How might the macro‑economic environment in Israel and globally influence ILCO's outlook?

Macro backdrop and ILCO’s outlook

Israel’s domestic economy is still wrestling with a post‑conflict slowdown, a tight‑fiscal stance and a modestly‑inflated NIS‑USD spread. The Bank of Israel has kept rates at 4.5% and is signalling a “wait‑and‑see” approach, which means short‑term credit growth and domestic demand for commodities remain constrained. On the global side, the lingering effects of the 2024‑25 energy‑price correction, a decelerating Chinese steel demand cycle and a modest rebound in the US construction sector are pressuring the pricing power of basic‑materials producers. For ILCO, which derives the bulk of its earnings from its 40% stake in ICL’s fertilizer and specialty‑chemicals businesses, these macro‑forces translate into a cautious earnings outlook: lower feed‑stock margins in Europe, modest price‑inflation in the US, and a weaker export pipeline to the Middle‑East and Africa.

Fundamental and technical implications

The Q2 2025 release showed a 10% YoY dip in ILCO’s share of ICL profit (down to $40 m from $50 m), confirming the macro‑driven compression of margins. While the balance sheet remains solid—cash‑conversion cycles are stable and leverage is low—the earnings contraction suggests the stock is now priced more on valuation fundamentals than on growth momentum. On the chart, ILCO has broken below its 20‑day SMA (≈ 12.30 NIS) and is testing the 50‑day SMA (≈ 12.00 NIS), a classic bearish “down‑trend” signal. The Relative Strength Index (RSI) is hovering around 42, still above the oversold zone, indicating limited downside pressure unless macro data worsen.

Actionable take‑away

Given the macro‑headwinds—tight Israeli credit conditions, subdued global demand for fertilizers, and a flattening commodity price cycle—ILCO’s upside potential is capped in the near term. A short‑position or a tight‑‑range trade around 12.00 NIS is advisable, with a stop‑loss at 12.45 NIS (the recent swing high) and a profit target near 11.55 NIS (the 20‑day SMA). If the Israeli central bank signals a rate cut or if global fertilizer prices catch a bullish tailwind (e.g., a sudden supply shock in South America), the downside risk could be re‑evaluated, and a long‑bias may be re‑instated. Until then, the prevailing macro environment keeps ILCO on a defensive, near‑term downside stance.