ICL Group Ltd

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 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 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 the webcast available after the meeting and a transcript will be available 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 2. 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 financial information discussed on this call at any time. We will begin with a presentation by our CEO, Mr. Raviv Zoller, followed by Mr. Aviram Lahav, our CFO. Following the presentation, we will open the line for the Q&A session. Raviv, please.

Thanks, Peggy, and welcome everyone. Similar to the recent quarter, I would like to provide a brief update on the situation in Israel. While there are still challenges caused by the war, we have continued to minimize disruptions to our business operations and for our employees. While various operational challenges related to the war have persisted, including higher logistics costs, we have been able to maintain good production levels, thanks in part to the return of most of our employees who have been called up for reserve duty. Despite the unique challenges, we were able to execute according to plan in the first quarter, resulting in a good start to 2024. For the first quarter, ICL delivered solid sequential improvement as global demand appears to have stabilized and as most of the multiple end markets we served have begun to show signs of recovery. While there are some exceptions based on location and other factors, gradual improvement should start becoming apparent in the various channels we serve. So, as we have said in the past, we will be agile and work to effectively manage the areas under our control and react with appropriate swiftness when necessary. Now, if you will please turn to slide three for a brief overview of the first quarter. Sales of $1,735,000,000 and adjusted EBITDA of $362,000,000 both showed quarter over quarter improvement, although down versus the prior year as expected. For the first quarter, we delivered $0.09 of adjusted earnings per share and will distribute a dividend of about $0.05 per share. Our longstanding policy is to pay out up to 50% of adjusted net income each quarter. We continue to focus on cash flow and generated operating cash flow of nearly $280 million in the first quarter, with free cash flow of more than $130 million. We continue to carry out efficiency efforts in the first quarter and manage through some logistics challenges. Aviram will discuss our efficiency and cost savings initiatives in more detail later in the call, but our commitment to these efforts has not dimmed our focus on innovation. We continue to expand our specialties product portfolio, both through the launch of innovative new products and via an acquisition in the first quarter. I would ask you to turn now to slide four and to look at recent trends for some key financial metrics. While first quarter sales were down, as expected, they were up 3% sequentially. Adjusted EBITDA also improved on a sequential basis, while earnings per share were slightly down for the same timeframe. Our consistent focus on increasing the contribution from our specialty-driven businesses resulted in sequential improvement based on volume growth. First quarter specialty-driven sales were up 6% versus the fourth quarter of 2023, while EBITDA improved approximately 17% quarter over quarter. Our specialties-driven divisions also delivered quarterly sequential improvement in gross margin, a trend that began in the third quarter of 2023. Let's start with a review of our divisions and begin with industrial products on slide five. For the first quarter of 2024, sales were $335 million with EBITDA of $72 million. As expected, sales and EBITDA have improved sequentially since the third quarter of last year. For the first quarter of 2024, sales were up approximately 12% sequentially, while EBITDA was up nearly 30% on higher volumes. Overall, we were able to gain market share and maintain key customer attendance, while continuing to drive contribution from cost savings and efficiency efforts. For our key end markets, demand was mixed, as profits continued in electronics and in building and construction. Flame retardant sales increased versus the prior year, as higher volumes for our brominated solutions were partly offset by a decline in volumes for phosphorus-based products and lower prices overall. In early April, we received news that the EU Commission had imposed anti-dumping measures on phosphorus-based imports from China, and in late April, a similar petition was filed in the US. Global demand for clear brine fluids, which are used by the oil and gas industry, was stable in the first quarter, and ICL remained the preferred supplier for the industry. On a year-over-year basis, sales were lower due to a peak market in the beginning of 2023. Our specialty minerals business, which targets food, pharma, and other end markets, continued to perform well with sequential quarterly improvements. On slide 6, you will see our putash results for the first quarter of 2024, with sales of $423 million and EBITDA of $124 million. In the first quarter, we completed the annual maintenance at the Dead Sea, and in Spain, we delivered record production at our Soria mine and remained on track to meet our full-year targets. One key commonality in both locations was the use of technology to optimize operations and improve production and safety as both facilities continue to focus on efficiency and cost savings efforts. Total sales volume for the quarter was nearly 1.1 million tons, up more than 120,000 tons year over year, but down approximately 100,000 tons sequentially as expected due to the annual maintenance. The average put-ash price declined in the first quarter to $324 CIF per ton, down approximately 40% year-over-year and 6% sequentially. Additionally, freight costs increased as global shipping remained under pressure. The global demand for potash is currently robust and prices have stabilized since the beginning of 2024. The outlook is generally positive with farmer affordability still healthy as high levels of potassium deficiency in soil have become a clear threat to yields for growers in most regions. Turning to slide seven and our phosphate solutions division where first quarter sales of $559 million improved sequentially while EBITDA was down slightly for the same timeframe. Volumes were higher in the first quarter and prices remained relatively stable, both on a sequential basis. In the first quarter, phosphate prices were at a crossroad and supply dynamics are expected to influence future quarters. For our phosphate specialties business, low raw material costs were offset by lower sales prices and mixed demand across end markets and regions. In the first quarter, our YPH joint venture in China continued to deliver strong results and set production records for both food-grade WPA and for MAP73, which is used for cathode material production. Turning to slide 8, in our growing solutions business, where first quarter 2024 sales of $479 million were roughly flat sequentially, EBITDA $42 million improved significantly on a sequential basis with an improved product mix. Efficiency efforts have continued to advance in the first quarter, even as the team navigated logistics and weather challenges. Regionally, North American sales improved year over year on higher volumes, while sales in Asia improved sequentially on higher prices. For Brazil and Europe, the start of the year was a little slower than expected in both markets. First quarter sales in Brazil decreased versus the prior year, but product optimization helped deliver high gross margins. For Europe, a significant increase in volumes was offset by lower prices and higher logistics costs as weather conditions on the continent were less than ideal across key growing regions. Changing legislation and foreign protests were additional obstacles during the quarter. Before we move on from growing solutions, I would like to highlight a recent change in leadership. Gustavo Vazquez, who has ably helmed our Brazilian business since 2021, has been nominated as the head of our European business. This move attests to the successful integration of our Brazilian acquisitions and the ongoing potential for additional synergies to continue to drive growth. Speaking of Brazil, if you will turn to slide nine, I would like to review a few quarterly highlights, including the accreditation of our third plant nutrition innovation center in that country. This endorsement by the Ministry of Agriculture, Livestock and Supply will benefit ICO as we develop, register and launch innovative technologies for the national and international agricultural markets. It will also be used to obtain registrations for new fertilizers, biofertilizers and inoculants, among others. Also in Brazil, we announced the acquisition of Nitro 1000 in late February. and the acquisition of this manufacturer, developer, and provider of biologicals marks another meaningful step into the biologicals market. It also helps expand our product offerings and to position us for further expansions into new and adjacent end markets. In North America, our battery materials expansion is gaining momentum. We recently signed three new MOUs and our Customer Innovation and Qualification Center in St. Louis is expected to be commissioned by year end. The acceleration of the Customer Innovation and Qualification Center is our first priority as it will allow us to take advantage of technological innovations with our business partners. This will influence both future costs and product performance for our overall business plan, including for our first commercial scale plans. While this will extend the project timeframe, it will also result in long-term benefits to our competitive position, which is aimed at achieving LFP leadership in North America. On the sustainability front, we improved our Sustainalytics ESG risk rating. We also received an upgrade from CDP with our climate change rating improving to A-minus. Additionally, we repositioned our Prolactal dairy protein business. As we focused on efficiency efforts, it clearly made sense to carve Prolactal, a non-phosphate related business, out of the phosphate solutions division, especially as our battery materials aspirations continue to advance. This will allow the division to focus on building its battery materials business, which is core to the phosphate value chain, while also allowing Prolactal to get the attention it deserves. With this change, Prolactile's new leadership is focused on aligning strategy with current market conditions and optimizing operations. I would also like to point out that the ICL Innovation Accelerator that is creating significant value for our shareholders was recently featured in a Harvard Business School case published earlier this week. Finally, as I do every quarter, I want to thank the entire ICL family of employees all around the world for their hard work, dedication, and support. And with that, I would now like to turn the call over to Laviro.

Thank you, Raviv, and to all of you for joining us today. Let us get started on slide 11 with the external macro environment. While some of these metrics have moderated slightly and others are unchanged, there has been a steady uptick in geopolitical tensions. Regardless, experts and pundits still anticipate a global outlook to begin improving in the second half of 2024. As Raviv mentioned earlier, global demand appears to have stabilized, and most of the end markets we serve have begun to show signs of recovery. Turning to slide 12, inflation remains stable, as did interest rates. While housing starts in the US declined in the first quarter, global industrial production is expected to improve as the year progresses. On slide 13, you can see a slight decline in most grain prices, with the exception, once again, of rice. Farmer sentiment is generally stable, and prices for potash and phosphate appear to have stabilized. Rate rates have also stabilized, albeit at an elevated level. On slide 14, you can see the expected trend over roughly the next decade for not only electric vehicles, but also for energy storage. In North America, the demand for cathode active materials used in both of these products is expected to become nearly equivalent by 2030. This trend is expected to result in gradually increasing demand for white phosphoric acid, technical MAP, and for global LFP. If you will now turn to slide 15 and our first quarter sales bridges, on the left side, you can see the decline for each of our segments versus the first quarter of 2023, resulting in first quarter of 2024 sales of $1.7 billion. Turning to the right side of the slide, you can see a year-over-year increase in quantities, which was offset by lower prices, especially for potash. On a quarterly sequential basis, sales increased as higher quantities offset lower prices. For the first quarter, we saw general improvement in our inventory position in line with internal targets. On slide 16, you can see the impact Potash had on our first quarter 2024 EBITDA of $362 million, and this is evident on both the left and right-hand side of the slide. Conversely, we benefited from higher quantities, lower raw material and energy costs, and also from our cost savings and efficiency programs. While the year-over-year impact on transportation costs look roughly flat on the slide, this amount excludes approximately $8 million related to the war in Israel. Once again, even as potash prices declined during the first quarter, ICL remained a leader in terms of average realized price, as you can see on slide 17. we continue to maintain the flexibility that allows us to rapidly shift in and out of markets based on profitability and to maximize our cost-efficient resources. I would also like to remind everyone where ICL is positioned in the global bromine market, which you can see on slide 18. The Dead Sea is the premier and most cost-competitive source of bromine and accounts for approximately two-thirds of global supply capacity. For the first quarter, we reduced SG&A by approximately 5% quarter over quarter, as you can see on slide 19. We also remained focused on our savings and efficiency efforts, and these actions included supply chain and production initiatives in the industrial products division, mining optimization and technology efforts in our potash division, and labor costs as well as supply chain optimization in the phosphate solutions and growing solutions divisions. The cost efficiency efforts helped in part to drive our effective cash conversion, and we ended the quarter with available resources of approximately $1.7 billion. Our net debt to adjusted EBITDA rate at quarter end was 1.3 times. In March, we repaid approximately $108 million of our Series E bonds as scheduled, which resulted in an increase in cash used for financing activities. In June, we will pay out $59 million as a dividend to our shareholders, bringing our trailing 12-month dividend yield to approximately 4%. For the first quarter, our effective tax rate was 25%. This was lower year over year due to a lower surplus profit levy and as we had increased profits in regions with lower effective tax rates. Additionally, as Raviv mentioned, in the first quarter, we carved the Prolactal dairy protein business out of the phosphate solution business. Financials for Prolactal can now be found in other activities, and we have stated historical results to reflect this change. Finally, If you will turn to slide 20, I would like to reiterate our 2024 guidance. As we discussed on our fourth-quarter call, we will be providing EBITDA guidance for all of our businesses other than Potash, which we call our specialty-driven business segments. This includes industrial products, growing solutions, and all of phosphate solutions, as our PS business is now predominantly specialty-focused. For 2024, we continue to expect adjusted EBITDA for these three businesses to be between $0.7 billion to $0.9 billion. For our potash business, we reiterate sales volume guidance for 2024, and we expect this to be between 4.6 million metric tons and 4.9 million metric tons. For 2024, we expect our effective tax rate to be approximately 30%. And with that, we can begin the Q&A.