The Tel-Aviv stock exchange has been declining consistently in trading recently, but few companies have been as hard hit as Israel Chemicals Ltd (ISCHY). ICL is a top fertilizer and specialty chemical company with exclusive concessions to extract high quality, low cost minerals from Israel’s Dead Sea and rights to mine the Negev Desert. The company is a major producer of potash, compound potash and phosphate fertilizers, food grade phosphoric acid, elemental bromine, magnesium and a major player in specialty chemical high margin niche markets. Unfortunately, their dealings in the Dead Sea, which may have been a boon for business earlier, are now catching up to them.
The Israeli Minister of Tourism, Stas Misezhnikov is looking to the company’s unit, Dead Sea Works Ltd. to supply majority funding for the rehabilitation of the sinking Dead Sea and the hotels that flank it. The policy is such that the principal polluter finances the aftermath of their actions. In this instance, that means Israel Chemicals could be accountable for a sum between NIS 5 and 7 billion. This derails the momentum of ISL, that had been building steadily alongside strong sales of Potash and other agriculture-related offerings. At last report, ISL, which actually extracts minerals from the Dead Sea for its fertilizer was up 16 percent for the quarter.
The most recent development would force the company to find a new source for the minerals, and impact their bottom line well into the future. Net income has been growing, reaching $279.7 million, according to their most recent statement to the Tev-Aviv stock market earlier this month, but the rise is not enough to account for the crippling fees and the task of finding a new source for their minerals.
Like the hotels bordering the Dead Sea, Israeli stocks on the whole are sliding. Potentially distracting from Israel Chemicals’ current debacle is this overwhelming negative trend for the market. In a rare turn of events on Wednesday, every single stock on the TASE fell as a result of geopolitical worries and the decision by Israel’s central bank to raise the interest rate earlier this week.
Many stocks fell, but few experienced the volume seen by TASE’s other prominent agriculture stock, Makhteshim-Agan Industries Ltd. (MAIXY), which produces agrichemicals. Koor Industries Ltd. (KOORF), the controlling shareholder of Makhteshim-Agan, issued a statement indicating it would turn over control of the company to China National Chemical Corp.
Elsewhere on the market, Clal Finance reduced its recommendation for Partner Communication Ltd (PTNR) after the company reported a sharp decline in its profits. Its parent company Scailex Corporation (SCIXF) has also been struggling in the aftermath. Partner relies primarily on the sales of smartphones and other such communication devices for its business. An optimistic conference call on the matter by the companies C.E.O. failed to convince Clal that the company would see improvement by next quarter.
Also hard hit among Israeli stocks, have been those companies directly involved or reliant on oil. They are especially vulnerable to geopolitical uncertainty and the price volatility of oil. Among the victims were Paz Oil Company Ltd. (PZOL), which declined on lower profits and El Al Israel Airlines Ltd. (ELAL) The latter experienced heightened losses and has been struggling, in the same way as American airlines, to offer competitive pricing and maintain volume on flights.
The interest rate hike impacted bank stocks hardest, with Bank of Hapoalim and Bank of Leumi struggling as investors asses how the change will impact their profits.