ICL Group Ltd

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 will need to press star 1 on your telephone. I must advise you that 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 Peggy Riley-Tharp, Vice President of Global Investor Relations. Please go ahead, Mom. 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. 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. Coby Altman, our CFO. After the presentation, we will open the line for Q&A session. Raviv, please.

Thank you, Peggy, and welcome, everyone. Once again, ICL delivered outstanding results driven by our specialty businesses and as we also benefited from continued commodity upside. As you can see on slide three, we delivered our fourth consecutive quarter of bottom line improvement as strong performance was supported by increased demand in higher prices in most markets. We also worked to overcome higher overall costs and global supply chain challenges during the whole quarter. All four of our businesses contributed, and each reported at least double-digit growth in sales and EBITDA, driven by our strengthening specialties product portfolio and commodity tailwinds. For innovative ag solutions, our recent Brazilian acquisitions helped balance the traditional seasonality of this business. Due to all of these factors, we are raising guidance expectations, and Kobi will provide more details in his comments. Our third quarter results are on slide four. And as you can see, once again, we demonstrated improvement in each key financial parameter. On slide five, you can see year over year sales were up nearly 50%, while adjusted EBITDA was up nearly 90%. We also added $70 million of operating cash flow and nearly $90 million of free cash flow. Each of our four businesses on slide six contributed to our third quarter success, and together we were able to break an eight-year quarterly profit record. For industrial products, strong end market demand remained unabated, which drove higher sales and profit. For potash, we had record third quarter production at the Dead Sea. Our phosphate solutions business once again delivered a record sales and EBITDA quarter, as we benefited from both higher sales volumes and prices. Innovative Ag Solutions showed very significant improvement year over year, resulting from both our existing organic business and our two recent acquisitions in Brazil. As a matter of fact, our organic IAS business delivered double-digit growth in sales and EBITDA in the third quarter, as did industrial products, putash, and phosphate solutions. Including our recent acquisitions in Brazil, IAS results were up triple digits in the quarter. Our teams delivered these outstanding results despite very turbulent times across the global landscape. While ICL benefited from commodity upside, raw material prices continued to soar around the globe, as did energy costs. Not only have transportation rates continued to increase, but there have also been significant disruptions to the global supply chain. For ICL, this has provided both challenges and opportunities. Thanks to our advantageous production locations and global supply chain capabilities, we have been able to maintain our position as one of the world's lowest cost producers. These advantages span several of our businesses, including our bromine production, and I would like to begin our segment review with industrial products on slide 7. Sales of $387 million were up more than 40% versus the third quarter of 2020, and EBITDA of $121 million was up 75%. This business continued to see strong end market demand and pricing, and also delivered record quarterly cash flow. Higher demand for flame retardants was driven by the electronics, automotive, and construction end market, and we were able to leverage our recent expansion of TBBA capacity. We also saw continued improvement in clear brine fluids as higher oil prices resulted in renewed oil and gas drilling activity. Our specialty minerals business also benefited from higher demand as the supplement and pharmaceutical end markets remained strong. On the pricing side, elemental bromine realized record high prices in China due to strong demand for bromine compounds and limited local supply. Environmental regulatory restrictions impacting P4 production have triggered tight supply and rising prices of phosphorus-based products, resulting in higher prices for our phosphate-based products. On the production and logistics side, freight and raw material issues continue to impact the business during the quarter, even as we ship the record number of containers in August. While the majority of our production is at full capacity and sold through, Input costs remained inflated, and raw material and transportation availability continued to limit our delivery capabilities. In order to meet increased customer demand, we have procured additional isotanks for our fleet, and we are also expanding production, including TBBA capacity. We expect to be able to supply an additional 7,000 metric tons of product beginning in the second half of 2022, and we plan to announce other additional capacity expansions in the months to come, based on new long-term agreements for the fourth quarter we expect the general continuation of these trends however there will be some impact from the 10 days of planned maintenance we completed at the end of september as was in the third quarter nonetheless we expect continued strong end market demand and the benefit from the recent record high bromine prices which should begin to flow through to icl beginning in the fourth quarter and continuing into 2022 as contracts begin to reflect these higher prices. Turning to slide 8 and our potash business, where sales of $436 million were up nearly 40% year-over-year, and EBITDA of $125 million was up nearly 80%. During the quarter, potash market prices continued to accelerate as global demand remained strong. corn, soybean, wheat, and rice prices were all up double digits year over year, and supply remained tight. Prices also recently accelerated for other commodities, including magnesium, which reflected higher demand from aluminum and automotive end markets due to energy-related production cuts in China in recent weeks. To give you a little background on our metal magnesium business, the potash segment produced approximately 18,000 tons in 2020, And our current annual potential production capacity is around 23,000 tons. While we are increasing our magnesium production, there will be a lag between current market prices and our realized prices, likely into the first quarter of 2022. Also on the production side, we achieved another record in the third quarter at the Dead Sea, as mentioned. We saw an increase in production at ICL Bowlby as well. and significant higher polysulfate sales volume, which was up more than 90%. Just last month, our ICL Iberia plant was awarded the S-Agua Gold for its involvement and commitment to water resource management, and we are proud of the team's commitment to the sustainable use of water. During the third quarter, we continued to optimize the consolidation of our Cabanases mine, and this effort will continue into the fourth quarter. Just after the quarter ended, we came to an agreement to terminate our partnership with Nobium for the sale of salts from our mining operations in Spain. As part of this agreement, ICO will pay a net amount of approximately $17 million, which will include Nobium's 51% of the Salvesta plant, its share in the joint venture, and the net settlement of all additional disputes. We expect this to result in a significant improvement of annual contribution from the Spanish operations of ICO. At the Dead Sea, we continue to work on completing the P9 pumping station in the Northern Basin and expect commissioning to be concluded by early 2022. We're also looking at other projects to help control costs and increase efficiencies. Also at the Dead Sea, we recently received confirmation from the Water Authority that an appeal we made regarding changes in the water law has been successful and ICL will not be charged for water production within the concession area. Turning to the logistics side of our putash business, marine transportation costs continued to increase in the third quarter and showed no signs of easing. However, we should see additional benefit from continued higher putash prices in the fourth quarter and into 2022. For all our agriculture-related businesses, we are attuned to concerns around farmer affordability, which are beginning to crop up. While we are monitoring the situation, we are also actually aware of other dynamics in the marketplace, including certain global sanctions and the need for distributors to continue restocking due to global supply chain issues. Turning to slide 9, our phosphate solutions division, which reported another record quarter for specialties, commodities, and our YPH joint venture. In total, sales of $655 million were up approximately 30% year over year, while EBITDA of $148 million was up nearly 80%. For phosphate specialties, both food phosphates and industrial salts saw higher demand with higher volumes and prices. Our food specialties business continued to benefit from our strong global supply chain organization and our ability to assure customer supply. Our industrial salts business also saw higher sales with increased demand in most regions and industries along with higher prices. As we previously discussed, we are further expanding our food specialties business, and in December, we will be commissioning our new alternative protein plant in St. Louis. I will be on hand for this event and hope many of you can join us if travel permits. For commodities, phosphate fertilizer sales were up on tight supply and healthy demand. Profitability was also up as we were able to partially offset increases in raw material costs and freight costs. As you know, a significant amount of our phosphate mining occurs in Israel, where we recently received some good news. Specifically, the Supreme Court has rejected motions to revoke the approval of the Barir Field mining site as an area for phosphate mining. The ministries of health, environment, finance, and energy have agreed that the plan will now move forward to the next step. Moving on to China, where our YPH joint venture once again delivered record results, due to higher prices and increased volumes. The JV also continued to implement efficiency measures and to maximize production of food grade WPA, and this work is ongoing until the fourth quarter. Turning to slide 10 in our innovative ag solutions business, where earlier this year we made two acquisitions in Brazil. The first, Fertilaco, closed in January, while the second, now known as ICL America do Sul, or ADS, closed on July 1st. These acquisitions contributed to the significant improvement we saw in ICS this quarter as they balanced the traditional seasonality of this business. In total, third quarter innovative ag solutions sales of $387 million were up nearly 125%, while EBITDA of $55 million was up more than 300%. It is also important to note that organic sales and EBITDA were up approximately 20% and 70% respectively. the third quarter specialty agriculture sales were up across all product lines and our turf and ornamental business also continued to trend positively overall ies has benefited from good continued momentum due to higher crop prices however we also experienced challenges related to continued raw material cost inflation and ongoing global logistic issues for the fourth quarter While we expect to see year-over-year improvement due to higher pricing and the addition of our recent Brazilian acquisitions, we also expect growth to moderate versus the third quarter. If you turn to slide 11, I'd like to walk you through some of our recent impactful events before turning the call over to Kobi for a review of our financials. Throughout the year, we've continued to target sustainability and recently announced a few innovative efforts. First, from an industrial perspective, we are now supplying the lithium iron phosphate battery market from our YPH joint venture in China through our specialty mono-ammonium phosphate offerings. The market for LFP battery technology, which offers superior safety at a lower cost and with a longer life, is expected to grow at a 25% rate through 2030 for a market value of up to $5 billion. We expect our future sales to grow significantly from a base of about $30 million in 2021. We consider the strong demand for electric vehicles and energy storage as a significant source of potential growth for ICL and are committed to creating additional capacity to meet rapidly increasing customer demand, including, but not limited to, specialty MAP products. From a food specialties perspective, this summer we announced the launch of ICL Planet Startup Hub, an innovation platform designed to help introduce food tech and agri-tech startups to the marketplace. The Hub's first investment was an AI-driven startup called Proterra, which is designing and developing new sources of protein, an effort which is complementary and synergetic with our food specialties growth strategy. While both of these innovative efforts are centered on sustainability, we recently made three more specific announcements. As we discussed briefly last quarter, we reaffirmed our overarching commitment to sustainability by pledging to be carbon neutral by 2050. In September, we announced a new 250 million euro sustainability-linked loan, which Kobe will discuss in a few minutes. We also continue to help our customers in their sustainability efforts and to meet the world's changing food needs by gaining organic status for our one-of-a-kind polysulfate fertilizer-based product. These products are now recognized by both the EU and the USDA as organic, and these standards are also accepted in other regions around the world. As you know, sustainability cannot exist independently. It requires many people and companies to join together. ICL did just that last month when we partnered with the OCP group from Morocco to fund sustainability programs at Ben Gurion University of the Negev and Mohamed VI Polytechnic University in Morocco. The positive developments in Israel's foreign relations opened up the possibility for us to build new relationships and create new collaborations like this one. We are thrilled to be taking this historic step forward with OCP to advance sustainability research and support our local universities in their efforts to make a difference in their communities and beyond. When it comes to sustainability, we also work with our suppliers to maximize our impact. And an example of this is our expanded business partnership with Haldor Topsil. Beginning in the first quarter of 2022, we will be taking additional potassium nitrate from TAPSO, which will then be fully and efficiently used to fertilize much needed crops on a global basis. This arrangement not only expands on our existing relationship, but also allows both companies to advance their sustainability efforts. If you'll turn to slide 12, we can review some of the key takeaways from the third quarter. As I just discussed, we are progressing against our sustainability targets across the company. I want you to know that for me personally, sustainability is one of our greatest challenges, but it also has the potential to be one of our greatest opportunities and achievements. In order to deliver on our sustainability promise, we need to first deliver as a business, and our long-term focus on driving specialty's growth is key to that success. In the more near term, we expect the recent positive momentum across all of our businesses to continue. Market dynamics have remained strong, and while there is uncertainty regarding overall global logistics, we have confidence in our strong global supply chain and in our ability to deliver results despite these somewhat turbulent times, as we have been able to prove in recent months. As a team, we've made good progress executing against our strategic plan and expect to continue to do so. As always, I want to thank the entire ICL family of employees spread out across the globe for their contribution to the quarter as your everyday actions make a difference. And with that, I'll turn the call over to Kobi.