6-K 1 zk1923590.htm 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 2019
 
 
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 ☒ 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 ☒
 
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 ☒
 
ISRAEL CHEMICALS LTD.
 
 
1.
Q3 2019 Investor Presentation

 Q3 2019 ResultsRaviv Zoller, President & CEONovember 7, 2019   
 
 Disclaimer and Safe Harbor for Forward-Looking Statements The information contained herein in this presentation or delivered or to be delivered to you during our presentation does not constitute an offer, expressed or implied, or a recommendation to do any transaction in Israel Chemicals Ltd. (“ICL” or “Company”) securities or in any securities of its affiliates or subsidiaries. This presentation and/or other oral or written statements made by ICL during its presentation or from time to time, may contain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and other applicable securities laws. Whenever words such as "believe," "expect," "anticipate," "intend," "plan," "estimate", “predict” or similar expressions are used, the Company is making forward-looking statements. Such forward-looking statements may include, but are not limited to, those that discuss strategies, goals, financial outlooks, corporate initiatives, existing or new products, existing or new markets, operating efficiencies, or other non-historical matters. Because such statements deal with future events and are based on ICL’s current expectations, they could be impacted or be subject to various risks and uncertainties, including those discussed in the "Risk Factors" section and elsewhere in our Annual Report on Form 20-F for the year ended December 31, 2018, and in subsequent filings with the Tel Aviv Securities Exchange (TASE) and/or the U.S. Securities and Exchange Commission (SEC). Therefore actual results, performance or achievements of the Company could differ materially from those described in or implied by such forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can provide no assurance that expectations will be achieved. Except as otherwise required by law, ICL disclaims any intention or obligation to update or revise any forward-looking statements, which speak only as of the date hereof, whether as a result of new information, future events or circumstances or otherwise. Readers, listeners and viewers are cautioned to consider these risks and uncertainties and to not place undue reliance on such information.Certain market and/or industry data used in this presentation were obtained from internal estimates and studies, where appropriate, as well as from market research and publicly available information. Such information may include data obtained from sources believed to be reliable, however ICL disclaims the accuracy and completeness of such information which is not guaranteed. Internal estimates and studies, which we believe to be reliable, have not been independently verified. We cannot assure that such data is accurate or complete. Included in this presentation are certain non-GAAP financial measures, such as sales excluding divested businesses, adjusted operating income, adjusted operating income excluding divested businesses, adjusted EBITDA excluding divested businesses, Adjusted net income excluding divested businesses, adjusted EPS excluding divested businesses and free cash flow, designed to complement the financial information presented in accordance with IFRS because management believes such measures are useful to investors. These non-GAAP financial measures should be considered only as supplemental to, and not superior to, financial measures provided in accordance with IFRS. Please refer to our Q3 2019 press release for the quarter ended September 30, 2019 and the appendix to this presentation for a reconciliation of the non-GAAP financial measures included in this presentation to the most directly comparable financial measures prepared in accordance with IFRS.   2  Important Legal Notes 
 
 3  Q3 2019 Highlights  Solid results with record cash generationSales of $1,325 million were 3% lower than Q3 2018, mainly due to delays in the signing of potash supply contracts in AsiaOperating income was slightly higher at $201 million EPS of $0.10, in line with Q3 2018Adjusted EBITDA was up by 4% to $307 million. YTD adjusted EBITDA increased by 18%6-year record quarterly operating cash flow of $368 million, 88% higher compared to Q3 2018. YTD operating cash flow almost doubled to $780 millionA dividend of ¢5 per share, reflecting a dividend yield(1) of more than 4%Important strategic milestones achieved by Industrial Products and Phosphate Solutions divisions, supporting ICL's future growth  LTM dividend yield 
 
 Adjusted operating income, adjusted EBITDA and operating cash flow for Q3 2019 include a positive impact of the new IFRS 16 accounting standard in the amounts of $2 million, $15 million and $10 million, respectively.EPS and adjusted EPS are calculated as net income and adjusted net income, respectively, divided by weighted-average diluted number of ordinary shares outstanding. See reconciliation table in the appendix of this presentation.   4  Key Financial Metrics  $ millions  Q3 2019  Q3 2018  % change  1-9/2019  1-9/2018  % change  Sales  1,325  1,371  (3%)  4,165  4,146  -  Sales(Excluding divested businesses)  1,325  1,371  (3%)  4,165  4,096  2%  Operating income  201  196  3%  668  1,353  (51%)  Adjusted operating income  201  200  1%  672  539  25%  Adjusted EBITDA   307  295  4%  997  842  18%  Net income   130  129  1%  427  1,158  63%))  Adjusted net income  130  134  (3%)  431  353  22%  EPS(1) (Presented in US dollars)  0.10  0.10  -  0.33  0.91  64%))  Adjusted EPS(1) (Presented in US dollars)  0.10  0.10  -  0.34  0.28  21%  Operating cash flow  368  196  88%  780  396  97% 
 
 5  Higher prices of bromine, bromine derivatives and phosphorous flame retardantsHigher sales volumes of elemental bromine and clear brine fluidsLong term strategic agreements with customers in Asia are expected to generate additional annual revenues estimated at $110 million, beginning in 2021  Including inter-segment sales    Industrial Products Business Performance  SALES(1)  $ millions  +3%  +6%  Q3 2018  Q3 2018  Q3 2019  Q3 2019  SEGMENT PROFIT 
 
 6  Including inter-segment sales    Potash Business Performance   SALES(1)  $ millions  -8%  +6%  Q3 2018  Q3 2018  Q3 2019  Q3 2019  Delayed contract signing in China and India resulted in a decrease of 10% in potash sales quantitiesUpdated supply contract with India signed at a $10 per tonne price reduction, to be supplied through March 2020 Polysulphate production doubled and is on track to reach 1 million tonnes run-rate in 2020Dead Sea plant upgrade, scheduled for Q4 2019, is expected to enable higher production in 2020  SEGMENT PROFIT 
 
 7  Including inter-segment sales.     Phosphate Solutions Business Performance  SALES(1)  SEGMENT PROFIT  $ millions  -4%  Q3 2018  Q3 2018  Q3 2019  Q3 2019  Results demonstrate the resilience of ICL’s specialty phosphate businesses amid the weak phosphate commodity market YPH continued to deliver improved results, driven by operational efficienciesICL signed strategic agreements for the supply of its ROVITARIS® technology for the meat alternatives market  -20% 
 
 8  Including inter-segment sales      Innovative Ag Solutions Business Performance  SALES(1)  $ millions  -1%  -100%  Q3 2018  Q3 2018  Q3 2019  Q3 2019  Stable revenues despite reduced sales of low-margin 3rd-party productsYear-over-year results negatively impacted by higher raw material costs and unfavorable exchange rates Increased focus on cost controls and cash generation  SEGMENT PROFIT 
 
 9  Growth Trend in Most Main Operational Parameters  Adjusted operating income, adjusted EBITDA and operating cash flow for Q3 2019 include a positive impact of the new IFRS 16 accounting standard in the amounts of $2 million, $15 million and $10 million, respectively.Adjusted operating income and adjusted EBITDA excluding divested businesses are non-GAAP financial measures. See Appendix to this presentation for reconciliation tables.  $ millions  Adjusted operating incomeexcluding divested businesses(1)  Adjusted EBITDAexcluding divested businesses(1)  Operating cash flow  Adjusted operating income    Adjusted operating income  %  Trend line  ……  Adjusted EBITDA    Adjusted EBITDA margin  %  Trend line  ……  Operating cash flow    Trend line  …… 
 
 10  Growth Trend in Most Main Operational Parameters – YTD View  Adjusted operating income, adjusted EBITDA and operating cash flow for Q3 2019 include a positive impact of the new IFRS 16 accounting standard in the amounts of $2 million, $15 million and $10 million, respectively.Adjusted operating income and adjusted EBITDA excluding divested businesses are non-GAAP financial measures. See Appendix to this presentation for reconciliation tables.  $ millions  Adjusted operating incomeexcluding divested businesses(1)  Adjusted EBITDAexcluding divested businesses(1)  Operating cash flow  Adjusted operating income    Adjusted operating income margin  %  Adjusted EBITDA    Adjusted EBITDA margin  %  Operating cash flow    16%  13%  24%  20%  10%  18%  10%  19% 
 
 Kobi Altman, CFO   
 
 12  Q3 2019 Sales  Numbers may not add due to rounding and set offs.  $ millions  Bromine value chain and phosphorus FRs +14Specialty phosphates +6Polysulphate & magnesium +3IAS +1Commodity Phosphates -4  Specialty +1Commodity -38Sett-offs & other -5   ILS +1Euro -18Other -5 
 
 13  Q3 2019 Adjusted Operating Income Demonstrating Resilience  Adjusted operating income is a non-GAAP financial measure. See Q3 2019 6-K and PR for a reconciliation of adjusted operating income to operating income. Numbers may not add due to rounding and set offs.  $ millions 
 
 14  Foreign Exchange Rates Impact  Foreign currency impact Y-O-Y  Q1 2019  Q2 2019  Q3 2019  Sales   46  34  22  Expenses  (48)  (26)  (13)  Operating income  2  8  9  Finance expenses  (13)  (4)  1  Tax  5  2  5  Total  (6)  6  15  Numbers may not add due to rounding      Up by 2.83%  Down by 4.50%  Down by 3.00%          YTD 2019  104  (87)  17  (16)  12  13 
 
 15  Finance Expenses  $ millions  Q3 2019  Q3 2018  Liabilities(1) (including ~$300 million of LT leases in 2019)(2)  2,650  2,514  Interest rate  4.2%  4.0%  Interest expenses(2)  28  25  Interest capitalization  (4)  (5)  Interest expenses, net  24  20  Total hedging transactions, balance sheet revaluation & other  (6)  (3)  Interest & exchange rate impact on long-term liabilities of leasing and employees(3)  14  6  Net financial expenses  32  23  Average liabilities during the given quarterQ3 2019 liabilities includes $300 million impact of IFRS 16, which are not included in the Q3 2018 debt figuresQ3 2019 financial expenses include a $4 million increase in interest and a $2 million exchange rate differences due to the implementation of IFRS 16   Numbers may not add due to rounding  Q3 and YTD 2019 finance expenses include an IFRS 16 related increase of $6 million and $18 million respectively 
 
 16  Operating Cash Flow Development  Q3 2019 debt includes $300 million impact of IFRS 16, which are not included in the Q3 2018 debt figuresQ3 2019 financial expenses include a $4 million increase in interest and a $2 million exchange rate differences due to the implementation of IFRS 16   Numbers may not add due to rounding  ($ millions)  2019    2018   
 
 16  Operating Cash Flow Development  Q3 2019 debt includes $300 million impact of IFRS 16, which are not included in the Q3 2018 debt figuresQ3 2019 financial expenses include a $4 million increase in interest and a $2 million exchange rate differences due to the implementation of IFRS 16   Numbers may not add due to rounding  ($ millions)  2019    2018   
 
 17  Solid Financial Position Supporting Strategy Execution  (1) Net debt to adjusted EBITDA calculated as short term credit + long term debt & debentures – cash & cash equivalents – short term investments & deposits, divided by last twelve months adjusted EBITDA   Net Debt/EBITDA ratio(1) 
 
 18  Q3 Key Takeaways 
 
 THANK YOU  19 
 
 APPENDIX  20 
 
 21  Q3 2019 Industrial Products Sales and Segment Profit Analysis  SEGMENT SALES   SEGMENT PROFIT  Numbers may not add due to rounding and set offs  $ millions  $ millions 
 
 22  Q3 2019 Potash Sales and Segment Profit Analysis  SEGMENT SALES   SEGMENT PROFIT  $ millions  $ millions  Numbers may not add due to rounding and set offs 
 
 23  Q3 2019 Phosphate Solutions Sales and Segment Profit Analysis  SEGMENT SALES   SEGMENT PROFIT  $ millions  $ millions  Numbers may not add due to rounding and set offs 
 
 24  Q3 2019 Innovative Ag Solutions Sales and Segment Profit Analysis  SEGMENT SALES   SEGMENT PROFIT  $ millions  $ millions  Numbers may not add due to rounding and set offs  1  1  1  1  1 
 
 25  Effective Tax Rate  $ millions  Q3 19  Q3 18  FY 2018  Adjusted income before tax(1)  169  179  608  Normalized tax rate  21%  23%  22%  Normalized tax expenses  36  41  136  Carryforward losses not recorded for tax purposes  (3)  4  17  Exchange rate impact and other items  2  2  (17)  Adjusted tax expenses  35  47  136  Adjusted Effective tax rate  21%  26%  22%  See calculation in the appendix of this presentation  Reported income before tax  169  172  1,364  Reported provision for income taxes  35  45  129 
 
 26  IFRS 16(1) Impact  Item  Net impactQ3 2019 VS. Q3 2018  Comments  Adjusted operating income  $2 million  Rent expenses decreased by $15 millionDepreciation increased by $13 million   Adjusted EBITDA  $15 million  Rent expenses decreased by $15 million  Property Plant & Equipment  ~$320 million  A right-of-use asset recognized at the amount of ~$320 million  Financial liabilities   ~$300 million  Net debt increased by ~$300 million due to an increase in long and short term lease liabilities  Finance expenses  $6 million  Interest expenses increased by $4 millionExchange rate differences of $2 million  Adjusted net income  $4 million   Operating income up by $2 millionFinance expenses up by $6 million  Operating cash flow   $10 million   Shift of rent payments (included in operating cash flow) to repayment of debt (included in cash flow from financing activities): $10 million   IFRS 16 is a new accounting standard which replaces IAS 17, leases and its related interpretations. See Note 2 in the Q3 2019 6-K.               
 
 27  Additional Data: Segment Profit Before and After G&A Expenses  * Divested businesses incl. Fire Safety and P2S5. In 2018 also including Rovita Numbers may not add due to rounding  Starting from the first quarter of 2019, ICL’s management will measure, and accordingly present in its reports, the results of its business divisions (operating segments) after allocation of general and administrative (G&A) expenses per each division. The purpose of the table below is to assist investors and analysts to prepare accordingly for the publication of the Company’s results for the first quarter of 2019. It should be noted that the allocation of G&A expenses with respect to comparison periods was made for convenience purposes only, and changes may occur in the allocation methodology in future periods. 
 
 28  Reconciliation Tables (1/3)  Calculation of adjusted income before tax  Q3 19  Q3 18  FY2018  Adjusted operating income  201  200  753  Finance expenses  (32)  (23)  (158)  Share in earnings (losses) of equity-accounted investees and adjustments to financial expenses  -  2  13  Adjusted income before tax  169  179  608  (1) See detailed reconciliation table in the Q3 2019 6-K  Calculation of adjusted net income excluding divested businesses to net income  Q3 2019  Q3 2018  Q1-Q3 2019  Q1-Q3 2018  Net income attributable to the shareholders of the Company   130  129  427  1,158  Total adjustments to operating income(1)  -  4  4  (814)  Adjustments to finance expenses(1)   -  3  -  3  Total tax impact of the above operating income & finance expenses adjustments(1)   -  (2)  -  6  Contribution from divested businesses  -  -  -  1  Total adj. net income excluding divested businesses - shareholders of the Company  130  134  431  354  Weighted-average diluted number of ordinary shares outstanding   1,283,675  1,278,780  1,283,401  1,276,564  Adjusted EPS excluding divested businesses (US dollar)  0.10  0.10  0.34  0.28  $ millions 
 
 29  Reconciliation Tables (2/3)  (1) See detailed reconciliation table “Adjustments to reported operating and net income (Non-GAAP)” in the Q3 2019 6-K  Calculation of adjusted EBITDA excluding divested businesses to net income   Q1-Q3 2019  Q1-Q3 2018  Q1-Q3 2017  Q1-Q3 2016  Net income attributable to the shareholders of the Company   427  1,158  209  (154)  Depreciation and Amortization  330  296  286  306  Financing expenses, net  104  92  99  113  Taxes on income  132  110  145  5  Adjustments(1)  4  (814)  44  517  Contribution from divested businesses  -  (5)  (109)  (79)  Adjusted EBITDA excluding divested businesses  997  837  674  708  Calculation of adjusted operating income and adjusted operating income excluding divested businesses   Q1-Q3 2019  Q1-Q3 2018  Q1-Q3 2017  Q1-Q3 2016  Operating income  668  1,353  440  (75)  Capital gain    (841)  (6)  1  Impairment loss (reversal)  (10)  19  18  489  Provision for early retirement and dismissal of employees  -  7  15  26  Provision for legal claims  14  1  11  7  Provision for electricity charges  -  -  -  (16)  Provision in respect of prior periods resulting from an arbitration decision  -  -  6  10  Total adjustments(1)  4  (814)  44  517  Divested businesses’ profit  -  (3)  101  73  Adjusted EBITDA excluding divested businesses  672  536  383  369  $ millions 
 
 30  Reconciliation Tables (3/3)  (1) See detailed reconciliation table “Adjustments to reported operating and net income (Non-GAAP)” in the Q3 2019 6-K  Calculation of adjusted operating income and adjusted operating income excluding divested businesses ($ millions)  Q3 19  Q2 19  Q1 19  Q4 18  Q3 18  Q2 18  Q1 18  Operating income  201  240  227  166  196  172  985  Capital gain  -  -  -  -  -  -  (841)  Impairment loss (reversal)  -  (10)  -  -  3  16  -  Provision for early retirement and dismissal of employees  -  -  -  -  -  -  7  Provision for legal claims  -  -  14  30  1  -  -  Provision for closure costs  -  -  -  18  -  -  -  Total adjustments(1)  -  (10)  14  48  4  16  (834)  Adjusted operating income  201  230  241  214  200  188  151  Divested businesses’ profit  -  -  -  -  -  2  (5)  Adjusted operating income excluding divested businesses  201  230  241  214  200  190  146  Calculation of adjusted EBITDA excluding divested businesses to net income ($ millions)  Q3 19  Q2 19  Q1 19  Q4 18  Q3 18  Q2 18  Q1 18  Net income attributable to the shareholders of the Company   130  158  139  82  129  101  928  Depreciation and Amortization  110  109  111  107  94  105  97  Financing expenses, net  32  37  35  66  23  54  15  Taxes on income  35  46  51  19  45  20  45  Adjustments(1)  -  (10)  14  48  4  16  (834)  Contribution from divested businesses  -  -  -  -  -  2  (7)  Adjusted EBITDA excluding divested businesses  307  340  350  322  295  298  244 
 
 31  Non-GAAP Financial Measures  We disclose in this Quarterly Report non-IFRS financial measures titled sales excluding divested businesses, adjusted operating income, adjusted operating income excluding divested businesses, adjusted net income attributable to the Company’s shareholders excluding divested businesses, adjusted EBITDA excluding divested businesses, adjusted EPS excluding divested businesses and free cash flow. Our management uses sales excluding divested businesses, adjusted operating income, adjusted operating income excluding divested businesses, adjusted net income attributable to the Company’s shareholders excluding divested businesses and adjusted EBITDA excluding divested businesses to facilitate operating performance comparisons from period to period and present free cash flow to facilitate a review of our cash flows in periods. We calculate our sales excluding divested businesses by adjusting our sales to exclude results of the divested Fire Safety and Oil Additives business (divested in Q1 2018) and Rovita business (divested in Q3 2018). We calculate our adjusted operating income by adjusting our operating income to add certain items, as set forth above and in the reconciliation table “Adjustments to reported operating and net income”. Certain of these items may recur. We calculate our adjusted net income attributable to the Company’s shareholders by adjusting our adjusted operating income excluding divested businesses, net income attributable to the Company’s shareholders to add certain items, as set forth above and in the reconciliation table “Adjustments to reported operating and net income (Non-GAAP)” in the accompanying press release, excluding the total tax impact of such adjustments and adjustments attributable to the non-controlling interests. We calculate our adjusted operating income excluding divested businesses by excluding the results of the divested Fire Safety and Oil Additives business (divested in Q1 2018) and Rovita business (divested in Q3 2018). We calculate our adjusted EBITDA by adding back to the net income attributable to the Company’s shareholders the depreciation and amortization, financing expenses, net, taxes on income and the items presented in the reconciliation table “Adjustments to reported operating and net income” in the accompanying press release which were adjusted for in calculating the adjusted operating income excluding divested businesses and adjusted net income attributable to the Company’s shareholders. Adjusted EPS excluding divested businesses is calculated as adjusted net income excluding divested businesses divided by weighted-average diluted number of ordinary shares outstanding as provided in the reconciliation table under “Calculation of Adjusted EPS”. We calculate our free cash flow as our cash flows from operating activities net of our purchase of property, plant, equipment and intangible assets, and adding Proceeds from sale of property, plant and equipment and dividends from equity-accounted investees during such period as presented in the reconciliation table under “Calculation of free cash flow”. You should not view sales excluding divested businesses, adjusted operating income, adjusted operating income excluding divested businesses, adjusted net income attributable to the Company’s shareholders excluding divested businesses, adjusted EPS excluding divested businesses or adjusted EBITDA excluding divested businesses as a substitute for operating income or net income attributable to the Company’s shareholders determined in accordance with IFRS, adjusted EPS excluding divested businesses as a substitute for EPS or free cash flow as a substitute for sales, cash flows from operating activities and cash flows used in investing activities, and you should note that our definitions of adjusted operating income, adjusted net income attributable to the Company’s shareholders, adjusted EBITDA excluding divested businesses and free cash flow may differ from those used by other companies. However, we believe sales excluding divested businesses, adjusted operating income, adjusted operating income excluding divested businesses, adjusted net income attributable to the Company’s shareholders excluding divested businesses, adjusted EBITDA excluding divested businesses, adjusted EPS excluding divested businesses and free cash flow provide useful information to both management and investors by excluding certain expenses that management believes are not indicative of our ongoing operations , in particular the divested Fire Safety and Oil Additives business (divested in Q1 2018) and the Rovita business (divested in July 2018), as we no longer own these businesses. In particular for free cash flow, we adjust our Capex to include any Proceeds from sale of property, plant and equipment because we believe such amounts offset the impact of our purchase of property, plant, equipment and intangible assets. We further adjust free cash flow to add Dividends from equity-accounted investees because receipt of such dividends affects our residual cash flow. Free cash flow does not reflect adjustment for additional items that may impact our residual cash flow for discretionary expenditures, such as adjustments for charges relating to acquisitions, servicing debt obligations, changes in our deposit account balances that relate to our investing activities and other non-discretionary expenditures. 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 improve the comparability of the financial results between periods and provide for greater transparency of key measures used to evaluate our performance.We present a discussion in the period-to-period comparisons of the primary drivers of changes in the company’s results of operations. This discussion is based in part on management’s best estimates of the impact of the main trends in its businesses. We have based the following discussion on our financial statements. You should read the following discussion together with our financial statements. 
 
 THANK YOU   visit us at www.icl-group.com  32                 
 

 
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/ Kobi Altman
 
 
 
Name:
Kobi Altman
 
 
 
Title:
Chief Financial Officer
 
 
 
Israel Chemicals Ltd.
 
 
 
 
 
By:
/s/ Aya Landman
 
 
 
Name:
Aya Landman
 
 
 
Title:
Global Company Secretary
 
Date: November 7, 2019

 THANK YOU   visit us at www.icl-group.com  32