November 12, 2015 / 4:13 PM / 3 years ago

UPDATE 1-Israel Chemicals suffers Q3 profit slip, to transform UK plant

* Q3 adjusted EPS $0.12 vs $0.13 forecast, revenue down 11.6 pct

* Shifting UK plant to production of potash to polysulphate

* ICL to invest at least 40 mln pounds in UK facility (Adds details, CEO/analyst comments, share reaction)

By Steven Scheer

JERUSALEM, Nov 12 (Reuters) - Israel Chemicals (ICL) reported a larger than expected decline in quarterly profit, weighed down by lower potash prices and sales, and said it would halt production of potash from its UK plant within 3 years.

ICL, which has exclusive permits to extract minerals from the Dead Sea, said on Thursday it earned 12 cents per diluted share excluding one-time items, compared with 14 cents a year earlier. Revenue dipped 11.6 percent to $1.38 billion.

The company, one of the three largest suppliers of the crop nutrient potash to China, India and Europe, was expected earn 13 cents a share on revenue of $1.4 billion, according to Thomson Reuters I/B/E/S.

Chief Executive Stefan Borgas said that in the third quarter ICL largely compensated for the negative impact of lower potash prices and volumes through significant cost cuts.

“The results are littered with exceptionals,” said Liberum analyst Sophie Jourdier in a note to clients. But, she added, “We believe the worst is most likely behind ICL. Strike action has ended, tax clarity is improving and cost savings are being implemented.”

ICL’s second quarter performance was marred by a workers strike that wiped out $253 million of sales and $112 million of profit in the April-June period.

With potash reserves dwindling, ICL has decided to end production of potash in the UK by the end of 2018 and shift to producing polysulphate, a product to help sulphur-depleted soil that is cheaper to produce.

“This is not driven by market volumes but by the near-term end of the reserves,” Borgas told a conference call of analysts, adding that potash demand into 2016 appears “stable”.

He estimated its UK mine has about 200 million tonnes of polysulphate resources and ICL plans to spend 40 million pounds to upgrade and adjust the facility and possibly another 40 million pounds for a granulation plant.

ICL expects annual sales of polysulphate to reach 1 million tonnes by 2020 with a longer term potential of 3 million tonnes.

ICL, controlled by conglomerate Israel Corp, declared a dividend for the second quarter of $84 million, or 7 cents a share.

The company is locked in a battle with the Israeli government over a plan to tax mining firms aimed at boosting state coffers by 500 million shekels ($129 million) a year. In protest, ICL has frozen or put under review nearly $2 billion in domestic projects, while expanding activities outside Israel. It said all future investments will be based on merit.

“The environment for having a stable basis to make investment decisions is still pretty shaky,” Borgas said.

The tax plan, which cleared parliament’s finance committee last week, is expected to be voted on by the full parliament on Nov. 19.

ICL’s New York-listed shares were down 1.4 percent at $5.10 in morning trade.

$1 = 3.8845 shekels Reporting by Steven Scheer; Editing by Elaine Hardcastle

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