May 27, 2008 / 11:59 AM / 10 years ago

UPDATE 2-Israel Chemicals Q1 net profit, revenue surge

(Adds analysts’ comments, share price, background)

By Tova Cohen

TEL AVIV, May 27 (Reuters) - Israel Chemicals (ICL) (ICL.TA), a maker of fertilisers and specialty chemicals, said on Tuesday its quarterly net profit more than tripled on higher prices for its products and higher sales.

The results sent its shares up nearly 6 percent in afternoon trading in Tel Aviv to a new high of 72 shekels.

ICL posted record first-quarter net profit of $346.7 million, or 26.9 cents a diluted share, compared with net profit of $90.9 million, or 7.1 cents a share, a year earlier.

Revenue grew to a record $1.528 billion from $882.9 million.

The company was expected to post net profit of $225.1 million on revenue of $1.336 billion, according to the average of seven analysts in a Reuters poll.

ICL is the second-biggest company listed on the Tel Aviv Stock Exchange with a market value of $26.5 billion.

Citigroup analyst Daniel Mon called the results “exceptional”.

“Potash was stronger than expected, but phosphate was substantially better than we had forecast,” Mon said in research note.

ICL said its fertilisers division is benefiting from sharply growing demand and limited supply of potash and phosphate fertilisers and from acquisitions completed in the past year.

Sales rose in all target markets, particularly in South America, Europe and Asia.

The fertilisers unit posted sales of $952.9 million in the quarter, up 111 percent from a year earlier.

Lehman Brothers analyst Joseph Wolf had forecast fertiliser sales of $785 million.

“Clearly the operating leverage of higher pricing continues to be a source of upside surprise. We will need to review our model and see how this flows through for the rest of 2008 and 2009,” Wolf said, reiterating a “1-overweight” rating.

Potash sales of more than 1.45 million tonnes beat Citigroup’s forecast of 1.219 million as 170,000 tonnes of inventory were sold, compared with Citigroup’s forecast of 100,000 tonnes.

Phosphate rock volume of 190,000 tonnes beat Mon’s forecast of 86,000, driven by earlier-than-expected sales from capacity expansion.

Demand for fertilisers is being driven by reduced world inventories of grains, resulting in higher prices that creates incentives to use fertilisers, ICL said.

“ICL remains our core fertiliser ‘buy’ rating given the attractive valuation versus the peers,” Mon said. “We expect material consensus estimate upgrades on the back of these robust results.”

ICL’s board declared a dividend of $173 million to be paid on June 25, following a dividend of $115 million paid on April 30.

ICL, which produces about 10 percent of the world’s potash, benefits from exclusive concessions to extract minerals from Israel’s Dead Sea. It also mines phosphate rock in the Negev Desert and potash and salt from mines in the Spain and the UK.

It is 52 percent owned by holding company Israel Corp (ILCO.TA). Potash Corp of Saskatchewan POT.TO owns 10 percent. (Editing by Paul Bolding)

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