ICL Group Ltd. — Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under IFRS as issued by the IASB, in U.S. dollars.
Business context and financial performance
ICL is an Israeli specialty minerals and chemicals company operating four segments: Industrial Products, Potash, Phosphate Solutions and Innovative Ag Solutions. Its products serve agriculture, food and industrial markets.
| Metric (US$ millions except per-share data) | 2021 | 2020 |
|---|---|---|
| Sales | 6,955 | 5,043 |
| Gross profit | 2,611 | 1,490 |
| Operating income | 1,210 | 202 |
| Net income attributable to shareholders | 783 | 11 |
| Basic / diluted EPS | $0.61 / $0.60 | $0.01 / $0.01 |
| Operating cash flow | 1,065 | 804 |
| Cash, cash equivalents, short-term investments and deposits | 564 | 314 |
| Total assets / total liabilities / total equity | 11,080 / 6,344 / 4,736 | 9,664 / 5,576 / 4,088 |
Gross margin was approximately 37.5% in 2021 versus 29.5% in 2020; operating margin was approximately 17.4% versus 4.0%. Net margin attributable to shareholders was approximately 11.3% versus 0.2%. These are calculations from reported figures.
Reported net financing expense was $122 million, down from $158 million. Income tax expense rose to $260 million from $25 million; the reported effective tax rate was approximately 24%, versus 51% in 2020. Cash capital expenditures were $611 million. Net financial liabilities were reported at $2.449 billion; reported debt included $2.436 billion of long-term debt and $577 million of short-term debt, including current maturities.
Material changes versus 2020
- Sales increased 38%, principally due to higher selling prices across potash, phosphate, bromine and other products, increased volumes in several businesses, currency effects and $341 million of contribution from the Fertiláqua and ADS acquisitions. Lower potash and phosphate fertilizer volumes partly offset growth.
- Operating income increased to $1.210 billion from $202 million. Management attributed the improvement to pricing and demand, including sharply higher potash and phosphate prices and tight bromine supply. Higher raw-material, energy, transport and selling costs partly offset the gains.
- Operating cash flow increased to $1.065 billion from $804 million, mainly reflecting higher net income. Investing cash outflow was $579 million, including acquisitions and capital spending; financing cash outflow was $244 million, mainly reflecting higher dividends.
- Segment sales and operating income were: Industrial Products, $1.617 billion and $435 million; Potash, $1.931 billion and $399 million; Phosphate Solutions, $2.432 billion and $307 million; Innovative Ag Solutions, $1.245 billion and $121 million. Segment sales include intersegment sales.
- 2021 adjusted operating income was $1.194 billion and adjusted net income attributable to shareholders was $824 million, compared with $509 million and $258 million, respectively, in 2020. These are non-IFRS measures; the company cautions that they are not substitutes for IFRS results. 2020 adjustments included impairment, site closure/restoration and early-retirement charges.
Liquidity, debt and capital allocation
At year-end, ICL reported $564 million of cash, cash equivalents, short-term investments and deposits, $1.030 billion of unused long-term credit facilities, and a $300 million committed securitization facility of which approximately $180 million was used. Management said available liquidity was adequate for anticipated working capital, capital expenditures and other needs over the next 12 months. S&P and Fitch affirmed investment-grade ratings of BBB- with stable outlooks; the company reported compliance with its financial covenants.
The dividend policy targets a distribution of up to 50% of annual adjusted net income, subject to board discretion and legal and financing constraints. The filing reports $276 million of dividends paid in 2021 and $0.21 per share declared for the year. It also reports a further $169 million, or $0.13 per share, declared in February 2022.
Outlook, management commentary and key risks
- Market outlook: Management described strong 2021 demand and pricing, supported by agricultural fundamentals, food-security policies, supply constraints and recovering industrial markets. It noted ongoing volatility, supply-chain disruptions and increased costs. The filing does not provide a consolidated earnings or revenue forecast.
- Commercial developments: Subsequent to year-end, ICL agreed to supply India with 600,000 metric tons of potash through 2022 at $590 per ton and signed Chinese supply contracts for 700,000 metric tons, with options for additional volumes, also at $590 per ton. These are contracts, not company-wide earnings guidance.
- Projects and growth: Management expected Spanish potash capacity to reach an annual running rate of about 1 million tons in the second half of 2022, with potential to reach about 1.3 million tons after further upgrades. Polysulphate production was expected to reach full capacity toward the end of 2023. The company also highlighted expansion in specialty agriculture, food-grade phosphoric acid and LFP battery materials.
- Phosphate mining and permits: Rotem’s existing economic phosphate reserves were described as limited to a few years at current mining rates. Continued operations depend on permits and approvals, including development of Barir field or other economic sources. Rotem’s unified mining concession was extended through 2024; its emissions permit runs through September 2023, with management citing difficulty meeting schedules for some required projects.
- Dead Sea operations: The Dead Sea concession ends March 31, 2030, with no assurance of renewal. ICL bears 80% of salt-harvesting project costs and the state 20%, subject to a state contribution cap. The P-9 pumping station began operating in early 2022 amid the continuing fall in the Northern Basin’s water level; sinkholes, dyke stability and harvesting costs remain operational risks.
- Energy supply: Energean’s gas deliveries were delayed, with supply then expected in the third quarter of 2022. The interim gas arrangement with Tamar was firm through April 2022, with an interruptible extension option to year-end. ICL warned that a shortage or higher gas prices could materially affect results.
- Environmental and legal exposure: ICL estimated 2022 environmental spending of approximately $197 million, compared with about $122 million in 2021. Disclosed matters include environmental class-action claims, the 2017 Ashalim stream incident, restoration obligations and a Haifa Bay government proposal to negotiate cessation or relocation of industrial activity. Outcomes and potential costs are uncertain; several claims have no recorded provision.
- Other risks: Commodity-price cycles, competition, raw-material and freight costs, currency and interest-rate movements, climate regulation and physical climate risks, COVID-19 effects, labor disputes, cyber incidents, geopolitical instability, and dependence on mining concessions, permits and licenses could adversely affect operations and liquidity.
- Unusual items and audit: 2021 results included gains from asset disposals and other items, partly offset by settlement and restoration-related charges; management’s adjusted figures exclude specified items. The auditor issued unqualified opinions on the IFRS financial statements and internal control. Critical audit matters included useful lives of assets tied to the Dead Sea concession and uncertain treatment under Israel’s natural-resources tax law.
Important facts for investors to verify
- Reconcile reported and adjusted earnings, including the treatment of disposal gains, tax adjustments and other special items.
- Track execution and cost of environmental projects, salt harvesting, the P-9 station and the Spanish collector; confirm actual spending against stated estimates.
- Monitor Rotem permit renewals, Barir field approvals and the timing and economics of replacement phosphate resources.
- Confirm natural-gas supply and pricing after the interim Tamar arrangement, and assess exposure to energy, freight and raw-material inflation.
- Review debt maturities, covenant headroom, available facilities and dividend capacity alongside acquisition spending and capital commitments.
- Assess the status and potential financial impact of environmental, tax, concession and other legal proceedings, including the natural-resources levy dispute.
- Check that subsequent-period potash contracts, segment capacity plans and stated specialty-product growth opportunities translate into realized volumes, margins and cash flow.