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 June 2020
 
Commission File Number: 001-13742

ICL GROUP LTD.
(Exact name of registrant as specified in its charter)
 
ICL Group 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


ICL GROUP LTD.
 
1.  S&P Reaffirms ICL's BBB- Rating with a Stable Outlook


Item 1
 
S&P Reaffirms ICL's BBB- Rating with a Stable Outlook
 
The Company hereby reports that S&P has reaffirmed the company’s Long-Term Issuer Default Rating at BBB- with a Stable Outlook. The Company hereby reports that S&P has reaffirmed the company’s Long-Term Issuer Default Rating at BBB- with a Stable Outlook. In addition, S&P reaffirmed the Israeli local rating at ilAA with stable outlook.
 
The S&P report is attached.



ICL Group Ltd.
 
Primary Credit Analyst:
Paulina Grabowiec, London (44) 20-7176-7051; paulina.grabowiec@spglobal.com
 
Secondary Contact:
Tom Dar, RAMAT-GAN (972) 3-753-9722; tom.dar@spglobal.com

Table Of Contents
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Credit Highlights

Outlook

Our Base-Case Scenario
 
Company Description

Peer Comparison

Business Risk

Financial Risk

Liquidity
 
Covenant Analysis
 
Environmental, Social, And Governance
 
Group Influence

Issue Ratings--Subordination Risk Analysis

Ratings Score Snapshot

Related Criteria
 
 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
 JUNE 29, 2020   1




Credit Highlights
 
 
 
 

 
 
 

Overview
 
 
 
         

Key strengths
 
Key risks
 
 
Relative resilience of the fertilizer industry to the recessionary macroeconomic environment caused by the COVID-19 pandemic.
 
Cyclical and competitive nature of the fertilizer industry.
 
 
One of the leading global potash producers and the largest global bromine producer.
 
Exposure to regulatory changes and political pressure in Israel pertaining to extending the Dead Sea mining concession, which is valid until 2030.
 
 
Competitive advantage from mining in the Dead Sea, which provides access to unique high-quality raw materials, logistical advantages, proximity to ports, and a more favorable cost position for potash and bromine than peers.
 
Large nondiscretionary capital expenditure (capex) requirements at the Dead Sea concession.
 
 
Synergies between the manufacturing processes for different specialty chemicals products, which provide added value.
 
Some exposure of the bromine segment to cyclical end-markets such as oil and gas, automotive, and construction.
 
 
Prudent financial policy and adequate liquidity.
     
         
 
S&P Global Ratings forecasts that ICL Group Ltd.'s (ICL's) credit metrics will remain commensurate with the rating in 2020, despite COVID-19-related pressures. The company's operations were minimally disrupted by the coronavirus pandemic in the first quarter of the year. In Spain, mining operations were stopped for about three weeks as restrictions to contain the COVID-19 pandemic were implemented in the country, while in the U.K. operating rates were down about 30% to realign shifts and maintain social-distancing measures. All operations, including those in China, are now back or close to normal levels. We anticipate that the demand for fertilizers will remain generally stable in 2020, while recognizing farmers' tight inventory management and weaker agricultural commodity prices. That said, we also assume that the impact of the pandemic on the agriculture sector and demand for fertilizers will be much lower than for broader chemicals. This reflects the indispensable role of the sector in security of food supply, a factor recognized by the governments by designating it as critical. In bromine, while about 25% of sales are exposed to cyclical oil and gas, automotive, and construction end markets, we anticipate that profits should be supported by resilient demand from pharmaceutical, food, and health care industries, which account for about 8% of sales. We note ICL's proactive measures to bolster cash balances, including drawing $300 million from its $1.1 billion revolving credit facility (RCF), and strict management of capex and working capital.
 
 
 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
 JUNE 29, 2020   2



ICL Group Ltd.

We anticipate weak potash and phosphate prices in 2020 and a more challenging operating environment.  Several factors drive weaker year-over-year fertilizer pricing. These include the delayed signing of ICL's benchmark potash contract with China at $220 per ton ($70/ton lower than previously), lower oil prices that have a trickle-down effect on ethanol prices (a key driver of corn prices) and ultimately on farmers' incomes, and an oversupplied market in both potash and phosphates that must be absorbed by higher demand. Given our expectations for an economic improvement in 2021, we forecast that ICL's adjusted EBITDA will improve moderately to $1.0 billion-$1.1 billion, from $920 million-$960 million we estimate for 2020. Long-term demand trends for both products are favorable since we expect volumes to increase 1%-3% on average annually, and some future capacity additions are required to meet demand growth. However, both potash and phosphates markets are vulnerable to downturns caused by greater competitive capacity. In addition, fertilizer markets are subject to seasonal fluctuations as well as weather conditions, government policies, foreign exchange rate movements, and contract negotiations with large buyers.
 
Chart 1
 
 
 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
 JUNE 29, 2020   3



ICL Group Ltd.

Chart 2
 
 
 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
 JUNE 29, 2020   4



ICL Group Ltd.

Outlook: Stable
 
The stable outlook reflects our expectation that ICL will maintain S&P Global Ratings-adjusted debt to EBITDA of 3.2x-3.4x, factoring in weak prices for potash and phosphate and the recessionary macroeconomic environment hampering fertilizer and bromine end markets.
 
We anticipate that ICL will generate adjusted EBITDA of $920 million-$960 million in 2020, supported by its strong position in the fertilizer markets and low production costs in Israel. We consider an adjusted debt-to-EBITDA ratio of 3.0x at the top of the business cycle and 4.0x at the bottom of the cycle to be commensurate with the current rating.
 
Downside scenario
 
We would consider a negative rating action if the company's debt to EBITDA was close to 4.0x without near-term prospects of recovery, and its operating performance deteriorated. In the first instance, this could occur due to weakening market conditions, for example as a result of prolonged low prices of potash or phosphate due to sluggish demand or ongoing oversupply in both markets. We could also lower the rating if ICL deviated from its publicly stated dividend policy or embarked on sizable leveraged acquisitions.
 
Over the medium term, the rating could come under pressure if uncertainty regarding the renewal of the Dead Sea concession continues. In this scenario, we expect the company's business risk to increase, since it currently benefits from inherent advantages of operating in the Dead Sea.
 
Upside scenario
 
We would consider a positive rating action if ICL strengthened its financial risk profile such that its adjusted debt to EBITDA remained below 2.5x on a sustainable basis. Rating upside would also depend  on our view on the credit quality of Israel Corp., ICL's main shareholder with a 46% stake.
 

Our Base-Case Scenario
 
Assumptions
•  North America GDP contraction of 5.2% in 2020 and 6.2% growth in 2021; Latin America GDP decline of 5.1% in 2020 and 3.8% growth in 2021; Europe GDP contraction of 6.4% in 2020 and 5.1% growth in 2021; and Asia-Pacific GDP growth of 0.7% in 2020 and 6.3% in 2021.
 
•  Brent crude prices of $30 per barrel (bbl) in 2020, $50/bbl in 2021, and $55/bbl in 2022 and beyond.
 
•  On average, both phosphate and potash fertilizer demand increases in the low-single-digit percent area annually, partly due to a growing global population, global GDP growth, and changing diets.
 
•  ICL's revenue at $4.8 billion-$5.0 billion in 2020, recovering to $5.1 billion-$5.2 billion in 2021.
 
•  Annual dividends of up to 50% of the adjusted net profit, in accordance with the dividend policy. Dividends are paid quarterly, which allows for some flexibility in the level of distributions.
 
 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
 JUNE 29, 2020   5



ICL Group Ltd.

•  Capex of about $570 million in 2020, in line with that in 2019, and $550 million in 2021. We note that ICL decides the level of investments depending on business confidence and the industry outlook.
 
•  Minimal acquisition of $27 million in February of Growers Holdings, Inc, and no sizable leveraged acquisitions in 2020 or 2021.
 
 Key metrics
 
ICL Group Ltd.--Key Metrics*
 
   
--Fiscal year end Dec 31, 2019--
 
(Mil. $)
   
2018A

   
2019A

   
2020E

   
2021F

Revenue
   
5,556
     
5,271
     
4,800-5,000
     
5,100-5,200
 
EBITDA
   
1,181
     
1,201
     
920-960
     
1,000-1,100
 
EBITDA margin (%)
   
21%

   
23%

 
~19%
     
20%-21%

Capital expenditure
   
550
     
557
     
570
     
550
 
Free operating cash flow (FOCF)
   
81.8
     
419.0
     
80-120
   
> 200
 
Debt to EBITDA (x)
   
2.6
     
2.5
     
3.2-3.4
   
< 3.0
 
 
*All figures adjusted by S&P Global Ratings. A--Actual. E--Estimate. F--Forecast.
 
Our revenue forecast factors in the ongoing weak prices for potash and phosphate in 2020. We also consider some deterioration in the bromine business due to applications  in cyclical end markets, such as clear brine in oil and gas drillings, or flame retardant additives in automotive and construction. These are partly offset by ICL's favorable cost position in the Dead Sea, higher volumes following the completion of a facility upgrade in late 2019, and the resilience of its specialty businesses lines. We also note that revenues will be supported by the steady performance of bromine applications  in markets such as pharmaceuticals, agrochemicals, and food, which are largely decoupled from the general macroeconomic conditions.
 
We note overcapacity in the potash industr y, and hence assume no further meaningful deterioration of prices in 2020. That said, we recognize that the Chinese contracts will provide some certainty to the market with regard to the price floor and offtake of the product. We assume a gradual improvement in potash prices in 2021 if major producers maintain supply discipline, notably as capacity additions from Eurochem Group AG come onstream.
 
In phosphate, prices will remain under pressure in 2020, owing to abundant supply in the market and competition among the key producers.  An important determinant of prices will be the pace and size of reductions in Chinese phosphate exports, due to environmental concerns, which in our view could help offset some oversupply in the industry.

Specialty products and efficiency gains provide support. Our adjusted EBITDA margin expectation of 19%-21% in 2020-2021 reflects our assumption that profitability will be supported by ICL's specialty products and by efficiency measures in mines in Spain and England. These will partly offset the weakening of margins in the commodity fertilizer business lines.

Company Description
 
ICL is a multinational company that operates in the manufacturing and marketing of basic and specialty fertilizers based on potash, phosphate, and bromine. The company is organized into four main divisions:

•  Industrial Products (25% of 2019 sales, 26% operating profit margin). Through this key division, ICL manufactures elemental bromine for a wide range of applications  in flame retardants, magnesia and salt products, and energy storage. ICL's Dead Sea operations offer the world's largest reserves with the highest bromine concentration. Together with its two main competitors, Albemarle and Lanxess, ICL accounted for the majority of global bromine production in 2019. Barriers to entry in this market are high, due to access to economically viable reserves of bromine, and stringent requirements for the logistics system (special containers are required for transporting the bromine). ICL uses about 80% of its elemental bromine production internally for the production of higher margin bromine compounds.
 
 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
 JUNE 29, 2020   6


ICL Group Ltd.

•  Potash (26% of sales, 21% operating profit margin). In this segment, ICL produces and markets potash fertilizers and salt extracted from the Dead Sea through a cost-efficient evaporation process, and from a conventional underground mine in Spain. It also transitioned its U.K.-based Boulby mine to the production of advanced polyhalite-based fertilizer (marketed by ICL as Polysulphate) from the production of potash. Even though ICL's potash operations are smaller than key competitors Nutrien, Uralkali, or Mosaic, the company benefits from low production costs, thanks to the evaporation method at the Dead Sea site and the logistical advantage of being close to customers.
 
•  Phosphate Solutions (36% of sales, 5% operating profit margin). Through this division, ICL operates four open pit mines, three of which are located in the Negev Desert in Israel and one in China. The division uses commodity phosphate as a raw material to develop specialty phosphate products with higher added value, where ICL has 24% of market share globally.
 
•  Innovative Ag Solutions (13% of sales, 3% operating profit margin). Through this division, ICL offers specialty nitrogen-, potash-, and phosphate-based fertilizers, including water soluble, liquid, and controlled-release products. The division is also ICL's innovative arm responsible for research and development, and digital innovation.
 
 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
 JUNE 29, 2020   7


ICL Group Ltd.

Chart 3
 
 
 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
 JUNE 29, 2020   8



ICL Group Ltd.

Chart 4
 

ICL's operations are based primarily on natural resources--potash, bromine, magnesium, and sodium chloride from the Dead Sea; and phosphate rock from the Negev Desert, via concessions and licenses from the Israeli government. Operations are also based on polysulphate and salt mines in Spain and England and on phosphate mines and processing plants in China. ICL is the sixth-largest global potash producer, and the largest global producer of bromine and purified phosphoric acid among others. The company is well diversified geographically, with about 36% of its 2019 revenues generated in Europe, 27% in Asia, 17% in North America, 13% in South America, and the remainder in the rest of the world.
 
 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
 JUNE 29, 2020   9


ICL Group Ltd.
 
Chart 5
 

Peer Comparison
 
Table 1
ICL Group Ltd.--Peer Comparison
 
Industry sector: Chemical companies
                                       
 
    ICL Group Ltd.
      K+S AG
      The Mosaic Co.
      Uralkali OJSC
      EuroChem Group AG
 
 
  (BBB-)/(Stable)/--
    B/Negative/B
      BBB-/Negative/NR
      BB-/Stable/--
      BB-/Positive/--
 
 
   
--Fiscal year ended Dec. 31, 2019--
 
(Mil. $)
                                       
Revenue
   
5,271.0
     
4,568.1
     
8,906.3
     
2,781.9
     
6,184.0
 
EBITDA
   
1,201.0
     
730.5
     
1,501.4
     
1,561.2
     
1,578.0
 
Funds from operations (FFO)
   
947.0
     
535.5
     
1,211.8
     
986.8
     
1,106.3
 
Interest  expense
   
140.0
     
182.6
     
296.9
     
276.1
     
257.4
 
Cash interest paid
   
134.0
     
143.5
     
243.1
     
377.3
     
291.9
 
Cash flow from operations
   
976.0
     
701.9
     
1,153.5
     
656.5
     
906.1
 
Capital expenditure
   
557.0
     
551.7
     
1,243.7
     
329.4
     
868.7
 
Free operating cash flow (FOCF)
   
419.0
     
150.3
     
(90.2
)
   
327.0
     
37.4
 
 
 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
 JUNE 29, 2020   10


ICL Group Ltd.

Table 1
ICL Group Ltd.--Peer Comparison (cont.)
 
Industry sector: Chemical companies
                             
 
 
ICL Group Ltd.
   
K+S AG
   
The Mosaic Co.
   
Uralkali OJSC
   
EuroChem Group AG
 
Discretionary cash flow (DCF)
   
146.0
     
96.5
     
(307.3
)
   
316.9
     
(747.6
)
Cash and short-term investments
   
191.0
     
373.9
     
519.1
     
482.7
     
313.4
 
Debt
   
3,034.5
     
4,837.2
     
4,657.1
     
5,606.4
     
5,828.4
 
Equity
   
4,061.0
     
5,044.3
     
9,367.6
     
2,105.5
     
4,983.1
 

Adjusted ratios
                                       
EBITDA margin (%)
   
22.8
     
16.0
     
16.9
     
56.1
     
25.5
 
Return on capital (%)
   
10.7
     
2.6
     
3.3
     
19.2
     
12.0
 
EBITDA interest coverage (x)
   
8.6
     
4.0
     
5.1
     
5.7
     
6.1
 
FFO cash interest coverage (x)
   
8.1
     
4.7
     
6.0
     
3.6
     
4.8
 
Debt/EBITDA (x)
   
2.5
     
6.6
     
3.1
     
3.6
     
3.7
 
FFO/debt (%)
   
31.2
     
11.1
     
26.0
     
17.6
     
19.0
 
Cash flow from operations/debt (%)
   
32.2
     
14.5
     
24.8
     
11.7
     
15.5
 
FOCF/debt (%)
   
13.8
     
3.1
     
(1.9
)
   
5.8
     
0.6
 
DCF/debt (%)
   
4.8
     
2.0
     
(6.6
)
   
5.7
     
(12.8
)
 
We compare ICL with business peers operating in the potash and phosphate fertilizer industry, such as K+S AG, Uralkali OJSC, EuroChem Group AG, and Mosaic Co. ICL's adjusted EBITDA margins have historically lagged those of Eurochem, which benefits from a first-quartile position in phosphate, thanks to access to lower gas prices for Russian producers and a high degree of vertical integration. In comparison with K+S, ICL displays higher margins, reflecting its highly advantageous cost position in potash given its access to high quality raw materials in the Dead Sea, and notwithstanding its high cost position in Spain. By comparison, K+S' profitability has been declining in recent years due to production challenges and the high cost position of its German mines. Overall, the EBITDA margins of ICL, K+S, and Eurochem contrast with Uralkali's superior margins. The latter has large and very low-cost reserves, which position it as the leader on the global cost curve.
 
 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
 JUNE 29, 2020   11


ICL Group Ltd.
 
Chart 6
 

Business Risk: Satisfactor y
 
Our assessment of ICL's business risk reflects its position as the sixth-largest global potash producer--a market with continuously increasing demand and few players--and the largest global bromine producer. ICL's business position is underpinned by its inherent advantages, including direct access to a concentrated source of unique high-quality raw materials in the Dead Sea; a good cost position of potash and bromine mining compared with competitors; low storage costs and easier inventory maintenance, due to the dry weather in the Dead Sea area; proximity to ports and strategic clients (notably China and India); and a synergy between  the manufacturing processes for different specialty chemicals products.
 
Our view of ICL's business is further supported by its wide geographic sales spread, which we believe reduces its exposure to demand shifts due to regional factors (like extreme weather), and by a diversified portfolio of products used in many industries.

ICL's main business risk relates to its dependence on the extension of its Dead Sea concession by the Israeli government in 2030, and its exposure to political pressures and regulatory changes, because it translates into uncertainty as to whether the business will continue  in its current form beyond 2030. There are currently no firm developments in this area. We also note that ICL's position in the commodity phosphate market is weaker than that of peers, for example OCP S.A. or Phosagro PJSC, due to the relatively low quality of the phosphate rock mined in the Negev Desert in Israel, high production costs, and the lack of an alternative mining site as reserves at the current site are dwindling.
 
 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
 JUNE 29, 2020   12


ICL Group Ltd.

Our view on ICL's business is further constrained by the highly cyclical nature of the fertilizer industry. This cyclicality reflects the industry's changing supply-demand balance, which is difficult to predict as it depends on fertilizer price expectations, harvests, the crop mix, farmers' earnings (which depend  on crop prices), the weather, and inventory levels. New supply tends to come on stream and higher cost capacities are curtailed. Political decisions influence both demand and supply, through export allowances or taxes and subsidies in various core markets, especially in India and China.
 
ICL's ongoing shift from the production of commodity fertilizers to value-added complementary products is an important strategic step to help it stabilize profits through the cycle. It is also continuing its cost efficiency programs at the phosphate mines in China, the production ramp up at the polysulphate mine in England, and consolidation of the mines in Spain. The company is also committing capex to improve capacity, lower production costs, and meet regulatory requirements.

Financial Risk: Significant
 
Our assessment of ICL's financial risk reflects the cyclical nature of the fertilizer industry, which historically--and as for peers--has led to significant volatility in ICL's adjusted EBITDA. We also factor in ICL's investment needs, which mainly include maintenance capex and obligations to the Israeli government as part of the Dead Sea concession (including the salt harvest project). We also factor in ICL's balanced financial policy, notably with regard to dividend distributions to the parent company, Israel Corp, and to all other shareholders. Over the medium term, ICL's strategy is to enhance its market positions across three core mineral value chains in bromine, potash, and phosphate, as well as expanding its Innovative Ag Solutions business. We understand that the company will execute its growth strategy via bolt-on acquisitions, organic investments, ramp-up of specialty fertilizer products such as polysulphate, innovation through new product development, and new applications  for existing products.

At the same time, ICL is committed to the current rating and to maintaining prudent leverage. Management demonstrated this commitment in 2018, when it used net proceeds of about $900 million from the sale of a fire safety unit to repay about $800 million of debt. The deleveraging was further followed by ICL's board of directors' decision to revise the dividend distribution policy to about 50% of adjusted net income from 70% in 2016.
 
Under our base-case scenario, we forecast that adjusted debt to EBITDA will be 3.2x-3.4x in 2020, compared with 2.5x in 2019. We don't anticipate any material transactions, with only $27 million outflow for a bolt-on acquisitions of Growers Holdings Inc. in February 2020. Based on reported EBITDA of $900 million-$940 million, capex of about $570 million, and modest working capital outflows, we estimate that ICL will generate $80 million-$120 million of free operating cash flow (FOCF) in 2020. We forecast that FOCF will recover to more than $200 million in 2021, but remain lower than the over $400 million the company generated in 2019.

The fertilizer industry's cyclicality is a structural constraint to its financial risk because it translates into volatility in profits outside of the company's control, as well as large seasonal working capital swings. ICL's track record of navigating the business through the cycle and prudent financial policy are important mitigating factors.
 
 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
 JUNE 29, 2020   13


ICL Group Ltd.

Financial summary
Table 2
ICL Group Ltd.--Financial Summary
Industry sector: Chemical companies
     
 
 
--Fiscal year ended Dec. 31--
 
 
 
2019
   
2018
   
2017
   
2016
   
2015
 
 
(Mil. $)
                             
Revenue
   
5,271.0
     
5,556.0
     
5,418.0
     
5,363.0
     
5,405.0
 
EBITDA
   
1,201.0
     
1,181.0
     
1,087.0
     
1,006.5
     
1,224.9
 
Funds from operations (FFO)
   
947.0
     
981.8
     
810.7
     
776.0
     
1,086.8
 
Interest  expense
   
140.0
     
165.2
     
175.3
     
187.5
     
132.1
 
Cash interest paid
   
134.0
     
143.2
     
149.3
     
146.5
     
118.1
 
Cash flow from operations
   
976.0
     
631.8
     
859.7
     
987.0
     
595.8
 
Capital expenditure
   
557.0
     
550.0
     
434.0
     
610.0
     
598.0
 
Free operating cash flow (FOCF)
   
419.0
     
81.8
     
425.7
     
377.0
     
(2.2
)
Discretionary cash flow (DCF)
   
146.0
     
(159.2
)
   
188.7
     
215.0
     
(350.2
)
Cash and short-term investments
   
191.0
     
213.0
     
173.0
     
116.0
     
248.0
 
Gross available cash
   
161.0
     
183.0
     
146.0
     
96.0
     
248.0
 
Debt
   
3,034.5
     
3,044.0
     
3,959.9
     
4,052.0
     
3,883.1
 
Equity
   
4,061.0
     
3,915.0
     
2,930.0
     
2,659.0
     
3,188.0
 
 
Reconciliation
Table 3
ICL Group Ltd.--Reconciliation Of Reported Amounts With S&P Global Ratings' Adjusted Amounts (Mil. $)
 
 
--Fiscal year ended Dec. 31, 2019--
 
 
ICL Group Ltd. reported amounts
                                               
 
 
Debt
   
Shareholders' equity
    EBITDA    
Operating income
   
Interest expense
   
S&P Global Ratings' adjusted EBITDA
   
Cash flow from operations
   
Capital expenditure
 
 Reported
    2,301.0      
3,925.0
     
1,189.0
     
756.0
     
109.0
     
1,201.0
     
992.0
     
576.0
 
 
S&P Global Ratings' adjustments
                                                               
Cash taxes paid
   
--
     
--
     
--
     
--
     
--
     
(120.0
)
   
--
     
--
 
Cash interest paid
   
--
     
--
     
--
     
--
     
--
     
(115.0
)
   
--
     
--
 
Reported lease liabilities
   
300.0
     
--
     
--
     
--
     
--
     
--
     
--
     
--
 
Postretirement benefit obligations/deferred compensation
   
439.0
     
--
     
9.0
     
9.0
     
12.0
     
--
     
--
     
--
 
Accessible cash and liquid investments
   
(161.0
)
   
--
     
--
     
--
     
--
     
--
     
--
     
--
 
Capitalized interest
   
--
     
--
     
--
     
--
     
19.0
     
(19.0
)
   
(19.0
)
   
(19.0
)
Share-based compensation expense
   
--
     
--
     
12.0
     
--
     
--
     
--
     
--
     
--
 
 
 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
 JUNE 29, 2020   14


ICL Group Ltd.

Table 3
ICL Group Ltd.--Reconciliation Of Reported Amounts With S&P Global Ratings' Adjusted Amounts (Mil. $) (cont.)
Dividends received from equity investments
   
--
     
--
     
3.0
     
--
     
--
     
--
     
--
     
--
 
Asset-retirement obligations
   
155.5
     
--
     
--
     
--
     
--
     
--
     
--
     
--
 
Nonoperating income
(expense)
   
--
     
--
     
--
     
9.0
     
--
     
--
     
--
     
--
 
Reclassification of interest and dividend cash flows
   
--
     
--
     
--
     
--
     
--
     
--
     
3.0
     
--
 
Noncontrolling interest/minority interest
   
--
     
136.0
     
--
     
--
     
--
     
--
     
--
     
--
 
EBITDA: Other
   
--
     
--
     
(12.0
)
   
(12.0
)
   
--
     
--
     
--
     
--
 
Depreciation and amortization: Asset valuation gains/(losses)
   
--
     
--
     
--
     
(10.0
)
   
--
     
--
     
--
     
--
 
Total adjustments
   
733.5
     
136.0
     
12.0
     
(4.0
)
   
31.0
     
(254.0
)
   
(16.0
)
   
(19.0
)
S&P Global Ratings' adjusted amounts
 
                           
Interest
   
Funds from
   
Cash flow from
   
Capital
 

    Debt    
Equity
   
EBITDA
   
EBIT
   
expense
   
operations
   
operations
   
expenditure
 
Adjusted
    3,034.5      
4,061.0
     
1,201.0
     
752.0
     
140.0
     
947.0
     
976.0
     
557.0
 

Liquidity: Adequate
 
ICL's liquidity is adequate. Our assessment of ICL's liquidity reflects our expectation that the ratio of sources and uses will be around 1.4x in the 12 months from March 31, 2020. Our assessment is underpinned by the company's prudent liquidity management, sufficient unutilized committed credit lines, and good access to the banking system and the Israeli capital markets.

Principal liquidity sources
 
•  Available unrestricted cash and cash equivalents  of about $500 million on March 31, 2020. We note that cash balances  were boosted by the preventative drawing of $300 million under ICL's committed revolving credit facility (RCF) in March 2020;
 
•  Availability of about $590 million under a $1.1 billion long-term RCF maturing beyond one year;
 
•  Our forecast of reported cash FFO of $720 million-$740 million; and

•  About $110 million in proceeds from the issuance of a bond in May 2020.
 
Principal liquidity uses
 
•  Short-term debt maturities of about $606 million;

•  Capex of $550 million-$560 million;

•  Working capital outflows (including intrayear) of about $50 million; and

•  Dividend distribution of about $120 million.
 
 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
 JUNE 29, 2020   15


ICL Group Ltd.

Covenant Analysis
 
We forecast comfortable headroom under the covenants incorporated in ICL's debt agreements. These include:
 
•  Total shareholders' equity greater than $2 billion;

•  EBITDA net interest cover ratio equal to, or greater than 3.5x;

•  Net financial debt to EBITDA less than 3.5x; and
 
•  Ratio of certain subsidiaries loans to total consolidated assets of less than 10%.

Environmental, Social, And Governance
 
We see ESG credit factors for ICL as more exposed in comparison with industry peers', given that it operates a unique natural resource asset in a region facing water scarcity and significant geopolitical tensions. The company conducts its Dead Sea operations under a concession agreement with the Israeli government.

The minerals from the Dead Sea are produced by means of solar evaporation, in which salt sinks to the bottom of one of the pools. As a result of this process, raising the water above a certain level may cause damage to the foundations and hotel buildings located near the shoreline and to other infrastructure on the beach. ICL also draws water from the northern basin of the Dead Sea and transfers it to pools at the southern part of the sea. As a result, the water level has decreased in the Dead Sea's northern basin over the years, most recently at an average annual rate of about 110 centimeters, leading to the creation of sinkholes.

We note that ICL's share of responsibility for the Dead Sea's water depletion is about 23%, with the balance due to evaporation, increased use of upstream water by neighboring countries (including Israel), and less rain in general. Over the longer term, we believe this situation may create pressure on ICL to reduce its use of Dead Sea minerals, which could have an adverse effect on its business.

In addition, ICL is exposed to lawsuits in connection with malfunctions at its plants resulting in an ecological environmental impact. For example, in 2017, a pool used to store water gypsum formed in production processes in the Negev collapsed. This event led to severe environmental pollution. Class action suits were filed against ICL and it was required to bear long-term costs relating to rehabilitation programs. Such costs are hard to predict but could influence the financial and credit metrics of the company if incurred.

Group Influence
 
ICL is 45.9% owned by Israel Corp., whose shares are traded on the Tel Aviv Stock Exchange. The balance of shares are owned by institutional and public investors and traded on the Tel Aviv and the New York Stock Exchanges.
 
Israel Corp's asset portfolio is dominated by its controlling stake in ICL (about 88% of Israel Corp's portfolio value as of May 31, 2020). It is also the major shareholder of Oil Refineries Ltd. (ORL), an Israel-based energy company (about 12% of its portfolio value).
 
 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
 JUNE 29, 2020   16


ICL Group Ltd.

Israel Corp.'s main source of cash for its debt service are the dividends from ICL, bearing in mind that ORL's dividends are relatively limited. Notwithstanding this status, we view ICL's credit quality as insulated from the estimated credit quality of Israel Corp. due to relatively strong Israeli legislative and regulatory protection frameworks, where both companies are incorporated. We recognize that five out of 10 board members of ICL are independent, and five are nominated by Israel Corp.
 
That said, we understand that Israel Corp.'s stated strategy is to expand its holding portfolio to new industries, through acquisitions. While the implementation of this strategy may take time and could be delayed due to COVID-19, we understand from management that it will not lead to an increase in net debt over time. In our view, this represents an important area of uncertainty with regard to the credit quality of the parent, notwithstanding our view of ICL's insulation.

Issue Ratings--Subordination Risk Analysis
 
Capital str ucture
ICL's capital structure consists primarily of senior unsecured debt issued at the parent or 100%-owned financing entity level. There is no material secured debt.
 
Analytical conclusions
ICL's debt is rated 'BBB-', the same as the issuer credit rating, because ICL does not have any material secured debt, limiting the risk of subordination for lenders of unsecured debt.
 
Ratings Score Snapshot
 
Issuer Credit Rating
 
Foreign Currency:  BBB-/Stable/--

Business risk: Satisfactory

Country risk: Intermediate

Industry risk: Intermediate

Competitive position: Satisfactory
 
Financial risk: Significant
 
Cash flow/leverage: Significant
 
Anchor: bbb-

Modifiers
 
Diversification/portfolio effect: Neutral (no impact)
 
 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
 JUNE 29, 2020   17


ICL Group Ltd.
 
Capital str ucture: Neutral (no impact)

Financial policy: Neutral (no impact)

Liquidity: Adequate (no impact)

Management and gover nance: Fair (no impact)

Comparable rating analysis: Neutral (no impact)
 
Related Criteria
 
•  General Criteria: Group Rating Methodology, July 1, 2019

•  Criteria | Corporates | General: Corporate Methodology: Ratios And Adjustments, April 1, 2019

•  General Criteria: Methodology For National And Regional Scale Credit Ratings, June 25, 2018

•  Criteria | Corporates | General: Reflecting Subordination Risk In Corporate Issue Ratings, March 28, 2018

•  Criteria | Corporates | General: Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Dec. 16, 2014

•  General Criteria: Country Risk Assessment Methodology And Assumptions, Nov. 19, 2013

•  Criteria | Corporates | General: Corporate Methodology, Nov. 19, 2013

•  General Criteria: Methodology: Industry Risk, Nov. 19, 2013

•  General Criteria: Methodology: Timeliness Of Payments: Grace Periods, Guarantees, And Use Of 'D' And 'SD' Ratings, Oct. 24, 2013

•  General Criteria: Methodology: Management And Governance Credit Factors For Corporate Entities, Nov. 13, 2012

•  General Criteria: Use Of CreditWatch And Outlooks, Sept. 14, 2009

Business And Financial Risk Matrix
 
 
Business Risk Profile
Financial Risk Profile
Minimal
Modest
Intermediate
Significant
Aggressive
Highly leveraged
Excellent
aaa/aa+
aa
a+/a
a-
bbb
bbb-/bb+
Strong
aa/aa-
a+/a
a-/bbb+
bbb
bb+
bb
Satisfactory
a/a-
bbb+
bbb/bbb-
bbb-/bb+
bb
b+
Fair
bbb/bbb-
bbb-
bb+
bb
bb-
b
Weak
bb+
bb+
bb
bb-
b+
b/b-
Vulnerable
bb-
bb-
bb-/b+
b+
b
b-

Ratings Detail (As Of June 29, 2020)*
ICL Group Ltd.






Issuer Credit Rating






Foreign Currency



BBB-/Stable/--

Senior Unsecured



BBB-

 
 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
 JUNE 29, 2020   18



ICL Group Ltd.


 
Ratings Detail (As Of June 29, 2020)*(cont.)
Issuer Credit Ratings History






27-Oct-2016
Foreign Currency


BBB-/Stable/--

20-Jun-2016



BBB/Watch Neg/--


29-Oct-2015



BBB/Negative/--



* Unless otherwise noted, all ratings in this report are global scale ratings. S&P Global Ratings’ credit ratings on the global scale are comparable across countries. S&P Global Ratings’ credit ratings on a national scale are relative to obligors or obligations within that specific country. Issue and debt ratings could include debt guaranteed by another  entity, and rated debt that an entity guarantees.
 
 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
 JUNE 29, 2020   19



Copyright © 2020 by Standard & Poor’s Financial Services LLC. All rights reserved.

No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
 
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating- related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
 
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw or suspend such acknowledgment at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
 
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity  of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.
 
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters  of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional  information about our ratings fees is available at www.standardandpoors.com/usratingsfees.
 
STANDARD & POOR’S, S&P and RATINGSDIRECT are registered trademarks of Standard & Poor’s Financial Services LLC.
 
 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
 JUNE 29, 2020   20


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.
 
 
ICL Group Ltd.
 
       

By:
/s/ Kobi Altman  
    Name: Kobi Altman  
    Title:   Chief Financial Officer  

 
ICL Group Ltd.
 
       

By:
/s/ Aya Landman  
    Name: Aya Landman  
    Title:   Global Company Secretary  

Date: June 29, 2020


ICL (NYSE:ICL)
Historical Stock Chart
From Jul 2020 to Aug 2020 Click Here for more ICL Charts.
ICL (NYSE:ICL)
Historical Stock Chart
From Aug 2019 to Aug 2020 Click Here for more ICL Charts.