ICL Group Ltd.

Foreign Filer Report • Jul 17, 2019

6-K 1 dp109850_6k.htm FORM 6-K

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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 July, 2019

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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

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ISRAEL CHEMICALS LTD.

1. FITCH Revises Israel Chemicals’ Outlook to Positive; Affirms Rating at BBB-

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Item 1

FITCH Revises Israel Chemicals’ Outlook to Positive; Affirms Rating at BBB-

The Company hereby reports that FITCH has revised the Company’s Outlook to Positive from Stable, while reaffirming its Long-term Issuer Default Rating at BBB-. FITCH has also affirmed the senior unsecured rating of ICL’s $184 million outstanding 4.5% senior unsecured notes due 2024 and $600 million 6.375% senior unsecured notes due 2038 at BBB-.

The FITCH report is attached.

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7/17/2019 Press Release IMAGE OMITTED Fitch Revises Israel Chemicals' Outlook to Positive; Affirms at 'BBB-' Fitch Ratings - London - 17 July 2019: Fitch Ratings has revised Israel Chemicals Ltd.'s (ICL) Outlook to Positive from Stable, while affirming its Long-Term Issuer Default Rating (IDR) at 'BBB-'. Fitch has also affirmed the senior unsecured rating of ICL's USD184 million outstanding 4.5% senior unsecured notes due 2024 and USD600 million 6.375% senior unsecured notes due 2038 at 'BBB-'. The Positive Outlook reflects a faster deleveraging than anticipated under our previous base case and our view that ICL will maintain funds from operations (FFO) adjusted net leverage below our 2.5x positive sensitivity over the next three years on the back of lower debt levels, stable EBITDA generation and modest capex and dividends. ICL's IDR incorporates a business profile commensurate with a 'BBB' rating, underpinned by its large-scale cost-competitive potash operations, diversification into non-agriculture end-markets, leading market position and cost leadership in bromine, and strong geographical footprint. The headroom under the 2.5x net leverage sensitivity remains limited and could come under pressure if the reduction in fertiliser prices is materially greater than we assume under our current base case. Upsides include improved underlying profitability in the Spanish and Chinese operations on the back of the successful completion of the capex plans and enhanced working capital management. Key Rating Drivers Deleveraging In Line with Strategy: ICL repaid USD959 million of debt between end-2016 and end-2018, in line with its plan to divest low synergy businesses and reduce debt ratios, and FFO adjusted net leverage fell to 2.4x from 4.0x. In 2017, the deleveraging was achieved through the use of USD174 million of free cash flow (FCF) and disposals of equity investments. In 2018, ICL paid down an additional USD785 million of borrowings using proceeds of the USD1 billion sale of its 'fire safety and oil additives' business. While this had been anticipated in our previous base case, leverage came below our 2.8x forecast at end-2018 aided by favourable market conditions in both the fertilisers and specialty chemicals segments. Our rating case forecasts net leverage sustained below our 2.5x positive

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guideline over the next three years on the back of modest capex and dividend requirements and despite supply-driven pricing pressure in fertilisers. Price Improvements Support 2018 Performance: FFO was USD943 million in 2018 compared with our previous forecast of USD760 million. EBITDA margin improved from 19.2% to 20.8% compared with the erosion to 18.2% that we had expected. This was primarily attributable to stronger prices, particularly in the potash segment, where 2018 was marked by idle/suspended capacities, slower-than-expected ramp-up for greenfield projects and robust demand across most regions. Margins were also aided by the shift to profitability in the group's Spanish potash operations and Chinese consolidated phosphate joint venture (JV) and the transition of the UK Boulby mine into polysulphate products. Our base case assumes some pricing pressure in potash as significant additional capacities ramp up over the coming years, notably by EuroChem Group AG (BB/Stable) with two potash projects in Russia and K+S's Legacy project in Canada. Specialty Chemicals Remain Strong: ICL's specialty chemicals segments accounted for more than half of its operating profit in 2018 after the disposal of the fire and oil additives business. The latter was less operationally integrated into the rest of ICL's specialty portfolio and had fairly volatile revenues. We expect the remaining businesses to continue delivering strong performance. ICL has the leading market and cost position globally in bromine underpinned by its strategic location in the Dead Sea. We also expect growth in specialty products to be supported by the group's investments in China. Further Developments in Phosphate Solutions Division: We expect ongoing investments in ICL's JV in China, to support further growth in phosphate-based fertilisers sales. The JV became marginally profitable in 2018 on the back of cost restructuring exercises and we expect further improvements. ICL's aim to change the product mix towards more value-added specialty products should be enhanced by a new white acid plant starting production in the first half of 2020. Possible Challenges in Polyhalite Market: Sirius's (NR) polyhalite mine project of 10 million of tons capacity could enter active investment phase by the end of 2019 as it is raising funds, with first polyhalite expected in 2021. If successful, this project would challenge ICL's leading market position and competitive advantage in the polyhalite market, and would represent a significant disruption in the low-chloride potash fertilisers market. ICL is the only producer of polyhalite in the world, a very niche market that generated USD40 million of sales in 2018. The company fully switched its UK production to polysulphate in 2018 as potash reserves depleted and expects full ramp-up to 1 million tons capacity by end-2020. Manageable Working Capital: While the higher prices supported ICL's 2018 FFO, they also translated into materially higher trade receivables and inventories than anticipated, with a working capital outflow of USD321 million in 2018 and CFO at USD622 million compared with

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• our previous forecast of USD728 million. We expect working capital requirements to return to lower levels in our forecasts, which should be partly supported the group's net working capital optimisation project as well as the decline expected in potash prices. Capex Focused on Efficiency and Maintenance: We expect ICL to maintain annual capex at about USD660 million over 2019-2022, though most of these investments should not lead to any significant increase in production capacity. Major projects include efficiency-focused logistic and consolidation initiatives in Spain, and maintenance projects in the Dead Sea with a salt harvest project and a new pump station. Projects related to environmental regulation also account for a significant part of projected capex. Headroom for Bolt-on M&A: The 'BBB-' rating offers some headroom for potential bolt-on M&A activities in the specialty segment. However, the 2.5x leverage guideline for an upgrade is only marginally higher than the 2.3x-2.4x leverage range forecast under our rating case leaving a cushion of USD100 million-USD200 million for further acquisitions over 2019-2022, unless more favourable than expected market conditions or compensating divestments support cash flow generation. Derivation Summary ICL's business profile is a combination of fairly volatile fertiliser and resilient specialty chemicals segments. ICL's fertilisers portfolio has a higher exposure to specialty fertilisers, comparable margins but smaller scale than its US fertiliser peer The Mosaic Company (last rating of BBB-/Stable was affirmed and withdrawn on 11 January 2019), and weaker cost positioning across its fertiliser products than its EMEA peers PJSC PhosAgro (BBB-/Stable) and OCP S.A. (BBB-/Stable). ICL's diversification across fertilisers and non-agro chemicals is similar to OCI N.V.'s (BB/Stable) whose portfolio is split between nitrogen-based fertilisers and industrial chemicals. OCI's exhibits higher margins than ICL's owing to access to low-cost feedstock in the US and north Africa but its credit profile is constrained by its high leverage. Key Assumptions Fitch's Key Assumptions within Our Rating Case for the Issuer: Commodity fertiliser pricing aligned with Fitch's global fertiliser price assumptions (except in 2019, when pricing also reflects actual performance in the potash segment), with a progressive decline of ICL's realised potash price from USD285 a ton in 2019 to USD235 a ton in 2022 and ICL's phosphate realised prices of around USD460 a ton on average;

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Potash division to maintain operating margin at 22% on average and partly supported by savings from efficiency projects in Spain; Phosphate Solutions division to maintain operating margin at 10% on average, partly supported by investments in the Chinese JV; Industrial Products volumes to track global GDP growth with stable margins at around 25%; Annual capex of USD660 million on average and dividend payouts at 50%; No further M&A activities. RATING SENSITIVITIES Developments that May, Individually or Collectively, Lead to Positive Rating Action Positive FCF translating into FFO adjusted net leverage sustained below 2.5x. Developments that May, Individually or Collectively, Lead to Negative Rating Action Stable Outlook: FFO adjusted net leverage sustained between 2.5x and 3.5x. Negative Outlook or Downgrade: Negative FCF leading to FFO adjusted net leverage above 3.5x. Market pressure leading to sustained margin deterioration with the EBITDAR margin falling below 15%. Liquidity and Debt Structure Undrawn Facilities Support Strong Liquidity: ICL's liquidity was strong at end-March 2019, supported by committed undrawn credit lines of USD1,030 million and cash balances of USD183 million which comfortably cover short-term debt of USD638 million (including USD347 million under the receivables securitisation facility). Fitch expects ICL to maintain its healthy debt maturity profile underpinned by its proven access to long-term funding from international financial institutions and public debt markets.

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Summary of Financial Adjustments RATING ACTIONS ENTITY/DEBT RATING PRIOR Israel Chemicals Ltd. LT IDR BBB- IMAGE OMITTED Affirmed BBB- IMAGE OMITTED senior unsecured LT BBB- Affirmed BBB- Additional information is available on www.fitchratings.com FITCH RATINGS ANALYSTS Primary Rating Analyst Myriam Affri Senior Director +44 20 3530 1919 Fitch Ratings Ltd 30 North Colonnade, Canary Wharf London E14 5GN Secondary Rating Analyst Laurent Vergnault Senior Analyst +44 20 3530 1842 Committee Chairperson Dmitry Marinchenko Senior Director +44 20 3530 1056 MEDIA CONTACTS Adrian Simpson London +44 20 3530 1010 adrian.simpson@thefitchgroup.com

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Applicable Criteria Corporate Rating Criteria (pub. 19 Feb 2019) Additional Disclosures Dodd-Frank Rating Information Disclosure Form Solicitation Status Endorsement Policy DISCLAIMER ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE AT HTTPS://WWW.FITCHRATINGS.COM/SITE/REGULATORY. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. COPYRIGHT Copyright © 2019 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual

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investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any

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registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001 Fitch Ratings, Inc. is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (the "NRSRO"). While certain of the NRSRO's credit rating subsidiaries are listed on Item 3 of Form NRSRO and as such are authorized to issue credit ratings on behalf of the NRSRO (see https://www.fitchratings.com/site/regulatory), other credit rating subsidiaries are not listed on Form NRSRO (the "non-NRSROs") and therefore credit ratings issued by those subsidiaries are not issued on behalf of the NRSRO. However, non-NRSRO personnel may participate in determining credit ratings issued by or on behalf of the NRSRO. SOLICITATION STATUS The ratings above were solicited and assigned or maintained at the request of the rated entity/issuer or a related third party. Any exceptions follow below. Endorsement Policy Fitch's approach to ratings endorsement so that ratings produced outside the EU may be used by regulated entities within the EU for regulatory purposes, pursuant to the terms of the EU Regulation with respect to credit rating agencies, can be found on the EU Regulatory Disclosures page. The endorsement status of all International ratings is provided within the entity summary page for each rated entity and in the transaction detail pages for all structured finance transactions on the Fitch website. These disclosures are updated on a daily basis. Fitch Updates Terms of Use & Privacy Policy We have updated our Terms of Use and Privacy Policies which cover all of Fitch Group's websites. Learn more.

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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.

/s/ Kobi Altman
Name:	Kobi Altman
Title:	Chief Financial Officer

/s/ Aya Landman
Name:	Aya Landman
Title:	Global Company Secretary

Date: July 17, 2019

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