UPDATE 1-ICL profit hit by lower potash prices, sees short-term COVID-19 impact

(Adds details on potash sales, coronavirus impact, CEO quote)

TEL AVIV, May 12 (Reuters) - Israel’s ICL Group on Tuesday reported a fall in quarterly earnings as lower potash and phosphates prices and a delay in the signing of a potash supply contract in China depressed sales.

The results were in line with forecasts, and the coronavirus outbreak “did not have a notable impact” on first quarter results but could affect annual results, ICL said.

“The COVID-19 pandemic has created a new, unprecedented challenge that will affect our results in the short term,” CEO Raviv Zoller said.

ICL said the decline in global economic activity will likely result in lower demand for certain flame retardants in the automotive and construction industries, while the drop in crude oil prices is expected to cut demand for clean brine fluids used in oil and gas production.

The company’s facilities have been operating at full capacity except for its UK mining operations, which are at about 70%, and mining operations in Spain which are running at about 60% of capacity after being halted for three weeks.

ICL, the world’s sixth-largest producer of potash with exclusive rights in Israel to extract minerals from the Dead Sea, said it is gradually ramping up production at both sites.

Formerly called Israel Chemicals, ICL earned 5 cents per diluted share in the first quarter, down from 11 cents a year earlier. Sales declined to $1.32 billion from $1.42 billion.

Analysts on average forecast adjusted EPS of 5 cents on sales of $1.25 billion, according to I/B/E/S data from Refinitiv.

ICL last week signed contracts for the sale of 910,000 tonnes of potash, a key ingredient in fertilisers, to customers in China.

However, first quarter potash sales declined to $314 million from $384 million a year earlier, with the average selling price per tonne falling to $250 from $294. Production was little changed at 1.145 million tonnes as higher production in Israel offset lower output in Spain.

ICL estimated the impact of COVID-19 on its potash business in the second quarter at $10-$20 million.

The company said it would pay a quarterly dividend of $30 million, or 2.3 cents a share, equal to 50% of net profit. (Reporting by Tova Cohen Editing by Kirsten Donovan)