Israel Chemicals Ltd. (TASE: ICL) will make a $135 million provision in its financial report for the second quarter of 2014 for the arbitration ruling, which requires the company to pay higher royalties to the state.
The arbitration ruling is partial, and the arbitrators have not yet decided on the financial mechanism for applying the ruling," said Israel Chemicals in a notice to the Tel Aviv Stock Exchange (TASE) on Tuesday. "Therefore, the company's estimate is based on various assumptions in accordance with the best of its understanding of how the royalties will be calculated on the basis of the partial arbitration ruling. The final amount that the arbitrators will decide, at the end of the second stage of the arbitration, and after they determine the financial mechanism, could be different, possibly materially different, from the amount of the provision."
Israel Chemicals added that, in 2013, its unit, Dead Sea Works paid $10.3 million in royalties on bromine sales, and that the amount should be $11.4 million according to the arbitration ruling.
The state is demanding that Israel Chemicals pay $291 million in royalties for 2000 through March 2011, when the claim was filed. Most of the claim is for bromine-based products that the company produced at Ramat Hovav. The state claims that Israel Chemicals should pay royalties on these products which it has avoided paying for years, with the knowledge of company executives, and that they executives expressed concern on this point at board of director meetings. Israel Chemicals countered that the government exempted the company from royalties on downstream products when it privatized the company, selling it to Shaul Eisenberg.
The state won the arbitration, and Israel Chemicals must pay more royalties.
Published by Globes [online], Israel business news - www.globes-online.com - on May 27, 2014
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