Consolidated Financial StatementsAs of December 31, 2021
ICL Group Ltd
Consolidated Financial Statements as of December 31, 2021
Contents
The accompanying notes are an integral part of these consolidated financial statements.
Net income
Foreign currency translation differences
ICL Group Ltd. (hereinafter – the Company), is a company domiciled and incorporated in Israel. The Company's shares are traded on both the Tel-Aviv Stock Exchange (TASE) and the New York Stock Exchange (NYSE) under the ticker: ICL. The address of the Company’s registered headquarters is 23 Aranha St., Tel‑Aviv, Israel. The Company is a subsidiary of Israel Corporation Ltd., a public company traded on the TASE under the ticker: ILCO:TA. The Company together with its subsidiaries, associated companies and joint ventures (hereinafter – the Group or ICL), is a leading specialty minerals group that operates a unique, integrated business model. The Company competitively extracts certain minerals as raw materials and utilizes processing and product formulation technologies to add value to customers in two main end-markets: agriculture and Industrial (including food additives). ICL’s products are used mainly in the areas of agriculture, electronics, food, fuel and gas exploration, water purification and desalination, detergents, cosmetics, pharmaceuticals, and automotive.
Impact of the COVID-19 spread
The COVID-19 pandemic continues to create business and economic uncertainty and volatility in the global markets. Many countries around the world are experiencing further outbreaks of the pandemic, following which governments are once again imposing various restrictions. At the same time, there is a recovery trend in the volume of economic activity around the world that leads on one hand, to significant demand for certain products and services and on the other hand, disruptions to worldwide supply chain routes and some raw materials. The Company continues to take measures to ensure the health and safety of its employees, suppliers, other business partners and the communities in which it operates in order to ensure, among others, the operation level, the proper functioning of its facilities around the world and to minimize the pandemic's potential impact on its business. Manufacturing continues at the Company's sites around the world without interruptions. However, there is still a difficulty in assessing the future impacts of the pandemic on the Company's operations, inter alia, in light of the uncertainty of its duration, the extent of its intensity and effects on global supply chains and global markets, and additional countermeasures that may be taken by governments and central banks.
Non‑monetary items denominated in foreign currency measured at historical cost are translated using the exchange rate at the date of the transaction.
The value of index-linked financial assets and liabilities, which are not measured at fair value, is re‑measured every period in accordance with the actual increase/ decrease in the CPI.
Concessions and mining rights – over the remaining duration of the rights granted
Property, plant and equipment of the subsidiaries Dead Sea Works, Dead Sea Bromine and Dead Sea Magnesium in Israel
Innovative Ag Solutions – The Innovative Ag Solutions segment aims to achieve global leadership in specialty fertilization markets by enhancing its global positions in its core markets of specialty agriculture, ornamental horticulture, turf and landscaping, targeting high-growth markets such as Brazil, India and China, by leveraging its unique R&D capabilities, vast agronomic experience, global footprint, backward integration to potash and phosphate and chemistry know-how, while integrating and generating synergies from acquired businesses.
In January 2021, the Company completed the acquisition of Fertiláqua, one of Brazil’s leading specialty plant nutrition companies, and in July 2021, the acquisition of the South American Plant Nutrition business of Compass Minerals América do Sul S.A. (hereinafter - ADS).
ICL is continuously working to expand its broad portfolio of specialty plant nutrition, plant stimulation and plant health solutions, which consists of enhanced efficiency and controlled release fertilizers (CRF), water soluble fertilizers (WSF), liquid fertilizers and straights (MKP/MAP/PeKacid), soil and foliar micronutrients, secondary nutrients, biostimulants, soil conditioners, seed treatment products, and adjuvants.
The Innovative Ag Solutions segment develops, manufactures, markets and sells its products globally, mainly in Brazil, Europe, Asia, North America and Israel. It produces water soluble specialty fertilizers in Belgium, Israel and Spain, liquid fertilizers in Israel, Spain, China and Brazil, straights soluble fertilizers in China and Israel, controlled‑release fertilizers in the Netherlands, Brazil and the United States, as well as secondary nutrients, biostimulants, soil conditioners, seed treatment product, and adjuvants in Brazil.
Note 5 - Operating Segments (cont'd)
Implementation of IFRS 16
USA
North America
Europe
Non-current inventories - mainly raw materials (presented in non-current assets)
In July 2021, the Company completed the acquisition of the South American plant nutrition business of ADS, for a total consideration of about $443 million, including net debt of about $104 million. ADS offers a broad range of solutions for plant nutrition and stimulation, soil treatment, seed treatment and plant health, covering all key Brazilian crops, and as such significantly expands ICL's product portfolio and segment profitability, while providing seasonal balance between the Northern and Southern hemispheres.
Identifiable assets acquired and liabilities assumed (*):
$ millions
Cash and cash equivalents
34
Inventories
102
Trade and Other receivables
169
Property, plant and equipment
125
Intangible assets
252
Other non-current assets
23
Trade and Other payables
Loans and Credit
(169)
Provisions
(3)
Net identifiable assets
427
A. Composition
A. Composition (cont'd)
Exit from consolidation
B. Additional information
(1) In accordance with the Company’s policy regarding the periodic examination of the estimated useful life of Property, Plant and Equipment, in 2021, the Company conducted an examination of the estimated remaining useful life of Property, Plant and Equipment at its facilities in Israel, which was based on the Company’s experience, level of maintenance and operation of the facilities over the years. According to the examination, it was found that following the increase in maintenance activity and the implementation of operational excellence processes, the life expectancy of certain Property, Plant and Equipment is higher than their previously estimated remaining useful life. Based on the assessment, the estimated useful life of the said assets was extended by 5-10 years, as of January 2021. The impact of this update is a reduction in depreciation expenses, of $51 million in earnings and a balance of $18 million as a change in inventory value.
(2) In December 2021, the Company entered into an agreement with a third party for the sale of an asset located in the industrial area of Ashdod, Israel, for a consideration of about $16.5 million. As a result, the Company recognized a capital gain of $16 million as "other income" in its Statement of Income.
Additions in respect of business combinations
Additions
Impairment
* The increase is mainly from the acquisitions of Fertiláqua and ADS businesses. For further information, see Note 8B.
Additions in respect of business combination
In September 2021, the Company entered into a new sustainability linked loan (SLL) agreement in the amount of €250 million, with a five-year term through 2026 and a fixed annual interest rate of 0.8%. The loan was entered into with a group of five leading global lenders.
The loan is an innovative step forward in the Company’s ongoing sustainability efforts and includes three sustainability performance targets: (1) an annual 4% to 5% reduction in direct and indirect Scope 1 and Scope 2 CO2e emissions resulting from ICL global operations. (2) Through 2025, the Company is committed to adding a significant number of Tfs (Together for Sustainability) qualified vendors each year who meet criteria of management, environment, health and safety, labor and human rights, ethics, and governance and (3) for women to hold at least 25% of senior management roles, by the end of 2024.
In September 2021, ICL Iberia signed a new loan agreement in the amount of €25 million with a 45-month term through 2025 and a fixed annual interest rate of 0.95%.
On June 23, 2021, the credit rating agency S&P reaffirmed the Company’s international credit rating and senior unsecured rating 'BBB-’. In addition, the credit rating agency S&P Ma’alot reaffirmed the Company’s credit rating 'ilAA’ with a stable rating outlook. As of December 31, 2021, the Company is in compliance with all its financial covenants set forth in its financing agreements. For more details see note 13F.
On June 21, 2021, the credit rating agency Fitch Ratings reaffirmed the Company’s long-term issuer default rating and senior unsecured rating at 'BBB-’. The outlook on the long-term Issuer default rating is stable.
The examination of compliance with the financial covenants is based on the Company’s consolidated financial statements. As of December 31, 2021, the Company complies with all of its financial covenants.
Under the “Ireland” track, the Company paid a reduced tax rate of 11.5% as of 2008 on parts of its income. The benefit deriving from the "Ireland" track ended in 2017, excluding a single entity in Israel for which the entitlement ended in 2021.
The part of taxable income entitled to benefits at reduced tax rates is calculated based on the ratio of the “Beneficiary Enterprise” turnover to a company’s total turnover. The turnover attributed to the “Beneficiary Enterprise” is generally calculated according to the increase in the turnover compared to a “base” turnover, which is the average turnover in the three years prior to the election year of the “Beneficiary Enterprise”.
A company having a “Beneficiary Enterprise” that distributes a dividend out of exempt income, will be subject to corporate tax in the year in which the dividend was distributed on the amount distributed (including corporate tax applicable amount due to the distribution) at the tax rate applicable under the Encouragement Law in the year in which the income was generated, had it not been exempt from tax.
On November 15, 2021, the Israeli Economic Efficiency Law for the years 2021 and 2022 was published, which consists of numerous legislative amendments and arrangements, including an amendment to Section 74 of the Encouragement Law, which deals with the identification of sources of dividend distributions as of August 15, 2021 (hereinafter - the amendment).
The amendment stipulates that in any dividend distribution from companies holding accumulated profits that were exempt from tax until their distribution as a dividend ("trapped earnings"), a certain part of the distribution will be considered a distribution of those trapped earnings, which will be fully taxed upon release.
In addition, a temporary provision to the Encouragement Law was published, which offers a reduced tax payment arrangement to companies that have trapped earnings. The temporary provision, which is valid until November 14, 2022, stipulates that companies that have chosen to apply it, will be entitled to a tax rebate on corporate income tax, for the released trapped earnings. The release of trapped earnings allows their distribution at a beneficiary corporate tax rate according to the ratio of the distributed profits.
The beneficiary corporate tax will be determined according to the ratio of the trapped earnings that the company seeks to release from all its trapped earnings. It will range between 40% to 70% of the corporate tax rate that would have applied to income in the year it was generated, but in any case, not less than 6%. Eligibility for the beneficiary corporate tax rate is conditional on a company's decision to release part or all of its trapped earnings and the payment of the tax due until November 14, 2022, as well as on making investments in the companies' industrial plants over five years, in accordance with the formula set forth in the amendment.
Considering the above-mentioned amendment, the Company assessed its deferred tax liabilities with regards to the possibility to release trapped earnings in its future dividend distributions. In December 2021, due to the Company's settlement agreement with the Israeli Tax Authorities, regarding tax assessments for the years 2015-2019, and as a result of the Company's decision to apply the said temporary provision, the Company recognized a tax provision for the release of trapped earnings in the total amount of $47 million. Accordingly, no additional tax provision is required in respect of the unreleased trapped earnings which as of December 31, 2021, amounted to about NIS 950 million ($305 million).
A price which will provide an operating profit for the bromine compounds manufacturer of 12% out of the revenue it generates from bromine compounds sales.
Amendment number 3 to the Law
In November 2021, Amendment number 3 to the Law was approved by the Israeli Kneset, according to which the arrangement of tax collection will be altered so that companies will be required to pay 75% of the disputed tax, after objecting to a tax assessment by appeal to the district court, and prior to a Court ruling. Prior to this amendment, the payment of the Surplus Profit Levy in dispute was not required until a Court ruling is rendered. This amendment may impact the collection of Surplus Profit Levy from the Company for the years 2016 and onwards.
As of December 31, 2021, the balances of the carryforward tax losses of subsidiaries for which deferred taxes were recorded, is about $286 million (December 31, 2020 – about $418 million).
As of December 31, 2021, the balances of the carryforward tax losses to future years of subsidiaries for which deferred taxes were not recorded, is about $338 million (December 31, 2020 – about $392 million).
As of December 31, 2021, the capital losses for tax purposes available for carryforward to future years for which deferred taxes were not recorded is about $161 million (December 31, 2020 – about $163 million).
Regarding the tax assessment for the years 2012‑2014 issued by the Israeli Tax Authorities (ITA) to the Company and to certain Israeli subsidiaries, in September 2021, a judgment was given approving a settlement agreement between the Company and the ITA, for the final and complete settlement of all claims, demands and arguments of the ITA against the Company in connection with such tax assessments. As a result, the Company paid $30 million, plus interest and linkage. The settlement had no material impact on the Company's Financial Statements.
Regarding the tax assessment for the year 2015 issued by the ITA, in December 2021, the Company reached an agreement with the ITA regarding the tax years 2015‑2019, pursuant to which the Company will pay $105 million, plus interest and linkage. The agreement will constitute complete and final settlement of all ITA's claims, demands and arguments against the Company for the said tax years. The settlement had no material impact on the Company's Financial Statements. For the release of trapped earnings see item A(2) above.
The Company's subsidiary in Belgium (hereinafter - ICL Belgium or the Company) recognized a notion deduction on its capital, based on its interpretation of the Belgian tax law. This position was disputed by the tax authorities. In November 2021, the Supreme Court accepted the Company's position, which finalized all tax disputes with the local tax authorities.
Note 15 - Taxes on Income (cont'd)
Given the mineral's price environment, its effect on the profitability of the Subsidiaries and after deduction of a 14% allowed deductible on the balance of property, plant and equipment, as stated in the law and based on the replacement cost, as of December 31, 2021, no natural resources tax liability was payable. In respect of the phosphate resource, due to prior years' losses, no natural resources tax liability was payable.
The Tax Authority's position could be materially different, even in very significant amounts, mainly, as a result of the different interpretation regarding the implementation of the Law, with respect to the carrying amount for natural resources tax purposes of the property, plant and equipment.
Should the ITA, and subsequently the applicable District Court, in case of an appeal, decides that the measurement of the property, plant and equipment, for this purpose, should be in accordance with depreciated historical cost, and fully rejects the Company's arguments with respect to this issue, the result can be an increase in the Company's tax liabilities in an aggregate amount of about $237 million (including interest and linkage and net of corporate income tax) for the years 2016‑2021. The Company believes that it is more likely than not that its position will be accepted.
In March 2021, the ITA issued an assessment for the years 2016‑2017, which includes a demand for payment of Surplus Profit Levy, in the amount of approximately $77 million, plus interest and linkage. The amount represents, in essence, the different interpretation regarding the measurement of operational property, plant and equipment. The Company submitted its objection to the ITA. As of the reporting date, no decision has yet been made regarding the said objection.
Balance as of January 1, 2020
Amounts recorded to a capital reserve
(9)
Translation differences
Changes in 2021:
Brazilian Real
Israeli Shekels
Actuarial profits (losses) deriving from changes in financial assumptions
The assumptions regarding the future mortality rate are based on published statistics and accepted mortality tables.
A.
Commitments (cont'd)
Dead Sea Works Ltd. (hereinafter – DSW)
Concessions (cont'd)
DSW (cont'd)
Rotem Amfert Israel (hereinafter – “Rotem Israel”)
Rotem Israel has been mining phosphates in the Negev in Israel for more than sixty years. The mining is conducted in accordance with phosphate mining concessions, which are granted from time to time by the Minister of Energy under the Mines Ordinance, by the Supervisor of Mines in his Office, as well as the mining authorizations issued by the Israel Lands Authority (hereinafter – the Authority). The concessions relate to quarries (phosphate rock), whereas the authorizations cover use of land as active mining areas.
Mining Concessions
Rotem Israel (cont'd)
Lease Agreements
In accordance with the Mines Ordinance (Third addendum A), the royalty rate for production of phosphates is 5% of the value of the quarried material. As part of the process of extending the concession as detailed above, an order was issued by the Ministry of Energy to amend the Third addendum A which is intended to anchor and clarify the basis for calculating the royalties and its components in the coming years. Following the provision of the order, the Company also aligned its royalties' calculation for prior years, and as a result, recognized an additional amount of $7 million.
Planning and Building
(2)
•
Emissions permit under the Israeli Clean Air Act (hereinafter - the Law): In June 2021, the Company's emission permit was renewed by the Israeli Ministry of Environmental Protection (MoEP), until September 2023. The renewed permit reflects an updated outline of requirements. Postponement in the execution of a limited number of projects was granted within the framework of an administrative order under Section 45 of the Law, received in July 2021. Management still expects difficulties in meeting the execution schedules of a limited number of projects and accordingly continues to work with the MoEP to find a satisfactory solution regarding the timing of the investments, taking into account the impact of uncertainty surrounding Rotem Israel's activity, as far as the implementation of long-term projects is concerned.
B.
Finding economically feasible alternatives for continued mining of phosphate rock in Israel – According to the Company's assessment of economic phosphate reserves in the existing mining areas and the estimated useful life of Rotem's phosphate rock reserves, which are essential for its production, is limited to only a few years. As described above, the Company is working to obtain permits and approvals which will provide an economic alternative for future mining of phosphate rock in Israel.
The Company is continuing its discussions with the relevant authorities, in order that the required approvals, permits and future phosphate rock resources are granted. The Company estimates that it is more likely than not that the said approvals, permits and future phosphate rock resources will be granted within a timeframe that will not materially impact the Company's results. Nevertheless, there is no certainty as to the receipt of such approvals, permits and future phosphate rock resources and/or the date of their receipt. Failure to obtain these approvals, permits and future phosphate rock resources, or a significant delay in receiving them can lead to a material impact on the Company's business, financial position and results of operations.
ICL Iberia – a subsidiary in Spain
United Kingdom
Regarding ICL Boulby's planning permit for mineral exploitation, which is valid until 2023, in December 2021, the North York Moors Park Authority Planning Committee approved ICL Boulby Mine’s application for the continuation of polyhalite and salt production for an additional 25 years, commencing 2023.
With respect to the mining royalties, ICL Boulby pays royalties of 1.5% which in 2021, amounted to $1.4 million.
YPH - China
Grant of Mining Rights to Lindu
Natural Resources Royalties
Ecology
Ecology (cont'd)
In conjunction with the aforesaid application, the NPA filed a motion to strike the three applications mentioned above and to prefer the approval application on its behalf, as it argues that it is the most suitable to serve as the representative plaintiff in a class action in this regard, as its application is detailed and well-established as well as the special status conferred upon it under the Class Actions Law, which allows for specific benefits.
In November 2018, the Company was notified that all four applicants had agreed to join efforts and manage the class actions in a joint and coordinated manner, as well as of their consent to take part in a mediation process in an attempt to resolve the disputes outside of court. In January 2020, the parties signed a procedural agreement that regulates the procedure by which the disputes will be addressed in the mediation procedure which has been initiated. Considering the early stage of the proceedings, there is a difficulty in estimating their outcome. The Company is in contact with its insurance carriers to activate the relevant insurance policies. No provision has been recorded in the Company's financial statements.
In May 2018, the Company was served with a motion for discovery and pursual of documents (hereinafter – the Motion), filed with the Tel Aviv District Court, by a shareholder of the Company (hereinafter – the Movant), as a preliminary proceeding in preparation for the possible filing of an application for certification of a multiple derivative action against officers of the Company and Rotem Israel who, according to the Movant, caused the alleged damages incurred and to be incurred by the Company as a result of the Ashalim incident. In 2018, the parties reached an arrangement, according to which, the legal proceedings will be delayed until the relevant investigation's materials are provided to the Company by the investigating authority. As of the reporting date, such investigative materials have not yet been received. Considering the proceedings are in an early stage and even suspended, there is a difficulty in estimating their outcome.
The Company operates in accordance with the provisions of the Concession Law and permits issued by the local Authorities. The Company rejects all of the allegations against it by the Kibbutz. Considering the preliminary stage of the proceeding it is difficult to estimate its outcome.
Increase in the level of the evaporation Pond in Sodom (hereinafter – Pond 5)
The minerals from the Dead Sea are extracted by way of solar evaporation, whereby salt precipitates onto the bed of Pond 5, located in one of the sites of DSW. The precipitated salt creates a layer on Pond 5 bed with a volume of approximately 16 million cubic meters per year.
The production process of the raw material requires that a fixed brine volume is preserved in Pond 5. Failure to maintain a constant volume of brine in Pond 5 could result in a reduction in production capacity. To this end, up to the end of 2021, the raising of the brines' level of Pond 5 was according to the rate at which the pond floor rises, while performing the salt harvest. Since the solutions' level maximum height (15.1 meters) was reached at the end of 2021, from 2022 onwards, the solutions' volume in Pond 5 will be preserved by way of harvesting the salt ("the Permanent Solution" and/or "the Salt Harvesting Project" as described below).
Raising the water level of Pond 5 above a certain level may cause structural damage to the foundations of hotel buildings situated close to the water’s edge, to the settlement of Neve Zohar and to other infrastructure located along the western shoreline of the Pond.
Until the end of 2020, in order to ensure that Pond 5 water level does not exceed the maximum height (15.1 meters), the Government of Israel, through the Dead Sea Preservation Government Company Ltd., implemented a project for construction of coastline defenses, together with DSW (which financed 39.5% of the project's cost), as part of which the dike along the western beachfront of Pond 5, across from the hotels, was raised, together with a system for lowering subterranean water. The construction work with respect to the hotels' coastlines was completed and currently the Dead Sea Preservation Government Company Ltd. is carrying out elevation work in the intermediate area between the two hotel complexes.
The "Permanent Solution", which should provide a defense at least until the end of the current concession period in 2030, was established in the agreement with the Government of Israel signed in 2012. The purpose of the agreement was, among others, to provide a permanent solution for raising the water level in Pond 5 and stabilizing the water therein at a fixed level by harvesting salt from this pond and transferring it to the Northern Basin of the Dead Sea. According to the agreement, the planning and execution of the Permanent Solution will be through the Salt Harvesting Project which will be performed by DSW. In addition, the agreement stipulates that from January 1, 2017, the water level in the pond will not rise above 15.1 meters. Nevertheless, in the event of a material deviation from the project's timetables, without the Company having violated its obligations, the Company will be permitted to request raising of the water level above 15.1 meters.
The Company bears 80% and the State of Israel bears 20% of the cost of the Salt Harvesting Project. However, the State's share will not exceed NIS 1.4 billion.
In 2015 and 2016, the National Infrastructures Committee and the Israeli Government, respectively, approved National Infrastructures Plan 35A (hereinafter – the Plan), which includes the statutory infrastructure for establishment of the Salt Harvesting Project in Pond 5, and construction of the P-9 pumping station in the Northern Basin of the Dead Sea.
Increase in the level of Pond 5 (cont'd)
Spain
In December 2018, an application for certification of a class action was filed with the Tel Aviv District Court against the Company, Israel Corporation, and office holders, including directors who held office during the said dates which are stated in the application, with respect to the manner in which the IT (the Harmonization) project was managed and terminated. According to the allegations made in the Application, the Company failed to properly report negative developments which occurred on certain dates during the said IT project, and such failure caused the company immense financial damages.
The represented class was defined in the application as all those who acquired the Company's shares at any time during the period commencing June 11, 2015 and did not sell them until September 29, 2016 (hereinafter – the Applicants).
(cont'd)
June 30, 2016
June 30, 2023
September 5, 2016
Former chairman of BOD
February 14, 2017
Former CEO
February 14, 2024
June 20, 2017
Officers and senior employees
June 20, 2024
August 2, 2017
March 6, 2018
5,554
March 6, 2025
An issuance of non-marketable and non-transferrable options, for no consideration, under the amended 2014 Equity Compensation Plan.
May 29, 2019 *
Chairman of BOD
June 30, 2021
Senior employees
6.8
7.1
31.70%
4.4
0.43%
Non-marketable options (cont'd)
(in millions)
In February 2022, the Company’s HR & Compensation Committee and the Board of Directors, approved a new triennial equity grant for the years 2022-2024 in the form of about 13 million non-marketable and non-transferable options for no consideration, under the amended 2014 Equity Compensation Plan to senior managers (including the CEO and the Chairman of the Board). The Fair value at the grant date (February 8, 2022) is about $24.5 million. Regarding to the grant of the CEO and the Chairman of the Board, the final quantity and fair value of their options will be determined at the date of the Annual General Meeting of Shareholders. The vesting period of the options will be in three equal tranches, upon the lapse of 12 months, 24 months and 36 months from the grant date.
The value of the restricted shares was determined according to the closing price on the TASE on the most recent trading day preceding the grant date (the approval date of the BOD and/or the approval date of the General Meeting where required).
(*)
Vesting of the Restricted Shares would be fully accelerated if the holder ceases to serve as a director of the Company, unless he/she ceased to hold office due to those certain circumstances regarding early termination of office or imposition of enforcement measures, as set forth in Sections 231-232a and 233(2) of the Israeli Companies Law.
February 4, 2019
May 6, 2019
July 30, 2019
November 5, 2019
February 11, 2020
May 10, 2020
July 27, 2020
November 10, 2020
February 10, 2021
May 5, 2021
July 27, 2021
November 3, 2021
The capital reserves include expenses for share‑based compensation to employees against a corresponding increase in equity (See item C above) and change in investment at fair value through other comprehensive income (See Note 21.E(3)).
Capital gain
16
-
12
Profit from divestment
Past service cost
Reversal of provision for legal claims
Reversal of Impairment of fixed assets
Provision for legal claims
17
14
Provision for historical waste removal and site closure costs
83
7
Transaction costs
Impairment and disposal of assets
Provision for early retirement and dismissal of employees
Net gain from change in fair value of derivative designated as economic hedge
Net gain from change in fair value of derivative designated as cash flow hedge
Interest income from banks and others
Banks and finance institutions commissions (mainly commission on early repayment of loans)
Net loss from change in fair value of derivative designated as economic hedge
Marine transport derivative designated as economic hedge
2
Foreign currency and interest derivative instruments designated as cash flow hedge
Investments at fair value through other comprehensive income
53
Asia
South America
Foreign currency and interest derivative designated as economic hedge
Long-term debt, debentures and others
Foreign currency and interest derivative designated as cash flow hedge
The Company has loans bearing variable interests and therefore its financial results and cash flows are exposed to fluctuations in the market interest rates.
The Company uses financial instruments, including derivatives, in order to hedge this exposure. The Company uses interest rate swap contracts mainly in order to reduce the exposure to cash flow risk in respect of changes in interest rates.
As part of the global reform in interest rate benchmarks, the Libor GBP settings ceased from 1 January 2022 and replaced by SONIA (GBP) Benchmark. Most US dollar LIBOR settings will continue to be calculated using panel bank submissions until mid-2023.
As of December 31,2021, USD LIBOR continues to be used as a reference rate and in valuation of instruments with maturities that exceed the expected end date for LIBOR. the Company has USD 30 million Libor Based Debt and USD 150 million LIBOR Based derivatives that exceed the expected end date for LIBOR.
As of December 31,2021, we have not finalized an agreement with the banks regarding the Libor transition effects on loans and derivatives.
GBP
SWAP contracts from variable USD interest to fixed GBP interest.
18/05/2021
Note 21 - Financial Instruments and Risk Management (cont'd)
(a) Sensitivity analysis (cont'd)
Euro/ U.S. Dollar
U.S Dollar/RMB
exchange rate
U.S Dollar/Brazilian Real
(1)
37
5.4
SWAPS – U.S. Dollar into British Pound
63
The fair value of the Shekel, Euro, Brazilian Real and Yuan loans issued bearing fixed interest is based on calculation of the present value of the cash flows in respect of the principal and the interest and is discounted at the market interest rates on the measurement date for similar loans having similar characteristics and is classified as Level 2 in the fair value hierarchy. The average discount interest as of December 31, 2021, for the Shekel, Euro Brazilian Real and Yuan loans was 1.5%, 1.2%, 13% and 4%, respectively (December 31, 2020, for the Shekel, Euro and Yuan loans 1.6%, 1.4%, and 5.1%, respectively).
Weighted-average number of ordinary shares in thousands:
Our directors and officers are beneficiaries of both tiers. Pursuant to the New Framework Agreement, the cost of the annual premium shall not exceed a cap of $10 million for both tiers. The division of the premium amount between the Company and Israel Corp. in the joint tier are 80% to be paid by the Company and 20% by the Israel Corp, and the HR & Compensation Committee and the Board of Directors have the authority to change, from time to time, the premium allocation in respect of the joint tier between the companies, according to the recommendation of the insurers and/or brokers, and provided that such changes will not exceed 25% over the entire transaction period. Deviation from these limits shall require shareholder approval. In accordance with the terms of the New Framework Transaction and the Company's Compensation Policy, the Company's directors’ and officers’ liability insurance policy for 2021, was approved by the Company's authorized organs, effective as of March 2021. The 2021 directors’ and officers’ liability insurance policy includes a liability limit of $116 million for both tiers (comprised of a limit of $40 million, with an additional coverage Side A (directors and officers only) limit of $76 million).
Transactions with related and interested parties (cont'd)
ICL America do Sul
Brazil
100.00%
Agro Fertilaqua Participacoes S.A.
Qualyquímica Industria e Comercio de Produtos Quimicos Ltda