This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk01: Ladies and gentlemen, thank you for standing by and welcome to the ICL Analyst Conference call. Our presentation today will be followed by a question and answer session, at which time, if you wish to ask a question, you'll need to press star 1 on your telephone. I must advise you this call is being recorded today. If you experience any technical difficulties, please press star 0 on your telephone. I'd like to hand the call over to the first speaker today, Ms. Peggy Riley-Tharp, Vice President of Global Investor Relations. Please go ahead, ma'am.
spk00: Thank you. Hello, everyone. I'm Peggy Riley-Tharp, Vice President of Global Investor Relations. I'd like to welcome you and thank you for joining us today for our quarterly earnings conference call. The event is being webcast live on our website at icl-group.com. Earlier today, we filed our reports with the securities authorities and the stock exchanges in both the U.S. and in Israel. Those reports, as well as the press release, are available on our website at There will be a replay of this webcast available after the meeting and a transcript shortly thereafter. The presentation, which will be reviewed today, was also filed with the securities authorities and is available on our website. Please be sure to review the disclaimer on slide two. Our comments today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are not guarantees of future performance. The company undertakes no obligation to update any information discussed on this call at any time. We will begin with a presentation by our CEO, Mr. Raviv Zoller, followed by Mr. Kobi Altman, our CFO. After the presentation, we will open the line for Q&A session. Raviv, please.
spk09: Thank you, Peggy, and welcome, everyone. I'm pleased to report yet another quarter of strong results, driven by our specialty businesses, which reported record results again and represented 53% of total EBITDA. This exceptional performance was augmented by commodity price upside, as our sales in the quarter were equally supported by increased demand and higher prices. We are currently well on track to achieve our strategic goals. On slide three, you can see some highlights from each division. Industrial Products' record quarter was driven by increased demand for our specialty product offerings and supported by long-term contracts, as some of our customers would rather purchase bromine compounds from us versus producing their own. For PUDASH, during the quarter we successfully completed both our one-week annual maintenance shutdown at the Dead Sea and the RAMP project in Spain. Phosphate Solutions delivered a record-breaking quarter across the board with strength in both specialty food phosphates and industrial salts, combined with higher commodity prices. Innovative Ag Solutions showed sales growth across all product lines with higher prices and volumes. We also completed the acquisition of Compass Minerals South American Plant Nutrition business. And while I'll talk more about this exciting news a bit later, I'd like to turn to slide four, where you can see just how important this acquisition is to our leadership strategy. While our acquisitions in Brazil will help to provide seasonal balance between the northern and southern hemispheres, and provide opportunities to expand our product reach, they will also firmly establish our agriculture business as a leader in the specialty plant nutrition and move us even closer to our 2025 targets. Our food business is also expanding as we continue to focus on food specialties. In the second quarter, alternative protein sales were up significantly as we are seeing organic growth from existing customers and also have a strong pipeline of new customers we are working with. Our new alternative protein plant in St. Louis, which we expect to become operational in the fourth quarter of this year, will help provide the means to meet this increased customer demand for our innovative products, which is yet another part of our 2025 leadership strategy. For our industrial business, which is more than just industrial products, while we continue to benefit from long-term contracts in that division, we are also investing in innovative new products and looking to grow our capacity to meet existing demand. Our research and development efforts are targeting the creation of new sustainability applications, which will help us reach the 2025 targets I shared with you at our investor day last September. Turning to slide five, you can see our progress over the past four quarters with sales of $1.6 billion in the second quarter, up more than 30% year over year. Adjusted EBITDA of $351 million was up more than 40% over the prior year. In total, we have already delivered more than $3 billion of sales this year with adjusted EBITDA of well over $600 million, and we expect to be ahead of our pre-COVID profitability for this year. In the second quarter, we continue to report strong cash generation with operating cash flow of $242 million, up $65 million year over year. Free cash flow of $94 million was also very strong and up more than 350% with all divisions contributing. Our complete second quarter results are on slide six, where, once again, you can see growth in every single financial matrix. This continued improvement is a reflection of the success we are seeing as we focus on providing specialty solutions while benefiting from a strong upcycle in commodities post-COVID-19. Moving on to slide seven, let's begin our segment review with industrial products. where we had an all-time quarterly sales record of $410 million, up 44% versus the second quarter of 2020, and record EBITDA of $128 million, which was up 45%. The business delivered record results for both bromine and phosphorus-based products, with continued strong demand for flame retardants driven by the electronics, automotive, textiles, and construction end markets. Other end markets, also showed resilience, including the supplements in pharmaceuticals and markets, which resulted in record results for our magnesia-based products. We also saw improvement in some oil and gas markets, which resulted in year-over-year sales growth in clear brine fluids. But however, overall demand trends remain under pressure and have not returned to pre-COVID levels, and such is unlikely to occur in 2021. Elemental bromine prices continued to rise hitting record spot prices in China, where higher demand for flame retardants is facing limited local supply. While we are benefiting from the exuberance in the market, we expect prices to stabilize going forward. Nonetheless, we are currently facing higher input and logistics costs, as well as some raw material constraints. With TBBA production at capacity, we are pursuing expansion opportunities and planning to bring on additional capacity through de-bottlenecking and other efforts. However, this will take a few more months. This is in addition to the TVBA capacity we added last year, which, as you know, is already sold out. Turning now to slide eight and a review of Putash. We successfully finished our annual one-week maintenance shutdown at the Dead Sea in early April and completed approximately 80 projects during that time. As I mentioned during our first quarter call, The ramp project in Spain, which connects our Cabanases mine and Surya plant, was also completed in April and is now operational and ramping up to capacity. This mine is expected to reach a production run rate of approximately 1 million tons by the beginning of 2022. The positive put ash environment continued in the second quarter, with prices increasing across all key markets. Sales of $412 million were up 21% over the prior year's second quarter, while EBITDA of $85 million was up 6%. Grain prices continued to increase due to strong global demand and supply remained tight with pressure from higher freight rates. We now expect to see significantly more benefit from recent price increases in the second half of this year, with improvement also driven by the expected increase in production in Spain. Turning to slide nine and our phosphate solutions division, which reported record sales for specialties, commodities, and our YPH joint venture. In total, sales of $623 million were up more than 40% year over year. Phosphate solutions recorded EBITDA of $134 million, which was up nearly 125% and was the highest of all of our divisions. For specialties, both food phosphates and industrial salts sought strong demand, with higher prices across most regions and industries. Food specialties saw strong momentum in North America, with product innovation contributing as food service demand began to recover. Industrial salts benefited from the institutional cleaning solutions and market, showing signs of improvement. For commodities, price improvement continued in the second quarter, along with increased prices for raw materials, mainly sulfur, and higher freight rates, combined with supply chain challenges. YPH sales were up on higher prices and volumes with continued improvement in efficiency. Growth in our white phosphoric acid business was universal across all regions, but with a particular significant increase in South America. Finally, turning to slide 10 in our innovative ag solutions where all product lines showed sales growth and total sales reached $237 million, up 20% year over year. Record second quarter EBITDA of $27 million was also up more than 20% on strong performance. Specialty agriculture sales were up on increased volumes of straights, liquid, and controlled release fertilizers with growth in all key regions. Our turf and ornamental business is having a great year and once again delivered record sales as all geographies showed improvement, but with new markets doing especially well. New categories also performed well, specifically liquids, biostimulants, water conservation, and grass seeds. Of course, the big news, which I already mentioned, is the completion of our acquisition of the specialty plant nutrition business of Compass Minerals, which was finalized on July 1st. We're delighted to have this business join our plant nutrition portfolio and to welcome its team and its customers to ICL. As I mentioned, this important step delivers on our stated strategy of achieving leadership positions in high-growth specialty plant nutrition markets and accelerates our progress towards long-term global leadership of our innovative Ag Solutions division. This acquisition will significantly expand our product portfolio and profitability and allow us to deliver the critical mass we've been seeking in Brazil. It will also provide further seasonal balance between northern and southern hemispheres and make us the leading specialty plant nutrition company in Brazil, one of the world's fastest growing agriculture markets. If you turn to slide 11, I'd like to walk through just a few key highlights before turning the call over to Kobi for a review of our financials. To achieve balanced long-term growth, we will continue to expand the profit contribution from our specialty businesses while taking advantage, when possible, of commodity upside. This approach has benefited us in 2021 as we have seen consistent strength in all our businesses with each contributing to our improvement in EBITDA. We will also remain focused on value over volume in our industrial products business by partnering with our customers to supply specialty products based on long-term partnerships. We will maintain and optimize our potash operations so we can continue to benefit from this very foundational part of our business. We will target long-term phosphate specialties growth through our focus on food products. And in innovative ag solutions, we will look forward to new opportunities in Brazil as we expand our product offerings and take on a leadership position in specialty plant nutrition. Finally, we remain committed to meeting our 2025 goals in our focus markets of sustainable agriculture, food, and industrial solutions by means of expansion, innovation, and plain old hard work. Once again, this has been a fantastic quarter for ICO. And as always, I would like to thank the truly talented family of employees we have across the globe and also extend a very warm welcome to our newest members in Brazil. We're glad to have you join us. With that, I'll turn the call over to Colby.
spk06: Thank you, Raviv, and to all of you for joining us today as we report significant improvement in year-over-year results, which Raviv just reviewed. On slide 13, you can see that in addition to our continued operational outperformance, we also maintain our financial strength and deliver continuous growth in cash generation. Operating cash flow of $242 million was up $65 million over the second quarter of last year. and up $105 million for the first half of this year. Free cash flow also improved significantly in the quarter, up $74 million year over year, and also up $105 million for the first half of 2021. Our net debt to EBITDA ratio improved to 2.1 times from 2.4 times in the first quarter of this year and second quarter of last year. This is good improvement and we expect to make further progress even as we make strategic acquisitions. During the second quarter, our investment grade credit ratings were reaffirmed. On June 21st, Fitch reaffirmed our senior unsecured rating at BBB-, and provided a stable outlook of our long-term issuer default rating. Just a few days later, on June 23rd, S&P reaffirmed our international credit rating and senior unsecured rating of BBB-. Specifically, Fitch called out our strong business profile, which stems from our strategic assets in the Dead Sea, stable earnings due to our leadership in Bromine, our focus on increasing sale of specialty products, and our efficient diversification of geographies and end markets, as well as our strong liquidity. For the second quarter, our liquidity increased slightly over the first quarter, and on June 30th, we had approximately $1.2 billion available. As you know, we closed the acquisition of Compass Mineral South American Plant and Tuition business on July 1st and funded the purchase through our cash generation and through the monetization of some non-operational assets from our balance sheet, including the sale of some YYTH shares and also the divestment of a business in China. Turning to slide 14. While we all know commodity prices and freight rates have been going up, this visual representation helps tell the story. While we have benefited from increases in potash and phosphate prices, we've also been impacted, to a lesser degree, by higher freight rates and raw material prices. For the second quarter, transportation costs had a negative impact of approximately $30 million, as we saw a net increase of nearly $20 per tonne shipped. You can see these amounts on slide 15. As Raviv mentioned earlier, our sales in the quarter were equally supported by increased demand and higher prices. On the right side of the slide, however, you can see the impact higher raw material and freight rates had on our adjusted EBITDA. If we net the $175 million of positive price impact for our products against the more than $50 million increase in cost of raw materials and energy and the $30 million increase in transportation costs, you can see we received a tailwind of approximately $90 million. If you'll turn to slide 16, we have the same results broken out by division. Clearly, phosphate specialties was a big contributor to our growth in the quarter. coming in with record sales and EBITDA. And it's evident we are executing our strategic goal to create a more balanced contribution from our four growth engines. With another solid quarter behind us, and as we have continued to see improved market condition, we have re-evaluated our adjusted EBITDA guidance for the full year, which you can see on slide 17. We now expect an adjusted EBITDA range of between $1,350,000,000 and $1,375,000,000, and this amount includes our recently completed South American plan to tuition acquisition. In addition, we are in the process of adopting the recommendation of the Task Force for Climate-Related Financial Disclosure, known as TCFD. and the standards put forward by the Sustainability Accounting Standard Boards. As the benchmark frameworks for our disclosure of climate-related risks, beginning with our fiscal 2021 annual reporting. Before Q&A, I would like to talk a little bit about slide 18 in our sustainability report, which will be published next week. ICI's vision includes ambitious goals aimed at addressing major challenges facing society and the global environment, and we are committed to becoming carbon neutral by 2050. We are on a mission, transforming from a company that extracts minerals, to reduce absolute greenhouse gas emissions by 30% by 2030, to increase our share of renewable energy consumption to 50% by 2040, to increase our circular economy and water savings impact by an additional 3% annually, to support community initiatives by contributing 1% of pre-tax income, and to promote personal development responsibility and volunteering among our employees. These are ambitious goals. But, as you can see on the slide, we have made our commitment to sustainability a priority over the past few years, as we believe these efforts benefit our communities, our employees, and you, our shareholders. On final note, before we turn the call back over to the operator, I would like to recognize our CEO, Raviv Zoller, who has been named chairman of the International Fertilizer Association Sustainability Committee. This is a fantastic and well-deserved honor, recognizing ICL as a sustainability leader among its fertilizer peers, and on behalf of ICL, I congratulate him. And with that, operator, we can begin the Q&A.
spk01: Thank you. Ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Once again, that's star 1 if you wish to ask a question. Please stand by while we compile the question queue. Your first question comes from the line of Alexander Jones of Bank of America. Please ask your question.
spk10: Great. Thanks very much. Good afternoon. Three questions, if I may, please. The first on potash in the context of the guidance, clearly guidance has gone up and potash prices have gone up even further. So could you give us a bit of color behind what potash price you're assuming in your guidance or what average selling price you're assuming for the second half so we can contextualize that versus the spot market? The second question also on potash is around the cost side. I think costs perhaps slightly higher than had been expected this quarter. Is that just a freight issue or is there anything else you'd like to call out there? And how should we think about the evolution of costs in potash going into the second half of the year? And final question on industrial products. Raviv, you mentioned that the Chinese market has been exuberant and you would expect some normalization there over time. In your pricing this quarter, how much of that pricing benefit reflects that exuberance, or should we not expect much downward correction in your pricing, even if the Chinese market normalizes a bit? Thank you.
spk09: Okay. Thanks, Alexander, for the questions. I'll ask you to repeat the third question because I couldn't hear it all. In terms of putash prices, last quarter as we spoke to you, we were sold out through almost August. Now we're sold out through October, so we actually know the realized price for Q3, and it's coming in at about $297 in comparison to $251 in the second quarter. So that's on third quarter putash. In terms of costs... You have the breakdown in the presentation and the appendixes, so you can see everything. Other than higher freight costs and energy costs, there's nothing out of the ordinary to call out. And could you repeat the question about exuberance in China? Just so I'm sure I answered all your questions.
spk10: Yeah, just on your pricing benefit in industrial products, how much of that is reflecting, you know, the significant rise in Chinese spot prices? Or how much is that just sort of gradual innovation, mixed benefit over time, just to get a sense of if the Chinese market does correct as you think it might? Should we expect pricing to come back down a little bit for that division?
spk09: Okay, great question. The spot market prices are going up. Most of our businesses are not spot. In fact, 90% of our business is compounds. So even if it comes down, there will be very, very little effect on the results in the coming months.
spk08: Great. Thank you.
spk09: Thank you.
spk01: Thank you. Your next question comes from the line of Vincent Andrews from Morgan Stanley. Please ask your question.
spk12: Hi, guys. This is Will Tang. I'm for Vincent. Thanks for taking my question. I'm just wondering if you guys can talk about your raw material costs. I'm wondering if, you know, any of these raw material constraints have impacted you on the volume side in any of your segments thus far, and how has that raw material picture kind of developed into the second half of the year so far?
spk09: Okay, so the raw material issues are related mainly to our phosphate and industrial products division. On phosphate, the issue is sulfur, and you're all familiar, and there are market prices of sulfur. So sulfur prices were going up, and they're not at this point. So we pretty much, we've consumed the effect. There were some issues regarding our ports in Israel that sulfur got held up coming in, so we had some logistic issues. But in terms of pricing, everything is well known. On the side of industrial products and raw materials for bromine and phosphorus, the current increases that we experienced in the past few months have been passed on to our customers. The market is such that there's excess demand. And, in fact, as I mentioned in the last conference call, unfortunately, we could not supply all of the demand, and we had to turn down customers in the second quarter to an extent that we don't like. We've de-bottlenecked a little and got through some complex logistic issues and issues. We have a little more capacity in Q3, so we hope that we don't need to turn down customers. It's never good to turn down customers. But raw materials pricing is not an issue for industrial products because of the market dynamics, the demand dynamics. The issue was the actual availability because of force majeure of certain raw materials, and fortunately that's behind us. It created some issues for second quarter logistics, but we're past that right now. I hope that answers, and thanks, Will.
spk12: Yeah, thank you.
spk01: Thank you. The next question comes from the line of Jeff Hare of UBS. Please ask your question.
spk05: Oh, good afternoon. I just had a couple of questions. First of all, I was wondering if you could help us with what the contribution from Compass Minerals will be in the second half or on a full year basis going forward. And also, can I just ask how the ESG targets that you've outlined today or the sustainability targets are linked into management compensations?
spk09: Okay, so on COMPAS, Jeff, and thanks for the questions. On COMPAS, we modeled $45 million of adjusted EBITDA contribution for the second quarter. I don't want to talk about 2022 at this point because it depends on the synergies that we will target for 2022, and we're going to We're going to build our model based on the first few months. We're more focused on clean integration and not disrupting the existing business. That's the model for the second half of the year. It's not a linear model, so that doesn't mean it reflects about 90 for the year. Brazil is second half oriented, second half of the year, so 45 means about 55 or 60 for the year. That's in terms of this year. In terms of next year, again, it depends on synergies, and we'll get back to you on that. On ESG, we have quite a few targets. Of course, we've adopted zero neutral policy for 2050. We also adopted a policy of 40% renewable energy by 2040 and 30% decrease in greenhouse gas emissions by 2030. We also have some other ESG targets regarding diversity, regarding water savings and circular economy, regarding safety and some others. All of these, we have nine KPIs all together, have annual targets, and they're part of management compensation. Each one of the GEC, which is the Executive Management Committee in ICL, each one of us has those KPIs in the remuneration. It's a different component of the bonus schedule for different people, but we each have those as team goals, and we each get compensated based on achieving those goals, and we intend to achieve those goals.
spk05: That's great. Thank you. Thank you.
spk01: Thank you. The next question comes from the line of Joel Jackson from BMO Capital Market. Please ask your question.
spk03: Good morning, everyone. I had a few questions. I'm going to ask them one by one. Raviv, I thought you said on a question, earlier question on this call, that the potash realized price for you was two 51 in Q2 and things are trying to be about two 97 in Q3. But I mean, you just, you reported two 81 per ton for potash Q2. Can you just reconcile that please?
spk09: Yeah. Two 51 is full, but it's FOB. It's a realized price. And two 81 is, uh, is, uh, uh, price before, uh, freight and, uh, and others.
spk03: Okay. So if we expand upon that, you're saying that, uh, before freight, pricing is now averaging about $45, $45, $50 a ton higher in Q3. That's right?
spk09: Correct.
spk03: And then what would be other higher freight costs you're seeing in Q3 that might scrape away some of that?
spk09: No, no. The $297 is after freight costs. We already know the realized freight costs, which is about $39. So it's $336 before the freight costs. Okay, fair enough. Coming to 297. So the first quarter was 238. The second quarter, 251. Not a big change. As I mentioned, in April, we were sold out through July. And in the third quarter, it's 297, which is net of 336. And fourth quarter, we expect, obviously, higher numbers. Okay, that's perfect.
spk03: Okay, that's good on that. Can you talk about polysulfate in the first half of the year? You gave some volume, volume's up a lot now. What's the contribution on earnings and when you think it'd be profitable in that business?
spk09: It's a good question, and as we stand right now, our production level in the second quarter was a little less than 200,000 tons, which is behind budget. We were planning to produce about 220 in the quarter. The good news is that we sold more than we expected in the quarter. We sold about 180,000 tons, which was well above our original target. Unfortunately, some of those sales were fixed in the beginning of the year at lower prices than we currently realize. And so, unfortunately, we didn't have a good result in the second quarter. We lost over $10 million in that business in the second quarter. We're still ramping up. We're still looking at improvements on two dimensions. One, increased production. which we're pretty sure of. And the other is demanding a higher premium on the product. The problem with the contracts that were settled early on in the year is that we, of course, didn't expect such high transportation costs. And when you have low price per ton and the transportation costs per ton is fixed no matter what the pricing of the product, then it hurts low-priced products. So that'll give you a little bit of color, and of course, we'll report on progress in the continuation of the year.
spk03: That was a really good color on that, Ruby. Thanks. And just my final question. So I look at your potash inventories. They're quite low. Obviously, you had some downtime in Spain. are you going to build inventory in potash here? Um, or are you going to try to run really low, uh, to add a bit more capacity into Spain as 22 comes on?
spk09: Uh, first of all, we have to prove the 1 million tons, uh, towards the end of this year. And then we have a next, uh, the next ramp up is to 1.3 million tons. Uh, we're at a all time low level, of inventory in the Dead Sea because the market is undersupplied and there's excess demand. And pricing is very, very attractive. You know about Brazil. Our last sale in Brazil, I believe, was $620. In the U.S., our last sale, I think, was $540 per short time. So that translates into... About $600. And just this over the weekend, our last sale in Thailand was also $600. So at $600 for Putash, we don't intend to hold inventory. There's nothing to wait for. And so that doesn't mean that the price won't go higher. It just means that as long as we have enough inventory to operate, we'll go as low as we can.
spk03: Thank you very much.
spk09: Thank you.
spk01: Thank you. Your next question comes from the line of Duffy Fisher from Barclays. Please ask your question.
spk11: Hi, good morning. This is Sean. Good morning. I'm for Duffy. Just a couple of questions from me. I guess first one, tagging on to, I guess, an earlier question. Is there any way you can give a sense of how much production and IP you guys had to kind of curtail because of raw materials?
spk09: I'm not sure I can give you an exact answer in tons. I can say that the missed opportunity in sales was around $40 million in sales, which comes out to over $10 million in operating income on average, which means on margin is higher.
spk11: Got it. That makes sense. Appreciate that. And then second question is, So just around generally your take around the phosphate market as we sit here today, if I asked you to give kind of a 12-month view looking out into the middle of next year, do you get a sense that we're at peak spot pricing now, or how do you see that market unfolding over the next 12 months?
spk09: Honestly, I don't know better than you guys do. It's, you know, everybody's looking at the current state of the market and not seeing any reason for prices to go down. At the same time, you know, the prices are highest they've been for many years and sulfur is not going up anymore and sulfur is a catalyst for prices going up. So I think the marginal catalyst now is freight costs. Freight costs are still going up. And as long as they go up, there's sort of a demand orientation in the atmosphere in the market. So I can tell you that everybody around me is talking about prices stabilizing to going up. I don't hear people talking about prices going down. Analysts are revising their assumptions. So analysts that thought the second half of the year there would be a significant downturn have moved up their predictions. But the short answer is I really don't know. I can tell you that we're sold out on phosphate until the end of October.
spk11: Appreciate it. I'll turn it over. Thank you so much. Thank you.
spk01: Thank you. Your next question comes from the line of Lawrence Alexander from Jefferies. Please ask your question.
spk07: Good morning. This is Dan Rizzo on for Lawrence. Have customers' supply chain constraints affected demand or delayed sales in any way, particularly in the industrial segment?
spk09: Yes. As I mentioned before, we had some raw material issues due to force majeure and some other logistic challenges. That didn't last for very long. We found alternative supply. But that sort of comes into the missed demand or missed sales that I referred to earlier.
spk07: Okay, and then you mentioned, I think, doing some debottlenecking. I was just wondering how much capacity you expect that to add.
spk09: We are going to add a few thousand tons. It's going to be north of 5,000 and south of 10,000, but that's what we're talking about. Okay. Within about one year. Yeah, some tons.
spk07: Okay, okay. And thank you. And then finally, have you given what your synergy targets are overall for the CMP acquisition?
spk09: No, we haven't. It's too early. And the big question is not what the total synergies could be, but rather the timing of the synergies in terms of their effect on our results in the coming couple of years. So we will give transparency on that at the later part of the year. Okay, thank you very much. Thank you.
spk01: Thank you. Your next question comes from the line of Kyle Quant of Citigroup. Please ask your question.
spk02: Hi there. Thank you for the opportunity to ask questions. I've just got a couple, if I may. On industrial products, I wonder if you'd be able to give an indication of the weighting between sort of bromine-based products and phosphorus and magnesium-based, just to get a yeah, an idea of relative weight, and that'd be great. And then technically on phosphate solutions, your stated aims to become a more specialty-based, yeah, to aim to be a bit more specialty-based, but with commodity prices where they are, you actually result in a bit of a higher margin, actually. And would you, might you pause that move for now, focus a little bit on commodities whilst The commodity prices are as high as they are. Thank you.
spk09: Okay. So I'll start with phosphate. Look, our strategy is to increase our specialties if we can above and beyond commodities. So if it's alternative proteins, we don't need additional phosphate capacity for that. And so we're growing. that business separately, but for our given capacity of phosphate production, we would rather increase our specialties component to 70%. We're very certain that in the long run, on average, specialties will be more profitable and also more stable. And we have unique value-added products. We're creating tremendous amounts of new innovation. In fact, our internal accelerator, which we call BIG, In the past year and a half has created additional future EBITDA at a run rate of $80 million, and about half of that is coming from the phosphate division. So we think that the right strategy is to be as competitive as we can where we are global leaders. We have about 25% of the global phosphate specialty market. market and we want to increase that share and we want to increase the value-add of that share. So that's on phosphate. That doesn't mean that if we have an opportunistic situation that we can leverage on, then we can take steps in the short run to benefit, and we do so. It's rather marginal, but we do so, and we could consider. But the strategy of specialties, we're very determined. On industrial products and the product mix, about 75% of the total business is bromine-related, of which 10% of that is bromine and the rest is compounds. and then about 20% of the business, a little less, about 17% or 18% is phosphorus-related, and the balance is the specialty minerals.
spk02: Brilliant. Thank you.
spk09: Thank you.
spk01: Thank you. Your next question comes from the line of Joel Jackson from BMO Capital Market. Please ask your question.
spk04: Your line is open. Please ask your question.
spk03: Sorry. I just want to follow up on the Brazilian acquisition. So obviously you've covered Compass. I've covered Compass. So we've got that segment in our model. You didn't buy the chemical side. I think you misspoke, Ravid. You said that it did $45 million in Q2. Is that what you think it's going to do in the second half of the year?
spk09: Second half of the year, yes.
spk03: Okay. And, you know, that business did about, $60 million for Compass. Of course, you didn't buy the chemical side, which is a smaller part of it. What's kind of the growth you're seeing in that business? And then I also want to ask a question about, you know, Compass really struggled on that business to get any kind of growth there. There was some currency pressures. It wasn't a natural business for Compass. It might be more of a natural business for you. What can you do to get better results out of that business?
spk09: Okay, it's a great question. First of all, I think that the basic difference is that for us, the Compass Plant Nutrition business that we acquired, which now is called ICL America de Seoul, is a part of our core business. And it was nowhere near any part of the core business of the previous owner. And I think that means a lot because it's an extension, it's a new extension of our product distribution capability. It's bringing into our organization additional expertise, additional R&D, additional relationships with customers. given that some of our products we currently don't sell in Brazil not because there's a lack of demand but because we don't have the right distribution system and in some cases we don't have the ability to produce locally that's definitely going to pick up and in the case of In the case of our new business, it's an amazing business that has direct distribution to 50% of its customers, which means that it allows us to get closer to the customer, and we're becoming a very customer-centric organization that can create a lot of added value, and we want to get closer to the customer. So the synergies are everything from global procurement, which allows... which allows better procurement of raw materials. to information exchange on R&D, to direct distribution of some of the products that don't go to direct distribution today. In some cases, don't even go to distributors, go to importers. So we can do better on that side. And, of course, this is all just the beginning. We just acquired the company. The company is already growing. This year it's growing at over 20%. I take that some of what you said has to do with the fact that the currency has fluctuated in a bad way over the years, and so their growth sort of disappeared. because the local currency was weak. But we can't predict the future in terms of what happens to the currency. The company is growing very, very nicely in local currency, and like I said, over 20% this year. Their performance in the first half was above the budget and above the model that we used. And so we're very happy with the beginning. Again, it's M&A. Integration needs to be seamless, needs to be responsible. We don't want to disrupt something that's working very, very well. So we're working with the local team that we think are an amazing group together in order to figure out what makes sense in terms of potential synergies. Everybody is excited, like any new adventure, and we want to do it carefully, responsibly, and get the most out of the acquisition. Thank you. Thank you.
spk01: We have no further questions at this time. I will now hand the call back to DeeDee.
spk08: Thank you. Thank you, everyone, for joining us. We will be available, Peggy and myself will be available for any questions that you have any time. And we'll see you back here next quarter. Thanks.
spk01: That concludes the conference for today. Thank you for participating. You may all disconnect. Speakers, please stand by.
Disclaimer