Revenues: Revenues for the third quarter of 2009 were $1,347
million, up 24% as compared sequentially with $1,083 million for the second
quarter of 2009. Revenues for the third quarter of 2008 were $2,178 million,
reflecting the exceptional demand and prices that characterized that "spike"
year for the fertilizers industry. 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.
*Note: the Company's gross profit, operating profit and net
profit for Q3 and 2009 reflect several one-time events. Results including the
influence of one-time events are presented in financial tables beginning on
page 6 below. To provide investors with better insight into the Group's
operating performance, the following discussion relates to adjusted results
that exclude these one-time provisions.
Gross profit: Gross profit for the third quarter of 2009 was
$575 million, up 50% as compared sequentially with $382 million for the
second quarter of 2009. Gross margin for the third quarter of 2009 was 42.7%,
compared with 35.3% for the second quarter of 2009. Gross profit for the
third quarter of 2008 was $1.2 billion, reflecting the extraordinary sales
and 57.0% gross margin achieved during that "spike" year. The sequential
increase in gross profit derived from the higher level of sales, together
with a significant reduction in some input costs as compared with 2008
(especially sulfur and energy), countered partially by a reduction in the
production of some of the Company's products. Profitability was also enhanced
by the period's weakening of the shekel as compared to the dollar, which
reduced shekel-based expenses as expressed in dollar terms.
Operating income: Operating income for the third quarter of
2009 was $357 million, up 87% as compared sequentially with $191 million for
the second quarter of 2009. Operating margin for the third quarter of 2009
was 26.5%, compared with 17.6% for the second quarter of 2009. Operating
income for the third quarter of 2008 was $963.6 million, with an Operating
margin of 44.2%, both all-time records for the Company reflecting the year's
steep climb of fertilizer prices, which peaked during the third quarter.
The sequential increase in operating income during 2009
reflects the increased sales and gross profit, together with the combined
effect of reduced shipping rates and overhead costs, which benefited both
from the weakening of the shekel and the Company's ongoing cost savings and
Net income: Net income to the Company's shareholders for the
third quarter of 2009 was $279 million, up 83% compared sequentially with
$152 million in the second quarter of 2009. Net income for the third quarter
of 2008 was $846 million, a record for the Company reflecting the year's
extraordinary fertilizer prices and profit levels.
Cash flow: Cash flow from operating activities for the first
nine months of 2009 totaled $881 million. Cash flow from operating activities
for the third quarter of 2009 totaled $242 million.
Debt: As of September 30, 2009, the Company's net debt totaled
$700 million, a reduction of $253 million compared to the end of 2008.
Further, on September 9, 2009, the Company completed a successful placement
of three series of debentures to institutional investors, raising NIS 898
million ($235 million). The Company's ability to reduce its net debt and
place its debentures despite the period's challenging economic environment
underscores its financial strength and stability.
- Grain inventory levels: Although inventories of grain, corn
and soy increased towards the end of 2008, global inventory
levels remain historically low. Current supplies represent
approximately 20% of annual demand.
- Grain & fertilizer market dynamics: Demand and prices for
both grain and fertilizers remain low compared to their levels in
mid-2008. However, they rose somewhat from their lowest points
during the first quarter of 2009 and have remained stable during the
second and third quarters.
- Fertilizer supply: With demand low and difficult to project,
many producers of potash and phosphate fertilizers curtailed production
during the nine months of 2009. During the third quarter, demand
increased in India and Brazil, and, to a lesser extent, in North
America and Western Europe. This may lead to a resumption of
production. With virtually unlimited storage capacity at the Dead Sea,
ICL has been able to continue manufacturing throughout this period of
reduced demand, taking advantage of the opportunity to stockpile
- Fuel prices: The global financial crisis led to a reduction
in the price of energy which began in the third quarter of 2008.
As a result, the Company's average prices paid for oil and fuel oil
during 2009 have been approximately 50% lower than their average
levels before the crisis.
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