Q2 2020 Icl Group Ltd Earnings Call
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Hi, everyone welcome and thank you for joining us today, what our second quarter Twentytwenty Conference calls the event is being webcast live on our website www Dot I see as Dash group Dotcom earlier today, we far that reports to the securities authorities and the stock exchanges in the U.S. any news right.
The report is what does the press release are available on our website there will be a replay of the webcast available a few hours after the meeting and the transcript will be available. Shortly after the presentation that would be reviewed today was also fire to the securities authorities and is available on our website. Please don't forget to review to discuss.
Labor on slide number two.
Our comments today will contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995. These statements are based on managements current expectations and are not guarantees of future performance. We will begin with a presentation by a CEO mr. reviews order followed by Mr. Colby.
<unk> our CFO following the presentation, we will open the line for the Q annexation Raviv. Please thank you do D and Hello, everyone.
Before discussing I sales highlights for the second quarter I would like to once again acknowledge ice yells employees globally for their perseverance in light of the challenging conditions brought about by the covert might seem pandemic that have affected all of us personally and professionally.
Due to the efforts of our committed team we've been able to maintain continuity of our business globally with zero disruptions to our customers, while ensuring the health and safety of our employees.
Turning to slide three of our earnings presentation.
In the second quarter, we generated positive operating income in each of our segments as well as positive free cash flow at a very challenging operating and marketing environment.
I'm pleased to report that these results were actually ahead of our internal forecasts in fact, there were more or less inline with our results in the first quarter when our business was not materially impacted by covert 19.
Our results. This quarter were also supported by record first half potash production at the dead Sea.
Output didn't suffer as a result of increased health and safety measures that remain in place today.
I will discuss our operating performance in greater detail shortly.
But I'd like to briefly discuss how our strategy drives our performance and provide context for some of the actions we took in the second quarter.
As we've stated before I still is far from a pure play commodity company with performance types of commodity in business cycles.
Well performance within some of our segments can certainly be impacted by these factors our business is highly diverse and growing more so.
Also while certain of our end markets like oil and gas or cyclical.
The vast majority of our revenue is derived from the very durable agriculture in food markets as well as from other various value added specialty products that I see all produces.
We are continuously emphasizing R&D and innovation to drive growth across our value chains and growth opportunities remain significant.
You know more commoditized businesses, we're continuously focused on cost efficiency.
If we can continue to be one of the lowest cost producers, we can generate operating cash flow even in weak commodity markets and maintain significant exposure to periods where prices are stronger.
Did that and we continue to execute on our global efficiency plans and initiatives across all of our segments in the second quarter.
Specifically, we reduced head count in all of our segments, primarily through early retirement programs and took important actions to optimize the footprint of our commodity businesses.
We discontinued the production and sales of phosphate rock to third parties from Israel, which does not contributes to the phosphate solutions segments downstream product value chain.
We will continue to produce phosphate rock in order to deliver higher value products to our customers globally.
But our cost base will be lower.
We also accelerated the closure of potash production in the Villa frozen mine at I feel Iberia in Spain.
This was originally scheduled to occur and 2021.
But given the put us price environment, we decided not to wait since our cost per ton of production will decrease in the savings will drop right. So the bottom line.
These actions resulted in charges totaling $297 million in the second quarter, most of which are noncash charges and the balance will be spread over a number of reporting periods.
Importantly on an ongoing basis. The actions will ultimately result in annual cost savings and enhanced profitability of approximately $50 million commencing next year.
Finally, as we announced in June we have consolidated our crop nutrition sales and marketing infrastructures into a single commercial organization facing the agriculture market.
We believe that this structural change, which will not impact or segment reporting will allow I see all to better leverage region specific knowledge agronomic in R&D capabilities logistical assets and customer relationships as well as enhance the global operational scale of our crop nutrition business.
Our strong financial position and balanced capital priorities provide us with the flexibility to make decisions that we think will maximize their cash flows and create the most value for our shareholders.
Our capital allocation priorities remain unchanged and our dividend for the second quarter amounts to about $36 million.
The summary of our financial results shown in the table on slide four.
Clearly shows the decline across all financial matrix compared to the second quarter 2019.
This should come as no surprise.
As I mentioned, our performance compared to the first quarter of this year was impressive even if our results were not materially different.
On an adjusted basis, our results were close to flat quarter over quarter, and our operating cash flow and net income actually increased.
Commodity prices didn't increase quarter over quarter, they went down and covert 19 brought about operational challenges and the severe disruption in demand from the oil and gas market.
I think this is a pretty clear demonstration of the effectiveness of our strategy our continuous focus on execution that innovation and the diversity of our business.
Like many other companies I still has been impacted by the cope with 19 pandemic, but the strengths of our business model and the critical role our products play in the food supply chain help us weathered the storm better than others.
Let's move onto the business performance of our divisions, starting from industrial products on slide five.
Segment sales and EBITDA in the second quarter of 2020 decreased by 15% and 19% year over year, respectively, due to lower demand for flame retardants and clear brine fluids, resulting from the negative impact of the covert 19 pandemic on a global industrial activity and demand for oil and gas.
Despite the large drop in sales volumes the segment generated a healthy EBITDA margin of 31% due to an ongoing strategic shift to long term contracts a diverse product portfolio and an increase in sales of specialty minerals to the resilient pharma and supplements markets.
The impact of gold with 19 pandemic on the segment is expected to continue through the third quarter of 2020 and result in lower demand for clear brine fluids and Brominated flame retardants.
At the same time, a slight recovery in certain flame retardants for the electronics markets and the European building and construction industry could partly offset the overall negative impact on the segment.
Turning to slide six.
We achieved record first half put us production at the dead Sea. Following the three week production shut down in our facilities for capacity upgrades in the fourth quarter 2019.
However, production gains were offset by lower production I see Liberia in Spain caused by disruptions to operations due to the cope with 19 pandemic.
Based on our prior production forecasts, we measure the negative impact of cope with 19 on the put us division to be about $23 million in the second quarter, mainly in ice still Iberia and I feel UK.
Currently our sites are operating as planned and we do not see a very significant impact from the cope with 19 pandemic on the segment's results in the third quarter 2020.
To put us segments sales and EBITDA decreased in the second quarter of 2020 by 21% and 43% respectively compared to the same quarter in the prior year.
Business performance was primarily impacted by $63 decrease in the average put us realized price protection and higher operational costs, resulting from cold with 19 pandemic.
Partly offset by a reduction in certain costs as a result to the segments efficiency initiatives and increased production in Israel.
Covert 19 also negatively impacted the global end market demand from magnesium primarily in the automotive and aviation industries.
As I mentioned earlier, we moved forward the consolidation process of activities of IC, Liberia into one site.
As a result production operations at the Villa Florence mine were discontinued towards the end of the second quarter.
The decision allows us to speed up the story of mine development and to improve our future cost per ton.
Sales to our customers will not be affected due to the closure of dealer phones as the Syria mine is already stepping up production and with support from I.C.L. did see we'll continue to meet the demand of our customers.
Production of Polysulphate increased by 38% to 184000 tons and sales volumes increased by 27% to 131000 tons compared to the second quarter of 2019.
These increases were achieved despite some operational challenges presented by the covert 19 pandemic.
Nevertheless, we are still on target to reach our annual production capacity Runrate goal of 1 million tons by the end of year.
Subsequent to the ended the quarter, we announced the expansion of our Polysulphate distribution network with long term distribution agreements.
Following the signing of these agreements we have contracted an aggregate of 1.1 million tons of Polysulphate as part of our strategy to enable and expand the adoption of Polysulphate globally.
Turning to our phosphate solutions division on slide seven.
The division once again demonstrated the strength of a diverse portfolio focused on growing specialties business.
The segment sales and EBITDA decreased by 15% and 23% respectively year over year, mainly due to a sharp decrease in phosphate commodities market prices, partially offset by lower raw material prices.
The continued positive operating income of the segment, despite the weak commodity price environment in market headwinds reflect strong phosphate specialties performance and ongoing positive operating profit from the white P. H JV in China.
For the first time, we have broken out operating income for phosphate commodities and phosphate specialties in our earnings report.
Phosphate specialties recorded an operating income of $30 million, 20% higher than the second quarter of 29 team driven mainly by lower raw material costs and strong sales volumes of food phosphates.
Sales of phosphate commodities were approximately 31% lower than in the second quarter of 29 team, mostly due to a significant decline in market prices and lower sales volumes of phosphate fertilizers.
This resulted in an operating loss of $22 million compared to operating income of $7 million in the second quarter 2019.
As I mentioned, our focus on cost efficiency in our commodity businesses drove our decision to discontinue the unprofitable production and sales of phosphate rock from Israel and activity that does not contribute to the segments downstream value chain and is consistent with our ongoing focus on growing our value add businesses.
Overall, I see I was robust and diversified customer portfolio and why geographic reach of its phosphate specialties businesses.
Coupled with a strong demand for food products prevented a material impact of the pandemic on the segments business performance.
Currently we do not see a very significant impact from the cope with 19 kind of dynamic on the segment's results in third quarter of 2020, although the fully effective depend emeka still difficult to assess.
Slide eight the is segment sales decreased 3% year over year, driven mainly by unfavorable dollar Euro exchange rates.
EBITDA increased by 29% year over year to $22 million, an EBITDA margin increased to 11% compared to 8% in Q2 of 2019.
This was primarily due to lower cost of raw materials, and the successful implementation of efficiency and cost reduction initiatives.
Sales to the specialty agriculture markets slightly decreased year over year, mainly as the negative impact of unfavorable exchange rates was partly offset by strong sales of straight fertilizers and higher sales to China.
Sales to the turf and ornamental market were lower compared to the corresponding quarter last year, mainly due to the impacts of cold 19 pandemic has a decrease in sales and the turf business, we're only partly compensated by higher sales to the ornamental horticulture market.
The reopening of sports fields and golf courses in Europe resulted in a slight recover in sales towards the end of the quarter.
Turning to slide nine.
As previously noted I still announced that it has consolidated its crop nutrition sales and marketing infrastructure, creating a unified commercial platform facing the agricultural end markets in order to drive internal synergies and optimize distribution channels of commodity specialty in semi specialty fertilizers.
We previously had multiple internal sales organizations across dozens of locations selling portions of our product portfolio to their own base of customers.
These organizations, where silos from one another including with respect to their back office I'm reporting systems.
This was both inefficient from a cost perspective, and not optimal for marketing reasons.
The company expects that this new operating model, which will be managed on a regional basis will serve to achieve commercial excellence increased the efficiency of its global operations and better leverage its region specific knowledge agronomic in R&D capabilities logistical assets and customer relationships.
To summarize on slide 10.
Very happy to say that overall, we are fortunate to have suffered minimal operational impact as a result of coal was 19 and all of our production is back online and operating under all applicable health and safety regulations related to cope with 19.
The pandemic was and continues to be disruptive to end markets.
In particular, we expect to see continued weakness in demand for clear brine fluids and to a lesser degree flame retardants.
The industrial product segments performance will ultimately fall the recovery and industrial demand.
By contrast, there's inherent stability in our agriculture, and food end markets, where our performance has been impacted by commodity pricing rather than end market demand.
Recently commodity prices have stabilized, albeit at low levels, and we expect prices to continue firming overtime.
Overall, the diversity of our business provides stability resilience and continued cash generation amid a weak commodity in business environment.
We firmly focused on executing our business strategy and increasing efficiency and cost savings across all our operating segments, which not only protect our performance against downside scenarios, but also positions I sell to generates significant cash flow when underlying demand in commodity prices are stronger.
Finally, while our business is diversified and not excessively depending on commodity prices, we manage our balance sheet as if our business had a higher level of commodity price exposure than it actually does.
This affords us a significant degree of flexibility to execute on our strategic initiatives in order to innovate bring new products and applications to the market and manage the growth of our business safely and consistently over the long term.
Before I hand, it over to Colby I.
I would like to briefly highlight recent recognitions, we have received with respect to our east GE practices.
First I see I was recently included in the foot see for good Index series, which is designed to measure the performance of companies demonstrating strong as GE practices.
These indexes are used to create indexed tracking investment products focused on sustainable investment.
Additionally, I sale was awarded the highest platinum plus ranking by my luck.
Leading professional nonprofit corporate membership organization comprised of over 110 of the highest impact companies in Israel.
We tried to display our commitment to the highest the as GE standards in our strategy and everyday practices.
And we are very grateful to third parties continues to validate our efforts.
Thank you all and with that I would like to handed over to Colby. Thanks.
Thank you Levine and good day everyone.
Despite the current equals market environment, which potash and phosphate commodity prices fell to what we believe all cyclicality levers we achieved adjusted EBITDA of 246 million dollar.
Adjusted net income of 72 million, though.
Operating cash flow of $177 million.
You can see the percentage of says we show increased versus Q1 in all those parliament theirs.
Compared to the second quarter of 2019, our results were impacted by a significant yield that even declining commodity prices.
Nonetheless, the stability fully woman in all of these out depending on which metric you look at it flips the diversity in the resilience of IC as business portfolio is whether the effectiveness of our strategic focus on value based specialty products.
Oh it he asked me that that achieving a very challenging environment that presented both operational challenges and decreases in both commodity prices and Colgate 19 related demand from industrial end markets.
Turning to slide 13.
The chart on this slide very clearly shows the impact of cyclically low commodity prices and Colby 19 related softer demand on our results in the second quarter.
I'll just mention I pledge, both the selling prices declined by $63 that on both 22% compared to the second quarter 2019.
Phosphate commodity prices also declined significantly decreasing quantities comes mainly from the bromine invited chain and we expect this demand pick up as the global economy recovers.
Assuming a feature is shown in the adjusted EBIDA segment contribution chart on slide 14.
Both our potash and phosphate solution segment was negatively impacted by lower classes.
You can see the quantities at much lower effect.
Penciled it took time child.
Well, we've mentioned performance in our full suite solutions segment was driven by strong operation.
Infosys sufficient.
On Slide 15, we provides additional details on the non-GAAP adjustments, we made this quarter before and after that DUC impact. They non-GAAP adjustments comprises of $187 million noncash impairment in write down of assets enrolling sites in Spain.
As part of the stemming all then we initiated that includes a global workforce reduction of about 250 employees.
We booked provisions for early retirement of over 400 employees in their mobile 78 million dollar.
We also increased well vision well asset retirement obligation in the amount of $32 million.
They bid on this slide shows how those adjustments.
Distributed by operating sites.
Please turn to slide 16 fully quick snapshot of our financial position.
Dan maintained a healthy balance sheet backed by immediately available liquidity, including Kish dental seat and Unutilized credit line of one point 15 began though.
The ending the quarter.
Oh, the budget will bolster.
In addition on $110 million issuance, so far series G bond in May.
With no major principal repayments of loans on think Twentytwenty for we are well positioned to focus on execution and also to pursue growth opportunities.
Our net debt to EBITDA ratio of 2.4 remained within an acceptable range. Although we expect these liquid as industrial demand picks up in commodity prices rebound S&P and Fitch ratings knowledge I see as strong financial position and credit metric.
Well as the actions we've taken that will further improve our liquidity over the coming years.
Each rating agency recently affirmed our Threefifty minus rating, both with the state but outlook.
Each rating agencies stated.
It's creating a slate I see as strong business profile stemming from our unique strategic assets in that C O <unk> market or cost leadership position.
Resilience of our specialty chemicals in bromine businesses.
Let's see energetic profile, if I see a specialty chemicals production, our strong liquidity and prudent financial policy and our solid funds from operations net leverage.
Slide 17 provides a view of the commodity cycle, we face we believe the both both us and phosphate commodity prices have fallen to sticky low levels.
And our business is significantly less commodity price exposure than a fuel plate what you'll see.
We still manage for commodity cycles, and maintaining a conservative financial profile as a result this exposure.
If we assume I mean, we see that the new supply contract, signing China, and India should help to reverse the downward trend in both as prices.
Has impacted our results later.
To conclude our performance in the second quarter in market environment without precedent is directly relates to differentiate that business model.
We are continuously focus on executing our strategy to increase the cost efficiency of our commodity businesses into low, especially at these for the business that by entering new product category and expanding our geographic distribution network.
Upset the impact of what we'd 19, they would be expecting increasingly strong results in the near term as commodity prices are expected to start the recovery from cyclical lows.
Pandemic post our expectations out being done.
But we maintain our positive outlook and believe that industrial demand with the rebound from second quarter levels and our specialty businesses will continue to positively impact our results.
At the same down our strong balance sheet enhancing liquidity pool fine.
Provides us ample flexibility to capture business opportunities in a volatile and changing economic environment.
Finally, I would also like to Danielle tension to the new interrupting data tool, we have implemented under the investors section in our website, which will enable people to easily access our financials and download customized data with multiple parents implementers waste.
I would like to thank you for listening to our core and open up the line for any questions you may have.
Yeah.
Thank you very much.
As a reminder.
Please proceed.
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Once again.
Mission today.
At first question, we have today comes from the line of Vincent Andrews from Morgan Stanley.
Please go ahead.
Thank you and Hello, everyone.
Wondering if you can just give us a little more color on the on the bromine outlook.
What you noted the prices stabilize towards you ended the quarter, but I'm trying to assess volumetrically. What do you think that there's volumes are going to be down sequentially threeq versus twoq, just as maybe the clear brine fluids.
Maybe that's still a little bit weaker in Threeq, you and then if you could just help us understand the moving pieces on the electronics uplift you think you might see which areas that is as well as what we need to see in Europe from construction perspective in order to get some favorability there.
Okay basically a thanks for your question last quarter, a we were asked the same question and.
It was more difficult to predict so we said that ER. Our best Guesstimate is to say that we don't have any different assessment from our competitors and at the time that competitors.
Said that they expect EBITDA to be down, 20% and I want to salute them because it came out a 19% and we said we don't have a better assessments, so I owe him that.
The third quarter looks very much like the second quarter.
So far what we see is on one hand of course, a clear brine fluids of Ah a bottoms and we also see that the electronics related flame retardant Theres still a week.
But at the same time bromine prices a the went down in China.
Over may and June of of come back to rising.
And we see a stronger demand.
For a home appliance flame retardant. So these are flame retardant.
Are used for a air conditioning units a television sets.
Appliances are like that.
PCB boards are still weak, but not as weak as a few weeks ago.
And on construction, we also see I'm the market is getting the demand is getting a stronger.
Still very low on a automotive related.
So all in all it looks like a we bottomed.
And now we see some signs of improvement.
But the net of at all is that we expect.
Third quarter should be very similar to the second quarter.
Similar to the second quarter in terms of the year over year decline or the absolute level.
I need it.
The absolute levels EBITDA.
Okay, and then if I could just ask a follow up on on the phosphate rock that you're no longer selling to the merchant markets are you doing something else, where the downstream or you just a you know.
Not selling it.
No. We're just a discontinuing the sales of phosphate rock given a labor union issues and regulatory issues. It was difficult for us to make this decision in the past and because of the weak markets and a new.
Approached by regulators and a healthy negotiations with the unions. We're in we're now in a position.
To save about 20 million out of 30 million loss.
That we had to live with for the past few years.
Okay excellent. Thank you very much I'll pass along.
Thank you.
Thank you very much the banks question today kept this puts a lot of Joe Jackson from <unk> capital markets. Please go ahead.
Hi, good morning, Raviv Koby.
I have a few questions.
We could start with potash on could we talk about John what you expect your potash production and sales to be this year in 21 in 22, considering different things like inventory levels in some of the stuff you're doing in Spain. Thanks to 2021 22.
Hi, Joe.
Expect and and 2020, we expect a sales to be around 4.5 million.
And we expect next year's sales to be about 150 to 200000 north of that.
Those are the numbers on the put us.
And then you would probably be holding inventory levels inventory level about about flat.
About flat yes.
Most of the obviously most of it is coming from the dead Sea. So we expect about 3.9 million tons from the dead Sea. This year and probably about 4.0 million next year from the density.
That's.
That's really helpful.
If we.
When we talk about Polysulphate probably.
What what was the earnings contribution or loss in the second quarter can probably felt right what will it be in 2020, and what are you happy to make a profitable.
Okay I'll start from a for the last part which is easier to answer in order to be profitable, we need to cross the 1 million tons in production and we need to also sell 1 million tons.
At a certain price level, which we are achieving today, but not on all of our product. So.
We still have ways to go in terms of the results on the second quarter.
The result was a loss of about $7 million. It was negatively affected by your covert 19, because of social distancing restrictions, we had to lower production during the quarter.
From the end of March and gradually picking up until June 1st we were back to full production in June 1st So our production for the quarter was about 80% of was originally plan and also in terms of sales we sold less than we expected.
We ran into some issues one of them versus plan was the fact that.
We were late with some sales to India, a we've been working on import licenses to India and it took us much longer than we expected happy report that that's a that's been settled this this month in July.
But of course, we okay.
Right, but.
We sold 131000 ton.
Order.
We plan to so about 160000 tons this quarter a two thirds of the difference Oh comes from our plans in India.
So again.
That was the result for this quarter with some headwinds from a covert 19, they shouldn't last into the second half the year.
But in order to become profitable in the UK, we have to surpassed 1 million tons and we have to be able to sell 1 million tons year, it's a new product, we're introducing into the market.
Our our level of a run rate of losses going down obviously.
And will come to zero cross that line of 1 million.
And and what percent of your sales in the second quarter in third quarter are being done at the minimum price you need to breakeven.
Or better.
You got me there I can't be accurate, but I would guess at about three quarters of the sales.
On premium and we reported towards the end of the quarter were reported that we were successful with citing some long term contract and all of them are at the right prices. So we're not signing any contracts were not doing any.
Long term business and pricing, but it's not appropriate.
And just finally from me you talk about you're on your cost reduction program and efficiency programs, leading to $50 million a year of annual savings is that net or gross of inflation and is that break down I guess, it's mostly.
It sounds like it's a kind divide half an option potash and phosphate roughly that right.
Yes, it's roughly a little over 20 million in phosphate and about a little less than 20 million in and put us and the balances between other business is coming mainly from early retirement programs.
Okay actually fight since the magnesium as part of put out then let me go back on what I said, it's a little more than 20 million in each of put out and and phosphate and the balance which would be around.
Moving to rate in or other two business sectors that also did some a.
Looking to beat them DNA is way yeah.
And and is that gross or net of inflation inflation, the 50 million.
Well I'd have to understand the question to answer.
50 million cost savings, but you also have inflation in the different businesses cost inflation.
So like that $50 million, we're going to see or yet there's actually some cost inflation. Another busy ma'am you may not fit.
I agree that of today's cost.
So it's $50 million today, if there's a wage inflation for next year. The next year it would be a little more.
That's it for me thank you very much.
Thank you Joe.
Thank you very much the bit question today comes the line of Duffy Fischer from Barclays. Please go ahead.
Hi, this is.
Sean get more nonproductive. This morning. Thanks for taking my question good to talk with everyone again, I guess it just a quick one for me again, just on the clear brine fluids business.
I mean, no secret that's been a real tailwind I guess the IP segment throughout 2019, even into Q1, we had kind of a record quarter I'm, just trying to get a sense or see it you can provide a sense of what you would consider the normalized percentage of segment sales or EBIT.
On that comes from the clear brine fluids business.
Oh, well last year was about 13%.
Duties, telling me that 11% so I guess at the end of the year. It was 13%. So it was 11% for 2019 and for the second quarter was about 4%.
Uh huh.
Got it but that's really helpful. Thanks for that.
And then I guess you just.
Provide maybe your outlook on phosphate fertilizer business. It seems like you're getting a little bit more positive. We think generally about the market, maybe just a month or so ago Didnt feel great.
And that seem to reverse here somewhat over the last few weeks. So just trying to get a sense of what you're seeing on the ground and kind of the puts and takes there in the phosphate market.
Well definitely there's been a rapid change over the past a month or so there are few signs for that one is a prices going up and Brazil shoe is a discipline from a Chinese supply and three obviously and that's the.
I mean catalyst I think.
The phosphate Oh, the Foss the like claim on anti dumping.
Which is causing the positive price momentum in the U.S. and sort of has a halo effect to the rest of the market.
So we've seen a about a 10% uptick over.
Over the past a six weeks.
And of course from our perspective, it's a positive side and what we're seeing is that we're selling at higher prices.
Got it makes sense. Thanks for the time that Ocas alone.
Thank you.
Thank you very much. The next question today, we have kept the sort of a lot of jump rider from Stephens incorporated. Please go ahead.
Next month Mark this morning.
First question, but must could you just talk a bit about the relative performance of PSP and SSP prices relative to the movement, we've seen that mapping that.
We've seen some divergence in the last couple of quarters and or curious whether you think PSP.
And SSP prices are reasonable in relative terms.
I think.
Yes, NSP have reacted a little less.
But over time, we're sure that there'll be a catch up.
Over the long term, there's almost 100% correlation between the pricing.
Okay. Thanks, and then just another one.
This is not market information that based on our sales.
Okay.
[music].
And then just one other one.
Do you think that co bid.
We will slow any of your initiatives to push more phosphate production special.
Absolutely not on the contrary I think we built a lot of innovation infrastructure in the company for internal ideation effective R&D investments.
We're taking some more a risk on on initial stages of a new solutions.
And our innovation is.
Oh, it's created some immediate immediate success.
Quick wins and so we have a.
Great pipeline of new products coming in and even during Cove, and we were able to launch a new products through Webinars, a which honestly surprised me also.
But we don't see we don't see any slowed down at this point the only I'm the only area, where we're moving a little.
Lower than we hope has to do with ER business development in alternative proteins.
And the reason being that it's a it's a new business for us.
We are.
Fine from a significant long term agreements.
And product.
A new product development with the food company.
It's about 18 months.
And some of the food companies or inward focused and focused on a existing product. So Paul the business development that going a little lower than we expected during cove it.
It requires a little more a personal engagement.
And so we think that both coal that.
Those are initiatives alternative proteins <unk> much faster.
The potential there's is extremely huge so it's a it's something that we're very keen on.
That's great color. Thank you very much.
Yeah.
Thank you very much once again as a reminder, if you'd like to ask a question. Please press Star then one your telephone keypad.
The next question we have today comes from the line of Laurence Alexander from Jefferies. Please go ahead.
Hey, everyone. This is a covenant like on for Laurence Thanks for taking my question.
I just wanted to ask a quick question about I guess, what do you guys have seeing and what years here, maybe medium to long term expectations are for industry comp.
Validation.
And bolt potash and phosphate.
Yeah.
I'm not I'm not sure I understand the question you're talking about industry consolidation Yep, yeah sort of based on the like in terms of kind of pricing environment.
Terms.
Yes exactly.
Okay. So obviously and these are in these times there's.
More talk about potential M&A and their companies out there looking for financing.
ER or looking to.
De leverage their balance sheet, so as far as the large players are concerned, but so obviously everybody knows about oh, okay plus this situation.
On in smaller companies there are some phosphate assets that that our for sale.
We we don't have any interest.
In a increasing our phosphate capacity I'm not sure.
What appetite there is in the market for those kinds of deals.
On put out there really know a signal there theres not a lot of a small players. So I don't have anything to think about that I guess from.
I don't see a I don't see a reason for they're not to be consolidation, but I'm not aware of any specific.
Action that is happening other than a capable.
Okay. Thank you and I get Prince most many questions were asked maybe just a quick one on scratch X. I know you guys launch that a couple months ago I think maybe back in May or April.
You guys are hoping to capture like 5% to 10% of the market I'm just curious.
A couple of months any update there.
Yeah, it's going very well that's one of those the products that were launched during the cold.
Virtually and we're very happy with the results.
Non scratch additive.
So it's been accepted well by the market and right now it's exceeding our plans, even though it's too early to say because.
We're just in the beginning of the process. We've had a few very successful launches and products and.
That's been one of the successful.
Okay. Thank you.
Thank you very much. The next question comes with a lot of Patrick sites from U.P.S. Please go ahead.
Thank you and hi, everyone and I got disconnected at some point. So please forgive me if.
My questions have there you can add church and there's three add piece the first would be.
Can you talk about how we should slate the 50 million cost savings in potash and phosphates.
Yeah that was actually asked and.
And is that a little over 20 and put us a little over 20 in phosphate and the balance of about eight.
<unk> is a between the other two divisions and Gionee.
Excellent. Thanks.
And then on them.
On fixed costs in the second quarter and.
They were lower pretty much in all lines, if I exclude the author like into PNM and about 74 million lower year on year.
And do you have a sense of how much of this was only temporary cost savings and or how much spot to be will be sustainable apart from the 50 million your part targeting for next year.
Most of the sustainable there a couple of items like travel costs for example.
We're saving about half a million dollars.
A month.
And those are one time, but on the other hand, you know we had the additional costs because of Cobot 19 for example for for a personal protection equipment.
For more transportation to bring a employees to the sites.
You know with a social distancing so.
The net of it is that there's very little.
One time, a savings and most of the savings have to do with the fact that.
Immediately when the crisis started and we are.
Closed our wallets.
We were very conservative I can tell at the senior management took a 10% pace, but it's still a at the end of the year. So we wanted to be conservative wanted to save all discretionary expenses and that's why our June is going down or so sales expenses are going down.
Maybe because we're very careful.
You can look at some of the.
One time, but my experience is that once an organization gets used to a leaner mentality than that.
Okay. Thanks.
The third question.
And we'll be on them.
On the site.
Makes that improve the in potash and you showed that didn't end to eat it breaches well if we now would annualize the closer in Spain.
How much do you think your cost for Tom.
We'll improve going forward.
We have a plan to go down from a current levels, which are about put us market price, which means that we're not making money on put us in other words.
To about 170 euros fun and it's a long term plan the savings that we're showing here related to the closing of the mine is mainly.
A short term savings.
Short term in a sense that their immediate savings such as for example, the fact that we have to mine.
Because of regulatory issues, we have to move.
Solved by truck from one side to the other side just in order to.
Use that mine so the mere fact that we close that might save the immediate cost.
Of a of moving that salt and also saves us.
About 250 contractor employees.
Which gives us a net savings that will stay with us well beyond well beyond the next year.
<unk> is is something that we realized now before our long term plan to cut.
Cut for us cost.
In other words since we're going down on our production than our cost per tonne is not going to go down this year, but we are going to see immediate cost because of the two items I mentioned the movement of salt in a savings of the subcontractors.
So again, we have short term savings that do not expect our cost per tonne, but we have a long term plan from Oh from next year going forward to take out cost per ton down all the way down 270 girls.
Maybe just lots of that review was referring to our Spanish operation. If you combine the over or I see on a division, including that did see because of our increased production in that did see the balance on the entire division, we look even better.
Okay. Thanks, so very very helpful. Thank you.
Thank you very much there no further questions at this stage. Please continue.
Okay. Thank you very much thank you for participating.
If you have any questions and you want to contact me please feel free to do so.
That's it have a great day. Thank you.
Thank you very much that does conclude the conference for today, except the spending you may all disconnect speakers Beast handbags.
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