due to rounding



 
 
 

 
 
 


Phosphates and Fertilizers

 Sales ($M)

 Operating Profit ($M)*

Numbers may not add due to rounding

* Q4 2013 operating income was impacted by a provision for early retirement in
Rotem, in the amount of about $60M, while Q4 2014 operating income is excluding
a one-time reimbursement of $8M from an insurance award in connection with the
strike in Rotem.



 
 
 

 
 
 


Industrial Products

 Sales ($M)

 Operating Profit ($M)

Numbers may not add due to rounding



 
 
 

 
 
 


Performance Products

 Sales ($M)

 Operating Profit ($M)

Numbers may not add due to rounding



 
 
 

 
 
 


Thank You



 
 
 

 
 
 


Appendices Financial Overview



 
 
 

 
 
 


Lower, Yet Strong Returns

2000-2006 figures are based on Israeli GAAP, 2007-2014 are based on IFRS Data
for 2012-2013 reflect the application of 2 new IFRS accounting standards Data
is based on adjusted operating and net income ROE (Return on equity) = net
income / shareholders' equity, average
ROIC (Return on invested capital ) = (operating income [](1-0.20)) / ((trade
receivables + inventory -- trade payables) + PP&E, net), average
* Operating income is after elimination of non-recurring effects: provision for
early retirement at Rotem, provision for removing waste at Bromine and
impairment of assets at ICL-IP. Net income is after elimination of non
recurring tax effects (mainly, tax in respect of release of trapped earnings in
2013 annual results, provision for early retirement it Rotem, provision for
removing waste at Bromine and impairment of assets at ICL-IP in Q4 '13)



 
 
 

 
 
 


Sequential Improvement in Cash Flow Delivery

[] Net debt to EBITDA (as of end-2014): 1.98X

* 2006 figures are based on Israeli GAAP, 2007-2014 are based on IFRS



 
 
 

 
 
 


More than a Decade of High Dividend Yields

Year Dividend Yield*
---- ---------------
2001           4.0%
---- ---------------
2002           4.8%
---- ---------------
2003           4.5%
---- ---------------
2004           4.5%
---- ---------------
2005           3.6%
---- ---------------
2006           6.4%
---- ---------------
2007           3.5%
---- ---------------
2008           5.9%
---- ---------------
2009           3.9%
---- ---------------
2010           7.0%
---- ---------------
2011           5.9%
---- ---------------
2012           6.4%
---- ---------------
2013           8.0%
---- ---------------

Dividend policy:
Up to 70% of net income in quarterly payments

2014 Dividend Payments *

Q1: $91.5 million announced on May 15, 2014 Q2: $47 million announced on August
7, 2014 Q3: $125 million announced on November 11, 2014

* Q4 dividend will be published with the full year reports on March 19(th)


[] Calculated according to market capitalization based on average share price
adjusted for dividends.  Dividends attributed to profits of that year.



 
 
 

 
 
 


Macroeconomic and Industry Parameters Which Affected Q4 2014 Results

(average Q4 2014 compared to average Q4 2013)

                                                                        Change
------------------------------------------- -----------------------------------
Depreciation of the NIS against the Dollar                                 8.7%
------------------------------------------- -----------------------------------
Depreciation of the EURO against the Dollar
(average for the period)                                                  -8.3%
------------------------------------------- -----------------------------------
LIBOR Dollar interest rate (3 months)       0.2% vs. 0.2% last yr
------------------------------------------- -----------------------------------
Decrease in Bulk Dry Freight Index (BDI)                                   -40%



 
 
 

 
 
 


Macroeconomic and Industry Parameters Which Affected 2014 Results

(average 2014 compared to average 2013)

                                                                       Change
------------------------------------------ ------------------------------------
Appreciation of the NIS against the Dollar                               -0.9%
------------------------------------------ ------------------------------------
Unchanged EURO against the Dollar
(average for the period)                                                  0.0%
------------------------------------------ ------------------------------------
LIBOR Dollar interest rate (3 months)      0.2% vs. 0.3% last yr
------------------------------------------ ------------------------------------
Decrease in Bulk Dry Freight Index (BDI)                                    -9%



 
 
 

 
 
 


Thank You


 
 
 

 
 
 
SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

   
Israel Chemicals Ltd.
 
       
       
     
By:
/s/ Avi Doitchman
 
       
Name:
Avi Doitchman
 
       
Title:
Executive Vice President, Chief Financial Officer & Strategy
 

   
Israel Chemicals Ltd.
 
       
       
     
By:
/s/ Lisa Haimovitz
 
       
Name:
Lisa Haimovitz
 
       
Title:
Vice President, General Counsel and Corporate Secretary
 

Date: February 11, 2015