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4 August 2014

The Second Sheshinski Committee – Draft Recommendations Mr. Stefan Borgas – President & CEO. 4 August 2014. Government Take (GT) from the Industry that Extracts Natural Resources.

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4 August 2014

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  1. The Second Sheshinski Committee – Draft Recommendations Mr. Stefan Borgas – President & CEO 4 August 2014

  2. Government Take (GT) from the Industry that Extracts Natural Resources ICL acknowledges the right of the Israeli public* to optimize the benefits it receives from the extraction of Israel’s natural recourses * within legal boundaries

  3. ICL’s World Markets Suffer Under Significant Overcapacity in Which ICL-Israel is a Small Player

  4. The Deteriorating Business Environment in Israel for ICL(NIS Until the End of the Concession)

  5. Government Take (GT) From Potash in Comparison GT Around the World Committee: 25%-47% ICL’s experts: average 29% GT in Israel following the Recommendations Committee: 46%-57% ICL’s experts: 70%-74% Including salt harvesting, signature bonus & dividend tax

  6. ICL Optimizes its Business Opportunities Worldwide

  7. Investment Opportunities Worldwide Comparative advantages of other countries: Rate on return for investment in Potash: over 20% Production costs are decreasing Governments provide incentives for investments: Netherlands and UK– “patent box” Germany – subsidies for corporate research UK – subsidies investments China– 10% pts tax rate reduction for “high tech” businesses

  8. Investment Opportunities Worldwide Ethiopia–0% income tax; accelerated depreciation China– reduced Income tax on phosphate; 3% royalty West Africa – tax exemption for many years Spain– no royalties; accelerated depreciation; reserve free of taxes; certain deductions in Corporate Income Tax

  9. Challenges in the Global Market Deteriorating prices of potash ($287 FOB) and phosphate ($80-$100/t) Stagnant demand Significant overcapacity Shrinking bromine market – new downstream products must be developed

  10. Decisions Must Be Taken – What Would You Do?

  11. Decisions Must Be Taken Unavoidable changes in ICL’s activities Magnesium Bromine compounds Phosphate downstream products Investment plans in Israel are frozen First step: NIS 2,500–3,800 million (next 5 years) Aggressive cost reduction Elimination or loss of direct and indirect jobs, mostly in the Negev: approximately 3,400

  12. Decisions Must Be Taken New investments or business acquisitions in other regions must be accelerated Spain, Ethiopia, UK, South East Asia, Latin America, West Africa, Netherlands and China Research and marketing functions will migrate over time to regions of value creation 3-5 years

  13. In Conclusion, the Committee Should Consider …. … the total picture for the Israeli economy … a truthful outlook on ICL’s profitability vs. competitors … How to GROW the pie: ICL and its industry IN ISRAEL ICL’s Profits

  14. Thank You

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