ICL Group Ltd. — Interim / Quarterly Report 2014

Nov 12, 2014

6-K 1 dp51077_6k-3.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 November, 2014

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 o

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 o 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 o No x

ISRAEL CHEMICALS LTD.

1. Presentation on Q3 2014 Results

ITEM 1

Q3 2014 Results Mr. Stefan Borgas | President and CEO November 12, 2014

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. 2

Highlights and Financial Results * Improved operating income margins compared to 2013 and sequentially due to improved volumes in most segments and contribution of efficiency plan * Strategy implementation on track with important milestones delivered [] Efficiency improvement will deliver approx. $80M in 2014 (year end run rate) [] Portfolio changes: divestiture of non-core assets (approx. $260M net proceeds) and acceleration of growth outside of Israel $ millions Q3 14 Q3 13 Revenues 1,559 1,445 Operating Income 262 222 Adjusted OI 262 222 Operating margin 16.8% 15.4% Net income 180 78 Adjusted net income 180 196 % change Q2 14 % change 7.9% 1,536 1.5% 18.0% 78 235.9% 18.0% 243 7.8% 15.8% 130.8% 67 168.7% (8.2)% 214 (15.9)% [] Adjusted operating income and net income in Q2 excludes past royalty payments at the amount of $152M and 135M respectively as well as the impact of the strike at Rotem at the amount of $15M and $12M, respectively. [] Net income in Q3 14 impacted by higher financial expenses and effective tax rate due to exchange rate fluctuation (mainly dollar appreciation vs. the shekel) [] Net proceeds: enterprise value net of taxes 3

Our Unique Business Model Resources Dead Sea U.K. / Spain Mines Negev Desert Global Opportunities Our Specialty Minerals Potash Bromine Magnesium Potash Polyhalite Phosphate Potash Phosphate Our Expertise Mining Chemistry Formulation Segment Fertilizers Performance Products Industrial Products End Market (% ICL Sales*) Agriculture 52% Engineered Materials 30% Processed Food 8% * Based on January -- September 2014 external sales 4

Business Environment and Major Developments * Potash market recovery continued across all geographies. Demand expected to remain robust, especially in China and India * Successful efficiency plan in Rotem led to record acid production at lower cost which resulted in improved profitability * Crop commodity prices pose challenges for 2014. Fertilizer prices remain affordable * Moderate improvement in flame retardants volumes due to good demand from the connectors, automotive and TV markets * Improved volumes of Industrial solutions and biocides * Profitability remains unsatisfactory. Price increases and cost reduction are in the focus of the business in order to maintain our high level of customer service and to improve our competitive position * Q3 benefitted from Acquisitions in the food business, active fire safety season in NA and improved product mix * Food specialties -- new application development progressing on track to expand customer base * Lower Advanced Additives sales due to economic slowdown in Europe as well as competitive environment and acid supply shortage in the US 5

Fertilizers Imports into Main Markets Thousand tonnes, January-September (Except the US Jan to Aug) 2014 7,007 6,815 6,482 5,645 5,934 4,810 3,071 2,776 2,152 1,868 2,005 2,046 2013 2014 * Phosphate fertilizers in P205 terms ** DAP imports Sources: China Fertilizer Weekly Market Report, Sindicaro Da Industria DE Adubose Corretivos Agricolas No Estado De Sao Paulo, GTIS, Fertilizer Week, Company estimates 6

Implications of the Natural Resources Committee Looking Forward [] Final recommendations need to be brought to the government for approval [] Once approved, the parliament will initiate a legislative process [] Changes to the potash tax system will not come into effect prior to January 2017 The Committee's final recommendations has not been altered in a substantive manner that would change ICL's prior mitigation actions: Advocacy: Challenge Recommendations within Policy Makers Legal Actions Operational Business Measures: Cost Cutting Acceleration, Revaluating Certain Product Lines Strategic Business Measures: Cancellation of $0.75Bn and Review of $1.00Bn of Capital Expenditures, Shifting Investments Outside of Israel Among the steps ICL will take following the committee's recommendations: [] Acceleration of Bromine Compounds and Dead Sea Works efficiency plan to lower costs [] closure of the Dead Sea Magnesium plant in 2017 remains conditioned on the committee's recommendations being turned into legislation 7

Maximizing Efficiency and Growth in ICL Iberia KCl Production 2012 2015 2020 2025 [] Establish a long term capacity increase while significantly reducing the cost per tonne to a near Dead Sea level, with marginal cost per tonne similar to the Dead Sea level [] Significantly reduce environmental foot print [] Approx. $435M investment to consist of: [] Step-by-step increase capacity to 1.4M tonnes [] Plant output to be almost 100% granular [] Double vacuum salt capacity to 1.5M tonnes [] Maximize ramp capacity, site and port logistics and infrastructure to support expansions (of up to 2.3M tonnes) [] Perform feasibility study of new brownfield project, aimed to expand production by an additional 1 Mt KCl annually 8

Strengthening and Expanding ICL's Specialty Fertilizers' Innovative Technologies Acquisition of AmegA Sciences: Targeting Growth Opportunities in Specialty Fertilizers [] Based in the UK, established in 1984 [] Developer and manufacturer of specialty products for the specialty agriculture, horticulture and turf and amenity markets [] Products providing solutions for water conservation, water retention and enhanced growth [] Acquisition will strengthen ICL Specialty Fertilizers' position in specialty agriculture markets, enhancing its supply chain and scaling its operations 9

Engineered Materials: Drive Bromine Market Growth A Agreement Between ICL and Albemarle: Establishment of a manufacturing joint venture for the production of polymeric flame retardant The Deal [] The JV will operate an existing 2,400 MT per year plant in the Netherlands and a 10,000 MT per year plant in Israel, which is now starting up [] The transaction, subject to certain closing conditions, including regulatory approvals, is expected to close in 2015 Opportunities [] ICL's FR-122P to replace the HBCD flame retardant which is being phased out in different countries [] Offering environmentally-friendly, fire safety products based on exclusive license from Dow Chemicals [] Additional capacity to meet the market growth needs [] Lower risk as well as lower costs due to economies of scale. The JV will create the largest producer of the companies' polymeric FR 10

Financial Flexibility to Support ICL's "Next Step Forward" Strategy -- APW divestment After the Quarter: Agreement with Kurita to sell ICL PP's Non-Core APW businesses The Deal [] Kurita to acquire APW business units for []250 million. Net proceeds* after tax approx. $260M [] Closing expected to occur at the end of 2014, subject to the completion of certain conditions Opportunities [] Proceeds to be used for growth opportunities in the Agriculture, Food and Engineered Materials [] Additional divestitures opportunities along the way * Net proceeds: enterprise value net of taxes 11

Fulfilling Potash Demand Growth Potential -- India and Africa [] Farmer education is an essential factor in the growth of potash demand [] ICL believes it will be the prime beneficiary of such initiatives given its strong position in these markets and the strategic location of its assets Incremental Demand Can Result in Material Growth Approx. 250,000 tons of incremental annual ICL shipments required to grow at 5% p.a. India - Potash For Life [] The program enters its 2(nd) year with the Kharif season [] Providing evidence of the profitable use of potash [] Activities include field days, jeep campaigns, crop seminars and farmers meetings. Demonstration plots increased from 561 in the previous season to 680 this season with more than 20 crops [] Results: 15-35% average increase in yields; Success stories demonstrate benefit- to- cost ratios between 13:1 and 43:1 Ethiopia -- Potash For Growth [] Initiated in 2014, the program operates 646 demo plots comparing NPS vs NPKs. Additional 600 plots in 2015 [] Conducted by the Agriculture Transformation Agency and the Ministry of Agriculture. [] Also engaged in a soil mapping project in Ethiopia [] Supporting Masters and PhD level students who are encouraged to conduct potassium related research 12

Global Leader in Climate Change Mitigation ICL has been recognized as a World Leader in managing and reducing Greenhouse Gas Emissions and mitigating Climate Change High Scores by the Carbon Disclosure Project (CDP) [] For the second year in a row, ICL has maintained its high score of 98/100 in the Disclosure Score and in 2014 achieved the top "A" performance score, acknowledging ICL's major efforts to both manage and reduce it's GHG emissions [] Both scores are among the top 10% of scores of all global companies in 2014, and place ICL in the CPLI, an exclusive index of companies that are excelling in climate change mitigation [] The combined scores are the second best score among global fertilizer-producing companies Outscoring Peers* Organization Disclosure Performance Score Score Mosaic 99 A ICL 98 A Syngenta 97 A K + S 93 C Agrium 81 C PotashCorp 80 C Monsanto 76 D BAGFAS Not received (disclosure 44 score too low) Uralkali Not received (disclosure 40 score too low) * Source: CDP Database, October 2014 13

Financial Results (Mr. Avi Doitchman)Executive VP, CFO and Strategy

Q3 2014 Results $ millions Q3 14 Q3 13 Revenues 1,559 1,445 Operating Income 262 222 Adjusted OI 262 222 Operating margin 16.8% 15.4% Net income 180 78 Adjusted net income 180 196 % change Q2 14 % change 7.9% 1,536 1.5% 18.0% 78 235.9% 18.0% 243 7.8% 15.8% 130.8% 67 168.7% (8.2)% 214 (15.9)% [] Operating income in Q2 2014 excludes provision for royalty payment for 2000-Q1'2014 following the arbitration decision at the amount of $152M and the impact of the strike at Rotem at the amount of $15M [] Adjusted net income in Q2 2014 excludes provision for royalty payment at the amount of $135M and the Rotem strike impact at the amount of $12M [] Net income in Q3 2014 impacted by higher financial expenses and effective tax rate due to the Shekel depreciation vs. the dollar 15

Potash Bridge Analysis -- Improved Demand more than Offsets Lower Prices Sales ($M) 5 105 57 450 397 Operating Profit ($M) 6 6 53 60 131 112 16

Phosphates and Fertilizers -- Efficiency Plan Bearing Fruit Sales 1 8 10 421 424 Operating Profit 5 8 11 7 37 22 17

Industrial Products - Volume Improvement amid Lower Prices Sales 6 33 328 301 Q3 2013 Volumes Prices Q3 2014 Operating Profit 3 2 4 5 6 13 36 27 18

Performance Products -- Acquisitions Contributed to Increased Sales Sales 4 11 451 436 Operating Profit 4 3 4 4 73 66 19

Commercial Bond Offering to Support Strategy ICL is preparing a bond offering in the US Investment Grade Rating BBB (Stable Outlook) BBB (Stable Outlook) Opportunities [] Further strengthening ICL's financial position: refinance existing debt, free up revolving credit facilities [] Diversifying the sources of finance through various financial instrument as well as through Local and international financing entities [] Proceeds to support the execution of ICL's strategy which includes growth, cost reduction and enabling platforms 20

Thank You

Appendices Financial Overview

Natural Resources Committee Final vs. Interim Recommendations -- Key points INTERIM RECOMMENDATIONS (May 2014) Fixed 42% tax on OP above 11% Return on Depreciated Assets (RODA) Fixed 5% royalty pay-off for all natural resources Phosphate royalties will be paid based on ex- plant value No recognition of financial expenses Natural resource tax will not apply to downstream products No recognition of the Magnesium synergies FINAL RECOMMENDATIONS (October 2014) 25% tax when RODA is between 14-20%, 42% tax when return is 20% or above Fixed 5% royalty pay-off for all natural resources Phosphate royalties will be paid based on ex-mine value 5% of working capital to be deducted from the financial statements OP Determine a unique mechanism for bromine regarding the transfer price to related parties, which will be the higher of three suggested options Only the benefit of the Sylvinite production in the magnesium plant will be recognized as an expense for the potash plant. Uncertainty regarding the contribution for the bromine production 23

Lower, Yet Strong Returns 4.2 2000 2001 ROE ROIC 2000-2006 figures are based on Israeli GAAP, 2007-2013 are based on IFRS Data for 2012-2013 reflect the application of 2 new IFRS accounting standards ROE (Return on equity) = net income / shareholders' equity, average ROIC (Return on invested capital ) = (operating income ) / ((trade receivables + inventory -- trade payables) + PPandE, 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) ** LTM, operating income is after elimination of about $149 Million relating to prior periods due to the arbitration decision regarding the royalties' issue and an increase in costs due the strike at Rotem, in the amount of about $15 million. Net income is after the elimination of about $135 million in respect of a provision relating to prior periods due to the arbitration decision regarding the royalties' issue and an increase in costs due the strike at Rotem, in the amount of about $12 million 24

Sequential Improvement in Cash Flow Delivery $ millions 1,414 1,384 1,111 1,011 925 881 582 415 285 20 * 2006 figures are based on Israeli GAAP, 2007-2014 are based on IFRS 25

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 [] Calculated according to market capitalization based on average share price adjusted for dividends. Dividends attributed to profits of that year. 26

Macroeconomic and Industry Parameters Which Affected Q3 2014 Results (average Q3 2014 compared to average Q3 2013) Change ------------------------------------------- ----------------------------------- Appreciation of the NIS against the Dollar -1.8% ------------------------------------------- ----------------------------------- Depreciation of the EURO against the Dollar (average for the period) -0.1% ------------------------------------------- ----------------------------------- LIBOR Dollar interest rate (3 months) 0.2% vs. 0.3% last yr ------------------------------------------- ----------------------------------- Decrease in Bulk Dry Freight Index (BDI) -27% 27

Macroeconomic and Industry Parameters Which Affected 9M 2014 Results (average 9M 2014 compared to average 9M 2013) Change ------------------------------------------- ----------------------------------- Appreciation of the NIS against the Dollar -4.0% ------------------------------------------- ----------------------------------- Appreciation of the EURO against the Dollar (average for the period) 2.9% ------------------------------------------- ----------------------------------- LIBOR Dollar interest rate (3 months) 0.2% vs. 0.3% last yr ------------------------------------------- ----------------------------------- Increase in Bulk Dry Freight Index (BDI) 10% 28

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.

/s/ Avi Doitchman
Name:	Avi Doitchman
Title:	Executive Vice President, Chief Financial Officer & Strategy

/s/ Lisa Haimovitz
Name:	Lisa Haimovitz
Title:	Vice President, General Counsel and Corporate Secretary

Date: November 12, 2014