harnessing nature creating value 2nd annual nasdaq tase israeli investor conference november, 2007
TRANSCRIPT
Harnessing NatureCreating Value
2nd Annual NASDAQ TASE Israeli Investor ConferenceNovember, 2007
Focused Synergistic Responsible
Disclaimer
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. Although our shares may be bought and sold on the Tel Aviv Stock Exchange (TASE) at any time, they do not constitute trade out of Israel - neither in the United States nor elsewhere and this presentation does not constitute an offer or investment advice to any US or other person at this time. If we ever do so, our offer will only be made by a prospectus or a registration statement conforming with the requirements of U.S. or any other applicable law.
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) the changes in worldwide economic and political conditions that impact interest and foreign exchange rates, (b) the extent to which ICL is able to successfully integrate acquisitions, achieve synergies and develop new markets, (c) the extent to which ICL is able to achieve savings from its various plans, (d) government funding and program approvals affecting products being developed or sold under government programs, and (e) cost and delivery performance under various program and development contracts. We caution you that the above list of important factors is not comprehensive. We refer you to filings that we have made with the TASE. 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.
Company Basics
4 Focused Synergistic Responsible
Dynamic Controlling Shareholder
IDE [50% by ICL]
Sea Water Desalination
IDE [50% by ICL]
Sea Water Desalination
13$ bn Mkt. Cap ’06 Rev. >$3bn
1.8$ bn Mkt. Cap
200$ m Mkt. Cap
5 Focused Synergistic Responsible
2006 Sales: $3.3 billion
A Balanced Business
Fertilizers41%
Industrial Products
25%
Performance Products
31%
Other3%
Note: % based on external sales
6 Focused Synergistic Responsible
FertilizersIndustrialProducts*
PerformanceProducts
Potash
Phosphates
phosphate rockphosphoric acidfertilizersanimal feed additives
Flame retardants
based on Bromine &organophosphorus
Brominated Inorganic productsWater treatment biocidesOther
SpecialtyPhosphates
food & electronic gradephosphoric acidphosphate saltsfood additivesother phosphorus based products
Alumina & OtherChemicals
performance products
50%
50%
% 2006 Sales
61%
39%
80%
20%
* Including Supresta’s 2006 results
From Basic Minerals to Value-Added Products
7 Focused Synergistic Responsible
Capital Research
5.3% Potash Corp10.1%
Public32.4%
Israel Corp52.2%
Recognized and Well Established
Shareholders
1952 Mining operations begin at Dead Sea & Negev desert
1975 ICL established as a state-owned holding company
1992 IPO (TASE)
1995 Israel Corporation acquires control
1999 Ofer Group acquires control of Israel Corporation
~ $13 billion market cap* * November 20, 2007
8 Focused Synergistic Responsible
Increasing Share Price Compared to Peers
-60%-10%40%90%
140%190%240%290%340%390%440%490%540%590%640%690%740%790%840%890%940%990%
1040%1090%1140%1190%1240%1290%
31/12/2001 16/12/2003 30/11/2005 15/11/2007
IMC-MOSAIC PCS Albemarle Chemtura Agrium ICL ($)
9 Focused Synergistic Responsible
S&P 500
ICL (US$)
Focused on Increasing Shareholders’ Value
TA 25
ICLNIS (NIS)
-15%85%
185%285%385%485%585%685%785%
31/12/2002 20/08/2003 08/04/2004 26/11/2004 18/07/2005 07/03/2006 23/10/2006 15/04/2007 22/09/2007
3.08.0
13.018.023.028.033.038.043.048.0
31/12/2001 16/12/2003 30/11/2005 15/11/2007
10 Focused Synergistic Responsible
Second Largest Company on TASE
-50
50
150
250
350
450
31/12/2001 28/02/2003 30/04/2004 30/06/2005 31/08/2006 31/10/2007
-250%
-50%
150%
350%
550%
750%
950%
31/12/01 28/02/03 30/04/04 30/06/05 31/08/06 31/10/07
Trading Volumes
% Change in Market Cap
11 Focused Synergistic Responsible
ROIC
ROE
25.0%*23.2%
31.2%
22.4%
10.5%10.4%8.1%10.9%
13.1%*12.9%
5.5% 5.3%5.5%4.2%
9.6%
14.4%
2000 2001 2002 2003 2004 2005 2006 2007
Impressive Returns
*Last 12 monthsROE (Return on equity) - Net income / (shareholders' equity + Debentures convertible into shares), average
ROIC (Return on invested capital ) = (Operating income ×(1-0.32)) / ((trade receivables + inventory – trade payables) + PP&E, net), average
12 Focused Synergistic Responsible
Dividend Yield – ICL *Calculated according to market capitalization based on average share price adjusted for dividends.
Year Dividend Yield*
2001 4.0%
2002 4.8%
2003 4.5%
2004 4.5%
2005 3.6%
2006 6.4%
13 Focused Synergistic Responsible
Strategic Focus on Core Businesses
Acquisitions and JV’s
~$1.06 billion worth*
Iberpotash
(Spain, 60%)Sinobrom
(50% JV)
Scora
(France)
NU3 (JV
between Yara,
SQM & ICL)
Rotem Turkey
(DCP/MCP
plant)
Cleveland
Potash Ltd.
(UK)
Food hygiene
bus., CFPI
(France)2 JV’s
in China
1998 1999 2000 20032001 2002 20052004
Adicon
(Brazil)
Astaris
(US)
* Including share acquisitions of ICL subsidiaries ($250 million in 1999-2000)
BKGLC
(JV in
China, 51%)
2006
JV with DKS
(Japan)
Iberpotash
(Spain, 40%)
Chemada
(Israel 26%)
2007
Fire-trol
Supresta
)US(
Biogema
14 Focused Synergistic Responsible
Invested Significantly
Acquisitions$674M
Investments$960M
ICL Spent ~$1.6B from 2001-2007 on investments (net of grants) and acquisitions
15 Focused Synergistic Responsible
Potash
Bromine
Magnesium
Salts
PhosphatesThe Negev
Desert
Direct Access to Low Cost Natural Resources
Iberpotash &CPL
Leveraging our low cost positions
The Dead Sea
16 Focused Synergistic Responsible
#1 elemental bromine ~one third of global production
#1 in organophosphorus flame retardants
#1 producer of pure phosphoric acid
#1 in specialty phosphates
#1 supplier in Europe of PK fertilizers (compound potash & phosphate)
#2 Europe and #6 Worldwide in potash supply
#2 Western World - magnesium production
and…
Major player in specialty chemical high margin niche markets & specialty fertilizers
Leading Player in Global Industry
17 Focused Synergistic Responsible
Strong Global Presence
North America 22%
South America 10%
Europe 37%
Israel 6%
Africa 2%Asia Pacific 23%
Sales by Geography (2006)
18 Focused Synergistic Responsible
1,7071,969
2,2112,419
2,889
177
253
448
389
491
89
169
340
284
371
2003 2004 2005 2006 2007
Net Income Operating Income
Growing Revenues and Highly Profitable
Sales
$millions, first nine months
19 Focused Synergistic Responsible
Environmental Strategy: An Active, Dedicated Focus
Integral part of ICL business strategy is preservation of the environment and full compliance with standards of environmental responsibility.
Environmental work plan includes investment of $130 million (2006 and 2007) to improve the environmental profile of operations.
Primary focus is on implementing processes for:
creating a safe work environment
improving safety of manufacturing processes
creating safe products for our customers (product lifecycle)
rehabilitation of areas for the benefit of the public, tourists (e.g. landscaping)
Environmental strategy includes full transparency to the government, environmental organizations and the public to increase trust in ICL’s stewardship of the environment.
Business and Market Opportunities
21 Focused Synergistic Responsible
Lowest Cost Potash Producer at Dead SeaSource : British Sulphur / CRU (June 2005)
Fertilizers
PCS (St.
John)
Canpotex (V
ancouver)
APCK+S
Belaruskali
ICL -
Israel
Uralkali,
Silvin
it (V
entspills
)
Uralkali,
Silvin
it (S
t. Pete
rsburg
)
Charges to FOB
Cost at mine
22 Focused Synergistic Responsible
A Leader in Global Potash ProductionSource: Fertecon, IFA, companies reports and ICL estimates, 2006
Fertilizers
K+S12%
Agrium2%
PCS15%
APC3%
Others9%
Uralkali9%
Belaruskali17%
Mosaic12%
Silvinit11%
ICL10%
Exports byCanpotex
Exports byBPC
23 Focused Synergistic Responsible
Long Term Increase in DemandSources: U.S. Census and FAO database
1975 1990 2005 20203,000
4,000
5,000
6,000
7,000
8,000
9,000
0.1
0.2
0.3
0.4
Population (millions) Hectares of land / capita
Fertilizers
24 Focused Synergistic Responsible
Growing Demand for Biofuels
Fertilizers
0
5
10
15
20
25
30
35
40
45
50
1980 1985 1990 1995 2000 2005 2010
Bill
ion
Lite
rs
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Biodiesel
Ethanol
3.8% of Global Consumption of
Gasoline
0.4% of Global Consumption of
Diesel
Source: Earth Policy Institute, Renewable Fuel Association
25 Focused Synergistic Responsible
Corn Wheat
Soybeans
Jun 2005 Sept 2006 Dec 2006 Mar 2007 Jun 2007 Sep 2007
Rising Grain PricesSource: CBOT
Fertilizers
26 Focused Synergistic Responsible
Source: Fertecon, October 2007
Fertilizers
Steep Increases in Fertilizer Prices
27 Focused Synergistic Responsible
ICL IP After Integrating Supresta
Industrial Products
* Based on 2006 sales, including Supresta’s 2006 results
Organophosphorus flame retardants
Brominated flame retardants
Brominated inorganic products
Other
Water treatment biocides
28 Focused Synergistic Responsible
10-12 g/l
2-6 g/l
0.3 g/l
0.05 g/l
Dead Sea Brine
Brine Wells(USA* and Russia)
Underground Wells(China)
Sea Water(China, India, Japan)
Most Concentrated Bromine Source Source: ICL estimates* Arkansas – brine wells of Chemtura & Albemarle
Industrial Products
29 Focused Synergistic Responsible
% of global capacitySources: Company estimates, US Bureau of Mines, ArkansasOil & Gas Commission, Companies’ press releases, 2006
#1 Bromine Producer
Chemtura16%
Albemarle23%
ICL33%
Others6%
China22%
Industrial Products
30 Focused Synergistic Responsible
Flame retardants
49%
Industrial21%
Clear brines10%
Intermmediates10%
Agriculture5%Water
treatment5%
Bromine Compounds - Broad ApplicationsSource: ICL estimates
Industrial Products
Global Industry~2$ billion
Elemental bromine, photographic applications, butyl rubber, dyes & more
One of the 3 leading players in the industry
31 Focused Synergistic Responsible
Leading Indicators for Bromine Market Trends
Worldwide Rig Count
Sources: Baker Hughes Rig Count, IPC Association, Semiconductor Equipment and Materials International (SEMI)
Industrial Products
1,500
2,000
2,500
3,000
3,500
Rigid Printed Circuit Boards Book to Bill Ratio(3 Months Average)
0
20
40
60
80
100
120
140
160
01/03
03/03
05/03
07/03
09/03
11/03
01/04
03/04
05/04
07/04
09/04
11/04
01/05
03/05
05/05
07/05
09/05
11/05
01/06
03/06
05/06
07/06
09/06
11/06
01/07
03/07
05/07
07/07
Month
Inde
x
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
Rat
io
Shipment Index Booking Index Book-to-Bill Ratio
139.3 98.7
Source: IPC
32 Focused Synergistic Responsible
Supresta – Enhancing ICL-IP’sProduct Mix & Geographic Reach
ICL-IPHeadquarters PlantsMarketing & SalesLogistics CentersTech Service
Industrial Products
Acquisition of Supresta completed August ‘07 Segment sales of $1.1 billion annually A leader in the flame retardants market
SuprestaHeadquarters Major facilitiesSales representatives
33 Focused Synergistic Responsible
Phosphate Downstream - Synergistic AcquisitionsT
yp
ica
l s
ell
ing
p
ric
e i
n $
/to
n
Services and Solutions
Food Additives – Worldwide
Phosphate Salts –
Europe &Asia
Food GradePhosphoricAcid – IsraelPhosphoric
Acid (MGA)Commodity Fertilizers
(eg. TSP)
Phosphate Rock
Food Hygiene
Basic Products
Phosphate Salts –
U.S. & BrazilE&FG
PhosphoricAcid –
U.S. & Brazil
FoodAdditives–
U.S. & Brazil
Business acquired fro
m Astaris
# 1 in the world in pure
phosphoric acid
Performance Products
34 Focused Synergistic Responsible
Astaris Integration
Phosphate Salts
ICL PP (Europe/AP)
Food Additives
PPA
ICL PP (Americas)Thermal Acid
Phosphate Salts
PPA
Acquisition of business & assets of Astaris completed November ‘05 Segment sales of over $1 billion annually A leader in the global specialty phosphates industry
Performance Products
Financials
36 Focused Synergistic Responsible
1-9/ 07 1-9/06$ millions
Gross profit
Gross margins
1,038.7
35.9%
828.7
34.3%
Operating income
Operating margins
491.2
17.0%
388.7
16.1%
Financing expenses, net
Taxes on income
34.2
87.7
25.1
105.3
Net income 371.0 283.7
Sales (CIF) 2,889.2 2,418.5
% change
25.3%
26.4%
30.8%
19.5%
Other expenses, net 5.6 (14.0)
1-9/07 Income Statement
37 Focused Synergistic Responsible
1 Net profit + depreciation and amortization + financing expenses + taxes + one time items 2 Cash flows from operating activities, excluding contribution of securitization and factoring
Strong EBITDA & Operating Cash Flows – YTD $millions,
first nine months
EBITDA1 Cash Flow2
543
640
261
377
0
100
200
300
400
500
600
700
2006 2007 2006 2007
38 Focused Synergistic Responsible
1,447 1,263
1,405
55
1,245
105
1,162
152
874
238
569
216
602
223
598
196
552
2191,011
172
1998 1999 2000 2001 2002 2003 2004 2005 9/06 2006 9/07
Net financial liabilities Securitization & factoring of receivables
Liabilities due to share acquisitions in 1999–2000:
$250 million
1,447
1,314
1,112
785 825771
1,263
1,4601,350
$millions (end of period)
794
1,183
Net Financial Liabilities*
* Net financial liabilities = credit from banks and other interest bearing debt, minus cash and cash equivalents, investments and short-term deposits, long term financial investments and income-tax deposits.
39 Focused Synergistic Responsible
($ millions)SalesOperating MarginsNet Income
Company2007% Growth2007200620072006
Chemtura2,9187.5%1.6%1.4%(34.0)(81.0)
Albemarle1,737(2.6%)13.4%5.6%171.180.0
PCS3,80338.6%29.9%22.2%726.8445.8
Agrium3,99916.6%11.6%4.6%269.095.0
Yara16,66023.2%8.7%8.2%665.1514.9
K+S1,23,28410.1%1.2%14.8%5.4257.9
Mosaic24,96634.7%17.0%2.6%550.3(143.5)
Innophos4356.0%9.5%8.5%(1.6)(8.1)
Average3,47516.8%11.6%8.5%6.9%34.2%3
ICL2,88919.5%17.0%16.1%371.0283.7
12.8%311.7%3
Note: The results of the comparable companies were taken from their public reports.
1 Based on an exchange rate of 6.00 NOK/USD and of 1.34 USD/EUR 2 Based on summing of the last three quarters (Mosaic 1st nine months ended in August 31, 2007)
3 Net income margins
Comparable Companies - YTD
40 Focused Synergistic Responsible
Conclusion
Multi-national company
Vast access to natural resources
Sustainable low cost position high margins
Growing revenues and substantial profitability
Strong cash flows and high dividend yield
Potential cost reduction pending availability of natural gas
Focused synergistic growth strategy
Thank You
Visit us at:
www.icl-group.com